04/12/2020 - 08:00

Competition accelerates in rideshare market

04/12/2020 - 08:00

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Targeting niche markets and improving green credentials are two strategies accelerating the growth of transport platforms in WA.

Competition accelerates in rideshare market
Terry Butts says there is significant demand for pet ridesharing services in Australia. Photo: Gabriel Oliveira

As ridesharing companies such as Uber, Ola, and DiDi fight for market share, a new offering is targeting a market niche most major players have largely overlooked. 

Terry Butts started Perth Pet Taxi in 2016 as a door-to-door animal and pet transport service.

That concept is now the foundation of a new app-based platform called Pawba, which Mr Butts hopes to launch nationally in March next year as a ridesharing service for pets.

Pawba won’t have it all its own way, however, with Uber having announced the national rollout of its own pet ride feature in June.

Both will be targeting pet owners, who constitute 61 per cent of Australian households. 

But Mr Butts said he was unfazed by Uber’s service because Pawba was a specialised pet transporter.

Uber won’t deliver what we deliver,” he said.

“The difference is all our pets will be secured, all our drivers will be trained internally, and we will only have drivers who are pet lovers.

“Pet lovers go the extra 10 per cent to make sure the pet is secure, safe, and comfortable.”

Perth Pet Taxi has had between two and five drivers on staff this year due to COVID-19 restrictions on movement, but Mr Butts said there had been significant demand for the service since lockdown eased. 

He said the business transported at least 3,000 dogs in 2019.

“Pet groomers, the elderly, and people who have lost their licence still need to travel with their pets,” Mr Butts told Business News.

Mr Butts has started an equity crowdsourced share offer for Pawba through online platform Birchal, which was also used by women-only ridesharing service Shebah to raise $3 million in 2019.

Mr Butts hopes to raise $500,000 to build the Pawba platform and will begin recruiting drivers in January 2021.

He said marketing the startup would be a big hurdle. 

“One of the challenges is the budget that small businesses have ... promotion has to be done well or not at all,” Mr Butts said.

Facebook posts and reviews have been the primary marketing mediums used by Perth Pet Taxi, given their low cost and the value of user feedback.

“There are always going to be funny experiences and stories with pets,” Mr Butts said.

“We want riders and customers to post to social media and share these magic moments.”

Mr Butts hopes to make maximum impact on the ridesharing scene by launching Pawba across six major cities on the same day: Perth, Sydney, Melbourne, Brisbane, Adelaide, and Canberra.

Ridesharing market

Most platforms in the increasingly congested ridesharing sector are unwilling to disclose private market share details, but Department of Transport (DoT) data, app downloads, and independent studies for Western Australia provide some insight.

A DoT spokesperson told Business News there were about 65,000 drivers in WA with an authorisation that enabled them to drive passengers for hire or reward, including app-based rideshare providers, as well as bus, taxi and charter drivers.

It is estimated that about 50 per cent of these drivers no longer work in the passenger transport industry.

One reason for this is the current licence arrangement does not require regular renewal, as current licence extensions have no expiry date.

However, the DoT will next year introduce a new requirement it claims will enforce a higher standard for safety.

“From July 1 2021, everyone who drives, or intends to drive, for hire or reward will be required to have a PTD [passenger transport drivers] authorisation, which will need to be renewed annually,” the spokesperson said.

“It is expected the PTD authorisation will more accurately reflect the number of drivers in the industry, although driving may continue to be a part time or volunteer activity for many.”

About 16,000 vehicles are authorised to be used for any type of charter service in WA, with more than 850 authorised on-demand booking services across the state.

Among those services are Swan Taxis, Shebah, and WA-based ridesharing platform Shofer, which owns 80 cars in Perth.

Lesser-known startups such as Perth-based ridesharing platform Karru, which was founded in 2018, are no longer operating and major players, particularly Uber, continue to lead the market.

Representatives from Shebah, Swan Taxis, and Shofer declined to comment to Business News, however, Google Play data indicates the Shebah app has been installed more than 50,000 times, on par with the Swan Taxis app. The Shofer app has been installed at least 10,000 times.

Internationally, Google Play data shows Chinese-owned DiDi and Ola have been installed 10 million and 100 million times, respectively, while Uber has racked up more than 500 million installations.

Competition in this space is intense worldwide, and investors have been pouring in cash to secure market share.

Uber remains the top platform in Australia, according to Roy Morgan.

A February 2020 study conducted by the firm showed that 93 per cent of those who used a rideshare service in Australia had ridden with Uber over a three-month period.

About 20 per cent and 14 per cent used Ola and DiDi, respectively, implying that consumers used more than one platform. 

Perth is Australia’s leading capital city for Uber usage, with 32 per cent of residents reporting recent use of the rideshare platform.

In a different market segment, food delivery service DoorDash, which arrived in WA in August this year, said its launch into Australia marked the company’s first international expansion beyond North America. 

A spokesperson told Business News there were cultural differences, food preferences, and tipping policies that had to be taken into account, and that having local teams allowed the company to adapt and adjust its model to meet the needs of Australian customers and partners. 

Service fees 

In addition to customers, platforms are competing for drivers.

Service fees, or the portion of earnings taken by the company, and incentives, are two levers used by ridesharing platforms to attract and retain drivers.

Ola’s recent announcement of a temporary earnings increase for its Perth drivers is one such move. 

During October, Ola drivers in Perth retained 100 per cent of their earnings when taking rides through the app.

