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How would a Grab-GoJek merger affect food-delivery riders in Singapore?

Throughout 2019 to 2020, rumors about a merger between Grab and Gojek being pushed by SoftBank’s Masayoshi Son have been whispered and teased out. With the pressure to become profitable after the WeWork disaster and also before the IPO deadline in 2022, a merger between these 2 giants is coming closer to reality. In fact, Grab’s Anthony Tan did not deny the information when being asked by the media.

When the merger will happen?

At AloRide, we think that the merger will happen before the IPO, maybe in early-2021, in order to push its stock price higher thanks to profitability and an absolute dominant market share. Moreover, with the quantitative easing programs globally (aka. printing money to help the economy), Grab and GoJek would likely want to do the IPO as soon as possible, to absorb some of the cheap liquidity that leads to a global rising in asset price, especially in tech stocks during this period.

The latest development is that Grab and Gojek have resolved most of their differences and mapped out a structure where Grab co-founder Anthony Tan would become the CEO of the combined entity, while Gojek executives would continue to run the business in Indonesia under Gojek’s brand, according to reports by Bloomberg.

If the two companies become a single entity, it would be a consolidation for tech firms with the highest spreadsheet value in Southeast Asia — a regional event with potential global implications. It would also be a major plot twist for the region’s internet economy, considering the two firms have been in tight competition for years. While investors seem eager to unite these two firms, the possible merger raises questions about market concentration and impacts upon consumers and driver-partners.

Today, we will discuss potential effects of the merger to the food-delivery riders in Singapore – who are their rider-partners and our renters.

Protest in Indonesia against the merger between Grab and GoJek
A big loss for consumers, employees, and partners?

Normally, a merger would be a loss for users, drivers, and merchant partners of Grab and Gojek. They definitely will reduce the incentives and bargaining power as it will primarily be monopolised by the merger entity. Users can bid farewell to the companies’ discount promotions, since there would be no significant or immediate competition in the arena.

For Grab and GoJek’s employees, the merger / acquisition process can immediately impact the stress levels of employees involved. Many mergers need to be approved by local governments, attorneys general, and regulators, which can drag the process out for more than a year. The time it takes to close a merger can be difficult for employees of both companies involved. Food-delivery riders, in a sense, are working for Grab, except that they don’t get any protection by local employment regulations – which make the matter even worse.

That’s true where there is a big overlap between the 2 companies, for example: Indonesia – where Grab and Gojek are both in a warchest for gaining market share, each having about half of the market. That’s a reason why there are now big protests in Indonesia to prevent the merger from happening. The 2 giants will stop burning money for the war. Both consumers and driver-partners lose out.

But ...

Fortunately, in Singapore, it’s clear that Gojek is a joke. GoJek doesn’t even have a food delivery business here in Singapore. If you are a delivery-rider, you should be more worried if Grab acquires FoodPanda – which we think it will eventually happen in a few years (because FoodPanda is a mess).

Then how does the merger affect Grab’s riders? Here are what we think in the long run:

  • Local food-delivery demand doesn’t get affected by the merger. In fact, the demand will be higher due to COVID-19’s accelerated digitalisation.
  • GrabJek will have more money for local operations in Singapore due to the improved position (monopoly) and efficiency in other markets, especially Indonesia.
  • That means the riders will get more benefit from Grab/GrabJek. Think of money, gifts, rewards, …

In conclusion, if you are a delivery-partner for Grab in Singapore, do not protest the merger. In fact, let’s celebrate it and hope that it will happen soon!

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Also, you may want to check out our another post: Motorcycle COE predictions – why we think it will keep rising

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