Founded in 2009 by Travis Kalanick and Garrett Camp in San Francisco, Uber is a taxi-hailing service that employs a business model based on a mobile app that instantly connects people who want a ride with drivers in the area.
Uber was definitely born as a problem-solver for passengers: it provides a solution for people who need a taxi quickly and at a reasonable price.
Moreover, Uber has fully reinvented the taxi industry by fixing its structure and making it more reliable. First, Uber made hailing a taxi more customer orientated by allowing users to constantly see available drivers on a map as well as to track drivers as they approach. Second, Uber offered more payment options, making it possible to pay for a ride with a credit or debit card right in the application. Third, the service incorporated a rating system for both drivers and passengers that boosts trust and safety on the platform.
[Uber’s web app back in 2009]
At the same time, Uber created job opportunities for drivers who had difficulties finding work. Uber doesn’t employ drivers directly but rather connects independent car owners (as well as certified taxi drivers) with customers who need rides within a specified area. Working as a driver, users can earn up to $500 per day, which is the amount an average taxi driver makes per week.
In just three years of its launch, Uber managed to build an extensive network of drivers and passengers, fully redefining the existing taxi industry and succeeding in the so-called sharing economy, which relies on the smartphone as a means of connecting users within an ecosystem.
In less than seven years, Uber has managed to expand from North America to every other populated continent – Europe, Asia, South America, Africa, and Australia. At the moment, the company is present in more than 84 countries and is valued at approximately $60 billion.
How to beat Uber
Despite Uber’s huge share of the market and its growing impact on the on-demand transportation economy, there are still quite a number of companies around the world that are trying to differentiate themselves from this ride-hailing service and compete with it – including popular ones like Lyft, Curb, and Sidecar in the US, Kuaidi Dache and Didi Dache in China, and Ola Cabs in India.
So how can businesses compete with Uber? We have a couple insights regarding this:
Support classic taxi services
The emergence of Uber posed a serious threat to established taxi services around the globe, including classic yellow and green taxis in the States, black cabs in London, and even private chauffeur services in Paris. While valuations for Uber are skyrocketing into the billions, the value of traditional taxi cab medallions has been diminishing drastically, meaning that medallion owners need to fight back somehow. This opens the gate for companies that can help link up passengers with licensed taxi drivers.
Focus on alternative vehicles
In February 2016, Uber launched its motorbike service in Thailand (called UberMOTO), marking the first time that the company offered rides on two-wheeled vehicles. Later that same year, however, the company indefinitely suspended its UberMOTO service in Bangkok to “work on creating modern regulations for app-based motorbike services with the government.”
The constant congestion in countries with emerging markets in South America, Africa, and South and Southeast Asia opens up new opportunities for ride-hailing. For instance, Uber’s main rival in Southeast Asia, which is called Grab, has focused on a local practice – motorbike taxis – in addition to offering private car and taxi booking.
But Grab, which launched its motorbike service in 2015, isn’t the only motorbike service fighting for the growing Indonesian market. It competes with another local ride-hailing startup Go-Jek, which debuted in 2015 as well. Both Grab and Go-Jek partner with motorbike owners, who outnumber car owners in this region.
[Percentage of households that own vehicles: Cars vs. Motorbikes]
Moreover, both of these ride-hailing services have attracted a substantial amount of funding from powerful companies in 2017: Grab reportedly got around $2 billion from Chinese taxi-hailing service Didi Chuxing and Japanese SoftBank; Go-Jek raised around $1.2 billion in a private equity round held by Tencent Holdings and JD.com.
Take advantage of Uber’s weaknesses
Uber is often criticized for its surge pricing: during periods of excessive demand, when there are more riders than drivers, Uber automatically increases its prices to encourage drivers to go to popular areas.
Even though Uber’s surge pricing is supposed to find that golden medium at which driver supply matches rider demand and wait time is minimized, some riders find this tactic outrageous, and it usually results in a massive churn of users trying to find alternatives at more stable prices. As a result, we’ve seen the rise of several surge-free taxi-hailing apps – Curb (US) and Gett (Israel, Europe) – that successfully compete with Uber.
