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Major challenges of the country’s ride-sharing economy

Dec 19 • Exclusive Report • 110 Views • No Comments on Major challenges of the country’s ride-sharing economy

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Bangladesh is now witnessing a leap in ride-sharing space with the emergence of the ride-sharing companies.

In 2016, ride-sharing tech companies stormed the market with Uber, Pathao and Amar Ride launching services in Dhaka.

On average, users took 6.0 million rides each month from rideshare services, according to January 2019 data. And it is clear evidence of massive uptake and growth of ride-sharing services. 

However, the country’s ride-sharing economy may face multiple challenges in future. Globally, the current status of ride-sharing powerhouses puts a question over the sustainability of the existing business model. And it is also considerable.

In Bangladesh, the rideshare service star Pathao has faced challenges when investors backing out from expected funding rounds.

Consequently, the start-up reportedly valued at $100 million had to undergo significant downsizing of large numbers of mid- to top-level employees. However, it has put a consequence in country’s ride-sharing ecosystem.

What are the key factors of the country’s ride-sharing economy?

Keeping users stick with one platform is a key challenge. While it’s not the happiest measure, customer churn is common since it is merely a matter of switching between apps.

Companies take on promo-code to counter this, as a key strategy for customer acquisition and retention. However, several geographies of the ride-sharing set the failure of the promo-code driven growth strategy.

Heavy investments in promotions, intended to acquire more market shares, and subsequently, more investor funds, worked less in many cases.

Another strategy to extend other service verticals, like food, logistics has got more users on-board, but balancing different strategies can drain investor funds too quickly. The platforms need to have multiple service verticals to strap up the users’ loyalty, since creating brand loyalty is more difficult for app-based services.

Another problem specific to the ride-sharing economy is disintermediation.

In the context of ridesharing, when users and service providers agree to transact bypassing the platform is disintermediation. 

Disintermediation has turned into a major problem. It also caused revenue loss for various sharing economy platforms. It leaves platforms and its users vulnerable since drivers are not accountable to anyone but the fee-paying customer.

This needs to be regulated as it has safety consequences for both the drivers and passengers and revenue and business implications for the platforms.

So far, the platform companies and investors are not the winners. Currently, the car-selling agencies are getting the ultimate benefit from the success of the ride-sharing networks.

Other actors are telecommunication companies, as both users and the drivers need to purchase mobile Internet access to operate.

However, the landscape of rideshare service appears to be evolving for the factors that may disrupt the overall economy of the ride-sharing space.

Major challenges of the country’s ride-sharing economy
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