Last Updated: 2nd February, 2023
The global ride-sharing industry has been undergoing transformation, disrupting the traditional business model that was in place for centuries. Earlier, in the 17th century, horse-drawn ride-for-hires were available in London and Paris. Then in 1653, horse-drawn hackney carriages did business and in the late nineteenth century motorized streetcars became popular. Moving forward, in 1891 a taximeter was invented from where the word taxicab was taken. This fare calculating device made the cab drivers adapt their business model as per societal and legislative demands.
In 1897, the world’s first dedicated taxi encompassing a taximeter was built in London. Since then, the taxi industry has come a long way. Moreover, with technological advancements, real-time ride-sharing industry gained ground and companies like Lyft and Uber began to experience phenomenal growth, as they offered services that helped passengers in finding a one-way ride in a short period.
In this blog, we talk about technological innovations, leading players, market trends, and then we’ll move on to understanding the business model of a ride-sharing app. We’ll also take a look at the key features of a ride-sharing app and as an entrepreneur, if you are looking to launch your own app, we discuss in detail the efficacies of custom vs readymade ride-sharing apps and the methods of scaling them to gain better wallet share.
The key factor driving the adoption of ride-sharing globally is the increase in demand for cost and time-saving transportation. Additionally, the high cost of vehicle ownership, increasing need to reduce traffic and CO2 emissions for environmental concerns, and government regulations have been promoting ridesharing. As per stats, the global ride-sharing business has grown by 50% between 2019 to 2021 and is expected to reach USD 61.24 billion by 2026.
|• According to Statista, revenue in ride-hailing and taxi segment in the US is projected to reach USD 78,140 Million in 2022.|
|• Uber and Lyft make up 90% of the ride-sharing market in the US.|
|• Americans between the age of 18-29, use ride-sharing apps more often than any other age group.|
|• In Europe, many cities are adopting low emission zones in line with the Paris agreement as an attempt to reduce carbon emissions.|
|• The projected revenue for 2022 in Europe for ride-hailing and taxi segment is USD 50,891 Million.|
|• The projected revenue for 2022 in Asia for ride-hailing and taxi segment is USD 177,414 Million. Overall, Asia is estimated to have the largest market share in 2022.|
The ride-sharing market is highly fragmented and competitive in nature and the primary reason is the operators’ ability to use independent drivers. Technically these companies do not provide rides to customers, instead, they connect passengers with drivers and charge for the service provided. Hence, ride-sharing services are arranged on very short notice, usually through a mobile app. And, these applications are impressive as with just a click, any individual can turn into a passenger or a driver. Top players dominating the ride-sharing market are:
|Ola Cabs||$110 M||2010|
As the landscape of mobility continues to change, abundant innovation and emerging technologies have provided the ride-sharing industry a front-row seat for expansion. Besides, individuals who wish to stay safe from the threat of COVID-19 eventually viewed ride-sharing as a better alternative to more congested forms of mobility (public transportation) – that made physical distancing difficult. In this section, we talk about the popular trends and the future outlook of ride-sharing.
The Covid-19 outbreak has caused operational disruption in the framework of the ride-sharing industry. There is a paradigm shift in the travel and psychological behavior of customers. So ride-sharing companies need to assess the behavioral change in customers’ emotions and sentiments regarding hygiene, safety, security, and more.
To reduce the risk of catching the infection, ride-sharing companies have deepened their ties with healthcare organizations to provide reliable, comfortable, and sanitized transportation. Features of enhanced ventilation, plexiglass divider to separate passengers are also being added. While wearing masks at all times is mandatory, the frequency of an already robust cleaning schedule has also been increased.
Ride-hailing companies have avidly embraced shared trips. Even passengers are booking taxis as a faster and more convenient way to commute. There is mounting evidence that in densely populated areas passengers are choosing relatively nimble, shared trips. This significantly helps in reducing traffic congestion and offers a city-friendly and sustainable product. Also, many ride-sharing companies like Uber and Lyft are using shared mobility principles that are developed by leading international NGOs for livable cities.
Electrification of vehicles is most likely going to be a trend for ride-sharing fleets in the coming time. As electric vehicles are becoming increasingly popular, companies like Uber have started to explore the EV segment. Furthermore, electrification of ride-sharing will help reduce pollution, decrease vehicle maintenance costs, and, above all, lessen dependency on fossil fuels.
