Uber are a digital success story in China but are now facing an increasing number of obstacles.
The American taxi app service ‘Uber’ are proving to be very successful in China despite some controversy surrounding their business practices. The question is whether they can keep growing and developing despite these obstacles and the increasing competition they face.
Uber estimates that in China there a million rides taken using their app per day.
The Washington Post reported that CEO ‘Travis Kalanick’ declared, “China now represents the largest region outside the U.S. and, at the current growth trajectory, will most likely surpass the U.S. before year-end.” According to data in that same email the Chinese city of ‘Chengdu’ alone was 479 times as large as New York in terms of Uber trips after nine months of activity.
Chinese urban consumers are increasingly using mobile phones to meet a variety of needs, the concept of using an app to locate a car or taxi with better service is a simple transition. In large urban cities people are prepared to pay a premium for a higher quality of taxi service. A moment of peace is a luxury in hectic, modern China and Uber can provide this quieter, more luxurious service.
The digital app is a growing phenomenon in China, consumers are attracted by the ease and efficiency of use
Customers can select what type of vehicle they would like and specify an exact pick up location using the app ‘on the go’, it is more convenient, faster and tailored to the customers needs. Personalizing the taxi experience is an interesting development. This reflects the increasingly fast paced lifestyle people are living with Uber setting the precedent and keeping up with this demand. In addition current taxi services and modes of public transport in China are often overstretched and congested. This unmet need for a higher quality and more convenient driver service is the key to their success.
Uber seemed to have achieved the impossible. They are one of the few technology based, western firms to have succeeded in China with a business model based on customer data collection. Customers sign up for and use the app paying via credit card. In contrast traditional data giants such as; Facebook, Google, Twitter and Amazon have all been shut out of China.
Uber are facing a number of challenges in China
Uber’s ride in China has not however been a smooth one, the company are facing a number of difficulties. Uber’s office in the southern Chinese city of Guangzhou was raided by local authorities who have accused the company of operating without a license. There have also been many strikes and protests from traditional taxi drivers who feel threatened by the success of Uber cars.
There is also increasing competiton from homegrown, domestic firms backed by huge Chinese internet giants Alibaba and Tencent. This represents significant competition in the fight for taxi app supremacy in China. Alibaba backed ‘Kuaidi Dache’ and Tencent backed ‘Didi Dache’ have merged to become Uber’s most significant threat ‘Didi Kuaidi’. These Chinese firms will benefit from accessing the established consumer base of these exisiting digital platforms whilst Uber has been blocked from the largest social network in China, Tencent’s “WeChat”.
Uber are responding effectively to these threats
Despite these obstacles Uber is still thriving, this demonstrates their tenacity and intelligent approach to the Chinese market. Uber currently operates in ten Chinese cities, and has plans to dramatically increase its staffing levels. It has partnered with the other internet giant in China, ‘Baidu’. This partnership has given it access to the leading Chinese search engine’s mapping and mobile technology as well as it’s extensive customer database. Uber will need this specialized, Chinese connection to compete with ‘Didi Kuaidi’.
Uber have arguably managed their reputation and the controversy well in China. They are aware and respectful of the most powerful player here, the Chinese State. When taxi drivers were protesting Uber cancelled contracts in those area’s. The company used GPS data to track drivers locations near protests and redirect them so as not to further antagonize the situation. This could be interpreted as a signal to the government that this data could be used for the “social order maintaining” objectives of the state. Companies have to collaborate with the government here to succeed.
The future is uncertain but Uber have certainly made a significant impact on the Chinese market, increasing domestic competition and controversy around their business practices has not stopped them yet. Other western firms would be wise to learn from Ubers success thus far.
Key lessons to be learnt:
– In the digital market there is a wealth of opportunity with an increasing number of Chinese using smart phones and apps.
– The variety and number of digital platforms is increasing. This presents more opportunity to connect and engage with consumers in a multiple number of ways.
– Uber partnering with Baidu is key, having a strong presence on this leading Chinese search engine and being able to utilize their links, data base and connections is important.
– Managing your reputation is vital, Uber took steps to limit the damage caused to the brand by the controversy in China. Managing your reputation in the press and online is required for success in China.
– Uber should take steps to manage their e-reputation. Negative comments and views can spread very quickly, particularly in China as the Chinese consumer places great emphasis on opinions and reviews in forums.
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