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With 7.5m rides a month, ridesharing services take over Bangladesh The estimated market value for the ridesharing start-ups, all business verticals combined, is worth USD 300 million at present. The value is expected to reach USD 1 billion within the next five to seven years, although it is expected by industry insiders that the industry will expand financially sooner Bangladesh, and the world, has seen an upheaval of technology-based sharing activities that have evolved considerably over time. Start-up companies using web-based platforms have opened up a brave new world of sharing-based businesses, blooming into "sharing economy". Dhaka has a fair share of start-ups offering ridesharing services. High traffic congestion and internet penetration rates have contributed to the business case of Dhaka-based start-ups. Since July 2019, 10 such companies - Pickme Limited, Pathao, OBHAI, Chaldal, Computer Systems, Akash Technology, Ezzyr Technologies Limited, Segesta Limited, Shohoz Limited and Uber Bangladesh Limited obtained licences, with the top 3 players being Uber, Shohoz and Pathao. Dhaka dwellers have adopted the app-based ridesharing services to a great extent and a study by Policy Research Institute says that the ridesharing industry of Bangladesh is valued at an estimated Tk2,200 crore and accounts for 23% of the transportation sector. According to data from January 2019, commuters took 6 million rides each month on an average via ridesharing apps. The current figures, however, have exceeded the 6 million mark and reached 7.5 million rides per month, reports industry experts. Drivers of growth Ridesharing services offer commuters certain benefits that mainstream transportation services do not provide. 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. Three-wheeler auto-rickshaws, or CNGs, gained popularity due to its availability and fare-pricing. However, CNGs exploited the elasticity of demand of transportation for commuters by refusing to charge by the meter installed in the vehicles, hiking up fares and refusing to go to places that do not generate higher fare. Taxi cabs followed suit and started charging exorbitant fares - often comparable to the fares in more developed cities. This led to the downfall of mass usage of taxi cabs, hampering its growth. According to a World Bank report, traffic congestion eats up 3.2 million working hours per day in Dhaka, adding up to 660 million working hours per year. The advent of motorbike-based ridesharing has not only saved commuters' time and provided faster transportation by bypassing gridlocked traffic, but it has also created employment opportunities for thousands. A Reuters report says that around 200,000 drivers are currently registered under the local ridesharing start-up Pathao. 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 – obliterating the struggles of haggling for reducing the fare. Market dynamics and estimations In contrast to western cities, where car-based ridesharing services have grown, Dhaka has seen the boom of motorbike-based ridesharing services since such ridesharing services are less expensive than the CNG auto rickshaws and taxi cabs. With year-on-year growth surpassing 40%, motorbike sales have continued to grow. Uber Moto, Pathao, and Shohoz Ride experienced success in its early stages in the motorbike-based ridesharing service sector. Each of these platforms have different strengths. While Uber is considered to have the best technology and training for drivers, Pathao has the most recognizable brand identity and early success rate. Shohoz, on the other hand, is the newest entrant with the largest single fundraising round among local start-ups and holds the most diversified position across business verticals. Although the car-based ridesharing sector has a clear market leader – Uber, the motorbike-based ridesharing market is still highly competitive. In 2018, Pathao raised USD 10 million in funding from investors, led by regional ridesharing heavyweight Gojek; while Shohoz raised USD 15 million in funding from investors led by Singapore-based Golden Gate Venture. However, the real stimulus for ridesharing companies and justification behind their successful fundraising rounds lies in the growth prospects of the various verticals in which they operate. Another ridesharing platform, OBHAI, provides motorbike and car services and it has ventured further by incorporating CNG auto rickshaws in their list of service offerings – which, unlike, the CNGs not listed on OBHAI, charge the commuters a fair amount through the app. Factors such as distance, traffic congestion, time of the day and pick-up area are taken into consideration to determine the initial fare. Another last-mile ridesharing service, Jobike, began operations earlier in 2018. Jobike is a bicycle-sharing app-based platform and it is the first of its kind in Bangladesh. Interviews with ridesharing company executives, investors, economists, and start-up ecosystem researchers suggest that a tremendous growth for this sector is in line within the next five years. The estimated market value for the ridesharing start-ups, all business verticals combined, is worth USD 300 million at present. The value is expected to reach USD 1 billion within the next five to seven years, although it is expected by industry insiders that the industry will expand financially sooner. Potential shifts in business models Major ridesharing services are branching out into service verticals. While Shohoz is pioneering bus, train, and launch ticket sales online, other platforms such as Uber and Pathao came forward with food delivery services. Uber Eats, Shohoz Food, and Pathao Food compete not only with each other, but also with established food