We are also likely to witness an increase in self-driving cars as ride-sharing services will soon operate autonomously (entirely); especially considering the number of self-driving cars currently in development. Joining the fleet of Waymo, Uber and Lyft are also said to operate without drivers in the future. This will not only decrease the costs for companies but will also help drivers earn more revenue per hour.
As per reports, in 2022, approximately 54 million new connected vehicles will be on road. This means that these cars have internet services, are connected to each other, and will soon be able to communicate with the infrastructure like traffic lights, stop signs, and more, leading to increased safety on the road.
Ride-sharing industry is rapidly expanding and gaining traction in the market. However, the adoption figures continue to vary by age, income level, and educational attainment. For example:
|• Millennials, i.e. the people born between 1980-2000 have used a ride-hailing service, compared with 24% of those who were 50 or older. Likewise, people born in mid-1990s to mid-2000s (generation Z) are tech-savvy and have smartphones with the internet. As a result, they have better access to app-based ridesharing mobility services. So the younger generation understands the benefits of ride-sharing. Hence, they are expected to continue availing these services even when they grow old.|
|• Similarly, on closer inspection, it was also observed that 70% of people who live in cities and have a yearly salary of $75,000 or more were more likely to choose ride-sharing services over potentially slower or congested modes of transportation. Furthermore, in the USA, individuals who are more educated use ride-sharing services.|
|• As per stats, 55% of post-university graduates use Uber or Lyft as compared to those with lesser qualifications. Moreover, substantial urban-rural differences have also been observed. This is because many of the individuals with higher education live in urban areas where access to this type of ride-sharing service is available.|
The convenience offered by taxi booking apps has made users more comfortable while providing businesses with a vantage point to deliver more value to customers by staying sustainable. Here, we share the benefits of ride-sharing apps.
Brand awareness is the most pivotal ingredient towards the success of a ride-sharing business. Companies like Uber, Lyft, and Ola have already established a strong reputation and goodwill for themselves in the market today, and thus, have become brands. Emphasizing credibility, unmatched customer services, and trust via ride-sharing apps can also help in increasing brand awareness. This helps in staying afloat in an era of cut-throat competition. Further, customizing a ride-sharing app with features that riders might like can also make the application more attractive.
Providing customers with quality services requires you to know them – their preferences and needs. When riders download ride-sharing apps, they log in using their email address or mobile numbers. Therefore, these apps help in gathering valuable data like contact information, location, and more. Additionally, when a ride is booked, other aspects like the choice of a cab, how often it is booked, time and distance traveled, and more can be monitored. All of these details help in sending personalized notifications to riders with lucrative offers like discounts, coupons, and so on, which can help in building a loyal customer base.
Rider feedback and review greatly influence the identity of a ride-sharing app. Ratings and reviews by users help in identifying the areas of improvement and the ones doing well. Subsequently, ride-sharing services are improved further, and as a result, a competitive advantage is gained.
In the age of digitalization where most people have smartphones, booking a cab via ride-sharing apps is both easy and convenient. Apps like Uber, Lyft, Grab, have already outclassed the traditional taxi services as they not only provide riders the comfort of transportation at their fingertips but also help businesses to get higher visibility, thereby, increasing the user base.
Real-time tracking is one of the biggest perks of ride-sharing services. By tracking the location in real-time the driver, as well as the passenger, can determine the exact location of each other. In other words, the passenger knows in how many minutes the cab will arrive and the driver is aware of the customer’s pickup and drop-off location. This also results in benefitting the business with reduced operating costs, improved customer satisfaction, and increased efficiency.
Ride-sharing apps can help in monitoring the efficiency and productivity of a cab’s driver. Sometimes a driver’s behavior can affect fuel expenditure, vehicle utilization, and customer satisfaction. For example, the driver did not go to pick up the passenger, the ride was canceled, or a longer route was followed, then the needed action can be taken by monitoring the driver.
However, in cases where the driver was rude or unprofessional, then it would largely depend on the customer’s feedback. That said, close monitoring of drivers (which is absent in the conventional type of taxi booking) can greatly help improve the efficiency and success of the ride-sharing business.
The traditional way of taxi booking has been an arduous task. But with the emergence of ride-sharing apps, the cab booking industry went into autopilot mode. Now, customers seamlessly book the cab through a ride-sharing app, get driver and payment details in advance, and upon trip completion make a hassle-free payment. This helps in improving the ROI and leads to the growth of the ride-sharing business.
