Transportation sector in India is large and diverse including railways, roadways, civil aviation, shipping and urban transport and contributing 5.8% to the nation GDP. The large sector of transportation is one of the biggest magnets to attract entrepreneurs to organize and consolidate the market volume. Goibibo, Yarta, Makemytrip, Ola, Uber, Shuttl, rBus, ZoomCar, JustRide are very few of the known name of transportation startups that have made their presence visible in the market and are growing continuously.

Transportation startups now a day have major focus on market consolidation, better consumer experience and cost effective consumer services. Air travel booking combined with other supporting service like pickup and drop to home, hotel books etc, aggregation of separate cab providers, cost effective car-pooling etc are few of the basic visions of these startups.

Urban commuting is the latest problem which has hooked the entrepreneurs. And why entrepreneurs are advised not to stay away from the trap? As per the industry experts, only bus based commuting is a business worth Rs 60k crore in India. Urban commuting problem doesn’t ask for mere pumping of more and more vehicles – taxi aggregators have done that – it asks for carefully planned mode of transport which would not only reduce the traffic but would also be a source of revenue generation and would provide satisfaction to customer.

Urban commuting – Taxi Aggregators are Not Enough

Mumbai has around 1 million private vehicles out of which 75% run at single occupancy. Speed at which traffic runs is pathetic in peak hours. Delhi government is already mulling on “Odd-Even Formula”. And then, in India there are around 2 million buses which are contracted with schools or companies. These buses merely operate for 4 hours per day. Government bus services, which are somehow managing the intercity run show, provides cheap and not so good option of travelling with poor bus condition. Delhi’s DTC bus service had posted a net loss around $1 Billion only couple of years ago and its condition has seldom improved.

Ola/Uber and other taxi aggregators utilized their early inception to their advantage and they captured the thick cream from the market because taxi service sits at the top of commuting pyramid at 8-15 Rs/Km. State operated bus/train service made the bottom of commuting pyramid by operating at meagre 1-4 Rs/Km. Mobile revolution along with boom in app based service provided the link which was earlier missing between a service provider and customers.

Evolution of Bus Aggregators

To solve the major problem of urban commuting – affordable, comfortable and effective, a new gang of startups has evolved – bus aggregators. A bus could easily replace 15-20 (mini bus), 35-40 (normal bus) odd single occupancy personal vehicles and provide consumers an affordable solution which is between cabs ( @ 10 Rs/km) and state owned bus service ( @ 2 Rs/km) along with the benefit of comfort level during journey. Startups are utilizing these facts that incentivizing drivers of private buses (which would otherwise stay idle for 20 hours a day) would bring them forward for helping in managing the exploding urban commuting.

Benefits from these urban bus aggregators are great. Tangible benefits are – Comfortable travelling, Cost effectiveness, more productive time for vehicles, more revenue to fleet owners etc. Intangible benefits are – Reduced traffic, lesser vehicle on road, Solution to parking problem, lesser pollution, lesser fuel consumption, reduced time for travelling a distance and many more.

Startups aggregating buses in the country include Mumbai-based Rbus and Cityflo, Gurgaon-based Shuttl, and Bengaluru-based Zipgo.

War of Bus Aggregators – Delhi NCR

FS Labs - War for Delhi NCR Urban Commuting

Evolution of Bus aggregator startup community in Gurgaon has been so far a tumultuous war between the new players and old market players. Though it’s only eight month old, yet the competition and strategies for attracting bus fleet owners, for attracting customers, for luring bus drivers has already ensured an early sector consolidation. FS Labs brings to you the real strategies used by the various players against each other and what is the current market scenario.

Let’s get introduced which are the major players who took part in this cutthroat battle –

1.Shuttl – They are undoubtedly reaping the benefit of starting early. The company started operations eight months ago, in April 2015 and was founded by Deepanshu Malviya and Amit Singh. Earlier, it had raised $3 million in seed funding from a group of angel investors.

It’s a bus aggregating platform which offers shuttle bus service to its commuters in Delhi-NCR. It claims to offer services such as good buses, reserved seats, flexibility in timing and economically viability. The mobile based minibus service is aimed at making daily commutation more convenient. The company’s vehicles are air-conditioned and operate with high frequency on fixed routes at a very economical price point.

One can access the service using its mobile app. There are three simple steps required to book a seat on Shuttl operated bus service: register account with the app, pick up a boarding point & drop point and time of commencement and you get the riding pass. All the payment has to be done either through mobile wallet.

Current situation is – Shuttl claims to be offering around 15,000 rides on a daily basis. The price points for a ride range from Rs. 20 to Rs. 100. Since the company started operations, it claims to have facilitated more than 8,00,000 rides. It is now targeting 50,000 rides a day with 600-700 buses on the platform by the coming six months.

Currently, on 22nd December Shuttl grabbed Series A Funding worth $20 Million from Lightspeed, Sequoia and Times internet. Company has said it would utilize this funding in further expansion to new cities. As per founders of Shuttl their major focus has been “building a platform that will bring in predictability, trust and dignity to the consumer.” They are trying to increase the service and plying more buses on right routes by using extensive data modelling on traffic patterns.

Shuttl has also started corporate tie-ups as per the routes required by office personal and industrial shit timing to enhance its market base.

2. Trevo – The co-founders of talentpad – a technology recruitment marketplace that shut shop in August, started a bus pooling app for intra-city travel with an aim to build a bus aggregator startup which would work in coordination with tourist and chartered buses. Trevo was started in August 2015 by IIT and IIM alumni Mayank Jain, Raghav Jain and Nikhil Vij.

