Uber, Ola Meru add value services, but have they spread themselves too thin?

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From food delivery to wedding makeovers to restaurant reservations and carpooling, cab aggregators are doing it all as they try to grab a big slice in the race to dominate the taxi market in India.

Companies like Meru, Uber and Ola are offering tangible and intangible add-ons such as booking and payment convenience through mobile applications, in-cab WiFi connectivity, 24×7 customer support and GPS-enabled vehicles to further boost demand in a highly competitive environment. The focus clearly seems to be on the four metros. Given that the average Indian spends 60 minutes in traffic every day, there is a compelling need to redefine the experience for commuters.

Taking a leaf out of the book, auto-rickshaw aggregator Jugnoo also recently launched its midnight food delivery service. This is in addition to a breakfast delivery service and B2B logistics delivery service in partnership with florists, restaurants and grocers.

While these services could drive engagement, they require significant capital and time to establish, and the returns may or may not be long-lasting. Are Ola, Uber and Meru diluting their core offering in this incentive-led battle for market share?

Pedal to the metal

“The radio taxi services market in India is expected to accelerate at a significant pace in the coming years on account of changing lifestyles, coupled with increasing service affordability for travellers. It is expected to grow at a CAGR of more than 17% during 2016-2021,” says Karan Chechi, research director, TechSci Research.

As the market matures, it is becoming more regulated with authorities taking steps to control surge pricing during peak hours to safeguard consumer interest. As a result, cab aggregators are looking at other ways to stay competitive.

From vehicle finance fairs to partnerships with financial institutions like SBI, to an OEM partnership with Tata Motors, Uber is creating a path where its drivers can have more economic independence and achieve a better livelihood. It also launched the UberSHAAN initiative with Maruti and the National Skill Development Corporation (NSDC), and has signed MoUs with several state governments to create entrepreneurship opportunities. It is also offering pure customer-centric services through a tie-up with Zomato and exclusive access to movie premieres, etc.

“We are investing in research and resources on building a digital mapping technology including localised maps/directions for countries like India which are unique,” states Prabhjeet Singh, head of strategy and operations, North India, Uber.

On-road mobility is a scattered market and while Ola has attempted to aggregate it onto one platform, it hasn’t been an easy task. Besides services like wedding makeovers and Ola Play, it has tied up with several companies to provide ancillary services. “Being a mobility solution provider, we engaged with several key stakeholders both from the supply and demand side,” an Ola spokesperson states. It has inked partnerships with Mahindra & Mahindra, BMW and Maruti to enable easy access to cars and skilling its driver partners.

But Meru Cabs has kept its focus largely on mobility. “We plan to do a lot of marketing automations and omni-channel communications which will help us engage with customers better,” says Nilesh Sangoi, CEO, Meru Cabs.

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Speed bumps

Although providing opportunities for engagement, customer-centric services don’t drive much traction or contribute much to the kitty currently. Many-a-times, companies have had to pull the curtains down on some of these ambitious offerings due to low adoption and high sustenance cost. Take the case of Ola, which launched a consumer-facing food business (Ola Café) and a grocery-delivery service (Ola Store) in March 2015, but pulled the plug within a year.

“We don’t shy away from experimenting,” Ola’s spokesperson mentions. “But sometimes, the market is not ready or evolved enough for a certain product and the focus of the organisation also shifts. We decided to focus on our strengths.”

The problem, industry experts state is that at times, some services are part of the valuation game because it finds favour among investors. However, Uber has managed to successfully create a model through UberEats in the US and other countries and plans to launch the service in India this year.

The biggest challenge, according to Abdul Majeed, partner, PwC India, is making money as customers are very conscious of pricing more than anything else. “So, they introduce one service and see if customers are willing to pay. If not, they pull the plug and this is mostly happening as customers do not see a benefit of such services for a short city ride,” he points out.

Meru, thus, pilots its services and constantly evaluates results before complete rollout. It tried building a carpool service which didn’t see much traction. “We understand that every geographic region has its own unique transportation requirements and the same reflects in our diverse product portfolio for India,” Singh highlights.

Building the correct model

In India, there are many opportunities including improving the quality of service, ensuring technology enables companies to maintain low ETAs, optimising pickups and drops, and ensuring high standards of a reliable and safe ride. Thus, Meru is focussing more on hatchbacks and SUVs as it also eyes the bike taxi service.

“The business has to have a potential for profitability, only then will we get into it rather than burning money to create valuation. Many small taxi companies have vanished from the space and it’s only due to capital. You need much more than capital to tackle competition,” states Sangoi.

While Uber is working towards bringing a mindset and cultural change that allows it to roll out more products like UberPOOL, and eventually help reduce private car ownership, Ola is building on Ola Play to give control to its customers. In fact, speculation is rife that Ola and Uber are also in talks with Amazon to offer its Prime Video service to aggregators.

Even as the game is changing, the business model will be sustainable for these cab aggregators only if customers see value as players can’t survive on a pricing strategy alone.