To counter pop culture aggregators like Ola and Uber, local cab rental companies are going beyond great price deals to keep customers, particularly corporate, from straying.
It is only recently that mobility as a sector has become a hot topic in the market. In earlier times, the reliance on privately-owned vehicles used to be high and public transport was the only fall-back option. A taxi service was called in only for ‘rich’ moments, trips to and from the airport or when one had to travel at odd hours. This remained the case until ride-hailing tech companies like Ola and Uber entered the scene a few years back with the proposition of highly attractive prices, ease of use and convenience.
Many local players such as TabCab or City CoolCab, for example, were caught napping for the large part. Consumers quickly adapted to the attractive offerings and highly competitive prices of tech cab fleets. However, the B2B operation of local players was hard to disrupt, with their long-term relationships with clients and a systematic movement of people versus the unpredictable booking spectrum that can be seen on the B2C side. But the threat from the Ubers of the world is real.
So how are traditional cab service providers gearing up for survival in the midst of intense tech-led competition?
Treating them right
Meru Cabs, for one, has ramped up its focus on B2B operations, which currently contribute 30% of revenue for the company (estimated to cross 50% over the next 12-18 months). But if combined with the revenue contributed by Employee Transportation Services from its group company Vlink Fleet Solutions, the B2B revenue ramps up to about 40-45%.
Another car rental company Carzonrent’s business is rooted in the B2B space, with it contributing 85% of the revenue. Within this, airport is a significant business accounting for 20-23%. Realising the importance of the role that technology will play in making mobility services accessible and easier to use, Carzonrent acquired RidingO (a cloud-based ride-sharing platform) about three years ago. The company has since then increased the tech team strength at RidingO to 35 engineers.
“Our annual expenditure is about $3-3.5 million on building technology,” provides Rajiv Vij, MD and CEO, Carzonrent. “The industry has been growing at 14-15% annually (B2B). At Carzonrent, we have had a CAGR of 24% over the years.” Carzonrent is currently investing 2.5% of its revenue in training its chauffeurs — the driver-partner aspect where tech companies have usually faced a lot of issues.
What Uber and Ola did in the B2C segment in terms of their pricing strategy, in a race to grab the bigger chunk of the market, is not the strategy that can be adopted in a sustainable fashion in the B2B space. Price alone does not guarantee clients to consider one player over another, as factors of quality and reliability gain priority.
Nilesh Sangoi, CEO, Meru Cabs points out that clients are willing to look beyond price. “For B2B clients, our biggest strength is transparent pricing, honest billing and overall efficiency in services,” he says. “Clients see a significant saving in their transportation spends, even though our rates may be higher than other service providers.”
Going beyond the price wars
Players like Uber and Ola are realising that the product will need to suit client needs and a price war is nowhere near sustainable. Some challenges are where companies say they would rather have a secretary book the cab for a senior executive instead of the executive doing it herself/himself. To serve this, Ola’s Dashboard allows a guest booking where a secretary or an administrator from the employer’s office can book the ride on an executive’s behalf.
Similarly, the Uber for Business platform was revamped last year to incorporate user feedback. Now, group-based access levels can be created along with customised programs, depending on the travelling employee’s needs.
Rahul Maroli, VP — rental, corporate distribution, Ola points out that mobility as a service has largely been a legacy business and even services like holding placards at airports was a market necessity at one point in time. He adds, “With mobile penetration, increased data usage and a new breed of employers emerging, there is a different take on how companies’ mobility needs to be addressed. That is where Ola Corporate comes in.”
Maroli provides that Ola Corporate brings down absolute costs by 20-25%, and currently commands a 20% market share in the corporate rental mobility market (executive mobility). In the past year, the company has seen significant business coming from Ola Rental where the cab remains with the user from anywhere between two to 12 hours with no limit on the number of destinations. This is more for senior executives where cost is not as high a concern as quality of service and convenience. Ola Rental currently forms about 35% of the entire corporate business.
Picking your battles
RedSeer’s engagement manager Ujjwal Chaudhry is of the opinion that tech players may not be able to take on the B2B mobility space as a whole and will have to pick their battles. “Mid size corporates will be a large enough segment for tech companies to pick up. It would then play out segment by segment,” he says. In theory, it could be easier to serve the mid size corporate segment where quality might not be high on the priority list. Large size clients typically like to arm-twist vendors to get scale benefits which they won’t be able to do with the Olas and Ubers.
While tech players are increasingly making the process simpler, clients have certain preferences that have been long-standing and are easily fulfilled by cab rental players. Ola continues to see customers still demanding a placard at the airport. “It is a hard-sell to tell them that a bottle of water or a copy of a newspaper in the cab is no longer a complimentary service. This is where we find resistance in the system,” Maroli notes.
Or say, some IT companies prefer having a guard in the cab for a lone lady passenger travelling after 8 pm. This has perhaps been an Achilles heel for the likes of Ola and Uber.
All said and done, tech companies have an edge with much deeper pockets and can offer unprecedented scale with a potential merger on the horizon (Uber and Ola). But understanding client sensibilities and crafting a solution for more professionally delivered services may be the key to cracking the code for corporate mobility or even B2B mobility as a whole.