Since its inception in March 2009, rideshare pioneer Uber has upended the way cities work and people move. This has helped to promote a shift from private vehicle ownership to a more efficient and effective shared economy, which fits well within a city’s transport mix. Here we take a look at Uber’s Strengths, Weaknesses, Opportunities and Threats after more than a decade of disruption.
1. Its global brand recognition is unmistakable and has come to actually mean “ridesharing.”
Uber’s ride sharing service has become a well-known brand name with an easily recognizable logo in over 60 countries worldwide. The company has the advantage of being the first mover in the mobility-as-a-service segment globally, gaining higher brand awareness than its competitors. Uber’s adaptive nature has helped gain customer trust and uphold its strong brand identity in various countries.
The company’s use of social media platforms – Facebook, Twitter and Instagram – allow it to reach its global target market, keeping them updated on the latest promos and deals. Uber’s innovative marketing strategy keeps its brand identity strong. In their latest overall brand rankings, Ranking TheBrands listed Uber in their top 100, above more established brands like Honda, BMW, Ford, Dell and YouTube.
In the third quarter of 2020, the number of people using Uber’s app on a monthly basis climbed from 55 million to 78 million. (Statista)
2. As a first mover, it has become the largest ridesharing company with a strong market position.
Uber is the largest ridesharing platform in the U.S. and worldwide. First mover advantage helped the company to capture a larger share of the U.S. market ahead of its biggest competitor, Lyft. Currently, Uber continues to dominate, taking in 71% of ride hailing spending.
Uber has more than 50 million active users a month in more than 600 cities internationally. Apart from its core ride hailing business, Uber’s expansion into the food delivery service with UberEats is gaining popularity across the globe.
Uber has 37.2% of the global market of $75.4 billion. (Statista)
3. Uber rides are cheaper and more convenient to use than traditional car services.
Innovations within Uber’s App has made it easier for customers to use ride hailing services. No more time-consuming hailing of cabs, waiting at curbs or having the right amount of cash. Uber’s app is easily accessible, simple to use and offers direct client-to-driver interaction. The cashless system means payments are handled through the app. Customers can link their credit cards to their accounts in the app.
The “sharing economy,” including ride sharing services and home sharing services, like Airbnb, is expected to be a $40.2 billion market by 2022. (Statista)
4. Diversification and forward-thinking are things Uber does well.
One of Uber’s key success factors is its ability to adapt and innovate to encompass changing needs. This can be seen in its diversification into logistics with Uber Freight and broadening its services to offer groceries and food delivery, UberEats and its Postmates acquisition.
Diversification has increased market share and revenue. Uber has expanded its interests in autonomous transport technology by investing in self-driving cars and partnering with self-driving tech start-up, Aurora Innovation.
5. Dynamic pricing helps its drivers’ morale and Uber’s availability for riders.
Uber’s dynamic pricing strategy, using a system where route prices increase if there is a surge in demand, has been good for its drivers. Drivers can also earn more at night, in bad weather conditions and during the holidays. This encourages more drivers to take ride requests to meet demand surges.
Uber uses a “willingness to pay” algorithm with artificial intelligence to determine whether a ride is more likely to pay a surge-priced fare, considering charging riders more for trips that the data shows they take frequently, and whether a rider’s phone’s battery is about to die. It knows about the rider’s battery because the Uber app switches into power-saving mode when the rider’s phone’s battery is low.
6. Customers are loyal to Uber because it offers a great customer experience.
Uber’s customer-focused business model has led to a high level of customer loyalty. Its user-friendly app designed around customer needs gives it an advantage over other car services. One of Uber’s biggest advantages over traditional taxis is its rating system for both drivers and riders.
The rating and feedback system ensures good service because drivers want good ratings from customers. Uber’s use of social media channels to engage customers and address complaints and get customer feedback is a huge advantage.
Riders who are loyal to Uber exclusively represent 51% of ride-sharing revenue. (Vox)
7. Its operational costs are low.
As a result of not having any fixed infrastructure and fixed investment, Uber operates at a lower cost. It has an unlimited fleet of cars and no full-time drivers which helps to keep operational costs down. Uber’s app service enables it to operate without dispatchers, unlike traditional cab companies.
