How Upway is introducing e-bikes to the U.S. market

0:04Hello, everyone, and welcome to the Modern Retail Podcast.

0:30a good amount of money, I think about$60 million. And I want to talk about, of course, the company Toussaint's background. He's worked at some really interesting companies like Uber, but also Upway started. It's a French-based company. It's in France. It's been very popular in Europe, but it's now in the US. And I'm really interested in just the rising popularity of e-bikes in the US, how that's going, where demands are. I live in New York, and so I bet you we're different than other cities and other areas. And I'd love to just get into all of that. But Toussaint, How are you doing? I'm really good.

1:00Thanks for having me, Cain. Yeah, I'm excited to have you here. So let's start with you. 2021 is when Upway launched, is that correct? Absolutely, end of 2021. Actually, we're about to celebrate our three-year anniversary. Well, happy birthday. Bon anniversaire. Thank you very much. So what were you doing before and what led you to ultimately launch this company? Yeah, absolutely. Before Upway, I actually worked for eight years at Uber, as you were mentioning. So it's been a bit of a funny story because when I joined, Paris was actually the first city outside of the US to be launched by Uber. And so when I joined in 2013, we were a five people team in a very scrappy office, you know, onboarding drivers on the app.

1:44And it was the very early days of Uber. And what's been exciting is to experience the massive growth and to help, you know, build what has become obviously a massive business, a great consumer experience across multiple verticals. And so in my last couple of years at Uber, I was actually leading Uber Eats, so the food delivery business for the UK, Northern and Eastern Europe markets. And so really helping build, you know, the leading destination for people willing to get their food delivered to their doorstep. It's at Uber that I met my now co-founder, Stefan, and he also worked on the ride sharing business and then on the food delivery side.

2:20And he actually led Uber Eats for the US and Canada markets over his last year at Uber before we decided to leave, take a one month break and then find a new idea to launch an entirely new business. So that's what happened, the story behind and before the Upway Genesis. I actually wanted to ask you because I knew that you worked on the Uber Eats side. And this is true in the US, but also my knowledge of food delivery in Europe is that a lot of it is delivered via e-bike. And so is that how you got that idea is that you saw a lot of the drivers that were using the service were using these vehicles?

2:57So it's quite funny because indeed, a lot of couriers, especially in Europe, increasingly so even in the US, do use e-bikes. So it's definitely a very popular way of moving around for couriers. Yet it is not where the original idea of Upway came from. So it's funny because it ended up, of course, having a lot of similarities, but it's not where we generated the idea from. First, what we really wanted was to make sure that we were building upon a massive consumer trend. And what we saw was, you know, it had been a long time since I had seen such a rapid adoption of an entirely new piece of equipment and new product.

3:34And when we looked at the numbers, e-bikes moved from, you know, non-existence to a very mass market product in Europe, especially in the matter of maybe seven to eight years. over the last three to four years, a similar trend has happened in the US. And when you project forward, what you see is that it's still only about halfway through the rise of adoption that we can project. And so that really intrigued us. When we double clicked, we really found out that it's because the product is super convenient. It's incredibly comfortable. It gives people a bit of a wow effect, a bit of a superpower feeling when they try an e-bike for the first time.

4:11So usually there's a before and after moment after your very first trial of an e-bike. And that really built confidence for us that we were confident this was an area and a category that was exciting to work in. And the one thing we found is there was one barrier to faster development, which was there was a lack of trust in buying secondhand e-bikes. And so on the one hand, you know, new e-bikes were quite expensive. Secondhand were not trustworthy. And that's how we decided to go build Upway, which effectively brings you the best bikes you could think of at a fraction of the price of new because they are used.

4:47But because they've been refurbished entirely, inspected and repaired by our professional mechanics team, they actually come in excellent condition with a one-year warranty. Can you just talk a little bit more about how having that element of inspection, your own warehouses, and figuring out where to source more vetted and trustworthy e-bikes? A, how did you build that? And B, how did you make it so that the economics worked so that you would be able to make this into ostensibly a profitable business down the line? Absolutely. And I think a good parallel to draw from in the US would be Carvana, where in the used car space, you do have a very large market leading player that does operate a similarly integrated, effectively, operation, rather than simply a marketplace without touching the actual products.

