Why bike rental model failed in India? 🥺
Insight from Goa bike rental shops being profitable.
Welcome to the 130th edition of the GrowthX Newsletter. Every Tuesday & Thursday I write a piece on startups & business growth. Today’s piece is going to 94,400+ operators & leaders from startups like Google, Stripe, Swiggy, Razorpay, CRED & more
Bike rental startups are a history🥺
Goa rental bike business is up 🏖
Here's why the model failed ⬇️
Quick context 🗓
I saw this intersting pitch of a EV bike rental company in one of the episode of SharkTank India. On one side it created a marketplace model of EV bike manufactures OLA, Bounce & Ather. On the other side are millennial users who want to "experience" vs "buy" products.
Here's why the model failed ⬇️
And why it works in Goa like places.
First/ focus on short term rentals 📅
Most users want to rent a bike when they need flexibility. Imagine someone landing up a new job in Bengaluru & don't know for how long they will stay in the city. Getting a rental for 3/6/9 months makes a ton of sense. You can't force this user for a longer commitment.
Second/ difference in 'rent vs buy' 🙇🏻
For customers who want a bike for longer than 12 months - the cost of EMI + insurance + repair is comparable to the monthly rental cost of a bike. No massive advantage there. Plus, you can always sell the owned bike which you can't with a rental one.
Third/ massive cost of operations 📈
From damages to fuel theft - the list goes on. Especially when you can't filter out a user based on their past behaviour (like how you can with a credit score in financial products).
Fourth/ hard to solve demand 🔁 supply
You can't force a user to order a rental bike like how Dominos forces you to order a pizza with a 50% off coupon. It's more of a 'need' than 'want'. This becomes a problem especially in non touristy places where demand density isn't high enough.
Fifth/ excess supply of bikes = loses 🔥
The logic is similar to airline industry. If you are Indigo, you want your planes to spend minimal time on ground and most in the air - that's when they make money. Same goes with rental bike model.
Here’s why it works in Goa 🏝
1. It has short term rental audience.
2. No-one wants to buy, except locals.
3. Demand » supply of rental bikes.
4. Localised operations are cheaper.
5. No excess supply for 8/12 months.
Full stack internet business like Bounce needs the right growth model 🙇🏻♂️
Especially when you are operating on razor thin margins. The 3 things that help these products are first - low customer acquisition cost, second - repeat user retention & third - scaled average transaction value. You solve for these three & your chances of winning exponentially increase. That’s all for now.
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Missed last few stories?
Providers like vogo, royal brothers etc has short term rental options and it works pretty smoothly. In tier 2/3 cities bike rentals happen unofficially. The major problem I see with rental is, if the provider isn't very prompt or professional, users tend to misuse the vehicle. I used bounce for my daily commute and it was always a game of luck to get a bike in proper running condition. According to me bounce failed due to misuse of it's users and bounce's incapability to keep it under control. This example set by bounce pulled the entire business possibility down, every bike rental is seen as cheap.
Anyway, i would like to read about your take on bike taxis (I used rapido at Bangalore and chennai, and both the places, it was risky. people drive rash and no helmets were given) and MH banning them.