uber economy?

Also an official taxi isn't necessarily a safe place (although Robert de Niro killed outside of it only)

Also an official taxi isn’t necessarily a safe place (although Robert de Niro only killed outside of it)

The news are full of stories about start ups in the “sharing economy”.  Depending on the source, they are praising or devastating. These services are fascinating (to me) because they build heavily on a digital and often even mobile infrastructure – while not invented today, this infrastructure is still quite new and thus makes concepts and business ideas possible that no one had thought about before. And they promise to tap into unused potentials of underused cars, un(der)employed people, or temporarily free flats.

cheaper by cheating? case uber

For many customers (users?) the main reason is: they are cheaper than comparable existing services. I wonder how they can do it.

If we think of an ideal market, excessive profits won’t last long because a competitor quickly offers the same service cheaper. If such a market is mature, prices have leveled in. Competitiors therefore try to offer something different, more valuable, in order to be able to ask higher prices (differentiation) or we see new, so called disruptive ideas that do the same thing better, more efficient, etc.
(note: the taxi market is not such an ideal market because you also need a taxi concession, which is limited and regulated. Whether this is useful is a different story, I think it isn’t important for my argument).

When we look at uber(Pop), they are often cheaper. So differentiation doesn’t seem to be their main point: The service they offer from the client perspective is pretty much the same: they bring people from A to B. They use dynamic pricing which can be good and bad for the passenger, depending on demand.

Is their business model disruptive then? They broker rides between passengers and drivers – but that’s common praxis with taxis already. The drivers are self-employed with all the benefits and risks – true for both. They have a nice app but that is available for taxis, too (2008 already!). They tap into a different pool of drivers: anyone! and cars: anyone’s car.

But is that a disruptive advantage? You need enough drivers so that you can serve your customers quickly. Driving for uber must be so profitable that drivers do it professionally and prefer it over driving a taxi. Or that they spend the remaining time besides aonther job transporting other people – not giving s.o. a lift on a way you have to go anyways, but making the tour just for the transport. uber also has a brokerage fee that the company itself lives on. This leaves little room for a cheaper price. Maybe they have a tremendously more efficient system to broker and schedule rides.

My suspicion is that they often circumvent regulations. A usual taxi has to go to inspection once a year. uber cars being private cars only once every two years (in Germany). A usual taxi driver needs a licence that allows transportation of people, they need to renew it every 5 years, they need a special insurance – uber drivers don’t need any of that (uber says it has an insurance in place but doesn’t release any proof of it). All of these regulations seem to be pretty reasonable considering that traffic is dangerous and you are in the driver’s hands as a passenger.

As far as I can see, uber is a little disruptive but also heavily cheating.
(if you have some more business knowledge, I welcome your comments to get this clearer for me!)

 

Tapping into unused resources: case airbnb

The uber considerations should be true for other services as well, such as Helpling: cheating on regulations, on customer expectations helps lower the price.

The case of airbnb is a little different: it’s a flat you have anyways, like the lift you give someone when ride sharing to a destination you go to yourself. To me, this model seems much more enabled by communication technology. Without it, tourists would just not be able to find that room that is empty over the weekend, at least it would be far too much effort. It also scales to a certain extent: everyone can do it for mutual profit (and some profit for airbnb) and it’s not competing for your time with a job.

The idea loses some of its shine because of its success: when people start renting regular apartments only to sublet them via airbnb, we are back in normal holiday apartment business (and even aggravate the problem of raising rents in crowded places).

 

Sharing vs helping

“Sharing economy” sounds a little too altruistic for all of these services, at least if we consider the connotation of “giving” in “sharing”. Most of these services are based on profit not just refunding expenses (which a classic ride share ideally does). The main point cultural critics mention is that these services commercialize social interactions, exchanging helpfulness through rational calculus. You can still offer things for free (such as a classic lift, couchsurfing, …). But these services seem to question helpfulness on a societal level.

 

 

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