Sharing economy – The agony of history.

The cautionary tale of bike sharing.

• The cautionary tale of the bike sharing companies should give the scooter companies pause for thought as I suspect that exactly the same issues will soon be affecting them.
• Hence, unless they do something different, the same ignominious fate awaits.
• Mobike which is now part of Meituan, is giving up on all of its international operations and focusing just on China in a sign that bike sharing remains a bloodbath which Meituan is not prepared to swallow.
• All of its APAC operations (Singapore, Malaysia, Thailand, India and Australia) will be closed down imminently with Europe and the US to follow.
• This is a sad end to the global ambitions of Mobike which was purchased by Meituan for $2.7bn just 11 months ago having raised a total of $900m from a series of VC and strategic investors.
• The last round was $600m raised in 2017 which was earmarked, at the time, for international expansion which, in all likelihood, has been used as fuel for the bonfire of brutal competition.
• The problem here is very simple.
• Bike sharing is a networked business with very low barriers to entry ensuring that it has quickly become a commodity.
• This means that the only differentiator remains price until one obtains 60% market share or becomes at least twice the size of its nearest competitor.
• Scooters are exactly the same.
• This means free rides and discounts in order to encourage loyalty.
• In the mad rush of 2017 (see here), bike sharing companies were able to raise ludicrous amounts of cash and consequently were able to bleed each other to death.
• As long as one company is not more than twice the size of the other in any one market, then neither will make money resulting in substantial cash drains at both players.
• The net result when the companies inevitably ran out of cash was bigger companies stepping in to acquire and add their services to their digital ecosystems.
• Those that fail to get acquired vanish almost without trace.
• I expect that the same will happen to the scooter craze still going on at the moment.
• The hype is the same, the business case is the same and the economics are the same meaning that unless something changes, the fate of the scooter companies will also be the same.