The Intense Market Competition of Indonesia Online Transportation

by | Apr 20, 2021 | Study Insight | 0 comments

Failures and lessons to be learned in the industry.

Indonesia is the country with the largest population in the world with a population reaching 273,52 million while 10,56 million people live in Jakarta. As Indonesia has a large population, the government has a target to increase the share of trips on public transport from 23% to 60% by 2030 (The Guardian, 2016). Public transportation has been really helpful and popular, especially nowadays many people use online transportation. They use online transportation because it is more useful and efficient.

In this article, we are going to talk about the development of online transportation in Indonesia and how the failures of several companies in this field can be learned later on.

Setbacks of Conventional Transportation

Some conventional taxis like BlueBird have been making moves to tackle some online transportation like Uber and Grab by filing a report back to the Indonesian government, which made Uber and Grab hustle to urge legal license to operate in Indonesia. Still, it did not stop BlueBird from losing profits. Instead, it backfired as they have created fully legal competitions to work in Indonesia, thus making them losing more. It decreased to the drivers’ demonstration and violence that now made them lose profits and hurt their brand, losing people’s trust and loyalty. Something that they’ve built hard over the years.

Numerous complaints of passenger’s experience for the corporate as customers claimed such as it is hard to book a cab and way too often, drivers take the longest route driving customers to their destination so that they can get more pay. It had a remarkable effect on the way satisfied customers of the ride-sharing startups started comparing the experience. The result is, conventional taxis did not stand an opportunity against the ride-sharing services. They appear never to bother fixing these issues and innovating; instead, they specialize in tackling their competitors.

So when online transportation like Uber and Grab finally set foot in Indonesia, it is about time to show the table as they rely heavily on customer satisfaction. Drivers are thriving to supply excellent service too. No got to put strenuous effort into reporting once you are on the ride with a crazy driver. We need to give them 1 rating, which will affect their performance to urge more bookings within the future. Passengers get what they pay, and drivers get what they supply to customers—Fair and square (The Daily Storm, 2016).

Overview of Indonesia’s Online Transportation

In the current disruptive era, technological development is developing so rapidly that it encourages the creation of innovations and ultimately replaces the previous technology. One industry that is experiencing very rapid growth today is the online-based transportation business. 

Indonesia’s online transportation sector began with the presence of the first online transportation company in Indonesia which was PT Gojek Indonesia in 2011 that was founded by Nadiem Makarim. Gojek allows users to order motorcycle taxis online in a very modern and professional way than the conventional ojek. Besides Gojek, Grab is also a leading company in the market. Grab itself was present in Indonesia in June 2012 as a taxi ordering application and since then it has provided various transportation options such as cars and motorbikes. 

These two companies already have the decacorn title for start-ups that are valued at over USD 10 billion in Southeast Asia. Throughout 2019, Gojek has contributed to the national economy of IDR 104.6 trillion to the national economy or about 1% of Gross Domestic Product (GDP) through their five dominant services, namely Gofood, Gopay, Gosend, Gocar, and Goride. While Grab’s contribution to the national economy over 2019 reached IDR 77.4 trillion or less than 1% of GDP. This contribution was contributed from various features owned by Grab, namely GrabBike, GrabCar, GrabFood, and GrabKios (Kompas, 2020). With a big amount of contribution to the country, these companies become the leading players in the market.

Collapses in the Online Transportation Sector

In 2020, there are 21.7 million Indonesians who are using online transportation for their daily mobility as the online transportation has grown rapidly in recent years. Not only providing transportation services, but many companies are expanding their services to provide easy mobilization for their customers. However, many companies try to enter this market but fail to survive the existing competition. Competition in the rates offered and failing to develop the technology becomes a significant problem. These following companies are some of the online transportation companies that were present in the Indonesian market but were forced to stop their operations.

Uber

Uber, one of the world’s first online transportation companies, entered the Indonesian market in August 2014. Unfortunately, during its four years of operation, Uber discovered its failure in Indonesia and was acquired by another transportation company, Grab. They find it difficult to compete with local players as well as having to follow the rules in several Southeast Asia countries. The way Uber did business during expansion was too much in line with the American way of life, for example, the sleek black brand design and over simpleness in the app that reflects a minimalist American style that sometimes didn’t “fit in” very well. 

Source: Kumparan

In addition, Uber has entered several countries where local players have copied their business model and succeeded. So when Uber entered the condition was just the opposite because the market in that country was already familiar with the business model and was not too impressed with what Uber was doing. Local players who appeared first by copying Uber’s business model immediately caught the attention of many people.

Blu-Jek

Appearing at the end of 2015, the company founded by Michael Manuhutu and Garret Kartono is known for its distinctive blue jacket color, as well as the GPS compass logo, many of which say they are strong competitors for Gojek. Based in Jakarta, they are one of the online transportation startups that have succeeded in owning a fairly large fleet (Tirto, 2019).

Source: Tirto

However in the last few years, Blu-Jek’s official website has been shut down and the last tweet on Twitter was discovered on December 17, 2015. Blujek suffered an unknown amount of losses in a fare war between other online transportation companies and was forced to close (Detik, 2019).

Ladyjek

LadyJek is a motorcycle taxi service, or commonly called ojek, specifically for women. Prioritizing security which has been a barrier for women to use public transportation services with some specialized features like panic buttons and live tracking. The goal is that the driver can provide location updates if something unwanted happens (Daily Social, 2015).

