Conclusion

Even in the payments space, Gojek lacks coordination in Thailand. Its local GET service lets users load money into their account for cashless payments in several ways, including by giving cash to a driver. But, to the frustration of many, that account credit can only be used to pay for motorbike taxi rides. Its food delivery service, which is extensively marketed and seemingly more popular, must be paid for using cash.

Like Go-Viet in Vietnam, GET has struggled to make a mark in Thailand. The company’s services are limited to food delivery and motorbike taxi rides. Grab offers those services alongside private cars, licensed taxis, courier deliveries and more.

The Age of China’s Glory

Grab is the frontrunner across the Southeast Asia region. Its presence was enough to convince Uber to pack its bags and focus on more winnable battles elsewhere in the world. Today, Grab operates in around 200 cities, claiming more than 150 million app downloads to date and more than 6 million completed rides per day. Little is known of its financials, but Grab said its revenue reached $1 billion in 2018, with the figure estimated to double in 2019.

Gojek holds home-court advantage in Indonesia, where it claims to have been downloaded over 125 million times since launching its app in 2015. Across all its services, annualised transaction value has reached $9 billion, the company claimed, of which $6.3 billion comes via its GoPay service. But, it remains unclear how it calculates that figure. An internal document shared with us covering Gojek’s 2017 financial data, suggests the company double-counts some transactions—once as a ride, food delivery or courier transaction, and then again as GoPay if the booking is paid for using the e-wallet—which would inflate the final number significantly.

What is more clear, however, is that Grab is increasingly encroaching on Gojek’s turf. In 2017, Grab doubled down on Indonesia with a $700 million investment commitment, which was boosted by a further $2 billion in 2019. Beyond figures, its operations have shifted, too. Its second headquarters are in Indonesia, and CEO Anthony Tan is said to spend 70% of his time in the archipelago.

“Regardless of how it expands, Gojek needs to remain strong in Indonesia, a market that on its own already drives success in the region,” said Yinglan Tan, founding managing partner at Insignia Venture Partners. Instead of going head-to-head with Grab, Gojek may focus on certain services that work across Southeast Asia, such as logistics and cross-border payments, added Tan.

Thorn in Grab’s side

For Gojek to replicate its Indonesian ride-hailing empire—where it claims to have over 2 million drivers—elsewhere was always going to be a challenge of the highest order. But it appeared a necessary one in post-Uber Southeast Asia.

An investor in one of Gojek’s subsidiaries said Grab had successfully used its regional growth story to secure funding from investors through the years. Now, Gojek appears to have adopted the same approach, the investor added.

While Covid-19 is being treated for free in government hospitals, as the number of cases rise, private hospitals will increasingly come into play. “We expect hospitals to see a 100-120% utilisation of capacity,” said Dr Prakash. On average, mature hospital chains like Apollo and Fortis see 60%-70% occupation.

But with no standard operating procedure or price for treatment of Covid-19 in private hospitals, the disease is also shining the light on the health insurance sector’s vulnerabilities.

Insurance’s Achilles heel

Insurance is a pool of risk. On a good day, less than 10% of policyholders claim the majority of the premium. But if the claim amount or the number of people making claims changes, it spells trouble. With Covid-19, it’s both. As it is, insurance companies work on very thin margins, so the sector usually is not able to absorb too much of a shock.

“When we have a bad monsoon and the claims increase by two percentage points, that wipes out a third of our profits,” said a senior executive at HDFC Ergo Health Insurance. Insurers generally see a spike in claims during the monsoon season because of a rise in cases of dengue, malaria, and cholera.

Another important source of income for insurers is investments. But insurers are restricted when it comes to what they can invest in. “We are not allowed to invest in risky assets, only in bonds, and that is also going down now (due to the economy). So we are in the worst possible place,” the senior executive explains.

Covid-19 is also bringing a long-standing problem to the fore—India’s healthcare prices are not regulated, but insurance prices are. As a result, Covid-19 treatment prices in hospitals range from Rs 70,000 ($918.9) to Rs 7 lakh ($9,189.2). The severity of cases also varies. About 80% of Covid-19 cases are mild and need about five days of hospitalisation, while 15% are moderate, and 5% severe.

“This makes it very hard for us to price our policies,” said Dr Prakash of Star Health. “That is why we have been urging hospitals to adopt a standard operating rate.”

Hospitals charge like hotels, said a senior executive from HDFC Ergo. “A hotel can charge Rs 25,000 ($328.2) or Rs 10,000 ($131.3). Nothing stops them. But the amount of profit we can make is linked to the hospitals’ pricing. So if there is a wide variance in price, our loss ratio can go wonky.”

Pernicious burden

Of the 100 claims Star Health saw, 14 are confirmed and the rest are suspected cases. Dr Prakash is worried about the suspected cases as they can add to the burden of people rushing to hospitals, undergoing treatment on suspicion and claiming insurance. ‘This population is nearly six-fold and we get all that additional volume. It is a pernicious burden,’ he said

IRDAI keeps a close eye on insurers’ loss ratios and takes action if it crosses a threshold. “If the loss ratios fall below 60%, IRDAI asks us to change the price as it feels insurers are making too much of a profit on a policy,” added the executive. HDFC Ergo has not launched a Covid-19 policy yet.

