Updated: Apr 2, 2018
Since its foray into Asia in 2013, Uber has struggled to maintain its market share. In 2016, it was forced to sell its China business to rival Didi Chuxing after losing a billion dollars every year. In 2018, as Uber prepares to sell off its Southeast Asia business, an exit from Asia is becoming a reality (from CNBC).
Image from Financial Tribune
L Brooks Entwistle, Uber Asia Pacific's new chief has acknowledged that the firm's reputation has been affected by scandals globally but will be focused on resolving these issues and aggressively grow in Asia. He added that Asia accounts for 20% of rides globally, a key marketing for the firm and there is no exit strategy for the region.
If Uber does not adopt a new strategy for Asia and continues to lose market share to its regional competitors, it will be forced to exit Asia.
When Uber first entered Asia, the U.S. firm adopted an aggressive strategy with little regard for regulations and adopted a one size fits all approach to its solutions. Let’s take a look at how proper market research could have helped Uber avoid its current situation.
1. Market Insights
In 2017, it is estimated that the ride hailing industry in Asia is worth $25 billion (source Reuters). The Asian market is diverse with major regional players dominating the battlefield, Didi Chuxing in China, OLA in India and Grab in Southeast Asia. Although Uber was the first mover in the region and has presence in 85 cities, they had fewer drivers, users and rides.
Comparison Table: Ride Hailing Market Share in Asia, 2017 (from Forbes)
The ride hailing industry has seen a multitude of regulation in Asia. With several countries imposing bans private hire services. As such ride hailing companies need to understand regulations, build government support and trust with its customers in order to succeed. And Uber has learnt this the hard way when it adopted aggressive campaigns and secretive launches that antagonized governments in the region.
A success story has emerged from South Korea despite government regulation. A South Korean ride hailing app gained a foothold in the country even with a government ban on private hire services. Instead of breaking the law, KakaoTaxi, partnered with national taxi organizations to acquire a large base of drivers for their ride hailing app. And this proved to be a success.
2. Understanding Customers
When Uber expanded to Asia, they adopted a one size fits all approach to its ride hailing services and marketing strategy. They used what had worked in the U.S. and replicated it in Asia without understanding the needs of Asian consumers.
In Japan, the taxi industry is worth $15 billion. The country is developed, had the technological infrastructure for a successful ride hailing economy. A major reason Uber struggled in Japan was that it did not understand the Japanese customers. Although taxi fares were the highest in the world, risk averse Japanese customers preferred high quality taxi services compared to private hire services driven by people without proper licenses. And, 85% of Japanese consumers preferred to use cash, Uber’s ride hailing app only accepted credit cards (from Japan Times). As such and even till today, Uber has very little presence in the land of the rising sun.
Unlike Uber, regional players have remained flexible, constantly innovated and launched services that benefit their customers. In China, Didi Chuxing was quick to adapt to traffic congestion in major Chinese cities. The company’s constant innovation gave rise to new services such as Didi Bus, a shuttle bus services in Beijing. The bus service is affordable (6 CNY or 1 USD) and helps ease congestion.
3. Competitor Analysis
Although Uber is a major player in the United States, it has been side-lined in most regions in Asia. How did regional competitors oust Uber from its pedestal?
Comparison Table: Ride Hailing Competitors in Asia, 2017
Regional competitors were more in tune with their customers, they understood their market and played to their strengths. They were flexible and fast to launched unique solutions to meet local transportation needs. In Indonesia, Grab offered motorbike services as a fast and cheap way for locals to get around congested streets.
Competitors focused on innovation and invested heavily in R&D and talent. Grab has expanded their services beyond ride hailing and ride sharing. With 95% of the region preferring to use cash, Grab ventured into mobile payments and developed mobile wallets for customers to use for purchases (not only rides).
With backing from huge investors, these Asian ride-hailing apps were no longer the bootstrap start-ups that Uber competed with several years ago. With billions in funding from investors like Softbank, Tencent and Alibaba, Asia’s ride hailing companies are posed to take on Uber in the regional and internationally.
By not conducting proper market research and overlooking market insights, customer needs and competitors, Uber has struggled for many years, never getting the market penetration it wanted. But, what's next for Uber?
Uber's New Asia Strategy?
Uber’s new strategy in Asia. In recent years, Uber has tried to reinvent itself in Asia. Some examples include, accepting cash payments in Southeast Asia and collaborating with Taxi companies in Korea, Taiwan, Myanmar and Indonesia.
New Marketing Strategy - To ease urban congestion in Asia. And shift from an aggressive to conciliatory approach.
Work with Regulators and Governments. Uber worked with governments when it launched its services in Myanmar and Cambodia.
Partner with Taxi Companies. In Singapore, Uber partnered with the city’s largest taxi operator, Comfortdelgro to double its driver network.
Revamp its corporate culture. It's still a work in progress.
Seek New Opportunities - Expand into areas such as payments and bike-sharing.
Uber is playing catch-up in Asia. The tables have turned and Uber is now copying regional competitors instead of innovating and leap-frogging the competition. Nevertheless, its strategy is a step in the right direction. But is it too little, too late?
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