Abstract

The online cab aggregator industry in India had witnessed tremendous growth since 2013. This was not only in terms of customer growth, but venture capitalists had also shown confidence in the industry by making investments of billions of dollars across a few companies including start-up firms, which might take a longer time to pay back the amount. What differentiated these cab aggregators from radio taxi operators was that there was no need for them to hold inventory and they had to face fewer legal hurdles as they neither owned the vehicles nor did they have any drivers on their payroll. The online cab aggregator industry operated on a pay-for-performance business model, where the cab drivers were paid for the pick-up and drop services of the cab aggregator companies. These aggregator companies connected the demand side, i.e. the customers, with the supply side, i.e., the cab drivers. The aggregators chose their supply side partners, i.e. cab drivers, as their target customers. To earn revenue, the cab aggregators charged a certain commission from the cab drivers’ income in exchange for providing leads / customers to them. So, operationally, these cab aggregators were giving rise to an on-demand economy, known as the Gig Economy. The challenge that these cab aggregators was to balance both the demand and supply side requirement. By 2016, backed by venture capitalists’ money, these companies were successful to a large extent in attracting and maintaining both parties in their ecosystem. The customers were brought into the system through various promotional discounts / offers, while the cab drivers were attracted by the ecosystem because they were given very lucrative incentives / bonuses. But with businesses needing to work on profit to survive in the long run, the aggregators’ concern was whether both parties would remain loyal. The aggregators were also exploring various options like bike taxis, online grocery, and partnering with hospitals / events in order to capitalize on economies of scope as well. So, they were considering several options like: getting into new market (tier III cities), launching new services like online grocery stores, entering into partnerships with hospitals, etc., or maintaining status quo to focus on economies of scale.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• To understand the business model options available to a marketplace player in the online cab aggregator industry
• To explore how a firm can create and capture customer value propositions in a marketplace business model
• To understand the importance of economies of scale and economies of scope for a marketplace player.

Keywords

Customer value propositions, Marketplace Player, Business Model, Online Cab Aggregators, On-demand economy, Gig Economy, Business ecosystem, Marketing strategy, India, Ola, Uber, Meru