Section 4

Uber and the Sharing Economy

A peer-to-peer business model is used for modern transportation businesses, such as Uber, within the sharing economy (Friedman, 2013). It fits within the collaborative consumption model, "used in online marketplaces such as eBay", (Schor, 2014) which involves consumers "obtaining" and "providing" goods or services (Ertz, Durif & Arcand, 2016). This is referred to as "commercial exchanges", which has coined the term prosumption (Botsman & Rogers, 2011). The Harvard Business Review argued that the term sharing economy is misleading, and stated that the term should be "access economy" due to the fact that the "company is an intermediary" and the transaction occurs to "access someone else's goods or services" (Rosenberg, 2013).

In response to the sharing economy and its primary definition of utilising an underused asset as a resource to benefit others, with AIRBNB, homes and underused rooms can be turned into an income, and ridesharing can provide use to a depreciating car or provide important employment to those not working along with concepts such as airtasker and taskrabbit (Wallsten, 2015 & Jericho, 2016) and  “a reduction in carbon dioxide emissions” (Cannon & Summers, 2014). But what separates these new services that are part of the sharing economy from the traditional hotels and taxi services, is the use of technology (Wallsten, 2015). Leveraging smartphones, enhanced payment technologies, online maps with inbuilt traffic navigators, online feedback and reviews, all contributes towards the experience of making their service more efficient, simple and easy (Singer & Isaac, 2015). This is therefore one of the single reasons for the exponential growth of peer-to-peer platform companies (Zervas, Proserpio & Byers, 2016).

Taxi’s are not globally or rurally available and are heavily regulated, the use of the smartphone app for Uber enabled car owners and potential drivers which are globally and rurally available (Cusumano, 2015). The use of platforms is cost effective and easy to use for all, utilising technology almost everyone already has may provide a local service but on a global scale, because of the simplicity and global reach of the technology (Demary, 2015).

Facing Competition

The rise of the sharing economy has created new found competition in various industries, such as hotels, with the likes of AIRBNB, and taxi transportation, with the likes of Uber, Lyft, and Sidecar.

The success of Uber is believed to be due to the lack of service received from original taxis, as well as the high number of complaints existing towards taxis within the New York and Chicago areas of the United States. The competition has seen a reaction from users, who are insisting taxis improve their services for issues such as; "broken credit card machines, air conditioning and heating, rudeness, and talking on cell phones" (Wallsten, 2015). This will change the experience for those who do not ride share, and potentially the behavior of ride sharers.

Traditional transportation companies have the option to react to the shifts in technology by adapting themselves to these changes. A taxi company in Boston has introduced a taxi ordering mobile application, where payments can be made via credit card. By working with local governments, there may be benefits for taxi companies in also implementing such an application (Cusumano, 2015). If these traditional transportation companies do not conform, they will lose their position within the market. Modern transportation companies such as Uber are already diversifying themselves further by expanding into different industries within the sharing economy. An example of this lateral shift is their recent concept of UberEats, competing in the food delivery services industry with the likes of menulog and foodora.

Since Uber entered the market for ridesharing there have been others follow, however none have had the same success. Uber's biggest competitor is currently Lyft. Lyft is mainly based in the United States of America and currently internationally in Indonesia, Singapore, Philippines, Malaysia, Thailand and Vietnam. This does not reflect the same global reach that Uber currently represents. Similarly, Lyft offers different types of rides including premium options and the popular carpooling service, which compares to Uber’s uberPOOL (Quirk, 2016). In an attempt to gain a competitive advantage, Lyft introduced the popular map software functionality Waze, which increases driver efficiency and provides faster routes (Quirk, 2016). However, Uber trumped this feature by integrating music subscriber Pandora as well as Spotify into their app with 6 months ad-free, cost free, subscription (Kieler, 2016).

Uber still remain the first and largest ridesharing company with global reach. In October 2014, Uber held the market share for its industry "valued at $18.2 billion relative to Hertz at $12.5 billion and Avis at $5.2 billion" (Cannon & Summers, 2014). Their efforts to continuously grow their business to new countries such as China and other parts of Asia is ongoing, with local dependencies on the latest technology such as affordability for the latest smartphones and infrastructure for the internet. Adapting to the challenges of global expansion and local markets “Uber has had to make changes to accommodate different languages, currencies, and distance measures” and in some countries such as Germany, Credit cards are not yet preferred over cash like they are in countries such as the US and Australia, so Uber partnered with PayPal in 2013 to offer an alternative payment method (Hyder, 2016).

Obstacles in the marketplace (Regulations)

Competition of the Sharing economy with the use of online platforms with traditional companies sees a challenge with this competition being the “application of the existing regulation” (Demary, 2015). Often sharing economy companies feel exempt from regulations due to their new online business models and it has been seen in many cases that the internet age still lacks regulation and governance. The heavily regulated industry of taxi’s has seen regulation crackdowns slow down the growth of the fast rising rideshare companies, this as a result has reduced the impact to the taxi cars (Wallsten, 2015).

Regulation is not believed to apply to peer-to-peer business models simply because the "supplier is an individual, not a company" (Demary, 2015). There has already been decisions and reactions to this in some markets and due to the various business models, each market needs to be assessed separately. For example, in May 2015 the Australian Government announced that Uber had to begin paying Goods and Services Tax (GST), “the ATO used the term "collaborative consumption activities" to describe digital players like Uber, Airbnb...and any business offering to provide goods and services to a consumer”, Uber reacted to the regulation change by commenting on the inconsistent approach to businesses in the sharing economy (Ryan & McNeill, 2015).

Being proactive about approaching regulators with a sharing economy business model to try and work together instead of simply appearing and posing a threat due to the unknown nature of the business, can be seen as the company trying to make a profit. This could mean bucketing of the business with traditional companies and charged taxes, whereas in most cases the business models of sharing economies align with those of the regulators (Cannon & Summers, 2014), “as a response to regulatory pressure, Uber announced they provide flexibility and a higher income for the industry when compared the taxi drivers” (Wallsten, 2015). In early 2015, Uber’s newly appointed Senior Vice President David Plouffe offered to partner with the government and share their transportation data with city planners. This was an effort to reduce congestion in exchange of regulatory hits, as the company had been paying fines that the drivers were receiving of up to $1,700, in addition to the pledge to create 20,000 jobs in Australia in 2015 (Lewis, 2015). Cannon and Summers agree that data sharing could be influencing to the government from regulations on the sharing economy to use for statistical information on road accidents, reduced pollution and congestion on roads (2014).