Pathao Tong, Ride-Hailing’s New Market Reality, And Pathao’s Path To One App For All Your Needs
Pathao has been experimenting with a service called Pathao Tong, a shopping service where Pathao users could buy anything from Sanitary Napkin to daily necessities and get it delivered to their doorsteps, for about two months now. Pathao Tong allows Pathao users to get their shopping done without leaving the Pathao app.
Broadly speaking, like any other ecommerce services in Dhaka, Tong is an ecommerce marketplace. The only difference is that it is from Pathao and that’s an important difference and accounts for an scrutiny. It aggregates sellers of different products, in some cases other ecommerce sites, and gives its customers an option to shop using the same app they use for other purposes such as transportation, sending parcels and deliveries.
The leverage Pathao has, why sellers are willing to get on Pathao platform, is users. It has a large user base that uses Pathao app daily to move from one place to another. This is yet another example of the shifting nature of business in the internet age from a supply-dominant structure to a more demand-dominant structure that I discussed here.
With Pathao Tong, Pathao primarily aims to achieve four goals: 1) giving its existing user base one more reason to keep using Pathao app 2) building a strong moat 3) improving earning per customer 4) growth. These are similar to the logic for Pathao food.
It is important to note that this is Pathao’s second attempt into building an ecommerce business. Earlier it launched and killed a product called Pathao Mart. You could ask why Pathao is trying again because it is such a big opportunity and essential element of its business that it would be unwise as well as risky not doing so.
Pathao Ecosystem and Pathao’s Opportunity
Mobile offers an incredible opportunity to today’s internet companies, and Pathao, being among the first local players to see it, wants to take it. Mobile allows centralization and aggregation. It is naturally tempting when you see such a big opportunity that you have all the means as well as the reason to pursue. The lure is even stronger when you look at the precedence of such things happening in markets like China or Indonesia or Singapore.
“Vision-wise, the ambition is we are going to allow people to build on a platform with millions of users, where you don’t have to worry about logistics and payments. You don’t have to worry about data. It’s all taken care of. You just come in and build and readily get and serve millions of users”, Pathao CEO Hussain M Elius in an interview with FS early this year.
I wrote about the unique opportunity the ride-hailing companies has in terms of building one app for all your needs in The State Of Consumer Technology In Bangladesh At The End of 2017:
“Ride-hailing is obviously a major trend. This is an exciting space. It connects both offline and online and does so very efficiently. On top of that, transportation is more like messaging in mobile, the ultimate deal in the physical world.When you dominate the nodes of transportation, you can do a lot of other things.
Moreover, Ride-hailing services are app-based which allow these service providers to have a dedicated space in users’ mobile phone, which you can use for many other purposes.
Thus Ride-hailing allows a service provider to become a platform on top of which you can put layers. Go-Jek is a good example. In Bangladesh, it is likely that a few ride-hailing companies will try to build layers the examples of which we have already seen.
Pathao Food, Uber Eats, and Pathao’s Urgency
“Pathao has launched its food delivery service Pathao Food on 15th January. The platform, which, according to Pathao, currently has over 300 restaurants on it is now available in Gulshan and Banani area, a hyperlocal strategy that food delivery companies often use. The company plans to expand the service to other areas in the city soon.
The service, so far, continues to receive rave reviews from users which prove two things 1) Pathao has built an excellent execution muscle 2) the ride-hailing startup has managed to build a loyal users base, a key factor to any consumer product success.”
Over the past months, Pathao Food has seen phenomenal growth, thanks to excellent execution, promotional offers, and marketing. Pathao CEO Hussain M Elius in an interview with FS this August:
“We have more than 3500 restaurants as we speak. As for orders, We have seen phenomenal growth. We have been delivering more than twice as much as all our competitors combined.”
“I don’t think Pathao Food is a decision about opportunity alone, I think Pathao is aware of the fact that competition is likely to intensify in Dhaka’s ride-hailing space and getting into food will give it certain competitive leverage from several perspectives 1) owning riders/users interaction for more than one reason. Since ride-hailing is a demand-driven market, it will allow Pathao to control drivers as well because drivers follow riders and vice versa effectively protecting it from the competition. I plan to explain this part in a future post. 2) Pathao, I assume, does have growth pressure. It ultimately has to raise more money to fund its expansion. And the only way to raise more money is more growth. That makes it only likely that Pathao will push further in the coming days. 3) of course, Pathao does have the infrastructure to get into Food delivery business and why not.”
Over the past months, the competitive reality of the Dhaka’s ride-hailing business has changed. Shohoz has raised a whopping $15M in new funding. It is doubling down in expansion in ride and other verticals. Uber launched UberMoto. Uber has also been working on launching Ubereats in Dhaka, which got delayed, and is now scheduled to be launched in the first quarter of 2019.
This new market reality demands a new response, and with Pathao Tong, Pathao indirectly says, it is their response to the changes in the market. Tong is both a moat and an opportunity for Pathao. And the above changes in the market makes it an urgency.
It would be lazy to think that the only path to success in ride-hailing in Dhaka is through building an ecosystem or a super app. It could be one of the ways, even it could be a false positive, and certainly there are more ways to it.
While Pathao and Uber both have food delivery businesses, they are maintained as a separate business. And there is no reason to think that an app for transportation services alone, with great depth of offerings, excellent services, and execution, would fail to survive in the long run.