Paul Riaikkenen - Car Bike Hot Swap

Social Innovation Venture/ Social Entrepreneurialism

Executive Summary

Every day, thousands of people travel from outside the metropolitan area to do business in the CBD. The massive influx of people causes congestion on roads and pushes pubic transport to its limits. Car Bike Hot Swap represents a more convenient, lower impact method of commuting.

The proposal is to establish dedicated parking spaces outside the CBD where a customer can park their car and for the price of their parking ticket receive a bike to rent. Or alternatively receive a daily Metcard in instances of inclement weather.

Given the rising price of car use and the absence of a bike-sharing scheme in Victoria there is a growing market for alternative transport methods.

Hot Swap allows customers to step down their dependence on cars and encourages participant to be more positively involved in their local community.

Business Model

Revenue:

Councils are willing to provide support for ecologically targeted projects by providing free parking spaces. Currently the Melbourne city council provides spaces to car-sharing companies: Flexicar, GoGet and Charter Drive.

Fees from ticketed parking for the space will be used to cover maintenance costs for the system.

Overall Market Entry strategy.

Establish 10 trial parking spaces in proximity to the Sandringham and Glen Waverly Lines.

Advertise the service through local newspapers and leaflet drops in outer suburbs.

Examine feasibility of system by monitoring usage trends and determine long term financial sustainability of service.

Growth Strategy

Successful implementation of the service would allow for service side and customer side improvements to be made to the system.

Quality of bike could be improved either by purchasing higher quality bikes and/or adding features such a GPS for navigation.
Market Research and Analysis

Customers and clients: Service targeted toward people living in suburbia and rural Victoria; People who commute daily into the Melbourne CBD.

Case study: Parisian Based Bike sharing scheme; “Velib” demonstrates feasibility of bike shared transportation solutions. Bike stations appear throughout Paris and offer the public cheap bicycle hire.

• 10,648 bicycles on July 15 [2007]

• 14,197 in early September [2007]

• 20,600 by the end of 2007.

Source: Velo-Mondial 2007 “33 question Velib”

Market Size and trends:

Energy Prices are increasing and placing major pressures on public transport. Consequently an increasing number of people are seeking alternative methods of travel.

Market Share

The absence of a bike sharing service in Victoria, coupled with the success of similar bike based services internationally (Velib reduced Parisian traffic by %3 in first two years) suggest that ‘Car Bike Hot Swap’ will attract a considerable market share.

Ongoing Market assessment

Using the data from the individual ticket machines and actual takings trends can be identified and the overall success of the system can be gauged.

Marketing Plan

Market Entry:

Establish 10 parking spaces to pilot the concept.

Sales/Pricing tactics:

Pricing adjusted to undercut the average city-parking price providing a price incentive for people to utilise the “Car Bike Hot Swap” service.

Price Range
-$12 Hourly (‘Secure Parking’ Collins street)
-$2 Hourly (Council sponsored street parking)

Average - $7 Hourly

Advertising and promotion

The target audience is outside the city centre. This allows for the use of smaller, community based Newsletters and Flier drops to be employed in promoting the system.

Also there is an opportunity for co-promotion with public transport providers.

Logistics

Initial start up locations:

1 - Around the Sandringham Train line to utilise the proximity of beachside Bike tracks and public transport

2 - Along the Glen Waverley line to utilise the proximity of the Gardiners Creek bike trail and public transport.

Operational plans

The operation of the service is dependent on the maintenance of the equipment (Bikes, ticket station) and establishing a customer service team to handle consumer problems (Such as missing or damaged bikes or illegally parked cars)

Product development

Rapid system implementation:

Use of current technology allows for quick implementation of the system. Ticket machines and council owned bike lockers are already located at many train stations.

The maintenance of these machines falls under the responsibility of the council and state government. Sharing these resources can represent a way to cut costs. A permit denoting participation in the service could act as a way of controlling unauthorised parking in the space.

Dedicated system implementation:

Alternatively, developing a new bike parking system, based on the European bike sharing technology represents a more convenient but resource intensive solution.

Case study: Velib Bike stations require credit card details to be entered to receive a bike. The details are stored and failure to return a bike results in a replacement fee to be charged to the nominated credit card.

Product enhancement plans

Successful implementation of the service would allow for service side and customer side improvements to be made to the system.

Quality of bike could be improved either by purchasing higher quality bikes and/or adding features such a GPS for navigation.

Integrated GPS can also be used to keep track of the bikes and evaluate usage trends.

Employees

Customer Service

Responsible for managing ‘customer concerns’ and directing maintenance of council workers to correct problems.

Other contractors

Council workers to issue fines for parking spaces.

Case study: Flexicar, a Melbourne car-sharing company receives permission to use council spaces free of charge but parking restrictions are still enforced by the council.

Maintenance

Contractors are used to maintain and repair the bikes and ticket machines. This is done to reduce the costs associated with hiring permanent staff.

Margins and profit potential

Income and expenditure projections

N.B. The Price of operating “Car Bike Hot Swap” (per unit) is expected to be lower than conventional bike sharing systems, as the equipment is not subjected to the same high use.

Below is a yearly projection using Velib Maintenance statistics

Revenue	Quantity	Per	Total
Parking Meters (Hrs)	10	$10,800.00	$108,000.00
Total			$108,000.00
Cost	Quantity	Per	Total
Purchase and Maintenance	10	$1,300.00	$13,000.00
Staffing	3	$20,000.00	$60,000.00
Total			$73,000.00
	Profit	$35,000.00

Breakeven projections

Based on the above profit projections the service should break eve within a year.

Cost control measures

Cost can be reduced by employing part time workers or contractors to fulfil the maintenance and customer control positions.

Also by utilising the established parking ticket infrastructure the price of purchasing and maintaining the system can be reduced