Chasing Profitability — Taxi Aggregators and On Demand Logistics
by Shruti Swarup
Gone are the days when we considered taxi aggregators a blessing — these days if our Uber or Ola is not available immediately or if the driver gets lost en route — we start complaining and seeking discounts and refunds.
Taxi aggregators such as Ola, Uber, Lyft, Didi Chuxing (formerly Didi Kuaidi) have completely changed the taxi game across the world. The Uber model has been replicated far and wide and especially so in the on-demand logistics space — wherein it has set new standards of delivery optimization and automation. However, Uber itself seems to be facing an uphill battle establishing itself in the space on on-demand logistics.
The On demand Logistics Race and the Rocky Road Ahead
To increase consumer reliance on their service, Uber and Ola entered the on demand local delivery market (as UberRUSH, UberEATS and erstwhile OlaCafe respectively) in 2015 to cater to the growing need for point to point hyperlocal deliveries. However, Ola recently lowered the shutters (March 2016) on its on demand model and Uber currently operates its on demand only in North America. In the words of a C-suit founding team executive at OLA, “… some ventures were undertaken only as a trial run exercise to capitalize on the network effects of their model”. Sustaining a long term competitive advantage in last mile and on-demand deliveries is not something that can be hit upon as a lottery. An Industry Week report claims that “16% of consumers would take their business elsewhere if they have even one negative delivery experience”.
With customers eagerly awaiting Amazon drone delivery services — the threat of substitution and internal rival amps up even higher. To gather and sustain the ever fickle customer’s ‘loyalty’ is such a market hence becomes a core challenge. Efficiently running operations and optimizing service times go a long way in influencing customer perspective. And this is where LogiNext steps in and strives to bring automation and optimization based on cutting edge technology to provide powerful tools for our clients to reduce costs and enhance consumer experience.
The WAR for Taxi Space in India
Although Uber is the undisputed leader on a global scale, Ola rules the roost in the Indian taxi market — with a presence in over 102 cities pan India and a whooping $700 million in their war chest. Both these giants are aggressively inking deals left, right, quarterback and center; and investing with a view to be the leader in the segment. Their aggressive driver retaining policies combined with prices that undercut the competitors and substitutes have got consumers who use even Rickshaws switching over to their platforms.
Although these strategies have majorly influenced customer behaviour and have had a heavy impact on the competition of offline taxi providers, this disruption has come at a massive cost. And higher than the financial cost is the loss of credibility these giants face because of a number of not so kosher practices that have landed them in trouble with worker unions and the US legislation.
Despite continued opposition, the taxi aggregators are intent on burning huge amounts of cash to acquire and retain more customers and incurring tremendous losses in the process. On the other hand, Taxi services like Meru, EasyCabs, Mega Cabs, who are into scheduled deliveries (asset — owner — operator Model) albeit with a smaller market footprint are profitable and are growing. Once the discount game ends we hope that these companies will pounce back to the better growth rates.
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