How Grab works – Business model explained
The development of On-Demand taxi apps makes a lot of sense for current businesses, startups, or even enterprises because of the mobility and convenience of their workforce. In the taxi industry, on-demand services such as Uber have surpassed traditional services. Mobility solutions as a service have begun to replace privately-owned taxis as a preferred mode of transportation for many consumers (MaaS).
To substantiate this claim, consider that in 2017, Uber in New York collected 30 million more rides than standard taxis. Statista predicts that the global ride-hailing service market will grow at a compound annual rate of $126,521 million by 2025.
As this industry expands at such a rapid pace, we think it’s only fair to share with you how on-demand taxi app development is done. In fact, over the past couple of years — many new ride-sharing applications have come into existence, and Grab is one of them.
What Is Grab?
There are many products and services available through the Grab app in Southeast Asia, including food delivery and financial services. While attending Harvard Business School, Anthony Tan and Tan Hooi founded Grab, an on-demand taxi service.
Launched in 2012 as GrabTaxi, the car-hailing, ride-sharing, and food delivery service has grown to be Southeast Asia’s most popular in just four years.
Southeast Asia is where Grab is present, with offices in places like Singapore and Malaysia as well as Thailand and the Philippines.
In March 2018, Grab acquired Uber’s Southeast Asian business, launching it as one of the region’s most popular cab-hailing apps. Grab has announced a 70% increase in its revenue run rate for 2020.
The business model for Grab is very simple. Physical assets and drivers are rare in small businesses. Grab’s technology connects passengers in need of a ride with drivers who are willing to transport them, and Grab will eventually receive a share of the fees.
It all began in Malaysia, where the taxi industry is/was split between officially licensed and black market or unlicensed drivers who make a living transporting people around. From the beginning, it was clear what needed to be done.
As the largest ride-hailing company in Southeast Asia, Grab Holdings had proposed a $40 billion merger with Altimeter Growth Capital, which would make it a Nasdaq company.
Globally, Grab has 187 million users. It provides a wide range of services, such as taxi booking, carpooling, shuttle services, bike-sharing, and on-demand food delivery.
Funding & Valuation
According to Crunchbase, Grab has raised $12.5 billion in debt and equity capital through 34 rounds.
Tiger Global Management, SoftBank, GGV Capital, Yamaha, Microsoft, HSBC, Vertex Ventures, 500 Startups, and Toyota are among the notable investors who have put money into Grab.
Grab is hoping to raise $40 billion from the SPAC merger, which should be completed by the end of the year.
For the fiscal year 2020, Grab announced a yearly revenue of $1.6 billion. In the meantime, the company suffered an $800 million loss during the same time period.
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How Does Grab Work?
With operations in Southeast Asia, Grab is a one-stop shop for a variety of services, including insurance and food delivery. Grab is now available in eight countries, including Myanmar, the Philippines, Thailand, Malaysia, Vietnam, Cambodia, and Indonesia, thanks to the company’s rapid growth.
There are numerous products available depending on where you live. The app gives users one-stop access to all of the available products. WeChat and Meituan, two of Tencent’s apps, first popularised the concept of a super-app in China.
Grab currently provides the following products:
- GrabRides is a ride-hailing service that allows users to order taxis and other types of vehicles on-demand.
- GrabMart offers grocery delivery services to its customers.
- GrabFood is a food delivery service that provides customers with restaurant-quality meals.
- Insurance for travel and transportation is available through GrabInsure.
- To make in-store purchases, users can use GrabPay’s digital wallet.
- Drivers and customers can use GrabFinance’s ‘buy now, pay later’ option.
- Grab is constantly experimenting with new features to see which ones will be successful.
If a customer orders food or a cab, Grab will use independent contractors to help with delivery and mobility.
Grab can be downloaded and used on any Android or iOS smartphone or tablet.
Grab’s Business Model
Grab is an online aggregator with a simple business model but one that is highly sophisticated in terms of technology. Through the internet, this service connects people in need of a ride with people who are willing to provide transportation.
Grab takes a portion of the fare and then hands it over to the driver. Grab is a leading on-demand company that provides more than just cab services, with more than 6 million trips per day and 2.8 million drivers.
Throughout the years, the company has expanded and developed numerous revenue streams, such as hotel reservation services, restaurant ordering systems, and grocery shopping.
How Does Grab Makes Money
The revenue generated by Grab is directly tied to the number of passengers it transports. More drivers will sign up on the platform as passenger demand for cab rides rises, resulting in more trips. Grab makes a certain amount of money as commission on each successful ride.
Grab’s business model is based on commissions. It takes a commission of between 16 percent and 25 percent of the fare and gives the rest to the driver. If you want to know how Grab’s on-demand business works, you should get to know these important Grab partners first:
- Driver — The Service Providers
As a result, they join the platform in an effort to turn their riding services into a revenue stream. Grab allows its employees to set their own hours, and the platform provides a sizable number of rides.
To protect the personal and professional interests of passengers, the company, and drivers, Grab also has driver safety rules and a code of conduct policy.
Grab’s lucrative offers for drivers who complete rides motivate the drivers to earn more and complete more rides per month.
In order to qualify for car maintenance coupons, a driver must complete at least 60 rides in the Silver category. After Silver, drivers can qualify for lifestyle coupons and vouchers by taking 150 rides per month. Medical benefits are available to drivers who complete 300 rides per month under the Diamond category.
Such incentives entice more people to become service providers on the platform, which boosts revenue.
- Passengers — The Customers
Customers are the lifeblood of any business, and Grab is no exception. For drivers, the platform will be successful only when demand for cab rides increases. In other words, Grab is dedicated to creating a safe and transparent app that offers a first-rate user experience. It makes use of contemporary technologies to locate the closest available ride and to bring the driver on board so that the passenger can be picked up in a matter of minutes after conducting their search.
Grab provides a safe and comfortable ride for both passengers and drivers by enforcing strict rules. Passengers will feel secure on the journey thanks to the vehicle’s emergency SOS buttons and live tracking capabilities.
- Investors — The Financial Backbone
Grab gets its money from high-profile investors. Strategic Japanese investors contributed as much as $856 million in funding just recently in 2020. According to recent reports, Grab will merge with a U.S.-based altimeter called Growth Capital. The company’s valuation is expected to rise to $40 billion as a result of this transaction, making it eligible to list on the Nasdaq Stock Market.
In addition, Grab collaborates with businesses on marketing and partnerships that increase its revenue. It, on the other hand, does not advertise any discounts for customers and only seeks to make a minimal profit from the ride fare.
How Did Grab Become So Successful?
Have you ever wondered how the company was able to so quickly conquer Southeast Asia? Since Grab’s ride-sharing platform concentrates on three key elements, it’s easy to see why it’s in high demand.
- Achieving success in meeting local standards
- Taking an active role in resolving local transport issues
- Hyperlocal businesses are easily accessible thanks to convenient location
The rest is history, as they say.
For the Southeast Asian market, Grab is unquestionably the most popular and successful company, with 66 rides per second across seven countries on offer. Due to its easy access to the on-demand hyperlocal market and its ability to meet local requirements, this college project turned business venture has become a premium and well-known brand in the on-demand transportation market..