With most of the world shut down and governments doing their best to saves lives and/or destroy the economy. We can let the pundits and politician argue about that we’re business people, the one missing component from the head lines and pleas for food services workers, save our restaurants, and Broadway actor Funds, all of which is are good causes. Yet what is missing is from the headlines is the impact on the gig economy. This episode in particular deals with Ride share drivers stranded without out an income and changing business conditions..
Perhaps it’s the lack of PR companies and Lobbyists but the talking heads in news media between talking about shortages of medical supplies and reporting on they 16 million unemployment claims in the first three weeks have failed to represent what has happened to the bastion of “be your own boss” also known as the gig economy. It has been sold to millions and millions as a way to start your own business, be your own boss and all of the other ideals that surround entrepreneurial spirit in the United Stated. After all as the day this piece being published Lyft was using the “Be Your Own Boss” slogan on their driver sign up page.
This is not meant to be a criticism of their executives, business model, or policies. It is not an indictment of any company and I have included publicly available stats for the two market leaders in the US ride share business as a reference
Fair warning I am not a professional journalist, nor an expert on the ride share field. My perspective comes as a consumer of thee services and details that individuals who drive for and depend on those incomes have shared with me.
As causal observer and business owner it seems clear that amid the huge banking, airline and cruise ship bail outs it seems as thought Washington is once again missing the little guy. Yes I know there are small business loan programs as part of the stimulus a number of my clients have filled out the forms. Yet more than corporate and wait staff layoffs not one has seemed to represent the free lancers, and gig economy “employees”.
The Gig Economy Where the Business Went – Personal Examples
When Tim Stops Traveling Times About 800 Million
When the businessmen go so does the business. Last year I took nearly 180 flights and spent over 200 nights in a hotel. This year a variety of changes took that to literally none in the 45 days. That means beyond the maids, wait staffs, and front desk staff the people I relied on for the past two decades as a road warrior that the Uber and Lyft drivers that I had used to replace car rentals with in many cities lost a client.
The issue isn’t one less traveller. it’s the millions of people like that who are no longer on the road. Or 8000,000,000 or so folks based on the on 2015 Bureau of Transportation Statistics Data.
With out large lobbing efforts, and CEO’s pleading for government money it’s the driver’s that have been lost in the shuffle. Before the chants to “eat the rich” begin most likely led by my youngest daughter. Or talks of how a union would protect get brought into play Let’s look at a few driver’s stories.
When No One Else Will Give You Ride Share Did
One Driver told me they used to start their day at 5am. Ride Share became a way for them to earn money when they were no longer able to work in a corporate role. The morning was spent picking up doppelgangers in their South Western suburban area and running them to the air port then newly arrived business people to offices and hotels around the airport and down town. In talking with them they had worked in the corporate world for nearly 30 years but times change. Their partner was a teacher so when the business world “was done with them”, and being a ranger on the golf course was nice but would never pay enough they started driving for a ride share company.
Their target was simple Monday to Thursday and Saturday Mornings during the busy winter season do 20 rides a day no matter the fare. They’d stay on longer if incentives went up which led to them bragging about making over $200 in incentives and bonuses one Saturday in early February for number of rides given.
This driver saw the initial slowdown as a boon for them. Essentially they hedged that with others driving less or stopping all together their rid count went up for a few weeks until the shutdowns and closures started in earnest. They simply couldn’t imagine what the world had become figuring if nothing else the weekend college crowd would still be out at the bars. Of course not only did the bars close but so did the schools. In a matter of days their rides went to virtually zero.
The good news in this case is their partners is a teachers, they have health insurance, and income from that job. As for whether they will return to driving for Ride share companies on the future they simply weren’t shore. It seemed a way not only to earn money, stay active, but also as a social outlet and passing connection to a world they were once part of.
It’s not So hot when your Ride Share Business Goes from 25 to 9 rides a day
This is where the original idea came for this story. A friend whose main income had been driving exclusively for one Ride Share company in a large metro over the past few years. He painted this rather stark picture. Pre shut down an average day was 25 rides. A good day was 30 rides, and a great one was 35 or more with several airport runs. In most cases it was 5 to 7 minutes to make the pick up and a fare of north of 40 dollars. He specialized it seemed in airport runs in the morning and early afternoon that were closer to 60 plus tip. After paying for fuel and factoring the cost of the car he leased and insurance, and his App of choice’s commission he’d make $150 to $200.
He saw the rides decrease quickly as the business laden suburbs and conferences in his city were canceled well before the lock down. His car was leased through his ride share company of choice and with decreasing revenues made the decision any business owner would be faced with. cut expenses and turned in his leased car (more on this part of the business later). It dropped $200-$300 (Mixture of lease insurance and fuel costs) out of his weekly expenses but cut his income to zero. He decided to preserve his savings rather than doubling down.
Alone in the Windy City
Many drivers aren’t as lucky as my friend. They were given short notice that the leasing and maintenance centers were closing. One driver told me how their rides had gone to 8 ir 9 dollar total fares. That they were out longer and getting less rides but needed to keep going to meet the costs of their lease. It took a few weeks but some individuals have said they got notice last week that their weekly lease amounts had been cut by 50% . Most felt it was as an inventive to keep them out and driving.
