INDIA. In the latest of a new series about travel retail in India, #Miles2Go Consulting Services Founder Shriram Sanjeevi comments on the power of cab-hailing apps in the country and how they could be used by airport retail and F&B players.
It’s a Saturday morning and I’m up at 4am and heading shortly to Chennai Airport for a 7am flight. No, I’m not going on vacation – I’ve just returned from one and am catching up on work. Client meetings are scheduled through the weekend, while I hope to catch up with friends for a drink during the late evening at one of Bangalore’s buzzing bars.
In my consulting practice, I travel about 20 days a month, mostly within India. My travel is spread through all modes – air, rail and road. India lags far behind other emerging economies in terms of public transportation efficiency.
At times I wonder how smaller countries such as Malaysia and Thailand, which are the size of a state in India, have much better public transportation. For them, it was sorted out a decade ago. Meanwhile, the Chennai metro rail system is still under construction and has been for over eight years now. So, airport trips mostly have to be made using private taxis.
Unlike the greenfield airports at Bangalore or Hyderabad, Chennai Airport is close to the city. That it is accessible by road is a small blessing. We have had private taxi services such as Fastrack and Bharti Call Taxi for a decade or more now, but the arrival of cab hailing apps like Ola & Uber have made life simpler. Or, so we presume.
It’s no surprise that over 80% of airport visits are now made through cab hailing apps. So much so that the Airports Authority of India-managed Chennai Airport, which earlier had shown little willingness to co-operate with the apps, had to finally open up a separate area for such vehicles to pick up passengers from the airport. Public pressure simply proved too great.
Needless to say, the incumbent taxi operator who won the tender rights at Chennai Airport (Fastrack Taxis) hardly gets any business these days – their rates are almost twice that of cab hailing options. That they are not getting enough business is a huge concern for the company as well as the airport. Customers are secretly enjoying their helplessness, unforgiving of the fact that for all these years the airport-authorised taxi operators were fleecing them with fixed rates.
The cab hailing apps work on the premise of matching demand and supply. So, when the demand is high (for their taxi rides), the rates are higher, and vice versa. Both home-grown Ola and USA-based Uber are funded by international venture capital funds and there is no dearth of money at the moment (Uber is usually a little cheaper). When the ‘surge pricing’ applies, however, rates go through the roof and customers start sulking without realising they are just repaying the discounts (with interest) they benefited from in the past. A business associate remarked this week that the only human emotion that’s common to this race worldwide is greed. More so among customers. How true!
“When the ‘surge pricing’ applies, rates go through the roof”
During my time at Bangalore International Airport Limited (BIAL) I was responsible for setting up the retail areas at the greenfield airport in 2006. I proposed the idea of tying up the airport cabs with airport retailers. A simple paper coupon (there were no mobile apps in those days!) passed on by the taxi driver as soon as the guest boards the taxi could have a remarkable effect on the passenger. We actually tried this for two categories – coffee and duty free. Neither took off as much as I would have liked them to. There were two reasons for this: a coffee at Café Coffee Day at the airport was perceived to be expensive by the consumer (around 2008); and duty free in departures (in India) was considered less competitive than global hubs such as Dubai, Doha, Frankfurt, London, Singapore and Hong Kong.
Airport retail was also in an earlier phase in those days, with most passengers presuming that airports were merely transit points. Cut to 2018, and things are different.
There is a Starbucks, a Café Coffee Day or a lounge (and even a bar) in the arrivals area of almost every major airport. The same is true in departures. A lot of work (80% of Indian travellers fly for work) is usually planned around the airport. Quite a bit of shopping happens at airports too. From a nearly negligible value a decade back, today, the four private airports in India record a turnover of approximately Rs1,350 Crores pa (approximately US$200 million). That’s a lot of shopping by Indian passengers at airports. Yet airport retailers haven’t even scratched the surface of what is possible with ground transportation.
For example, I flew out from Bangalore to my hometown Chennai yesterday (as I write this) and am flying off to Mumbai tomorrow morning. The drive from Bangalore city to the airport was 45km and took me two hours. I was busy during the ride on my Macbook on a report I had to send to my client to meet a deadline. I also made two calls and finally switched over to my iPad for some quick reading. All along, there was zero engagement with the cab operator. Customer engagement – which is among the most used (and abused) phrase in marketing today – between a customer and a cab hailing app ends just after booking and boarding the cab. Some of us use the cab regularly, so there is continuity of engagement (rebooking), albeit extremely minimal.
Uber launched its Uber Eats App recently where customers can hail food just like they hail cabs. The service has been appreciated and there was a surge in orders during the recently ended IPL Cricket series in India. Uber makes a double-digit commission from the food retailer and gets the food home-delivered while the customer merely pays online or cash on delivery (COD) and dines at the comfort of his or her living room. Whether the whole commercial viability works or not is unclear. Ola acquired Foodpanda last year and is poised to launch a similar service soon. As a (self-proclaimed) business and management guru I do not see the two businesses of transportation and food merging anywhere for Uber or Ola.
“What if I am able to book my food on the cab hailing app and pick it up at the airport?”
However, as a retail guy who travels 22 days a month, I see a much bigger (and viable) opportunity. What if I am able to book my food on the cab hailing app and pick it up at the airport? I am already using the app to book a cab to the airport, so if I can book food as well on the same app, then it’s brilliant value addition to the company. Uber and Ola can charge similar commissions from the F&B retailers at the airport and customers could avoid standing at crowded kiosks for their food fix. It’s a win-win for all.
Airport F&B retailers have almost nothing to lose. The F&B penetration at Indian airports is less than 15% in the mornings, around 18% through the day and touches 20% between 6pm and 11pm. That’s because more passengers prefer a meal before boarding plus the fact that there are often flight delays. I see this as a lost opportunity for F&B retailers at the airport and as an incremental opportunity.
Plus it’s habit-forming too. Over time, passengers could pre-book their meal at the airport just like they already pre-book meals on board the aircraft, but with much higher quality. I am told that this opportunity is already being explored. Let’s hope we see it soon.
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