Uber has certainly changed the world’s ‘taxi’ landscape, for better or worse. In the UK it has come from nothing to dwarf more traditional providers in just a few years. It’s been regarded as a market ‘disruptor’, with an associated new nomenclature not associated with the traditional industry, such as the ‘gig’ and ‘sharing’ economies, and descriptors like ‘ride-hailing’. And the assumption is that Uber and similar entities are substantively different to the market they’re disrupting. However, this assumption is never properly explained, nor has it ever been, in my opinion at least.
My thesis, on the other hand, is that Uber isn’t really so different, and this will be outlined in subsequent posts. That’s not to say that Uber doesn’t have peculiarities as compared to what’s gone before. Perhaps five important differences can be identified.
1 Uber is a global brand, which is effectively unknown in the industry. Most brands in the UK tend to be associated with particular towns or cities, and are certainly not national in scope, never mind international. At best, brands are regional in terms of market penetration, such as Delta Taxis on Merseyside, or Blueline Taxis on Tyneside. City-wide brands include Addison Lee in London, Aqua Cars in Portsmouth and StreetCars in Manchester. Most people will know similar or smaller brand names in towns and cities across the UK. But even in the UK context, nothing approaches the geographical scope and brand recognition of Uber.
2 Uber does not accept cash payments. Except for the younger generation, the vast majority of people who have ever used ‘taxis’ will have predominantly paid in cash. However, Uber has historically only accepted automated payments. Of course, in common with consumer-facing businesses generally, the established ‘taxi’ industry has largely adapted to accept automated payments, while at the same time retaining the cash option. (It seems that Uber does accept cash in some overseas jurisdictions, and has trialled cash payments in at least one UK city. And, on the other hand, traditional ‘taxi’ providers have generally offered account facilities to customers, albeit that historically this would have been less technologically sophisticated than app-based and card/contactless payment methods.)
3 Uber accepts only app bookings. Whether Uber individually pioneered booking ‘taxis’ via an app, it was certainly one of the more prominent trailblazers, and in a global context probably enjoyed ‘first mover advantage’ it terms of markets and competition. Of course, apps are ten-a-penny in the industry these days, and it’s probably difficult to find a significant player in a town or city of any size that doesn’t offer some sort of app-based booking option. But, as regards the legacy part of the sector, it seems highly unlikely that any of them have totally abandoned more traditional pre-booking methods – primarily landline and mobile phone voice bookings.
4 Drivers pay Uber a commission-based sum. Traditionally, self-employed drivers in the trade would pay a despatch operation (often called a ‘circuit’) a fixed fee (known by various terms, including ‘settle’, ‘office fees’, ‘base fee’ or ‘franchise’). Locally, there could be some variations on this, such as different sums based on how many drivers used the vehicle (the sum would generally attach to the vehicle rather than the driver(s)), or weekend/part-time fees. But, generally speaking, these sums would be fixed rather than vary with the driver’s income from fares. Uber and other app-based platforms like Bolt and Freenow use commission-based fee systems, and this may have presaged a shift towards this kind of model in the traditional trade. However, in the latter fixed-fee systems still dominate.
5 Uber does not require driver exclusivity. Another significant factor from the Uber drivers’ perspective is that they are free to work for other providers in the sector. In the established industry this would have been largely unknown and indeed forbidden, and a driver found to be working for a competitor would be dispensed with forthwith. However, in purely economic terms the fixed-fee system described above would militate against a driver working for two old-style platforms at the same time. Likewise, local authority licensing rules have also discouraged or indeed prohibited drivers from working for more than one operator, and this can be linked to rules relating to vehicle signage. However, so-called multi-app working has been instrumental in softening many such restrictions, and in some locations it’s now commonplace for drivers to be working for the likes of Uber and Bolt at the same time. In turn, this may have softened the attitude of the legacy trade to such arrangements, although the dominant model probably still requires driver-exclusivity.
Of course, from the passenger perspective 2 and 3 above are related – the app and payment systems are integrated. Likewise, for drivers there’s a link between the traditional fixed-fee arrangements in 4, and the exclusivity and dependency in 5 – the corollary is that commission-based fees required by app-only platforms encourage flexibility and undermine dependency and exclusivity vis-à-vis a single operator.
Thus Uber is different. On the other hand, the differences as posited by experts and commentators is only tangentially linked to the factors above, and this will be examined in a future piece.
In the meantime, though, perhaps the above analysis suggests that the difference between the ‘ride-hailing platforms’ and the legacy ‘taxi’ industry is more of a continuum or spectrum than a binary or dichotomy.
(The above was written with minimal active research, as opposed to historical knowledge and experience. Therefore holes could almost certainly be picked in the details and nuances above, but I’m reasonably confident about the fundamentals.)