Why Food Delivery Prices Stay High in Southeast Asia, Even with Competition?
- Cristabelle Chang
- Sep 21
- 5 min read
In recent years, food delivery apps such as GrabFood, ShopeeFood, Foodpanda, Gojek, and LINE MAN have become integral to daily life across Southeast Asia. From Bangkok to Jakarta, millions of people rely on these platforms to bring meals to homes and offices.
But despite the variety of platforms available, many users still wonder:
Why are delivery fees so high? Why haven’t they come down with more competition?
This article explores the economic forces behind persistently high delivery costs in Southeast Asia’s food delivery market, using Grab as a central case study.
The Illusion of Competitive Pricing
At first glance, a market filled with multiple apps should drive prices down. However, in reality, the food delivery industry in Southeast Asia functions much more like an oligopoly than a highly competitive market.
What Is an Oligopoly?
An oligopoly is a market structure where a small number of large firms dominate the industry
In Southeast Asia, Grab controlled about 55% of the region’s food delivery Gross Merchandise Value ( the total monetary value of goods sold over a specified period via customer-to-customer or e-commerce platforms.) by the end of 2023, according to Momentum Works. Other players like Foodpanda, Gojek, and ShopeeFood held smaller shares.
With so few competitors, and each platform having regional strongholds, companies have little incentive to engage in aggressive price wars.
Network Effects
Food delivery platforms are multi-sided marketplaces that connect three core groups:
Consumers
Restaurants
Delivery partners (riders)
For example, a large user base attracts more restaurants, and more restaurants attract more users, reinforcing the platform's position, Network Effects.
This creates barriers to entry for new competitors. As, to survive, they must build a network quickly. Which a challenge made even harder if existing platforms already dominate the market.
Economies of Scale Don’t Always Lower Prices
Large platforms like Grab benefit from economies of scale (firm's cost per unit decreases as its production output increases) . Their fixed costs ,such as app development, customer support, and marketing, are spread across millions of orders.
However, this does not guarantee lower prices for consumers. Companies may maintain fees to:
Offset variable costs e.g. riders
Improve thin profit margins
Recover past losses or meet investor expectations
Grab’s Q2 2025 report revealed it posted its first net profit (US$20 million) after years of losses, but the Deliveries segment had an EBITDA margin of just 1.8%.
Dynamic Pricing: Higher Fees During Peak Demand
Platforms increasingly rely on surge or dynamic pricing, which means adjusting delivery fees based on real-time supply and demand conditions.
Delivery fees typically rise during:
Lunch and dinner rush hours
Public holidays
Rain or bad weather
Periods of high demand in specific areas
This is designed to attract more riders and ensure timely deliveries, but it means that prices are often unpredictable, especially during peak times.
The Cost of Last-Mile Delivery
Food delivery involves significant last-mile logistics costs, including:
Rider compensation
Fuel and vehicle maintenance
Route inefficiencies due to traffic or poor infrastructure
Delays at restaurants
Failed delivery attempts
In many SEA cities, issues like urban congestion, infrastructure gaps, and inconsistent addressing systems increase delivery complexity and costs.
The End of Subsidies and Promotions
During the growth phase, platforms relied heavily on subsidies — offering:
Free or discounted delivery
Cashback offers
Rider bonuses
But as investor pressure grows for profitability, platforms like Grab have scaled back incentives, leading to increased direct costs for consumers.
Regulatory and Infrastructure Constraints
Southeast Asian countries present unique challenges, such as:
Varying regulations for gig workers and delivery drivers
Road tolls and fuel taxes
Parking fees in crowded urban areas
Payment system fragmentation (cash vs. e-wallets)
These factors often raise the operational costs of food delivery, further reducing the feasibility of low or free delivery fees.
Grab’s Rising Market Power
A case in point: In May 2025, Foodpanda exited Thailand, citing sustained losses. Before its exit, it held 23% of the Thai market. Grab, already with around 46% market share, now faces even less price pressure.
