The Bike Wars: Sanwo Olu’s Knockout Blow May Leave Only One Contender Standing.
Sometime last year, I had the opportunity to attend a meeting of young business analysts. During one of the sessions, the convener asked a question; it went something like this:
“In a state like Lagos where the government can wake up one day and ban bikes for whatever reason they like, what can bike hailing companies do to mitigate the risk of being legislated out of business? “
The answer was easy: Diversification.
Today, it rings like a prophecy of doom come true. But if we’re sincere, everyone knew the recent ban on bikes, and tricycles was a possibility. The decision-makers in government have never been known to be rational. Lobbying and politics are their biggest influencers.
While the standard answer to the question was diversification, the route to take was a point of disagreement.
One argument reasoned that, since they were already in the transportation business, if the legislation went against them, they could quickly pivot to logistics and home deliveries. It was a fair argument if you only looked at it superficially.
The logistics business is a very competitive and complicated landscape. So far, it doesn’t appear that the logistics sub-industry is under-served or lacking in competent hands. Much of the problems centre around the dearth of adequate public infrastructure that plagues most business. Infrastructural issues are not the domain of private players. They would be coming into a saturated industry with no differentiating quality.
In addition to that, these companies had made remarkable investments in bikes for passengers. It would not be practical to convert all those bikes to now serve a new purpose they were not initially intended for.
Another argument was for them to extend themselves to other modes of transportation. While it was a novel suggestion, there were apparent limitations. Barring any future innovation, there are only four modes of transportation available to man — land, rail, water, air. Land was out of the question; they had already ‘conquered’ it. Rail was too costly to finance and mainly government jurisdiction. Water and Air held promise but the limiting factor was the buying power of the population. For all the talk of Nigeria’s growing middle-class, we are still a very cost-conscious people.
One thing we didn’t consider at the meeting was that the vision of each company determined what industry they were in. You see, while Gokada was fully invested in the transportation business, Max Okada was divested in logistics.
So, while Gokada saw itself as a business primarily concerned with the transportation of people (bike, boat, etc.), Max Okada saw itself as being in the general business of transporting people and things.
The most remarkable of all the companies, however, have been Opay. While other companies were positioned themselves as being in the transportation business, Opay’s reasoning was somewhere else. For Opay, they were in the payment business.
Opay came with a bang, offering the lowest rates for bike rides all around Lagos. They almost ran the competition out of business in those crazy discount months. Gokada had to take a break under the guise of “improving their service.” The immediate concern, however, became how they were going to survive after they had exhausted the bonuses — after all, it couldn’t continue forever. The long term play became clearer after a while.
You see, Lagos, and Nigeria by extension has a very young, upwardly mobile population. This statistic is commonplace in business pitches. Rookie entrepreneurs often point to it as evidence of a market for whatever they are selling — drugs, tech, food, cars, anything. While many have fawned at the staggering figures, the problem has always been harnessing the potential of this enormous population.
This is where, I believe, Opay saw an opportunity. There are few B2C (Business to Customer) industries that allow for scalable access to end-users. Communications is dominated by giants and would require a fortune before you could dream of competing. The situation is also similar in banking, although the diversity of options also means that no single organisation can come close to monopolising a generation.
Transportation, on the other hand, had always been democratised in Lagos. Although it was a great avenue to interface with customers, no one bothered to take the industry head-on. The reason for that was likely the margins. To compete with the already established transport fees meant taking a significant hit financially.
The only alternative, if you wanted to be a profitable player in the industry was to mark up your prices. Marking up your prices meant you had to offer some extra advantage. In a sense, you’d be a premium service. The fallout of that is that you wouldn’t capture most of that young population. All other players in the industry decided to go that way though. After all, their aim was to “survive in the transportation industry”.
For Opay, however, gaining a foothold in transportation was a means to an end. After acquiring most of the market share through cut-rate pricing and promos, they proceeded to take on fintech.
The first step of their onslaught was food delivery. With so many potential customers on the app already, it was easy convincing food vendors to register with the app. There was no downside and plenty upside. More promos followed, more users registered.
Next stop was supermarts and B2C SMEs. Since they already had substantial user numbers on their side, it was easy to convince these SMEs to accept them as a payment method, especially QR payments. I don’t think any other tech company has had as much success as Opay has had with QR payments, and in such a short time too.
Since then, they’ve extended their services to cover almost all routine payments including cable subscription, ban transfers, Jamb registration fees. There’s also Owealth which offers investment at a 10% p.a rate, Okash offers small loans with little or no collateral.
Last year, I read a piece from an old issue of Harvard Business Review on “marketing myopia”. The guys at Opay must have read it too. While the other major players in the industry tried to create a unique place for themselves in an industry subject to the whims of government, Opay realised the potential the sector afforded them and acted accordingly.
The greatest personal anecdote for me on this issue is that this year, I’ve had to use the Opay app to conduct transactions every 48 hours at least, but strangely enough, I have not had to order an Oride.
I’ve always been bullish on Opay/Oride. Now, I’m even more confident. Though of all competing companies, they might have made the biggest investment in bikes, they hedged their bets smartly. I didn’t even get to acknowledge that they have the most prominent coverage across the country. So, while the damage may be significant, I believe Opay is best positioned to weather this storm.
