Why Uber failed in China.
Why Uber failed in China.
As you probably already know, recently Uber's China business was bought out by the famous Chinese local cab hailing app called 'Di Di' owned by both Alibaba and Tencent. Two competing companies in almost every field. Here's my take on why Uber let their China business go, assuming the billions of dollars a year they were spending on China were start-up costs and looking deeper into exactly why Uber ran into difficulty.
It's Monday evening, 10:13pm. I'm waiting outside McDonalds in downtown Guangzhou, Zhujiang new town. I'm waiting for a taxi with my girlfriend after class and with a few taps of her phone and the driver is on its way.
We're chatting, ironically, about why Uber failed in China, being Chinese and high ranking in a large foreign company in Guangzhou, mentioned the government as almost the sole reason for Uber failing here.
She gets a call from the driver, 6 minutes until he arrives. For as long as I know it's always been that long a wait, we're waiting every Monday watching empty taxis going by. Meanwhile, I respond her saying, “why exactly would the government stop a company like Uber operating.” She said because their servers are operating outside China. The government doesn't allow this.
I stepped back in my mind and thought the scenario through with my own foreign owned company in a similar situation to Uber. I envisioned the government issuing their requirements regarding the servers and threatening or attempting to control Ubers operations but it seemed a little odd to me. Something didn't quite add up.
3 minutes until the Uber car arrives. I respond my girlfriend with my partial answer. Saying that if Uber were being pushed to use servers in China. And pushed far enough that they had no choice and had to move their servers to China. Then, Why didn't they? I continued. If it was my business, and my business also has a lot of data in servers outside China. I would just move my servers to China if the government requested. If I was worried about data protection i'd have the servers in-house with everything encrypted. No big deal.
It seemed something else was the cause of the failures. 1 minute until the car arrives. My girlfriend mentioned some raids on the Guangzhou offices of the company. I said, yes, it's not surprising; new foreign companies get that treatment unless they go out to meet the government employees responsible for their company. Once the government meet the bosses, or person/s running the company a relationship can start to be built to prevent future random raids.
I was still unsettled. Uber, with several billion dollars of investment? i'm pretty sure a big fish like Uber would have the correct advisers on China to get that bit right.
My mind jumped a step. Why on earth does it take 6 minutes for a car to arrive in central Guangzhou during non-peak hours? Surely their system is smart enough to choose the nearest car? Can the nearest car really be that far away? Why is it that far?
A Honda, popular with Uber drivers here goes by, we check the license plate. No, not my girlfriends car.
Then it clicked in my mind.
Uber didn't fail in China because they are a foreign company here. They failed because they tried to use their successful western model and impose it on China. In China, business happens immediately. If you're paying even 1 yuan, you get it now or you never get it.
With Uber this is exactly the problem. Their cars are taking far too long to arrive at their clients' location. Perhaps because of the very complicated and illogical road system and more likely because their drivers are paid the same whether they pick someone up in 6 minutes or 2 minutes.
Likewise, the passenger pays the same whether they stay put and get their Uber from the near-side of the road, which means a U-turn 300m down the road in thick traffic (Which can take 10-15 minutes), instead of them just crossing over by the pedestrian crossing right in-front of them.
My girlfriends Uber car just arrived.
My advice, Uber and every foreign company looking to or currently operate in China must never forget the requirement for immediate service even when life in general is fairly laid back and slow paced. Chinese customers do not take kindly to waiting even 1 second longer than needed even if they have nothing else to do afterward.