grab-business-model

How Does Grab Make Money? The Grab Business Model In A Nutshell

  • Grab is a Singaporean food delivery, transportation, and digital services company founded in 2012 by Anthony Tan and Tan Hooi Ling. Tan was inspired to create the platform to revitalize the Malaysian taxi industry
  • The Grab app has been compared to WeChat and Alipay for its versatility and diverse product offering. Grab takes a 16-25% commission for every ride it facilitates and charges delivery fees across its food, courier, and home shopping services.
  • Grab charges premiums to individuals and driver-partners who desire insurance cover. The company also collects a fee every time a consumer purchases from a merchant using GrabPay.

Origin Story

Grab is a Singaporean food delivery, transportation, and digital services company founded in 2012 by Anthony Tan and Tan Hooi Ling.

Tan first had the idea for a taxi-booking mobile app in Southeast Asia while studying at Harvard Business School. At the time, the Malaysian taxi industry had a poor reputation. Customers were frequently overcharged by drivers and the security of women using taxis was a significant concern.

Grab began as the MyTeksi app in Malaysia after Tan partnered with fellow Harvard graduate Tan Hooi Ling. The app was funded with a $25,000 grant from Harvard Business School and Tan’s personal capital. Two years later, the company headquarters shifted from Malaysia to Singapore. There, the company invested in a fleet of 100 fully electric taxis, becoming the largest such fleet in Southeast Asia.

As the company continued to expand, Tan maintained a focus on improving the safety of women passengers in particular. Every Grab driver was interviewed personally before they were recruited, a process Tan admitted was exhaustive but non-negotiable.

Within seven years, Grab’s ride-hailing service could be found in eight countries across Southeast Asia. In 2018, the company momentously acquired rival Uber’s entire presence in the region. Users can now hail a range of transportation options in addition to taxis, including private vehicles, bicycles, shuttle services, bike taxis, and car-pooling. 

The app then followed a similar model to so-called “super apps” such as Alipay and Wechat, offering additional services like hotel booking, ticket purchasing, food delivery, grocery shopping, and on-demand video. In recent years, Grab has also moved into fintech with a range of insurance and loan options available to small-medium enterprises.

In June 2021, Grab postponed a $40 billion IPO because of an intended merger with acquisition company Altimeter Growth Corp. First-quarter revenue for the same year totaled $216 million.

Grab revenue generation

Grab has an extensive revenue generation strategy, owing to its diverse range of products and services. Without further ado, let’s dive into how the company makes its money.

Ridesharing

For each successful ride Grab facilitates, the company earns a commission of 16-25% of the total fare. 

The remainder of the fare is then distributed to the driver.

GrabFood and GrabMart

GrabFood is a food delivery service offered in more than 200 cities across the region. For the privilege of having their food delivered, Grab charges consumers a delivery fee. 

This fee depends on the time, area, and merchant processing the order.

Food can also be ordered and delivered from GrabMart, an on-demand delivery service for everyday items such as groceries, packaged food, and healthcare products. For GrabMart customers, there is also a delivery fee.

GrabAds

GrabAds enables business owners to connect with millions of online and offline customers. The advertising service can be used to drive store traffic, boost sales, attract new customers, or promote a product.

Here, the company offers typical website advertising in the form of banners and mastheads. Alternatively, a business can also utilize the Grab taxi fleet for car wrap advertising or branding and sampling purposes. Prices are available on request and are tailored to each advertiser.

GrabExpress

GrabExpress is a courier service available to consumers for any purpose, whether that be sending a birthday gift to a friend or having an urgent document signed and sent back.

There are several GrabExpress delivery options, depending on the size of the package and how urgently it needs to be delivered. Here, the company charges a base fare plus a fee for every kilometer the courier travels. There is also an additional fee for multiple-stop deliveries and return trips.

GrabInsure

Grab also offers insurance to individuals and rideshare drivers. Currently, the company offers travel insurance and ride cover insurance to individuals, with the latter protecting against late pickups and car accidents.

For rideshare drivers, insurance also provides accident cover, excess cover, and income protection for earnings lost because of prolonged sickness. Again, prices are tailored to the individual and for drivers, policy rates are determined by their Grab driver-partner rating.

GrabPay

Like many similar platforms, Grab offers payment facilitation services using a digital wallet.

GrabPay can be used for in-store purchases, rides, food deliveries, and funds transfers.

For merchants that want to accept GrabPay as a form of payment, the company charges a so-called Merchant Discount Rate (MDR) for every transaction processed through their unique QR code.

Exact MDR figures are not disclosed. However, most fees are typically between 1.2-2.9%.

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