5:35It's really been fundamental and quite foundational to Upwaste business to integrate, indeed, this entire operation. I think the key insight we started from was, I believe it was a survey that we found before we started the business, which identified that a majority of consumers had considered buying an e-bike and a majority of them were concerned about fraud and concerned about quality and therefore not turning to a secondhand product. So there was an appetite to get a good product. They definitely wanted to acquire an e-bike, but they didn't trust buying secondhand. And so clearly this point of trust and quality was absolutely central to our thinking and to the way we built Upway.

6:15And what we found was that there was no meaningful repair and certification operation out there that existed. And so if we wanted to bring you more than just a random e-bike from someone you don't know without any kind of vetting, we had to build that operation ourselves. There was no alternative that would reach the kind of scale that we've achieved in three years at the kind of global level that we've had since we operate already in eight countries in Europe and the US. And so we had to do this ourselves. What that meant is definitely a lot more homework for us in terms of, you know, finding warehouses, building a team of mechanics, opening those up centers, which is effectively where we receive the bikes, inspect them, repair them to the best condition, photograph them, and then effectively deliver from.

7:04But that enabled us to build the kind of today customer feedback that we've received and the kind of product market fit that we have built upon over the last three years. Got it. How many of those upcenters do you have? Like for one space, how big of a geography can you fill with the amount of bikes you have going in and going out? So today we operate from four upcenters globally, three of them in Europe, one in the US. So we're live from Gennevilliers near Paris, where I am today. We are live in Maryland in Belgium. We're live in Berlin in Germany, which is the largest e-bike market in the Western world, Germany, and from New York in the US.

7:42And in the next three months, we will actually be operating from Los Angeles. So we are opening a new location in LA, as well as Düsseldorf in the West of Germany. Well, that's very exciting. I imagine biking in general is much more popular in Europe. If you go to any European city, I think about Amsterdam, Berlin also, but it's much more integrated and I would say accepted into car culture in Europe than it is in the United States. Is that where you're seeing the demand are people who are bike riders who want to go a little bit faster, at least on the Europe side? So it's a fascinating question because we've wondered a lot what are the drivers that effectively explain the trend and the speed of adoption of e-bikes in different countries.

8:25And so first you look at the Netherlands, which is a country where for the last 40 to 50 years, you've had a tremendous amount of cycling infrastructure being built and a deep cycling culture emerging. And so a lot of people consider that to be a bit of an isolated case, quite different from the rest of Europe, quite different from the US. And there were reasons to believe so. They are more advanced, especially from an infrastructure standpoint, than many other places. What's fascinating, though, is that when you look back in time, where that came from was in the 70s. The Netherlands were actually just as car-centric as many other Western world countries are today.

9:01But a series of fatalities and car accidents leading to, in particular, child deaths led to a bit of an outrage, a bit of large protests arguing that cars should take slightly less space and place in the cities and that there should be alternatives. And so there's been 50 years of public authorities' efforts to actually develop alternative infrastructure that explains that move. Now, Germany is interesting because of any country that you could think of in Europe that has a car culture, Germany comes on top. And so a lot of times when we talk about the fact that we're live in the U.S., we get questions, especially from Europeans, about, you know, is this going to work?

9:37Are the U.S. really into biking? Is this a thing? But what you realize is that Germany is heavily car-centric. There's no other countries in Europe with a heavier car culture than Germany, yet it is the number one country when it comes to e-bike adoption today. And the key reason is because people don't see it as either owning a car or owning a bike or an e-bike. What they see is that there's a large number of use cases for which their car isn't the best option and for which e-bike is actually a great alternative. So typically in Germany, most of the users that we see, most of the people buying from Upway and buying e-bikes in general, they're not necessarily people that come from the sports bike use case moving into the e-bike space.

