The race for Nairobi’s taxi market

By Malaika Judd  |  March 26, 2014

 

At Savannah Fund we’ve been eagerly watching the taxi startups in Nairobi – admittedly more for personal benefits than anything business related. Paul (partner in our fund) is an investor in Uber, and to avoid conflicts of interest we will not invest in another local taxi app. Regardless, we are committed to helping and advising the teams as they prepare to launch, and willingly beta test each platform.

CHALLENGES IN NAIROBI’S TAXI MARKET:

Pricing:

In Nairobi we use zone pricing. With an approximate 200kes ($2.20) fee for getting into the car, one can travel anywhere within a zone (or to another zone) for a fixed price. This is true regardless of traffic, rain, supply and demand, bribes to cops, flat tires, stopping to fuel up, getting lost, or waiting time. In fact, most of us know the base rates that we hand over what we’ve calculated as the rate without asking the driver the final price, hoping to avoid the barter process.

Traffic:

Traffic (or time) is not a factor in the cost of a ride. A ride from A to B can cost 1,500kes ($18) and take 20 min or 1,500kes and take 3 hours. And trust me, a 3 hour ride in Nairobi covering a 15km distance is not that uncommon.

Corporate accounts and discounts:

Most companies have discounted accounts with preferred taxi networks. Instead of paying in cash, one can sign a paper ticket for the ride and the charges will be credited to the company at the end of the month. This saves employees from fronting cash for a ride and also ensures that the company pays a discounted rate. So far the apps I’ve seen in Kenya are missing this feature.

Payments:

We pay in cash or M-Pesa. Local taxi startups like Maramoja and EasyTaxi have been quick to integrate with M-Pesa and cash payments but I’m betting the bigger players, such as Uber and EasyTaxi will also adopt the M-Pesa model. But does M-Pesa allow for a seamless payment experience? Safaricom is constantly being pushed to open up their APIs and allow easier integration, but so far solutions have been clunky. Whomever masters the a 1-step M-Pesa payment inside the app will have a huge advantage.

What about credit cards? Is Kenya ready to pay for cabs on card? Trust has always been an issue here in Kenya, but the market is slowly shifting. Bigger international players like Uber and EasyTaxi will win on this as they come internationally accredited and trusted. Smaller players will struggle.

THE REAL DIFFERENTIATORS:

Pricing, payments and business accounts are the easy localization tricks every app quickly incorporates. In fact, the majority of the teams we look at are simply Uber clones + localized pricing + M-Pesa accounts. But that’s not enough. The real challenges are training local drivers to understand and use the app dispatch and payment system and protecting smartphones against theft.

Driver Training:

Let’s face it. Truth is most taxi drivers don’t know how to read a map. I’ve tried too many time to show my driver where we need to go using my smartphone – which shows the moving arrow and final destination – only to find out he has no idea where to look or what it all means. Navigation here is based on landmarks and stops on the side of the road to ask for directions.

The new players vying to modernize the taxi dispatch systems need to spend time educating their drivers to use a smartphone, read a map, and understand GPS navigation. This is no small feat. Last time I rode in a car with a driver whom I’d called directly – but whom was suppose to be working on the Maramoja platform – I asked him why he hadn’t answered any requests through the app. He replied “I don’t know how to work it. I need training on what to buttons to push. So I left my phone in the office.” Turns out, apparently this driver had already gone through 3 training sessions. I repeat. Not an easy feat.

Theft:

This issue is simple. You’re training taxi drivers to operate a (pretty basic) smartphone worth more than their monthly salary. Now make sure it’s totally blocked from operating other apps and securely protected against theft.

THE PLAYERS:

EasyTaxi – Rocket internet taxi company that proved successful in Brazil. Recently launched in Nigeria and has just hired a CEO for Nairobi. Has experience with developing markets and also has a big enough budget to potentially battle Uber. Planning to launch within the next 3 months.

Uber – Proven track record around the world. Less success in developing countries (ex: see India). Having trouble hiring a highly skilled local team. Rumored to have a $20million budget for Nairobi. Potential to change the taxi market, but needs to be able to customize enough for local pricing models and payments.

Pewin Cabs – Has a working app already in Nairobi. When reserving a cab to the airport, was shocked with a ticket price almost double (2,500kes) my local taxi driver’s (15,000kes). Not enough cars currently on the road and I haven’t seen any marketing on this app yet.

