Why do Uber-for-X businesses fail? Here’s a summary of the top reasons for failure identified by Juggernaut, a platform and consultancy for Uber-for-X businesses.
Beyond Juggernaut’s top reasons for failure, it’s important to understand the top reasons why Uber is successful.
- Uber is successful because it rationalises an inefficient market for repetitive high margin purchases with a marketplace model that matches demand spikes with under-utilised supply.
- Implication: Uber-for-X businesses will [only] thrive where there is an inefficient market for repetitive high-margin purchases
- Uber is successful because it rationalises consumer behaviour by allowing consumers to ‘value-optimise’ – get the biggest bang for our buck, not by reducing the price, but by reducing the other two costs associated with every transaction – time and effort. In other words,Uber reduces inconvenience.
- Implication: Uber-for-X businesses will succeed where there is a consumer dissatisfaction due to inconvenience.
- Uber is successful because it exploits irrational, incomplete or ambiguous market regulation, playing in the grey area between traditional taxis and unlicensed rides.
- Implication: Uber-for-X businesses will succeed where there are grey markets and regulatory ‘black holes’- between traditional provision and illegality
From this basic economics of Uber – ‘ubernomics’ – there are three key questions any Uber-for-X business needs to ask itself
- Is the market I want to enter an inefficient market for repetitive high-margin purchases?
- Is the market I want to enter characterised by a problem or pain point around inconvenience?
- Is the market I want to enter suffering from incomplete, ambiguous regulation?
Answer yes to all three, and you may have a wining business idea.
The key thing to understand is that Uber is not a merely a taxi service, it’s a blueprint for digital transformation – based on the fundamental insight that ultimately digital is not about technology, it’s about ‘rationalisation’. Digital has the power to rationalise whatever it touches, be it people, businesses or markets and does so by reducing waste, cost, time or effort.
But watch out for these top mistakes
- Not servicing a specific niche. Exec was an Uber-for-errands of any kind requiring a broad range of skills and runners. Solve one problem and solve it well.
- Not servicing genuine demand. HelloParking enabled people to share paid-for parking spaces, something that few people wanted to do
- Not solving a genuine problem. DinnrDinnr offered a same day ingredient delivery service for recipes, something that few people actually wanted
- Not making it convenient. TaskRabbit is an Uber-for-errands that had a time-consuming bidding system where runners would bid for work. Successfully pivoted to on-demand service with set prices
- Low margin product. Cherry was an Uber for car washing that allowed customer to park anywhere and get their car washed, but the low ticket price and low margin made the business unviable
- Premium pricing. Prim was on-demand laundry service including pick-up and delivery, but costs meant pricing was considerably higher than traditional drop-off laundry services
- Not enough focus on customer acquisition. Tutorspree was an Uber-for-tutors that failed because it did not priorities an effective customer acquisition strategy
- High costs of customer acquisition. Rivet & Sway online eye glasses retailer offered a convenient try-at-home-before-you-buy service, but the high cost of acquiring customers made the venture unviable
For more reasons for Uber-for-X #fails, check out Juggernaut.