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Ride Sharing rises to 54% of Australian Taxi Market

TheSharingEconomyRIDE SHARING SERVICES USED BY 54% OF TAXI MARKET IN AUSTRALIA

 According to Nielsen Australia Consumer & Media View, Survey 2, 2016 National three Month database (Jan-March), Australians 18+, Nielsen Digital Ratings (Monthly), March 2016, Australians 18, the sharing economy is alive and well in Australia, with more than 2.8 million Aussies using applications such as Uber and Airbnb for travel and accommodation services.

 Nielsen’s latest Consumer & Media View data reveals that of the 3.8 million Australians that use taxi services, more than half (54%) now use ride sharing services such as Uber, GoGet, GoCatch, and others. And, more than one quarter (28%) of Aussies who use taxis now prefer these ride sharing services almost exclusively.

It’s not just the ride sharing services that are on the rise

In the past five years the Nielsen Consumer & Media View data has shown an 11% increase in the number of Australians 18+ intending to travel. Of this group, one-in-two (9 million) are planning to travel either domestically or internationally within in the next six and 12 months respectively.

 As the intention to travel increases, so too do the booking mechanisms available to consumers. Over 1.6 million Australian-travel-hopefuls indicated they prefer to book their accommodation through share accommodation services like Airbnb.

 During March 2016, Uber and Airbnb, the sharing economy leaders in their respective categories, had 1.08 and 1.14 million unique audiences respectively visiting their digital properties, according to Nielsen’s Digital Ratings (Monthly) information.

 It’s clear that consumers are embracing this alternative and often highly digital experience to fulfill their needs. This creates many opportunities for players to carve out their unique offering and corner of this growing market.

According to a study by Deloitte in 2015 that looks at ‘The sharing economy and the Competition and Consumer Act (ACCC)’, the defining feature of the sharing economy is the existence of a platform connecting buyers and sellers in a market and reducing transactions costs, where the buyers and sellers are individuals or small businesses. Essentially, the sharing economy emerged because developments in information and communications technology have significantly lowered transactions costs.

Platforms also provide coordination benefits, reducing bargaining costs and the need for individual contracts to be negotiated for every transaction. They can also assist with policing and enforcement through peer review structures and requirements for background checks, safety checks, or insurance.

Other sectors with growing sharing businesses include peer-to-peer lending, task services, and household goods sharing. The sharing economy is even more developed in the United States and some European economies.

There is an almost universal view among academic, market and technology commentators that the sharing economy will continue to grow. This will include the geographic and service-line expansion of existing players and the potential development of new services around urban living, broadband and additional task services.

At present, sharing economy operations may not fully comply with existing laws. As laws and regulations were designed with the traditional economy in mind, there are instances where their application remains uncertain, including in the areas of taxation, insurance and employment law.

However, our focus in this report is on competition and consumer issues that are of most relevance to the ACCC (and the enforcement of Competition and Consumer Act 2010 (CCA)) but that may also be of interest to state-based offices of fair-trading.

Competition and the sharing economy

There are three aspects to competition in the sharing economy— first, between suppliers that offer goods and services over sharing platforms; second, between sharing platforms themselves; and third, between sharing platforms and their providers and traditional businesses. By facilitating the growth of trade overall in certain sectors, it is likely that sharing economy platforms encourage competition between suppliers.

Competition between sharing platforms depends on a range of factors, including:

·  the extent of sunk costs incurred in starting up a platform (for example, platform and technology research and development, advertising or promotion to establish a reputation in the market);

·  economies of scale that preclude viable entry below a minimum efficient scale;

·  customer switching costs (e.g. search costs, transaction costs) and customer inertia in switching platforms;

·  network effects that provide an advantage to platforms with an existing user base; and

·  actions by incumbents to deter new entry (e.g. price wars, the creation of strategic user switching costs through contracting).

Where there are high sunk costs in starting up a platform, significant economies of scale, high customer switching costs and inertia, and significant network effects, sharing economy platforms are more likely to gain a significant share of a particular sharing market, and hence to dominate that market. As the sharing economy continues to gain market share, the barriers to entry may evolve as platforms grow, and it is unclear whether barriers to entry will be lower or higher in future.

Indeed, where significant network externalities are present, it may be optimal for only a limited number of platforms to exist. This can encourage more competition in the market for the services that the platforms supply and raise consumer welfare overall. Nevertheless, this need not mean that the market should be limited to only one platform.

A bigger issue for competition is ‘regulatory neutrality’ between sharing economy providers and traditional businesses. Regulatory neutrality need not involve identical regulations for the sharing economy and traditional businesses, as long as the same effect is achieved from regulation. At present, sharing economy providers have fewer regulations applied to and/or enforced against them, and this affects traditional businesses’ ability to compete. The scale and speed of the rollout of sharing economy platforms, as well as differences in the way they operate compared to regular businesses, have overwhelmed regulators’ ability to enforce regulations applying to platforms. This means that platforms may be able to side step complying with regulations that already apply to them.

It is conceivable that a lack of regulatory neutrality may strengthen traditional businesses’ incentives to engage in anti-competitive conduct in order to maintain market share, for example, by colluding over sharing particular markets, or engaging in exclusive dealing to require that employees only work for the traditional business. It may also lead to an increase in the number of complaints to the ACCC about sharing platforms’ conduct from traditional businesses or their representatives.

There are also considerations in relation to the Competition and Consumer Act 2010.  If you would like to read the full report, click this link https://www.accc.gov.au/system/files/Sharing%20Economy%20-%20Deloitte%20Report%20-%202015.pdf.  If you need any help in marketing your business as part of the sharing economy in Australia, contact Hall of Fame Marketing Solutions Bendigo.

 

 

 

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