The rise of the superapps was an inevitability. In the tech world, the consolidation of products and services is becoming the USP for many companies thriving amidst the ultra-competitive landscape. Just take a look at Silicon Valley’s Big Four tech companies – Facebook, Amazon, Netflix and Google – known as FANGs, which have grown from offering a simple, singular service at its inception into the behemoths of today with an umbrella of services at their disposal, from AI, to FinTech, cloud services, to the launching of their own digital currency.
It’s easy to see why the superapp formula is so appealing. Having multiple individual apps makes the smartphone user experience cumbersome, as users have to scroll through pages upon pages of widgets to find what they’re looking for. A superapp streamlines this process, acting as a one-stop shop for a whole host of miscellaneous services, akin to what a department store or a supermarket is to retail. Why go through the hassle of downloading multiple apps when you can access multiple services with just one?
This formula has paved the path for the fruition of superapps around the world and is especially popular in less mature markets with an absence of established competitors with strong brand loyalty. In Southeast Asia, aspiring superapps are slowly gaining traction. Established in Indonesia as a ride-hailing service a decade ago, Gojek is now considered as a “decacorn” with a valuation of US$10 billion providing more than 20 services including food delivery, mobile payments, grocery delivery, and courier services.
As tech companies jostle for market dominance in an industry that is still fragmented with plenty of small players, some app-based companies have embarked on an ambitious goal to offer services far beyond their original purposes. Starting from a ride-hailing service, Grab has expanded to mobile payments with GrabPay, a QR-code based payments service, and on-demand food-delivery with GrabFood, and is even expanding into offering online video content, ticketing, and mapping services.
Superapps hold enormous promise in South-east Asia due to the region’s massive young, tech-savvy population. The 641 million people who call the region home are younger, more urban, and upwardly mobile. The growth in internet and mobile phone users, driven by more affordable smartphones and mobile data plans made Southeast Asia a thriving geographic region of new digital users for tech companies to tap into. For comparison, Southeast Asia has an internet penetration rate of 58 percent, compared to 88 percent in Northern America and 94 percent in Northern Europe.
This potential has not gone unnoticed, evident by the investments rapidly flowing in. Lazada has been on the receiving end of an almost US$4bn investment from China’s Alibaba. On a macro level, takeovers of tech companies in Southeast Asia hit US$4.9bn in the first half of 2019, almost double the US$2.2bn accrued over the same period last year. Homegrown companies aren’t faring that poorly either. Southeast Asia’s tech unicorns – start-ups valued over US$1bn – had a collective market value of US$34bn in 2018, according to Bain & Company.
For some, the fast growth expansion to becoming a superapp has proven to be too much and they risk running out of capital or delivering a sub-par product while chasing after the dominant superapp ambition. An example will be homegrown start-up Honestbee which was founded in 2015 and quickly grew from an online grocery delivery service into an all-encompassing app, delivering everything from food, laundry, and tickets. The company was forced to stop its food delivery service in Singapore in May 2019 and had to temporarily suspend its operations in Japan and the Philippines, due to financial woes. The embattled grocery start-up owed about US$209m to its largest creditors as of August 2019.
Conversely, if you grow at a leisurely pace, you risk being eclipsed by competitors, or worse, becoming an acquisition target for larger companies. Southeast Asia’s relatively underdeveloped infrastructure and landscape could present a huge opportunity for superapps that can successfully fill in the gaps. Many of the region’s residents rely on the informal economy for their goods and services, leaving them vulnerable to sudden price surges or a lack of supply. As such, successful superapps in the region will have the first-movers advantage in several sectors that do not have the required infrastructure to sustain the region’s large number of unbanked and underbanked individuals. With only 42% of Southeast Asian residents owning a bank account, the fintech offerings of superapps can accelerate and help drive financial inclusion within Southeast Asia.
Ultimately, it remains to be seen if the rising prominence of superapps is a harbinger of things to come, or just a passing fad. Aspiring superapps need to find the right pace of expansion to ensure sustainable growth and profitability. It is crucial to avoid becoming a jack-of-all-trades but master of one, by tailoring and refining the superapp specific to the needs of a diverse set of customers.