Transport giant ComfortDelGro has had a bumpy ride in
recent weeks, after a double dose of bad news.
Its taxi business — accounting for nearly a third of
the group’s revenue — is in danger of losing thousands of drivers
to its rivals, after ride-hailing company Grab dangled
heavily-discounted rentals to entice the cabbies.
Then came the news that SMRT Trains had beaten
ComfortDelGro subsidiary SBS Transit to bag the tender to run and
maintain the upcoming Thomson-East Coast Line.
The transport operator’s shares promptly tumbled below
the S$2-mark for the first time in almost 3.5 years, as investors
deserted the stock in droves.
Although the stock has recovered slightly since, dark
clouds still loom over the company.
Its lacklusture earnings for the second quarter of this
year, released in August, showed its revenue falling by S$35.1
million or 3.4 per cent year-on-year. Operating profit declined by
9 per cent.
Revenue from its taxi business — squeezed by intense
competition, not least from private-hire car operators — dropped
10.7 per cent.
In August, its taxi fleet declined for the eighth
straight month, although it remains Singapore’s largest.
It had 15,127 Comfort and CityCab taxis on its books, a
fraction of the more than 40,000 private-hire vehicles here.
Grab and Uber are not exactly new kids on the block,
having operated here for about four years.
So the question is whether ComfortDelGro could have
heeded the warning signs and upped its game sooner?
PLAYING CATCH-UP
ComfortDelGro is not new to competition, having seen
new taxi companies break its monopoly more than a decade ago when
the market was further liberalised.
But with its fleet far outstripping that of the other
taxi operators, ComfortDelGro still largely commanded the space for
point-to-point transport.
Uber and Grab clearly provided competition of a
radically-different nature.
The ride-hailing giants, buoyed by cutting-edge
technology and the wherewithal to dish out attractive incentives to
both drivers and riders, have slowly but surely usurped market
share, leaving traditional taxi operators in the dust.
ComfortDelGro has attempted to fight back.
For instance, in 2015, it unveiled a new-look
taxi-booking app with the ability to recommend routes and give
estimated metered fares, and other features.
That same year, ComfortDelGro announced that commuters
could start paying taxi fares without using a physical credit or
debit card for pre-booked rides through digital payment service
Masterpass.
In August this year, the Masterpass service was
expanded to include street-hails.
ComfortDelGro has made other strides on the
digital-payments front. For instance, it made Alipay, the Chinese
digital-payment service, available across its fleet in July.
Alas, these efforts, belated as they are, beg the
question if ComfortDelGro has been aggressive enough in guarding
its market share.
Uber, for instance, has offered remote card payments
since it was set up here in 2013.
Consider also ComfortDelGro’s CabRewards programme to
reward riders who make cashless payments, for instance.
Launched in March 2014, it required passengers to log
in to a website, open an account and register up to two EZ-Link
cards which will double up as “membership cards” to earn points.
These can be used to redeem perks such as taxi vouchers or free
transfers to the airport.
In contrast, Grab’s GrabRewards programme launched last
December automatically credits points in riders’ accounts which
they can use to redeem rewards, including discounts on rides.
In June, ComfortDelGro fought back with a new rewards
initiative called CabRewards+, which gives riders double the reward
points if they hop onto ComfortDelGro’s cabs within 24 hours of
alighting from buses or trains.
But it again drew brickbats from commuters who found it
too complicated.
Meanwhile, Grab has since expanded its rewards
programme to include more than 150 merchants in South-east Asia as
reward partners.
Besides redeeming discounts on Grab rides, users can
snag offers on shopping, food and travel, among other things.
Earlier this week, Grab upped the ante again, under a
partnership with national carrier Singapore Airlines. Soon,
GrabRewards users will have the flexibility to convert their points
into the national carrier’s KrisFlyer miles.
Experts note that examples like these show that
ComfortDelGro is still lagging behind the ride-sharing apps in
using technology to better serve and attract riders.
While ComfortDelGro once had the most advanced
real-time booking and taxi-location system, its app emerged “a
little late” and fell behind in popularity for a while, said
Singapore Management University transport specialist Terence
Fan.
“If ComfortDelGro could have developed a more
user-friendly app earlier, introduced admin-fee-free credit-card
charging earlier, and massively advertised these, perhaps it might
be able to hold onto its fleet advantage somewhat longer,” said
Assistant Professor Fan.
Agreeing, Singapore University of Social Sciences
transport economist Walter Theseira said ComfortDelGro “did itself
no favours” by sticking to a taxi-booking system widely seen as
slower and less effective than Grab’s and Uber’s.
