The Merger Decision between Tokopedia and Gojek is Getting Closer

Gojek and Tokopedia are reportedly getting closer to the merger decision. The report from D-Insight said that the two of them had signed a conditional sales and purchase agreement (CSPA) or a conditional sale and purchase agreement, with the ownership of Gojek and Tokopedia being allocated for the 60/40 distribution.

The hope is that the combined entity will be listed for the first time on the Indonesia Stock Exchange, followed by listing in the United States. Analysts say that the Gojek-Tokopedia merger is an important step to strengthen Tokopedia’s position against Shopee, which continues to erode Tokopedia’s market share.

Based on the iPrice survey, Shopee has surpassed Tokopedia as the market leader since the fourth quarter of 2019. A number of more optimistic observers believe that the combined entity Gojek and Tokopedia will be a strong contender for Sea Group (Sea Limited/parent of Shopee), which has enjoyed a share increase rapidly over the past year.

According to Technology and Informatics (IT) Observer Heru Sutadi, the consolidation between Gojek and Tokopedia will strengthen the existing ecosystem and build things that both parties did not previously have.

“(With the consolidation) the shortcomings of Gojek will be answered by Tokopedia and vice versa. For example, with consolidation, Tokopedia could become a decacorn startup,” Heru said. Another advantage that will be gained from the consolidation of Gojek and Tokopedia is the Gopay payment system which may dominate.

Shopee is not Worried about the Tokopedia-Gojek Merger Issue

Taking a closer look at the dynamics of competition, Sea Limited as the parent of Shopee was not worried about the merger. E-commerce is essentially a business that “burns” money, and market leadership usually means whoever is better capitalized.

In this regard, Shopee is in a stronger position to compete because they can rely on an unlimited source of funding from the Sea Group, which is also supported by Garena’s funding sources. This is as quoted from Tech In Asia, Tuesday (16/3/2021).

Tokopedia, through a merger, may seek financial support from Gojek or eventually an IPO, but Gojek also faces tough and well-funded competitors at Grab. On the other hand, the MomentumWorks report published in January stated that the gross merchandise value (GMV) market share of GrabFood food delivery in Indonesia was 53 percent vs Gojek’s 47 percent.

Meanwhile, in research conducted by the survey institute CLSA, the majority or 35 percent of Indonesians prefer GoFood and 20 percent choose GrabFood.

There is Still Competition between E-commerce and Ride-Hailing Providers

Basically, the competitive landscape will remain the same. Tokopedia must continue to fight against Shopee and Lazada in the realm of e-commerce, while Gojek will continue to compete with Grab in terms of ride-hailing and food delivery, as well as with OVO, ShopeePay, and LinkAja in digital payments.

Sea Group might be worried if Gojek and Tokopedia dominate Indonesia, a market of 267 million people and by far the largest in Southeast Asia. However, domination is far from guaranteed. Neither Tokopedia nor Gojek holds a substantial position outside Indonesia, at least for now.

Tokopedia is not well known outside of Indonesia, and it will be difficult to compete with other e-commerce players such as Shopee, Lazada and AliExpress, even with successful mergers. Tech in Asia also recently mentioned Gojek Singapore spent US$ 141 million in its first year of operation, but only grabbed a 3.6 percent market share, based on an analysis of ABI Research.

As one of GoPay’s competing digital wallets, OVO is Tokopedia’s biological child. Rumors has it that if this mega-merger occurs, Tokopedia will sell its OVO shares. “There is a possibility that OVO-GoPay will operate separately, but the funds will be kept in Bank Jago (22.2% of shares owned by Gojek),” wrote CLSA analysts Merlissa Trisno and Jonathan Mardjuki in research entitled CLSA Indonesia Tech Sector Outlook.