Tuesday, March 21, 2017

How hype and greed destroy the bike-renting business - Jeffrey Towson

Jeffrey Towson
As long as funds are flooding the bike-renting business, the dance will go on. But, warns Beida business professor Jeffrey Towson at his website, when the music stops, the dancing will be over. Consumers might be the winners, as long as the music plays.

Jeffrey Towson:
Across the board, what we are seeing is non-economic behavior and a race for scale that is fueled by hype and enabled by easy access to money. This is warping and distorting what is an ultimately very nice and popular consumer bicycle rental service. But the ‘music is playing’ and all the companies ‘have to dance’ – or leave the market. This is likely to end badly for everyone, except for the consumers and bike thieves. 
The biggest part of this problem is the drive for scale. The leading companies are all trying to get big and capture market share, with Mobike reportedly having over 70 percent of the China market, measured both by the number of bikes and number of rides taken. 
However, the problem with this is there doesn’t appear to be any big advantages to scale. It doesn’t create a superior service like in taxi ride-sharing (more drivers means shorter waiting times). It doesn’t get a network effect. It doesn’t create a much lower cost structure per unit. And it ultimately doesn’t stop any small company from spending RMB 200,000 and deploying 1,000 bikes in a particular neighborhood. 
The business model followed by so many bicycle-sharing companies just doesn’t appear (yet) to have any competitive advantage. The market may well consolidate, but there is no reason yet to think the business itself will generate any type of exceptional profitability. The race for scale looks more like a race for a big sale or IPO.
More at Jeffrey Towson's website.

Jeffrey Towson is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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