24 Jul 2015 19:29 IST

The ever expanding sharing economy

Collaborative consumption is one of 10 ideas that will change the world. But, those impacted, like taxi drivers, are not happy about it

Recently, a friend’s family landed at the Nedumbassery airport near Kochi, collected their baggage, and emerged from the exit to wait for their app-booked cab. Like moths to a flame, they were soon surrounded by ‘local drivers,’ part of the airport’s taxi stand. Despite the family’s repeated requests, the drivers wouldn’t let them board the car. “We have got our permits paying lakhs of rupees. We won’t let this taxi (which the family had booked) operate from here. It is a question of our livelihood,” said one of the belligerent drivers. Eventually, the family, desperate to get out, cancelled the app-booked taxi and took one of the taxis from the stand instead.

The fight between the traditional and sharing taxi services is now a world-wide phenomenon. In India, the debate was ignited after a woman in Delhi was raped by the driver of an Uber cab in December last year. There were calls to regularise these services, which do not depend on government-approved licenses or infrastructure to operate. Anyone with a car can become an Uber driver. In June, the Delhi government said that over 80 per cent of Uber and Ola cabs were ‘unfit’ to run on the roads, as they didn’t have state permits and were not running on LPG as the local laws mandated.

As this debate raged in Delhi, traditional taxi drivers brought life to a standstill in Paris. They were protesting Uber services and demanding regularisation of the app-based service. Similar protests took place in London as well. In March, New York’s yellow cabs sued the Taxi and Limousine Service for allowing Uber’s fleet to skirt rules, including the need for medallions (or permits) and sticking to metered fares.

The French government has made Uber’s services illegal and the company subsequently suspended its low-cost service UberPop. After a similar strike in Mumbai by taxi and auto drivers in June, administrators in States and at the Centre are now mulling blocking taxi hailing apps in India.

Impact assessment

Does Uber really have an impact on the traditional taxi companies? Reports say that in a few places, the service has had fatal repercussions on the traditional sector. In Dallas, business travellers now use Uber over the usual cab. An interesting study cited by this report, showed that across all parameters Uber’s low-cost service was cheaper than the traditional cabs, sometimes costing half as much. In fact, a well-known taxi company in London, with a sizeable fleet, announced job cuts after failing to match up with Uber.

In India too the increasing popularity of Uber and other app-based cab services is indisputable. The immense convenience of these services has disrupted the segment. Once a friend of mine, who was visiting Chennai, was running late to catch his return flight to Delhi and he hadn’t booked a cab. He tried a couple of ‘traditional’ service providers who said they will take at least 20 minutes to arrive. Then he tried the Ola app on a common friend’s smartphone, located a cab that was just four minutes away, and in no time was on his way to the airport.

But even as we love this disruptive technology, it is hard not to empathise with the traditional taxi drivers. Permits in India cost up to Rs 3 lakh, or even more. In some of the European and American cities, one has to sell out close to Rs 4 crore to acquire a taxi or a fleet. In fact, many in India and abroad have made a business out of this by buying permits and then leasing them out to drivers.

Which brings us to an important question: Is there something that these drivers can do to square up to their more ‘modern’ peers? Yes, they can reduce fares, use technology and become more efficient. However, would that be enough? It is unclear.

Sharing is increasing

The popularity of Uber, where anyone with a car can register, has put a spotlight on the sharing economy. Though some question if Uber can be part of the sharing economy (as it now has services with ‘professional’ drivers), the system built on sharing one’s unused resources now extends to several sectors. I have used and continue to use Airbnb. The service is easy to understand and gives me an opportunity to stay and make friends with strangers and share their culture. And most of the times, it doesn’t burn a hole in my pocket.

I’m one of the 30 million consumers of Airbnb around the world. A study said that revenues of hotels will come down by 0.35 per cent if Airbnb’s supply in that area increases by 10 per cent. In Austin, Texas, which is home to the largest number of Airbnb ‘rooms,’ the traditional hotels lost 13 per cent of their annual revenue. In a slowdown, that is a significant number shaved off your topline. In India, Airbnb may not be as dominant, but a hotel industry that is beset with over-supply will be surely wary.

Sharing companies now cover logistics ( TaskRabbit), lending ( Lending Club) internet ( Fon), clothing ( Poshmark) and many more sectors. In 2011, a leading international magazine had named collaborative consumption as one of the 10 ideas that will change the world. It is now up to the several stake holders to decide on how they react and evolve to these changing circumstances. Till now, it hasn’t been pleasant.