Five years ago, when redBus, an Indian online bus ticketing company, after conquering the Indian market decided to venture into Southeast Asia, it went to a market that was easiest to get into, although not the best.
“We saw a lot of people from other countries reaching out to us, asking for licensing of technology. So, at some point we thought, we have built all of this out of India, why don’t we look at expanding to markets outside India,” said Prakash Sangam, chief executive, redBus, in an interview with KrASIA.
The first international markets that Sangam zeroed in on were Singapore and Malaysia, which he believes were “the easiest to set up operations in.”
After going through the grind of setting up its entity in these two countries, which included building their supplier ecosystem, integrating with banks, hiring employees, and complying with all the regulatory requirements, redBus learned that there was less intercity travel via buses in these markets, and most of the buses plied between the two countries.
“We said, if we are going to put effort, we should put it into markets that are fundamentally large in size. That is how, for example, we identified Indonesia as a market where we could potentially get into,” said Sangam.
The company launched its Indonesia operations in 2016.
At first, Sangam said the company did not prioritize Indonesia because the e-commerce ecosystem was not that developed. But a massive jump in the number of people making digital payments and the kind of investment that had gone into Indonesian digital companies like Grab and GoJek changed his mind.
Although Indonesia was adopting digital tools, it was still largely a cash economy and people didn’t trust making payments online. To overcome this challenge, the company partnered with convenience stores and banks in the country that allowed redBus’ customers to pay for their tickets at ATMs or in these stores.
Whenever users would choose a seat on the redBus website for their journey, the company would give them a unique code, which users could show in their nearby store or in the ATM and pay via cash or money transfer, Sangam explained.
Sangam said redBus has taken care of such peculiarities of different markets, even as the business model remains the same across the countries.
“That is where we made a lot of investments in technology, to make sure that our tech platform is a completely modular, microservices architecture based,” he said. “So we are able to make changes in a particular module, tweak it for a particular country, while the overall code-base remains the same.”
A modular or microservices architecture based-system ensures that changes can be made in a particular module, without affecting other chunks of code.
“It helps us absorb such differences that we see in a particular country and implement things,” he added.
When Phanindra Sama, a Bengaluru-based young microchip designer at Texas Instruments, failed to get a bus ticket to hometown Hyderabad during Diwali of 2005, he thought it would be good to have an online portal where people could buy tickets from different bus operators.
With that idea, Sama came together with his friends, Charan Padmaraju and Sudhakar Pasupunuri, and pooled in INR 500,000 collectively to build redBus.com. Once the portal was ready, the three founders went to bus operators, only to find that they weren’t convinced that tickets could be sold online. At last, in August 2016, they got five seats from a travel agent, who asked them to sell them within one week. If not, he said, not to bother him again, Sama told the local media Times of India in 2013. With those five seats, redBus went live.
After desperate efforts, on the fourth day, they were able to sell their first ticket to a techie working in Infosys. After that, they managed to sell the rest of the tickets within time. However, the co-founders were so worried whether the ticket checker would allow the passengers with the printed ticket, that they all went to the bus station to board their first passenger.
Over the next year, not only they managed to get seats from many more bus operators and travel agents but also landed themselves a USD 1 million check from a Mumbai-based early-stage VC firm Seedfund.
At that time, there weren’t many Indian consumers transacting online, so they opened outlets in partnership with retailers or travel agents, where users could go and book the bus tickets. They also provided home delivery of tickets, with a cash-on-delivery option. Even when the Lehman Brothers collapsed, setting the stage for the global financial crisis, they were able to raise USD 2.5 million in July 2009, which they used to build and roll out a software for computerizing the bookings and inventory management for the bus operators in early 2010.
They clocked in the revenue of INR 600 million in FY 2010. And a year later, the company raised USD 5.5 million in Series C funding. Growing at light speed, the company sold tickets worth INR 3 billion in FY 2012 and became one of the biggest internet companies.
In July 2013, Sama was out in the market for a fresh round of funding but instead ended up selling the company to the Ibibo group for about USD 100 million (INR 790 crores). When Sama and Padmaraju left the company in 2014, Sangam took over as its CEO.
From Southeast Asia to global
The company began its global expansion spree post its acquisition by Ibibo. After expanding to Singapore, Malaysia, and Indonesia, it went to Latin America (LATAM) and acquired bus ticketing platform Busportal in mid-2016, which gave it access to Peru and Colombia.
The company replicated some of the things in Latin America that it had implemented in Southeast Asia.
For instance, redBus had developed terminal-to-terminal search feature between Singapore and Malaysia, after it found that was how commuters searched their buses there, as opposed to searching from one city to another which is usually the case in India.
“We found a similar requirement in LATAM, so we were able to adapt very quickly,” said Sangam. “Similarly, offline payments feature that we tried in Indonesia was very useful in markets like Peru and Colombia, where the online payment is not as widespread.”
With LATAM entry, redBus established its presence in five countries, apart from India.
However, in late 2016, when Ibibo Group was acquired by rival MakeMyTrip after a long-standing discount war that left both the parties high and dry, redBus’ dream run was cut short. After redBus’ owner changed to MakeMyTrip, the company hasn’t entered any new market.
Since then, redBus has been strengthening its footprints in the markets it has been present in, by figuring out the pulse of consumers.
Last year on Eid, redBus ran a campaign in Indonesia centered around a locally popular character, Bang Toyib, who wasn’t able to travel back home in the last three Mudiks, and how redBus helps him get home. Mudik is a practice of Indonesians going back to their hometowns on major festivals like Eid al-Fitr.
Once there is a connection with travelers and the traction starts growing steadily in a specific market, redBus explores launching locally relevant products. And this is what it is up to at the moment in Malaysia.
“We are just launching ferries in Malaysia. That is something that remains a popular form of transport in Singapore-Malaysia as well as intra-Malaysia,” Krishnan Ramaswami, who heads Southeast Asia business for redBus, told KrASIA.
Ramaswami said redBus is also in process of rolling out a new offering called bus-pass in Malaysia to help people ease their daily commute in regular inter and intra-city buses across routes that people travel frequently. He added that the company is also exploring a bus-hire service in the country, which it launched in India back in 2017.
As for the new markets, the company said it would keep looking for the right opportunity. It did reveal its plan to enter Vietnam, Thailand, and Turkey in August 2019, but the healthcare crisis earlier this year forced it to shelve its plans for the time being.
Instead, redBus has come up with a global platform to target overseas travelers, as opposed to local ones who it caters through its country-specific websites. This global portal lets any user across the globe book tickets in countries where redBus has a partnership with local operators, even if the company doesn’t have a physical presence there.
Phase one was launched in early July, in countries where redBus is already operational, and the company is in process of integrating inventories from other markets like The Philippines, Thailand, and Europe, Sangam said. He expects to get over 20 countries on board by the end of this year.
“Our ambition and vision for this platform is to connect all the markets where there is bus inventory,” he added. “Whenever international travel picks up, this can become interesting.”
Although for the first quarter of this year, redBus, which has 3,500 plus bus operators globally, sold 18.6 million tickets across all the countries, the company’s revenues went down by over 98% year-on-year in the second quarter. But the company is already seeing the Southeast Asia market rebounding.
India, Sangam feels, would still take some more time. He believes the next phase of growth would come from overseas markets, which he expects would contribute 30% to its revenue over the next three years, up from the current 7%.