The story of Uber is without any doubt one of the most impressive ones among new Silicon Valley Tech Giants. Some months before its 10th anniversary Uber has become the most popular ridesharing service with more than 7 million drivers globally.
However, when it comes to Vietnam, Uber stopped its operation in several South-East Asian countries this year and sold its Vietnam business to Singapore based competitor Grab. The Washington Post argued that this strategic deal was supposed to prepare the company for an IPO this or next year, which sounds reasonable. Nevertheless, the deal followed another deal in 2016 when Uber withdrew from the Chinese market because the company was less popular than local competitors.
Although details about both the China and South-East Asia deals have not become public, the de-investment strategy will likely be the result of lower than average profit margins in that region.
During my past years in Vietnam I observed the development of Uber and Grab and would like to share with you my opinion why from a cultural point of view Grab outperformed Uber over the years.
I have extracted the 5 main reasons:
1) Accepting cash payments
When Uber launched its services in Vietnam, rides could only be paid by credit card since the handling of cash payments was likely considered to be too costly.
During my time in Vietnam I learned about the importance of cash payments not only because people are used to pay cash but because most Vietnamese would only pay for a service once it is delivered in full and at their satisfaction. An app debiting your credit card automatically would mean a loss of control.
We know that legal enforcement in Vietnam has yet to be improved. Paying cash means security.
2) Fixed fares
Unlike Uber, Grab offered the customers fixed fares for their booking long before Uber did the same. Although there were times when the Grab price was more expensive than the indicated Uber price, most Vietnamese I met would book the Grab service – likely for the same reasons as in 1).
3) Xe Ôm drivers
If you lived in Vietnam during that time you will remember that in the beginning Uber did not offer motorbike taxi services. The Xe Ôm drivers have a long tradition in Vietnam and when Grab launched its service to offer motorbike taxi rides both driver registrations and bookings exploded. Uber only followed months later when Grab’s “Grab Bike” service was already launched and thousands of drivers had already registered.
4) Their platform is better, but…
What are the advantages of a highly sophisticated platform if you cannot read a map? 9 of ten times I booked a Uber or Grab service I would receive a call from a driver asking me where I am and how he could get to my place. A big number of drivers in Ho Chi Minh City come from the countryside and they just have never needed to develop skills on how to read a map. So instead of using all the functions of an app they would rather give you a personal call. One of Uber’s biggest competitive advantages was unfortunately useless in Vietnam.
5) Branding – the green jackets
Uber only focused on branding once hundreds or thousands of green jackets filled the streets of Hanoi and Ho Chi Minh City. Grab succeeded in establishing its brand with green jackets and helmets for the Grab Bike drivers. Again, Grab was first and after they had already established their competitive advantage, Uber followed some weeks later. Further, the drivers appreciated it a lot to have a good jacket and a rain coat to drive more safely and without getting wet.
Probably, we will never know all the reasons why Uber sold its business to Grab and why their South-East Asian business was likely underperforming. Nevertheless, these 5 examples show the high importance to understand and adapt services to the local market needs. Don’t forget to include the locals in the decision making and respect local culture and habits.
