Gojek driver on the streets of Hanoi. Photo: Nguyen Long.
Recently, Gojek and Tokopedia made the largest merger in Indonesia with the goal of developing into a super app, competing with Grab. Reporter of Business Forum Magazine had a discussion with Mr. Huynh Minh Tuan – Brokerage Director of Mirae Asset Vietnam Securities about the M&A trend seen from the deal.
– The merger of Gojek and Tokopedia (GoTo Group) is considered a deal to compete with Sea and Grab in the super-app race in Southeast Asia. How do you evaluate the trend of super M&A to develop?
The market for food delivery, logistics, and personal transportation in Southeast Asia is quite unique. Due to the large number of personal vehicles here, almost global giants come to the area to provide services: delivery, food delivery, passenger transportation, logistics.
Currently, in the Southeast Asian market, Grab is the “king”. Particularly in Vietnam market, Grab holds the largest market share up to 75%, far ahead of other competitors. It can be said that Grab’s market share is special.
In the history of operations in Vietnam, many times Grab has suffered from bad publicity when it increased the discount for drivers, many drivers went on strike. But Grab has absolutely no move to announce it will stop its new policies.
This shows great pressure for the remaining competitors, because the remaining market share is about 25% at present, it is very difficult for businesses to pay back.
Another aspect is that with the current characteristics of the business of transportation and food delivery applications, the breakeven coefficient will be very high, I think the market share must reach 40% or more to start breaking even.
Therefore, it will form a trend of M&A, ie 2-3 small businesses have to merge into one large enterprise to avoid monopoly as well as increase market share to achieve breakeven point.
Therefore, it is not surprising to me that the bottom companies have to do M&A.
– In the long term, Go To Group may find a way to IPO. These two startups are said to have discussed various scenarios with the ultimate goal of IPOs in Jakarta and the US. In your opinion, will Go To Group choose the SPAC form to IPO in the US?
First, to IPO in the US, depends on many stages, in which at least the business is profitable or takes a shortcut through the SPAC route. However, I do not have much data about Go To Group, so the feasibility of an IPO business needs more time to evaluate. And through SPAC, the feasibility will be higher.
Because they can use accounting techniques for them to account for profits as well as standards for new entities that want to IPO on the US stock exchange.
– In your opinion, how should Go To Group be oriented to compete with Grab?
Currently, Grab has over 70% market share in Vietnam, so it has created a habit for consumers to use Grab for everything from passenger transport to food delivery, logistics.
So to get market share of Grab requires businesses to spend money, even a lot of money.
But the market is in a saturated stage with many businesses participating in the delivery technology application segment such as Now, Be Group, Baemin…and still have to burn money. Due to market saturation, businesses have to choose how to burn money.
Meanwhile, Grab is continuing to expand the market to become an “all in one” application. So in my opinion, it is quite pessimistic with the case of Gojek merging to compete with Grab.
– So how do you think you need to “burn money”?
From the perspective of management and operation, I think businesses need to learn and re-research the market, avoiding direct confrontation with Grab. From research, businesses can redefine their goals and new consumer trends in the future to develop.
If Go To Group is strong enough, it can compete directly with Grab in the regular market, but if it doesn’t want to “burn money”, Go To Group needs to follow the niche market and push its market share up.
– Thank you!
Source: enternews.vn – Translated by fintel.vn