Bus shuttles are looking like yet another disruptive business model in the ever changing world of transportation.
Story by: Anirudh Raheja
App.-based transportation solutions are transforming the way people are travelling in India. Dictated by the use of technology, it is both easy, and challenging, to use app.-based platforms over various devices, including smartphones. The good part is, they save the task of having to step out on the kerb and flag down a taxi. If understanding the fare structure is a challenge, paying it is made easy by digital payment medias like Paytm. Even cab aggregators like Ola have come out with their own purse called ‘Ola Money’. It may not be viable for many yet to hail a cab however. It is not easy for Monica and Sambhavi either. The two stay at Noida and Faridabad respectively, and commute to Gurgaon for work. A cab makes a costly proposition for them. The lack of good last mile connectivity is making it tough for them to commute. It is therefore that the two are finding the concept of bus shuttle attractive. It was kick-started by Shuttle, and has seen the inclusion of Ola, Cityflo and Zipgo. The other app.-based cab aggregator, Uber is also claimed to be looking at entering this segment. According to Jaspal Singh, an analyst with Valoriser Consultants, there is a need for such a service. “There is a need to nurture it, and to let it bloom,” he adds. Singh points at the cab aggregator model, and how it has grown thus far.
The need for shuttle bus
The number of daily commuters in India is estimated to be over three million. Most of them ride a bus very often. It is not surprising therefore that over 30 million bus rides are taking place in India everyday – through public transport buses and private transport buses. Promising last mile connectivity, the public transport buses offer a cheaper ride, courtesy the government subsidy. More disposable income is fuelling new modes of travel with emphasis on safety and comfort. The metros, monorails and BRTS services may offer safe and comfortable travel, they are however not able to address the last mile connectivity expectations of commuters to the hilt. States Singh, “Commuters are increasingly looking at a comfortable mode of transport. The need is to understand the demand and supply pattern, and also the travel pattern.” According to the research done by UITP, even though taxi fares in India are the cheapest when compared to 21 cities across the world, they are neither volume based, nor value-based. The scale of players that operate in this space is also low. This is resulting in lower per trip realisation. Cab aggregators are having to look for options to sustain. For instance, in Delhi, not more than 60,000 trips are carried out by cab aggregators. Privacy, air-conditioning are fine, but the cost is considerably higher than that of a bus ride. Identifying the opportunity – between aggregator cabs and various other modes of transport including buses, it was Shuttl who kick-started an aggregator-based shuttle bus segment. It built the app-based platform in 2015. Ola entered not much after. Available in Pune, Bangalore, Kolkata and Delhi NCR, according to industry sources, Ola Shuttle, aggregates tourist and chartered buses, and promises to take the hassle out of getting to work everyday with express routes and attractive features.
Informal to formal
At a nascent stage, the aggregator model-based shuttle bus service could well lead to the market assuming a formal dye. Mentions Singh, “Even if 10 per cent of the commuter volume shifts towards bus aggregating platform, it is a big number for the industry. There is an informal market, and the need is for a formal structure.” Drawing attention to issues like heavy traffic and pollution, Singh avers, that the industry is finding it suitable to skip 12 m buses for smaller more agile bus forms like the Force Traveller. “If the preference for smaller buses is in response to the demand, the fact is, the industry is at a nascent stage,” he adds. Bigger buses are not passe; a shift to bigger buses is expected as the bus aggregator model picks up pace. As of current, the advantage of small and midi-buses like the Traveller, is turning out to be the most suitable since they serve the tourism industry during weekends and holidays, making it a sustainable business case. Such buses are finding favour with corporates too, and are known to ferry their staff on fixed routes. With bigger buses, such flexibility may not be always possible. As the aggregator-based bus shuttle model picks up pace, and turns a good deal formal, bigger buses will find a place for themselves.
Shuttle services by Ola, Shuttle and Zipgo ran into rough weather last year at Gurgaon and Bangalore respectively. The reason for Ola and Shuttle service being suspended at Gurgaon was the seisure of over 20 shuttle buses by the Gurgaon RTO. The reason given was, the shuttle services cannot operate in the city as they don’t fall in the ambit of the Haryana Contract Carriage Permit Act 1988, 1993, 2001, 2004, and 2013. Zipgo’s all-women shuttle bus services also had to be stopped at Gurgaon. It is situations like these, claims an industry expert, that highlight the fact that the government and industry are not on the same page. There is a need to offer solutions, engineer checks and balances quickly, and simplify procedures, he adds. Facing regulatory challenges, shuttle bus aggregators are not ready to give up. They are continuing to invest in technology. The Near Audio Communication Protocol (NAP) for example, is Shuttl’s sound based boarding technology that uses sound to transfer the boarding details locally between two systems. Paving the way for ticket conductor less travel, the technology, according to Amit Singh, Co-founder, Shuttl, “uses sound to transfer the boarding details locally between two systems – the driver and the rider apps.” “The rider’s boarding details are sent to the bus driver’s smartphone through sound signals which is enabled by pressing the button on the app., and it does not require internet” informs Amit.He adds that NAP saves time, resources and adds to commuter comfort. Improving customer experience, technologies like NAP are also helping to quickly retrieve data as compared to the traditional methods of scanning the QR code or physically entering the boarding pass number. Since its launch last year, Shuttl has added over 400 buses. It has plans to expand its fleet, and become a pan-India player. Not much could be known about the other players. Despite repeated attempts Ola did not respond to the queries. Neither did Zipgo.
