Can the share bike business survive in Australia?
ABC News, 12 July 2018
After months of damaged and discarded bikes on city streets, it now looks like three of the four major firms who launched app-based bike sharing schemes last year have pulled up stumps.
The Chinese backed start-ups expanded rapidly with dockless bike schemes in cities including Sydney and Melbourne. But with too many bikes, not enough riders and tough new anti-dumping rules in Melbourne, the crash has come quickly.
Ofo, backed by Chinese internet giant Ali Baba, has just announced it is pulling out of Australia to concentrate on “international markets”. Obike went into liquidation in Singapore last week and pulled out of Melbourne because of its beefed-up regulations, although it told the ABC it is still operating in Sydney.
Local player Reddy Go is ending operations in Sydney and giving away bikes to some members.
But others are still operating or looking to expand their business. Mobike operates in 200 cities around the world and entered the Australian market late last year.
US start-up LimeBike has received a cash injection from ride sharing company, Uber, and has started recruiting staff in Australia.
Unreliable schemes blamed
Customers want a reliable service with share bikes that work, helmets available and easy to find and convenient locations for pick up.
Cyclist Paul Hindle used oBike last year in Sydney and was bitterly disappointed after living in the US and using New York’s share bike scheme.
“The lack of docking stations in the Sydney system meant you got to leave the bike where ever you chose which meant that it was impossible to walk out of your front door in the morning on a commute and rely on there being a bike in any kind of meaningful distance,” Mr Hindle said.
Refunds of customer deposits are also a concern with Consumer Affairs Victoria and NSW Fair Trading citing recent enquiries from people asking how to get their deposits back.
oBike customers in Singapore are waiting to see if they get their more than $6 million in deposits back although the government has threatened to file a police report against the company if the money isn’t returned.
Mr Hindle said it took nearly two months to get his refund from oBike last year.
Schemes need to suit consumers
Craig Richards, the head of bike riding organisation Bicycle Network, said bike share schemes could work with changes including public education and agreements between operators and local authorities about where bikes can be parked.
“When it comes to bike share, consumers do want a convenient, easy solution [where] they can hop on easily, hop off easily,” he said.
“The bike will be in good condition so they are able to ride it without it being uncomfortable.
“And the person who doesn’t want to ride the bike, they are just looking for something that doesn’t get in their way,” he said.
How do they make their money?
Right now, bike-sharing services don’t make money and that’s the problem. Mobike, Ofo, and oBike have so far had investors with deep pockets.
The firms also rely on the revenue they get per ride and from customer deposits. Data provided to local councils by the bike share operators showed there were just over 142,000 registered users in Sydney at the end of February who made an average of 6600 trips a day.
Advertising on bikes and selling data gathered from users are other potential income sources, although the companies have denied selling users data.
Mina Nada, general manager of Mobike Australia, said the rationalisation in the industry was a natural part of a maturing market.
“The share bike industry has huge potential, and while there are undeniable set up costs we have a clear path to profitability in Australia,” Mr Nada told the ABC.
“A number of things set Mobike apart here —we did not partake in the same extended discounting of some of our competitors, instead trusting that our premium product offering would attract loyal customers.”
Can it work here?
It costs millions for governments and councils to set up public bike sharing schemes with docking stations although many cities like New York, Paris, London, Melbourne and Brisbane have done it.
New York City and US bank Citigroup run Citi Bike, the biggest bike share program in the US. The bikes can be unlocked at one station and returned to any other station in the system.
The Brisbane CityCycle scheme has come under fire for costing ratepayers millions of dollars although it has been used more since tap and go payments were introduced last year.
The City of Sydney is among the councils discussing a new code of practice for bike share services with the New South Wales Government.
Professor of management at the University of Technology Sydney, Emmanuel Josserand, thinks the bike share business model could turn a profit if big players such as Uber or Chinese ride share giant, DiDi, set up monopolies or duopolies and partner with governments and local authorities.
“They could maybe come up with a business model where the data is shared across their activities,” he said.
“If that happens then it’s likely there could be a profitable model, it might take a while.”
However the success of the model is yet to be proven and customer data will be subject to privacy laws.
Docked schemes the winner
It’s clear from overseas cities that bike share schemes need to be part of the transport network to be effective.
Deloitte partner Kellie Nuttall said the numbers from US show that docked schemes are far more popular than dockless schemes.
“The number of trips made on dockless bikes is actually less than 10 per cent,” she said.
“These schemes are most successful when they are supported by dedicated infrastructure.
“We know from the research that people will go out of their way to ride on segregated bikeways where they don’t have to intersect with other modes of transport like private vehicle.”
Craig Richards still believes that share bikes can be popular in Australia.
“I think it certainly can be a key part of our transport solutions particularly as our cities grow in size,” he said.
“We’re going to have to find novel solutions to make sure that people can get where they need to go quickly and easily.”