The future of transportation: how sharing economy companies can manage their fleet – and their core business

What’s Driving the Rise of Sharing Economy

People can now ride, scoot, bike and even pogo (!) to get from place to place, and as one challenger after another emerges in the sharing economy ecosystem, it’s worth taking a step back to examine this paradigm shift in transportation.

Let’s first take a look at the rise of urbanization and the forecasts and trendlines pointing to a future full of densely populated and compact megacities. In fact, the UN expects 68 percent of the world population to live in urban areas by 2050, a number that sits at about 53 percent. North America is already trending ahead of that curve, with 82 percent of the population living in urban areas.

In the U.S. specifically, urban county populations rose 13 percent since 2000. This shift to cities has a huge impact on how people can and prefer to get from point A to point B. Add in recent seismic shifts in technology that changing consumer behavior, and you have a deeply disrupted transportation ecosystem.

Understanding the End of Ownership

The converging technological and social trends driving a new era of transportation are also inextricably connected to the decline in consumer preference around ownership.

Arity’s Car Ownership Report, for example, found that 30 percent of Americans say that “cars are not worth the cost,” a number that shifts to 51 percent when looking at just Millennials. This shift away from ownership was underscored by Deloitte’s 2019 Global Automotive Consumer Study, which found that 46 percent of Millennial ride-hail users in the U.S. question whether they ever need to own a vehicle, versus 17 percent of Boomers.

Millennials and younger generations have grown up in a world where sharing apartments, surfing couches, divvying rides and renting bikes is the norm. The sharing economy is an accepted, mainstream practice and sharing economy is an obvious extension of that idea.

How Consumer Preference Creates Opportunity in Sharing Economy

These changes in consumer behavior around ownership create a greater demand for more sharing economy services. McKinsey’s 2017 consumer survey indicates “shared mobility should see further growth given that for those currently using non-taxi ride-sharing services, 63 percent expect to increase their usage ‘a lot’ in the next two years, with even more (67 percent) saying they will do the same concerning car sharing.”

This demand creates a significant opportunity for companies providing sharing economy offerings, and the U.S., as one of the largest markets for sharing economy at $23 billion (surpassed only by China at $24 billion), is currently dominated by ride-sharing companies Uber and Lyft.

Interestingly, the on-demand and personalized nature of these ride-share services point to critical roadblocks for scalability: Geographic and cultural differences alongside existing transportation infrastructure, the regulatory environment and consumer routines mean there’s no one-size-fits-all mobility model.

That means there’s room for multiple private or public-sector players to step in and seize on various elements of moving from point A to point B from traditional mobility providers like airlines to micro-mobility entrants like shared scooters. And with such a clear opportunity comes many companies ready to fight to win mindshare and market share.

Competition for drivers (where relevant), consumers, etc., create price wars that leave sharing economy companies hemorrhaging money to stay competitive. According to IPO filings, for example, Uber was running at a $3 billion loss while Lyft was running at an almost $1 billion loss in 2018.

It’s evident that to ensure the long-term viability of an industry that’s working hard to meet consumer’s where they are by offering new, flexible options to get from point A to point B, maintaining a viable business model will be core to establishing market share, exciting investors, and scaling for longevity.

The nascent stage of the industry means that operating losses are expected – investments in growth and innovation are high – however, central to sustaining a business to drive meaningful change in the transportation ecosystem is tapping into consumer preferences and managing your fleet in a way that caters to them.

That’s what we’ll cover next: Three Ways for Sharing Economy Companies to Cut Costs (and Become Profitable).