Uberization is a very trendy topic, the side of the digital economy that scares businesses the most. Uberization is, in fact, double-sided
â€¢ re-intermediation : a new intermediary captures the demand and allocates it to new partners (drivers). In some countries the platform works with the existing players (ie Hailo in Spain).
â€¢ platformization : the intermediary organizes the relationship between clients and providers at scale with a very low marginal cost. When margins are tiny, success requires a high volume and perfectly mastered operations.
The Uber model won but is at risk
Uber take a market. It’s the world champion besides which some challengers are trying to exist, sometimes with success, on a local niche, but with very little hope to become a worldwide player with a critical size. And we should not forget that among the key success factors of an uberization strategy there is the ability to become a monopoly (or nearly).
So Uber won. Its model is winning in many industries where it’s been applied. The platform won. Period.
What’s the current situation ;
â€¢ Uber took most of the market
â€¢ The “Suit and Sedan” model is slowly regressing to the profit of UberX that is a better product to win large market shares.
â€¢ This implies a lower quality of service (let’s be honest, UberX is sometimes not better that taxis who raised their quality of service over time).
â€¢ As said here, all the conditions are met for investors to become impatient and ask for profitability and payback.
â€¢ As predicted, Uber reacts in two ways : rise of the price for the customer, rise of the fee paid by the drivers.
Stage #2 : People vs the platform
Logical consequence, driver are not happy. In France and in other countries, some are asking for better conditions, others to have their contract recognized as a work contract.
The consumer may, one day, show his discontent. Today, if some find the tax optimization systems used by Uber is not fair, they’re still using the service. But betwenn higher prices and a lower service, what saves Uber is it’s cool image. If you don’t like Uber you’re an old brained person from the old economy, you don’t understand a changing world. I’d even go further : people love Uber because they hate taxis. Remember why Uber failed in Japan : taxis are doing a very good job there, so there was no room for Uber. And even if some old taxi companies improved their service they did it too late to change their image. But until when ? Taxis are still alive….and profitable.
What are the available options for drivers ? Since Uber won’t be able to lose billions every ear for a long time, I hardly see how they can improve their revenue significantly. Gather on a local market and build their own Uber on a cooperative model ? Some believe this is the only sustainable option. No matter. In the end they will die.
Stage #2 bis : People vs the robots
Uber is clear : the future of their model is to be driverless. The first experimentation started and, one day or the other, it will become the norm.
It raises other questions. For example knowing if the asset-light model of these platforms can coexist with car ownership and the investments it requires. But, for drivers, things are client : they are not a part of Uber’s future. What they’re asked is to help Uber keep the old model alive until Uber can switch to a new one that will mean drivers extinction. Ironically, when this day will come, they will surely join their forces with taxis because they all will face the same situation. But was is clear is that any concession that will be made today will only have one purpose : buy time until the platform can get rid of the drivers. Will drivers be the accomplices of their own extermination ? It’s up to them to decide.
Elsewhere, AirBnb is building its own lodging. Will they eventually become competitors with those who helped them to start their business ? The relationship between platforms and their partners may radically evolve as they are trying to optimize their model.
Uberization in a dead end ?
Will there be a stage 3 ? At first sight it should be the era of bots and autonomous cars but that’s not sure. Today we know that :
- it’s possible to pre-empt a market with cash
- the model is not sustainable as is
- profitability is reachable but in the detriment of the client or of the driver
- the path to profitability is vert narrow. Uber can’t lose customers but can’t afford a fight with drivers while the autonomous car is not a reality.
Uber is the perfect example since it proved the holdup is possible. But nothing proves that in 10 years the company will not feature in economics books to explain that as big the holdup could be, it’s not always possible to live on a theft.
Photo credit : Fotolia.