- Didi offered more and much better features based on their deeper knowledge of the Chinese market compared to Uber, who despite spending over a billion dollars to prop up its position in the country, was left far behind.
- The upshot of the Uber-Didi deal is that Uber now has a US$7 billion dollar stake share in Didi's dynamically growing business - not a bad result given its estimated US$2 billion Uber investment in China.
- The moral of this story is that everything in China is more complicated and less 'black and white' as it often appears to be the case.
- China is still going to want- and need- the involvement of international tech companies. Western firms will find there are still major opportunities in China.
Kitty Fok, Managing Director, IDC China, has published a LinkedIn Pulse post on Uber's sale of its business in China to local rival Didi. According to Fok, Didi simply offered better features based on their deeper knowledge of the Chinese market compared to Uber, which was left far behind.
"Unlike other Western Internet giants such as Google, Facebook, and Twitter, who ran afoul of Chinese regulations or the country’s pervasive censorship apparatus, Uber encountered few official or bureaucratic roadblocks. It simply could not compete with a better product for Chinese customers, as any close comparison of the services between the two companies makes clear," notes Fok.
Fok points out that there were only three kinds of Uber cars available to Chinese consumers - cheap, medium-priced, and expensive, while Didi offered the same thing and more: taxi-hailing, bus-hailing, and a carpool service. "In addition, it was possible to use the Didi app to arrange for someone to drive ones’ own car home after an evening of drinking - in effect, hiring a designated driver," Fok adds. "These additional services were much more attuned to the dynamics of Chinese society and the needs of Chinese consumers. The designated driver feature, for example, was a recognition that in China, an enormous amount of business is conducted over dinners where copious drinking is the norm, and having a way to get home safely would thus be widely popular."
In particular, Fok named mobile payments as key to success in China. "Credit cards – the mainstay of Uber’s business - are, in relative terms, a rarity in China. The vast majority of payments are instead made through WeChat, owned by Ten Cent, and AliPay, which is owned by Alibaba. The upshot is that multinationals are facing growing pressure to develop partnerships with- or at least reach an accommodation with- these two giants. Uber’s inability to do so was one of the reasons for its problems in China," she said.
Fok also brought up Indonesia’s on-demand motorbike (ojek) service Go-Jek as another example of how understanding of local needs has spurred success. "Go-Jek’s founder, Harvard-educated Nadiem Makarim, recognised that an app linking ojek drivers with customers would offer a way to overcome the frustrations of Indonesia’s dreadful transport infrastructure... The Go-Jek app has been downloaded 25 million times, and the company now has more than 240,000 drivers signed up."
Fok also said China will still need international partners, and predicted that Western firms which can adjust to local conditions, government sensitivities and regulations, and Beijing’s desire to promote e-commerce, will continue to discover opportunities in China.
"Unlike other Western Internet giants such as Google, Facebook, and Twitter, who ran afoul of Chinese regulations or the country’s pervasive censorship apparatus, Uber encountered few official or bureaucratic roadblocks. It simply could not compete with a better product for Chinese customers, as any close comparison of the services between the two companies makes clear," notes Fok.
Fok points out that there were only three kinds of Uber cars available to Chinese consumers - cheap, medium-priced, and expensive, while Didi offered the same thing and more: taxi-hailing, bus-hailing, and a carpool service. "In addition, it was possible to use the Didi app to arrange for someone to drive ones’ own car home after an evening of drinking - in effect, hiring a designated driver," Fok adds. "These additional services were much more attuned to the dynamics of Chinese society and the needs of Chinese consumers. The designated driver feature, for example, was a recognition that in China, an enormous amount of business is conducted over dinners where copious drinking is the norm, and having a way to get home safely would thus be widely popular."
The outcome of the sale is that rather than being forced out of China, Uber has a $7 billion dollar stake in a dynamically growing business, Fok says. "Its costly price war with Didi is over, and Uber is now well positioned both to acquire a much more sophisticated understanding of the China market and to devote resources to expanding in other parts of the world," she said.
Fok also called on international companies hoping to tackle China with digital transformation strategies to accept that localisation is now much more than using the local language and making products cheaper and more affordable for target consumers. "It will increasingly require creating more localised features that reflect the scope, complexity, and sophistication of the market," she said.
Fok also called on international companies hoping to tackle China with digital transformation strategies to accept that localisation is now much more than using the local language and making products cheaper and more affordable for target consumers. "It will increasingly require creating more localised features that reflect the scope, complexity, and sophistication of the market," she said.
In particular, Fok named mobile payments as key to success in China. "Credit cards – the mainstay of Uber’s business - are, in relative terms, a rarity in China. The vast majority of payments are instead made through WeChat, owned by Ten Cent, and AliPay, which is owned by Alibaba. The upshot is that multinationals are facing growing pressure to develop partnerships with- or at least reach an accommodation with- these two giants. Uber’s inability to do so was one of the reasons for its problems in China," she said.
Fok also brought up Indonesia’s on-demand motorbike (ojek) service Go-Jek as another example of how understanding of local needs has spurred success. "Go-Jek’s founder, Harvard-educated Nadiem Makarim, recognised that an app linking ojek drivers with customers would offer a way to overcome the frustrations of Indonesia’s dreadful transport infrastructure... The Go-Jek app has been downloaded 25 million times, and the company now has more than 240,000 drivers signed up."
Fok also said China will still need international partners, and predicted that Western firms which can adjust to local conditions, government sensitivities and regulations, and Beijing’s desire to promote e-commerce, will continue to discover opportunities in China.
Interested?
Read Fok's LinkedIn Pulse post
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