Irctc made its debut in the stock exchange in October 2019. Since then, it has created wealth for investors in spades. With an initial IPO of Rs 625/-, it at one time reached to Rs 1994/-. Later on, it settled at Rs 1400/-. This is quite impressive for a PSU. This reduction in its share price was largely due to ongoing corona crisis. Railways’ had to cancel all of its passenger trains. This badly affected its earnings. In spite of a reduction in its share value, it’s still way ahead of other government companies.
IRCTC, in a way, is a unique e-commerce site, which enjoys monopoly since its inception. This is different from other internet giants like GOOGLE, FACEBOOK, etc. They acquired near-monopoly like status in their domains over a period of time. They gained critical mass over the years. Later on, customers gravitated towards them, due to Networking effect’ [It refers to phenomena wherein cost of being left out of the platform outweighs the cost of joining the platform. This forces an individual to join that platform.].
IRCTC being a government organization, can hope to keep its monopoly intact for a significant period of time. There is no rival ticket booking site on the horizon for the next few years. However this luxury is not available to other transport platforms like UBER, OLA & Make my trip. They are facing cut-throat competition. In spite of this, IRCTC’s market capitalization stands at Rs 22,900 Cr. This is way below its potential.OLA cabs earlier a start up, has already become a 10 billion $ giant in a much competitive cab space.
In this article, I will analyze reasons where IRCTC is falling short, & suggest remedial measures for the same.
TOP 4 reasons why IRCTC is not able to realize its potential:
Lopsided business model
IRCTC tries to be a platform as well as a service provider at the same time. This can be seen from the fact that IRCTC runs catering service in trains from Rajdhani to Shatabadi. It is also a ticket booking platform. Thus it wants to have the cake & eat it too. This results in serious confusion of its roles between the service provider and a platform. It is unable to do justice with both the roles.
It receives a large number of customer complaints about the poor quality of food. Similarly, complaints regarding site crashing, nexus by the agents in ticket booking are plenty which leads to severe customer dissatisfaction. Not only this, but it also invites bad PR for railways also.
Inability to understand customer’s needs
IRCTC in its business strategy has failed to respond to customer’s needs & requirements. Take, for instance, a traveller from MUMBAI to DELHI. As soon as he reaches his desired railway station in DELHI, his tendency is to book a cab or auto to reach his place or book a hotel for stay. However, IRCTC has neither provided this facility in IRCTC Next Generation app nor integrated any app-based cab services like UBER, OLA with itself. This leads to unnecessary waste of time, inconvenience for the passenger.
Besides this, railways also lose a significant amount of its revenues on the cabs entering & using its premises. Now contrast this with Delhi airport operator. It charges cabs, which are entering its premises Rs 150/- per cab. This significantly has increased its earning manifold. [Read it Here]. Thus, Railways loses both revenues as well as invites customer’s ire for lack of facilities.
Failure to monetize & analyze the data collected
IRCTC sells millions of ticket every day [Read it Here]. This means it has data of crores of persons varying from their phone number, eating preferences, age, gender, address, destination etc. However, in spite of that, it has not been able to monetize it. Data is the new oil of the 21st century. The more data a company has, more chance of its monetization it will have, the more revenue it will get. Thus data monetization brings a virtuous circle.
Facebook, Google has successfully monetized this data by analyzing customer’s preferences, their age profile, their likes & dislikes. By sending them advertisements, they have earned millions. However, IRCTC has failed to do this. It has neither analyzed the data collected nor tried to use it for train operations.
For instance, take JAIPUR to DELHI Double Decker train. It runs every day in the morning from Jaipur & makes a return journey from Delhi in the evening. During Friday evening & Monday morning it’s jam-packed. This is due to people moving from Delhi to Jaipur on Friday & vice versa on Monday. On the rest of the days, the train usually runs empty. IRCTC could have used this to increase or decrease the number of coaches based on data analysis of IRCTC. However, it has failed to do so.
