Pricing Within the Sharing Economy: The Case of Uber

Pricing Within the Sharing Economy: The Case of Uber

Unathi Sonwabile Henama (Tshwane University of Technology, South Africa) and Pfarelo Manavhela (Department of Tourism Management,Tshwane University of Technology, South Africa)
DOI: 10.4018/978-1-7998-2603-3.ch002
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Abstract

South Africa has a poor public transport system, which is dominated by the minibus taxis that transport more than 60% of the population, characterised by abysmal service and bad driving. The emergence of Uber in South Africa has created a new transport avenue for South Africans. Uber became a hit amongst locals and tourists, overtaking the metered taxis as direct competition. The night time economy has been one of the major beneficiaries, as Uber provided a 24 hour transport system. The entry of Uber has been associated with disruptive technology, which has disrupted the metered taxi industry specifically and the transport industry generally. The emergence of Uber has brought about a new pricing strategy called surge pricing, which has not been captured by the academic gaze in a Southern African context. The chapter seeks to add to the body of knowledge on Uber and surge pricing.
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Introduction

“Technology plays a crucial role in tourism and has enhanced the way of doing business in the industry. Tourism is defined as the movement of people, a sector of the economy and lastly a broad system of interacting relationships of people. Technology has changed how people communicate and the way of conducting business globally” Sifolo and Henama (2013, p. 1). The impact of technology has been more profound in the tourism industry. The cost of doing business has been reduced, lowering barriers of entry and increasing the competition for customers. Technology has led to disintermediation especially for travel agencies, which were the traditional distribution networks in the tourism industry. Technology provided an avenue for airlines to sell their tickets directly to the customers, and this led to the proliferation of low-cost carriers. “The changes brought by the Internet revolution had altered the distribution of tourism products forever. Airline carriers have been steadily decreasing the amount of commission paid to travel agencies as payment for selling their tickets and this has threatened the existence of travel agencies” Henama (2013, p. 62).

According to Henama (2014) the emergence of low-cost carriers (LCCs) has been able to open up new airline markets, use cheaper secondary airports that offer lower costs that are transferred to lower fares for customers. “Business benefit from the tourism industry. There are three different types of commerce namely: business to consumer (B2C); business to business (B2B) and consumer to consumer (C2C)” Sifolo, Maimela, and Tladi (2014, p. 58). The major structural problem facing South Africa is the high rate of unemployment. “The high rate of unemployment should have ignited entrepreneurship in South Africa; however, this has not been the case. Policy makers often view entrepreneurship as a panacea for inclusive growth” Henama (2018, p. 2). Uber has emerged as a form of disruptive entrepreneurship, which has been able to create thousands of jobs. The entry of Uber has not been without challenges, as the metered taxi drivers have launched attacks against Uber drivers. The extent of crime against Uber drivers has captured national news, and the police has increased policing around Uber frequented areas.

The emergence of Uber and e-hailing operators has become a form of direct competition to the metered taxis in South Africa who had used premium pricing because of having a monopoly. Uber disrupted that monopoly and become the preferred transport provider. Instead of the metered taxi drivers responding to the competition by means of adapting their business processes, violence was metered out to the Uber partner drivers and their customers. Uber is a transport system that is instititionalised amongst the independent tourists that arrive in South Africa. As a result, acts of crime associated with Uber, are regarded as an attack on the tourism industry. The tourism industry in South Africa is regarded as the new gold, as it has shown sustained economic growth, just like gold mining had done in the 60s and 70s. The public transportation system in South Africa is dominated by the minibus taxi industry. According to Van Zyl and Labuschagne (2008) the minibus taxi industry carries currently 65% of all public transport passengers. The taxi industry is divided into the minibus taxi industry on the one hand, and the metered taxi industry on the other hand. The taxi industry operates without the subsidies that are granted to other sectors such as rail and bus.

Methodology

The literature review is a review of literature or a synthesis, which is a meta-analysis. A literature review is associated with information gathering, and critical analysis. Johnston (2014) noted that secondary data analysis is analysis of data that was collected by someone else for another primary purpose. According to Van Wee and Banister (2015) literature reviews are very helpful as the reader gets an up to date and well-structured overview of the literature in a specific area and the review adds value. “Conducting a literature review is a means of demonstrating an author’s knowledge about a particular field of study, including vocabulary, theories, key variables and phenomena, and its methods and history” Randolph (2009, p. 2). The literature review will add to the paucity of academic gaze on the surge pricing associated with Uber.

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