Free-floating scooters: business model conundrum
In the USA as well as in Europe, free-floating electric scooters have popped up in every major city. Despite small start-ups transforming into major operators, experts still doubt the sector’s profitability. Hindrances, like high running costs and machines’ short lifespans, make a headache out of the business model. Plus, users’ bad behavior doesn’t help to better the means of transport’s image.
“I offered my 8-year-old daughter a bicycle, but she asked me for a scooter. That gave me the idea of an electric scooter service for adults,” explains Bird’s founder, Travis VanderZanden, to French newspaper Le Figaro. In 2017, the company started offering its services in Los Angeles. Nearly two years later, it has become a worldwide phenomenon.
Today, American companies Lime and Bird respectively hold the first and second place in the sector. In Europe, a number of start-ups (VOI, Dott, Tier, etc.) are trying to get their part of the cake.
“In Paris, we recorded 60.000 trips on July 8,” explains Aymeric Weyland, founder of micro-mobility council firm Fluctuo. It’s a blatant success. Where it took five years for Uber to reach 50 million users worldwide, Lime managed to do so in only 18 months. Thus, investors are knocking on the door. Lime is valued at 2,4 billion dollars. Business angles invested 400 million dollars into Bird. Even VOI and Dott raised 83 and 55 million.
Despite the flagrant success, there’s a fly in the ointment. All operators are losing money and none are disclosing their turnover. The reason is to be found in the rather expensive business model, lying on costly machines with short lifespans.
In May, BCG cabinet found that each scooter has to be used at least 3,8 months to reach profitability. Yet, the current average lifespan doesn’t exceed three months. “We’ve now put into service our new Bird 0 scooter, which has a lifespan of at least 12 months. Thus, we’re earning money in around twelve cities,” declares Travis VanderZanden.
Companies might do all they can to increase the lifespan of their products, users’ behavior will still hinder their progress. In some cities, part of the population sees the scooters as clutter on the pavement and a danger on the street. In France, cities have decided to reduce the number of operators to better manage the legal framework.
Marseille and Paris will choose three operators. Which is probably why American Bird has chosen to place its new European activities hub in the French capital city. In two years, the company should employ around 1.000 people.
Freelance to employee
Currently, both Lime and Bird use freelancers to charge their scooters. Every evening, those self-employed workers drive around the city picking up as many machines as possible. They charge them during the night and bring them back on the streets before 7 a.m. for five euro per scooter.
“We’re heading toward an employee model,” explains Bird’s founder. “The job won’t change very much, but workers will now benefit from all the advantages of employee status.”