[Gett Taxi’s motto]
After all, people rate services with their wallets, and if there’s anything that will get them to make their choice in favor of another product, it’s cost.
Moreover, in its pursuit of world domination, Uber often neglects the quality of its service in some markets – for example, the company doesn’t always vet its drivers for criminal backgrounds as carefully as traditional taxi companies. In some cases, this has led to bad PR.
In London, for example, 19 Uber drivers were investigated for sexual offenses in 2014, with five convictions; in 2015, 28 drivers were investigated, with nine convictions according to statistics from London’s Metropolitan Police.
In 2017, more than 8,000 current Uber and Lyft drivers were denied licenses to operate in Massachusetts under a new state background check process for infractions that ranged from license suspensions to violent crimes and sexual offenses.
You should be very careful when it comes to background checks of your partner drivers and do your best to work with local governments so as not to let the same situation happen to your business.
Although Uber has expanded to many cities and countries around the globe, there are still some corners of the earth where the service isn’t available. This creates an ideal market opportunity for businesses that want to build their own local taxi-hailing services. At the moment, for example, Uber doesn’t have a presence in Luxembourg, Brunei, Iceland, Malta, Cyprus, or Oman.
No doubt Uber is one of the world’s most popular apps; however, the service isn’t without a stain on its reputation. The company has been banned (or has willingly suspended its service) in a number of cities and countries around the world.
As of November 2015, the company was involved in at least 173 lawsuits according to Wikipedia. At the end of September 2017, Transport for London refused to renew the company’s license to operate on the UK’s capital streets, saying that the ride-hailing company had demonstrated a lack of corporate responsibility in relation to a number of issues from failing to report sexual assaults by drivers to conducting superficial background checks.
[Where Uber is banned around the world]
The forced unavailability of Uber in some regions creates room for startups to maneuver and fill the void. In recent years, we’ve seen similar ride-hailing services rise around Europe (including the UK) and North America that are now gaining ground locally and regionally.
To provide a better picture of the situation, let’s take a more detailed look at some of the examples mentioned above.
Arro – Supports classic taxi services
Arro was launched in 2015 in New York as beta.
The purpose of Arro was to support classic taxis and fight Uber’s hegemony in the United States. Launched in 2015, Arro lets users e-hail and pay for a regular cab (yellow or green) instead of an Uber.
As with Uber, a user opens the app, sets their pick-up location, and enters their destination so their request can be sent to a nearby driver. Once a driver takes the request, the user receives the name of the driver and the car’s license plate number so they can find the right cab.
Uber also offers a service called UberT that allows passengers to hail an ordinary taxi, but it charges a $2 service fee and riders still have to pay cab drivers directly. Contrary to UberT, all payments in Arro are carried out through the app.
Arro partners with Creative Mobile Technologies (CMT), a technology company that serves taxi fleets across North America by installing and operating entertainment video screens, taximeters, and payment systems in yellow and green cabs. Arro’s integration with CMT payment systems makes it possible for taxi drivers to pick up fares without an additional mobile driver app, as passenger requests are sent directly to CMT terminals already installed in their cars – a great advantage vis-a-vis Uber.
At the moment, Arro successfully operates in New York City, Chicago, Boston, San Francisco, and Houston.
Tootle – Focuses on alternative vehicles
Tootle is a ride-hailing service that matches passengers with motorbike drivers. The service aims to solve traffic woes for locals and tourists in Kathmandu, Nepal.
Tootle was launched in 2017 by a group of students conducting research on location-based online platforms. Initially the team, which included Aayush Subedi, Princi Koirala, Bina Laxmi Shrestha, and Sixit Bhatta, came up with an app that could track Sajha buses. However, the state-owned transport company didn’t show much interest in the project.
Later, the team decided to design a ride-hailing app like Uber, but they didn’t focus on providing a car service, since they realized that such a product wouldn’t suit their local market needs. That’s how Tootle was born.