There are stories of individuals struggling with filing unemployment, at a loss for when stimulus checks will come in. In fact that was some of the main concerns that were share with me as I spoke to people in the gig economy, not just the ride share drivers but across the board.
Ride Share Apps Facts
Uber
Uber has a global market value of $72 billion.
Uber generated $12 billion in gross bookings Q4 2019.
There are more than 75 million active Uber riders across the world and the service is available in more than 80 countries worldwide.a They have completed more than 5 billion rides.
Over 3 million people are Ride Share Drivers for them globally, 2 million which are in the U.S. drive for Uber and prior to the pandemic In the United States, Uber fulfills 40 million rides per month with average Uber driver earning $364 per month.
Lyft
Has a gross booking of over $8.1 billion, hold north of 33% of the domestic U.S. Rideshare market and prior to the shutdowns had been growing consistently They offer insurance of up to $1 million to its drivers who make on average $12.53 per ride.
The Business End of Being a Driver
How a driver gets paid
“Base Fare: The amount passengers pay to start the ride
Cost per mile: The amount you earn per mile in the city where your ride starts
Cost per minute: The amount you earn per minute in the region where your ride starts”
Be your own boss…but expect to still have to pay the man. Drivers don’t get a cut of the the imposed fees … What imposed fees you ask?
“the Service Fee” the App itself charges to provide the platform.
Event, Airport Pick Up and Drop Off Charges, and Tolls. Also there are varying circumstances where drivers do or don’t get part of the cancellation fee.
If you look at it through a traditional lens it’s just like a taxi. Wanna know why? Because that is really what a ride share is. It’s a damn Taxi and while disruptive and malingered by the traditional taxi industry all they really did was innovate on decades old model that had gotten over priced (outside of NYC), Delivered poor and often spotty service (I’m looking at you Dallas and Orlando),and a myriad of other concerns (Never use a Cab in St. Charles County Missouri), I have had better rides in the back woods of 3rd world countries.
Keep Them In The Family and the Cash Close at Hand
Both Uber and Lyft offer program where drivers can rent/lease a car from their app provider of choice in conjunction with covering the insurance needed, maintenance. It takes as corporate schmucks like me would say “the barrier of entry” out of the equation. Don’t have a new enough car? Then they have got a solution for you.
Here’s where I began to get educated he leaded his car direct from the ride sharing app at a rate of roughly $200 a week with insurance.
What you insurance covers and how can vary by who you lease from and what status you are in. Personal use, waiting for a ride or on an active fare.
Often leases require a visual inspect every few months,some include routine maintenance services while other are incented to use company owned garages that perform the work at or below marker rates.
The leasing programs allow drives to change out cars, upgrade or downgrade and ion some cases see available inventory. Major rental companies have come on board and Avis and Hertz seems to participate with both market leading ride share companies in providing vehicles.
A Circular Problem with Shutdowns, Ride Share Drivers, and Less Travelers
Economics while not an exact science is pretty good at cold stats like supply and demand. Ride Share drovers are simply part of the math. The demand is down. Take business travelers out it hurts, take shelter in place orders and their daily commuters that relied on the service to get to and from work and it kills the business. Less demand means less and less supply. Who can blame them if they can’t make money, and there isn’t enough need less drivers turn on their app.
Passengers and drivers alike have been stating that pick up wait has gone from that ideal 5 to 7 minutes to 15 to 20. Which increases cancellations, with less travelers on the road there are also less drivers, some banned from working by their localities. The Wall Street Journal reported consumers spent 21% less on Uber rides and 19% less on Lyft rides in the week ending March 16, compared with the previous week. Those number have likely continued to plummet as less and less people are moving around.
No one knows what the new normal will look like for travel or the world as a whole. How we attend events, and how we get from here to there may change dramatically. Perhaps it’s not a matter of self driving cars replacing the gig economy drivers but whether we go at all or if we go much less often that is the question.
In the mean time countless millions have seen their incomes cut or vanish. They are not the only people hurt by the down turn. By cost cutting and even what could be long term cultural changes. Yet they are ones who people like me have depended on for years who just don’t seem to be being heard above all of the noise.
Resources for Ride Share Drivers
For Drives and practitioner please read on, add your one context in the comments. If you are looking for additional resources “The Ride Share Guy” has put together a step by step guide on applying for unemployment, as well and the economic disaster loan program. https://therideshareguy.com/applying-for-the-economic-injury-disaster-loan-program/
Tim Kubiak
Tim Kubiak is a Business Geek, Nomad, Aging Metal Head, Nerd, & Coffee Addict. Plus the only big guy at Hot Yoga. For over 25 years he's been building high-performance sales teams globally. With over 2 billion in lifetime sales in goods and services. Tim works as a coach mentor with Founders, Business Owners, Executives, and High Performing individuals to transform companies, bring new solutions to market and achieve their professional goals.