A collapse of MSMEs, which account for a third of the economy, could set off a snowball effect. Not only would it slash jobs and household spending, it risks sapping demand for suppliers, landlords and lenders. As the financial ordeal ripples through to more businesses, more jobs get threatened. A downward economic spiral ensues.

MSMEs get creative

But Catimbang resists the idea of handing pink slips. Saying employees are his biggest asset, he’s determined to sustain salary payments.

“When things bounce back, we’re going to need everyone, so it’s important that my employees know I share in the pain,” he said.

Another company that was forced to scale back is Mercato Centrale, which runs food markets—huge open tents filled with third-party food stalls—in three locations around the metro. It also acts as an “incubator,” training micro and small food vendors in operations, finance and marketing so they can professionalise their business.

It’s a tough time having to pay rent without sales, but owner RJ Ledesma looks at the crisis as a chance to innovate. Ledesma said Mercato Centrale just launched online ordering on Facebook, providing logistics services to its roster of food vendors. He said he intends to convert this into a cloud kitchen once quarantine measures are lifted. A cloud kitchen provides space for vendors to cook meals, along with delivery services.

Catimbang’s first response to the unfolding crisis was focussed on making concessions. He pleaded with his landlord and spa and restaurant suppliers to postpone collections, essentially halving what Tribu Babaylan was supposed to shell out on a normal month.

Then came the more crucial question: How can the business continue to earn?

Initially barred from operating when the quarantine was declared, restaurants were allowed to reopen on the condition that they’d be restricted to takeaway and delivery. Catimbang saw an opening.

“We’ve never done a single delivery, but I told my team let’s go for it – just so we don’t experience zero sales,” he said.

He reached out to firms that were still operational, and in under 24 hours, heard from local pharmaceutical company Unilab. Unilab sponsors meals for doctors, nurses and other medical personnel on the coronavirus front lines. On the first day of the enhanced quarantine, Catimbang kicked off deliveries for Unilab recipients in top Manila hospitals. To his surprise, orders grew from 10 meals to 300 by the end of the day to 500 the next day. “I was glad I took the chance.”

While the delivery service accounts for only a small share of the overall business, the hope is that it will generate enough income to help support the staff, who’ve been worried about their jobs, said Catimbang.

But the task is neither easy nor 100% safe. He, his wife, three of their closest friends and five employees—all staying at Tribu Babaylan—split the tasks of cooking, packing and delivering meals using their personal cars and motorcycles.

“There’s that fear that you might get exposed to the virus. I have three kids, all of them still young,” he said.

But his biggest motivator is to keep his people employed and support those battling the pandemic. The team does ensure that they take the necessary precautions like wearing protective gear and limiting deliveries to a hospital’s reception area.

 

 

pproval takes one day, according to a spokesperson. That fastrack system led LINE MAN to increase the number of new restaurants joining its platform by 5X compared to January, but it remains to be seen whether there’s a compromise on quality or customer experience.

The process requires adaptation from restaurants, too.

“The premium restaurants are all desperately flocking [to] delivery. It’s interesting how many of them are super desperate now but were playing hard-to-get previously,” a senior executive at a company that works with food delivery services said. They requested anonymity because they’re not authorised to discuss client business with the media.

The food delivery companies declined to discuss specific merchants, but Nittayakasetwat shares that some eateries, including high-end Japanese restaurants, are “adapting their menu to be more ready-to-eat or suitable for food delivery packages.”

It isn’t just the restaurant menus that are adapting, there’s an opportunity for staff impacted by the ban to pick up new work as delivery drivers. That’s significant given that the partial shutdown on business has left tens of thousands of daily wage workers in the capital without income.

Mass exodus

Some 100,000 workers are estimated to have returned to their home provinces, or—in the case of overseas workers—to neighbouring countries Laos and Cambodia.

“Demand for F&B jobs went to zero, but other industries are seeing a huge boom,” an executive at a recruitment company specialising in daily wage work in Thailand tells us. “For on-demand services, it is literally insane, demand is spiking.’

Beyond simply hiring for their fleets—which covers those with a motorbike license or simply on-foot ‘walkers’—companies like Foodpanda are adding customer support and admin roles to handle increased business. These roles require working from home and are often filled by workers whose jobs in hospitality or F&B industries are on pause right now, the executive quoted above explained.

Food delivery aside, grocery delivery services such as HappyFresh—which includes Grab among its investors; Grab offers the service as ‘GrabMart’—are hiring in significant numbers. As is conglomerate CP, which has said it wants 20,000 delivery people for a new on-demand service for Thailand’s ubiquitous 7-11 stores.

“We’re talking about tens of thousands of people,” the recruitment executive says.

Appetite for expansion

Despite the Covid-19 outbreak, Thailand’s food delivery firms are hungry to reach more of the population. Foodpanda currently operates in 50 provinces across Thailand, but it plans to reach all 76 this year. Grab, meanwhile, is aiming to more than double its Grab Food coverage from 14 provinces to 30, and LINE MAN’s expansion plan includes growing from 5 to 15 provinces.

1 million a day
But restaurants are still on the back foot.

“The rise in food delivery revenues is not sufficient to offset lower restaurant revenues,” Anantaporn Lapsakkarn, a senior researcher at K-Research, told The Bangkok Post this week. Lapsakkarn suggested that restaurants will try to handle their own delivery rather than relying on apps.