All hail: How taxi companies stay competitive in an evolving marketplace. As ride-hailing services grow in consumer popularity, savvy cab companies are using technology and improved sustainability to compete for business.
Every innovation brings the potential to revolutionize an industry or create a new one, but also the potential for negative consequences, intended or unintended. For example, the booming ride-hailing industry — namely driven by Uber and Lyft — has significantly cut into market share and profitability for taxi businesses. Consumers’ considerable shift from taxis to ride-hailing in such a short period of time has led to desperation for some taxi drivers and owners, even to the extent of an increase in taxi employee suicides in New York.
But some cab businesses eschew the melancholy mindset and instead turn to modernization to better compete with ride-hailing services. Yellow Cab of Columbus (Ohio) is one business taking that approach.
Some taxi businesses have allowed customers to hail a cab with apps for years. But ride-hailing services upped the game on what transportation apps could do. They allowed users to pay directly through the app, but perhaps the greatest distinguishing factor they introduced is showing a flat fare in advance, contrary to the metered trips in taxis.
That model gave consumers what they increasingly crave across all goods and services purchases: more convenience and transparency in addition to lower costs. It created a difficult environment for taxi businesses to adapt. Cabs are regulated by the municipalities in which they operate, whereas ride-hailing services traditionally haven’t had the same restrictions, said John Boit, executive vice president for the Taxicab, Limousine & Paratransit Association (TLPA), which represents taxi fleet owners.
Taxi drivers had to charge the rates that were set by that city. They had no choice. The cities are “essentially setting a minimum fare. As soon as you close that door it’s $2.50 for the ride to begin and then we charge ‘X’ number of dollars per mile.” Cab businesses couldn’t even offer coupons to customers without prior consent from the municipality.
It is an inevitable consequence of the different forms of protection given to traditional cabs in cities (such as limiting numbers or fixing fares) that the quality of service goes down. Those who have gained entry to the market provide the minimum quality of service to stay within the market as there is no incentive to do any more. This is why traditional taxi drivers and companies have most bitterly objected to the start of Uber and Lyft – because they alter the terms of competition. It’s also the reason why London’s black cab drivers bitterly fought the licensing of minicabs. We now have, in London, black cabs that offer an expensive service with few, if any attractions over Uber. For black cabs to survive in any way more than route masters have survived as a tourist feature, the black cab sector has to up its offer and provide a far higher quality of service to justify higher fares. Attempts to stop this by ways of, for example, limiting Uber or minicabs, will just delay the outcome. A more healthy taxi market will be much better for Londoners.