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Commentary: With Tokopedia merger, Gojek will take Indonesia by storm

Tokopedia complements Gojek’s core business and extends its reach even further into Indonesia, say business researchers.

Commentary: With Tokopedia merger, Gojek will take Indonesia by storm

A Gojek driver, left, gives a helmet to a customer in Jakarta, Indonesia, Monday, May 17, 2021. Indonesian ride hailing company Gojek and e-commerce firm Tokopedia said Monday that they are merging, in the largest ever deal in the country's history. (AP Photo/Achmad Ibrahim)

LAUSANNE, Switzerland: In May 2021, Gojek and Tokopedia, Indonesia’s leading ride-hailing and ecommerce companies, respectively, announced their decision to merge and create the biggest technology group in the world’s fourth most populous country.

Named GoTo, the newly established group could be worth US$18 billion. It will be the first platform in Southeast Asia to combine e-commerce, on-demand services and financial services.

READ: Indonesia's Gojek, Tokopedia merge to create tech giant

But it is not only size of the combined entity that is impressive. GoTo is emerging as a force for innovation.

Gojek was established in Indonesia in 2010, as a response to rising demand for urban travel in Indonesia, Thailand and Vietnam. Where once it was merely a call center connecting customers with taxis, it eventually grew into a ride-hailing giant – the Uber of Southeast Asia.

And, just like when Uber extended the utility of its fleet by developing the food delivery service Uber Eats, Gojek launched its own mobile app in 2015 to fulfill founder Nadiem Makarim’s broader ambition of providing consumers with a one-stop platform for their everyday needs.

READ: Commentary: That Gojek and Tokopedia merger should have happened a long time ago

GOJEK’S EVOLUTION INTO A SUPER APP

The app began with three main services: GoRide (ride-hailing), GoSend (parcel delivery) and GoMart (online shopping). In April 2015, it added GoFood, a food delivery service.

In the first 18 months after its launch, the Gojek app grew 900 per cent. In late 2015, Gojek was receiving 300,000 orders every day across all its services, but by 2018, that figure ballooned to 3 million.

But it didn’t stop there. It continued to add new services, ranging from massages to online payments, movie tickets, games, even a loyalty program. Gojek has evolved into a “super app” with more than 20 services on the platform.

But that threw it into more direct competition with Southeast Asia’s other super app: Grab, whose core business areas include car-hailing, mobile payments and food delivery.

A Grab food delivery rider checks his bicycle outside a fast food outlet in Singapore on Sep 30, 2020. (Photo: AFP/Roslan Rahman)

However, Gojek also saw the potential for collaboration. In early 2020 ,reports emerged of a potential merger with Grab.

That triggered concerns that the combined firms would create a monopoly in ride-hailing, food delivery and online payments. Drivers in Indonesia worried what a merger would mean for their livelihoods.

Ultimately, Grab and Gojek failed to reach a consensus on the ownership of the post-merger company.

But later, Gojek found a great partner in Tokopedia, because it complements Gojek’s core business and extends its reach even further into Indonesia.

READ: Commentary: Could S$1 ride-hailing fee hike hurt Grab more than it realises?

READ: Commentary: A Gojek-Tokopedia merger has ramifications for regional unicorns including Grab and Sea

TOKOPEDIA’S COMPLEMENTARY SERVICES

Tokopedia was founded in Indonesia in 2009. It is a customer-to-customer marketplace that drew inspiration from China’s booming e-commerce industry, particularly Alibaba’s Taobao.

Throughout 2017 and 2018, Alibaba with other investors poured US$2.2 billion into Tokopedia. Before the merger with Gojek, Alibaba was Tokopedia’s second largest shareholder.

Tokopedia had previously tried to complete its own ecosystem by investing in logistics companies, cooperating with payment service providers and setting up an AI centre to predict consumer buying behavior.

According to Tokopedia, it serves 99 per cent of the districts of Indonesia and offers more than 42 digital products that simplify the lives of many people. Users can also buy gaming vouchers, tickets for trains and events, and can even settle payments with Tokopedia.

A man checks his mobile phone as he sits amid physical distancing markers prior to the start of a movie at CGV Cinemas theater in Jakarta, Indonesia, Friday, Oct. 23, 2020. (AP Photo/Tatan Syuflana)

Given Tokopedia’s penetration into the Indonesian market and range of e-commerce services, a merger with Gojek creates equal value for both parties.

THE GENIUS OF GOJEK

Gojek has often been ranked among the most innovative companies in Asia.

What has made Gojek so successful is its focus on customers. The app has always positioned itself as a one-stop platform that can solve every problem for their customer.

Gojek has increased the retention rate of users through its diversity of products and services. It also reduced its own costs through cross-selling services on its platform.

Innovation is not only about technology and products, but new ways of solving customer pain points, which do not necessarily require major technological breakthroughs.

READ: Commentary: Why Grab, Gojek, Tokopedia and Sea are the new darlings of US markets

Gojek started out with simple motorcycles and gave its riders opportunities to do other tasks such as food delivery to maximise their time. It essentially formed an express delivery network, then continued to expand into other areas.

By merging with Tokopedia, Gojek is creating an ecosystem. The larger it gets, the more consumer data and insights it develops.

The company can use this data to provide more relevant services in a faster and more responsive way than its rivals without this data can.

READ: Commentary: One of Big Tech’s biggest critics is now its regulator. This has implications for users globally

When a company makes a bet on an emerging market, it may appear risky. Ecosystems closely mirror the fate of the entire economy.

However, home-grown companies tend to outperform because they've mastered the local language, culture, and infrastructure. China, for instance, is dominated by local companies including Alibaba, Didi, Meituan and Bytedance. It’s no different in Indonesia and Southeast Asia.

With its plethora of services fine-tuned to the Indonesian market, GoTo is poised to grow in lockstep with the world’s largest emerging market.

IMD Professors Mark Greeven and Patrick Reinmoeller run IMD`s Asian Innovation Strategies program. Yunfei Feng is lead researcher on Asian innovation and co-author of Mark`s book on The Future of Global Retail.

Source: CNA/el

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