Bypassing the traditional methods of taxi booking, ride-sharing applications have been gaining popularity. The underlying reason is – digital “ride-sharing” platforms are improving efficiency and providing better transportation facilities while matching supply with demand in a cost-effective way.
Ride-sharing applications have also brought the concept of aggregator business model to fore. Its uniqueness involves building partnerships with individuals who work under the brand of the ride-sharing company instead of building or developing an offering on their own. Being tech-driven, peer to peer, ride-sharing companies also have conventional corporate governance.
In effect, companies like Uber, Lyft have a business model that uses a special algorithm to put ride-seekers in touch with ride-providers. The fares are adjusted as per market conditions. Furthermore, features like trip-tracking and driver rating enhance the transparency offered making it a win-win situation for customers, drivers, and the ride-sharing company itself.
The ride-sharing business model also facilitates vehicle owners to become public service providers, as it gives them the flexibility to drive their own vehicles in areas they choose to work. Features like trip-tracking and driver rating enhance the transparency offered. It also functions without overburdening the service providers with exorbitant registration fees, tariffs, and licensing.
A ride-sharing app has three panels – passenger, driver, and admin. Listed below are the features for every segment.
|Features for Passengers||Features for Drivers||Features for Admin||Other Features|
|User-friendly sign up portal||Driver-friendly registration||Heat Maps Analysis ( where the demand for rides is more)||Support for various locations|
|Integration of real-time tracking (to track driver’s movements)||Accept or reject a ride request||Driver and fleet management||Rating system based on user feedback|
|Electronic payment gateway||Built-in navigation for optimized directions||Real-time analytics and reports||Internet messages (SOS in case of emergencies)|
|Pop-up notifications to keep users updated||Integrated system for receiving payments||Rental package management (basic, luxurious, moto, and more)||Ability to schedule rides in advance|
|Hassle-free facility to cancel a ride||Every rider’s trip information||Promo-code management||Regional price monitoring|
The success of ride-sharing businesses like Uber, Lyft, and Grab has made numerous entrepreneurs interested in the ride-sharing business. In a bid to meet these requirements, ride-sharing app development companies are offering two types of solutions. These are:
Custom apps allow the building of a ride-sharing app as per tailored requirements of a business or an entrepreneur and at a suitable pace. These apps are built from scratch providing the flexibility of:
Pre-built software can aid in bringing the best results for your ride-sharing business without taxing your patience. You do not need to do anything – just buy, install and start using your app. A few factors contributing to the success of readymade ridesharing apps are:
It is known that startups gain a lot of attention, however, with evolving customer needs and demands, it is important for ride-sharing businesses to scale up. While the focus should always be to enhance the passenger’s ride-sharing experience, expansion through adjacencies, cross-industry collaboration, and in-app mobile marketing can efficiently scale the ride-sharing businesses to gain a competitive edge.
To remain sustainable and profitable, ridesharing companies should chart a course to expand into adjacent markets. For example, Uber leveraged the in-market (core market) with existing customers by delivering food through UberEats. The company has also incorporated a pickup and go feature into its app, that allows passengers to order and pick groceries or meals while en route to the destination.
The global market is made up of several independent industries, each having its own supply and demand. However, this method is outdated in many ways as new collaborations are straddling the boundaries. As Uber and Lyft have been the premier in the space of ride-sharing industry, they already have a huge user base that makes them attractive to bigger brands who are looking for partnerships as a part of their marketing strategy.
In the past, Uber has partnered with Hilton, Spotify, Pepsi, BMW, and so on. The passengers of Uber were also treated to free trips in BMW 7 series to promote the new car before it arrived in the U.S. showrooms.
With numerous ride-sharing apps getting introduced to the stores every other day, promotions and referrals offer a new vantage point that empowers businesses to outmaneuver their competitors. Hence, most ride-sharing apps use referral marketing and promotions to deliver more value and boost app downloads.
Ride-sharing is quickly gaining momentum by harnessing the power of digitalization. Entrepreneurs, startups, or companies can benefit greatly from the changing ride-sharing dynamics. Further, innovation will drive the future of mobility. So if you are looking to start or scale a ride-sharing business, get in touch with us. We at FATbit Technologies comprise a multidisciplinary team, that blends their deep domain expertise with emerging trends, to deliver innovative ride-sharing applications.
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