Why Uber and Airbnb Are Struggling in Tokyo

At first glance, Tokyo seems like an ideal city for the so-called sharing economy. It is incredibly connected, both digitally and socially; welcomes huge numbers of tourists every year; and has a culture of communitarianism.

Yet when the two giants of the gig economy, Airbnb and Uber, tried to break into this market, both quickly saw themselves at the whims of both residents and regulators in ways they hadn’t encountered anywhere in the world.

TriplePundit has covered both companies extensively -- and it wasn't always good news. Uber faced a class-action suit for mis-classifying drivers, was called out for unethical use of subprime auto-lending, and launched a controversial social media assault on New York City Mayor Bill de Blassio for having the tenacity to stand up to the company. And Airbnb found itself under fire for reducing the number of rooms available for rent in urban areas, a multimillion-dollar ad campaign that successfully overturned regulations in San Francisco, and a reluctance to work with regulators in general.

Uber’s tactics are pretty well-known now. The company enters a city, often without warning, begins offering heavily-subsidized rides to undercut existing taxi competition, offers huge initial bonuses to increase drivers, and then lobbies to have the city’s rules changed in its favor. This model has, initially, worked quite well, allowing the company to gain a stranglehold on several markets – including San Francisco, Los Angeles, Chicago and London, among many others.

Airbnb, the other massively valued darling of the sharing economy, is little different. It also ignores regulations – even hiding information from cities – and resisted paying hotel taxes for years.

Yet, when Uber and Airbnb both tried to enter the world’s largest, richest city, this strategy not only failed to succeed, but it also forced both companies to do something they were loath to in the U.S. – follow the letter of the law.

Cultural challenges

Both Uber and Airbnb failed to recognize that their models were ill-fitting in the Japanese context, Tim Romero, founder of the Japanese startup site Disrupting Japan, told TriplePundit.

“Trying to use the U.S. playbook backfires horribly [in Japan]. Taking on regulators ... refusing to turn over information, and launching a publicity campaign to convince the public that the laws are outdated ... won’t work,” Romero explained.

“The Japanese consider regulators to be annoying, but not an enemy ... Loudly declaring your intention to defy them earns you nothing but contempt from the Japanese public.”

Moreover the companies' other main tactic – rally users in their support – did not work once it became clear both were violating Japanese law.

“Both Uber and Airbnb grossly over-estimated the amount of grassroots support and goodwill they would receive when they entered the Japanese market,” Romero told us.

Unexpected opposition

Another issue for Uber was the fierce opposition of the Japanese taxi industry -- which was renowned for being both reliable and safe, something Uber had challenges with in other markets. In the U.S., it was easy to denigrate taxis --however unfairly. In Japan, safety messages resonated most with the public.

“The safety of taxi services could be weakened if rideshare services are introduced in Japan,” said Kazuhiko Kikuchi, chief secretary of the taxi drivers union JIKO-Soren, which opposed Uber’s use of ride-hailing in Japan.

For Airbnb, it was the surprising effectiveness of something as simple as the police showing up and telling people it was illegal to list their homes. No fines; no legal action; yet people began to de-list homes. With new regulations that make home-sharing far more restrictive, Airbnb faces huge challenges to growth in Tokyo.

A growing trend

Tokyo is not alone. Other cities are starting to stand up to Uber, including Austin, San Antonio, Berlin and many more. Airbnb, too, is seeing cities begin to restrict its use.

Disrupting by breaking the law is no longer cool. And these companies' struggles in Tokyo may be the first sign that the gig economy -- built on venture capital valuations, law-breaking and lobbying -- is changing.

At the very least, Uber and Airbnb are seeing some chinks in their once seemingly impenetrable armor. Tokyo might be a sign of things to come as both labor organizers and cities are now better prepared to stand up to rule-breaking giants.

2017 is poised to be an interesting year for the gig economy, to say the least.

Image credit: Nalilord via Wikimedia Commons