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Uber for X - A Sure-fire Way to Business Success?

 

Uber for X

 

‘Uber for X’ companies are the latest talk of the town. Are their high valuations justifiable compared to Uber and its clones in Asia? How scalable is their business model? And, last but not least, what is their survival rate?

 

While there are no simple answers to these questions, the signs are deifinitely there for anyone who cares to look closely.

 

SIGN 1: RECURRING TRANSACTIONS?


To decide whether an ‘Uber for X’ company can survive, examine if the service is a recurring need or a one-off want. This will hint at their capability to generate recurring transactions. For example, all of us need to eat, and hence, the on-demand food delivery service becomes essential during certain times of the day. Comparatively, dry cleaning of suits in laundry is not really a high recurring need.

 

SIGN 2: TRANSACTION VOLUME?

 

The ability to control cost per transaction based on demand is pivotal to profits maximisation. And high volume and high demand allude to ‘Uber for X’ companies’ potential to scale. It is therefore a misconception that a niche service with a high customer lifetime value can be successful. Truth is, without the volume, the companies lose the ability to scale.

 

SIGN 3: SCALING UP CAPABILITY?


Typically, ‘Uber for X’ companies conflate the consumer to consumer market with the business to business market. And they, including Uber, are unable to scale to the enterprise market. Reason being, to meet required enterprise level service levels neccessitate these companies to own their own supply – totally decimating their asset light advantage against traditional companies.

 

It is challenging to scale up a two-sided marketplace till such time a critical mass is achieved. However, if successfully executed, the ‘Uber for X’ company can stem off potential clones and competitors. That is why there can only be one Uber in the U.S. That said, ‘Uber for X’ companies can take advantage of geographical localisation, which explains why Uber is challenged by Kuaidi-Didi, Olacabs and Grab.

 


 

 

‘UBER FOR X’ VS TRADITIONAL LOGISTICS

 

Many predict ‘Uber for X’ companies can replace FedEx, UPS and DHL without realising that they offer a very different service promise. While the logistics companies offer same day, next day or optimised delivery across borders or within cities, the start-up companies (whether on demand or not) tend to either go after same day or next day delivery – rarely both. This is because they are market efficient but not cost optimised. The order sizes they fill cannot compare to what logistics companies are doing from fulfilment centres with an optimised fleet.

 

Logistics companies have accumulated data about demand and supply; and they leverage on major contracts to keep costs low. Hence, it makes sense for them to have optimised fleets and not depend on supply and demand. For ‘Uber for X’ companies to compete in the same space, they will perhaps have to build their own fleet of self-driving cars? On the other hand, logistics companies can easily convert their same day delivery services to Uber-like services.

 

But, there is value to Uber and its clones. They are solving the real need for same day deliveries – not an area logistics companies are interested in. Simply ask any logistics company, “Will you deliver the goods from point A to B at the lowest cost, and as and when the customer wants it?”

 

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