Didi’s Shot at World Domination in Ridesharing
*This is a follow up to Uber + Didi = Dudu?!
Ridesharing Consolidation
Ridesharing is one of the first sharing economy to take off globally with copy cats faster than AirBnB. The regulations are unique for every country; however, versus housing it is much faster and easier for global startups to produce a local rideshare offering (Grab, Ola, Go-Jek, etc…)
Therefore what has happened within ridesharing is that we see consolidation much faster. First at the local levels (myTaxi + Halo, Didi + Kuadi), and then at global levels in the forms of mergers and investments — first Didi+Lyft and then the latest: UberChina+Didi .
Didi’s New Position (as of buying UberChina 2 weeks ago)
Didi has investments with the following companies:
Lyft (US)
UberChina (China)
Grab (SE Asia)
Ola (India)
Didi basically has every country covered within ridesharing through investments. It only needs to conquer the rest of the developing world, which they are the best position to do.
Expansion into Developing Countries
Didi is in the best position to understand these markets from a developing market point of view. In developing countries and markets, there are several traits shared with China:
Dependency on local — One thing that has struck me in living in China is a distinction between local vs. foreigner. This comes down to schools and services. In the Western world, there is no distinction between local and foreigner. We don’t have a “local” hospital for “local” people and a “foreign” hospital for people from another country used to a different (higher) standard of medical care. This is a by product and indication that the country is still developing.
In many Western countries, I never see different services offered to local people or foreign people. In the US we have the same schools and expect almost all immigrants to speak english (perfectly). There are not two levels of service or even different hospitals.
However, for a developing country, the dependence on locals can offer a large amount of wisdom to how the ecosystems works. The dominance and importance of local is due to their developing infrastructure.
Infrastructure — The infrastructure in terms of technology as well as payment systems have grown and leaped frog into the next generation technology.
When I visited China in 1991, to make a call, there was one phone that was shared by the entire neighborhood.
It did not make sense for China to wire every home. This paid off, because when mobile hit, they were ready for it (after building several cell towers and laying down fiber). They did not need to upgrade the home and deal with helping 1.2 billion people change from ethernet cable to wireless.
Also the payment infrastructure has been on a cash only basis in most developing countries, that swapping for to a credit system requires much a lot of infrastructure.
Debit vs. Credit — Only about 10% of China’s population owns a credit card. They automatically tie all their payments to their debit card that is password protected.
When talking to a Chinese local, he said he does not want to get a credit card because it does not have password protection — this was just last week!
What I chalk it up to is comfort in moving a cash-only society into a digital cash society. Credit is something that has been enjoyed by the developed countries and is quite Western in nature. This is mainly because of the lack of infrastructure to make credit a success. Being able to track credit card payments as well as setting up a billing system of invoicing as well a collections arm — well that requires time, infrastructure, and mindset shift.
Didi approaches a develop(ed) country with a developing mindset. They provided a local solution (integration into local China taxis) , with local payment integration (Wechat) using the current infrastructure where people (pay now_ had the most trust. Therefore their path to world domination is best served by leveraging local partners, so the investments into dominant ride sharing companies come to no surprise.
Customers
In China, Didi effectively has a monopoly on the ecosystem (integrating into the local taxis), which means they can have monopolistic pricing, leaving customers with no choice if a taxi is needed. Furthermore, with no competitor such as Uber (as small as it was), there is no need for Didi to attract drivers through bonuses or subsidies. Less supply, with demand stagnate means pricing tends to go up.
While the government may regulate against this, Didi is currently dominate and a monopoly until the government does something. And in this situation the customers’ wallets are the ones potentially hit the hardest by Didi’s new position.
Executive Summary
- Merge with largest local ridesharing taxi service
- Invest in the largest ridesharing companies in all continents (exception is Lyft)
- Buy UberChina — kicking out any foreign competition
- Expand to developing countries through local partners
- Raise prices to how you wish
And there you have it — Didi’s plan for world domination.
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I am the co-founder and Chief Development Officer of Kabam, and have resided in Beijing, China for over a year. These perspectives are my own and do not necessarily represent Kabam.