BusinessGojek-Tokopedia Merger. Purpose and Impact

Gojek-Tokopedia Merger. Purpose and Impact


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The rumors of the merger of Gojek and Tokopedia were finally answered. The two companies finally confirmed the news that had been circulating in the public since the last year with the announcement of the merger into the GoTo Group on Monday (17/5).

GoTo is claimed to be the largest business collaboration in Indonesia as well as the largest collaboration between two internet and media service companies in Asia at this time. The two companies will complement each other for a variety of services to consumers, ranging from e-commerce, delivery of goods and food, transportation, to finance.

According to the expert of Researcher Center of Innovation and Digital Economy Indef Nailul Huda, the merger of Gojek and Tokopedia is inevitably necessary because competition in the Indonesian digital economy sector is increasingly narrowing to big players.

Its dominance has even penetrated to the Southeast Asia (ASEAN) level. First, there is the SEA Group with one of its e-commerce business lines Shopee.

Second, a business collaboration of Grab, OVO, and EMTEK. So, Gojek and Tokopedia are trying to answer this challenge through a merger action.

“I think the goal of GoTo formation is to compete with the SEA Group and Grab,” said Huda.

According to Huda, if the goal is to compete in the Southeast Asian market, GoTo has the potential to increase its market share and valuation. The prediction is that the GoTo merger valuation value can reach US $ 20 billion to the US $ 25 billion or the equivalent of Rp. 284 trillion to Rp. 355 trillion (exchange rate of Rp. 14.200 per US dollar).

“Although this is still far from the (valuation prediction) of the SEA Group of US $ 120 billion, if the strategy works, then the IPO can (make valuations) soar, especially if it can dominate the market share in Indonesia, which is the largest market share in ASEAN, “Huda explained.

However, if you want to compete in the Asian market, according to Huda, the potential to become king is still quite difficult. Because like it or not the dominance of Chinese digital companies is still the strongest in Asia.

“Unicorns in ASEAN cannot compete with digital giants like Alibaba. GoTo is also far away,” Huda said.

Another Indef Economist, Bhima Yudhistira Adhinegara, also shared the same opinion. According to Bhima, the challenges at the Asian level are huge because there are players like Alibaba and Tencent.

“It is still difficult to estimate at the Asian level, but if in Southeast Asia (market share and valuation) may be sufficiently increased after the merger, we must be aware of Shopee and Grab, which might merge,” said Bhima.

Bhima sees that the current GoTo merger is more aimed at complementing the various services that the two companies can provide to consumers. The reason is, Gojek has advantages over on-demand services and digital payment systems.

Meanwhile, Tokopedia is a big player in the e-commerce sector. These various things are trying to combine so that they become stronger in one group so that services can be integrated into consumers.

“This is indeed a momentum to significantly increase the market share of Gojek and Tokopedia,” said Bhima.

Bhima sees that there are several impact simulations. First, after the merger, if the company makes an Initial Public Offering (IPO ), then the funding they collect will be greater.

In this condition, there are two possibilities, namely that it could be possible to increase promotions to discount rates for users. This is because more and more sources of funds can be “burned to win the hearts of the market”.

However, because of the IPO, there is accountability to the public, and it could also be the other way around. Promotions to discounts are limited because the company must be profit-oriented.

“So the promotion itself will probably decrease because it is profitability oriented, especially when it is opened to the public, IPOs, demands from public investors will encourage more to seek profitability. This will be the question of whether consumers will be loyal?” said Bhima.

Second, according to Bhima, after the merger, there is a possibility that the two companies will develop more integrated logistics so that there is still the potential for postage services to be cheaper for users. Especially for the delivery of groceries at Tokopedia because it can take advantage of Gojek’s logistical network.

Third, the payment system and lending and borrowing ( peer-to-peer lending ) can be stronger and more aggressively offered to users.

“So in the future, people can buy goods on Tokopedia to use the credit scheme from Gopay, so it is not only a payment system but also P2P because there is PayLater,” he explained.

Apart from these three things, there are also negative impacts from this merger. Learning from the development of digital companies in China which are controlled by a handful of big players, can lead to the creation of unhealthy competition.

“This can repeat the case in China, maybe not similar, but almost the same, where one of the weaknesses of a digital system that is integrated into a handful of players, it can hinder the innovation of new players. Another antitrust problem is related to the digital market monopoly,” he said.

According to him, if the digital market is already controlled by big players, it will be difficult for small players to develop. Even if they dare to enter the market and have good innovation, it is not necessarily that the market will pay attention to it because they already depend on the broader ecosystem of big players.

“This makes switching costs for people to move from one platform to another expensive, difficult,” he added.

Meanwhile, Huda sees that the short-term impact of the Gojek and Tokopedia merger will certainly benefit consumers.

“Consumers will benefit from competition in terms of prices, such as discounts, free shipping, and cashback, which I think will still be used to compete,” said Huda.

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