Grab and Uber continue to play catch-up while Foodpanda pulls out of Indonesia – how does Go-Jek continue to stay the market leader?
In August, Rocket Internet’s Foodpanda announced it was selling its operation in Indonesia and that it would also take time to evaluate the success of its business in Southeast Asia as a whole. Considering that less than half a year ago, Foodpanda also pulled out of Vietnam by selling its operation to local food delivery competitor Vietnammm.com, a similar fate may be on the horizon for other Foodpanda units in the region.
At a glance, it might be easy to attribute Foodpanda’s retreat from Indonesia to its inability to take on fierce local rival Go-Jek, but there’s more to this story.
Peng T. Ong, managing director at Monk’s Hill Ventures, a venture capital firm based in Singapore and Jakarta, says it’s important to note that there are big structural differences between Foodpanda’s parent company Rocket Internet — which is an online startup builder — and Go-Jek, a home-grown Indonesian startup. While Go-Jek is an entrepreneur-led business that has grown under traditional startup methodology by raising seed capital from investors, Foodpanda was a business created by a corporate venture builder.
“It’s a model issue. It’s a ‘how do you build a startup’ issue,” Ong tells Indonesia Expat in reference to Foodpanda’s untimely demise in Jakarta. “Foodpanda is actually not a startup, it’s a corporate business unit from Rocket Internet. There are new ways to build tech businesses these days and Rocket is innovating, saying: “We don’t need this traditional entrepreneur-venture capital model of doing startups. We’re going to think about what could be an interesting company to start, then we will hire people and let them build.”
While Go-Jek was built with the Indonesian market in mind, Foodpanda was conceived with plans to go global from the very start. Today, Foodpanda is active in 500 cities across five continents. Go-Jek, a startup run by Indonesian entrepreneur Nadiem Makarim, has the home court advantage as it is focused solely on the local market. This makes innovating and implementing new business strategies much easier.
Although Foodpanda hired local ‘co-founders’ to run its Indonesian business, the top-down corporate model that Rocket Internet uses likely slowed the flow of knowledge and communication between Indonesia’s team leaders and Rocket’s headquarters in Germany.
The difference between a corporate business structure and a startup operation is often the speed at which they’re able to iterate their products. Pure startups can typically iterate faster than their corporate counterparts. Delivery businesses like Foodpanda require a great deal of localization and the freedom to pivot quickly to find product-market fit. This depends on what the local market is demanding at a given moment, and calls for speedy, on-the-ground strategy tweaks. With this in mind, the firm that has fewer hoops to jump through in its decision-making process will ultimately grow faster.
Apart from Foodpanda, behemoth foreign competitors in the ride-hailing space such as Grab and Uber have also entered Indonesia and launched their own version of motorcycle taxis. But Go-Jek is still arguably leading the pack. It recently added US$550 million in fresh venture capital to its war chest. Ong thinks this might have something to do with Go-Jek’s ability to become the one-stop-shop for Indonesian users.
“I would say Go-Jek, given that it’s just focused on Indonesia, is driving vertical integration with its business. You open up the Go-Jek app and there are 11 or 12 businesses in there, beyond food delivery, payments, massages, manicures, and pedicures,” says Ong. “If you look at it objectively, Grab and Uber have been a bit slower on that, as they’re focused on their cars and taxis. What Nadiem did, which was really smart, was to ask: ‘If I had a platform with a lot of users, what else can I do on it besides transport?’ This is also what the WeChat folks in China did.”
To illustrate why Go-Jek is winning Indonesia’s large market of 250 million, Ong compares its success to China’s popular WeChat. Initially developed as a simple messaging app, WeChat has since grown into a one-stop-shop where users can do anything under the sun. WeChat users in Beijing can order food, pay for their meals, hail a taxi, and much more. This ‘one app to rule them all’ mindset that WeChat and Go-Jek have adopted works well because it addresses the diverse needs of the users, even beyond social and transport.
With fierce competition between foreign competitors like Uber, Grab, and local operators like Go-Jek in mind, Ong cites China as an interesting example. WeChat is among a number of Chinese tech giants that have flourished under the protection of the “Great Firewall of China,” which has kept out big players like Facebook, Google, and Twitter.
“I saw this all happen. A lot of American companies were complaining that ‘the Chinese government is blocking us.’ I would say at some level, some of those companies were just sore losers. They came into a country that has a different set of rules in terms of government relationships and requirements, but they wanted to play by US or international rules and didn’t have enough leaders on the ground. Then they were surprised when they lost,” says Ong.
He adds that it’s essential to look beyond simply blaming local businesses when discerning why foreign companies in China or Indonesia fail. According to Ong, one of the main reasons why foreign businesses are unable to take on their local rivals is because executives generally lack a deep understanding of the market they’re trying to penetrate.
“Things are not as black and white as ‘the government is blocking us’ or ‘the locals are fighting unfairly.’ Local companies are fighting by a different set of rules, that’s all,” says Ong. “The problem is that the leaders of foreign companies are refusing to go native.”
When Ong says “go native”, he’s referring to taking the plunge, and basing yourself in the target market to understand local culture, as well as the big, fat, hairy problems that need solving. Ong’s advice to foreign companies interested in entering Indonesia and attempting to take on local tech giants, like Go-Jek, is simple: immerse yourself and tap into the local talent pool.
He says, “Don’t take a lot of time to understand it intellectually, but just get on the ground. Go eat and drink at the local warung, hire lots of locals, understand the culture and try to understand economic and day-to-day pain points. You’ll figure things out a whole lot faster this way.”