Trevo launched operations in Gurgaon with a team of 15 with an aim to cover 25000 commuters across the 100 routes in Delhi NCR by year end. Trevo claimed to have offered rides to about 2,000 passengers every day at Rs 5 per kilometres. It was reportedly scouting for Series A funding of up to $10 million.

Facing aggressive battle from Shuttl and Ola Shuttle, Trevo was forced to shut its operation by November 2015. Such was the might and strategies of other players that Trevo not only struggled to make a loyal commuter pool but it also struggled in keeping bus fleet owners loyalty.

3. Ola Shuttle – Looking at the success of rBus, Shuttl etc OLA decided to plunge into Bus Aggregator business. This move not only put the panic button on for small players, but also raised a hope of early recognition by funding sources.

It started with 500 shuttles on 100 routes in September 2015. Sundeep Sahni, VP of New Initiatives at Ola, at the launch of OLA Shuttle said that the shuttle service would target commuters who might otherwise opt for taking their own cars, bikes or auto-rickshaws. Rides would cost less than $1, which equals Rs. 66 compared to the average $4- $6 price of a ride in a private taxi. The users would have to share with between 12 and 20 other people. The shuttles would come with air conditioning, WiFi access and in-vehicle entertainment.

How Trevo was Forced to Shut Down its Operations

FS Labs - Shuttle War - Trevo Shutdown and Potential Saver

Here are few of the strategies followed by Ola to penetrate the established market volume of other players –

Fight For Bus Fleet – Initially bus fleet owners were persuaded (first come first basis) to align their buses to any of the bus aggregator at a generic cost. Initially it was around 60-80k/month. Trevo and Shuttl were doing fine and suddenly Ola enters the market and rate of attaching a bus on monthly basis rose to 1 lakh/month plus rate. Shuttl was already having a loyal fleet and was able to take the early beginner’s advantage. Trevo being the late starter couldn’t stand against this cash burn tactics of Ola.

Incentivization of Drivers – Driver’s incentive is the next straw which was waiting for little friction to start burning. Cash rich OLA started incentivizing drivers on trip basis. It was purely a cash burn tactic to outplay the rivals. Investors backed Shuttle was managing its business well and its deep penetration and investors backing made it bear the push of OLA. Trevo however already in cash crunch battle due to losing money on associated buses was not able to burn the cash for driver incentivization.

Not opting to work with market leaders – when you are up against a mighty rival who is cash rich and can simply flex a single muscle to run you out of business, the wise would love to act in sync with such rival. It will not only keep your share of business intact but would also help in gaining insight of operations of the bigger players. Trevo somehow failed to look out for any kind of association with either Shuttl or Ola shuttle and had to leave the market just after couple of months of its operation.

Trevo Least Priority to CRM – CRM is one of the biggest factors for startup success. Ola started and managed the relationship with its customers in a decent way by providing additional services to its consumers like Free Wi-Fi, lower cost etc. On the other hand, Trevo distributed the “token of insult” to its iOS and Windows consumers stating “Trevo wish it would be so easy to create iOS and Windows App as of Android. So we wouldn’t be able to serve iOS and Windows users”. This was sufficient enough to show the strength of technical back-end of Trevo and to loss its loyal consumers as well along with the group of different phone operating system users.

Founders themselves cannot do Everything – Many time founders think they are the only one who could do the entire job with perfection. This stops them from selecting the talented public from market who could extend their support in making a new business a successful venture. Too much optimism also acts as a cancer. Running a business for two months by running on the streets chasing customers was leading nowhere. Proper planning and a great support team were always felt needed in case of this war.

Ola Customer Trust Tactic – Last week, Ola introduced a feature called ‘number masking’ where the user’s number would not be disclosed to drivers, and calls made by the drivers would be recorded and stored by Ola, across its operational cities in India. The company has integrated a cloud telephony solution which sends an encrypted number to the driver, through which all further communication is routed via the cloud number. Such kinds of initiatives are good step towards gaining consumer trust to use all the business verticals of player.

How Trevo could have Survived

Here is a small analysis on Trevo, how it could have survived in spite of the stiff market competition-

Strategic Selection and Sourcing of Fleet – Trevo could have aligned its selection of routes and sourcing of vehicles in following manner to get the loyal consumers –

  • Tie ups with corporate could be a good strategy to get the targeted market base. Since most of the daily commuters of Gurgaon are office going personnel, so it could have given an advantage to get their startup endorsed by the corporates itself.
  • Running the fleet as per the industrial shift timing could be better strategy for Trevo to keep its business running. In industrial corporates, approximated 2000 persons work in a single shift, assuming 50% of that are using public mode of transportation, so these targeted fleet timing could have given an advantage to Trevo.
  • Selection of routes where Ola and Shuttl were not active could be a good strategy for initial survival.

Introduction of New Business Verticals – Instead of remaining dependent on a business vertical which was facing stiff market competition, Trevo could have introduced other business verticals like Auto, Bike Taxi etc and act their aggregator as well to expand its business model.

Consumer Relationship Management – Instead of distributing token of insult, Trevo could have gone for –

  • Development of iOS and windows App by third party, friends etc.
  • Office payment option for iOS and Windows users till any way was figured out.

Consumer never has any problem to pay for the service he/she got addicted. Online or offline, it hardly matters.

Stay tuned with FS Labs for more updates.

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