As competition fades, remaining players like Grab and LINE MAN gain greater control over pricing and can operate with less urgency to offer discounts.
Consumer Behavior Supports Higher Fees
Despite price increases, many users continue using the same platforms due to:
Brand familiarity
Perceived reliability
Exclusive restaurant partnerships
Integrated digital payments
This consumer loyalty limits the impact of minor fee differences across platforms and makes users less sensitive to price changes.
Slower Growth, Higher Profit Expectations
The pandemic-driven boom is over. According to Momentum Works, Southeast Asia’s food delivery market grew only 5% in 2023 — down from double-digit growth in previous years.
Slower growth means platforms focus more on profitability than market share expansion, leading to fewer subsidies and more sustainable (and often higher) pricing strategies.
Summary: Why Food Delivery Fees Remain High
To summarize, food delivery costs stay high in Southeast Asia due to a combination of structural, economic, and behavioral factors:
High operational costs (riders, logistics, traffic)
Limited price competition due to oligopoly dynamics
Dynamic pricing increases costs at peak times
Reduced promotions as platforms pursue profitability
Consumer willingness to pay for convenience and reliability
Regulatory and geographic complexity raising the cost floor
Country Examples
Thailand: With Foodpanda’s exit, Grab and LINE MAN dominate. Prices are unlikely to drop in the near term.
Vietnam: Grab and ShopeeFood are forming a duopoly. This setup often leads to price stability rather than fee reductions.
Indonesia: Geographic challenges (island-based logistics, traffic congestion) create a higher baseline cost, regardless of competition.
In Future: What Could Lower Fees?
If launching a new delivery platform in Thailand or Vietnam, lowering prices sustainably would require innovation. Some strategies could include:
Collaborating with restaurants for shared pickup points
Using AI to optimize rider dispatch and route planning
Sharing infrastructure across delivery categories (e.g., food + parcels)
Smartly balancing incentives with profitability
Each of these options has trade-offs, but creative models may help address the cost challenges while offering value to both users and riders.
Full Citation List (in order of appearance):
Momentum Works. (2024). Food Delivery Platforms in Southeast Asia 2024. Momentum Works.https://momentum.asia/report/food-delivery-platforms-in-southeast-asia-2024/
Seeking Alpha. (2025). Grab Holdings: Business Model, Margin Pressure, and Competitive Landscape.ht
Grab Holdings. (2025, July 31). Grab Reports Second Quarter 2025 Results. Grab Investor Relations.https://investors.grab.com/news-releases/news-release-details/grab-reports-second-quarter-2025-results
Grab Holdings. (2025, February 20). Grab Reports Fourth Quarter and Full Year 2024 Results.https://investors.grab.com/news-releases/news-release-details/grab-reports-fourth-quarter-and-full-year-2024-results
FedEx. (2025, June 30). Best Last-Mile Delivery Options for APAC SMEs.https://www.fedex.com/en-apac/small-business/last-mile-delivery-options.html
Locus. (2025). Understanding the Real Cost of Last-Mile Delivery in Emerging Markets. Locus Blog.ht
Phuket Insider. (2025, April 15). Foodpanda to Exit Thailand by May 2025. Phuket Business News.https://phuketinsider.com/foodpanda-to-exit-thailand-may-2025
Reuters. (2025, April 23). Delivery Hero to Exit Thailand Foodpanda Operations.https://www.reuters.com/business/retail-consumer/delivery-hero-exit-thailand-foodpanda-2025-04-23/
e27. (2025, February 17). SEA Food Delivery Market Surges to US$19.3B as Vietnam, Indonesia Grow.https://e27.co/sea-food-delivery-market-surges-to-us19-3b-as-vietnam-indonesia-grow-20250217/
Finimize. (2025). Grab's Path to Profitability: Q2 2025 Analysis. Finimize Market Briefings.https://www.finimize.com/content
Thanks for reading!– Cristabelle Chang/grab-profitability-analysis
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