Jun, 2017     

The success of online cab aggregators

The growing on-demand economy has led to the development of Taxi-aggregator firms that have changed the way people view commuting within a city. Uber, and Ola are perceived to be the 2 main competitors aiming to capture this market in India, backed by venture capital funds, and the plans of rapid expansion.

Ola settled on the current app-only model after testing their services as a radio cab. Uber entered the India market with their global model of cashless payments, and adopted cash payments at a later stage. Uber, though a global firm, entered late into the India market, thereby giving Ola the first mover advantage. But Uber has the advantage of having a higher spending power, and a global market to fund their operations if required. Both firms currently use their revenues to rapidly expand their fleet of vehicles, and to expand geographically across the country. This puts both the companies at a position where they currently make little to no profits. Cash as a payment mechanism also had an impact on their operations. Uber was forced to introduce cash payments in India as it was the easiest mode of payment for the majority of population, and also due to the competition already having this payment mechanism.

In terms of fleet size Ola cabs has a sizable advantage over Uber with its acquisition of Taxi-for-Sure. Ola has been diversifying into the food and grocery delivery sector, whereas Uber has been investing on improving the quality of rides. Ola has considerably higher revenue, but their net profit is negative compared to Uber’s slightly positive one. Consumer preferences inferred from app downloads and usage statistics suggest Ola to be the widely used application. But highly informed consumers from metros slowly seem to be shifting loyalties towards Uber owing to lower rates, and quality of the ride.

The customer is the person that has benefited the most from this ensuing competition. The customer requirement from this service is a hassle free ride at cheap rates, and companies are working to keep their customers satisfied. Offers and discounts, intended for both customer acquisition and retention are made available on a daily basis. The ease of booking, travel, and payment have made taxi aggregators a cheaper alternative to traditional taxis and autos, with the service having the potential to replace owning a car. The cons of this rapid expansion have been the absence of a reliable customer support, and grievance management systems. Instances of overcharging, and a lack of customer support has led to customers switching between companies. Though small in number, reports of such incidents are on the rise and could influence customer preference in the long term.

Along with the customer, the driver is the other important person that these companies need to keep satisfied. Both Ola and Uber have launched various incentive plans for their drivers. Incentive plans based on number of rides, and hours clocked during peak hours help put the drivers on the road during times of high demand. These schemes have received some backlash with drivers using loopholes in the system to make profits, thereby causing losses for the company in terms of finance and customer perception. Another important objective has been to tie the drivers to a single taxi aggregator, when drivers prefer to be part of both of Ola and Uber to make maximum revenue. Introduction of Weekly Platform Management Fees has discouraged drivers from being in service to more than one aggregator.

Employee loyalty, like customer loyalty, forms an important aspect of operations for taxi aggregators. Loyalty among drivers is highly volatile, but could easily be controlled as compared to customer loyalty. Making the supply side efficient enough to meet the ever growing demand will prove to be the challenge than the aggregator firms would have to face. Right set of initiates for drivers, and customers, coupled with good acquisition and expansion strategy could be a deciding factor as to which company captures the market post consolidation.