Source: Merdeka

Unfortunately, this new online transportation concept has failed in the market. One of the problems that users experience quite often is the application is riddled with bugs. In addition, market competition based on tariff prices was also a factor in this failure.

Lesson Learned For The Future

As one of Indonesia’s prominent industries, the transportation industry has a crucial role in Indonesia’s tourism industry, and it will be very promising for subsequent few years. However, there are some lessons learned from the failure of the beginning up above that we will learn and implement in our business within the future.

Find genuine solutions to real-world problems

Every business that exists has to serve a requirement for its customers. However, most companies employ an equivalent limited set of business models – which are rarely enough to unravel all the various challenges customers face in the future. Companies that will grow are companies that provide unique services and offer better solutions.

The only thanks to growing rapidly are by offering a product or service that’s unparalleled by any of its current competitors. Customers will happily work with a corporation that gives something better – even though it is costlier – but that company must be passionate and communicate the advantages of its services over competitors (Single Grain, 2016).

Be an early adopter

Being the primary entrant into a replacement market is crucial. It has more significant opportunities to allow it to carve out an outsized share of the market. As a result, consumers will nearly always think first once they consider ride-sharing companies – and that’s the type of brand name recognition you can not buy.

For this reason, there will be a significant benefit to entrepreneurs who take their ideas to plugins as soon as possible. While a part of that difference is often attributed to the corporate offering a more comprehensive array of services and participating in additional markets, the greater brand exposure from being a primary adopter also plays a key role.

Certainly, it would help if you didn’t rush things to the purpose of launching before you’ve got a viable product or service. But there has to be something to be said for the thought of the viable product minimum. do not waste time with endless tweaks when there’s a definite advantage to being the primary to enter your new market (Single Grain, 2016).

Consider all possible venues of expansion

Expanding and exploring into new markets is, obviously, one of the foremost effective ways to grow a business. Startups got to consider every possible avenue for expansion, which can include:

  1. Finding new customer demographics
  2. Penetrating new markets or regions
  3. Using demand generation marketing tactics
  4. Growing a base of repeat customers
  5. Expanding What Your Service Entails

Never being one to keep far away from taking over new opportunities, be recently expanded what their service offers. They need no limits once you consider their high involvement with the latest technology that most other businesses have not yet touched. Driverless cars, flying taxis, the list could most certainly continue (Single Grain, 2016).

Keep it simple

Contrary to popular belief, elegant business models are rarely the thanks to accompanying startups. More moving parts during a business model means there are more ways for things to travel wrong. Ironically, taking the time to make a well-optimized approach is often far more challenging within the early stages. However, it will save considerable time and energy down the road, allowing you to release resources to specialize in growing your startup.

The original business model and plan were actually more complicated than the one they ended up. Offering ‘luxury taxis’ to consumers was complex. It wasn’t what they began to do. Luxury taxis were only one way they might set about achieving that goal. It wasn’t until they searched beyond that and discovered that they needed to supply a ‘better experience’ and luxury cabs would be one among many benefits (Single Grain, 2016).

Understand the character of adjusting markets

Over the centuries, many philosophers have acknowledged that change is the only constant in life. That position couldn’t be any longer proper for growing business startups – especially within the 21st century. Capitalism may be a constantly evolving ecosystem, which suggests that companies have to answer changing customer expectations, new technology, and regulatory uncertainty. Many government agencies feel compelled to make new laws addressing any problems that come to their attention.

Companies that compete within the sharing economy face another sort of scrutiny on top of those challenges. People often expect them to possess a more simple mission than corporate service providers, suggesting that customers hold them to a better standard. Transparency is the best thanks to avoiding these issues. The criticism during this case isn’t centered around (Single Grain, 2016).

Start Your Business with BRIGHT Indonesia

With the rapid advancement of technology advancement and the development of the economy in Indonesia, traffic congestion nowadays has become serious—one of the problems within the quality of life among the urban population. At present, because of the necessity of owning a vehicle, the amount of private-owned vehicles has tremendously increased, and ride-hailing online transportation is coming to Indonesia and becoming popular.

With several startups that lose out on the online transportation market competition, you need an excellent strategy to register at the beginning if you want to start your Indonesia Online Transportation Industry. Start your business with a local partner like BRIGHT Indonesia can be one of your strategies to register your business. BRIGHT Indonesia provides several services to help set aside the challenges, such as Business Partnership Engagement, Foreign Direct Investment Promotion, Management and Strategy Consulting. To help your company’s growth, we can provide services such as providing a list of potentially suitable partners, developing corporate or business strategies, and linking your company to both private and public sectors in global FDI.

With exceptional local market expertise and networks in Southeast Asia, BRIGHT Indonesia will offer excellent services explicitly designed to achieve your company’s goal. 

For more information, email info@brightindonesia.net

This article is co-written by Alifia Berizky

For a no-obligation discussion about available opportunities or navigate business in Indonesia, please get in touch with Primadi Wahyuwidagdo Soerjosoemanto, Co-Founder & Principal Partner at info(at)brightindonesia.net, or Eric Lesmana, Managing Partner and Head of Consultant at eric(at)bright-Indonesia.net

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