Published on 25 Jul 2022

Consumers feeling the squeeze as industry disruptors come under pressure to deliver profits

Experts have long warned that it is inevitable for these industry disruptors – from food delivery and ride-hailing to e-commerce platforms – to shift towards seeking profitability, but the time of reckoning has come sooner than expected.

As a regular user of ride-hailing and food-delivery services, Mr Gabriel Goh could not help but notice how their prices have slowly but surely been climbing in recent years.

“Delivery fees have also increased. Like previously it was S$3.50 from the same place, now it has become S$4.50,” said the 31-year-old business analyst, pointing to how the increase of almost 30 per cent occurred within the past two years, far outstripping inflation over the same period.

While external inflationary pressures are pushing up the prices of almost everything in Singapore — from groceries and cooked food to petrol and electricity — it has not gone unnoticed that services once hailed as industry disruptors offering cheaper alternatives for consumers and merchants have become increasingly costly, at times even more expensive than incumbent players. 

These services include e-commerce platforms, food delivery, private-hire car booking or super apps that offer a range of similar services under one roof.

Another consumer, 33-year-old Ian Chong, noted how private-hire car trips these days seem to “always show” surge prices — referring to higher fares that factor in peak demand and low supply of cars in an area typically during busy periods.

“Once I tried to get back home in the Dawson Road area from Marine Parade, (fares for private-hire cars) were averaging at S$28, (but) flag-down taxi fare was about S$21,” said the finance industry professional of his experience on a weekend night earlier this month.

Experts have long warned that it is inevitable for late-stage disruptor companies to abandon the cash-burning ways of their earlier days and shift towards seeking profitability, but the time of reckoning has come sooner than expected.

For one, the rising cost of capital due to climbing interest rates, as well as increasing inflationary pressures, make it more expensive for companies to artificially lower the prices of their services to attractive levels.

And even though investors typically do not look at near-term profits when pouring funds into disruptor start-ups, “the point at which investors will have questions about future profitability will be brought forward by difficult market conditions”, said Associate Professor Walter Theseira from the Singapore University of Social Sciences.

“The raising of prices by disruptors generally signals a shift from growth to consolidation, and I would expect this to happen earlier for more firms now,” the economist added.


Tweaking prices to bolster profitability while trying to grow active users — or at the very least not haemorrhage them — is a balancing act all disruptor companies face, even for those that have risen to become global household names.

And this struggle has become more acute in recent times.

Having consistently raised its prices, Netflix has become profitable with the aim of finally achieving positive free cash flow on an annual basis this year. 

However, the video content streaming platform saw 970,000 subscribers cancel their accounts between April and June.

This was the biggest decline in the number of customers for a company that has been credited with revolutionising how people consume video content, after losing about 200,000 subscribers during the first three months of this year.

"Tough in some ways, losing a million and calling it success, but really we are set up very well for the next year," the company's co-chief and founder Reed Hastings said in an earnings presentation on the same day. Netflix had earlier warned that it expected to shed around 2 million subscribers in the second quarter of the year. 

The Financial Times attributed the loss to more cost-conscious consumers in the United States, where the streaming platform is bleeding subscribers the fastest as a recession looms and inflation soars to 40-year highs.

Netflix, erstwhile positioned as a cheap alternative to cable television subscriptions, is now the most expensive option among other streaming services, the newspaper pointed out. 

Firms closer to home, too, are grappling with tough times.

Super-app Grab, headquartered in Singapore, saw its shares tumble on its first day of trading on the Nasdaq in December last year, before generally declining further along with global stock prices this year.

All the while, the company is still operating in the red, though in May it reported that its ride-hailing and food-delivery businesses showed signs of recovery for the quarter ended Mar 31.

Mr Angus Mackintosh, an analyst at CrossASEAN Research, told Reuters then that the rebound was "promising" and that Grab's move to reduce spending on incentives has worked well from the firm's perspective. 

E-commerce giant Shopee, owned by another Singapore-headquartered company Sea Ltd, was laying off staff across its various markets, according to an internal memo in June.

This came after its retreat in quick succession from India, Spain and France earlier this year.

Source: Channel News Asia