According to a business school professor, bike sharing business could become less profitable for companies because of a shortage of brand loyalty, poor consumer behaviors and faults in prediction of future regulations.
The comments were made in connection to the stoppage of business operations by three dockless bike-sharing companies — Gbikes, oBike and ShareBikeSg — in Singapore even as new regulations related to parking of vehicles were implemented on July 7. Operations have also reportedly been stopped in Australia and Israel by China’s largest bike sharing company Ofo because of some of its rivals offering deposit free services.
Nitin Pangarkar, associate professor of National University of Singapore Business School said in a television interview that “poor strategies” was the fundamental reason that scaling back of their business operations is being forced on bike-sharing companies.
“Many of the companies just didn’t factor in the fact that people would behave poorly in terms of parking the bikes, there would be regulations coming,” said Pangarkar. “So in the past, it was just like a land grab, which is just, you know, try to grab market share and the money was easy.”
With respect to predicting what could happen to the bike sharing industry in the near future, most of the companies have exhibited a poor track record, he said. He explained that a number of the early attempts of business in the industry comprised of a trial-and-error approach as such business were financed by money that had been easily won.
Pangarkar said, those places with a lax regulation and with low rates of fines and licensing are the most likely markets where there is a future for good business of the bike sharing companies in the future.
He also suggested that the larger and better financed companies that are seeking to diversify their business and platform through the addition of bike sharing services in their list of services offered needs to make a good assessment of the amount of return they could get from the venture.
“What is the incremental value of offering a platform in which you can have all kinds of transport. So the value, the additional value generated from that has to be assessed,” he added.
The lack of stickiness in the market is another challenge that such companies would face in the future in the bike sharing sector. it is less likely that the customers would be loyal to a brand. Pangarkar said that this puts up questions about whether the current market shares of companies are actually sustainable or not.
(Adapted from CNBC.com)