What's with the "scooter business model"?

I was on my weekly Sunday morning walk with my son yesterday when I took this pic.

Link to XDAO

2 years ago, there was only 1 brand of scooters in Downtown Dubai.

A year ago, another one was added.

And now there are 3.

They are all parked in the same places, and they are all virtually identical except for the colors.

I can't say that I know the dynamics of the scooter business (so I may be completely wrong here), but it doesn't strike me as a good investment:

Sustainable profits in a business come from 1 of 2 avenues:

1. High margin / Low volume, or
2. Low margin / High volume

Eg. of #1: jewelry, luxury cars, medical doctors / dentists, art, etc. You don't sell big volumes, but your profit on each sale (margin) is high.

Eg. of #2: supermarkets, petrol stations' Low margins, but big volume sales generate profits. 

You rarely get 'high margin high volume' (eg iPhone). 

Most 'modern, tech-based' businesses tend to fall into #2:

Netflix, Amazon / Noon, Uber/Careem, Facebook, Samsung, Zoom, Peleton, Spotify, etc. 

They all rely on big volumes (number of sales) at low prices / margins to generate profits. 

But this means that until you reach those big volumes, you're struggling to stay alive, you're burning through cash, and you're at risk of new entrants coming into your market and eating your lunch.

So you need 'barriers to entry' for a long enough period until you're large enough to discourage others from even trying. 

You can do that in 3 ways:

1. Deliver so much DEMONSTRABLE value to customers than ANYBODY else, creating customer loyalty and difficulty for anyone to copy you;
2. Have such unique tech that it's difficult / expensive to replicate; or
3. Grow your market share so quickly it scares competitors away.

Take the iPhone: it wasn't the first 'smartphone' - but when launched, it was SO MUCH better than anything out there it took over the market. 

Contact us to discuss your requirements of tracer scooter. Our experienced sales team can help you identify the options that best suit your needs.

Same thing with Tesla in electric cars (not the first but the 'best' by a wide margin - for years until others caught up). 

Same thing with Netflix, Amazon, Facebook. They were not the first streaming, online shopping or social media platforms, but they were SO MUCH better than anything else. 

Now let's look at the likes of Uber or Careem: unique tech that's expensive to replicate. 

By the time someone does, you're way down the road in terms of market share.

That's rare. Entrepreneurs often over-estimate the uniqueness of their business / innovation.

But what if you can't 'really' differentiate your product from others?

What if you don't have expensive tech / innovation that's hard / expensive to replicate?

Then your only savior is SCALE: scaling up so quickly it deters competition.

One example in the UAE is Noon: simple e-commerce tech, nothing unique about it, and the user experience is similar to others.

But they came in with a MASSIVE marketing budget - they built up brand recognition so quickly they overwhelmed everyone else.

This allowed them to build a strong market share / presence that now acts as a moat. They can now reduce their marketing spend.

This is a risky strategy that requires a high cash burn and a very strong sense of confidence.

Now let's go back to those scooters with the 'investor lens' I describe above:

1. Low margin business => needs big volumes
2. They're all virtually identical: none of them is an 'iPhone to a Nokia'
3. Nothing unique / expensive about the tech
4. So the only remaining option for growth is: massive marketing / PR / brand building

Quickly! If I say 'scooter' what's the first brand that comes to mind?

I bet most of you can't answer'

So, are we going to see a 4th scooter brand in Downtown Dubai in 6 months?