Most bike sharing businesses in Australia have withdrawn from the market over the past week, including oBike, ReddyGo and Ofo.
Industry information research company, IBISWorld, said that while bike sharing services have proved popular in Europe and China, they have struggled in Australia due to local laws, vandalism, complaints about misplaced bikes, and data collection concerns.
IBISWorld senior industry analyst, Kim Do, said the bike sharing business faced two main hurdles: balancing supply and demand and vandalism and dumping.
“An oversupply of bikes is a key reason why dockless bike sharing services are failing in Australia,” she said.
“An abundance of bike sharing start-ups have entered the Australian market over the past year, all fighting for market share. However, the number of users has failed to grow in line with supply, leading to a glut of share bikes.”
Ms Do also said bike sharing companies have failed to identify and implement ways to incentivise consumers to correctly park their bike, leading to the second hurdle.
“As Australian government authorities began to crack down on dumping, imposing fines of up to $3,000, Australia was no longer a viable market for these players.”
Ms Do added that the business model, (revenue through data mining, advertising and interest the ride fee) is another contributor the failure.
“A substantial amount of revenue for bike sharing companies stems from selling consumer data to other businesses. This includes details such as rider profiles and locations frequented.
“This data is then used by other organisations to assist with urban planning, marketing campaigns, or to assist with identifying locations with high consumer traffic. However, a business model that relies on data mining poses an issue, as consumers have become increasingly cautious of data breaches.”
IBISWorld said the share and gig economy has an uncertain future in Australia, with companies such as Foodora and Airtasker also facing issues.
Ms Do predicts an increase in government intervention.
“Some unions have already begun pushing the federal government and Labor opposition to create a dedicated, independent body to monitor the share and gig economy.
These unions are calling for current economic regulatory standards, which particularly affect small-business owners, to more readily apply to larger providers. If achieved, this would likely lead to a fairer competitive environment,” said Ms. Do.
She added that larger players, such as Uber and Airbnb, are expected to continue dominating the share and gig economy.
“These larger players benefit from marketing strength, brand recognition and consumer trust. As a result, smaller players find it harder to compete, and are being squeezed out of the market.
“A large amount of mergers are not anticipated in the share economy, with the collapse of many start-ups more likely.”