Bike Hailing Service in Nigeria – The Mistakes of the Startups Involved

Two months ago, I made a post to express my concern about Opay’s scalability.

Now back to the real discussion and I want you to learn a lot from this post. Opay is a fintech service with an app where you can transfer funds and this start-up came into the market with a 50 million dollars funding.

The day I heard about this, I quickly converted to Naira and discovered it was a whopping eighteen billion naira. That’s really huge right? There’s so much to spend till the business becomes stable right?

About a week ago, professor Ndubuisi made his own post about Oride and I decided to make it the perfect time to share some lessons.

As analysed, Opay is a payment service and in order to get people to use their payment service, they came up with Oride, O-boat, O-food etc.

I want you to note this somewhere as we begin this analysis journey;

“If the goal of Opay is to use these other strategies to get people to use their app for payment, then there is an issue”

Let us pick these services one after the other and analyse them to see if the use of Opay service will be a success in the long run.

O-Ride

I must give them kudos at first on how they made entry into the market and disrupted the whole market. The bike hailing industry contained two other startups who had also raised some funding, Gokada and Max.ng.

These start-ups had lesser funding compared to O-Ride anyways. I made a post a few months back when Gokada was shutting down temporarily to analyze the bike hailing industry.

I feel O-pay did a perfect job because at first they got the need of the market right.

Before launching a business into the market, there’s a need to make a proper research of the needs of the market before developing your unique selling point. I don’t think Gokada did a good job on that.

We are talking about bike hailing and I will list down reasons why people will want to use bikes. Mind you, I don’t mean the regular bikes, I mean why will a person need to go through the stress of downloading an app in order to get a bike to move distances?

The reason I needed to be specific was to make a clear distinction that anyone can always come out of their houses to get any bike going from one place to the other. However, this time,I’m referring to patronizing the bike hailing services.

1. Flexibility in transportation: Due to the regular hold-ups on the ever busy, never free Lagos roads (using Lagos as a general example), and the popular track record of getting stuck on the road for hours, these bikes offer better flexibility in navigation than the vehicles.

A bike man can always maneuver his way around the heavy trucks, the tight blocks and still get through.

2. Time saving: Time saving is very important in Lagos. If there’s any city where time is being wasted on the road in Africa, Lagos might be listed as the first. The honest truth is that sitting down on a bus filled with so many passengers in a Lagos traffic can be so discomforting that you will never have the time to work on personal projects.

People outside Lagos might be wont to think that they can maximize the time on a bus by reading or listening to some podcasts but I tell you, it’s not as easy as you think.

3. Cost: Why take an Uber and get trapped in hours of delay when you can take a bike and save time? I mean when you get to consider both options, most times you will rather take a bike to save more expenses even while you’re saving time.

Uber is for the middle class and the rich and it’s expensive. It’s expensive to the lower class. The issue here is while saving time, I can save money.

…..

Now let’s analyse some basic things here and I’m still on why Gokada didn’t understand this market very well and why I give Kudos to O-Ride. I will still explain why O-pay also made a huge mistake.

We have 3 basic reasons why people will want to use a bike from an app.

The fact that you can stay at a spot and call a bike to come pick you up directly is in itself a good selling point where you don’t need to go through the stress of describing location because your bike man should know the routes at least 50%.

In order to create a unique selling point, we need to begin to analyze the different solutions these bike services are offering and rank them in order of urgency or priority.

My own take is that if Gokada did this, they wouldn’t go through the whole stress of spending so much in branding their bikes, getting expensive ones, doing a lot of spending on just customising.

Let me quickly talk about, I want you to put on your business thinking cap.

You want to go from point A to point B, and you’re fully aware there might be hold-up on the road. At this point, if you’re a middle class or higher class who can afford Uber conveniently, you totally discard the idea of Uber because you want to save time.

Right?

So time is the first most important unique selling point. Because you want the bike to come down to the front of your house, you’d get the mobile app of any of these bike services.

Now, pay attention. The next consideration is safety. Nobody wants a risky bike so it pays more to get an experienced rider who has a spare helmet to a rider whom you don’t know and you cannot trust.

All these are factors that plays in the mind of the user which is you and I before we make a move to either download the app or use it.

Now, with these two factors, Gokada has a very good market and O-Ride shouldn’t have had any reason to disrupt the market. However, there’s one key factor that can override a lot of other factors.

That is purchasing power; PRICE.

Now, a little bit of diversion once again to establish another point. I must say that as a business strategist working for a research company here in Nigeria, I have come to agree to the truth that if a business does not invest into research, such business may never go far.

In my company, we help companies both locally and internationally make detailed market research that will help come up with the buying decision analysis and other key consideration to put in place.

Nigerian companies must spend money, I mean good money on research. That’s by the way.

I had to divert to talk on that so that you’d be able to understand the next point.

Gokada had safety as one of their unique selling points which is good. The fact that it is a flexible means of transportation which will save time is also good. Matter of fact, that is the most important unique selling point.

However, this is Nigeria, a very price sensitive market. What this means is that Nigerians buy with their pockets and purses in front of their faces.

Pay attention;

Gokada came out with all their bikes customized and all their riders trained to guarantee safety. Then they set a price to meet this service.

O-Ride on the other hand had an app and made it available for other riders to come on board. This means that they are not spending so much money on branding bikes.

Just come with your bike, get our devices and equipment and keep working.

Customising all bikes will have cost so much and this will reflect in the service charges which obviously did for Gokada.

Now let’s talk about something really important here which is psychology. How do people see bikes in Nigeria?

Nigerians obviously do not perceive bikes to be a luxury service. The unique selling point for Uber are, class, comfort, privacy.

However, for bikes, class is not psychologically perceived. Neither is comfort. All these do not come to mind when people go to use bike services, whether rich or poor.

Two major factors are psychologically perceived

1. Speed (time saving); How do I get to my destination on time
2. Safety; Hope this wouldn’t be my last day on Earth with these reckless riders

If comfort was a unique selling point, then people will rather go for Uber services than bike services. This means spending to provide comfort is actually not totally necessary.

Does this cancel out the helmet and overall?

No, the helmet falls under the security category. The raincoat falls under the comfort category.

Most times, the raincoat isn’t really considered a factor. Although, no dispute, it will be needed during rainy seasons.

However, excessive spending on these by the startup itself was not the right way.

O-Ride on the other end saved themselves the stress by not owning the riders but making them partners. Now that will save more cost and give room for the service charge to reduce.

Now because of the huge money O-Ride has, they were able to cut down service charge to a give away rate.

Since bikes has no class attached to it, people do not mind and do not care. They will always go for the cheaper one due to price sensitivity.

This is simply the way O-Ride was able to gain entry into the market and dominate. However, this is just the beginning of a failed business model for O-Pay as well.