In the third quarter of 2020, Uber had $4.25 billion in costs and expenses worldwide. (Statista)
8. The company has a high valuation and can secure additional financing easily to fund its growth.
Uber has significant investors whose financial backing has helped the company grow rapidly. Due to its high brand value and market dominance, Uber attracts investors. More investors mean more money to operate and diversify.
The global ride sharing market is predicted to grow by over 50% between 2020 and 2021. (Statista)
1. The Uber vetting process has historically shown to be inadequate to ensure rider/driver safety.
Stakeholders in the Uber ecosystem have reported a number of safety and security issues, including sexual assault, violence and other violations. Furthermore, the platform perpetuates an environment that promotes gender-based violence.
Uber has registered 3,045 sexual assaults, 58 deaths and 9 murders in the United States between 2017 and 2018. (The Verge)
2. Gender inequality has proven to be persistent in Uber’s driver makeup, both in prevalence, and pay gap.
Despite the “sharing economy” business model perceivably leveling the playing field in terms of gender inequality, female Uber drivers earn less than male counterparts. This is due to male Uber drivers completing rides faster, therefore fitting in more rides per shift.
Furthermore, female driver turnover remains at 76% as opposed to 60% for men. This translates into male drivers being more experienced, which translates into higher earnings. Finally, although number of female drivers are increasing, only 40.9% of Uber drivers are females.
Female Uber Drivers earn 7% less than their male counterparts. (MarketWatch)
3. Uber’s disruptive nature has resulted in action from policymakers.
Uber’s first-mover advantage, coupled with its disregard for the rulebook, has allowed competitors to take up market share as governments move to regulate the rideshare platform. This has allowed competitors to adapt their offering around regulations created for ridesharing platforms and efficiently compete.
While 70% of the global ride-sharing market remains in Asia, Uber’s competitor Didi Chuxing controls more than 80% of the market in China. (Nikkei Asia)
4. Driver wages are reported to be repeatedly under Uber’s estimates.
Uber drivers reportedly earn less than minimum wage in many locations. This has allowed Uber to undercut traditional taxi models. However, this is at the expense of its driver base. Drivers have become more active in various locations in advocating for their “fair share,” even blocking traffic in protest.
Studies commissioned to try to understand driver pay in the so-called “transportation network companies” resulted in estimates of $9.73/hour on the low end, and $23.25/hour on the high end. (GeekWire)
5. Uber’s competitor, Lyft, remains the leader in terms of driver satisfaction.
Apart from Uber drivers reportedly earning less than minimum wage, their satisfaction levels are lower than that of its rivals. Initiatives are in place to address driver welfare, including 3% shares offered to Uber’s drivers at the IPO price, as well as the 180 Days of Change Campaign to address driver welfare. However, satisfaction remains low.
48% of Lyft’s drivers stated that they were satisfied with driving for Lyft, compared to 43% with Uber. (The Rideshare Guy)
1. The Covid-19 Pandemic has seen a drastic increase in food delivery service, resulting in a 125% increase in year-on-year revenue for Uber Eats.
Food delivery has become more accepted during the recent Covid-19 Pandemic, with citizens across the world experiencing some varying kinds of “stay-at-home” lockdowns. This has served the market well and helped the restaurant industry at a time where dining-in was restricted or prohibited. Uber Eats’ third quarter saw a 41% year-on-year increase in active diners on the delivery platform.
Second-quarter 2020 net revenue experienced a year-on-year surge of 125% to $1.45 billion. (MarketWatch)
2. Toyota, alongside Denso and Softbank, invested $1 billion into Uber to develop autonomous vehicles.
Uber has established itself as a market leader in the upcoming battleground of self-driving vehicles and invests up to $150 million every quarter in self-driving vehicles (BGR). Though the platform has experienced a number of setbacks in driverless vehicle trials, including the death of a pedestrian in 2018, Uber’s self-driving car division, the Advanced Technologies Group, has continued to push forward with its efforts.
