FINANCIAL FRIDAYS: THE BUSINESS OF SUBSCRIPTION

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Welcome to movmi’s Financial Fridays micro-webinar series. Every other month, movmi’s Venkatesh Gopal will be inviting an exceptional panel of experts to join a discussion on shared mobility operating financials and business models. The series will explore key financial aspects of a diverse range of business models from sharing to subscription and even integrating MaaS along the way. The goal is to get a deeper understanding of operational management, utilization, electric vehicles, customer loyalty, technology, insurance and much more.

For the fourth session of our Financial Fridays series this year, movmi is joined by Ramu Nair, Head of Business Operations at INVERS, Sergio Aceveda, Director of Business Development at Launch Mobility and Kevin McLaughlin, CEO at Zygg e-bike Subscription. Over the last 18 months we have seen subscription as a business model gain a lot of traction across many modes and markets. In this webinar, the panel discusses what exactly makes this model so desirable to the user.

Watch the micro-webinar below! Keep reading to learn more about each guest panelist and for a brief summary of our forth #FinancialFridays discussion!

FINANCIAL FRIDAYS: THE BUSINESS OF SUBSCRIPTION WITH RAMU NAIR, SERGIO ACEVEDO, KEVIN MCLAUGHLIN AND VENKATESH GOPAL

Financial Fridays Session Four: The Panel

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Ramu Nair

Head of Business Operations – INVERS

Ramu is a business operations expert in the B2B software Industry. He is constantly looking for ways to optimize the process and always questions if his assumptions are right. He is currently busy being part of the changing space of mobility and grateful to be part of building technologies that help change how people move.

INVERS has been in the shared mobility industry for over twenty years, their technology is an ioT hardware and an API that allows vehicles to be connected and their providers to share them easily.

Sergio Acevedo

Director of Business Development – Launch Mobility

Sergio helps financial companies, manufacturers, and startups to develop, plan, launch and scale mobility projects all around the world. He understands how to connect different industries and goods to create value and has led a variety of sales teams in the retail, industrial, and technology sectors. 

Launch Mobility is a software platform shared mobility company. They focus on what their customers truly need and their mission is to connect their customers with a platform that is easy to use.

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Kevin McLaughlin 

CEO at Zygg – Subscription E-bikes

Kevin is an Urban Mobility Advisor and a strategic builder who has founded four companies. He is passionate about turning great ideas into products & services that people love, with more than 20 years C-level experience driving results in Shared Urban Mobility, Healthy Cities and related Technology.

His latest venture is Zygg, where he provides electric bikes to food delivery and commercial fleets. Their goal is to get more people onto electric bikes and out of privately owned cars and polluting vehicles.

FINANCIAL FRIDAYS SESSION FOUR: THE BUSINESS OF SUBSCRIPTION

WHAT IS A SUBSCRIPTION MODEL AND HOW IS IT DIFFERENT FROM MEMBERSHIP SERVICES?

The idea is to take a product or a service that you would normally need to purchase or finance (and also be responsible for maintenance) and to wrap it all into a single monthly price.  If it’s a new piece of unknown hardware, this is a number that you can afford and feel comfortable with that will give you a hassle free experience. The fear or depreciation and the insurance cheque just doesn’t exist for the individual user via a subscription service. A good example of this type of service that we use everyday are cell phones. People get the benefits and joy without the unknown financial costs.

Similarly to shared mobility, like carshare and micromobility, it’s a simple concept but with lots of logistical planning required on the operations side.

HOW IS IT DIFFERENT FROM LEASING?

The business model of subscription services is usually more flexible and convenient to customers. With a traditional lease you usually have to go to a showroom and choose a car, have your credit checked and then you have a fixed commitment. With subscription services, most models are open ended so you don’t have a particular day that you have to return your vehicle. It’s easy to use and anyone can access the vehicles that are available. It’s also super easy to sign up via an app or website. The platform is usually integrated with many vendors so that credit can be checked easily and dynamic prices can be created. Subscription services usually include bundles. You aren’t just paying for the assets, but you are also paying for insurance, the service etc. You don’t have a big commitment.

HOW ARE SUBSCRIPTION SERVICES TODAY DIFFERENT FROM PREVIOUS VERSIONS OF THE BUSINESS MODEL?

It’s leasing but with more open ended flexibility. There is more democratization of choice and more power going to the customer. It has been driven by all the different options people have with all types of subscription models, such as Netflix, cell phone plans etc. It is the industry adapting to the demands of the customer and it is allowing the customer freedom when investing into an asset or using an asset.

