Amazon engaged Indonesian ride-hailing firm Go-Jek in preliminary talks to create a partnership, according to the Wall Street Journal. There are few details available on what the partnership would involve, but as part of a potential deal, Amazon would likely make a capital investment in Go-Jek.
Though Go-Jek grew market share in Indonesia as a ride-hailing company, it has since expanded to five Southeast Asian countries, offering a wide range of services including food and grocery delivery, mobile payments, and courier services. Through these expansive offerings — creating what is referred to as a “super app,” similar to what WeChat offers in China — Go-Jek attracted an estimated 20 million to 25 million monthly users in 2018, despite lagging local competitor Grab in share of the Indonesian ride-hailing market.
Go-Jek’s positioning as a broader logistics platform makes it an attractive investment for Amazon. Amazon has been expanding its logistics network as a means of lowering shipping costs, which surpassed $8 billion during Q2 2019. Amazon appears to be taking a two-pronged approach to developing these logistics capabilities:
- Developing full-scale logistics operations. Shipping with Amazon launched in February 2018, allowing third-party merchants on its e-commerce marketplace to ship packages through Amazon’s network. And in June 2018, it introduced Delivery Service Partners to facilitate the expansion of its network; the program encourages people to become delivery partners with Amazon, providing such services as a leasing program for Amazon-branded delivery vans. These efforts are helping Amazon to handle more of its own package deliveries, and to position itself to compete against established shipping companies, including UPS and FedEx. The efforts have been concentrated in markets where Amazon has an established footprint, particularly the US.
- Partnering with logistics operators. In May 2019, Amazon led a $575 million funding round for London-based food delivery company Deliveroo. Deliveroo operates in 14 countries, with 60,000 couriers on its platform. Food delivery may be an attractive industry for Amazon because it provides a near-term use-case for developing logistics operations — the delivered goods come from restaurants rather than warehouses, meaning less infrastructure investment. Amazon is reportedly looking to enter the food delivery market in India with local partner Catamaran, with a target of operating later in 2019.
A Go-Jek investment could lay the groundwork for Amazon to accelerate its expansion into Southeast Asia. The e-commerce giant is currently only in Singapore, but other markets hold significant potential. The Indonesian market — home to 260 million people — had $12.2 billion in e-commerce sales last year, and is expected to reach $53 billion in sales by 2025, according to a Google report cited by the Wall Street Journal. By investing in Go-Jek, Amazon could ease the logistics buildout that would be necessary ahead of a potential entry to the market.
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