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Taxi Aggregators in India:

Mental and Market Positioning amongst the youth

Symbiosis Centre for Management Studies Pune (UG)


2013-2016

Mavika Bhatnagar (3139)


Vanisha Dudani (3162)

TY-C

September 9th, 2015

Abstract

One can agree that connectivity is the essence of our generation. Our vested interests in
persons and events located world over necessitate the innovation of effective and more
importantly, efficient, means of communication and transportation.
A shining example of efficiency in communication and transportation is the taxi aggregator
model that has taken the personal transportation industry by storm. Exemplars of taxi
aggregators in India are Uber, Ola, Meru and Taxi For Sure. These taxi aggregators,
otherwise known as taxi networking companies, offer affordable and organised personal
transport solutions and are amongst the fastest growing startups in the Indian economy.
This research delves into the market dynamics of the taxi-aggregator segment and its
relevance to todays youth.

Introduction

What is the next big thing in Indias mobile consumer marketplace, after the mushrooming of
of e-retail platforms such as Amazon, Flipkart and Snapdeal? Industry specialists suggest
mobile on-demand taxi-availing services, otherwise known as taxi aggregators or taxi
network systems.
A taxi aggregator or transportation network company has been defined as a company which
makes use of an online platform to connect passengers with drivers using their noncommercial personal vehicles. Transportation network companies develop a computing
platform which feeds the online mobile marketplace wherein a driver and car owner
registered with the firm can offer their car and services to users who request a ride to a
mutually acceptable destination.
These platforms have often been termed ridesharing, however industry experts do not agree
with this term and rather prefer the term ridesourcing, which clarifies that drivers do not
share a destination with their passengers. Unlike ridesharing, taxi aggregators do not help in
reducing traffic congestion, number of vehicle trips or emission from automobiles. Their
major activities include marketplace maintenance and development, driver vetting and
evaluation and maintenance of finances between driver and firm.
Taxi aggregators are witnessing a meteoric rise in the demand for taxi services in cities all
over India, even in areas where transportation infrastructure is old, creaky, smelly and
outdated. Furthermore, safe commutation options, both public and private are scarce. This
ascent can be attributed to a paradigm shift in consumer habits towards convenience and
instant or on-demand delivery of services. Consumers are further incentivized by the
shockingly low prices set by these startups, eager for rapid and widespread acceptance among
the masses. Convenience in ride-booking via mobile app, experience supervision and
standardisation and competitive pricing for services are perks that draw people towards using
these services.These startups contuinue to spend heavily on marketing, discounting, large

scale recruitment of drivers and expansion into new markets, hoping to maximize their
market reach.
Major players in this segment are Uber, Ola, Meru and TaxiForSure. The market leader is
Ola, an Indian-bred startup founded by IIT Mumbai graduate Bhavish Aggarwal which
operates in 100 cities across India and has raised $676 in funding. It entered the market first
and thus gained early traction and has unparalled understanding of local markets. Ola
acquired TaxiForSure in a bid to counter their biggest competitor, Uber. Uber is a global giant
in the segment founded by Travis Kalanick and operates in 60 countries worldover, of which
India is their second largest market and plan to invest $1 billion in the Indian market, to beat
out Ola and TaxiForSure for the majority share. Meru cabs was the first organised cab service
in India but its late adoption of the taxi-aggregator model and inferior tech platform yields it a
minor share in the cab sector.
The California Public Utilities Commission established regulations for taxi networking
companies in 2013, while laying down a definition for this new and previously unregulated
form of commutation. These regulations include driver background checks, drug and alcohol
policies, driver training, mandatory insurance cover and company licensing.
It was recently made necessary in India for cabs connected through taxi aggregators to be
licensed as radio taxicabs with legal authorities. As per the Association of Radio Taxi India,
the taxi business in India is growing at 20-25% p.a. The organised cab sector accounts for just
4-5% of the industry and sums around $800 million. It is predicted to grow to $7 billion by
2020.
While cab services are becoming tremendously popular with its users, Uber, Ola and other
players are subject to weighty regulatory difficulties.
The Delhi transport regulatory body banned Uber as well other app-based cab service
providers in December, in a fallout after a taxi-driver operating with the firm reportedly raped
a 25-year-old female in the NCR. Investors in taxi services imagined the worst, as it appeared
like some other states could follow Delhi in making the decision to ban taxi aggregator firms.
Despite the taxi service providers having resumed operations in Delhi, the threat of regulatory
action still lingers.
Prior to the ban in Delhi, Uber was made to restructure its payment model completely, once
the Reserve Bank of India (RBI) vetoed auto-payment through credit cards. Uber, which till
then acknowledged payments only via credit cards, introduced a payment wallet in
association with Paytm in the month of November.
Subsequently, the Union government announced that Uber and other taxi aggregators were
responsible to pay service tax in the latest budget. Thus, taxi aggregators, that didnt pay
service tax till now, potentially face a substantial tax liability. Uber has collided with
authorities in countries other than India too, such as South Korea, Thailand, and Germany.
Following the ban in the capital, all taxi aggregators have bettered safety protocols. They
have become even stricter about driver verification. They have teamed up with third-party
agencies to screen driver backgrounds. They also added extra safety features to the process
like the SOS or panic buttons on their mobile platform, and offered users the option to
disclose cab details to friends when taking rides.

