8 Reasons Why Rapido Is Beating Ola and Uber in India

How Rapido managed to break into the big league of Ola and Uber while all other bike taxi companies failed?

Rapido which is an Auto and bike taxi platform has raised 180 million dollars in its latest series of funding with approximately 200 million two wheelers on the road of India. India is unquestionably the world’s largest market for motorbikes and scooters. Uber, the ride company has lost 2.8 billion dollars last year in taxi service by Rapido. They’ve survived the ambushed by brush. Ola and Uber seem to be surprised by what they have done right.

Story of one of the nation’s most intelligent startups.

The story I’m about to tell you today is about a small enterprise named Rapido that was able to enter the market that Ola and Uber controlled as a dominant duopoly, although dozens of bike taxi firms appeared and vanished and even Ola and Uber gave up after failing in this industry. Rapido today stands as a dominating force in the exact same segment, this segment that I’m talking about is the bike taxi segment and today Rapido is  doing so well that they do 4 lakh rides a day and have over 60000 active riders and also have an app download from 25 million customers.

This is an old story from 2015. Ola and Uber were already well-established at this point. Almost every company was entering the Indian cab sector as the Jio wave was almost here. At this point, the founders of Rapido discovered two significant market gaps.

THE FIRST GAP

The absence of a ride-sharing service in the low ticket category was the initial gap. Whilst also Ola and Uber had been excellent for cab services, the average cost of a ride is between 200 and 400 rupees, and the only ride-sharing option below this range are rickshaws. Additionally, given that India’s per capita income is only 91481 rupees per year, or 7623 rupees per month, only a tiny minority of its population—roughly six people—could afford to provide cab rides at these prices. Even before the pandemic, if you look at Ola and Uber’s growth in India, you’ll see that expansion actually slowed down significantly to just 4.5 percent, and the number of rides each day hit a peak at 3.65 million rides. This clearly shows that somehow there was and is a tonne of demand for ticket sizes 200 and below.

THE SECOND GAP

They identified the huge market of two wheelers in India which were much underutilized. There really are 220 million bike owners in India, 20 of whom are either students or part-time workers without benefits, and the average bike usage per day is little under 18. This information comes from an early investor in Rapido. Furthermore, 80 percent of bikes on the road have poor rear seats, and India’s public transportation system is exceedingly slow and does not run as frequently or thoroughly across the most crucial areas as is required. When you combine that with the inconvenience of traffic, whether its Ola Uber buses or rickshaws, you’ll find yourself wasting hours of your time. However, when it comes to two-wheelers, we all know how adept we are at using our two-wheelers to browse via both traffic and traffic laws, and this is when ladies and gentleman Rapido came in.

What was Rapido’s strategy that enabled them to crack this non-existent market of India?

These businesses’ strategies are fairly transparent and easy to understand. The cash drain phase, in which a company spends a lot of money acquiring the stakeholders for supply and demand, is the initial stage that these businesses introduce. Passengers and drivers were quite pleased with Ola since they offered crazy discounts and extremely cheap access to download the app, while the drivers received extremely generous incentives. So, in this way, we had cheap rides at our doorstep, and the drivers made 50 to 60 thousand rupees per month driving Ola cars, and then in the second and third phases, as the cab drivers’ incentives decreased, the cost of the consumers began to rise, but in this process, these companies experienced hundreds of cores of losses every single quarter, and here is where the main difficulty in this model arises, because the drivers totally commit to Ola during the cash drive and It’s understandable because if you’re a blue collar worker making 20 000 rupees a month and seeing your fellow drivers earn 60 to 80 000 rupees  monthly will inspire you to quit your job, take out a loan, and work as an Ola driver. But the catch over here is that with time these incentives stain, and you end up with a situation where you’re tied to the vehicle and Ola for your primary source of income. They still have to pay the RTO passing cost, which is approximately 40,000 rupees per year, as well as approximately 6,000 rupees for bimonthly maintenance. As a result, they can only expect to make 30 to 35 000 rupees in profits per month, which created three significant issues for the market. First of all, when extremely lucrative incentives are offered, many drivers sign up, increasing the cash drain automatically. Secondly, with inflation and rising costs, drivers anticipate that their incomes will continue to rise over time. However, with both Ola and Uber, this hasn’t been the case, and they soon began to feel the pinch. Thirdly, all of these drivers’ basic survival is under jeopardy if something like a pandemic strikes unexpectedly.

Why Rapido sailed over the pains like pandemic?

