Bike-sharing schemes might seem like a waste of space, but the economics make sense
While each individual trip might be incredibly cheap, bike-sharing schemes can provide us with a valuable a lesson in data mining, advertising and turning a profit from interest, argues Sun Sheng Han in this crossposting from The Conversation.
Have you ever walked past (or tripped over) a shared bike and wondered how it’s possible for the business to survive with a ride costing as little as $2 per half hour?
While bike-share schemes attract controversy in some places, the economic models behind such schemes actually have more to do with data mining, advertising and turning a profit from interest on the deposits than from the bike rental itself.
The most recent Australian example is Obikes. Launched in Australia in mid-June, there are currently over 1,250 dockless Obikes in Melbourne and over 1,000 in Sydney. According to its marketing director, Obike’s Australian user numbers have increased rapidly since its introduction.
The yellow ones (Obike) don’t have gears. That might work in Melbourne but it’s a disaster in Sydney. The red ones are quite nice. Just gotta ditch the helmet laws and they might catch on!
Sure but 90% of the OBike’s I’ve seen in Melbourne don’t have helmets with them. I’ve seen one person riding one and by accounts they are heavily bikes without gears that are hard to get up a hill. They’ve spent the money getting them here but I’d be amazed if they are embraced or make their money back.
They were fishing O Bikes out of the Yarra River this week, to the sum of 40..!
So one of the claims is “the amount of money held in the deposit pool is potentially enormous”.
The Obike deposit is $69 and there are 2,250 bikes in Sydney and Melbourne.
So if all were hire out, the total deposit held (i.e. the maximum) would be $155,250. Yes that is a lot of money.
But wouldn’t the gross majority of the deposits be refunded the same day? So what is the financial benefit of holding that money. Even if you could put it into a term deposit for a year you’d earn 3% tops or $4,657.50 or around $12.76 per day (with 2,250 bikes “at risk”).
So can someone please explain why and how the level of deposits is relevant to the business plan?
Nah they hang onto the deposit when you sign up. You can request it back and they will get it back to you “within 30 days”. Still waiting for my Obike refund — I rode once and realised no gears.
Simon you are spot on about the mandatory helmet laws. If I wasn’t risking a $319 for not wearing a helmet I would use them for short trips from my office in Surry Hills into the CBD