The Rise and Potential Fall of Last-Mile Transportation

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.

7 thoughts on “The Rise and Potential Fall of Last-Mile Transportation

  1. Great post, Carter! It’s always interesting hearing about people’s personal experiences with these type of emerging markets. I think there is definitely a desire for this type of technology, as evidenced by the piles of scooters in Santa Monica, but it’s hard to say what the best implementation strategy would be. It seems like so far the “ask for forgiveness” gambit has worked, but I wonder how sustainable it is. I also wonder if eventually they’ll develop a better process and more durable scooter so they’ll be able to use them for more than ninety days at a time.

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  2. I first saw (and tried) the sharing e-scooters this winter in San Antonio, Texas. I was super surprised to see the rise of this industry and want to see how it will turn out in the future. And one cannot fail to mention the sharing bikes and I am very familiar with the problems sharing bikes face(d) in China. In China, the frenzy started a couple years ago: when the colorful bikes from several companies flooded the streets, only the two big players survived (ofo and Mobike). There were a ton of problems regarding safety regulation, parking and resource sustainability. Ofo is recently suffering from near bankruptcy and users request their deposits back. Mobike has just been bought by a big food delivery company in China (Meituan) yet it still isn’t profitable. I would love to discuss more about the last-mile transportation industry more in class.
    Here’s an article I found talking about ofo’s rise and fall: https://www.forbes.com/sites/ywang/2018/12/20/how-chinas-bike-sharing-startup-ofo-went-from-tech-darling-to-near-bankruptcy/#31638e4066e6

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  3. I have heard a lot about these kinds of scooters, but have never actually had the chance to use them myself. It was really cool to read about your personal experiences with them, and how they blew up so quickly in Santa Monica. As you described, last-mile transportation companies have grown immensely in the last few years, but are facing a lot of legal and logistical challenges. In Chicago, we have Divvy bikes, which have to be picked up and dropped off at specific docking locations which are placed all over the city. While the freedom of being able to place the scooters anywhere is definitely appealing, it presents a good deal of logistical challenges, as you mentioned in the post. It will be interesting to keep an eye on how companies like Lime and Bird grow and evolve in the near future.

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  4. Nice post. To me, it was always surprising that companies like Uber and Lyft didn’t temporarily drop prices for rides shorter than the “minimum ride” in order to run these companies out of business. If these companies get even more popular, that type of pricing strategy may be something to look out for.

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  5. Great post! I especially like the poll that you included! I understand that one of the key aspects of these scooter companies is the ability to leave or pick up the scooter from anywhere. However, if this strategy is not sustainable, these companies should consider adopting Zipcar’s business model. With Zipcar, users have to pick up and drop off the car in dedicated Zipcar spots throughout the city. This is similar to the way in which Citi Bikes work in NYC. Also, if the scooters are all in one place, the companies can provide helmets there that must be checked out in order to ride the scooter. Additionally, if the scooters have a home to be returned to, as opposed to being left on the street, their lifespans could potentially be extended.

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  6. Hey Carter, I never considered the issues with last-mile transportation like regulation and inventory. Realizing that scooters only last from 30 to 90 days, this would result in a lot of scooters getting junked which is not great for the environment. I wonder if any regulations, the government, or other organizations would help solve this problem of broken scooters like recycling parts of them or something.

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  7. Carter, really cool post! I have never actually used one of these scooters myself, but I have seen them ALL OVER social media, so it was interesting to learn more. I had no idea that there were SO many of these companies out there; I was only familiar with Bird and Lime. I feel like these companies will consolidate and then raise prices in the future gradually. They are just so popular that I cannot see people ditching them altogether.

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