Ola head of operations Wolf Aron said the move was aimed at supporting the WA driver-partner base following a difficult year due to the pandemic.

“We have all had a challenging year as Australians have been in various states of lockdown across the country,” he said.

Outside of this period, Ola charges a 15 per cent service fee, which the ridesharing platform said was more than 10 per cent lower than its largest competitor.

DiDi, which entered the Perth market in November 2019, further undercuts this rate, offering an 11 per cent service fee (lowered to 5 per cent during March and June this year as a result of COVID-19). 

“The pandemic has allowed DiDi to explore alternative products and services to benefit the Australian community, and provided increased earning opportunities for driver-partners,” a spokesperson told Business News.

Despite these incentives, Uber, which offers discounts and a loyalty program for its drivers but retains its relatively higher 25 per cent service fee, remains frontrunner in the ridesharing race, with 74,000 active drivers in Australia.

Carpooling hopeful

Another business planning to enter the market is WA-based carpooling service ReddyRide, which hopes to launch in February next year. 

The app-based platform, which is in the early stages of capital raising via Birchal, would connect people commuting along similar routes, allowing them to schedule and share the cost of their ride. 

ReddyRide co-founder Sharon Wilkins said the ridesharing service’s crowdfunding effort had received more expressions of interest than expected.

“We’re very excited, we’ve had a huge amount of interest considering we’re not an established business that’s had a social media following,” Ms Wilkins told Business News

ReddyRide’s driver base will consist of everyday commuters seeking to make small positive changes for the community, rather than those driving as a side-hustle or on a full-time basis. 

“It’s not a career and there’s much more than just the monetary benefit,” Ms Wilkins said.

“Anyone who wants to drive for ReddyRide wants to firstly offset their costs, secondly reduce congestion on the road that they are travelling on, and thirdly reduce carbon emissions.” 

Ms Wilkins and her father and co-founder, Richard Wilkins, said they were not concerned about building their driver base or competing with major ridesharing platforms such as Uber.

“We’re not replacing rideshare, we’re co-existing with them,” she said.

While people would still want on-demand services like Uber, Mr Wilkins said: “You don’t see people going to work in an Uber every day”. 

Their minimum target is 2,000 drivers to ensure a high likelihood of passengers finding a journey, a figure they believe is feasible given there are 6.6 million single-driver vehicles used in Australia daily.

Sharon and Richard Wilkins say their service will help people offset costs, reduce congestion, and lower carbon emissions. Photo: Matt Jelonek

Partnerships, sustainability

In a bid to reduce emissions, car sharing companies such as Flexicar are forming strategic partnerships to drive consumer usage. 

Founded in Melbourne in 2004, Flexicar is a membership-based car-hiring service with vehicles available for booking from designated pods around Australia.

A spokesperson told Business News Flexicar had worked with universities and developers to secure its presence in WA.

“Flexicar has a unique partnership with the Royal Automobile Club of Western Australia, where Flexicar is the dedicated car share provider for RAC’s on-campus mobility service for the University of Western Australia,” the spokesperson said.

An on-campus mobility service provides students, staff, and visitors with point-to-point transport options.

Flexicar’s offering consists of six cars available for students to travel between campuses and around the city, and a number of electric ‘Whoosh’ bikes.

“This allows partners to offer their customers reliable access to cars, without the stress and hassle that comes with maintaining a fleet,” the spokesperson said. 

Meanwhile, Uber announced in September it would be collaborating with the World Resources Institute to work towards a clean energy future

The company said it would spend $US800 million globally to move to 100 per cent zero-emission vehicles by 2040.

It follows other brands such as Airbnb, which launched a sustainability education hub in January 2021, and Deliveroo, which is offering meals in reusable bowls through partnering with reusable packaging company Returnr.

“The main challenge we see in the next five years for Australia will continue to be the move away from fossil-fuelled, private car ownership towards a shared, electric future,” an Uber spokesperson told Business News.

“We know the future of transport is electric and will continue working with industry ... to increase electric vehicle uptake in Australia.”

Regulation

For the future, operators plan to continue to push for a reduction in red tape.

Since April 2019, the On-demand Passenger Transport Levy has been imposed to fund the buyback of the Perth metropolitan taxi plates.

The levy is 10 per cent of the levy fare for on-demand trips in vehicles seating 12 people or fewer in the Perth, Mandurah, or Murray areas to a maximum of $10 per trip.

The levy applies for four years from the commencement date, or until the buyback is complete.

Uber said it welcomed an end to the levy because it artificially increased the cost of transport for passengers.

Barriers to electric vehicle scalability, such as model availability and the lack of charging infrastructure, particularly in metropolitan areas, were also highlighted by Uber as challenges that required change.

Uber already has EV programs under way in some international markets, and we want to continue to work with Australian governments to help create policies that support EVs, to enable more electric mobility options and improve both environmental and public health concerns,” an Uber spokesperson said.

Ms Wilkins said state and federal governments should make it easier for people to access car-sharing services by providing dedicated car parks and lanes for people with more than one person in the car. 

Flexicar shared this sentiment, urging local governments to consider increasing advocacy for car share as a sustainable transport option for WA residents, and to include car share in their sustainability policies.

“In WA, Flexicar does not have any on-street parking bays,” they said.

“We would like to see the same growth and benefits of car share as we do in Sydney and Melbourne, where we have worked with local councils to dedicate on-street parking spaces that are located in areas that can conveniently be accessed by all members.”

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