Careem tweaks its strategy once again as competition gets fierce

Once a clear leader in the ride-hailing market, Careem is finally trying to fight back.

Ride-hailing platform Careem has realigned its strategy with the launch of a price bidding option for customers, as competition in the ride-hailing industry gets fiercer with the entry of Russian Yandex-group backed Yango in the country. 

Careem already faces stiff competition from inDrive, also a Russian origin company. Matters are not helped by the entry of Bykea in car-hailing. Both companies allow users to bid fares and offer them more control over pricing. Yango also offers these rides at discounted prices. 

Which is why, in a recent announcement, Careem launched Flexi Ride, in the company’s new bid to allow for more user flexibility. Careem has kept the original model of automatically generated fares without the bidding option intact in all categories.

What is Flexi Ride?

The Flexi Ride feature might be a new offering by Careem, but it is not a new concept in Pakistan. This feature allows commuters to set their preferred price at the time of booking, with an average fare initially displayed. 

Users on the Careem app can only bid fares 15% over or under the displayed average fare, while users on Bykea and InDrive do not have any range restrictions. The rest of the process remains the same, where the user’s offered price is sent to multiple drivers, who either accept the fare or offer counter bids. When an agreement over the fare is reached, a driver is assigned, commencing the journey.

Careem’s justification for having a 15% upper and lower cap for bidding range is to prevent users from offering exploitative fares to Captains and keeping the prices fair. 

The new offering was piloted in Faisalabad and Multan in September, where it received a positive response, according to the company, prompting its launch in Islamabad and Rawalpindi in November. The company plans to expand to other cities like Lahore and Karachi soon. 

Imran Saleem, General Manager Ride Hailing at Careem Pakistan told Profit, “We launched Flexi Ride because we saw an appetite for it in the market based on surveys and routine connect sessions with the Captains and customers. While the early adoption rate is promising, we will continue to monitor and see how it progresses.” 

The company refused to share the exact adoption rate but informed Profit that the new feature has gained positive traction. 

Flexi Ride is currently available in three categories of rides, including Flexi GO, Flexi GO Mini, and Flexi Bikes. GO Premium remains unchanged, and maintains the existing variable price marketplace model. While Careem did not disclose the commissions charged to Captain, it was confirmed that commissions under Flexi would be lower than in the original non-bidding fare model. 

Recently, there have been complaints that Careem captains can not earn enough from rides, as they are charged hefty commissions between 30% to 40%, as claimed by Captains. This means that from every Rs1,000 that a driver earns, anywhere between Rs300 and Rs400 will go to Careem. In conversation with Profit, Careem has denied that it ever charged commissions that high. A Careem representative said that the company’s maximum commission charged to drivers was 25%, which has now been reduced to 10-15% in some cities.     

Careem was forced to charge high commissions, as investors demanded more profitability from Careem’s parent company Uber. 

Competitors such as inDrive took advantage of the situation, and started with no commissions. Now, Careem appears to be forced to adopt the same route by introducing a similar offering and lower commissions for drivers. 

Recently, Careem had also announced that it would resume bonuses and incentives for its drivers, in a bid to prop up the supply of drivers which had fallen since the pandemic.

But why would commuters, especially ones opting for the smaller GO and GO Mini cars, continue using the original model when Flexi exists? Should Careem not have discontinued the previous billing model in GO and GO Mini cars because customers and captains alike have greater incentive to opt for the new price model? 

A Careem captain, who requested to stay anonymous, disclosed that the company is using several incentives for captains to adopt the new model. “Careem is charging less service fees from Captains on Flexi Rides,” he shared, confirming that high commissions might have been part of Careem’s troubles.  

With the new offering, Careem’s own commissions might suffer, but the company will have to succumb to market demand, especially in today’s highly competitive ride-hailing landscape.

The captain also told Profit that in a briefing session for captains prior to the launch of Flexi Ride, a Careem spokesperson said, “The idea behind keeping both the Flexi (fixed) and marketplace (variable) models operational is, to account for factors that influence the cost of the ride. This way Captains have liberty to take rides on the marketplace model during peak hours, whereas, customers who prefer the original model due to any factors, such as having multiple stops or longer journeys, but want a cheaper and smaller car can also opt for it.”

It is safe to say that this new feature was launched to cater to more price sensitive customers, who prefer having control over the fares they pay. It is also safe to assume that Careem was urged to introduce this new feature in order to retain its market share in a highly competitive market, so that it does not lose its user base to alternatives like Bykea and InDrive.

In an interview with Profit in 2022, Bykea’s CEO Muneeb Maayr said, “We are rolling out a hybrid between immediate matchmaking that we do today and a bid offer that inDriver does.” He added: “In a recession, we feel that the hybrid of both of these is going to be something that the market is going to accept. It is going to both allow drivers to send offers and even allow customers to send bids, even if they are low bids, especially the customers that want to save money and want to wait after bidding for low fares.” 

Bykea assumed that movement might not stop, but commuters might have lowered expectations of quality and time. In essence, Bykea relied on the premise that the decline in disposable income, attributed to escalating inflation, coupled with the essential need to commute for work or school, will prompt individuals to trade waiting time for ride costs. This strategy seemed to open the door for the inclusion of less expensive, lower-quality vehicles, further reducing overall prices and positioning Bykea to seize a larger market share. Something similar might be in the play for Careem as well.

Careem Pakistan seems to be shifting its focus away from segments which are not related to ride-hailing. Just over two months ago, the company withdrew its electronic money institution (EMI) licence from the State Bank of Pakistan (SBP), ending its plans to launch a mobile wallet. Careem’s food delivery service also is nowhere to be seen, hinting that the food delivery segment might have succumbed to food delivery platform Foodpanda’s mammoth presence. 

Instead, changes at Careem, such as the introduction of Flexi rides, come on the back of a $25 million investment for the Pakistani market. The lower commissions on rides means that Careem’s focus has come back to ride-hailing. It has cash and is ready to spend it to regain its market share in car-hailing. 

Nisma Riaz
Nisma Riaz
Nisma Riaz is a business journalist at Profit. She covers retail and media and can be reached at [email protected] or https://twitter.com/nisma_riaz

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