Uber is pushing hard into the self-driving car market to reduce its business costs because the drivers at Uber represent 80% of Uber’s total ride-hailing cost per mile. (CNBC)
3. Uber’s digital freight brokerage service, Uber Freight, accounts for 1% of the group’s bookings, but 4% of the group’s net revenue.
This offers a glimpse into a more profitable segment within Uber’s arsenal, allowing a diversification in its revenue mix. The success thus far indicates potential growth in the years ahead.
In the 2018-2019 period, Uber’s digital freight brokerage division, Uber Freight, reported a 74% year-on-year increase in gross bookings, a value of $219 million. (FreightWaves).
1. Fierce competition means Uber will need to work hard and creatively to retain its customer base.
As competition with other rideshare companies increases, it will become more difficult for Uber to retain customers. Increasing competition from Lyft and ride services in other countries, such as India’s Ola, China’s DiDi and Bolt in Europe, forces Uber to keep prices low.
New Uber competitors are continuously being launched, for example, inDriver in South Africa. Traditional taxi services protest for governments to regulate pricing because they can’t compete with Uber’s rate. In Germany, Uber was taken to court by the local taxi industry for violating competition rules.
Uber’s U.S. market share has declined from 74% in September 2017 to 71% in October 2020, but is still far above Lyft who only had a market share of 29% in October 2020. (Statista)
2. Employee retention will increasingly be an issue due to Uber’s competition.
Drivers may switch to rival platforms due to better incentives from competitors from the ride-hailing space or from other parts of the sharing economy.
Driver satisfaction rates have declined from 2017 to 2019, where only 34.1% of drivers in 2019 said they were somewhat satisfied with Uber. (Statista)
3. It faces intense competition outside of its ridesharing industry as well, being attacked on all sides.
In the food delivery industry, UberEats faces competition from companies like GrubHub and DoorDash. Google Cars and Tesla are Uber’s major competitors in the driverless technology industry.
Uber Eats, with its acquisition of Postmates, has a combined 37% of the food delivery market share in the U.S., behind DoorDash which has 45% of the U.S. market. (npr)
4. Its low prices for riders means Uber’s profit margins are also low.
To maintain its customer-centric model, Uber keeps its rates low and only takes between 5% to 20% of payments, leading to low-profit margins.
Uber’s unprofitability has prompted it to withdraw from China, Russia, and Southeast Asia. Uber has an 80% market share in Brazil, but it is still unprofitable there. None of the other top ride sharing platforms are profitable. (Forbes)
5. Local laws vary widely across regions and are changing, making it difficult for Uber to make sure it is complying everywhere it operates.
Increasing pressures from local authorities require Uber to comply with certain laws, which the company skirted when setting up in different countries. Non-compliance with local laws incurs fines and results in bad publicity. Changes in legislation can lead to complications for Uber. For example, in California changing laws required ridesharing companies to treat drivers as employees, not independent contractors.
Uber claims that 0% of its workforce are drivers in order to limit various liability. (The Washington Post)
6. It has received some bad publicity, which may alienate some riders.
Sexual harassment scandals and stories of driver fraud reflect poorly on the company’s image. Class action lawsuits filed by drivers against Uber over its minimum wage policy have damaged the company’s public image.
Uber, in its own report, admitted to 235 reports of rape, 280 reports of attempted rape, and 1,560 reports of groping in 2018. (NBC News)
7. Frequent lawsuits have diverted time and money away from Uber’s core businesses.
Uber is plagued by controversies regarding its employment and HR practices, such as whether Uber is required to classify its drivers as employees versus independent contractors. It has gotten so bad that Uber and Lyft have threatened to stop ridesharing services in California due to a judge’s order mandating the companies classify their drivers as employees, increasing the companies’ costs and liability.
Uber has become synonymous with disruption, challenging norms and rewriting rules for an industry that has been around for decades. Although the company has weathered its fair share of challenges since its inception, it’s forward-thinking, resilient approach is proving to be an effective strategy to continue its position as an industry leader.
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