People vote with their wallets

Flywheel has finally figured out its secret weapon against Uber

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A few weeks before New Year’s, I received a pitch from Flywheel that I’ve been waiting for since I started using the service in 2013. It said, “Flywheel Battles Uber with #FairFare.” The email inside proclaimed “Flywheel is the no-surge pricing alternative to get a ride around town.”

flywheel email to me

It looks as if Flywheel, the booking app for taxis, has finally figured out its secret weapon against the likes of Uber and Lyft: Reliable pricing. It’s not a new feature for the company. From its inception in 2009 Flywheel has never had surge pricing in the cities it operates in — now SF, LA, Seattle, Sacramento, and San Diego. But for the longest time, the company didn’t seem to understand that this was the best way to lure people back to the taxi system. Instead, it touted Flywheel’s legality, its use of regulated taxis, the number of car companies on its app. None of those were big enough draws.

At the end of the day, people vote with their wallets, and if there’s anything that will get people to move to Flywheel, it’s cost.

Is price part of reliability?

Town car ride-hailing Uber

Uber and Lyft argue that surge pricing makes their services more reliable because it gets more drivers on the road during a time they might not otherwise drive — like New Years or a hostage crisis. There’s truth to that.

But these companies miss the fact that for many non-wealthy customers, stable price is one of the factors in determining reliability. Without the assurance of a fixed fee, people will turn to other services for backup.

Although people have been complaining about surge pricing for years, this New Years showed the first sign that they are willing to stop using Uber and Lyft as a result. The SF Examiner found that on New Year’s Eve in San Francisco there was little to no surge pricing, because of either low demand or too much supply.  The lack of surge upset drivers who gave up their New Year’s to make money.

Tweets from passengers suggest that people planned ahead, deciding to walk, take public transit or flag taxis to avoid the ridesharing surge. Ironically, that resulted in little to no Uber or Lyft surge pricing because there wasn’t enough demand to drive it there. “It was an incredible sight to see all the cabs full and the rideshare cars empty,” one driver told The Examiner. “I was laughing and crying at the same time.”

Another potential reason there was no surge pricing on New Year’s Eve in San Francisco is because so many drivers took to the road in the hopes of making money. With such a flood of supply, there wasn’t enough demand to cause surge pricing.

It’s worth noting the story isn’t bulletproof — it’s based on anecdotal evidence. When I asked, neither Uber nor Lyft would confirm specific SF surge rates in 2014 compared to previous years.

In other parts of the country, where the Uber service is still relatively new, surge pricing was common, according to this CNN data.

Passengers wise up and avoid the surge

The difference between SF and other cities suggests that over time, passengers get smarter about using ridesharing services. Although they may put up with surge pricing initially, they eventually expect and avoid it. As a result, Uber and Lyft could lose customers, and the resulting profit, on some of the biggest travel nights of the year.

It’s clearly not hurting Uber at the moment — the company saw 2 million rides on New Years Eve alone. But the service is new in a lot of places, so passengers are just starting to feel the pain of unpredictable surge pricing. By New Years Eve next year, will Uber users in other places get smart about avoiding the surge, the same way San Francisco residents did?

I suspect surge-avoidance will slowly trickle down to day-to-day travel. I live near Union Square in San Francisco, so I’ve already learned I can’t rely on Uber and Lyft from a pricing perspective, because they’re nearly always operating with surge pricing here. Without that reliability, I prepare alternative options for travel and develop new habits, lessening my ridesharing addiction. That’s where a competitor like Flywheel or Sidecar could come in and do really well.

There’s been plenty written about how surge pricing is a broken system, but there hasn’t been much ado about the fact that it’s also Uber and Lyft’s biggest weakness. It’s the one area where other companies can easily beat them.

8 Responses to “Flywheel has finally figured out its secret weapon against Uber”

  1. Tereraw yenger

    The beginning of the end of UBER, new years eve 2014. No surge means no one drives for uber because the rate is so low that it is less than a minimum wage, it doesn’t worth my time. In order to keep a driver happy , uber has to surge charge, this means custmers have to pay more for the same service taxis provide. Smart Custmers are avoiding the surge charge by other alternatives , this means less unhappy uber drivers on the road. Without divers UBER has nothing except an App.

  2. John Fitzgerald

    I’m a driver for both Uber and Lyft. Surge pricing is not a broken system. In fact, I make very little income from surges and I’m driving in Los Angeles from downtown to Santa Monica most of the time. Surges happen, it’s nice to make a few extra bucks from them, but they don’t account for a stunning amount of my revenue.

    That said, I do try to position my self to enjoy surges because, hey, it’s extra money. So I try to put myself in areas that I know will surge at certain times. Sometimes it works, sometimes it doesn’t.

    Surges do pull in more drivers, and surges also push away riders who don’t want to pay a higher price. Those that will pay a higher price are either not price sensitive or they really need the ride. Surges help to balance supply and demand.

    Imagine a world without surge pricing – oh, wait you don’t have to, it already exists. I have heard more complaints from people about cabs in LA – they don’t come when you call for them, they’re slow to respond, they won’t take you where you want to go, they won’t take credit cards. All this is because cab drivers don’t have an incentive – no surge pricing!

    This isn’t that hard a concept to understand, but apparently a lot of people do have difficulty with it. It’s simple, if you don’t want to pay surge prices, DON’T DO IT. No one is holding a gun to your head to do so. Just call a cab! And good luck with that.

  3. Sleipnir

    The drivers depend on that surge to actually make a reasonable profit. After Uber’s cut, gas, and vehicle maintenance costs, you’re left with very little profit at the base rates. Many drivers are refusing to drive when there isn’t surge because of this. That’s the main reason Uber is constantly hiring, it takes the new drivers a while to realize this fact.

  4. You know I find it funny how we talk about customers of these services as all or nothing. This isn’t your local cable company with a last mile monopoly and a contract. People can, and do use multiple services all the time.

  5. “By New Years Eve next year, will Uber users in other places get smart about avoiding the surge, the same way San Francisco residents did?”

    Of course they will. It’s becoming ridiculous to complain about surge pricing these days. Very few people are sympathetic now that it’s been established riders have to accept the surge multiplier before requesting the ride. If you use Uber on a busy day/night, you should expect to get hit with surge pricing. That’s the Uber way.

    But slowly, drivers like myself, and plenty others, are starting to realize that surge pricing isn’t in our best interest. Just like riders, we want consistent fares, equivalent to taxis, that guarantee us consistent business at fair prices. Not this up and down dynamic that Uber and Lyft are shilling. It’s great to get a two mile trip during 5x surge and make a hundred bucks, but what about all the other times when that same ride only nets us $7?

    Surge pricing from a driver’s perspective:

    • Yep. There’s a very good reason NYC has limited the number of yellow cab medallions for decades. The job needs to be viable for drivers. It also needs to have a consistent rate of fare and full commercial insurance.

  6. Carl Hancock

    I hope for Flywheel’s sake that this “secret weapon” involves more than flat rate pricing during surge periods. Because it’s no longer a secret and there’s nothing stopping Uber from adopting a similar stance in the future. There’s nothing Uber can’t replicate here.