As I mentioned earlier, there are 220 million bike owners in India, and 20 of those are either unemployed workers or students. Rapido did not spend their money trying to persuade people to buy a bike and become full-time drivers; instead, they capitalised on the existing inefficiency with the already purchased two-wheelers in the market. More importantly, Rapido served as these drivers’ secondary source of income rather than their primary source of income and As a result, they crafted their registration process and marketing so that virtually anyone with some spare time could become part-time Rapido captain. They began earning anywhere between 200 and 500 rupees per day based on their location, time, and speakers. By the way, this is not revenue but rather their actual earnings after reducing their fuel costs.

Why the risk in comparison to Ola and Uber is extremely low?

 Because the two wheelers have very low maintenance cost and very high mileage secondly for the part-timers like the students or the unemployed, 200 to 500 rupees in a day is an absolute blessing with such low barrier to entry so you see while an older driver has to feed his family and came with an inspiration to make 30 to 50 thousand rupees a month the Rapido captains by default sign up with the expectation of monetizing their spare time so they are more than happy with making 200 to 500 rupees per day. Consequently, a tonne of captains hopped on board. In fact, you can find numerous YouTube films made by college students who document their Rapido journeys. You can understand the market which Rapido is aiming to serve if you watch that. This is the reason why Mr. Sanga says and I quote “our motto is to use the existing vehicles and create employment for the underemployed. Our product highly attracts part-timers and gives much more flexibility for the captains” The burn rate of Rapido during cash train era was and is still very low, and if you look at their financing record for the first three years till May 2018, they survived on a just two million dollar seed capital. By the way, all due to our super-efficient two wheelers, the ticket size for these consumers is so cheap that they do not require the company to roll out extra costly incentives for keeping the workforce happy.

Why is it that other companies and even giant companies like Ola, Uber couldn’t crack the market and Rapido did?

Because in India you cannot use a broad number plate act as a taxi and there is no provision for purchasing Taxis in the motors act, regulators did not allow bike Taxis in several states, which made the situation more complicated. In fact, this is one of the reasons Ola Uber and other companies initially chose to build new fleets of yellow plate number bike taxis. Therefore, in a certain sense, a single legislation was literally altering Rapido’s entire business model. But this is where the founder’s Indian jugaad mindset came in. There were no Rapido branded t-shirts helmets for bikes and the transport authorities who went after these bike taxis mostly targeted only Ola and Uber because of their visibility. While all this was going on, most officials were completely unaware of Rapido. Since purchasing taxis was prohibited by law, but vehicle pooling on a cost-sharing basis was permitted, Rapido positioned itself as a bike pooling service. While operating under this positioning, Rapido and its investors pressed the government of road transport and highways to allow the use of private bike taxi services. Eventually the request was granted. However, this wasn’t a long-term solution. Even though many states are still opposed to this idea, Rapido’s daily trips have continued to rise over the years, and the company now has around 25 million clients and 60 000 riders.

By end of this year, Rapido hopes to have served over 50 million clients.

There are currently 5 female riders and nearly 20 female customers, and it processes up to 20 million orders each month. Currently, bike taxis are its main service, but they’re also experimenting with vehicles and delivery. This is how Rapido, a small business, entered the Ola and Uber oligopoly market and learned from their failures to emerge as a pioneer in India’s bike taxi industry.

What are the key takeaways from the rise of this amazing efficient company?

Lesson No 1.

Moving on, the first business lesson that we must take away from Rapido is that whenever a new market emerges, huge players frequently strive to snatch up the biggest pieces of the pie while neglecting the breadcrumbs, which could represent an opportunity for your company. For instance, while Amazon and Flipkart were competing for the electronics and fashion markets, Nykaa started out small with personal care and has grown to be a billion-dollar powerhouse in this scenario, while Ola and Uber were locked in a bidding war.

Lesson No 2.

When you engage in cash drain activities in India, you could convince customers to buy your goods, but when you do so for your employees, it’s more likely to collapse after a certain point because you’re creating unrealistic expectations so as much as incentives are necessary it’s very important to not create unrealistic expectations in this case we clearly saw how Rapido is very careful with cash while Ola and Uber promised the moon to the drivers and lastly I love the fact that these Rapido guys first operated under the radar got proof of concept and proved it to the investors that this market deserves investment and then went on to scale their business you know it just speaks volumes about the jugadu spirit of the entrepreneurs so now all we need to do is wait and watch how Rapido collaborates with Swiggy and achieves profitability.

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