In recent years, the ridesharing boom had made it a business opportunity for ridesharing startups for those who want to capitalize on it. The business model is attractive as you have a massive demand out there, with people ready to switch from self-owned vehicles to shared rides to save money and cut down the hassles of diving. Also, you can do your bit for the environment by reducing traffic congestion and pollution.
With such immense benefits, the ridesharing industry will only be bigger and more lucrative in the future. But the coin has a flip side, too, as several challenges lie ahead for startups looking forward to entering the domain. It makes sense to know these challenges before taking the plunge so that you are all set with relevant solutions for addressing them. Let us highlight the ones you are most likely to encounter during the evolutionary phase.
Growing competition
Perhaps the biggest challenge that new ventures face in any domain is the market competition, and ridesharing is not an exception. Since the opportunity is big, many established players are ramping up their services and offerings to maintain their winning advantage.
Several new players are joining the bandwagon as well, including smaller ones offering e-scooter rentals. With the competition growing rapidly, the chances of making it big depend on going the extra mile with your services and offerings. It is equally vital to assess the market and competition before you go ahead with your startup idea.
Government regulations
As local governments design and enact several compliance regulations and requirements for ridesharing providers, new players’ survival becomes hard.
The regulations often make things tough for companies and complicate their processes. For example, you may be required to submit detailed records of every driver with the local police.
It may be a hassle if you have hundreds of drivers in your network and more joining every day. Some jurisdictions are also coming up with regulations meant for protecting the local services. Proper research and awareness of these regulations become a vital aspect of starting a viable venture.
Injury lawsuits
Another challenge that these companies face is injury lawsuits, which are most likely to happen whenever a vehicle gets into a mishap. You can expect the passengers and injured parties to engage a lawyer for a car accident injury claim whenever there is an accident.
So there could be a steady stream of lawsuits that you may have to deal with. The best approach would be to implement safety policies and procedures to prevent accidents and related lawsuits in the first place. Having a core legal team to play an advisory role is a good idea, while they can also help you with settlements or represent your company for the lawsuits that go into court.
Price and profitability
Pricing and profitability are common challenges for most startups in any business domain, and they apply to ridesharing companies. Even as the business model is attractive, it is hard to make money in the domain. It happens because providers have to compete aggressively to attract and retain customers, and they mostly end up compromising with pricing.
They need to think out-of-the-box, rather than only offer services at lower prices. For example, your competitor may even offer free rides for gaining market share, and you can well imagine how you will have to respond to this tactic. These price cuts reduce profitability, which can affect your startup’s survival probability in the long run. In particular, the newbies are at high risk if they cut down on profits to match the competitive pricing.
Labor issues
Relations with drivers are significant issues that ridesharing companies often face. These drivers are a part of the gig economy, which means they are treated as independent contractors rather than full-time employees. Businesses often struggle with the level of control over them. Things can be even tougher if you are only starting because the lack of experience wouldn’t help you handle things better.
Rebellious drivers are likely to affect the quality of services to the customers and eventually damage your business’s reputation. Sometimes, drivers may even file lawsuits against the company for paying them below the minimum wage levels. It is the last thing any startup would want to deal with during the business’s early stages.
Autonomous vehicles
As technology evolves, self-driving cars are just around the corner. Once they are here, they will probably shuttle people around, which means that ride-sharing startups may lose their business unless they keep pace with the established players and invest in autonomous vehicles’ fleets.
It may not be viable for new businesses that may have just started, and there is a risk that they wouldn’t survive in the competitive landscape. Although nothing can be said with certainty, the looming threat of autonomous vehicles is a challenge that startups have to deal with.
Despite these challenges and complexities, the ridesharing business is an opportunity that several entrepreneurs want to explore. The domain has bright prospects ahead as people become more eco-conscious, and a move towards shared rides seems like the best approach to reduce their carbon footprint.
For a startup that wants to make it big in the industry, proper planning and awareness can be the keys to success. If you know these challenges and have the right strategies to deal with them, nothing can stop your business from becoming a success.