The development of mobile apps in smartphones and the latest affordable technologies have developed this market niche “Taxi Aggregators”. Entrepreneurs started investing venture capital in taxi aggregator business after keenly looking into the Taxi Aggregator Business Model.
It is undeniable, that huge capital is invested by the topmost taxi aggregators like Uber, Ola in this business due to opportunities in the market and the popularity of this new market niche.
To analyze this taxi aggregator business in this article, we will look into the Taxi aggregator business model.
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What is Taxi Aggregator?
The taxi aggregators is a new market niche where the owners or the brand do not own their taxi and they depend on their associates to organize the taxi operators.
The intellectual property of the taxi aggregators are their capital invested for developing their App, IT support system and the network required for this business.
The most popular taxi aggregators are Uber, Ola in India. They always focus on developing or building their brand to expand its business worldwide by providing lower and affordable services to its massive customer base and thus maintains the relationships with their business partners or cab operators.
Opportunities that are driving Taxi Aggregators are as follows
- Highly jammed Road
- Congested driving
- High Parking charges
- Limited Parking Slots.
Taxi Aggregator Business- The real background
- The taxi aggregators still need to expand to become profitable
- Still, need to achieve a high return on venture capital.
- Investors are waiting for a high return on investment
- The business may grow in the future. However, one of the taxi aggregators had sold to their competitor within three years of establishment.
The threatening strategies of Taxi Aggregator Business model
In the real business of taxi aggregators, the technology used to build the app or the brand comes secondary when compared to the partners of the taxi aggregator business. The partners are the main key to this taxi aggregator business.
To realize the benefits of the taxi aggregator business for the aggregators or to the potential customers, it is necessary that the partners need to be focussed in this business. Thus to maintain the relationship with the partners of the taxi aggregator business, the aggregators need to offer high incentive schemes for the driver-partners or the users.
Speaking the truth, it is difficult for the aggregators to make money in between offering high incentives for the partners. They should afford to lose a huge amount of money to grab the market share. This is the point where they fail to occupy the position in the industry and may fail in this taxi aggregator business.
How large are the Competitors
- The current valuation of Uber is around $68 billion.
- The competitor of Uber is Didi Chuxing in China and the current valuation of Didi Chuxing is $28 billion.
- The competitor of Uber in India is Ola and the current valuation of Ola is $5 billion.
Why Aggregators get funded even after losing billions
- In the first half of the year 2016, Uber lost around $1.2 billion
- The net loss of Ola around the year 2015, was $120 million
- Just like Ola and Uber, Didi Chuxing also lost in billions by offering the high incentives to the driver-partners
To achieve a monopoly in the market, they should afford to lose billions during the initial stage of the business. Here in this taxi aggregator business, it is difficult for all the taxi aggregators to grab the market share. Many of the competitors of taxi aggregator business are moved out of this industry and it is always one market leader model business. The one which grabs all the market share will achieve the monopoly in this niche.
It is evident from the below information about the taxi aggregator competitors that the business model achieves monopoly
- Uber is the taxi aggregator market leader in the USA with 87% current market share.
- Didi Chuxing is the market leader in China with 80% current market share.
- In India, the market leader of taxi aggregator is Ola cabs and it is with 85% current market share.
Taxi Aggregator Business model-Sustainability
The market share of the taxi aggregator is retained by possessing the potential customers and loyal driver-partners.
The short term incentives are focussed by the taxi aggregators and this strategy may fail in the long term
Let us discuss this with one example. Consider a scenario where one market leader has grabbed the maximum share and they start focussing on short term incentive to generate profit. The drivers may move out of the business or move to the competitors. This, in turn, increases the service charges of the cab operation to compensate for the loss due to lack of driver-partners.
Now the condition of the market leader is the same as when they started the business but the only difference is that they have the maximum market share and the popular brand which is difficult for other competitors to grab the market share as it involves billions of dollars.
In this way, the taxi aggregator business model is a monopoly and it can be sustained by gaining the brand and popularity
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Hope this article helps you to understand what is taxi aggregator business and the business model of taxi aggregators. You will also be able to find the information about the market leaders of taxi aggregator business.
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