Grab has a relatively easy to understand business model. The company doesn't own physical assets or employ drivers - at least, in most cases. Grab's technology enables people looking for a ride to be matched with people willing to drive them, and Grab will ultimately take a cut of the fares.
Grab's business humbly started out in Malaysia where the taxi industry is/was divided between legally authorised taxi drivers and the black market, fake taxi drivers without a proper licensing to make a living from driving people around. The job-to-be-done has been clear from the beginning.
This article simply covers Grab's business model and will be a referenced for future Grab related articles.
Grab's revenue model is to take a commission out of the rider's fare. This alone is enough to get a business started. But how does the business model operates?
Image Credits: Grab
The value proposition offered by Grab to riders(passengers) are straightforward:
- Riders get a car to pick them up within a few minutes (anywhere from 1 t 10 min);
- Fare is fixed in advance and displayed on the app offering price transparency to riders;
- Riders get to leave feedback on drivers, as a result, riders can feel safe when they are assigned a driver;
- Riders can pay through multiple methods (This has particularly evolved from cash to cashless).
But, drivers also benefit from using Grab's technology. For simplicity, both taxi (otherwise also known as professional) drivers and self-employed drivers are labelled as drivers. These are the benefits to them:
- Drivers can earn money and monetize their time and asset (rented car or owned car);
- Drivers enjoy flexible work hours
- Drivers do not need to search for passengers, given its all taken care by Grab;
- In case of any dispute, drivers could use the app to liaise with Grab, who will in turn handle each case.
Grab's key activity and fundamentally the core of its existence is to connect riders looking to go from A to B with a driver. Thus, this activity aims to remove friction that exists in the offline world.
Grab's key activity could be further explained through the benefits derived by both riders and drivers (i.e. Value Propositions).
As the company grew, it needed to expand its activities which would either support the key activity or expand/improve the overall company's welfare.
An example of new activities that are all inter-linked would be to grow the number of drivers (supply) while partnering and keeping taxi companies happy. Grab has to maintain customers' happiness and therefore, it is necessary to work on an improved customer service and customer experience.
There are a few players here that are essentially the core key partners.
- Drivers (supply-side)
- Customers (demand-side)
- Investors (from Angels to institutional investors)
- Others (insurance companies, financing companies, car rental companies among others)
- Public Sector (to some extent, the government and through the right regulatory may have a say over Grab's business model in their respective country)
Grab has employed a broad range of channels to reach out to its target customers. This ranges from digital ad campaigns, branding cars, Youtube videos, referral links among many others.
We believe building a brand (which encompasses many channels) has been one of the reasons for Grab's success and riding on the smartphone adoption wave in Southeast Asia has certainly played a positive role.
Note that a smartphone is a medium, rather than a channel but at its core, mobile adoption has made it easier to spread word of mouth and increased ease of install through key channels.
At the foundation, Grab has 2 key customers to maintain a good relationship with: Riders and Drivers.
However, as it grew in both presence and network, Grab has had to build and work nicely with regulatory bodies in each market where it operates.
Adding to that, Grab also work with other companies for marketing or partnerships. These are important ecosytem players for Grab to grow new sources of revenue (e.g. promoting another product) or improve its metrics (e.g. a promotional code partnership with another company to activate users during an off-peak period).
Image Credits: Grab
Grab's business model closely follows that of Uber. In their early days, Grab was still accepting cash while Uber took many years (2-3 years) before switching on cash payment. The localization aspect was essential to Grab's early days and especially in countries such as Indonesia, Thailand, Vietnam and even Malaysia.
Grab's business model is evolving continuously. It went from a ride-hailing app to a lifestyle platform building an ecosystem around its brand: Grab. In the near future, if not already, Grab will be synonymous to what Google is today. Don't know something? Google it. Want to go to airport? Just Grab.
Grab's business model is also becoming more interesting with GrabPay which powers up the entire lifestyle ecosystem that it is building. It will also radically change the way people will use financial services in the future, in particularly, if Grab is able to break into the unbanked across Southeast Asia.
We will definitely be following Grab as it grabs more territories and evolve its business model.