Even the automotive industry is seeing the change and adapting. It’s not just something that is coming from new start-ups, there are a lot of dealerships across the world exploring subscription as an option, as well as the big OEMs, such as Audi and Nissan – who are trying to get more usage from their vehicles by exploring this model. It  also offers the option of recurring revenue and at times it can even be higher revenue overall. Though it does come with some risks.

We have also seen a lot of already established shared mobility operators start to offer subscription packages, in response to the pandemic, such as Lime in Europe, who did so with their micromobility offerings. This type of model offers more financial dependability, especially when there is a volatile market situation, like there was during the first and second wave of COVID-19. 

WHAT WERE THE USER PREFERENCES, BEFORE COVID-19, THAT WERE DRIVING THE SUBSCRIPTION BUSINESS?

There is a supply and demand issue when you have a fleet and customers, so you have to balance that side out. The gym membership is used as a bad example, because you need to sell twice as many memberships as the capacity because you know many will cancel after a while. The most important thing that subscriptions offer shared mobility providers is that it allows them to expand their customer base. The thing about the current shared mobility model is that for example, if you take an e-scooter out for a ride, a ride that only lasts a couple of minutes can cost $3/$4 and after a while that can get very expensive to use it every day. But if they adapt and offer a subscription service, this will allow more people the opportunity to use these services. Every country, state and city are different, so users are not the same either. They have different travel needs. Subscription services do not take away from the services already offered, but can open up mobility to a new market.

WHAT IMPACT HAS COVID-19 HAD ON SUBSCRIPTION AS A MODEL?

Pre-pandemic there was a lot of experimentation from different companies, for example one of Launch Mobility’s clients worked with university campuses. However, once the pandemic hit and nobody was going to class, the business model had to change. A peak for shared mobility was half way through the first wave when Uber and delivery services were in high demand as people stayed at home but also tried to find alternative ways to move around when necessary. As a technology provider, INVERS saw an increase in the need for keyless access from their clients during the pandemic and witnessed shared mobility companies provide their usual service offerings as well as subscription models in order to create a sustainable revenue stream.

Zygg was created during the pandemic and has found that one of the biggest changes seen during the pandemic was the implementation of safe bike and scooter infrastructure, which would normally take about 20 years to do so. The pandemic has essentially sped up the future. If we can keep up that momentum, we could see a big change.

Now that people are going back to school and work (or working from home) they are looking for convenient and safe options to move around, but one of the biggest problems right now is the lack of cars in the market. We are waiting for the market to stabilize in terms of inventory around the world so that we can see an increase in new mobility services.

WHAT MAKES A SUBSCRIPTION MODEL MORE ATTRACTIVE TO OPERATORS IN TERMS OF FINANCIALS?

A subscription model can also reduce cost for many operators but reducing the costs of rebalancing for example, as it is a one-to-one model. However, even with a subscription model is it possible for assets to sit and remain unmoved. A company that is addressing this problem is ZoomCar in India. They are allowing peer-to-peer carsharing within their community. The members that have a subscription model, are effectively able to offer their car as a carsharing service to other members of the ZoomCar community when it isn’t being used. This could be a trend we see in the future and could also allow operators to bring in extra revenue per vehicle. 

WHAT DOES THE FUTURE LOOK LIKE FOR SUBSCRIPTION MODELS IN SHARED MOBILITY?

“I think subscription is going to grow, especially as people explore e-bikes and all kinds of other electric vehicles and the faster technology changes, the less people want to own something that might get old and they may not know how to fix. I think there is a lot of opportunity for subscription which is great for consumers and on the business side and hopefully good for cities and climate change as well.”

-Kevin McLaughlin

“I think there’s going to be a disruption in the market. We are trying to increase the utilization of assets. Fleet managers and operators with a lot of assets can choose different business models. It’s going to disrupt the traditional dealership models, who are looking into new technologies for the utilizaiton of their assets and getting new customers. It’s an expanding market. We just need for COVID-19 to be gone before we see all these new business models taking off.”

-Sergio Acevedo

“With this new subscription model, new sets of problems come up when it comes to users and operations. More and more data is needed to ensure the assets being used are optimized. Driving behaviour cracking will also come up, at least in the carsharing space, maybe not in the e-bike space. As the subscription model gets bigger, there will be a question of asset production. These problems will pop up so technology needs to get stronger to help operators to protect their assets and users.” 

-Ramu Nair

If you like our Financial Fridays webinar and would like to watch more, check out the previous episode here and our Multimodal Mondays series here

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