MaraMoja – Run by a small team of local entrepreneurs. Lots of dedications and enthusiasm, but struggling to launch their app, prioritize features, train their drivers, and get enough connected drivers on the road.

SasaCab – Currently taking bookings via the phone. This is not different from the current solution where we store our preferred taxi dispatchers into our phone and call when we need a ride. Minimal viable product? Maybe. But let’s see how long it takes before they get their app out there.

ZapaCab – Startup from South Africa that soft launched in SA and Nairobi. Came and went in Nairobi. Was up and running for less than a month.

MyTaxi – Presented at an AppWiz competition sponsored by Safaricom late last year. Haven’t seen any progress from the team since.

PROGRESS SO FAR:

What are these apps really trying to solve? What is the specific problem in Kenya that needs fixing? I can list several – but I can’t tell you what each team is tackling. In fact, it seems like every team is just racing to rollout an Uber clone before Uber does (see comments on tech clones). But why? Uber launched in San Francisco with the aim to ride in class. Quickly they realized their other value add – being able to find a cab on the road within minutes. In Kenya, you can find cabs everywhere. They’re lined up on the side of the road ready to compete with each other to win your business. So what are we trying to solve here? Is it trust in drivers? Confidence we’ll pay a fair price? Ability to have a preferred driver in the middle of the night? Or interest in choosing the type (size) of the vehicle? If tasked with building a minimal viable product – I’d build a mobile optimized website with a list of preferred drivers, their base stations, working hours, phone numbers, and a basic rating functionality. I’d probably also include a simple zone-pricing map. This would solve my biggest problem: being stuck at night in a neighborhood where I don’t know the local drivers and I don’t know the standard zone based fare home.

It’s not impossible to make an app that will  simplify the taxi dispatching system here in Nairobi. Several of the players above could probably do it. But so far they haven’t. We’ve found that most of the teams are building for too long, delaying on their launch to include every last feature, delivering poor driver education, and downright missing the simplicity and ‘wow’ effect to their app. Or they have no focus on what problem they’re actually trying to solve. If I have to try 5 different times to request a cab – only to find out certain buttons don’t work, fancy features are displayed but not yet functional, no cabs are on the road, or the taxi drivers forgot to take their smartphones with them (or worse, don’t know how to work the app!) – I’m going to uninstall the app before it’s operational. And I’m definitely not going to refer it to my friends.

I look forward to the first app I test that just gets it. Where I can actually request a ride, pay a reasonable price, and feel like it simplified my life just a little bit. When that happens, I’ll be sure you let you know…

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  • njoshsn

    🙂

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  • John

    Very nice and clearly laid out article! Malaika please check out TaxiPixi – we are just setting up base in Kenya and might launch in the next couple of months. Would love to get your feedback on the App. You can get the app for Android or iOS from these links: Android ( http://www.bit.ly/TaxiPixi ) and iOS ( http://www.bit.ly/TaxiPixi_iOS )

    • Malaika Judd

      Hi John. Been waiting to see TaxiPixi move into Nairobi! I saw you launched recently in Nigeria… and the move to Kenya? Is it on hold?

  • Nairobi

    Terrific article. How have things progressed in the last 4 months?

    • Malaika Judd

      Not much has changed. EasyTaxi is the dominate player at the moment. Uber has stalled considerably in launching – they’re still recruiting their Nairobi based team (job positions have been open for over 15 months now). Maramoja hasn’t gained any momentum. PewinCabs is still too expensive.

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  • Tamzin

    It would be really interesting to see an update on this, now that Uber has launched…

    • Em Lee

      Funny thing is that nothing much has changed. Uber has come and overtaken them

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  • Peter Muigai

    I own a car and would prefer to lease it, what is required of me

  • Em Lee

    This is a very good analysis of the taxi industry. Am surprised that two years down the line, nothing much has changed. These companies have not made any great impacts. They are being overtaken by uber.. Or replicating what uber is doing. What we need is to be more innovative. I am working with a company which understands this differentiation and wants to make a break through for the Kenyan taxi industry and travel market. The application is not just about a taxi hailing app. We are concerned about security, budget management for companies and convenience. Individuals and corporates should not compromise on their security and value for their money. Therefore, when it comes to the taxi industry, rather than replicate what others are doing, companies should look at the loopholes… The challenges and how to ensure convenience and that all stakeholders benefit.