With 7.5m rides a month, ridesharing services take over Bangladesh

Bangladesh and the world have seen an upheaval of technology-based sharing activities that have evolved considerably over time. 

Start-ups using web-based platforms have opened up a brave new world of sharing-based businesses, blooming into the "sharing economy".

Research associate Md Oliur Rahman Tarek and Sajid Amit, director of the University of Liberal Arts Bangladesh's Center for Enterprise and Society, have taken a closer look at the sharing economy, global ridesharing, and ridesharing in Bangladesh.
  
Dhaka has a fair share of start-ups offering ridesharing services, they said. Since July 2019, 10 companies – Pickme Limited, Pathao, Obhai, Chaldal, Computer Systems, Akash Technology, Ezzyr Technologies Limited, Segesta Limited, Shohoz, and Uber – obtained licences, with the top three players being Uber, Shohoz, and Pathao.

A study of the Policy Research Institute says that the ridesharing industry of Bangladesh is valued at an estimated Tk2,200 crore and accounts for 23 percent of the transportation sector.

According to data from January 2019, commuters took 6 million rides each month on average via ridesharing apps. The current figures, however, have exceeded the 6-million mark and reached 7.5 million rides per month, report industry experts.

Drivers of growth

Dhaka, being one of the most densely populated and congested cities in the world, demands considerable efficiency, reliability, and safety for mass transportation from commuters.

Ridesharing services offer commuters certain benefits that mainstream transportation services do not. 

Three-wheeler auto-rickshaws, or CNGs, gained popularity due to its availability and fare-pricing. However, CNGs exploited the elasticity of demand for transportation by refusing to charge by the meters installed in the vehicles, hiking up fares, and refusing to go to places that do not generate a higher fare.

Taxi cabs followed suit and started charging exorbitant fares, which lead to the downfall of the sector.

According to the World Bank, traffic congestion eats up 3.2 million working hours per day in Dhaka, adding up to 660 million working hours per year. 

With the introduction of app-based ridesharing services, commuters have been blessed with ease of finding transport, doorstep pick-up, and app-based fare estimation.

Market dynamics and estimations

The advent of motorbike-based ridesharing has not only saved commuters' time and provided faster transportation, bypassing gridlocked traffic, but it has also created employment opportunities for thousands.

In contrast to western cities, where car-based ridesharing services have grown, Dhaka has seen the boom of motorbike-based ridesharing services which are cheaper than auto-rickshaws and taxi cabs. 

With year-on-year growth surpassing 40 percent, motorbike sales have continued to grow. A Reuters report says that around 200,000 drivers are currently registered under Pathao.

Uber Moto, Pathao, and Shohoz Ride experienced success in its early stages in motorbike-based ridesharing. 

While Uber is considered to have the best technology and training for drivers, Pathao has the most recognisable brand identity and early success rate. 

In 2018, Pathao raised $10 million from investors, led by regional ridesharing heavyweight Gojek; while Shohoz raised $15 million from investors, led by Singapore-based Golden Gate Venture.

Another ridesharing platform, Obhai has ventured further by incorporating CNG auto-rickshaws in their list of service offerings, which charge the commuters a fair amount through the app. 

While Shohoz is pioneering bus, train, and launch ticket sales online, other platforms such as Uber and Pathao came forward with food delivery services.

The estimated market value for ridesharing start-ups, all business verticals combined, is $300 million at present. The value is expected to reach $1 billion within the next five to seven years, although certain insiders suggest this will happen sooner.

Potential shifts in business models

The rising number of ridesharing services, in the already densely congested cities, contribute to traffic congestion. As a remedy, transitioning from high-frequency ridesharing to high-occupancy ridesharing services are in talks. 

Jatri is one such mass-transit bus service that will facilitate ticket sales and seat booking through an app for commuters of the same route and also allow real-time tracking of the bus's location. 

Meanwhile, another start-up of the same model, Shuttle, provides microbus services to female commuters of the same route. 

Major challenges

The ridesharing industry's strength lies in their funds from investors, access to talent relative to other start-up sectors in Bangladesh and extraordinary publicity, among others. 

Setbacks include regulatory scrutiny and scepticism, and unhealthy competition.

Globally, share prices of ridesharing powerhouses have fallen this year, sparking serious introspection about the sustainability of the business model. 

In Bangladesh, Pathao – valued at $100 million – faced massive challenges when investors started backing out. This stance caused the start-up to downsize through a mass layoff of mid to top-level employees. 

Another critical challenge for the platforms is ensuring consumer loyalty. When it comes to switching between services that cost the least, using multiple apps at the same time is not at all problematic. 

As a countermeasure, platforms resort to offering promo codes to the users to initiate strategies for customer acquisition and retention. However, to sustain in the market, they need to branch out into vertical services. But introducing different strategies can also drain investor funds too quickly.

In Bangladesh, with the increasing motorcycle-based ridesharing services, more and more people are leaning towards bicycling to commute. The only bicycle-sharing app-based platform, Jobike, began operations earlier in 2018.   

Recently, the Dhaka North City Corporation set-up a 9km-long bike lane for the first time in Bangladesh. 

Sustainability and policy directions

The process of disintermediation has caused revenue loss for various sharing economy platforms. In ridesharing, this happens when the commuter and the drivers agree to transact, bypassing the app that is intended to connect them. It leaves platforms and its users vulnerable since drivers are not accountable to anyone but the commuter. 

Experts in the sharing economy posit that ridesharing platforms must ensure a sufficient ratio of drivers and commuters to maintain a healthy business environment.

Such platforms are increasingly focusing on data analytics to understand and predict the behaviour of its users. But they need to refine their knowledge about the user base alongside customising the user experience on the app and outside the app.

Meanwhile, debates regarding the many aspects of the drafted Ride Sharing Services Policy 2017 need addressing.

Car owners and service providers have yet to come to a common ground regarding car registration policy – which allows one car to be registered to only one platform.

Currently, ridesharing companies treat drivers as third-party contractors. One of the reasons why platform-based sharing services adopt the contractor-based model is because it keeps the cost of business at bay. But the risks that emerge from this ambiguous relationship with drivers are not sufficiently mitigated in the current model. These risks have caused the most recent ban on Uber in London.

Some of the ridesharing platforms also tend to stray away from ridesharing and branch out into verticals. But how do the regulators define the businesses once they have branched out? 

Some insiders opine that it is too early in the stage to regulate ridesharing start-ups if this space needs to be grown. Regulatory measures need to be introduced later in the process so such businesses can drive value creation, innovation and employment.

Despite recent scepticism about its long-term profitability, analyst forecasts suggest ridesharing services will continue to claim a bigger slice from the transportation pie globally.

From 2018 to 2025, the ridesharing market has grown and is expected to grow from around $61 billion to $218 billion, and by 2030, the figures are likely to reach $285 billion annually. 

By the next three years, almost 100 million people are expected to use ridesharing services globally.