Uber headed off a class action lawsuit by 2,000 New York-area drivers this week, with a promise to pay $3 million to end a dispute over the fees it imposes on those drivers. It is evidence that marketplaces will see more pressure to lower fees in order to retain workers.
The ridesharing company has settled many similar suits and appears headed for many more settlements. We think the underlying signals point to a decline in the advantage marketplaces had over workers which allowed fees of up to 30 percent to be deducted from fares.
On-demand companies should be prepared to thrive on margins similar to retailers, such as Amazon and WalMart. Where a 25 percent or greater fee is deducted from a driver’s or a housekeeper’s earnings today, the on-demand market his headed for a sub-10 percent fee structure over the next decade.
Two factors will accelerate this trend:
1.) As purpose-specific marketplaces mature, such as ridesharing, workers will diversify their listings, making themselves available on many systems. This is true of Uber and Lyft drivers, who typically use both apps simultaneously to get work. This means workers will be arbitraging work opportunities across many marketplaces. Purpose-specific markets will respond by consolidating related markets, which presents significant brand challenges. “Uber” has become a verb denoting ridesharing, but not housecleaning; It would have a very difficult time extending its brand into home-services. Price is the manageable factor in consolidating markets.
2.) Information efficiency favors the consumer, not the marketplace. As more data is applied to the problem of anticipating demand, consumers and workers alike will move to low-cost marketplaces in pursuit of better prices and pay rates. These twin demands put the marketplace in a lurch. In order to lower consumer costs while retaining an attractive workforce, the marketplace must lower its fees charged to those workers.
As workers diversify, marketplace providers will compete for labor supply, lowering their fees charged to workers who focus on their service categories. Likewise, consumers will embrace marketplace brands that solve many in-home and on-demand needs, leading to greater optimization within those marketplaces and lower fees charged to workers.
Here’s the problem with building a purpose-specific marketplace, such as a consumer mobility platform like Uber, Lyft, or Didi Chuxing: Once the platform is saturated, it’s necessary to diversify. In the case of China’s Didi Chuxing, the ridesharing company is adding management of a bike-sharing service, moving into an adjacent, though painful, market with its platform.
Didi customers will get access to Bluegogo bikes in Chinese markets. Didi is taking a chance with Bluegogo since the company has already failed. In fact, all Didi is doing is acquiring Bluegogo’s abandoned bike inventory, hoping to earn back the cost by increasing revenues from existing customers.
As on-demand evolves, the apparently explicit delineation (rides on demand versus, for example, housecleaning) between one consumer market and another will become a barrier to expansion. Markets are more efficient when they include many products and services than in any dedicated marketplace. Early leaders in transportation may find that adding any non-mobility service proves difficult.
Didi customers may consider taking a bike instead of a ride. But not all those customers will be interested in bike options, so expansion into bike-sharing could produce little incremental additional spending by Didi customers.
Didi Chuxing, purchased Brazil’s 99 for $600 million, in addition to its previous investment in the target company.
Splend, an Australian fleet management company that provides cars to Uber, Lyft, and other transportation network company drivers, raised $220 million in new debt financing this week to support inventory expansion. Between equity and debt financing, Splend has $232.2 million on hand to spend now.
Search and content don’t always go together. In fact, they may work at cross-purposes, raising barriers to search access to competitive content sources and reducing trust in the search engine’s objectivity. Google seeks to sell restaurant guide Zagat after purchasing it for $151 million in 2011.
GrubHub’s annual Year In Delivery list is out. Lettuce Chicken Wraps were the biggest gainer among orders last year and is expected to be popular in 2018. Avacado toast peaked earlier in 2017, but earned the biggest gain in orders overall.
Transportation network companies are changing wealthy New Yorkers’ home buying preferences, sais a leading realtor. “Today, in our Uber-tech world — I [can be] in the back of a car with my iPhone, and I’m not losing out on anything. That has changed [commutes] dramatically. Your commute time is not lost productivity,” realtor Leonard Steinberg told Business Insider. Consequently, the wealthy are willing to buy homes further from work than in past years.
Consumers experience of media will inform their retail expectations. Now that the majority of audio consumption is fulfilled through streaming services, with video close behind, consumers have come to expect immediate gratification in most transactions. Watch for media to set consumer’s patience levels with on-demand delivery and service experience.
Beauty products companies are shifting to chatbot-based and interactive customer interfaces. The idea is that beauty-related tasks are immediate and susceptible to machine analysis. Wondering if you have too much eye shadow on, let a camera-equipped bot check it out? What if a human being was also able to provide advice? That’s a one-two punch that will convert.