Stay on Top of Enterprise Technology Trends
Get updates impacting your industry from our GigaOm Research Community
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.”
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?
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.”
I layered up w/ trench coat, jacket, and sweater in preparation for the possibility of walking home when Uber/Lyft go into surge pricing ????????????
— Tracy Chou (@triketora) January 1, 2015
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.