SINGAPORE — About 18 months ago, algorithmic trader-turned-serial entrepreneur Lin Shijing, 35, was studying the operations of car-hailing app companies Uber and Grab. There has to be a smarter way to use the pool of drivers, he thought.
His friend from junior college, Mr Arthur Chua, 34, had earlier toyed with the idea of developing an algorithm to pick up and drop off food in a more efficient way than what existing solutions offered. The pair put their heads together and came up with a business model that they believe can give Uber and Grab a run for their money.
“They are definitely faster in getting commuters from point A to point B, but we are more efficient in moving more people with the same amount of resources. We can take more passengers, with more rides per hour — about six or seven,” Mr Lin said.
Less than four years after Uber and Grab had burst onto the scene and become the poster boys of the disruption economy, these disruptors are having their business disrupted and things are already getting ugly: Brazil-based Easy Taxi, which was among the first batch of entrants, packed its bags last year and left the Singapore market.
Now, new boys such as Swat — co-founded by Mr Lin and Mr Chua — are out to get a slice of the pie, by setting themselves up against the incumbents. In September, TODAY reported on Swat’s entry into the market. The company charges a flat fare of S$5 no matter the distance of the rides and uses 13-seater vans to ferry people around. It promises commuters that travelling time will be no more than 10 minutes longer than a conventional taxi ride. Its technology optimises both vehicle routes and passenger pick-ups to generate the “most efficient route” for all, and allows new passengers to join a ride without delaying the travel times of commuters already onboard, said Mr Lin.
Apart from the ride-hailing industry, a similar phenomenon is being played out in other sectors, including logistics and food delivery: A brutal face-off where only the fittest survives, and where the hunter quickly becomes the hunted. Welcome to the Disruption Economy 2.0.
FIGHTING FOR A SLICE OF THE PIE
Former private-bus driver Imm Streamways, 42, has signed up with Swat, which has put up a recruitment video claiming that its perks for drivers are better than Uber’s. Mr Streamways said he prefers driving for Swat to driving for Uber or Grab as the route is simpler. “I don’t have to go through blocks to find the passenger, as the pick-up points are standard — at bus stops and such,” he said. “The route is not complicated — no need to detour or go up and down all over the place as it is planned out for the driver.”
Real estate agent and Uber driver Rennu Mahajan, 55, prefers to stick with the more-established players, as they are able to offer better perks, especially amid fierce competition. “Every time Uber comes up with some incentive, Grab will follow, and vice versa. So I switch between the two, depending on who offers better benefits,” said Ms Mahajan.
She has enjoyed petrol discounts of between 18 and 30 per cent under tie-ups that Uber has with petrol stations. Grab has also offered health screenings for its drivers at cheaper rates or even free, through its partnerships with hospitals, she said.
Uber and Grab did not reply to TODAY’s queries.
Be it the ride-hailing, logistics or food-delivery industries, the intense competition — and the constant innovation that has come about as a result — has benefited large swathes of the population, including those seeking to earn a living, corporate clients and consumers.
Less than three weeks ago, a team of five — comprising four fresh graduates and one undergraduate — launched Heartland Chefs, which enlists housewives, or any resident for that matter, to whip up home-cooked food for sale. Inspired by the notion that many people want to eat home-cooked food but do not have time to prepare it, the team aims to shake things up in the food delivery business, where companies such as Foodpanda and Deliveroo have established a foothold.
Mr Siddiq Poh, 25, a co-founder, said: “Deliveroo or Foodpanda can’t provide home-cooked food. This service is also more convenient as neighbours can meet each other nearby to collect the food. It can even lead to a sense of community as people get to know each other through this service.”
Individuals can list their dishes on the Heartland Chefs app, which residents living nearby can place orders for, and subsequently collect at an agreed time and location within the neighbourhood.
A Deliveroo spokesman played down the competition. “We love seeing new services come into the market — it further proves that Singaporeans love food delivery! The competition also keeps us all on our toes and encourages us to innovate further,” said the spokesman, stressing that the key to retaining consumer loyalty is to provide “consistently great service” to its eatery partners, delivery staff and customers.
Similarly, Foodpanda said it is “constantly optimising both our systems and technology to provide the best customer experience”. Describing the company as an “industry pioneer”, a Foodpanda spokesman pointed out that many restaurants that have come on board as its partners have seen a 20 to 30 per cent increase in revenue. “We will continue to invest in next-generation technology such as drones to ensure that our service can be even more convenient,” he said.
In the area of logistics, disruptors are also fighting tooth and nail for market share, constantly seeking to outdo one another.
Some of the main players to enter the market in the past two years include home-grown start-up Ninja Van, Hong Kong-based GoGoVan and CarPal, which was founded by Dutchman Maarten Hemmes. Each of these companies believes it holds an edge over the others.
Mr Hemmes said: “We can deliver immediately, whereas for Ninja Van, they only do a next-day delivery. This is good for businesses that need to deliver within an hour, such as cakes and flowers — anything that needs to go from point A to point B fast.”
He added that his company goes one step further by offering a personal concierge service, with its drivers running errands for customers. So far, these errands have included queuing up for food or collecting items, he said.
GoGoVan country manager Patrick Wong said his company was not only “asset light”, but also boasts a “good driver network of 11,000 vehicles”.
“Businesses and even traditional logistics companies rely on GoGoVan’s on-demand network of vehicles during periods of surges like the upcoming holiday season. In this uncertain economic climate, we are anticipating that businesses will cut back on their fixed costs of owning vehicles and hiring drivers who are usually not fully utilised during the day,” he said.