Objective of the Study

This study seeks to gauge the market position and the mental position occupied by major taxi
aggregators in Indian personal transport industry and in minds of the youth today.
Market shares of the major taxi aggregators, positioning, investment and scope for growth are
topics of focus in the analysis of the market position of taxi-aggregator giants.
In analyzing the mental positioning of taxi aggregators amongst the Indian youth, relevance
and usability of the service, safety concerns and intra-segment preferences will be explored to
obtain a holistic understanding of consumer perceptions, dependence and future use.

Review of Literature

The Big Two Ola and Uber


Market giants Ola and Uber, in particular, have witnessed exponential growth by offering
auto and car rides at prices lower than those charged by unorganised roadside autorickshaws.
Before the advent of such on-demand taxi services, taxis were hired selectively and
infrequently. However, that is no longer the case, due to the unparalled accessibilty and
affordability offered by mobile apps. A majority of taxi bookings for market giants Ola and
Uber are through their mobile apps, which is why they switched to an entirely app-based
business platform in 2015.
Similar to the business model followed by e-retailers like Flipkart and Snapdeal, Ola and
Uber merely host services offered by third-parties i.e. drivers and have no ownership of the
cars used by their customers. Nor do these firms employ drivers; they simply connect mobile
users with drivers using the app and exact a commission ranging from 13-20% on every ride.
These firms dont even employ drivers; they simply connect customers with drivers, using
technology, and charge a commission varying from 13-20% on each ride. This aggregator
model has prevailed over that of employing drivers and owning cars. Even Meru, which
started out in 2006 doing so, currently generates over 60% of its business using the
aggregator model and is expecting the figure to inflate to around 80% by early 2015.
(DesJardins, J., 2015)
Considering the daily nature of travel, repeat usage and lack of on-demand alternatives, one
can conclude that the scope of growth in this segment is massive. If Indian-bred market
leader Ola fetches a valuation of $2 billion or more in its next round of funding, it will
cement its postion as the third most valuable internet venture in India, following Flipkart
($11.5 billion) and Snapdeal ($2 billion+).
Ola and Uber continue to be the major players in the industry as they have far more scalable
business models vis--vis smaller fragmented players in the market that do not use
technology as a key enabler and differentiator

Funding and Investment


Ola, promoted by ANI Technologies Pvt. Ltd, bookmycab, Savaari, TaxiForSure, and
ZoomCar India have raised approximately $365 million total from investors thus far, as per
information by Tracxn, which sells data on private companies to investors. Over $320 million
of this has been accounted for and utilised by Ola and TaxiForSure. (Das, G. ,2015)
Investors will continue pump in more money in the future to support the heavy spending cab
aggregators. Ola will raise Rs.760 crore this month from existing investors like Tiger Global
Management, SoftBank Group, Hong Kong-based hedge fund Steadview Capital and venture
capital firms Matrix Partners and Sequoia Capital. (Das, G. ,2015)
When Ola received $210 million from SoftBank in 2014, TaxiForSure investors got scared by
the magnitude of the funds raised and by the profile and repute of the Japanese investor.
TaxiForSure failed to raise money and had to sell out to Ola for $200, giving birth to a megagiant in the industry, which began to earn more money than many thought possible in the taxi
industry.
All the three companiesOla, Uber and Meruare rapidly expanding to new cities.
Meru, will have a presence in 23 cities by March end, and plans to expand to minimum one
new city every month starting 1 April.
Ola aims to operate in 200+ cities by March 2016 end, catapulting from its current score of
100 cities. It plans to delve deeper in existing cities and enter new cities and is solving the
obstacle of the availability of quality supply by fostering a conducive ecosystem for drivers
through skill development and training, deep discounts from car manufacturers, access to
easy financing, and more, which will further aid drivers in their growth as entrepreneurs. In
fact, many drivers are part-time students and the money earned from registering with taxi
aggregators as a driver helps to support their education and lifestyle.
Uber, too, will enter new markets next fiscal. It has expanded to 11 cities, including Delhi,
Mumbai, Chennai and Pune and kickstarted two cheaper services that significantly added to
the apps usage. They have localized in India by launching UberX and UberGo as low-cost
services for old and especially new cities of operation. India is Ubers second largest market
by the number of cities after the US.

