2018 was a year where last-mile transportation took off at an exponential rate. For those that may be unfamiliar with the term, last-mile transportation is basically the notion of traveling a distance too short for a car or public transport, but also too far to walk. In 2018, all the hype for last-mile transportation revolved around e-scooter companies. Companies such as Bird and Lime have been filling cities with scooters this past year, but the future of these companies and many others may be in jeopardy. The major problems that these companies face are price sustainability, regulations, and inventory.
Personally, I have been able to see the amazing rise of Bird, given the amount of time I spend in Santa Monica. Based out of Santa Monica, Bird was valued at over $1 billion (also known as a unicorn) in a little over a year. This valuation came from a Series C round of funding led by Sequoia Capital. I remember in late 2017 and early 2018 the first time that I started seeing these scooters around the streets of Santa Monica. Everyone was a little confused at first with the concept of electric scooters that you could ride and drop off anywhere. But, in a short amount of time, people became quite confident with the concept and you started to see more and more people riding them. To begin with, there weren’t that many scooters so often it was hard to locate one. Fast forward to this past June, I was back in Santa Monica for the duration of the summer. I had been following Bird’s progress while I was back in school for the spring semester, but I did not expect to see this big of an impact in a city that I was just in months ago. There were scooters everywhere, and now it was more than just Bird scooters. Lime had burst onto the seem and launched scooters as an expansion to their bike sharing platform. Scooters were taking over the city and it was getting quite overwhelming. Even though I am a big fan of the scooters, I thought it had gone a little too far. You couldn’t walk fifty feet without seeing a scooter.
As the summer progressed, Bird and Lime were faced with numerous problems. For one, residents were getting upset about how scooters would just be left randomly in places like sidewalks, streets, walkways, and in front of residences and stores. The amount of scooters was getting ridiculous. Basically, the strategy of these scooter companies was to launch services without permission and then later ask for forgiveness once regulators stepped in. The hope was that by the time regulators stepped in, they would be so popular that could convince and work with regulators to not kick them out. There were also safety concerns, as scooter riders were technically required to wear helmets, but in reality, nobody did. Eventually, the city of Santa Monica decided to take charge in dealing with the rise of electric scooters. There were various city hall meeting in Santa Monica as a chance for people to voice their opinions and try to work things out with the scooter companies. But as a result, Santa Monica started to crack down quite hard. Scooters began to get banned on sidewalks, on beach boardwalks, and in parks. These are places where most people were using these scooters in the first place. Soon it seemed like the only place you could ride scooters were in bike lanes. Police offers even started giving pricy tickets for riders not wearing helmets, which they were required to do. I heard of tickets going as high $250 dollars. This sudden surge in regulation led to me stop riding these scooters during the later parts of the summer.
Upon leaving Santa Monica at the end of the summer, it is evident to see the expansion of electric scooter companies that have flooded not only the United States, but overseas as well. This scooter sharing economy is prominent due heavily to massive amount of venture capital funding. Many investors believe that electric scooters are the future and they do not want to miss out on the next Uber and Lyft-like opportunity. Even Uber and Lyft are heavily investing in electric scooters to stir up the competition even more. But, as more and more competition enters this market, it seems unlikely that these scooter companies will be sustainable. To start, all of the scooter companies charge the same price of $1 to unlock and 15¢ per minute to ride after that. At prices this low, it will be almost impossible to become profitable. It was thought that these low prices were initially set by the first companies to lure in customers, but now that there are so many competitors that no one can raise their prices without losing their users to competitors. Another big problem is that the scooters that these companies are using are not the most durable. The average life span is between thirty and ninety days before the scooters cannot be used anymore.
So, it’s obvious that these scooter companies face some major difficulties in order to survive. It will be extremely interesting to see how this year plays out for the scooter sharing economy. There are a few different things that could happen. For one, they could all run out of money based off of the struggles to be profitable that I mentioned earlier. The second thing is that the big scooter companies could simply just last longer and eventually beat out the new and smaller companies given that they have more capital to survive long enough for the little guys to drop off. A third scenario is that we may seem some companies merge in order to elevate themselves and avoid keeping competitively low and unsustainable prices.