10:19There are more people who own a car or two in their household, but have realized that half of their trips are actually less than five miles. And so they're like, for a number of them, it's probably more practical to actually just grab an e-bike rather than pay for fuel, take the risk to dent my car, and actually try to find and pay for a parking slot when I can actually just grab an e-bike and do it in just a few minutes. Got it. This actually goes into, let's talk about the US launch because I'm really fascinated with what you're seeing and how you're approaching it because, I mean, the US is huge.

10:49We have a lot of cities. I guess my first question would be is, is the growth that we're seeing, like I think I read a Gartner statistic that, and I think you cited some earlier, but like it's seeing like a 13 % CAGR, right? Or something like that, the global market. Correct. We're seeing more courier delivery. And just living in New York City, when I see an e-bike, it's more often than not a courier delivery person on it. Is that where you're seeing this growth? Or is it a lot of normal consumers as well? And then the second part of this question is, is it in the cities specifically? Or are you seeing this in more suburban areas?

11:22Yeah, both really, really interesting points. And again, points where we actually got quite surprised since the launch of Upway. So starting with that second point, actually, about is it city-centric? or is it something that's happening everywhere? What we have found in our data and looking at the broader market is that actually penetration, so if you could look at it as number of units sold per 1 ,000 inhabitants, is actually very comparable whether you're in cities, in the suburbs, or in smaller towns, or even the countryside. So adoption and product market fit of e-bikes in general is very similar regardless of your geography.

11:58The use cases might differ. So in cities, you will look a lot more at commuting use cases where people just grab a bike to get to work in the morning, get back home. Whereas in the countryside, for example, there's going to be a lot more recreational leisure use cases. You have, you know, very popular electric mountain bikes in California, in Colorado for a weekend ride that takes you up the hills with far less efforts. Or, you know, just trekking e-bikes, which are great for, you know, some casual ride in the forest, in the countryside around your town. So we definitely see different use cases, but a similar penetration, a similar adoption, regardless of the geographies.

12:36And that also explains why couriers are actually only a small fraction of the entire e-bike market. Out of the million plus new e-bikes that are sold every year in the U.S. today, couriers actually represent, you know, probably sub-15%, if not sub-10 % of that total volume. And actually, the vast majority are, you know, you and I, standard consumers, buying a bike for their own use case. That's super interesting. I'm shocked. That's really interesting. I wanted to ask just about the marketing side of things, because I think that in Europe, you said that the big issue and what you were trying to bridge was making sure people felt it was a trustworthy used bike.

13:15Explain to them, we vetted this, you have a one-year warranty. Is that the same marketing you're doing in the US, or is it more just about educating people about e-bikes in general? Yeah, excellent question, because clearly the e-bike market is not at the same maturity level in the US versus Europe. And clearly, as a consumer brand, you want to make sure you're responding to specific customer and consumer needs, and you're not trying to just copy-paste whatever worked in another location. And so as a European company, it was super important for us to actually make sure we were looking at the US as a standalone and from a blank sheet of paper approach, rather than try to copy-paste what's worked in Europe.

13:54And one thing that came out of our early days in the U.S., discussing with consumers, listening to their feedback, talking to them, even calling our first customers ourselves, really was that there was one big difference, which is that the market has been happening and growing for less long. And so the brands are less well-known. People want a little more guidance and a little more help in identifying what the right brand, what the right model, what the right specs are for them. But there was also one big similarity, which is, you know, it's a meaningful ticket for most people. You know, paying$1K,$2K,$3K for an e-bike is a really meaningful purchase.

14:31And so they want to make sure that they can trust the quality of product and of service that they will get. So that was the very, very similar point that we saw across both Europe and the U.S., but with more focus on educating and guiding consumers and helping them make the best choice. And that's why we have, you know, seven days a week chat support available on our website. That's why we have a bike finder tool that's based on a few key questions that are non-technical. You can get a very, very specific select choice of recommendations that we make based on our inventory available. So we've definitely approached a few things differently in the U.S.