Like the cab aggregator model, the shuttle bus model too has its own set of complexities. One of the most prime is commuters preferring to travel only one way. This can lead to the bus waiting for them, hampering the experience of other commuters. Says Amit, “We operate on over 100 routes with daily ridership of 20,000 in the Delhi NCR region. After booking the ride, the commuter can track the bus real-time through our app. He or she knows exactly where the bus is, and how much time it will take to reach their pick-up point.” However, it does not always simply work out as expected. Delay does set in, and this has the risk of reflecting negatively on the service. Uber, after exiting China, is increasing its concentration in India. With quality of service at the core of the aggregator commuter bus model, it is logical of players like Uber to aim at offering more value. Avers Amit, “It is natural for us to think beyond bus rides.” “We have therefore invested in driver training,” he adds. Shuttl bus drivers are trained in behaviour skills and etiquettes according to Amit. They are trained to follow the traffic rules and avoid over speeding. Any deviation from the set guidelines, and they are subject to commensurate corrective action including fines. If this presents some idea of the complexities involved in the aggregator shuttle bus model, the stoppage of services by the Gurgaon authorities is perhaps the most evident. It adds a new dimension to the aggregator based bus commuter model. and what it is trying to achieve.
A lucrative business opportunity, the aggregator shuttle bus model is. This, despite the various complexities associated. Like the cab aggregator model, technology and infrastructure are playing an important role. Witnessing the participation of private players, the model is calling upon the operators to balance out the cost of operation and revenue. Commuters are willing to pay more for comfort and convenience, turning the need to create a pull almost unnecessary. Avers Singh, “There’s no need to create a pull strategy. The need is to get operators on board.” He draws attention to technology-based platforms offering a minimum guarantee of Rupees one-lakh per bus per month as revenue. “The basic thought is to encourage operators to pool in their assets and wait till the volumes rise. Once volumes rise, bigger investments can be made,” he adds. This may sound similar to the path taken by cab aggregators, the fact is, upon realisation of payback potential, the operator will be more than willing to invest. Opines Singh, that he will also allocate more assets to the business. In order to induce a self-drive, aggregators are mulling over per trip incentive. According to Singh, this would be the next best thing. He expresses, “It is possible only when the tech-based platforms will offer bookings and charge money against every trip.” “Model adaptability will happen, the game will however continue to revolve around volumes,” he adds. Drawing attention to bus registrations decreasing year after year, Singh states that OEMs will come forward only when it makes business sense for them. “With bus code implementation, reforms will happen sooner than later. They will also drive standardisation,” he mentions. Shuttl is said to be in talks with Mahindra and Force Motors among others to procure customised buses, developed specifically for intra-city transportation. According to Deepanshu Malviya, Co-founder, Shuttl, “Focus is on buses that are suitable for commuting, and the need therefore is to have buses that are more conducive to intra-city travel.”
Permits, funds and awareness
Money is what drives the aggregator shuttle bus model. Shuttl, in a quest to make more money, is said to be drawing up plans to expand to newer markets like Mumbai and Bangalore. It is said to have raised USD 23 million in series A from Sequoia India, Lightspeed Ventures, and Times Internet Limited. Zipgo is claimed to have raised an undisclosed amount from Orios Venture Partners. Mumbai-based Cityflo has raised USD 750,000 from IDF ventures. Venture capitalists, on their part, look cautious. They look cautious about channelising money in such ventures. This, says Singh, has been the limiting factor. He draws attention to the fact that the cost of acquiring a bus is considerably higher than a cab. “Once a bus is bought, the capital gets locked, and there is a supply constraint. This results in the funds flow being less optimal,” he adds. Claims an industry expert, that there is a need for government policies to change. This is necessary to support the growth on new, non-traditional transportation business models, he adds. An impression is somehow had that government policies do not make it easy to do business.
For a bus rendering intra- and inter-city services, the need is for stage carriage permit and contract carriage permit. This is seeming to create ambiguity as the operator struggles to decide upon the right permit he needs to operate with. The Delhi aggregator scheme enables contract carriage to operate. As per the rules however, buses cannot pick-up commuters on the way unless they have pre-booked. According to Singh, operators are asserting that they operate between residential and commercial points and pick-up passengers in a two-to-three kilometer periphery. This, he adds, is beneficial since the operator can schedule his movement in the city, and co-exist with other transport modes. Inefficiencies can thus be eliminated, and also any chance of cannibalisation.
There is no doubt that the demand for mobility is growing. The need is to develop supporting infrastructure, and maintain quality. Companies like Shuttl are working towards expanding their services to newer geographies in India. The prospect of invading new markets should be exciting for other players too. Success could be defined when the aggegator shuttle bus model grows in co-existence with other aggregator models and transportation solutions. Not only would this create a cohesive transport environment across the country, it will also make the life of India’s growing young population more productive and meaningful. Government support for such models is absolutely necessary. The need is for a transparent framework. The need is also for transport departments to have strategic cells that think about reforming the transport sector. They seem to be overloaded with permit issuing, licensing and vehicle registration responsibilities. After the aggregator policy took off in Delhi, many cities have followed in its footsteps. Contract carriage permit however seems to be an issue. With most commuters following a fixed route (to and fro), the need is to create a multi-modal channel that is efficient for masses, and is environment-friendly. This could be achieved through seamless integration. Different transport systems including cab aggregators, metros, monorails, buses, and suburban trains, are currently lacking integration. They are seemingly operating in isolation. The foremost need is to integrate. Mentions Jaspal Singh, “It is important to integrate; to ensure the requisite development and availability of physical and technological infrastructure. This will make commuting easy and enjoyable. Seamless integration of various modes will enable various transport models to sustain and grow. Issues like pollution and congestion will be tackled, and private and public transport efficiency will increase.” For Monica and Sambhavi, the commute to Gurgaon continues to be challenging. They are happy about the new aggegator shuttle bus model, and what it would offer them. It holds the promise of getting closer to offering them, and many other commuters like them, an effective last mile connectivity medium like no other.