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What Next for Small Players in Kenya’s Taxi Hailing Business?

July 14, 2016
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What Next for Small Players in Kenya’s Taxi Hailing Business?

Eric Wainaina by Eric Wainaina
July 14, 2016
in Editorial
Reading Time: 4 mins read
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little slashes basic cab option

Little Cabs

The local taxi hailing space has been heating up with the entry of new players by the day. A few weeks ago, Safaricom in partnership with Craft Silicon launched Little Cabs, their own taxi hailing solution. Little Cabs is looking to unsettle Uber, which has managed to takeover the market. Little Cabs is seen as the most formidable challenger to Uber for a number of reasons. Firstly, Safaricom and Craft Silicon both have deep pockets, a necessary requirement in mounting a spirited marketing campaign. Secondly, Safaricom will seek to ensure ease of payments on the service through integration of its mobile money solution M-Pesa onto the platform. Third and most important is the innovation around the platform in terms of incentives for both riders and drivers.

Little Cabs is seen as the most formidable challenger to Uber for a number of reasons. Firstly, Safaricom and Craft Silicon both have deep pockets, a necessary requirement in mounting a spirited marketing campaign. Secondly, Safaricom will seek to ensure ease of payments on the service through integration of its mobile money solution, M-Pesa, onto the platform. Third and most important is the innovation around the platform in terms of incentives for both riders and drivers.

At the launch of Little Cabs, it was announced that users will soon have the ability to redeem Bonga points for rides. Users will also earn points every time they use the service, for which they can redeem rides in the future. In addition, Little Cabs added little nitty gritties such as in-car Wi-Fi, ability to see live fares all which are attractive to the user. For the drivers, Little Cabs promises to give them a free 4G smartphone upon signing up, in addition to 7.5GB of data every month. In terms of revenue share, Little Cabs will get 15% of the driver earnings, which is below what other services demand.

The other possible challenger to Uber and Little Cabs is Taxify, an Estonian company which partnered with the Kenya Taxi Cabs Association. The Cab Association was opposed to Uber’s services after launch owing to the intense competition created for traditional taxi cabs. Owing to the large membership of the Taxi Cab association, Taxify will have some clout in the market although it’s yet to announce how it plans to mount its challenge for the market.

What does this mean for other players?

Prior to the entry of Little Cabs and Taxify, Easy Taxi, a Brazilian taxi hailing service was seen as the main challenger to Uber. The service has since folded its African operations and opted to concentrate on its native Latin American market. This now leaves other smaller players, jostling to eke a share of this lucrative market. These include MaraMoja, which was arguably the first taxi hailing service in Kenya, Teke Taxi, Mondo Ride, Pewin Cabs and the yet to be launched service by logistics startup, Sendy.

Innovation in price, technology and incentives for both drivers and riders key for growth of players….

I think these services are going to have difficulty surviving in this market and they will need to innovate on price, technology and incentives for both riders and drivers if they are to survive.

Already, MaraMoja has announced changes to its pricing model; a key indicator of the shifts taking place in the market. MaraMoja previously used a pricing map that segmented different areas in Nairobi into zones, which then informs the pricing of a ride. This means the pricing of the rides are fixed from one zone to another (say a ride from Nairobi to Kilimani has a fixed price regardless of traffic and other factors). The new ride structure by MaraMoja charges a flat rate per kilometer of KSh. 65 with a base price KSh. 250 and no charge for time spent in traffic. You actually get a quote for the cost of your ride beforehand. Others are yet to announce changes to their prices but this will likely happen soon.

A common notion of taxi hailing services is that they are merely algorithms which share driver and passenger location and boom, your ride comes, your trip is completed and you pay. The bulk of these services is logistics which includes managing cars, drivers, passengers and payments using technology. The smaller players will have to seek ways to manage their logistics much more efficiently. Typically, they should ask themselves how they would lower the arrival time once a rider hails a taxi? How do they ensure even distribution of their drivers? How do they make the process of payments faster and more seamless? What interesting technology will likely attract users to their service? A re-evaluation of these aspects will then likely inform their decision to continue seeking market share or opt out.

Still on technology, a major problem for me and other users of ride-hailing services has been the UX (user experience), which is an eyesore for most of them. This should be a core area of improvement for the smaller players as they seek to grow their presence in the market. Offering a clean and neat solution that the user actually enjoys interacting with. Importantly, these services will also have to ensure they adequately incentivise their drivers and riders if they want to retain them. In the face of increased competition which will likely threaten driver earnings, how will they retain them onto their services? How do players ensure they retain their current users and attract more to their service? This goes beyond free rides and should be a core matter of consideration by a majority of smaller players.

Going Forward

Going forward I foresee likely exits and consolidation efforts through mergers and acquisitions between some of the smaller players. In light of increased competition and decreasing working capital, some of these smaller players will likely fold their local operations. Many of them have raised funding from investors and with the market becoming tough to run a sustainable operation, some of these players will opt out. Consolidation is likely to take place sooner in this space, as some of the smaller players coalesce around each other as a means of survival. Some will merge to allow them increase their capital, driver and car numbers, which will give them some room to wiggle in the market. Others will be acquired by some larger players for their technology and users. My bet? It’s going to be a cold world for smaller players. Time to get the sweaters out.

Tags: Little CabSendyUberUber Kenya
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Eric Wainaina

Eric Wainaina

Eric writes on business, govt policy and enterprise tech.

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