New cab business needs niche to survive
From lost drivers to lost receipts, questionable times of arrival to questionable smells, cab rides are the bane of busy professionals.
But a tiny Toronto firm called HireWinston is making taxis 2.0 with an app that hails luxury town cars at the tap of a touch-screen. It allows users to track a car’s route using GPS, sends a text message on the driver’s arrival, and even bills a rider’s credit card—avoiding the fumble for change at a trip’s end.
The problem is, the technology isn’t really new. And Uber, a global company with a similar app—and more than $40 million in venture capital backing—just rolled its cars into Toronto. HireWinston doesn’t stand much of a chance in a head-on fight against the larger business, but their clever business plan means they may be able to duck the competition and focus on an untapped market.
Aidan Nulman, Krista Caldwell, Yilun Zhang, and Mindy Lau started HireWinston last year with a pitch to The Next 36, a Toronto-based entrepreneurial incubator. Almost a year later, the company is in business and picking up steam—and corporate partnerships—across Toronto. They now have two angel investors, a fleet of 30 cars on the road, and four multinational consulting and audit firms signed on as HireWinston users.
“The ‘press a button and get a car’ concept wasn’t new,” says Nulman, 24, one of HireWinston’s co-founders, “but no one was doing much for the corporate folks.”
There’s the rub. Uber caters to a much wider audience, basically anyone with deep enough pockets, while HireWinston has carved out a lucrative niche in the business world. The team spent the past year researching corporate transportation needs, and realized they could capitalize on demand for a simpler way to process taxi expenses. They eradicated the messy affair of collecting taxi chits and paper receipts, replacing the process with easy-to-manage electronic transaction records compiled into a company spreadsheet.
“We knew our business had to be solving a serious problem,” says Caldwell, 21. “People who expense all of their rides—it’s way more of an inconvenience than the average person (faces).”
Targeting that niche is fueling HireWinston’s survival in an ocean of flashier competitors. Though Uber has been pushing their app with coupons, ads, and a social media blitz (they’ve racked up 40 times as many Twitter followers as HireWinston), Nulman says the team is concentrating on marketing through good corporate word-of-mouth. They don’t have an advertising budget, but they’re confident the seamless door-to-door experience will sell the service.
But is a good reputation alone enough to support the company? Alan Carsrud, a chaired professor for Ryerson Unversity’s Ted Rogers School of Management, says corporate customers will need to be convinced the new service is worthwhile.
“Word-of-mouth sounds good on the front end, but it takes feet on the ground,” he says. “They need to be knocking on doors. Unless it’s saving the companies money, it’s a hard sell.”
While Canada’s mobile-app luxury car services cost 20 to 30 percent more than average cab rides, HireWinston is one of the more affordable options, with a minimum fare of $20, a $7 base fare and an additional $2.10 for every kilometre. So far these prices are working. After launching a Blackberry app and introducing prescheduled rides, a feature Uber has yet to implement, the company saw ridership double in March.
Still, the company faces other troubles.
Caldwell says the real challenge for the taxi 2.0 industry is converting people used to flagging down taxis into regular app-users.
“Our biggest competition is the status quo,” she says. “Our generation is used to using apps, but it’s a pretty big behaviour change for most people.”
Niche marketing has brought the company its success so far, but they want to tap a broader market. Caldwell says taxi companies are trying to cut out middlemen by losing their brokerages, meaning the race is on to go mobile, and deliver a platform that works. So his company developed Fleetbit, a program customized for taxi fleets that employs the same concept as HireWinston. It’s packaged as a white label, no-name technology into which taxi companies can plug their own information, making it appealing to a broad set of clients.
The company is in talks with investors from Toronto, New York, Chicago, Vancouver, and San Francisco about the new Fleetbit technology, pitching it as a way to keep up with the changing taxi enterprise.
But they don’t have the companies on board yet, and moving into direct competition with Uber, and a number of other companies, means losing their niche-marketing edge.
“Cabs everywhere are having their margins squeezed like crazy,” says Carsrud, who has helped launch more than 200 technology firms worldwide. “The white-label app is doable, it’s just that you have everybody and his grandmother doing that.”
But the HireWinston team says their product is a transportation game changer, and is confident that there’s enough demand in the industry to support multiple apps.
“Taxis are a very visceral experience. If someone just puked in the cab before you got in, you’re going to swear off the brand,” says Nulman. “There always needs to be an alternative, and we just want to be the best one.”