Bike Sharing 101

What Consumers and Investors Need to Know

Bike Sharing 101
September 8, 2015

Auto sharing is becoming a more popular method of transportation, so why shouldn't bike sharing follow suit? Quite a few consumers and companies agree with that statement. Bicycle-sharing systems have mushroomed over the last few years in large and medium-sized US markets, from bustling New York City to the slower-paced McAllen, Texas. Motivate, B-Cycle, and Zagster are among the larger and more established companies in the field, managing bike-sharing efforts in multiple metropolitan areas.

Bike-sharing systems establish stations throughout a metro area where patrons can rent bicycles for use and return them to the station when they are finished. Typically, the rental is per day via a credit card on the unlocking station, or by membership fee where members are given a key or ride code to unlock bikes for their use. In some areas, 3-day passes and/or monthly rates are available. Some systems are experimenting with mobile payment methods.

As a potential user, these systems can be cost effective when compared to cabs or other mass transit methods. Most daily rentals are in the $7-$10 range, and annual memberships are usually in the $70-$100 range (CitiBike's is $149 and offers a series of different ride lengths).

Check for limitations on the length of any individual ride — to keep people from hogging the bicycles all day, overage fees are usually included for rides beyond a certain time (30 or 45 minutes is common). You can take as many shorter rides as you want within the day/week/year without extra cost, but each individual ride during that time needs to be under the time limit.

Can bike sharing make money in the long term? That is in serious doubt.

Tim Ericson, the founder of Zagster, puts it bluntly. "There's no bike-share in the world that's profitable on rider revenue." Almost all bike-share systems rely on some sort of grant or partial government support because there simply is not a sufficient rider base to make the service profitable. Per-ride rental costs and memberships can only be raised so far before bike services price themselves out of usefulness. Credit-card-only systems may already be limiting ridership in some economically stressed areas.

New York City's CitiBike may be the exception to Ericson's statement. It takes no public funds and has all the conditions to be successful — a high population density nearby with many popular destinations within biking distance. (All riders have to do is survive NYC traffic.) However, it also has one of the highest fee structures.

If you are considering investing in a bike-sharing company, assess the revenue streams and assumptions very closely. In how many cities does the group operate, and are they at least close to profitable in all of them? How much income is derived from riders and how much comes from grants and subsidies? Do they have maintenance or theft issues? How are their customer service ratings? Do they compete with or complement mass transportation alternatives like subways or bus routes? Do they have advertising tie-ins?

If the entry is into a new market, assess the natural ridership, taking into account typical weather, a likely customer base such as a college campus, street accessibility and bike lanes, and how the base locations of the bikes fit into the logistics of the city. The locations need to be within reasonable access of the riders, either in populated areas or near transfer hubs such as rail stations, and enough desirable destinations have to be within biking distance and have their own stations available.

These factors can help you assess the potential risk and reward of a bike-sharing investment. If you like the idea but cannot bring yourself to invest directly, invest in the concept the old-fashioned way and patronize your local service. Keep carbon emissions low, stay in shape, and help your local bike-sharing program stay in business; that is a winning proposition.

