redBus Sells 3 Million Bus Tickets Online: CEO Phanindra Sama On How They Did It

Pilani Soft Labs Pvt Ltd, which runs India's largest bus ticket booking website redBus.in, needs no introduction. The company, launched  in 2006, has created an altogether new market only by connecting bus operators and travellers online, a service which was not available earlier. The news is the company will be hitting the milestone of 3 million tickets sold and Rs 150 crore in gross revenues by this fiscal. Also its not just about setting up a website to sell tickets. The company is helping the traditional, old economy sector like transportation industry use technology in a big way.

Techcircle.in spoke to Phanindra Sama, the founder of Pilani Soft Labs Pvt Ltd, on what is new at one of the hottest startups.

How has your drive to computerise bus operators worked out since you launched the reservation and route tracking system in January 2010? What were the challenges to getting them to adopt computerisation? How many have opted out? Do you outsource training? What are the future plans to scale this up?

Now, 300 operators on our network (of 700 plus) are computerised, though it has just been a year since we launched the reservation system. We didn't strongly push the software, bus operators took it up as a function of value they get out of it. As they realise its value, they come to us and we help them set it up.  We train the operators ourselves. Initially, we have to configure buses, routers, drop points, routes and convert offline data to online. Post that, we deliver central support over phone. Opting out of computerisation has not happened and we are only witnessing people signing up for it.

There is a huge unorganised market of private bus operators, more than 2000. How are you planning to convince them into using your software? How long will it take you?

We have increased our bandwidth now and should be signing on more operators than we ever did in the past. In a matter of 2-3 years, every bus operator will be computerised, irrespective of which location they are in.

And we will then get as comprehensive a platform as airline/train for bus ticketing?

Oh, absolutely…the whole bus industry is growing fast. If you talk to Volvo or Mercedes or other bus manufacturers, their estimate is 40% growth for the industry, year on year for the next 10 years. With roads getting better, the coach (which is an a/c bus) industry is going through a rapid growth. To give you an example, the operator VRL Logistics runs around 150 coaches and plans to list this month. There are also new routes coming up - there is now a bus from Surat to Andhra Pradesh.

How many redBus active customers do you have now compared to last year?

In February, we will be selling our 3 millionth ticket. Only recently, we were calculating and we crossed aggregate sales of 2.8 million tickets. In February 2010, we would have sold about 50,000 seats.

What is the feedback from customers and clients?

There is a cult out there which is pro redBus. Interestingly, bus operators are increasingly taking our advice on which route to ply buses on and how to improve customer satisfaction – it is very heartening. They write to us saying that after our entry, there has been sanity in the industry as they were dependent on hundreds of small travel agents who wouldn't pay them on time and now it is streamlined and online. So on both sides of the equation, people are happy. Problems still exist – delays, condition of the bus, etc, but overall quality of service has increased a lot and operators are conscious now about it. Our star ratings are watched closely and redBus has become the homepage of many "they are constantly looking at how many seats have been sold and how competitors are faring.

Can you give us an idea about your revenues and target for the year.

We clocked Rs. 30 crore in revenues in 2008 and Rs 60 crore in the fiscal year ending March 2010. We are on track to Rs 120-150 crore this year.

And what are your margins?

The commission varies from operator to operator and also on location.  We cant disclose the exact numbers.

What percentage of your revenues comes from SeatSeller, Bus Operator Software Services (BOSS) and website?

In terms of absolute revenues, our redBus website brings in 90% of revenues. Of the remaining 10%, the majority is through our distribution system SeatSeller and about 3% comes from BOSS. In terms of volumes, we do more seats in SeatSeller or BOSS, but value-add and revenue per seat are very less compared to what we get through a direct sale. 50% of our bookings are done over the Internet, 30% through call centres and 20% through SeatSeller.

So consumers will continue to be the prime focus going forth?

Yes, absolutely so you can see from revenues. The majority of our revenues comes from consumer side.

What is the focus of your investments right now? How much have you spent of the $3.5M raised so far from Inventus, Seedfund and Helion?

We used the seed fund to strengthen our operations and team. Until we raised the money our team was a bunch of enthusiastic, excited people doing things. Later we had to get skill sets and experienced people – so we now have a CFO, and heads of technology, marketing, operations.

Fortunately for us, we have been doing well. We have exceeded expectations and on P&L basis have been profitable for most of the month so we didnt use much of the money – it is still there. I always believe that it is "more work" that is required than "more money". We are working to streamline our operations. When you raise capital, it is natural to think of expanding to more locations, set up a small call centre in Malaysia, but we didn't opt for that path. I believe there is a lot to do within our scope right now – set up processes and streamline work rather than to expand.

So it is going to be organic growth and focus on running a lean firm, are there any acquisition plans?

No acquisitions.

