One startup untangles the mess of India’s private buses

February 26, 2013
February 26, 2013

India is a country of hustlers. And yet, Bangalore, which is the rightful startup capital of the country, hasn’t proven its potential as the next Silicon Valley. That promise was born in the 1990s when it attracted entrepreneurs and investors to what was already home to India’s IT giants: Infosys and Wipro. But success stories from the startup hub have been slow to emerge. A recent example is Flipkart, dubbed as India’s Amazon. The latest addition to the list is RedBus, an online service for bus tickets, which has pulled off a trick that few thought possible.

A little context: In India, a common mode of inter-city travel is buses. There is usually state service and few private operators that compete for customers. The state transport tends to be less comfortable and more unreliable. So those who can afford it use private operators for journeys that can last anywhere from a few hours to more than a day. But the booking system for these private operators can be a nightmare. Tickets are usually bought from agents who try to make a high profit margin. Lack of centralization also means that the customer has little leverage to bargain.

So in 2007, the founders of RedBus built a website to serve as the central database for all buses in India, a ridiculously difficult task given the highly-fragmented nature of the market. The site gives bus operators a web-platform to handle ticket bookings. For the traveler, the experience is much like using CheapFlights, but for buses. Payment is made through (inter)net banking (still commonly used in India), or credit or debit cards, and tickets are delivered by text message, or SMS, to the buyer. RedBus keeps less than a 1% cut of over 750,000 rides taken daily.

RedBus’s chief product officer, Alok Goel, told TechCrunch: “Up until last year, most bus drivers required a printout of a ticket, which is difficult for most people to do.” So, you basically forced bus drivers to accept SMS because it was the best experience for your users? “Yes,” said Goel.

Its efforts have finally started paying dividends. The site now handles ticketing for over 7,000 bus routes across India, and its revenues have been more than doubling year-on-year. Ticket sales for 2011 were $25 million, which grew to $70 million in 2012 and are projected to be more than $120 million in 2013.

Being pushy helps. RedBus is not the only player in this arena. Large private bus networks such as VRL Travels and KPN Travels, and even the Karnataka State Road Transport Corporation have launched their online booking services on the heels of RedBus. While they make access to tickets easier, buyers prefer to compare offers from different operators at one place.

In that sense, the only real competitor for RedBus is Ticketvala, which was launched in 2006. It has been comparatively slow to take off, though. Where it fails, analysts say, is in delivering on its promises. Indian customers tend to be more wary of online purchases compared to those in rich countries and a whiff of unreliability can do a lot of damage. Ticketvala has been re-strengthening its brand since it was bought by MakeMyTrip, an airline booking service. RedBus’s attempts to outdo Ticketvala have included building a database of user ratings for each bus service and offering a Google Maps-type 360 degree view of bus-stops.

RedBus also capitalizes on the preference of Indian customers who cannot book and pay online, but would rather pay through “cash on delivery,” which puts the risk of a no-show on the company. That route has proved popular for RedBus, which makes almost half of all its sales through phone calls to their toll-free number.

Follow Akshat on Twitter @akshatrathi. We welcome your comments at ideas@qz.com

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