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steven | 09.08.15 @ 14:30
Maybe it is where I grew up. But I have never heard of bike sharing up until now. That is kind of interesting. I can see how in bigger cities this might be a good thing.
Sara | 09.08.15 @ 14:34
That is an interesting concept. To be honest unless its for bigger cities not sure how well it will work. But I know a lot of people want to exercise more and help keep our environment clean.
Clarissa | 09.08.15 @ 14:34
I like the idea of bike sharing! I know some universities have programs, at no cost to students, where students can rent bikes for whatever reason. It's a great way to promote healthy life styles and definitely helps with parking.
Britt | 09.08.15 @ 14:36
I have always wanted to use one of the bikes... not gonna lie. I've always thought it was kind of a cool idea.
Morgan | 09.08.15 @ 14:38
This is a really interesting concept, and something that I could totally see being helpful/useful.
Chrisitna | 09.08.15 @ 14:39
This is a huge trend where I live! I think it's a fabulous solution for bigger cities like mine. Also saw this in practice in Montreal and thought it was fabulous.
Kate | 09.08.15 @ 14:39
I don't think I would use this service day to day for commute and basic transport, but I would like to try it if I am touring somewhere. renting a bike and maybe riding through Washington D. C.
Elaine | 09.08.15 @ 14:42
Think that is a great idea for maybe college communities. However, if you rode one in my area, you would get ran over in afraid.
Kyle | 09.08.15 @ 14:43
This is actually really cool. They have something vaguely similar in certain parts of san fran.
Angie | 09.08.15 @ 14:45
Great idea for the users, but I can see why it would be a risk to invest in.
Owen | 09.08.15 @ 14:49
Great for big cities and convenient.
Meredith L | 09.08.15 @ 14:52
I love this idea for urban areas as long as there are safe bike paths. Too many horror stories of irresponsible riders and drivers who feel like they own the roads, you know? I would love to participate in this kind of program but everything is at least 8 miles away (one way) but I fully support implementing this in all cities.
Daniel | 09.08.15 @ 14:59
This is new to me but not a bad idea at all, there are places in the world where more people bike than own cars so hey this could be a great way to get around save money eliminate pollution and traffic, and stay fit
Jo Ann | 09.08.15 @ 15:00
I agree it is an interesting concept, but I really don't see it becoming a trend due to cost. If a person was to use it everyday at $7.00 per day buying a bike would be cheaper. Now i could see offering locking stations in major metropolitan areas might give added revenue.
Apryl | 09.08.15 @ 15:05
That's a really interesting concept!
Nancy | 09.08.15 @ 15:06
It seems that the places that it could be most profitable are also the places where traffic is crazy and riding dangerous.
Kamie | 09.08.15 @ 15:11
Bike sharing is all around here in Phoenix, but it costs like $20 a day to use one of the bikes.
Beverly | 09.08.15 @ 15:14
Bike sharing is great for a densely populated city, but wouldn't work in the more rural areas. And I don't see how popular it would be in the winter months either, but it is a good thought.
Carla | 09.08.15 @ 15:22
I can understand how this would be great if you live in a big city. Bike sharing to help you keep fit and great for the environment. It's a win win!!
Crystal | 09.08.15 @ 15:31
Interesting idea
Rychana | 09.08.15 @ 15:31
This is a great idea. I wish that had this in my area. It would be nice to use in the summer since I don't have a place to store a bike.
Kathryn | 09.08.15 @ 15:37
I think this a wonderful and helpful idea for our environment AND communicating with other people. :)
Erin | 09.08.15 @ 15:40
This is an interesting concept, but it would be inconvenient to have to return a bike every 30-45 mins if you wanted it more than once a day. I guess if you're a high-frequency user though, it would be better to just invest in your own bike.
Steffanie | 09.08.15 @ 15:42
Great idea, but definitely for bigger cities or campuses. Where I live, I just don't think it would work.
Jonathan | 09.08.15 @ 15:53
Yeah bike sharing especially in tourist areas has been a big thing.
Wanda Langley | 09.08.15 @ 15:53
I think this is a great idea. Good for the environment as well as exercise all in one. I can see this going over well in a college town.
irene | 09.08.15 @ 15:55
Can't say this would really appeal to me at all.
Zanna | 09.08.15 @ 16:26
I saw these while I was on vacation, and it seems like a useful thing, if I had known about it ahead of time, we'd have tried it!
Sarah | 09.08.15 @ 16:26
For a large area, this is a great idea. For my area, nothing is close enough for a bike - 10 miles to the corner store haha. It's interesting to see how large cities are popping up with ways to attempt to make life a little easier.
Ambar | 09.08.15 @ 16:31
I think there's not enough "bike-riding culture" for this to be profitable. People, at least where I live, think they need a car for each member of the family to go everywhere, even nearby places. This kind of environmental friendly companies is the kind of business we need and should support.
Chelsey | 09.08.15 @ 16:47
I think this is a great idea in larger cities where things are easily accesible but for some smaller cities I don't think it would pan out too well.
Bobbie | 09.08.15 @ 16:53
I see that this has the possibility to be successful in a few select cities, but not in very many.
Heather | 09.08.15 @ 17:18
Write a commenti think this is an awesome idea. I've seen it in bigger cities but where I live we don't hacmve bike lanes.
Jackie | 09.08.15 @ 17:19
This would be especially great for avid bike riders when they visit another city.
Jonathan | 09.08.15 @ 18:48
Bike sharing has been a big deal in tourist areas, I've used it a time or two on vacation, great idea.
$commenter.renderDisplayableName() | 12.04.20 @ 01:48