In recent years, ride-hailing companies have gained prominence with their unique business model. Uber, Bolt, and others operate digital aggregator applications that connect passengers needing rides with nearby drivers willing to serve them. This on-demand transportation service seamlessly links demand with supply.
The year is 2014.
Africa still prides itself on the hashtag #AfricaRising, which connotes a continent emerging from pre- and post-colonial oppression and gradually gaining global attention due to its growing population. It also has enormous unfulfilled demand, making it ripe for large-scale entrepreneurship and innovation. Economic indicators are on the rise. In her 2014 TED Talk “Africa Rising: Real or Hype,” Ngozi Okonjo-Iweala pointed out that the growth of African economies, which had been less than 2 percent in the decade before, had leaped to 5.5 percent. She also highlighted that foreign direct investment skyrocketed from $9 billion in 2000 to $50 billion in 2014.
McKinsey further estimated that private consumption in Africa rose from $860 billion in 2008 to $1.4 trillion in 2015—significantly higher than India, which has a similar population size. By their forecast, this figure could reach $2.1 trillion by 2025. Clearly, it was imperative that business be done here.
Being the first to enter the market, Uber understood the importance of tapping into such a key emerging region for a multinational looking to scale and maintain relevance in the long run.
Since its inception, Uber has largely been successful. However, this success has not been without challenges, owing to the peculiarities of doing business in Nigeria. Political volatility, frequent policy changes, lack of trust, propensity for fraud, and economic and geographical complexities create a difficult business terrain. It becomes challenging for multinationals to deploy strategies that have worked in other regions, making it imperative for them to adapt to the Nigerian market.
A classic example was the introduction of multiple incentives at launch to encourage driver sign-ups and stimulate supply for rising demand. This strategy, also adopted in countries like China, saw Uber introduce a ₦40,000 signup bonus for new drivers. However, many people signed up but did not drive. Uber later adjusted the policy, requiring new drivers to complete 20 trips before receiving the bonus. Still, drivers would complete the 20 trips, collect the bonus, and stop driving. Since these incentives failed to meet their objectives, they were eventually discontinued.
This case illustrates the importance of considering the Nigerian business environment in strategy formulation and conducting risk assessments to counter factors that may hinder execution.
This article examines the recent upsurge in offline trips, how this trend can affect ride-hailing companies, and recommendations for responding.
The Rise of Offline Trips
Recently, customers have reported a growing increase in drivers on ride-hailing applications engaging in offline trips to avoid the 20–25% commission fee charged by the companies. In a personal encounter with a driver negotiating an offline trip, he remarked:
“Uber no buy motor, no maintain am, no buy fuel, but go collect 25% service fee. Madam, please, make we do offline. I go give you small discount, make e no be like say I dey work for Uber.”
Drivers convincingly negotiate offline trips through emotional appeals, often warning passengers of higher fares during traffic. They offer to charge a reduced, predictable fee and sometimes attempt to convince riders to contact them directly for subsequent rides.
These behaviors expose a loophole in the business model of ride-hailing companies—one that drivers have increasingly exploited. To counter this rise in offline trips, the following recommendations are suggested:
1. Create Buy-In from Customers
To discourage offline trips, ride-hailing companies should implement measures that encourage customers to remain on the application and resist drivers’ requests to go offline. One option is to deploy payment systems that lock in customers and promote more online trips.
For example, an incentivized Uber or Bolt wallet that allows customers to pre-pay for rides can reduce acceptance of offline trips. This option also provides additional value by helping customers budget for transportation needs and ensuring seamless payments.
2. Raise Awareness About the Risks
Many customers are not fully aware of the risks to their safety or goods (in cases of delivery) when engaging in offline trips. Their narrow view of ride-hailing companies as mere connectors overlooks critical benefits such as safety assurances, easier tracking of drivers in cases of forgotten items, stolen goods, or misconduct.
By raising awareness about these complementary brand values—and clarifying the risks and liability limits in offline arrangements—ride-hailing companies can reduce the incidence of offline trips.
3. Pay Attention to the Data
Ride-hailing companies should monitor offline trip activity by tracking unusual spikes in rider cancellation rates. Traditionally, cancellations are attributed to delays, but companies must now factor in the likelihood of offline trip arrangements whenever such spikes occur.
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