Everything going on only highlights the fact that none of the many ride-hailing services currently operating in Lagos have figured out how to own the market.
The ride-hailing space here in Nigeria, particularly in Lagos, has been in a unique kind of disarray throughout this week.
Uber drivers in Lagos have been on strike since Monday, May 8. Taxify has not stopped trying to prove that that strike has somehow ensured Uber’s defeat in the ride-hailing ‘war’, drivers on both platforms are acting bonkers all over Lagos and the consumers are going through a dilemma over which ride-hailing company to get behind.
So how did we get here? Well, it all started with a Taxify announcement on May 3, 2017, that it was reducing prices in Lagos, the only city where it operates in Nigeria.
The next day, on May 4, 2017, Uber Nigeria also announced a 40% cut in its fare prices for rides within Lagos. By Monday, May 8, Uber’s announcement had already devolved into a strike with Uber drivers in Lagos staging a peaceful protest against the price reduction.
Since then the drivers have mobilized and tried to get more drivers to join the strike, had a meeting with Taxify (Uber’s chief competitor right now) about dumping Uber entirely and Uber has released a statement to the effect that it’s all “business as usual”, strike or not.
Truth be told, the drivers have a point. Uber charges a 25% commission and when you takes away 40% of earnings, there is very little left, if any, for the drivers.
I’ll break it down: Let’s assume a driver makes N100k per week before the price reduction. N25k from that belongs to Uber, between N30k and N55k goes to the car owner (if the driver doesn’t own the car), and the driver will spend roughly N20k — N30k on fuel and other expenses (dependent on the amount of rides he/she executes) which leaves the driver with next to nothing to show for the work. Nobody would like that.
But at the same time, Uber’s reasoning is based on the law of supply and demand. The company definitely understands that the profit margins for the drivers will be reduced with the cut in fare prices (it can’t say it doesn’t), but it also expects demand to increase (because that is typically what happens — prices go down, demand goes up). This means that drivers will have more rides to complete and the sheer volume of rides would offset the lower profit margin — everyone wins.
The problem with this instance is that Uber failed to communicate this line of thought effectively to the drivers before implementing the fare reductions. A lot of them already used both Taxify and Uber concurrently anyways, so it was obvious that they weren’t getting as many rides as they would need to operate lucratively ergo demand just isn’t enough, yet.
Also, a fare reduction wasn’t entirely necessary — if it was put in place to counter Taxify in the first place. I say this because Uber could’ve just done one of those ‘promos’ it has been doing from time to time and worn out Taxify over a few weeks before going back to the status quo.
The strike is still ongoing because Uber and its drivers have refused to back down from their respective stances. Taxify seems to think this is an opportunity to deprive Uber of more market share and has been playing to the gallery to drive that point home, literally.
First, Taxify apparently ‘leaked’ an App Annie screenshot showing that it was atop Uber in the iOS App Store (in Nigeria) to a fairly popular tech blog. The blog ran the story (which was a bad idea) hailing Taxify as the new king of the ride-hailing apps.
Nigerian Twitter was not having it and Taxify’s Twitter could only resort to some dry-boned attempts at humor and trolling to make it go away. It even got a nod of support from Hotels.ng founder and CEO Mark Essien. Ah, well.
Taxify’s advantage over Uber has been its lower commission rates (it charges the driver just 15%), cheaper fare rates and less complex vetting and onboarding process. That made it attractive to a lot of riders and driver alike.
The problem with that approach is that it automatically made the service seem like a cheap, pirated version of Uber. The quality of cars are poorer, the drivers were incompetent and dangerous because Taxify does very little vetting (you should go on Twitter and see horror stories littered all over the place) and even the user experience wasn’t anything to be excited about. I guess that’s the best you can do when you are only charging 15% (or is it?).
Uber, on the other hand, has better cars, a more robust vetting system, a better app (and user experience) even with the same generally crappy drivers. Also, despite its many problems on the global front (Uber is still not profitable, it is under investigation by the US Department of Justice, about half a dozen execs have left this year alone, amongst other issues), Uber still has more than enough cash, technical expertise and pedigree to assert itself on the Nigerian market. In my opinion, Taxify [and the other ride-hailing services] need to sit down and be humble.
Unfortunately, Lagosians are the ones bearing the brunt of all this drama. People who are very reliant on these services now have to seek alternatives and the few drivers that are even available are being exceptional dickheads by being rude and ripping people off.
This case of an Uber driver beating up a passenger and this one where a Taxify driver calls a rider while shirtless on his bed and several other similar stories tell a tale of inefficiency and endangerment by both Uber and Taxify. Both services need to do better, the regulatory agencies relevant to the space they both play in need to get on their game, and users should protect themselves when using these services (Ladies, buy that pepper spray today).
In the end, everything going on only highlights the fact that none of the many ride-hailing services currently operating in Lagos have figured out how to own the market. A slow business death awaits every single ride-hailing startup/company currently operating in Nigeria if they do not focus on the most important factor to this business: the Customer.