The number of drivers on GoGoVan’s books has more than doubled from a year ago. It currently has 300 corporate clients, the company said.
As for CarPal, Mr Hemmes said it has more than 10,000 drivers and 6,000 customers — a 50 per cent jump from a year earlier.
Amid keen competition, the companies are pulling out all the stops to attract drivers. For instance, GoGoVan provides drivers with movers to help with bulky and heavy items — and this drew Mr Lam Chun Chee, 60, to work for GoGoVan over Ninja Van.
“I’m old already and can’t carry heavy things. So it’s good that GoGoVan will provide a mover,” said Mr Lam, who was previously a FedEx deliveryman but had to quit because his old job required heavy lifting.
Unlike Ninja Van, which hires drivers as its employees, those who drive for GoGoVan can do so whenever they wish. Mr Lam said: “I also like the flexibility as I can accept jobs only when I’m free, and this way, I can also do my own things. It’s convenient for me to earn extra money.”
On the growing competition, Mr Lai Chang Wen, chief executive officer of Ninja Van, said its systems are built to cater specifically to the demands of e-commerce players. It has features such as “strong parcel traceability”, as well as flexible pick-up and delivery options. For instance, the company offers collection points at traditional retail shops via tie-ups with it.
It has also set up “Ninja boxes”, or collection points where consumers can pick up their packages. Mr Lai added that Ninja Van was prepared to adopt any new disruptive technology such as drones and self-driving trucks.
‘TO SURVIVE, DEEP POCKETS MATTER’
The intense competition in the ride-hailing app industry, for example, has led to a market norm where companies operate on “very thin margins”, said transport economist Walter Theseira, a senior lecturer at SIM University. “A niche market provider may not be able to survive on the same margins because they have fixed costs to cover and typically higher costs of capital,” he said. “Investors will give money to Uber at a lower price than to a new start-up because Uber already has a market share and is less risky than a completely untested new idea.”
Mr Manjunath Bhat, research director of mobile and client computing at Gartner Singapore, reiterated that, in the disruption economy, companies will have to “create new markets instead of competing on existing ones”. For example, Google and Nutonomy, which have gone into the business of self-driving cars. Uber, too, had announced in August that it is going to introduce a small fleet of self-driving cars in Pittsburgh, United States.
“Companies such as BlackBerry and Nokia, which were slow to respond, didn’t quite make it,” Mr Bhat noted. The best way to respond to disruption is for companies to constantly think of how to be disruptors, by introducing new solutions to existing problems, he said.
Still, Dr Theseira said, new players can carve out a niche within the market that is not well served by incumbents. He cited the example of Schoolber, a new service where parents already making the school runs pick up other children living nearby for a fee. The service, which TODAY reported on last month, has received an overwhelming response from parent-drivers.
Dr Theseira said: “This strategy can work, but it is ultimately limited by the size of the niche market. Translating success here to the bigger market will be very difficult because the mass market may not get the same value from the niche provider as from the main player.”
However, niche providers may need to fend off “copy cat” start-ups that have greater financial muscle. “They (also) face the constant risk that … the big player will be able to innovate to capture its market; for instance, providing an option through Uber for school rides (in the case of Schoolber),” he added.
The situation in Singapore mirrors that in other countries. In the US, for instance, Uber is finding itself having to fend off competition from newcomer Juno, which was set up by the same group of entrepreneurs who co-founded Viber and sold it off for millions to a Japanese company.
Juno had set its sights on Uber right from the start, The New Yorker magazine reported last month. Going all out to woo Uber’s drivers over to its side — offering them stocks in the company and a 10 per cent commission on fares — Juno targeted what the company’s partners reckoned was Uber’s one vulnerability. Juno CEO Talmon Marco told The New Yorker: “(Uber) treats its employees poorly, that’s not that unique. I’m sure there are a lot of Fortune 500 companies, and on their Websites you’ll read, ‘Our employees are our asset, yada yada,’ but they still go on food stamps.”
He added: “But over time, when you’re looking at the independent-contractor model, you can independently take joint custody over … workers. That’s a unique, if you wish, weakness in the sharing economy.”
On its part, Uber is sceptical about the sustainability of Juno’s business model. Several venture capitalists also believe that Uber, with an estimated worth of almost US$68 billion (S$94 billion), has become such a mammoth that it was virtually impossible for any newcomer to disrupt it, The New Yorker reported.
Indeed, experts here agree that any potential disruptor hoping to shake things up needs to have the stomach — or rather, deep-enough pockets — for the fight. Dr Theseira noted that as newer entrants try to gain an edge by being asset-light — for example, logistics delivery companies that do not have any vehicles on its inventory and tap into a network of drivers using their own cars — they cannot afford to be “capital-light”.
Adding that the “high costs of customer acquisition mean that only well-funded players will survive”, Dr Theseira said: “An idea is not enough by itself. Deep pockets are almost certainly necessary. It is almost certainly a bad idea to challenge a major player unless you have deeper pockets than they do.”
He added: “All players in the industry are currently concerned with growing market share but have not considered fully whether profitability is possible once cheap financing is no longer available and they have to face the real costs of doing business.”
Not that it matters for now to consumers such as Mr Jeremy Ng, 35, who are reaping the benefits. The financial consultant has quickly become a fan of Swat.
“It is much cheaper than taxis, and what’s more … (the journey) doesn’t take that much longer,” he said. “The other passengers are all heading in the same direction, and the van can travel in the bus lane. Taxis or Uber/Grab cars can’t do that.”
