Google has transformed our lives in numerous ways. Right from live cricket scores to election results and from stock markets to food recipes; google is used everywhere. It has become a verb for us. The very usage of a proper noun as a verb in the English language itself signals the penetration of internet in day to day activities. Another good example nowadays is Uber. Uber has changed the form and method of doing business via the internet. Realising the need to mitigate the problems of the taxi drivers and customers in the traditional taxi system, Uber has created a revolution in a very short span of time with the help of technology. It is a $ 10 bn Company and serves in more than 60 countries. There are several others who followed it and are successful in their respective locations. Undoubtedly, this business is glorifying across continents.
Three important features were displayed:
- On demand services –Customer’s pain of getting down and search for taxi is lessened. It is equally important to get consensus with taxi driver for the place you desired. We experience this problem on a daily basis with our traditional taxis where they reject to go to a location you wanted. A mobile app becomes the only platform for buyers and sellers to meet and raise an offer in these new services. Demand of customers is matched with the supply of taxi drivers with the help of geo-sense, the internet and algorithms. Once the offer is raised and accepted by another party it is called a contract. Likewise, in the taxi hailing services like Uber, Ola! Or Didi, an e-contract is entered into by customers and the taxi driver once both agree on the specifications of the contract. Initial notifications inform us about the driver, his current location and ratings. Once you enter the taxi, the performance of the contract begins and ends as you pay the driver.
- Surge pricing – Surge pricing works on an algorithm which considers type of car, distance to be travelled, peak timings, demand-supply situations, traffic analysis, etc. Using it to value services often has resulted in regulatory issues, but it acts as an efficient tool in pricing decisions. Pricing a product or service is an arduous task since companies need to balance between margins and customer satisfaction. In this clamour, companies often fail to achieve one leg of the act affecting the other in later stages. Surge pricing does a fair job in this regard (assuming everything being legal and properly programmed and tested). Since, calculations are automated, one cannot question and haggle around it. This model is now quite famous and is also used by Indian railways to price high end trains.
- Different customer type – These cab services have been successful in providing better services like free Wi-Fi, luxe and even car pool facilities. Product and price differentiation techniques are used to cater different needs of different customers. However, everything comes at a cost.
These taxi aggregators have always been subjected to various regulatory issues. Indian traditional taxi drivers are quite unhappy with these services which are encroaching their lives. We have witnessed protests from taxi unions against Uber and Ola. Even political parties are hesitant in welcoming them since they want to protect Kaali Peelis (traditional black and yellow taxi) and rickshaw systems.
The Indian taxi transportation is concentrated into the hands of government and is in much need of liberalization. As taxi unions are politically influenced, such decision appears distant. Complex and unstable regulations for taxi aggregators would hamper ‘ease of doing business’ motto of government. Surge pricing attracted huge opposition from all parts of political and governmental agencies. But, economic principles are very simple. If a person has the desire, ability and willingness to consume these services, there will be demand for them. If a customer can afford to spend on it, she will continue to avail the services. If consumers stopped using Uber and Ola due to price rise, low quality or for any other reason, automatically market dynamics would change and Kaali Peelis will be at their rescue.
A rational and forward looking approach is required to save traditional taxis from waddle. This can be achieved by embracing new technology and welcoming more players in the market. Why traditional taxis don’t use technology? There must be a level playing field for all the service providers to make the competition intense and benefit consumers. Stringent rules and unnecessary restrictions are entry barriers to this sector, which feed the monopoly markets of traditional taxis. A paradigm shift is indeed important to welcome this new approach. Ultimately, customer is the king and a good journey is what he expects. Let’s wait and watch what the time unfolds in the next couple of years. Till then make sure your next ride is safe and happy, irrespective of the service provider. Bon Voyage!
– Swapnil Karkare
(The feature image is original and captured by the author)