delivery only platforms like Foodpanda Bangladesh – a dominant market leader in this space. The platform has solidified its market position by investing in technology as well as its dedicated driver network. Despite early and projected success stories of ridesharing, the year-on-year 40% growth in motorbike sales will add to the metropolitan's traffic congestion. As a remedy to this problem, transitioning from high-frequency ridesharing to high-occupancy ridesharing services are in talks. Industry insights indicate that at least three ridesharing services have already started work to develop such a service model. Jatri is one of such services. Jatri is a 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. The bus can be boarded from specific stops. Meanwhile, another start-up of the same model called Shuttle focuses exclusively on female commuters. Shuttle provides microbuses to female commuters of the same route. The commuters can ride Shuttle vehicles, that are prescheduled and booked, from specific pick-up points. Another app-based service called Buddy will enable commuters of the same route to ride in one car. Major challenges The ridesharing industry, like all other industries, has pros and cons. The pro lies in the funds from investors, access to talent relative to other start-up sectors in Bangladesh, extraordinary publicity, among others. The cons arise with regulatory scrutiny and scepticism, unhealthy competition, and, in some cases, difficult questions about the sustainability of the ridesharing business model. Globally, share prices of ridesharing powerhouses have fallen this year, sparking serious introspection about the sustainability of the business model. In May 2019, Uber offered its shares to the public and experienced a world-record first-day loss since 1975. Additionally, Uber and Lyft's performance in the capital markets over the last several months have cast doubts in the minds of investors globally. Similarly, in Bangladesh, Pathao - valued at USD 100 million - faced massive challenges when investors started backing out from the venture. This stance caused the start-up to downsize through a mass layoff of mid to top-level employees. This move, despite not putting the ridesharing market at risk, did put into question the quality of business leadership at the helm of start-ups in Bangladesh. 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 difficult. As a counter measure, platforms resort to offering promo codes to the users to initiate strategies for customer acquisition and retention. However, the promo-code driven growth strategy not been proven as successful in many countries, namely Indonesia. Heavy investments in promotions - intended to acquire larger market shares and increase its market value, lure in more investor funds. But such strategies tend to attract failure in the long-run once funds start draining out. In order to sustain in the market, ridesharing companies need to acquire and retain customers constantly. An effective method to do that is by branching out into vertical services. But introducing different strategies at the same time can drain investor funds too quickly. Problems for the app-based ridesharing companies arise when disintermediation takes place. This happens when the commuter and the drivers agree to transact, bypassing the app that is intended to connect them. The process of disintermediation has caused revenue loss for various sharing economy platforms. This process is part of a larger problem in Bangladesh which has led to grave consequences for corporate entities in the sharing economy. Disintermediation has been the cause behind the murder of a ridesharing driver who agreed to pick up a passenger offline recently. It leaves platforms and its users in a vulnerable state since drivers are not accountable to anyone but the commuter. In order to ensure safety of both the driver and the commuter, authorities need to regulate the process of picking up commuters offline. This also affects the revenue generation of the platform since the app is being bypassed while making transaction. Sustainability and policy directions Experts in sharing economy posit that critical mass - sufficient number of participants necessary to make the platform self-sustaining, plays an important role in the success of these platforms. Accordingly, ridesharing platforms must ensure a sufficient ratio of drivers and commuters in order to maintain healthy business environment. Promotions, despite not being successful in the long run, have been widely used to acquire new customers. Uber's retreat in Indonesia can be attributed partially to its spending spree on promotions. Platforms are increasingly focusing on data analytics to understand and predict the behaviour of its users. But in order to harness loyalty, these platforms need a deeper understanding of the user base. While predictive analyses are, to some extent, successful in harnessing users, platforms also need to engage in empirical research, refine their knowledge about the user base alongside customizing the user experience on the app and outside the app accordingly. The platforms also need to provide more reasons for its users to continue using the apps. It is important that customers recognize and even identify with the different platform brands but marquee advertising and indiscriminate marketing spending at this point may not be the solution. The rising number of ridesharing services, in the already densely congested cities, contribute to the traffic congestion. In order to harness loyalty, platforms need a deeper understanding of users. Shifting from the existing high-frequency ridesharing model to high-occupancy can have positive impact on both the commuters and city-dwellers. The classification of ridesharing services in Bangladesh reveals that there are at least three categories of ridesharing services and most are operating using the high-frequency model. In Bangladesh, with the increasing motorcycle-based ridesharing services, more and more people are leaning towards bicycling to commute. Currently, Jobike is the only service that facilitates bicycle-sharing through an app. However, the ever-expanding bike sharing services in heavily congested cities like Dhaka is a courageous initiative due to the lack of dedicated bicycle or bike lanes. Recently, Dhaka North City Corporation (DNCC) established a 9 km long bike lane for the first time in Bangladesh. 