Scope for Growth


The prevailing way of doing business in e-commerce in India is to burn cash on marketing
and discounts to acquire customers; generating profits is not a prime concern. This prevailing
strategy in taxi services, as well as the larger e-commerce business, seems to be workingfor
now.
According to analysts and investors, three firms are likely to dominate the marketOla, Uber
and Meru.The others such as Mega Cabs and Easy Cabs have all missed the bus, or cab as it
were, and are struggling to survive. Some of these companies, which didnt have the
technology know-how to adapt to the on-demand opportunity, are seen as potentially cheap
acquisition targets.

Interestingly, a new development in the taxi aggregator service arena can trump existing
platforms as it seeks to eliminate the problem of using multiple platforms to secure a cab
quickly. This platform seeks to integrate all the existing taxi-aggregators, functioning as a
super-aggregator of sorts, to give customers the option of hiring cabs from any platform,
based on considerations such as travel rates and taxi proximity at the time etc.
Research Methodology
For studying the market dynamics of taxi aggregator giants in India, articles from prominent
business journals such as The Economic Times, Business Standard and Business Today were
referred to. Their detailed updates on activities of Ola, Uber and other taxi aggregators over
their timeline of operation in India have been particularly informative and critical to gain an
understanding of the market scenario.
A questionnaire was also created, aimed at gaining insight into customer mindset regarding
these services, and subsequently answered by 30 respondents. Questions were based on issues
such as adoption of service, company preference, factors of influence, safety perceptions, past
experience, frequency of use etc. Responses from the questionnaire were recorded, studied
and charted to obtain a graphic representation of consumer perceptions and preferences in the
taxi aggregator segment. Conclusions were formed from the same.

Analysis

The presence of the taxi aggregators has grown tremendously in the Indian market in such a
short period of time. In order to understand the perception of the general public, their
preferences and views on different taxi aggregators like Uber, Ola and Meru, a questionnaire
was prepared and answered by 30 people. The questionnaire was prepared with a view to
broadly understand three aspects:

Relevance of taxi aggregators to the youth frequency of use, need fulfilment,


dependence and integration in daily life
Safety Concerns
Preferences Taxi service preference, factors of influence such as cost, alternate
commutation options etc.

The number of males and females that filled out the questionnaire were 16 and 14
respectively.

Gender
16

AGE
1-16 years old

17-24 years old

11% 7%
25-35 years old

7%

35-45 years old

14

45+ years old


Ma le

Fe m a l e

74%

Out of 30 people, 20 people belong to the 17-25 age groups, 3 belong to the 45+ age group
and 2 belong to the 1-16 and 25-35 group. The age groups of these people were mostly
between 17-25 years as these taxi services are used widely by them as compared to the
elderly public who generally prefer to rely on their own personal means of transport.
Out of 30, 26 people were well aware of the various taxi aggregators which is 86% of the
population, and had already availed their services in the past. They gave a positive response
when asked if they were content with the services they had availed. In terms of frequency, 17
people were regular users while 4 had never availed of taxi aggregator services before. When
asked to what is the reason that would attribute to non-usage of these services, 23 people
already had alternative travel options, 6 people found these services too costly and 1 had a
safety concern. Out of the 30 people, 20 which is 66.6% of the people would use these
services as an alternative to public transport, 8 people would use it sometimes and 2 said no.

