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Should ride-hailing companies with shared economy system develop logistics service, in order to reach steady revenue sources? The answer is yes, but enough is enough
After the mounting losses battle with lucrative commissions and deep discounts offered in China market, the ride-hailing giants warfare ended with an M&A deal. Although it stopped almost US$1 billion losses in Uber per year, the original revenue model is still not steady and right.
Imagine one day if ride-hailing companies no longer provide any discount, then what’ll happen? Drivers and consumers will decrease. That said, what may be the next business area to earn steady profit for ride-hailing companies?
Sharing economy
Let’s start from the essence of ride-hailing companies business model——sharing economy, which means sharing the idle resources in society. In spite of the one-sided explanation, another key value is by connecting (IoT) Internet of Things to link supply and demand more effectively; forming a model with new type of resources and services.
Sharing economy should not be “free economy” but “effective economy”, thanks to some ride-hailing giants that increase the usage of idle vehicles by innovation of mobile IoT.
Take UberRush for example
Online vehicle renting platform as a core, Uber continuously enriches its business types. Logistics and express delivery services as main direction, it has also tried food delivery, goods transporting, etc. After a few months, Uber even launched “UberRush API” and provided to some companies to take delivery orders from their clients.
Comparison: Ride-hailing vs. logistics companies
1. Driver’s working attitude
Under traditional logistics system, the relationship between courier and customer is unfair, therefore, couriers may not make any effort in interacting with customers but just want to finish the job as soon as possible; while under sharing economy system, the couriers’ attitude might be better because of their autonomous engagement.
2. Effectiveness
Traditional logistics system originally owns fixed delivery routes, especially the packages which have to be grouped at least once at the delivery centre and distributed to each stop before arriving at its destination; while ride-hailing services directly leave out this centre altogether, saving time for customers.
3. Insurance
Traditional logistics system can promise our clients to protect their goods safe and sound upon arrival; While sharing economy system can’t constraint the drivers seamlessly, which is often a concern among many.
Why not? Because it’s still immature
In consideration for the humanity and user experience, ride-hailing giants that represent sharing economy model are making an effort to be disintermediation. But when it comes to “quality”, “order intensity” and “vehicle dispatching”, in short term, ride-hailing services cannot cover the whole user base but focus on high-class delivery.
- Quality: If there’s some complicated and professional problem involved, how will we control our service quality?
- Order intensity: If there isn’t enough orders to tie each delivery costs, then that makes no sense to develop logistics service from ride-hailing.
- Vehicle dispatching: Even if we get enough orders, how will we divide the orders and dispatch our vehicles by accurate computing to handle the operation?
Revise the percentage to balance
So, should ride-hailing companies with shared economy system develop logistics service, in order to reach steady revenue sources? The answer is, yes, but enough is enough.
A price war will likely ensues if we consider Uber, Didi, Grab, Ola, and Lyft to operate in a long time. As we all know, when transferring core business, we should put appropriate percentage to the former and the latter, in order to balance the new operation costs.
With partial logistics service collaborating with online retailer or brand e-commerce giants, and stabilising the original ride-hailing business, not only will ride-hailing companies find steady revenue sources, but they may also be suspending the endless price war around the corner and having a new operation method worth trying.
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