# Cash Burn # Smoke without Loyalty

Recently Uber  altered the incentive scheme for drivers in Kolkata ! From what I gather from conversations with drivers is that the structure has changed dramatically , with attendant consequences both for the drivers and the customers. This reinforced a lot of lessons as far as the Indian e-commerce space was concerned

Instead of a  trip based flat incentive structure (say Rs 200), the Uber will now pay as incentive only 50% of the actual billing in specific time slots during mornings and evening. After deducting service tax and its commission, it only remains a 37.5% incentive.Not lucrative enough for drivers plying AC cars @ Rs 8 per km plus Rs 1 per running minute. especially when the plain jane yellow taxi costs Rs 12 per km in Kolkata

The result of this is that drivers have migrated en-masse to Taxi for Sure as it still continues to offer a lucrative trip based flat incentive structure, that was hitherto offered by Uber. As a result availability of Uber cars has dropped significantly

Now whenever you try Uber during peak hours, it either shows No Cars Available or wants a surge pricing , ranging anywhere from 1.3X to 2X. This instantly turns off the customer and he migrates to Taxi for Sure

Investors have given a lot of money to Uber, which is now valued at $50 billion, and Uber is burning this cash to buy market share all over the world. But the purported amazing growth number actually needs to be dissected into the real/sustainable part and the unreal/unsustainable part bought by throwing crazy money !! The latter is literally useless, especially in the price sensitive Indian context. So as per Bloomberg estimates, what was the point Uber making an operating loss of $470 million when it had revenue of $415 million

So what was the use of all the cash burn in the recent past? It could earn zero customer loyalty and zero supplier loyalty

Looking at how customers and suppliers dump your brand at the drop of a hat , I am unable to fathom the rationale for all this ; neither the CA in me who looks at only MIS numbers nor the MBA in me who has been taught to try and understand the large strategic play ( organized taxi market in India being only 800 mn $ of the overall 14 bn$ and thus massive growth etc etc)

And this is not just Uber, I am completely disillusioned by the multiple concepts floating around in  the Indian e-commerce space. To my mind, they are only wanting to bet heavily on customer acquisition at a crazily high price without bothering about profits or customer retention.

But in India, people are high price conscious. They know that its an Apple i-phone irrespective of whether its purchased on Amazon or Flipkart or Snapdeal or Shopclues. Look at websites like this - http://compare.buyhatke.com/extension.php. You compare prices from all the shopping sites ! The customer will buy the cheapest , no charm for any brand please

So what's next for the Indian startup space?