For almost two years, I’ve been writing about the shallowness of India’s paid consumer market. Companies are discovering that they are running out of users quickly, and are hitting natural limits. They are also finding out that acquiring users is not just expensive, but also extremely unprofitable. 

As a result, when funding is scarce, consumer companies are choosing to deepen the market instead of trying to broaden it. They are choosing protection over expansion. In other words, everyone is trying to convince their limited, high-value customers to buy more often, and to cross-sell other products. 

Everyone is doing this. 

It’s why Cleartax isn’t free anymore. Or why Amazon and Flipkart have chosen to go back to go forward. And how Flipkart crossed the secret e-commerce chasm. Or why Google and Slack have raised prices in India. Or why Disney has reduced its investment into Hotstar in India. Or why Zomato and Blinkit are trying to create more use-cases like home services. The list goes on and on. 

All of these companies made a choice. Clear. Amazon. Flipkart. Zomato. Google. Slack. Disney. Blinkit. All of them chose to protect their best customers, and shed the freeloaders—at least for now.

But what about the companies that didn’t make this choice? 

Maybe it’s because they felt that they didn’t have to. Or maybe it’s because they were running a virtual duopoly, so they didn’t believe that anybody could come for their best and most profitable customers. They didn’t believe there were any viable alternatives.

Enter BluSmart.

BluSmart is an interesting company. It started in Delhi, and recently expanded into Bengaluru. By some estimates, Ola and Uber have about 25,000 cabs in the city. BluSmart has just 1,000. 

But the most interesting part is not how many cabs BluSmart has, but where it chooses to operate.

Last week, I decided to try it out. So I installed the app, and tried to book a cab. I quickly found out that BluSmart has some interesting guardrails in place to ensure that I was a “profitable” ride. And the way it does this is by restricting its serviceable area. 

Here’s what it looked like.

If you are from Bengaluru, you’ll understand what that yellow area signifies. It’s the area that includes two key tech corridors, along with their offices and residential areas. This is what BluSmart has chosen to target, while excluding 60-70% of the city. 

These are Bengaluru’s most lucrative routes. Repeatable, predictable demand. High-income customers. Clear routes and use-cases. Home to office and back. That’s one way to do it. You can segment Ola and Uber’s customers by geography, and isolate the most profitable ones. And take advantage of it. 

But there are other ways.

When I met Kislay, I’d asked why Shoffr chose the airport route of all things. Sure, market size is one thing, but what else? Surely there were easier problems, like, say, tying up with all the five star hotels in the city and offering them pickup and drop services. Or stuff like that. 

He indulged me politely, and then said, very simply.

“All of our research told us that the airport route is the most profitable route in Bengaluru.”

He explained to me that Shoffr needed predictability if it needed to be profitable, so it decided to lock down one side of the ride, i.e., the destination. And what better destination than the one that lay at the end of the most profitable use-case in Bengaluru? 

That’s the other way to peel off Uber and Ola’s best customers. Not by picking areas, but by picking use-cases. Kislay has plans to try more use-cases going forward, like office to home for specific companies and their employees. And over time, Shoffr will simply eliminate the ones that aren’t as profitable. 

This brings us to two final aspects about why this strategy is promising. 

First, it’s not just about where the cabs go, but also when you can go. If you open the BluSmart app and want to go on a ride, you can’t just book and wait for it to show up immediately. You’ll need to book it in advance, at least an hour or two ahead of time, in my experience. This is not an on-demand app. 

The reasoning behind this is the same as Shoffr—predictability. BluSmart is locking down another aspect of the ride, i.e., the time when you want it. 

If we plot this across two axes, it looks like this.

Destination on the X-axis. Duration on the Y-axis. 

This is the ride-hailing space-time matrix. 

Right now, Ola and Uber are the very top-right, which gives them growth, but it’s the bottom left that contains the most profitable users, the one that BluSmart is targeting. 

Then there’s the second aspect—the electric vehicles.

EVs are key to this because they create the margins that enable this disruption to happen. Every single ride in an EV happens at a much lower cost compared to an ICE vehicle. This ensures that EV companies can price themselves as an Ola or Uber, but operate at a fraction of their costs. 

The conventional definition of disruptive innovation is that it comes from below. 

This was researched and written about by Harvard Professor Clayton Christensen in a book in 1997, titled Innovator’s Dilemma (I’ve written about this). Fundamentally, his thesis was that established incumbents face new technologies which initially look sub-par, and take away the lower end of the market, i.e., the least profitable customers. Over time, as the technology improves, it starts going higher up, and incumbents make the rational decision to cede the relatively less profitable customers and protect their most valuable ones up the chain, until they find themselves stuck at the top. The key point is that all parties are acting rationally, and yet, inevitably, the incumbents lose. This is what happened with digital cameras and steel mills. 

But this is not what’s happening with EVs. In the case of Ola and Uber in Bengaluru, the disruption isn’t coming from the bottom. 

It’s coming from the top, from companies creating use-cases to take away the best, profitable customers. These are still relatively small companies, and there’s a long way to go, but the ball is rolling. 

During our conversation, I asked Kislay if he saw the airport metro line that’s currently being built as a threat to his model. Not really, he said. He believes that the metro line won’t affect him much because those aren’t his target customers. 

“I’ll let Uber and Ola worry about them."