The American research and advisory firm Gartner calls it the Hype Cycle. Emerging tech innovations attract lots of attention, but often fail to live up to their initial promise; a crash inevitably happens and, eventually, a less hyped-up but more sustainable wave emerges.
The bike-sharing industry in Singapore may be about to reach this second wave as new companies emerge out of the initial wreckage of bankruptcies and abandoned operations.
With the exit of the first wave of the players, the market has consolidated to three players – SG Bike, Anywheel, and Moov Technology.
What is different this time? All three are homegrown companies with a direct stake in seeing their model succeed on home soil.
Initial signs also suggest this second wave of companies has learnt from the mistakes of the first.
The regulatory landscape is also favourable with encouraging conditions that enable long-term growth.
Previous bike-sharing business models were based on creating and rapidly growing the network of users.
However, unlike a highly scalable platform business model powered by data, such as Facebook or Netflix, there are operations and costs involved with maintaining a tangible asset network of bikes.
The bulk of operating costs are physical and localised, making scaling the business more difficult compared to a tech platform with a purely digital play, even though overhead costs can be spread out.
Town-by-town expansion
At its peak, there were more than 200,000 shared bicycles on Singapore’s streets. Today, the number of licensed bicycles allowed by the Land Transport Authority is more manageable at 45,000.
What has also changed is the drop in unit cost since licensing fees per bike have been halved. The earlier each bike reaches its cost break-even point, the lower the potential for losses stemming from damages and repairs.
Two of the three current players have said that they are looking at a careful town-by-town, localised expansion approach in specific neighbourhoods like Holland-Bukit Timah and Punggol.
This is sensible because each bike has inherent limits to how far it can travel. The most frequent commuter is likely to ride a bike to connect to a main MRT arterial line or trunk services at a bus stop.
So for operators to determine the optimal cluster of bikes and users in specific areas makes for prudent strategy. The utilisation of each bike could increase substantially given the smaller pool of bikes within each intended area of coverage, and a higher ratio of potential customers per bike.
Starting slowly will also allow companies to first understand customer behaviour and requirements, thereby allocating resources more efficiently.
Broader offerings
The second wave of bike-sharing companies has a wider selection of vehicle choice that also include e-bikes and personal mobility devices (PMDs), allowing them to cater to varied customer segments.
The growing market for food delivery has created potential new demand for bike-sharing solutions, especially with the recent ban on e-scooters using footpaths.
As the market for bike-sharing matures, bike-sharing companies could evolve to embrace a business-to-business model, creating partnership and acquisition opportunities. This is already the case for more mature markets. Ride-sharing company Lyft in the US, and Didi in China, have acquired bike sharing companies to broaden their transportation offerings.
In China, bike sharing has also been linked to e-payments, food delivery, and location-based advertising.
With these factors in place, the new wave of bike-sharing companies would have a higher chance of success. However, challenges remain in executing a successful business model.
Shared bikes still have to be parked at designated areas meaning the offered mobility is not door-to-door. Consumer usage rates would depend on the location of these designated areas.
One way to improve accessibility may be to open up unused motorcycle parking lots in industrial, commercial and residential areas for share bikes.
Scaling up
Bike-sharing companies will also have to operate in denser areas to strike a better balance between supply and demand and to reduce the cost of repositioning bicycles.
Another challenge lies in scaling up. Bike-sharing involves ownership of the asset by the operator, and leasing it out in short pockets of time. This is no different from the rental of office space or other properties, where increasing asset utilisation is key to profitability. Each cluster of operations is also fairly independent.
One other major problem firms will need to manage is the difficulty in recouping costs for damage to bikes. Few firms charge deposits, probably as a way to build up market acceptance and adoption, but also given widespread consumer aversion after previous firms such as oBike exited the market without returning the deposits they had taken.
While it remains to be seen whether bike-sharing can succeed in this second round, the signs are promising that this new wave of companies are aware of the potential challenges and are working to address them.
As with personal mobility devices, bicycles in developed cities have become part of urban transportation options, helping to integrate public transportation with the first and last mile commute, and complementing other forms of first- and last-mile travel.
Bike-sharing in Singapore may not be the next unicorn sector that reaps billions in valuation, but may yet end up a sustainable business with profitable companies, given the new regulations coupled with the gradual approach companies are taking.
Perhaps the key limiting factor to growth is how much cycling can be done end-to-end when someone gets on a bike.