Similarly, it can analyze data based on demands of tickets booked in different coaches. This can be used to increase or decrease the number of coaches in a particular category. However, this data analysis has not been done yet. Usually, it is more of a jugaadism, which guides the increasing or decreasing of coaches in a particular train.
Inefficacy to develop their own payment wallet
IRCTC is selling more than a million tickets online per day. [Read it Here]. However, till some time ago, it did not have its own payment wallet. It has now developed IRCTC e-wallet. However, it has failed to take off. The reason lies in the lack of attractive offers to lure customers towards it. To disrupt the market, you need a strategy of discounts and offers to woo customers. Once the market is disrupted & a brand gains critical mass, it’s easier to sustain it. OLA, UBER, Paytm, adopted the same path of shock & awe. Later, on the basis of their critical mass, they become market player. However, IRCTC e-wallet has faltered in the first stage of disrupting the payment market. Result: It is yet to take off.
Failure to offer a complete package
IRCTC is primarily a railway e-ticket booking site. With the coming of IRCTC next generation, it is venturing into hotel booking, airlines booking etc. It has also started offering tour packages for sightseeing. However, it’s still in the nascent stage. It has still not connected many hotels on its website. For a passenger in Delhi, it offers a stay in Ginger on railways property. It does not offer customers a variety of options to choose from.
Railways have reached in every nook & corner of the country. IRCTC should have taken the lead in becoming a primary hotel booking site. However, it is OYO, which is offering room booking services. Here IRCTC has again missed a golden opportunity.
However, all is not lost for IRCTC. It being in a monopoly business can make a quick come back. Here are my few suggestions to make it next global giant from INDIA.
Reform in Work Culture
IRCTC is govt owned PSU. Because of this, it suffers from many of the ills of a bureaucratic agency. Issues like slow decision making, slow career progression, time-consuming decision making, red-tapism, Babudom etc. are rampant. This calls for a complete overhaul of the management. Instead of having govt management, it should reinvent itself with private management and govt ownership. This will ensure it is able to innovate in accordance with customer’s requirements, understand their needs.
This private management will also entail a change in the recruitment process. IRCTC will have to widen its talent pool and recruit from IITs and IIMS, which will also reduce its dependence on Railways’ limited talent pool. In addition, this will give it fresh ideas and much-needed freedom of innovation. It will be able to design products in accordance with customer’s requirements, which will give them much-needed freedom to choose.
Change in thinking pattern
IRCTC must stop seeing itself merely as a Railway ticket booking site. It must think of itself as an AI company involved in bringing customer & railways on a common platform. It must be remembered that all major tech companies be it Amazon, UBER, OLA, make heavy investments in the development and maintenance of their Platforms. UBER & OLA see themselves as a tech company, not as a transportation organization. Transportation is taken care of by the driver.
IRCTC should work on similar lines. It should start developing algorithms and software to predict a customer’s moods and needs. It should keep changing its products accordingly. For this to happen, IRCTC needs to take a holistic perspective.
Change in the Business model
Instead of being the jack of all trades & master of none, it should be master of some. Undoubtedly, it has to be e-commerce and not catering. Now many naysayers will ask how railways will provide food to customers. What about Railways’ already depleted earnings? What about revenue loss from catering? Blah Blah. Well, these are valid concerns as railway is making millions from onboard food sales. But so is the exponential rise of customer complaints.
Railways should offer passengers a choice in food. It should collaborate with all food chains through its app & charge them a small fee. It has started it, yet more needs to be done. Look at the benefits that will accrue to railways’:
First, it will, by and large reduce customers’ complaints regarding food quality from railways. Responsibility will also shift towards food chains. As these are run by professional food giants, with the conscious brand image, instances of flies coming into food will become rare.
Secondly, it will give customer the freedom to choose the kind of food from any of the outlet. This will increase his satisfaction manifold. He will not have to eat simple menu provided by IRCTC.
Third, it will give railways huge revenue. Think lakhs of passengers booking pizza or Desi Thali and railways making millions without investing a single penny on them.
