Already, some food delivery companies have sliced their minimum order amounts and introduced promo codes as competition heats up with the entry of Grab.
Grab agreed to buy Uber's food- and ride-hailing operations in Southeast Asia, giving the US firm a 27.5 percent stake in return AFP/Roslan RAHMAN
SINGAPORE: The entry of a heavyweight player like Grab has turned up the heat in the local food delivery scene and some observers expect a tussle for market share to whip up a potential price war here.
GrabFood, the food delivery arm of Grab, was officially launched in Singapore on Monday (May 28). It replaces UberEats, which the ride-hailing giant had acquired when it took over Uber’s operations in Southeast Asia, and will go head-to-head with a slew of food delivery apps.
Among them include foodpanda and Deliveroo, which entered Singapore in 2012 and 2016, respectively.
While the growing food delivery scene has seen various new entrants over the years, Grab’s market stature and deep pockets “will definitely shake up” the industry, said associate professor Lawrence Loh from the National University of Singapore (NUS) Business School.
“It is coming from a totally different vantage point,” he explained. “Once Grab is in, the market’s competitive dynamics won’t be the same anymore.”
Echoing that, Mr Samuel Tan, a retail management expert from Temasek Polytechnic’s (TP) School of Business, said Grab is supported by competitive advantages derived from the acquisition of UberEats and its domination of the on-demand transportation market.
“They are building on the large customer base of existing Grab services and UberEats. Food and beverage vendors will be eager to come on board given the established set-up … Additionally, in terms of technological advantages, Grab has its own expertise on top of that from the merger with UberEats.”
Grab also seems “serious about getting a stronghold in the food delivery business” as it steers itself towards the goal of becoming an “everyday app”, said Assoc Prof Loh.
“To be able to attract so many restaurants within two months says something … This is just the beginning and I don’t think they will stop here.”
PRICE WAR BREWING?
Price will likely be the first battleground for the eager new player aiming for a slice of the market pie and incumbents defending their turfs, experts told Channel NewsAsia.
This boils down to how price-sensitive customers are and the low switching costs involved. “An alternative option is just an app away,” said Assoc Prof Loh.
Nanyang Technological University’s (NTU) associate professor Momin Zafar Abdulmajid reckoned “a price war is imminent as Grab looks to build up the size of the business quickly”.
Already, GrabFood has dished out a promo code giving users a S$5 discount for three orders before the end of this week, among other promotions.
When asked if there could be more discount codes in the pipeline, a Grab spokesperson said the company “continually creates new and exciting products, not just on the food delivery front, to ensure that customers always have something new and exciting to look forward it”.
File photo of a GrabFood delivery. (Photo: Grab)
Other food delivery players also seem to be gearing up to compete on price.
Apart from a promo code for first-time customers, London-headquartered Deliveroo has sliced its minimum order value from S$18 to S$12 and reduced delivery fees by 50 cents to S$3.
Homegrown online concierge service Honestbee also cut its minimum spend on orders by nearly half to S$8 in April and offers free delivery. “We hope that we’ll be able to entice more customers to try out our food delivery service,” said its Singapore managing director Chris Urban.
Over at major player foodpanda, the minimum spend was reduced to S$12 from S$15 in February. When asked if it could do away with that or have promo codes like its rivals, managing director Luc Andreani replied that the company focuses on balancing a long-term business model with “the dynamics of the industry” and is “continuously exploring next steps”.