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Online ticketing: RedBus has posted a staggering growth & Rs 300 cr in revenue this year

Rekha TP loves travelling by bus. What she doesn’t love is standing in a queue to book tickets. But life has become much easier for the Chennai-based software professional ever since she discovered the convenience of booking tickets online. “I frequently travel by bus from Chennai to Madurai, where my parents live. Online bus ticket sites are a great option for people like me.

The booking takes only a few minutes; you can choose your seats, compare different bus operators and get good deals on the fares,” she says. Not surprising then that after the success of online train and air bookings, bus ticketing is emerging as the fastest growing internet travel segment.

In the past few years, almost 20 pureplay online bus ticketing sites have sprung up on the web. The market that they are bringing online is a highly fragmented, though untapped one, comprising some 2,000 private bus operators plus government-owned transport corporations in every state.

“The country’s bus market today would be around Rs 15,000 crore,” says Keyur Joshi, COO of travel portal, which acquired one of the first players in the sector, in 2010. “The market has a robust growth outlook, since buses play a dominant role in India’s roadways segment, which transports more passengers per day than railways and air.”

The potential is there but so are the challenges . Primary among these is the dispersed and unorganised nature of the sector, which relies on a network of agents and sub-agents for bookings. This makes it difficult to bring the booking mechanism onto a seamlessly integrated platform. Which is why, despite the mushrooming of ticketing sites, only a few have really tasted profits.

The most successful of these, according to analysts, is the Bangalore-based Redbus. Started by three friends from BITS Pilani (after one of the founders failed to get a bus seat to go home on the eve of Diwali), the site has built up a database of almost 800 bus operators and has finished the last financial year with gross bookings of a little over Rs 300 crore.

“A major reason for Redbus’s success is that they have been consumer-centric and focused on sales rather than trying to automate the operations of bus operators,” says Parag Dhol, managing director of Inventus Capital Partners, a venture capital firm that has invested in the site.

“Automating the operations of bus operators” is a strategy that most ticketing sites, including Redbus, started out with. It essentially involved getting operators to use booking softwares to manage their seat availability. The rationale was that once the backend from the operator’s side was streamlined and digitised, they could aggregate all the information and put it up for consumers. But this scheme had a flaw.

“We soon realised that most bus operators had a huge resistance to change. They were willing to forego the benefits that technology offered rather than invest in a new system,” says Phanindra Sama, CEO of Redbus and the guy who had the eureka moment of starting the site after he failed to get a bus seat.

It required another eureka moment to get out of the logjam. Sama and his team had one when they decided to shift focus from the bus operator to the end user.

The move paid off. By blocking a few seats in each bus and uploading the information on their website for consumers, they slowly created a dedicated user-base, which was willing to buy tickets off the internet. “When operators saw sales happening, they became interested in automating their operations as well,” says Sama.

Bus operators who have gone online are happy with the change, especially since the colour of their balance sheets has changed as well – in many cases from red to black. They are now able to track the number of seats sold and get payments on time – a welcome change from the manual process when many of them were losing money because their agents and sub-agents were either not paying up or under-reporting the number of seats sold.

“I’m releasing more of my inventory to online ticketing sites, since sales have increased through them,” says Joginder Pal Sharma of Delhi-based Swagatam Tours, which runs buses on the Delhi-Manali route.

Although the online market has started sprouting, it still accounts for only 10% of the bus tickets sold (according to industry estimates, 70% of the bookings happen through phone and the balance 20% are counter sales). There’s a clear growth opportunity here for the net players. Plus, most of the online action is limited to Tier I cities, while Tier II and Tier III towns, with their limited internet penetration, are still to be tapped.

With more sites coming up and profitability slowly rising, this should happen in the future even as the market is expected to become intensely competitive. “Competition will help grow the segment, but eventually there will be a limited set of players in the sector – those that can achieve scale in terms of customers, routes and operators,” says Prashant Agarwal, principal, Boston Consulting Group.

Those who can zoom ahead then will enjoy the fruits of future success. But as far as the bus traveller is concerned – with tickets and deals available on a click – the ride has already got better.

Speeding Ahead

The Indian bus market is estimated to be worth Rs 15,000 crore and growing at a rate of 25-30 % Almost 2-3 lakh bus tickets are sold everyday, of which an estimated 10% is booked online The online bus booking market is expected to increase significantly in the next five years. This would coincide with rising demand for bus travel, according to a study by CRISIL.


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