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 states that one car is allowed to be registered to only one platform, as it goes against the spirit of entrepreneurship. The draft policy states that a car has to be more than a year old to be registered on a ridesharing platform, but does not state the car's maximum age for registration. And since the number of motorbikes in the city still growing, a mechanism of progressive taxing should be formulated for the ridesharing companies, since the fleet is large enough to significantly contribute to the city's traffic. As ridesharing companies majorly rely on drivers to act as throttles for the business, the relationship between platforms and drivers need to be explored more for the business's sustainability in the future. Currently, ridesharing companies treat drivers as third-party contractors by not providing them benefits and protection which, as a matter of fact, the platforms to not deny to their clerical employees. One of the reasons why platform-based sharing services adopt the contractor-based model is because it keeps costs of the 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 of Uber in London. Some of the ridesharing platforms also tend to stray away from ridesharing and branch out into verticals. Similar business detours have been piloted by local ridesharing companies. The question that arises here is how do the regulators define the businesses once they have branched out? Can the platforms still be defined as ridesharing companies? If the answer is yes, is it legal for the platforms to use user data obtained from the ridesharing end to develop the verticals? 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. What is for certain is the fact that digital transformation of various business and economic sectors in Bangladesh, and globally, is inevitable and this is high time for more research and policy dialogues in this space. Globally, sharing platforms have existed long before even the idea of it existed in Bangladesh. Napster is one of such services dating back to 1999 - that facilitated the digital sharing of music within users as a form of peer-to-peer (P2P) file sharing. With time, sharing economy services have already disrupted several industries and according to analysts, the growth potential of the sharing economy is rather compelling. According to PricewaterhouseCoopers (PwC), global revenues from the five sectors of the sharing economy will increase to 2,133% between 2015 and 2025. The monetary range will exceed $335 billion from the current $15 billion. This economy has also broken several social taboos. 15 years ago, sleeping on someone else's bed in exchange for money was a wild thought. But now, every night, 2 million people are sleeping on the bed of a stranger, while Airbnb has accommodated 500 million such people. However, given the disruptive nature of sharing economy services, controversies have followed in some cases. Meanwhile, regulators globally have struggled to keep up with the innovative business models on offer. Safety concerns have risen as well due to carrying out transactions with strangers on the internet. Additionally, traditional sectors have pushed back against sharing economy companies, while recently 10 major European city governments have requested the European Union (EU) to regulate Airbnb in the fight against the worsening housing crisis faced by the city dwellers. There are also high-profile cases of start-up failures, even for the privately-owned start-up company Unicorns. Its equity value has dropped significantly in the last few years. A snapshot of global ridesharing Simply put, ridesharing services connect drivers with people looking for rides. The mobile application or platform that enables the service calculates real-time data regarding demand and supply, traffic and distance in order to determine the cost of the ride. This then allows the driver and rider to communicate – ultimately leading to the transaction. 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 size has grown and is expected to grow from around $61 billion to $218 billion and by 2030 and the figures are likely to reach $285 billion annually. By the next three years, almost 100 million users are expected to be added to ridesharing services globally. The North American region represents the largest ridesharing market at present, while the Asia Pacific region constitutes the fastest growing. Uber is the poster child of ridesharing services. The industry has also seen the rise of such giants like Ola in India, Lyft in the US, Grab in Malaysia, Carpooling.com in Germany, Gojek in Indonesia, Didi in China and so on. Many automotive corporate giants, like BMW's DriveNow, are also investing in in-house ridesharing services. The industry has also seen fierce competition, resulting in takeovers and exits. In China, Didi's market dominance forced Uber to sell its Southeast Asian businesses to Grab in 2018. Meanwhile, Japan's Softbank became an unexpected winner in the ridesharing battle - which holds a considerable amount of equity positions in Uber, Ola, Grab, Didi, and Brazil's 99.