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Grab’s Business And Revenue Model Explained : How it Works?

One of the leading ride-hailing platforms, Grab is trusted by more than 187 million users. Right from booking services for taxis, car-pooling, shuttle services, bicycle-sharing, etc. to on-demand food delivery services, it has a lot to offer.

 Do you want to know how Grab works, and what are the factors that propelled its growth? Let us gain some insight into its business model and understand how it used the on-demand model to build a billion-dollar company. 

How Does Grab Work: Business & Revenue Model Explained

Grab, an on-demand ride-hailing platform was conceptualized by Anthony Tan and Tan Hooi while pursuing MBA at the Havard Business School. The Singapore-based company was initially launched as GrabTaxi in 2012 and has since been a growing business that offers ride-hailing, ride-sharing, and food delivery services via its mobile app in Southeast Asia. 

Grab offers services in Southeast Asian countries like Singapore, Malaysia, Indonesia, Thailand, and the Philippines. In March 2018, Grab acquired Uber’s operations in these Southeast Asian countries, which triggered its growth towards becoming one of the most popular cab hailing apps in South East Asia. In fact, Grab claimed their annual revenue run rate to grow by 70% in 2020.

Understanding Business Model Of Grab

Grab is an online aggregator with a simple yet technologically advanced business model. It offers an online platform for those looking for a ride and connecting them with the right people willing to offer ride services. Grab charges a particular sum from the fare, while the driver gets to keep the rest of it. 

With more than 6 million rides per day and 2.8 million drivers, Grab is now one of the leading on-demand businesses that offer more than just cab rides. Over the years, the company has expanded and created multiple revenue sources from hotel booking services, food ordering platforms, grocery shopping, and many more.  

The picture below shows how Grab works:

For drivers

Grab Business Model

Source: Grab.com

For passengers

How Does Grab Works?

Source: Grab.com

How does Grab make money?

How Does Grab Make Money?

Source: Techcrunch.com

Grab’s revenue depends on the passengers or the customers. Greater the demand for cab rides from passengers, the more drivers will sign up on the platform, generating an increasing number of rides. With each successful ride, Grab earns a particular sum as commission.  

Grab works on a commission-based business model. It charges around 16% to 25% as commission from the ride fare and pays the rest to the driver. To understand how Grab’s on-demand business works, you need to know the key partners that complete the Grab model:

Drivers: The Service Providers

They sign up on the platform as a way of creating an income source through their riding services. Grab offers flexible working hours, and they also get considerable rides from the platform. Grab also has driver safety rules and a code of conduct policy to safeguard the personal and professional interests of passengers, the company, and the drivers. 

The drivers earn a considerable amount and are encouraged to complete more rides in a month, with Grab’s lucrative offers for drivers completing rides. 

A driver who completes at least 60 rides belongs to the Silver category and is eligible for car maintenance coupons. The second category is the Gold, where drivers need to complete 150 rides per month and are eligible for lifestyle coupons and vouchers. The third category is Diamond, where drivers who complete 300 rides per month are eligible for medical health benefits. 

Such offers encourage more people to join the platform as service providers, which ultimately escalates the revenue to greater heights. 

Passengers: The Consumers

Passengers are the consumers, and like any other business, they are the lifeline of Grab. Only when there will be more demand for cab rides will the platform be successful for drivers. Therefore, Grab diligently works towards creating a safe and transparent app that amounts to an impeccable customer experience. It leverages modern technologies to identify the nearest ride available and gets the driver on board so the passenger can get a pickup within minutes of their search. 

With strict guidelines for passengers and drivers, Grab ensures a pleasant ride for both parties involved. It also has safety SOS buttons and live-tracking features that make the passengers feel safe during the journey. Such additions attract more passengers to the platform. 

Investors: The Financial Backbone

Grab raises its funds from big-shot investors. Recently in 2020, it raised as much as $856 million in funding from strategic Japanese investors. The latest reports suggest that Grab is likely to merge with a U.S. based altimeter named Growth Capital. This deal is estimated to increase its valuation to $40billion, and make the company eligible to be listed on the Nasdaq Stock Market. 

Revenue Model of Grab

Source: FinancialExpress.com

Grab also works in collaboration with companies for marketing and partnerships that add to its revenue source. It, however, does not promote any discount offers for riders, and sticks to earning a minimum commitment from the ride fare. 

Conclusion

Grab is undoubtedly one of the most popular and successful businesses in the South East Asian market, with around 66 concurrent rides per second across the seven countries. The easy access to the on-demand hyperlocal market and the capabilities to meet the local requirements has made this college project turned business venture into a premium and reputed brand in the on-demand transport market. 

June 14, 2021
Author

Aashish Sharma

An enthusiastic content writer and marketer who loves to write on the latest trends and updates of the digital world. Always looking forward to creating and sharing quality content that can withstand the competition.

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