Ride hailing was riding high on a wave globally until COVID-19 struck. Ride-hailing operators have had to diversify their services to include delivery options to stay afloat and will now have to differentiate based on safety precautions as personal mobility makes a slow return.
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A Falling Tide Sinks All Ships
Given all the noise and investment in the areas of connectivity and automation, there can be little doubt that the biggest transformation of personal mobility in the past decade has been the ride-hailing revolution. Advancements in Artificial Intelligence (AI) to deliver optimized and low-cost routing, combined with leveraging the ubiquitous smartphone as the primary User Interface (UI) for both drivers and riders, have made ride hailing a major personal transit mode across the entire world. Therefore, as the COVID-19 pandemic and the resultant measures taken by governments to contain the spread of the virus had the effect of collapsing the demand for personal transit, demand for ride hailing has similarly contracted during 2020, just like it has for all of the mobility modes open to consumers, such as public transit or the use of private vehicles. Data published in ABI Research’s Vehicle and Mobility Market Data (MD-MOBI-105) showed a global contraction of 59.1% in 1H 2020.
Two questions are hanging over the future of the ride-hailing market:
1) How can ride-hailing operators navigate the current crisis, repurposing their platforms to enable additional applications to offset the collapsing demand for ride-hailing trips?
2) How can the ride-hailing market maintain and continue to grow its share of the overall mix of personal mobility modes available to consumers as the demand for personal mobility begins to increase again, particularly considering consumer and regulator concerns over shared and confined spaces?
Weathering the Storm
As the demand to take consumers from point A to point B has contracted, ride-hailing platforms have pivoted to mobility services that bring items to customers. Many ride-hailing vendors had already begun diversifying from the core ride-hailing use cases, adding food delivery services over the last 2 to 3 years. Those platforms that had already made investments in food delivery services have been able to expand into other related delivery services, such as goods and grocery delivery. For example, Grab, a ride-hailing platform operating in multiple countries in Southeast Asia, was able to expand its GrabMart grocery delivery service from two countries to eight countries in 3 months, transferring 150,000 of its ride-hailing drivers into the GrabMart delivery service within the first month.
These delivery-related applications (for food, goods, and groceries) have helped generate some much-needed revenue to offset the decrease in the number of ride-hailing trips, with some ride-hailing companies finding that these services now account for almost half of their revenue in 2020 Year-to-Date (YTD). Perhaps more importantly, the rapid transitioning of drivers from ride hailing to delivery has enabled ride-hailing operators to maintain driver engagement with the platform, helping the ride-hailing operators retain experienced drivers, which is a key differentiator in a market otherwise plagued by homogeneity.
Plotting a Course Ahead
In the longer term, ride-hailing companies must consider how they can maintain their share of the overall mobility mix, accommodating consumer and government concerns over confined shared spaces, with the ultimate question being whether or not ride-hailing vendors can achieve their historical levels of trips under the current market conditions. Like many other businesses operating in public spaces, ride-hailing operators have adopted a host of measures in the “physical” domain to secure their ride-hailing service, including distributing hand sanitizer, mandating masks, and installing protective screens, including, in some cases, a wearable screen that two-wheel drivers can wear on their back to protect their riders.
However, the core strength of ride hailing lies in the “digital levers” uniquely available to them, certainly in comparison to the consumer’s alternatives. While government-led track-and-trace efforts strain to log contact between public transit users, ride-hailing platforms are inherently able to provide robust contact tracing, with the ubiquitous smartphone providing a Human-Machine Interface (HMI). Similarly, some ride-hailing operators have also been able to reinforce the “physical” measures they are taking with the digital tools at their disposal, such as requiring riders to send a selfie to prove they have a mask before the driver accepts their trip, or calibrating the biometric unlock function on the driver’s app to unlock only if the rider is wearing a mask. The biggest storm on the horizon remains the limit of one rider to a vehicle, limiting the development of carpooling efforts, an essential component in the future success of smart mobility. Single-occupant ride-hailing vehicles are a major issue for city and municipal governments concerned that such services might cannibalize high-occupancy transit modes, adding to congestion woes.
Therefore, while the core ride-hailing use case may remain in limbo, ride-hailing operators are well placed to cater to the increasing demand for mobility, while concerns over shared spaces remain, requiring them to further diversify their range of services. The longer the COVID-19 crisis continues, the more important safety will be as a differentiator between competing ride-hailing platforms. In the longer term, investments in delivery services that are keeping the market afloat will prove to be long-term differentiators for those ride-hailing platforms left standing.