I was fortunate to speak to a number of vendors, observers and attendees at the IPI show last week. What follows is some observations gleaned from those discussions.
Traditional vendors are struggling to survive:
Poorly managed traditional vendors that didn’t reinvest in their product suite have been the biggest losers. Many legacy vendors both on and off street have let their products to drift, allowing newcomers to take a quick hold on the market.
Some companies have led traditional business with newer technology (credit card acceptance, license plate recognition, parking guidance) and a smarter go to market model that appealed to a cash strapped market place.
Emerging technology vendors have shredded their VC’s capital.
In some cases, ego driven managers have wasted and have consumed their cash largesse by systematically reducing prices to protect or increase market share. This initiative combined with very high management costs have forced them out of business. On street companies are prime examples and are finding themselves being sold off at fire sale prices, and it’s likely that others are in the same boat. Whether it was a purposeful directive or a consequence of mismanagement, the driver seems to have been “grow market share or perish”. There appears to be little interest in profit.
The unanswered question
Is M-Commerce a “real business” or is it simply part of a “bundled offer” of services of a traditional vendor? This remains to be seen. M-Commerce, the use of mobile devices to participate in buying and selling, is growing exponentially, with it projected to top $650 billion in 2018. This is not simply “pay by cell” but is a commercial activity where the buyer finds product and the seller provides product and services through mobile devices including smart phones, tablets, and “connected” cars.
Will our industry be able to step up and provide services including reservations, dynamic pricing, parking guidance, and the like? It remains to be seen.
Liquidation and consolidation
Some assets will be liquidated cheaply and market share will be purchased for a small amount of money.
PaybyPhone, for instance, tells me that they are being sold by their current owner due to the inability of companies like them to provide quick cash returns and are looking for an owner who has a more long term view of the parking market. PaybyPhone have some 400 cities across the world. It will be sold to an organization that will enhance its portfolio type. Duncan could be sold as a whole, but may be broken up into its individual parts and sold to enhance the product lines and market share of larger companies. Its Autocite division, for instance has over 8000 licenses that would be a coup for a competitor.
The power of three has reduced to the power of two.
In meters, both single space and pay and display, consolidation is occurring to the point that where there were three major suppliers, there will now be two. Similarly, in the M commerce and Pay by Cell where there were three market leaders, there will now be two. Consolidation has occurred but not through acquisition, it has occurred because disruptors have caused lazy companies to incur costs they couldn’t recoup from the market. Prices have been driven down, and this will force some companies out of the market.
Venture Capital money has failed to achieve an outcome:
A number of companies have received VC over the past few years. Many have a high burn rate and little to show on the profit side. Extremely high expenses and low margins mean that they will begin to slow, and then either consolidate or fail.
Corruption is Topical
A few vendors and customers have been involved in bribery. It seems that it is not possible to do business in some cities, without some type of “backhanding.” This is primarily on the municipal level, but some customers seem to feel that some “consideration” is necessary to gain access to decision makers.
So what’s good?
There are clear winners. Those companies that have focused on customer relationships, service, and a business model that allows cash strapped customers to pay as they go seem to be succeeding.
New companies are appearing that have novel and dynamic ideas that are taking hold. Some will succeed, some will not. However they are forcing legacy companies to rethink their products and markets and challenging them to adapt to change.
Many startups will bring new ideas and technology to bear on parking, but they must consider good management and a frugal approach. Their business models must reflect reality, true costs, and generate necessary profit.
Many companies are growing though strong non-US markets with growth in Latin America, Asia, and to a lesser extent Europe. Growth is slower in the US where the industry as a whole is not in the greatest shape. Margins have plummeted, costs have risen and new technology is being brought to the market for less than it costs to deliver it. The European market is in slightly better shape.
What does it all mean?
The parking industry will grow, but at a slow rate. Technology will be paramount in the growth but companies that relied on traditional silicon and metal devices in lanes and on streets will have to be certain that they understand that software often costs as much or more than hardware and price accordingly.
This may not best the best news for parking equipment consumers, but if the manufacturers are to survive, they have to be profitable. There are two ways, raise prices or lower costs. The successful ones will do both.