Meru CEO on how its new marketplace model beats surge pricing

Amidst ongoing strikes and skyrocketing rates, Meru Cabs has found a win-win strategy to keep drivers and customers happy. Nilesh Sangoi, CEO of Meru Cabs tells us how. 

Nilesh-Sangoi-CEO-Meru-Cabs_0.jpg

Two things have plagued the shared mobility space for quite some time now – driver engagement and customer satisfaction. 

The lack of profitability had driven 95 percent of Ola and Uber drivers in Mumbai to go on strike. Last week 12,000 drivers previously registered with Ola and Uber switched sides and joined Meru Cabs. At the consumer end of the spectrum, customers have had to bear the brunt of surge pricing and unavailability of cabs.

Meru Cabs spotted this as a prime opportunity and revamped its business model to benefit both drivers and customers.
A long time player in the ride hailing market, Meru Cabs has deployed a patented Cab Marketplace model through which it simply matches customers with nearby driver partners. In this model, Meru’s driver partners decide the rate within a particular range. 

As a result of this, customers are protected against surge pricing as the model encourages healthy competition between driver partners. And as drivers get to choose the rate, they too are a happy lot. 

CIO India speaks to Nilesh Sangoi, CEO of Meru Cabs to understand the rationale behind its revised business model.

Meru’s win-win formula

If you look at a typical marketplace, it allows the supplier to set the price.  For instance, a hotel aggregator doesn’t mandate all 5-star hotels to offer the same price. However, if you look at the shared mobility space, the price is decided by the cab aggregator – there are fixed slabs for sedans and hatchbacks.

So the cab aggregator marketplace is actually not a marketplace in the truest sense, and this is the biggest challenge at this point in time. Initially a lot of incentives were given to drivers to create a large market. But at the same time, it created an imbalance in the whole ecosystem – driver partners became dependent on incentives. 

“When we looked back, we asked why should the cab aggregator fix the prices – why not allow the driver partner to fix the price. With this model, we share the estimated price with the driver and then he gets to decide the actual price,” says Sangoi.

Now when the customer accesses the app, he or she can view all the nearby cabs and the prices set by the respective drivers. There’s an upper cap that prevents driver partners from charging exorbitant amounts, and a lower cap that ensures drivers don’t run at losses.

This brings about a healthy competition between the drivers, and also encourages them to keep the prices at a minimum.
From an IT infrastructure point of view and how it aligns with Meru’s plans to expand, Sangoi says that Meru Cabs utilizes the public cloud and this has helped it maintain a flexible and elastic infrastructure. Additionally, scaling up and scaling out can happen on the fly.

Was Meru late to the party?

With respect to why Meru hadn’t joined the fray in the shared mobility space, Sangoi said that it has a lot to do with the perception. Since Ola and Uber saw huge investments early on, the popular perception is that they were the first to come up with mobile apps. 

“We couldn’t break this perception with the limited resources that we had. We are a small player but we have survived the onslaught of 5 billion dollars being invested in our competitors. Since we haven't seen this kind of investment, we will wait for the right opportunity to challenge the players in the top rung,” shares Sangoi.