DR MIKE GALVIN: Can taxis and private hire CO-EXIST in the UK market?
Plan Insurance recently spoke to Dr Mike Galvin who remains one of the taxi and private hire industry’s most experienced and respected voices. Here he shares his opinion, as CEO of consultancy firm Mobility Services Limited, on the hot topic of whether ride-hailing, private hire and taxi services can co-exist inside the UK.
The taxi industry was the first to feel the shock back in the sixties when their hitherto ‘monopoly’ in the personal transport industry was pretty much removed overnight through the advent of minicabs/private hire. The ructions that followed were ultimately futile as the challengers had identified a loophole in the law that enabled them to operate legally. Outside of London, the 1976 Miscellaneous Act provided the warmth of proper legislation and twenty-two years later London followed suit. I’d like to say things settled back into a new status quo until the next shock but they never quite did with grumbling and irritation on both sides which is still in evidence today.
The next significant shock was the explosion of venture capital money starting this time in London and with mixed success spreading across the UK. This of course was Uber.
Uber came into town and used it methodology that it had finessed (a generous term) in New York of fire hosing money around like some drunken sailor to win drivers and to win customers. Earnest and angry meetings took place, the trade press went into meltdown, legal challenges were devised and regulators stood… I’d like to say aghast but more accurately aside, urged on by their Downing Street masters. Like many good intentions, Downing Street’s stance was that they wanted London to be the tech hub of Europe and Uber was a high profile, Silicon Valley pup that set exactly the right optics for the start of a revolution that turned the UK from a dying Empire to a bright shiny incubator for the next generation of tech companies. IPOs would follow, money would flow, and Downing Street would be lauded for its forward-thinking strategy. Forget fuddy-duddy rules and laws (aka public safety) and give them free rein was the Downing Street mantra.
Well, we know what happened next so I won’t dwell. But what is happening now? A little like my earlier comments, despite legislation and regulation being enforced against Uber and some of its competitors in the market place selling on a high bar of regulatory compliance, the industry continues to grumble as the taxi industry did from the sixties except now traditional Private Hire and Taxis both grumble albeit very separately. So where do we go from here – can the three segments co-exist, can each prosper?
One group that is not listed above and features only occasionally in the narrative of the combined industry is the customer… we ignore their wants at our peril but frequently do. What the sixties proved, what the last decade has proven is very simple, there is a cohort of customers who value price above safety – fact! What is also proven is that there are many cohorts – some demand public safety measures, many want certain standards with cars, with drivers, wheelchair accessibility and more recently a greener approach. Of course, there are niches as well, close protection, chauffeurs, stretch limos etc. One of the interesting outcomes of the last half of the decade is how ride-hailing apps have developed their own customer base evidenced by how the overall market has grown and yet almost every operator is still in business. I have spoken at conferences about this phenomenon so please forgive me if you have heard it before, but I honestly believe that there are few industries that could have withstood the fire hosing of billions of pounds that this industry has seen and survived – that to me is truly remarkable.
Has this fire hosed money been poorly targeted? Inevitably a percentage of any marketing money spent is wasted – the conundrum is which percentage? Or are the incumbents so resilient that the newcomers never stood a chance of putting them out of business? How much of a part did lax enforcement championed by Downing Street play? We will all have an opinion but sadly we will never really know. I would hazard a guess that each played a role. We have of course to learn from history so what have we learnt? My guess would be not much! If a new threat arrived tomorrow are our trade bodies in so much better shape that they would immediately launch an action to deal with the enforcement failures? I guess not. What we would see is more earnest meetings, the trade press in meltdown and history repeating itself. Perhaps the industry has retained its stoic resilience but after the beating everyone has taken over the last nine months… maybe not. But this is to look inwards. What about customers how would they react and while we are on the subject how did they react to the last incursions; did they like politicians jump on the approaching bandwagons? Clearly not!
Maybe and not surprisingly customers are the key to a safe secure future. Perhaps the industry needs to recognise this as obvious as it sounds. Does everyone look after their customers as they should? Are we too busy moaning, sitting in hot little rooms listening to tub-thumper ranting on about judicial reviews to bother with… customers? Have the new entrants seen this as the industry’s weakness and exploited it? I suspect not otherwise they would have taken all of the customers. Rather than thinking about hurling some money around, hard earnt money I might add, to fight off the new entrants with promo codes (equally poorly targeted), perhaps incumbents should be thinking about just spending a little more time considering what customers want, why they use your company, how to make them stickier? Will this stop the large, respectable companies from pushing forwards… I don’t think so but it will protect your business.
Many small shops continued to thrive when supermarkets hit the town, why? Because they provide what supermarkets couldn’t and wouldn’t. Doesn’t that analogy apply to our industry? Won’t traditional operators continue to thrive despite the ride-hailing app companies’ growth and likewise won’t the large ride-hailing apps be able to grow despite the incumbents remaining in situ? I would, perhaps contentiously, say an emphatic yes! Let me explain… Customers!
British Airways unarguably charges more than Ryan Air so why do both survive… because not everyone wants to pay £300 and listen to a woman who talks like the queen introducing her 15 colleagues at the start of the flight. Not everyone wants a middle-class Downton Abbey experience flying from London to Berlin and to buy a Marks and Spencer sandwich on the flight and have three inches of extra legroom and pay X times more. Likewise, some people are not bothered about being squeezed into a bright yellow and blue cabin, carrying their own bags and not being able to understand the cabin staff, landing at an airport miles from the city it is purported to land at and are happy to pay £25 for an hour’s equivalent of a bus journey. British Airways dyed in the wool customers are not going to move to Ryan Air easily or any time soon, likewise Michael O’Leary doesn’t have to lie awake at night worrying that BA will take a substantial share of his customers. Yes, that is an extreme example and at the fringes, there will be those who ebb and flow between the two BUT the point is the customer is king. If a market functions well there is a choice not only on price but also on the proposition. As in our industry, EasyJet, Whizz and Ryanair have got people flying who would never have flown with the established carriers… they have done what Uber et al did and created their own customer cohort.
Like this industry, creating that cohort was not an exact science. I am not saying that no incumbent ever lost a customer to Uber but what I am saying, and the evidence speaks to this, is that the airline market grew with low-cost airlines and the personal transport market grew with low-cost ride-hailing apps. Sage’s law (supply creates its own demand) is always borne out in these scenarios as it was when private hire/minicabs first appeared in the sixties. Of course, there have been other consequences, prices have slipped in our industry and in the airline industry. However, in our industry was this as a consequence of defensive or offensive pricing, was it considered in correlation with customer data or just used as some kind of tactic to retain market share? The clever guy is not the guy what can buy at a £1 and sell at 90p, to me the clever guy is the one who can but at 90p and sell at £1.50p and the really smart one gets £5!
The propositions are clear – taxis a bit pricey but instantly available, anonymous, wheelchair accessible, roomy and metered fares. Private hire, local, generally competitive with taxis, lots of vehicle choice, pre-booked. Ride-hailing – cheap and quick to arrive, occasionally surge prices. Each has, of course, subsets and levels of flavour to the basic proposition but the key is they are all different. This applies to airlines, supermarkets and lots of other industries. But the key to each one is to identify the target customer, nurture and expand that customer cohort and ensure that your market share of that cohort is as large as it can be and your part of that cohort is stickier than the firm down the road. How do you do that… that is where you add the value, you know your business, your cohort and your proposition ensuring each is aligned is called running a business!
Whinging and whining about new players or old players is futile, worry about your business, your customers and aligning them and you will live a happier and more successful life. Taxis, private hire and ride-hailing apps can live together successfully but the focus needs to change to do so.