Fourth, it will save space of pantry car in the train. Railways can provide an additional coach in this space released. Thus Railways’ will have increased passenger earnings with the same resources.
Become a tour and travel Company
IRCTC should take some cues from ‘Make my trip’. It offers complete holistic package across the globe by collaborating with hotels and airlines. IRCTC Next generation has started offering these features, but they don’t provide comprehensive choices. These choices should be widened to cover various tourist destinations across the globe. This will involve facility of ticket booking from various airlines at competitive prices.
As more and more Indians are going abroad, IRCTC will be able to make a flying start. This will allow IRCTC to be bigger than any other tour and travel site across the globe.
It can adopt the same strategy by offering cab services. Like UBER & OLA, it can also be a cab aggregator through IRCTC next-generation APP. India urgently needs a new cab aggregator to break the duopoly of UBER and OLA transport market. IRCTC is the perfect candidate to fit the bill. In a mature market, there are largely three players who themselves control 70 to 90% of the market share [Read it Here].
Indian cab market is slowly maturing, which consists of UBER, OLA, & various other small players. Many people use private transport to drop in and drop out of the railway station. IRCTC can offer cab services to and from the railway station in a city at discounted prices. Later on, these can be extended to other places as well.
Advantages that will accrue to different sections:
To IRCTC & Indian Railways
Indian Railways will earn millions of rupees per day only by dropping in and taking out the passengers through cabs. It is already facing a revenue shortfall of Rs 20,000 Cr [Read it Here]
With the ongoing Corona Epidemic; this financial crisis is going to worsen. In such a situation, IRCTC-owned cab aggregator will work wonders for railways’ finances.
To cab drivers & customers
OLA and UBER are facing heat from angry drivers due to their shrinking margin and high commissions [Read it Here].
Similarly, Customers are also fuming due to rising fares charged by UBER and OLA [Read it Here]. This is due to higher profit margin kept by both OLA and UBER with themselves. This requires a unique cab aggregator at a reduced profit margin. IRCTC can become such cab aggregator. This will satisfy both the segments- customers and drivers. Not only this, it will deliver in spades for IRCTC also. As lakhs of passengers move in and out of the railway station, railways can make millions with such an innovation.
For the Indian nation to ensure Tech sovereignty
An Indian govt-owned cab aggregator will be another shining example of tech companies opened in India. It will join the shining league of platforms like GEM, RuPay, BHIM, which will help in protecting Indian sovereignty and safeguarding data of Indians. At the time of rising nationalism and closing down of borders, this makes perfect sense to have a national tech company. Indian govt will get billions in revenue which can be used to meet its various obligations. Indigenous Tech platforms are needed to protect India’s economic, political and strategic interest.
Develop IRCTC wallet into payment bank
IRCTC should take a cue or two from reliance trends. It gives credit points on every purchase made by a customer. This motivates a customer to make more purchases again and again. Thus it becomes addictive and unresisting for a customer. IRCTC can also offer the same in the form of discounts, food coupons, etc. to onboard customers through IRCTC e-wallet which will allow it to gain customers’ loyalty. Once it gains a foothold in the hyper-competitive payment market, it should be expanded across different platforms.
Thus Railways will be able to develop its own payment bank without investing a single penny on infrastructure. This will further enhance the railways’ earning, which will also be a boon for the nation in the long run. Thus we can have an indigenous modern payment bank rivalling that of Paytm or Airtel money. This bank can, later on, be used for other activities also.
In Essence, IRCTC being a natural monopoly has a huge advantage over its e-commerce rivals. The market knows its true potential. Due to this, it has responded favourably to it. On the contrary, shares of many PSUs and private companies are gathering dust. Indian railway is facing a severe financial crisis right now. In such times, IRCTC can turn out to be elusive Akshyapatra for Railways to remove its miseries. Million Dollar question is whether Railways’ has the appetite to feed itself from its Akshaya Patra or it has developed anorexia, like that of Durvasa. Only time will tell.