15:08based on that feedback. And can you just talk about how you approached the U.S. launch in general? Like you have one center in the U.S. I imagine that opened in tandem with the U.S. launch. Were you in certain geographies? Did you go national? What were the pockets that you were really targeting at the beginning? Yes, launching the U.S. first was a major decision. It's clearly a big bet for the company. It's a massive priority. It's a gigantic market, incredibly different from Europe. You know, you've got to be prepared to put a meaningful and long-term investment into it if you actually want to build a leading brand and to make meaningful progress.

15:42So it was definitely a very thoughtful and intentional decision. but doing it required then to really set ourselves up for success. And so what that meant was a few things. First, having a strong local team with strong local leadership that can really drive and own and manage the business with large autonomy. And so today we have two general managers who are fully in control of the U.S. business and, you know, they've got a clear budget. And based on that, they run basically the day-to-day decisions, the team, and make sure that we build the best business locally. The second big decision was to set ourselves up in New York to start with in order to attract great talent, as well as address incredibly well all of the East Coast and Northeast region, which we knew was a region where e-bikes are very popular.

16:28And lastly, the last decision we made was to open an additional location in LA, which is going to open in literally the next three months, to address very well the California business and the California region. In short, when you look at the U.S. markets, today we deliver nationwide, so across all continental U.S., but we do see pockets of states where demand is higher and where the e-bikes are more popular. One of those is the Northeast region for sure, and the second is definitely California, where e-bikes are incredibly popular today. I always think of the U.S. like the states operate somewhat similarly to how like European countries do just because it's such a big place and the cultures are so different.

17:13So like is the LA market like what the France market is to what New York is to Germany? Like are you thinking about them as different or is the country the entire the same in terms of strategy? So there's a lot of parallels indeed between the way we approach Europe and the way we approach the US. To give you an example, in Europe, we have three up centers that actually deliver cross border. So you could order a bike from France or in France as a consumer, but that bike might have been purchased and refurbished and totally certified in Berlin and then be delivered to you in France. Similarly, you could be in California today and order from Upway and receive your bike from our New York upcenter.

17:51So clearly, we want to offer that cross-border or cross-state offering because it provides for one very important part of our, let's say, value proposition, which is the breadth of choice we're able to offer you. We want to make sure that regardless of your need, we're going to have the brand that you love, whether you're an Aventon fan, whether you want a Rad Power bike, a Cannondale, a Specialized, a Trek, whatever, you name it, we'll have it for you. And so that breadth of offering really is helped by having multiple locations available. However, we also want to make sure that you get bikes that are incredibly competitive from a price standpoint, delivery fees that are super competitive from a price standpoint.

18:29And that is definitely better addressed with a local operation. And that's one of the key motivations behind launching an LA location to better serve California. And the second part of the answer is we definitely then, from the moment we have that local operation, we want to address California in a specific way. So we will offer specific delivery experience to our California customers. We will have an offering that is tailored to their needs. We will truly make sure that we address California almost very well as a standalone market. and on top of that, it will benefit from what we do in New York and future upcenters as well in the country.

19:05Can you talk about sourcing? Correct me if I'm wrong, but do you generally source directly from the brands themselves? How does it work and is it a different supply pool in the US than it is in Europe? Earlier you talked about what did it take to launch Upway and to launch this integrated operation. One big thing was building this actual operation, this upcenter, those mechanics. The second big component is then, okay, where do you source and buy the bikes from? And here, our mindset and our philosophy is that we want to offer you the widest and most relevant and popular choice possible, which involves effectively building the best experience possible for anyone, whether an individual or a business, willing to sell their e-bike.

