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As COVID-19 wipes out ride-hailing, Myanmar’s Oway turns to online groceries

Oway Ride has raised a total of USD 26 million from investors such as the World Bank’s International Finance Corporation, Openspace Ventures, Emerging Markets Group, and Daiwa PI Partners.

via Tech in Asis

COVID-19 has taken a heavy toll on ride-hailing startups worldwide. Uber, one of the biggest names in the industry, has laid off 6,700 employees and closed 34 offices due to the pandemic. Southeast Asian players Grab and Gojek have taken similar measures to save on costs during the crisis, with the former slashing 360 jobs—around 5% of its total headcount—and the latter letting go 430 people, or 9% of its staff.

Myanmar-based Oway Group has found itself in a similar situation. The company started off in 2012 as Oway Travel and Tours—an online travel platform that remains to be the group’s largest business to date—before entering the ride-hailing market in 2015 with Oway Ride. The company has raised a total of USD 26 million so far from investors such as the World Bank’s International Finance Corporation, Openspace Ventures, Emerging Markets Group Holding Corporation, and Daiwa PI Partners.

However, Oway CEO Alok Kumar tells Tech in Asia that the pandemic has “completely decimated” the ride-hailing and travel sectors in Myanmar, forcing the company to move fast and accelerate its planned entry into the online grocery space.

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Yangon, the largest city in Myanmar where Oway Ride is based out of, stayed mostly quiet in April after the government imposed lockdown measures to curb the spread of the virus. The stay-at-home orders were then extended in May for several townships in Myanmar.

Kumar shares that these strict measures have affected Oway’s business lines both negatively and positively. With traveling banned and people wanting to stay safe, Oway Travel and Tours has seen a drop in activity, Kumar says, without sharing specific figures.

Meanwhile, the company’s corporate fleet service, Oway Fleet, has seen an increase in demand, though this uptick isn’t enough to offset the losses from the company’s other services, the CEO notes.

Oway now relies on its online supermarket, Oway Fresh, to keep the small momentum. According to Kumar, Oway Fresh is an end-to-end ecommerce service, taking care of not just delivery but also sourcing, quality control, and packaging. It’s focused on everyday needs such as fruits, vegetables, and meat.

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It also offers non-food items from focused categories such as personal care, cleaning supplies, and baby products. In the future, the company is considering adding healthcare products and essential services to the mix. Oway Fresh has partnered with fast-moving consumer goods companies such as Unilever and tapped into its own network of driver partners for deliveries.

“We are using the distribution margin from our partners as our revenue model,” says Kumar. “Consumers benefit—they get to buy better quality at the same, or better prices, compared to street vendors or other platforms.”

The service has only been live for over a month with a small active user base, but results have been promising, Kumar says.

“We are using word of mouth as our key channel for customer acquisition, and our focus is to drive customer lifetime value by incentivizing repeat purchase either by delighting on service delivery or other value-added services like free exchange,” Kumar shares. As of now, 22% of purchases from Oway Fresh come from return customers, the chief exec adds.

Staying on the right track

According to Kumar, Oway Fresh’s gross margin is currently in the double digits. Without sharing specific financial details, he says that the business aims to double its numbers month on month for the next six months.

While Kumar is confident that the company will be able to make a business out of Oway Fresh, as it already did with Fleet and Travel and Tours, he says a key challenge right now is whether it can become sustainable after the pandemic dies down. A study from consultancy firm Bain & Company and Facebook, however, showed that e-commerce and other digital trends, including grocery delivery, are here to stay.

Nonetheless, Oway has adopted a strategy called “on time in full” to help its grocery business stay relevant even after COVID-19 blows over. “We commit to 100% delivery of what’s available on Oway Fresh within 24 hours. We help our consumers get the best products in the fastest way and at best value,” notes Kumar.

That being said, Oway Fresh is going up against stiff competition. Grocery delivery in general has seen a boost in adoption amid social distancing measures—an uptick that other companies have also taken notice of. Other ride-hailing companies, including Grab and Gojek, have doubled down on the sector to make up for losses in their core transportation businesses. In Grab’s case, its expansion plans for GrabMart include Myanmar.

In Pakistan, bus app Airlift Technologies also announced an offshoot service called Airlift Grocer as it waits for its core transit business to get back up to speed. Oway also competes with established players such as FreshGora, which has been in the scene since 2018, and Myanmore, owned by regional delivery and ride-hailing firm Meal Temple Group.

Meanwhile, the chief exec says that the operations of Oway Travel and Tours and Oway Ride have been slowly recovering. The former has shifted focus to the domestic market, providing value-added services for local travel and tours. Kumar says that the business, along with Oway Ride, has seen an increased demand in the past few weeks.

“We see that there is an upgrade at each level of transportation. Consumers who used to travel by buses are taking taxis, and taxi users are upgrading to private short-term lease until COVID-19 is fully behind us,” he shares.

This article first appeared in Tech in Asia.