In message
-sept
ember.org, at 08:43:53 on Wed, 28 Sep 2016, Recliner
remarked:

Basically, a new entrant can't beat an established market leader just by
having lower prices. It has to offer something better

What's better about Aldi than Tesco, if not the prices?

It's certainly not the range of products or length of checkout queues.

Aldi is a low cost, not just a low price, chain.

Having lower costs is how they can do the lower prices. It's the latter
which attracts the customers.

Absolutely. But it's why they can have sustained low prices. A start-up
Uber competitor would have higher costs

Even if run from someone's back bedroom?

That's probably a higher labour cost per ride than the highly automated
Uber incurs. How would this little operation handle fare calculations,
customer billing, driver payments, advertising, route creation and
monitoring, and all the other things that Uber slickly automates? Or are
you just suggesting a simple, local, manual mini cab operation?

Still automated (writing an app is easy these days) but local market.

and wouldn't be able to compete on price for long.

It could compete for as long as the local drivers were prepared to swap
more business for lower fares.

Not if their payments were less than the running costs of their cars.

At £1/mile typically, there's a big gross margin. The biggest running
cost is sitting for an hour on a rank, with no customers.

Uber's drivers in the same city would earn more per ride, and probably get
more of them.

If there are any.

An Uber start-up competitor would have higher, not lower costs.

A Uber competitor in a small section of their market would have lower
costs. No vanity projects like driverless cars, and they'd probably
expect the drivers to pay their way rather than be subsidised.

They would, and it's why their prices would be higher than Uber's.

Why does drivers not being subsidised make this new-Uber's prices
higher?

Uber's subsidies are basically to allow fares to be lower than what the
drivers earn. The niche competitor, by not doing this, either has to pay
its drivers less than it costs them to run the cars (so zero drivers),

At £1/mile?

or charge more than Uber (so very few customers).

I just looked up Uber where I live, and it said £1.25/mile.

It's why Ryanair and easyJet succeed, where bmi Baby failed.

The reason BMIbaby failed was because they failed to fill the planes up.
Part of that is because as a much smaller airline they had very little
brand recognition on the Continent, where you want a lot of your
customers to be living, so that you don't get excessive tidal flow
arising from mainly UK-based customers.

Whenever I've flown easyJet or Ryanair, it's been on routes that primarily
attract Brits or the Irish, and that's what all the pax were, in both
directions.

You must not have flown to Eastern Europe very often.

And as for brand recognition, Uber will be the easy winner against a niche
local competitor.

I bet more people where I live have heard of Panther [500+ cars in
Cambridge] than Uber.

Perhaps. Does Uber even operate yet in Cambridge?

Since this June, apparently.

And would visitors to
Cambridge have heard of Panther (which is where branding matters)?

Visitors (to Cambridge) are a niche market for cabs.

I'm no sure which part of their costs you think were significantly
higher - they had one of the oldest fleets in the air, and the other two
one of the newest. That must impact the cost.

Yes, it does, in favour of the airlines operating large, modern, homogenous
fleets. It's why true low cost airlines all buy their planes new, and don't
keep them too long. By bulk buying, they get brand-new planes, built to
their exact spec, and support services, all at the lowest possible cost.
BmiBaby had a motley collection of elderly 737s, all acquired second-hand.

So their buyer's fault they failed?

No, the airline's lack of strategy or understanding of the low cost airline

I'm more inclined to think it was the routes they operated.
--
Roland Perry