WHAT ATTRIBUTES TO NON-USAGE OF SERVICES PRICING OF TAXI AGGREGATOR SERVICES


Too Costly

Expensive

Safety Concerns

Slightly Overpriced

Existence of other travel options

Value for Money - The Price is Right


0 5 10 15 20 25

0 10 20 30

Different taxi aggregators price their taxis differently depending on the car the customer
chooses. For instance, OlaCabs provide different fare rates for a mini, prime and sedan
depending upon the customers individual preferences. When asked, 27 people felt that they
were getting value for their money and were content with the current taxi fares, 2 found it
slightly overpriced and 1 found it expensive.
21 people which is 70% had travelled alone using this service. Out of these 12 felt safe, while
7 felt moderately safe. The rest 9 had never travelled alone using this service. However there
have been no instances where a driver of these services have ever made one feel threatened,
unsafe or uncomfortable. Further, 46% of the people would call the drivers behaviour
friendly, 40% decent and 13% professional.
Out of the 30 people, 1 person felt that these services should be banned in interest of public
safety while 29 people said no. 16 of the 29 people felt that the companies are not to blame
and the services should be allowed to operate while 13 people said that the companies are too
useful and can be made safer over time.

SHOULD SERVICES BE BANNED IN INTEREST OF PUBLIC SAFETY


Yes.

No. The services are far too useful. The companies can make them safer over time.

No. The companies are not to blame and the services should be allowed to operate.
0

5 10 15 20

When asked if the taxi aggregator services had done enough from their side to make their
services safe, 19 people said they had done enough and the safety issues are due to the Indian
society, 6 said that the company had not done enough and could adapt the app to operate in
the relatively unsafe society while 5 felt that the company had done more than enough to
make services safe in the Indian Environment.

HAVE THE COMPANIES DONE ENOUGH TO MAKE THEIR SERVICE SAFE


The company has done more than enough and has taken measures to make the services safe in the Indian environment.

The company has not contributed enough. They must adapt the app to operate in the relatively unsafe Indian environment.

The company has done enough. Safety issues are due to Indian society, not due to lack in services.
0 5 10 15 20

Out of 30 people, 22 people were willing to avail these services in the future, 5 said no while
3 were not sure.
15 people had made use of Uber, 25 people made use of Ola, 10 people made use of taxi for
sure, 7 had made use of Meru while 4 had never made use of any of these taxi aggregators.
20 of the 30 people which is 67% prefer Ola, while 8 (26%) prefer Meru and 2 (6%) Taxi
for Sure.

CUSTOMER PREFERENCES REASONS FOR CUSTOMER PREFERENCE


Ola

Uber

Meru

7%
27%

10 15 20

67%

The people attributed their preferences and loyalty to Ola, Uber, Meru and Taxi for Sure
based on good experience, safety, habit, brand, price difference and use by friends and family.

Conclusion
The increasing rise in the demand for taxi aggregator services is identified in the Indian
market. The taxi service provider companies like Ola, Uber and Meru well understand the
need for their service amongst the customers and pan out their expansion plans and consumer
retention plans accordingly. For instance, OlaCabs being an Indian start up were the first to
introduce Ola autos that was a major hit in the minds of the customers. A shift has been
noticed in the minds of the people where they now are starting to rely on these taxi
aggregators for daily travel to workplace, school etc. as opposed to owning their individual
transport. This has been the case mostly for the youth where they do not consider owning
their individual transport as practical. The convenience, ease of access, and low pricing have
kept the youth dependent on these taxi aggregators. With the help of the questionnaire
prepared and filled, it can be said that 67% of the people prefer Ola, 27% Meru and 6% Taxi
for Sure. Their preferences in general could be attributed to good experiences in the past,
habitual, safety concerns and pricing.
At the same time, some people still hold reservations when it comes to safety of these taxi
aggregator services, in light of incidents of sexual crime and harrassment by drivers being
covered in the media. They choose not to avail the services of these taxi aggregators and rely
on other means of travel say metro, individual cars etc. depending on their situation.
However, as noted from questionnaire responses in this research, not many hold these
premonitions about travel by taxi-aggregator. All female respondents felt safe or moderately
safe in their travel experiences with these services. They continue to use taxi networking
company services despite the absence of the promise of absolute safety, merely for the
convenience of the service. All in all the sudden rise in the need and demand for these taxi
aggregators by the customers cannot be denied and the growth potential of the companies
engaged in such services cannot be ignored in the Indian market.

References
Dalal, M. (2015, September 4). Ola and Uber finally gaining pricing power as they grow.
DesJardins, J. (2015, August 26). Infographic: India's Taxi War - Uber vs. Ola.
Verma, S. (2015, March 19). Companies.
Das, G. (2015, August 30). How Ola and Uber are making other taxi companies irrelevant in
India.
Business Standard (2015, February 12) Uber introduces India-specific safety features. (2015,
February 12).
Agarwal, S. (2015, January 16). Now, traditional taxis want to expand through aggregator
model.

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