Wednesday, 25 December 2013

Uber rational, but not uber here

Uber is a recent startup from San Francisco has built a platform designed to match smart-phone users with "sedans" which are a notch more upmarket than taxis. Its obviously pitched at customers with a bit of coin, but is also working on the supply side of its platform to finance cars for its drivers.

Like all transport services, Uber needs to be scaled for peak demand. You can either do that by having huge capacity sitting around waiting for the peaks (think gas pipelines & power transmission), or by calling it as required which can work with taxis. Uber uses spot-market pricing to help this process along - prices increase when there are more customers than cars, bringing more drivers onto the road and rationing demand. All very sensible, but it annoys the hell out of their customers, despite those customers presumably being reasonably well-educated.

It will be fascinating to see whether this pricing model changes, or whether the customers end up getting trained to understand the market. One obvious change would be to give customers the option of booking ahead of time, before the price spikes.

Meantime, I note that while Uber is available in 25 countries including Australia, NZ is not one of them. Put this alongside the fact that there are regulatory barriers to entry in many US taxi markets plus Australia, and it makes me wonder whether deregulated taxi markets like ours might not have the kind of gap Uber is filling. Or maybe our markets are just too small to be bothered with at this stage.

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