Published on April 28th, 2014 | by Bhavishya Kanjhan1
For Careem, the growth lies in supply
You would be forgiven for thinking that demand of services like Uber and Careem could be on the lower end here. In a region which has very high car ownership numbers, and fairly well established taxi system, one could questions why users would pay a premium for a service – unless in an exceptional scenario like going to the airport at 5 AM in the morning.
However, Mudassir Sheikha, Co-founder of Careem tells us that the growth for them lies in supply.
The startup recently launched officially in Jeddah and has seen 50-60% growth over the first three months of its pilot launch. The overall growth rate across six GCC cities has been around the 30% mark.
Sheikha says that there is “a huge appetite for the service” and that they aren’t demand constrained. This is why they’re working with service providers to get the right supply – this includes both the car and the driver – at an acceptable price. Careem also provides training and support services to fleet and drivers to bring them up to a certain level of quality.
There is “a huge appetite for the service” – Mudassir Sheikha, Co-founder, Careem
In addition to that, Careem is working with providers to stimulate the purchase of the right kind of cars for a fleet. These incentives among other things, include committing to business over a period of time.
This same level of commitment is extended to drivers who have a high rating over a long period of time. In this manner, Careem is able to guarantee a good level of service to the user while providing an equal level of business to drivers and service providers.
Of course demand and supply can be a tricky issue. Both are cyclical and depend highly on a lot of events. This is where the phenomenon of ‘Surge Pricing’ as applied by Uber has come in. Sheikha points out that they haven’t implemented a surge pricing system in Careem and that they work with drivers to ensure a steady supply at the regular rate to users. This does mean that Careem sometimes surges on the driver side, but not the consumer.
This emphasis on supply has helped Careem achieve its target of 99.3% on-time arrivals of bookings. When asked about the 99.3% number, Sheikha said they aimed at 99% but were actually achieving beyond that. This does come at a cost though – for example Careem’s pre-booking service has a minimum charge of AED 75. This pricing could be brought down but that would mean the on-time metric possibly dropping – a trade Careem isn’t willing to make.
However Careem is running ‘a few experiments’ to ‘test the boundaries of the market’ which will help optimize pricing and supply, in the coming weeks.