Tootle offers two standalone apps – Tootle and Tootle Partner – that are designed for passengers and drivers respectively.
The Tootle app lets riders make a booking by setting their pick-up and drop-off locations. The app then shows motorbikes in the area that are ready to give a lift. Once a motorcycle driver accepts an order, they pick up their passenger at the specified point. Riders can either pay with cash or with their Tootle wallet balance, which can be topped up using the eSewa service.
The Tootle Partner app allows drivers to accept and cancel rides and inform users of their availability. Drivers can choose to accept payments in cash or have them transferred to their Tootle wallet. Drivers get to pocket around 64 percent of the fare after deducting government taxes and Tootle commission, which comes out to around 20 percent.
All Tootle drivers are screened, which involves submitting a copy of a driver’s license and a recent photograph. The app also allows users to rate drivers to help improve their service.
Flywheel – Takes advantage of Uber’s weaknesses
Flywheel, formerly known as Cabulous, was founded in 2009 as a ride-hailing platform with a focus on traditional taxis.
In 2015, Flywheel introduced TaxiOS, a replacement for traditional cab meters that runs on smartphones. This multifunctional system provides GPS-based rates, processes mobile payments, and works as a new type of dispatch system. Today, Flywheel has an impressive network of 1,800 active drivers across San Francisco, Los Angeles, Seattle, San Diego, Sacramento, Portland, and New York City.
Apart from supporting licensed yellow and green taxi drivers by providing reliable navigation and dispatching technology, Flywheel’s other competitive advantage is its fair rates – the company positions itself as a no-surge alternative to Uber.
Since its launch in 2009, Flywheel has never used surge pricing. It seems that for a long time, Flywheel didn’t understand that fixed prices were the best way to lure people back to taxis. Instead, the company was stressing its legality, its use of regulated taxis, and the number of taxi companies using its app. Later, however, the company turned the absence of surge pricing into their unique selling point.
Moreover, because Flywheel works with the existing taxi industry, each of its drivers complies with a high level of screening, which Uber has difficulties with.
Dart – Arrived earlier than Uber
Launched in May 2017, Dart is Brunei’s first Uber-like ride booking app. Operated by Dart Logistics Sdn Bhd, the Dart app was born in an attempt to build a cheap and reliable form of transport for the Bruneian public.
The application works similarly to Uber, with customers pinning their current or desired pick-up location and setting their intended drop-off point before their request is assigned to the nearest taxi driver in the area.
Just like Uber, Dart supports digital payments via credit or debit card, though it also has an option for cash payments.
So far, the service partners with the Taxi Drivers Association of Brunei Darussalam, which consists of over 50 drivers; but Dart is now letting both licensed Brunei taxi drivers as well as private car owners cooperate with the service. Dart claims that partner taxi drivers and independent car owners can increase their income while providing their local community with a high-quality means of transportation.
RideAustin is a nice example of a ride-hailing service that filled the void after Uber left the city. RideAustin appeared in the Texas city just weeks after Uber ended its service in 2016, after failing to conduct fingerprint-based background checks on drivers.
When Uber was kicked out of Austin, around 10,000 drivers lost their jobs. Users resorted to Facebook, where passengers posted requests and drivers showed up to give them a lift. However, both passengers and drivers were worried about safety risks and the lack of insurance. RideAustin took advantage of the situation.
Even though some drivers were skeptical that such a small company could replace Uber, they now appreciate RideAustin’s efforts, which first helped drivers survive and then meant more options in their home city after Uber returned in May 2017.
After Uber returned to Austin, some of RideAustin’s drivers started working for both companies; others, however, hope to never return to Uber and are loyal to the local organization.
Bobbi Kommineni, vice president of strategic programs at RideAustin, says that partner drivers will never forget what Uber did to them. “We came in and provided a service when they were abandoned.”
Despite Uber’s large share of the market and aggressive expansion strategy, the examples above prove that businesses can still successfully compete with the ride-hailing giant.