SMARTER LANEs FOR PUBLIC BIKES
San Francisco based Public Bikes is unconventional in many ways, but the startup isn't immune to the challenges of building a business. During grad school, I helped Public Bikes evaluate a retail expansion, and along the way, learned some surprising things about the bicycle industry.
The first time I saw a Public bike, I happened to be heading UP a zigzag bike path known as the Wiggle. I emphasize UP because things are always up or down here in San Francisco.
I didn’t realize it then, but the man on the bright colored bike with a distinct dutch style, was Public Bike's Head of Marketing. Despite the throngs of bikers on that evening commute he was hard to miss.
First of all, he was the only one towing a trailer. On the trailer was a boombox which was serenading the ride with music. Second, he wasn’t alone. In fact, the lifestyle marketer had a small entourage. As he and his troupe amicably rolled up the Wiggle, one got the impression they were just back from a picnic. We were all too envious.
Little did I know then that our paths were meant to cross again.
That moment occurred during the third semester of my graduate program at California College of the Arts (CCA). Like most of the classes in my graduate program, real-world projects were prioritized over case studies.
And, at CCA clients were never handed out. Therefore, the first order of business for any team is to find one.
My teammates and I quickly made a shortlist of potential clients. Then, we ranked that list by learning objectives, potential impact, alignment with course material, etc. Public Bikes came up in our discussions, and it happened that our Program Director knew the Founder of Public Bikes.
We had an initial meeting with Public Bikes to assess client/consultant fit. Our point of contact was the then Head of Operations. During our meeting, we discussed a host of pain-points the small startup faced. Examples included replenishment and merchandise planning, product lead times, and revenue growth.
These were all interesting problems, but one stood out as critical given the company’s financial situation. That challenge was revenue growth.
Public Bikes leveraged a multi-channel strategy including dealer, corporate, and direct sales. But, the startup’s growth was directly correlated with its retail locations. At the time, the company had three retail stores and was considering opening another to boost revenue and brand exposure. It was a complicated decision for many reasons including the company’s cash position and distribution strategy.
We opted to take the challenge.
Our first step was to quickly gather data and relevant insights specific to Public Bike’s business.
That’s when I got to meet the company’s marketing director whom I had seen in the Wiggle. In speaking with him, we learned an important sales criterion for Public Bikes - the significance of the test ride.
If a customer took a test ride, she/he was likely to purchase, and this was attributed to the perceived safety and serenity of Public Bike’s retail locations. That was something we needed to keep in mind for new retail locations.
Next, we visited the distribution center. There we learned the bikes required some assembly upon arrival from the overseas manufacturer. That meant we needed to allot for a certain amount of assembly space in each of our scenarios.
With this and other key insights, we dived deep into the factors that influence a bike sale. Then, we built a tool to evaluate the information. We called it a Favorability Score. The tool allowed us to reconcile qualitative data (consumer perceptions, etc. ) along with quantitative (demographics, etc.) to rank a shortlist of locations.
Next, we refined our scope to three cities, but we still had to assess the impact of distribution.
To do so, I leveraged my financial background to devise a series of financial scenarios. The models relied on assumptions about costs and market demand. To consider those assumptions, I performed a sensitivity analysis. A sensitivity analysis shows which assumptions will have the greatest impact on the bottom line. The analysis quickly revealed that land transportation via truck was a cost we needed to watch out for.
In fact the cost of trucking bikes was so prohibitive, it didn’t make sense as a replenishment option for most locations.
After plugging in the different scenarios, we identified the location and distribution option with the least risk and greatest opportunity to achieve the company’s goals. We presented our recommendations to the client along with our aggressive and conservative sales forecasts.
More importantly, we provided the decision makers at Public Bikes with a tool to evaluate the decision moving forward. Because unlike those hills, decision factors and inputs are never static.