What are your hiring plans - which teams are you scaling up - is it sales or product development?

We have 250 and are adding 100 people this year. A majority of hires will be in the call centre, it is a variable expense we have. At this stage, we are adding in all departments.

How is SeatSeller doing? How many agents and point of sale outlets do you have?

We have about 5,000-6,000 travel agents of our own and also power travel agent networks for Suvidha, Sugal & Damini, Itzcash etc. Through them, we reach out to many more travel agents. They are equally excited. It was an auxiliary business for us, but we have now set up a team to take it forward systematically. We also power bus ticketing for ViaWorld and Yatra. The aggregate of all the above partnerships makes it 75,000 point of sale outlets.

You also offer home delivery of tickets - how viable is this? How much does it cost you to offer this service?

We are the only ones who offer home delivery of bus tickets – it is viable because we work on a different model "they can take a printout and deliver it. And delivery is no longer necessary since we introduced SMS tickets. Our delivery boys are also employed for cash on delivery "they pick up money from users and send them an SMS ticket through their phones. On our payroll, we have 40 delivery boys and atleast 100 who work on a pay per performance basis employed by other travel agents and grocery shop owners. We have broken even on that because of reduction in unnecessary expenses of having to transfer from a central location.

What about your payment partnerships with Itzcash Card, Oxigen, mchek and NGpay. How many subscribers are they bringing in?

There's not much traction there due to the RBI regulations and they were unable to sell to end consumers, only travel agents, who have the option of becoming our redBus agents. Cash on delivery, credit card and debit card works.

How is the trial with Bangalore-based startup Gharpay for home delivery system going?

They are our college juniors from BITS Pilani so we have a soft corner for them. They were in our office studying the way we do home delivery and our dedicated system which we built to manage deliveries. Right now, they have started a trial in Hyderabad, where they do home delivery for us where we were not providing service. As an independent company, they can scale up. We are providing bandwidth on operations and understanding to them, help them out with daily issues such as delivery boys not turning up. They are planning to expand services but they might compete with biggies like Aramex. My advice to them was to stick to the niche ticket space which is a huge volume – bus, train, airline tickets. It's a very interesting niche.

How are sales through mobile phone bookings right now? How is this expected to change with 3G coming up?

Right now, we are seeing good traction in mobile sales but not comparable to other revenue streams. Right now, I am told that one of the OTAs is seeing around 10% of their searches and about 3% of their bookings comes from mobile. So it is better than the 1% we saw earlier.

With 3G, it depends on the mass consumer behaviour and if it picks up with them, we will adopt. We have evaluated internally whether it is the right time to invest in it or not. We are prejudiced because of our experience in the last 4-5 years – every time we thought it is the right time for the mobile revolution to take place, it didn't happen. So maybe we are a little biased on if it is just another wave or is it really the boom. There is no problem with being a second mover there – it is just another medium. So once there are indications that it is picking up well, then maybe we will have a very strong focus on it.

Tell us about competition and how you see the market.

Traditionally, in OTA biz, due to the huge network effect, it is the largest guy who gains a lot of traction from consumers, suppliers, etc. That's how the travel business is always. In the bus industry – we have this advantage – suppliers are coming in at competitive rates because we have the largest number of consumers. None of our competitors have this consumer traction.

Early on, our strategy was to invest and work on the consumer side and that is why we did not have software for bus operators for 3 years whereas all of our existing competitors today have, since their inception, focused on giving software to bus operators. I believe any company has limited bandwidth and our bandwidth was on the consumer side, which is helping us now. I can say this only in retrospect and it was only by chance and our mentor's wisdom that we are reaping the advantage now. This business has a huge network effect so it will be very tough for anybody else to get traction.

Right now, it will be tough for startups in this sector "they are coming to us for inventory. Sites like Nomorequeue.com, Busticketvala, Mybuswala. Every month we get requests for inventory and our stand is that we will provide it to anybody – for us, SeatSeller and redBus are 2 separate businesses. Redbus will win because of its own capability - its operational efficiency, its customer service. SeatSeller will be successful only if it has more distributors, each selling few seats …and these drops become the ocean.

What were the top challenges over the past 2 years? What are you worried about, going forth?

I keep asking my mentors at every stage of the company what I should be watching out for – and this keeps changing. Last year, the thing that kept me up at night was scalability of the team and our capability of handling new load, traffic and traction. But now with the team set in, that is no longer a big concern. Right now, the concern is, at this scale, every decision we take is impactful. Also, external factors start impacting us and we have to watch out for them...it is like Game Theory – even if we don't do anything and someone else does, we get impacted, positively or negatively...whether it is government regulations or a consortium of bus operators forming portals on their own. People look at us and say, "Rs 150 crore aisa hi banta hai to..why should we not do it!"