“ComfortDelGro had a huge market-share lead, an
existing widely-used booking system, lots of data on booking and
matching, and yet it could not offer a product that was as
user-friendly as the entrants’,” he said.
As competition renders the taxi business increasingly
untenable on its own, ComfortDelGro’s rivals have warmed up to
collaborations to net more riders and boost driver earnings.
In March, SMRT Taxis, Prime Taxi, Premier Taxis,
Trans-Cab and HDT Singapore Taxi joined forces with Grab to roll
out JustGrab, a fixed-fare service subject to dynamic pricing that
also draws on Grab’s private-hire car fleet.
ComfortDelGro’s response? A flat-fare option.
This was followed by a partnership with third-party
booking app Ryde — which has a far smaller user base than Grab and
Uber — to allow commuters to book a Comfort or CityCab ride through
the app.
Finally, in August, ComfortDelGro announced it was in
talks with Uber on a potential collaboration, which could include
teaming up on fleet management and booking software solutions.
The talks also include making its fleet available on
Uber’s app.
While ComfortDelGro and Uber have stayed mum on the
progress of discussions, the potential tie-up could not have come
sooner.
Asst Prof Fan reckoned that ComfortDelGro was likely
banking on its fleet size to weather the storm that was
brewing.
“When business was still good, it was not clear how
urgent the need to change was,” he said.
Still, he noted that a tie-up between ComfortDelGro and
Uber may not be too late, if it allows both to raise prices and
stem further contraction in ComfortDelGro’s fleet, for
instance.
If ComfortDelGro’s fleet is added to Uber’s pool of
vehicles, this may reduce the incentive for Uber to keep expanding
its fleet, enabling it to relax some of the discounts it is
offering and raise prices gradually.
THE WAY FORWARD
Another area where ComfortDelGro has remained somewhat
passive is the fight for drivers.
Amid an exodus of drivers to its rivals, ComfortDelGro
is doling out rental rebates less attractive than what Grab is
offering.
Grab’s campaign, broadcast to thousands of
ComfortDelGro cabbies in September, promised drivers a S$50 daily
discount for six months on rents — amounting to about S$9,000 in
savings — if they join any of Grab’s five partner taxi firms.
The discounts are higher if they switch to a
private-hire car through Grab’s rental arm.
ComfortDelGro’s counter offer paled in comparison, with
rental rebates totalling S$3,600 over six months.
More than 3,000 ComfortDelGro drivers have joined Grab
as part of its recruitment campaign, with the majority signing up
as private hire car drivers.
National Taxi Association executive adviser Ang Hin Kee
said the association hopes ComfortDelGro will come up with a
package to attract and retain its remaining drivers.
“If people haven’t quite responded the way you wanted,
you have to rethink what is an attractive package,” he told
TODAY.
Many drivers had told Mr Ang that they wanted to stay
on, but for the moment, ComfortDelGro’s terms seemed less
attractive.
Long-time drivers who spoke to me echoed this, and were
keen to stick it out with the company but only if it lowers its
rents substantially.
As its driver pool comes under threat, ComfortDelGro
can ill afford to be passive.
Hit by falling earnings, drivers can seek alternatives
easily and are drawn to whichever operator offers the best
deal.
Dr Theseira said ComfortDelGro should look into
improving its driver-loyalty programmes and pricing structure.
“A more creative and proactive approach towards
addressing the longstanding pain points that taxi drivers have —
ranging from insurance deductibles to costs and lost earnings when
the taxi is out of service, to lost income from sick days — could
go a long way to addressing the rental-price disparities,” he
added.
Right now, ComfortDelGro’s taxi hirers receive benefits
such as loyalty and performance incentives, and compassionate
leave.
For the time being, it is still too early to write off
ComfortDelGro.
SUSS transport analyst Park Byung Joon said that to
prevent further erosion of its market position, it has no choice
but to offer incentives to win drivers back.
ComfortDelGro, said Asst Prof Fan, must develop other
advantages to hold onto its market-leader position, noting the
“switching cost for commuters from one platform to another is not
sky-high”.
Indeed, with innovation and technology disrupting the
taxi industry at breakneck speed, ComfortDelGro must draw up a
sound game-plan laying out a more far-reaching package for its
drivers, one that will withstand the heftiest of discounts offered
by rivals.
For customers, it ought to improve its app’s agility
and user-friendliness, and offer more regular and fuss-free
promotions to regain market share.
ComfortDelGro owes it to its passengers and drivers —
many of whom have stood by it through the decades — to act
decisively now.
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