Discover the key factors that help shared micromobility services to be profitable by reducing costs and growing revenue.
Several shared micromobility services are projected to reach profitability for the first time this year. But with ever-growing competition and continued market concentration, can businesses expect to increase revenue? Our research shows: yes, but under some conditions!
While some costs like technology and backend infrastructure remain high, innovation in devices and hardware manufacturing, the drop of permitting fees in cities supporting micromobility, and insurance costs coming down are all proving that there’s still room for shared mobility profitability.
But, the profitability of the service provider is and will be the critical success factor to remain competitive in what researchers are calling The Next Normal. So how have companies like Cooltra, one of our partners, managed to be one of the most profitable mobility service providers since 2019 and counting? While other actors are folding under the pressure of profitability?
After reviewing a number of market leaders and compiling insights on micromobilty revenue, we’ve identified 3 key takeaways for increasing profitability. Let’s dive in.
It goes without saying that business costs should be one of the first places you look for opportunities to optimize. But what are some operational costs that are specific to the shared mobility industry and warrant investigation?
Consider where you might be able to optimize for efficiency in your fleet management and maintenance. Rather than having to bring the entire fleet back to a warehouse for charging, opt for swappable batteries which are more economical and time-efficient. Then, go a step further. A common practice that can make swapping strategies more flexible is to divide swapping shifts into part-time shifts.
While logistical effectiveness is prime for refinement, there’s one cost you may be able to rethink altogether. Your technical solution, its maintenance, and eventual need for evolution. Maintaining the back-end, front-end, and the multi-environment mobile app requires extensive software engineering talent. Upfront recruitment costs aside, an in-house development team can represent up to 20-30% of the workforce.
Instead, when it came time to scale-up phase, several of the highest performing businesses including Cooltra, Pick-e-Bike, and Billy, used an external, specialized shared mobility software solution like ElectricFeel. Allowing them to access the required state-of-the-art features while keeping costs under control and profit margins healthy.
There are a list of factors that can directly impact your revenue, including your number of rides, length of each ride, vehicle idle time, customer acquisition, and most especially how well you engage and retain those customers. Thankfully, there’s cutting edge technology you can leverage to do just that.
You may already be building out acquisition funnels that help you target desired customers, but you may not realize there’s opportunities to use advanced segmentation and data analysis to engage customers with better cost-benefit. By comparing the Customer Acquisition Cost (CAC) with the Lifetime Value of different groups you can identify the best place to focus.
Acquiring a new customer can cost 500% more than retaining an existing customer. Not to mention, a loyal customer is 5x as likely to repurchase, 4x as likely to refer, and 7x as likely to try a new offering, so don’t lose them once they’ve shown interest! Customer conversion rates can be increased considerably when their documents are quickly approved, so consider automatizing the document-approval process.
There are also several ways to re-engage churned and dormant riders, by up to 65%, using inbound communication and specific promotion types. It’s a matter of making them timely, personal, and actionable. Flexible offers, promotions, and subscription plans can do wonders for increasing customer retention, boosting revenue and cash flow.
Once you’ve addressed your operational spend and leveraged the advanced marketing opportunities available to you, there are still a few ways to go beyond the basics and better balance your costs with your revenue potential.
By gathering vehicles in strategic locations, or hubs, you will have better control over high demand areas. Allowing you to, both, apply those promotional incentives effectively and increase the efficiency of your field operators. It’s win-win. When vehicles are concentrated in hubs it makes swapping batteries and performing small fixes faster—increasing vehicle availability and therefore the quality of your riders’ experience.
But how do identify these hot spots and make the hard calls around where they should be? You can implement a system that helps you track and manage these optimization experiments; we refer to this practice as Service Area Optimization or SAO. Once you’ve collected data for a few months, it enables you to identify opportunities. For example, sometimes sacrificing a more remote area can be a smart decision for shared mobility businesses, if it means fleets can be more balanced in high-demand areas.
Back in 2019, Pierre and his co-founders created Billy, a free-floating e-bike fleet. Not long after, we joined to help them scale from a 150 bike prototype to a fully-fledged fleet of 600, and thousands of paying customers. Since then, Billy has effectively weathered COVID-19 and is looking to scale again. This time with another 1000 e-bikes in 2021.
“The real challenge of this industry is keeping your costs down while you scale. That’s how companies like us can start making money. ElectricFeel has allowed us to gain efficiency while scaling.” — Pierre de Schaetzen, Founder & CEO at Billy
ElectricFeel’s advanced task and data management features have made it possible for Billy to scale their operational team while keeping an eye on all the key metrics, ultimately tripling its revenue while keeping the fleet’s running costs exactly the same.
If you want to learn more about these detailed strategies and their proven impact on profitability, you can download our new white paper. Or if you want help launching or scaling your shared micromobility business, get in touch for a demo.