Fuel costs could drive up e-hailing, food delivery prices

 

Ride-hailing and food delivery services could face weaker demand if rising fuel costs lead to higher prices, as most Malaysians appear ready to cut back on spending for convenience.

KUALA LUMPUR: Ride-hailing and food delivery services could face weaker demand if rising fuel costs lead to higher prices, as most Malaysians appear ready to cut back on spending for convenience.

A recent Malaysia Cost Pressure Pulse survey (Wave 3) by Rakuten Insight found that 82 per cent of 1,003 respondents would change their behaviour if ride-hailing and food delivery charges continued to increase due to fuel-related costs.

Of those surveyed, 28 per cent said they would switch to cheaper alternatives such as public transport, driving themselves or cooking at home, while 27 per cent would use the services less frequently. Another 17 per cent would only use them during promotions, and 10 per cent said they would stop using them altogether.

Only eight per cent indicated they would continue using the services as usual, citing convenience.

Rakuten Insight Malaysia commercial research lead Ming Yao Kong said consumers are generally more willing to accept higher prices when they are accompanied by better service or added features.

However, fuel-related increases are often viewed as costs being passed on to consumers without any improvement in value, making it easier for users to seek alternatives.

The survey also found that consumers were more likely to notice higher fares and fewer promotions than longer waiting times or a shortage of drivers and riders.

Kong said this suggests operators may initially respond to higher costs by raising prices or reducing discounts rather than cutting service levels.

Meanwhile, 56 per cent of respondents said they would cut spending on dining out before reducing food delivery expenses if household costs continue to rise, compared with 31 per cent who would trim delivery spending first.

Despite this, Kong noted that spending intentions for dining out have recovered more strongly than for delivery services, highlighting the fragility of convenience-based businesses.

He said ride-hailing and food delivery are particularly exposed during periods of financial strain because consumers have readily available substitutes, while additional charges such as delivery fees, service fees and surge pricing make price increases more noticeable.

As a result, services built primarily around convenience may face greater challenges when consumers tighten their budgets. - NST