Why Do Consumers Choose “Tada”?

The conflict between taxis and “Tada” continues. “Tada,” a service that allows passengers to use an app to hire a van and driver at the same time, has become so popular that it surpassed 500,000 members in just six months after launching. As a result, the taxi industry is calling for “Tada” to be driven out, arguing that under current law, providing paid transportation services without a license is illegal.

“Tada” introduced a new service based on the Enforcement Decree of the Passenger Transport Service Act, which allows customers to hire both a vehicle and a driver at the same time in the case of vans with 11 seats or more. Because of this, fruitless debates have continued over whether “Tada” is illegal or legal. But more important than determining its legality is the fact that consumers are willingly choosing “Tada,” even though it is 20% more expensive than taxis.

“Tada” offers services differentiated from taxis. Whereas traditional taxis allowed drivers to choose passengers after confirming their destinations, “Tada” uses a system in which drivers cannot know a passenger’s destination in advance, thereby solving the problem of ride refusals. It has also strengthened its passenger service manual for drivers, providing comfortable and friendly service. Consumers are willing to pay a little more to use “Tada” because it allows them to choose the level of service they receive.

Many innovative services besides “Tada” have tried to challenge the market. But time and again, they were met with opposition from taxi operators and could not even enter the market. Uber withdrew from the Korean market in 2015, and the late-night call bus in December 2015, the carpool service Poolus in 2016, and Kakao Carpool in 2018 all gave up their businesses. In the meantime, the government has chosen a policy of blocking the market entry of new transport services and protecting the vested interests of the taxi industry.

Consumers want the freedom to choose how they travel. Accordingly, there is a need to broaden consumer choice so people can use the smartphone in their hand to decide whether to take a taxi, use Uber, or choose carpooling. The emergence of new services such as “Papa,” “Chacha Van,” and “Waygo Blue” while “Tada” has been held back by regulation also reflects this consumer demand.

Technological progress is bringing major changes to the very concept of owning and using cars. Overseas, consumers accustomed to shared services such as Uber and Grab are said to be renting cars rather than buying them. Companies that traditionally manufactured automobiles are now turning their attention away from simply selling more cars and toward autonomous driving and shared services. Ride-sharing services, which are growing rapidly in the global market, have become part of the trend of the times, and we cannot afford to fall further behind.

It is natural for new services to appear in the market through innovation. Just as the arrival of taxis in the past caused rickshaws to disappear, innovation inevitably pushes out some industries and causes some occupations to vanish. “Tada,” too, may one day be displaced by another service and disappear. But out of such concerns, preventing new businesses from emerging and new services from being offered is undesirable both for consumers and for the economy as a whole. We need to remember that our companies’ productivity has risen and the economy has developed through a process in which diverse market participants competed to win consumer choice.

What matters is whether existing businesses can provide services that meet consumers’ diverse needs. In other words, blocking new competitors through regulation does not guarantee that existing firms will continue to survive in the market. For now, the taxi industry may feel threatened by the emergence of shared vehicle services such as “Tada,” Uber, and carpooling, but it needs to use this as an opportunity to strengthen the competitiveness of the industry as a whole by providing the services consumers want.

Eun-kyung Kwak

Head of Corporate Culture Division

Center for Free Enterprise (CFE)

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Original title: 소비자들은 왜 ‘타다’를 선택하나

Author: Eun-kyung Kwak

Date: 2019-07-16

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=24&idx=20327