Whoever would have thought 10 years ago that you would be able to book the humble urban Indian transporter of choice -- the three-wheeled auto rickshaw -- with an app and a smartphone. Yet, this seemingly absurd notion is exactly what has transpired in the super-hot, rideshare and taxi market in India.
Uber was recently reported to have launched an Uber-auto rickshaw service, imitating rival Ola Cabs which launched its own auto rickshaw app in December last year.
On the other hand, Ola Cabs has been inspired to imitate Uber Fresh, the global rideshare's model of food delivery, under the name 'Ola Café', where like Uber, it curates a menu from local restaurant offerings and delivers your chicken tikka masala straight to your doorstep, thereby instantly also becoming a challenger to food delivery platforms such as heavily-funded Food Panda, Zomato and the smaller Tiny Owl.
Now, Ola Cabs is going after the immensely popular (to investors) 'hyperlocal' category, especially grocery deliveries under the banner 'Ola Store,' driving itself to compete head-on with well-funded, local e-commerce plays such as Zopnow, Bigbasket, Grofers, Localbanya and PepperTap. India's largest-commerce player Flipkart earlier this year announced this it will soon launch an online grocery store while Amazon has architected 'Kirana Now' for local deliveries with mom-and-pop retailers. Not to be outdone, Snapdeal has allied with food retailer Godrej Nature's Basket.
The app-hailing taxi market, otherwise known as rideshare, has become desperately competitive and pots of money are being thrown at the big players so they can scale up and shoulder aside competition. The local taxi business in India is generally pegged at anywhere from 50,000 crore rupees ($8.5 billion) to 80,000 crore rupees ($13 billion). Only 5 percent of this is considered organised, which means that there is lots of headroom to grow.
Yet, companies like Ola Cabs and Uber clearly see themselves in any and every business requiring wheels in order to build scale. For instance, Ola recently took out ads in blue-collar job site Babajobs announcing its need for delivery personnel with bikes, indicating that it was willing to eschew its four-wheeled approach to two if there was a business opportunity to be found.
The question is, are these forays into already competitive landscapes a wise choice for companies who probably need to make sure that their core offering is stable, continuously innovative and a quality product?
Then, there's the that less-important notion in the great e-commerce game called profitability, of great importance to people like Warren Buffet but not salient to e-commerce VCs and entrepreneurs chasing size over earnings.
Take this interesting observation offered by a Quora thread which neatly dissects what Ola Cabs is chasing in the Indian food delivery market:
The Indian market will approximately be 385 crore rupees ($62 million) of gross billings by the end this year. Assuming 15 percent commission, the pie up for grabs would be 57.75 crore rupees ($9 million) Now, there is no way that a single food ordering app would be able to dominate this 57.75 crore business right away. So, assume this 57.75 crore business is further divided into five major players where each business on average garners 11.55 crore ($1.8 million) in gross revenue. Gross income for this business is slated at roughly 15 percent so this means a paltry 1.7 crore ($280,000) before the 30 percent income tax wallop.
Never mind things like marketing expenses, business development and heaps more, that need to be pumped into a state-of-the-art technology platform (that needs to keep evolving to maintain a competitive advantage).
For now though, the strategy seems to be 'expand horizontally and vertically as quickly as possible and worry about the numbers later'. Of course, strategic tie-ups and payment innovations are also part of the grand strategy of one-upmanship. Ola recently announced that it would expand its Ola Wallet digital payment platform in a series of e-commerce tie ups to allow users -- which it claims to number around 20 million -- to pay for anything from groceries to travel.
For now, these include leading online eyewear firm Lenskart, budget hotel network Oyo, music streaming site Saavn, hyperlocal mobile marketplace Zoppr and a few more. Battling this development, Uber announced its own non-native mobile wallet called 'Airtel Money' which it has forged through a union with India's largest telecom carrier along with 4G perks available to users in Uber cabs.
If anything, this kind of froth and a desperate quest for more business is only bound to increase. Having suffered the cruel blow of being blocked by Tencent on its subsidiary WeChat's app (Tencent controls Uber's Chinese rival Didi Kuadi which controls 90 percent of the rideshare market), Uber realises that its next juiciest opportunity which it absolutely has to corner is India. So, it's no surprise that, numbers be damned, the company is going to fork out at least $1 billion over the next year in India to dominate every angle of business it thinks is important to it.
For its part, Ola can only gaze in amazement at its rival Uber's global estimated market cap of roughly $50 billion, giving the Indian company further ambition to spread its tentacles before Uber does. Ola recently raised an additional $400 million this year to spread to a hundred more cities by the end of this year, bringing its total to 200.
So brace yourself for more ridiculous numbers to be thrown at both companies as they strive to dominate even more businesses that involve ferrying things to and fro.
On one hand, it may make sense to expand the power of the Uber business model to anything requiring wheels, with revenue originating from a cut of the business that links a buyer and a seller rather than owning assets (like taxi cabs, which Ola does).
On the other hand, splintering into a multitude of offerings, each with its own business pressures along with mounting costs to maintain agile technology backbones and storefronts, could be the death knell for a company that should have just stuck to offering rides.
I won't be surprised if the learning curve for both these companies eventually hinge on the age old business adage of 'keeping it as simple as possible'.