19:46And so what that means is that, number one, any consumer can come to our website, get a real-time quote for an increasing amount of brands or a quote within 12 hours if we cannot provide it real-time. And so you'll be able to know exactly at what price UpWake and Commit to buy your bike tomorrow. And if you agree with that quote, the bike will be picked up from home, you'll be paid as soon as we've received the bike and inspected it in our upcenter. And so it's a totally seamless experience as a user and as a consumer. And that's increasingly popular and that represents a growing share of the bikes that we purchase.

20:18On top of that, we do work with businesses in multiple ways. We work with retailers. You know, we work today globally with more than 5 ,000 bike shops. And we offer them a trade-in, a seamless trade-in solution. What does that mean? It means that in-store, they have an account on the Upway platform. And they're able to offer to their customer a real-time quote for their old bike if they want to buy a new one. And so they're able to say, hey, you know what? You've got an old, maybe Aventon. Upway can offer you$1 ,000. for it. So you'll trade it in. That will serve as a discount to buy maybe a$3 ,000 new track.

20:54And for the consumer, it's super easy because they just come in with the old and live with the new. They only pay for the difference. They don't need to figure out the cash flow problem. And for the retailer, it's a totally effortless experience. You know, they get a real-time quote, the bike is picked up from them, they get paid by Upway within five days. And as a result for them, it's just help them do more sales without having to carry the workload behind it. So that's a very popular channel as well. And lastly, we do work with brands and manufacturers. To give you some examples, we work with a number of brands managing their returns.

21:26What that means is that, you know, Super 73 is a good example. 10 Ways is a good example. They sell direct to consumer. They might have a couple of percentage of points of returns due to their commercial policy, and they don't want to have to inspect and then resell those bikes, which are not entirely new. And so they're trusting us to manage that process. Is the independent retailer the biggest of the pie, or how does it shake out right now? It really varies by country. It varies over time. So there is no definitive answer to that. What's definitely happened over the last, let's say, 12 months is a consistent growth of the consumer sellers.

22:02So individuals selling us their bike, that as a share of our acquisition is actually growing consistently. And the second largest has been our trading program, which again is very popular with a vast network of retailers across the US and Europe. Got it. Got it. Can you talk a little about like the US marketing part? Like how are you getting people to know what Upway is? I imagine probably working with these retailers who know you and are using it for trade and that's helpful. But you know, where have you been trying to reach people? What is what has worked? And has it been mostly people who have had bikes before or people who are, I guess, e-bike curious?

22:39Yeah, approaching marketing and getting the brand known in the US is a beast of a challenge because to your earlier point, you know, it's such a vast country and vast market. Each state might behave differently. Consumers in different locations might have different needs and appetites and even, you know, media that they look at. So it's been definitely a big challenge. The way we've approached it has been, number one, to focus on very bottom of funnel acquisition channels. So, you know, we got started. one of our big strengths was being able to deliver you nationwide. So regardless of which state you're in within the continental US, we were able to get a bike to your doorstep within 10 days and of a superior quality.

23:17And so that was a very powerful offering. And so the first thing we did was making sure that we've got a very, very strong bottom of funnel set of channels. In particular, you know, Google search, Google shopping, making sure that anyone that is already actively looking for the e-bike of their choice with the best value for money offering would find out about Upway and would be capable and able to buy from us. And then as we grew and as we grew confident about understanding our audience, we were able to start, you know, going a little more closer to the middle of the funnel. And so we do more and more partnerships, whether it's with newsletter, whether it's with, you know, other e-commerce companies to basically address the audience that we know is most popular.

23:59And sometimes it's at the state level rather than even nationally and make sure that we are able to start getting our name in front of more people. We did some newsletter sponsoring for the New York Times. We did quite a lot of different trials. And then, you know, you keep repeating those that do reap rewards and then you move away from those that didn't. So it's a constant trial and error process. I wanted to ask, how much do major events fit into like, you're launching in LA. I know that in 2028, I think the Olympics are coming to LA. And I imagine people aren't going to want to drive even though LA is a pretty car-centric city.

24:34So like, are you expecting that to be a big time to market, get an e-bike for that? Or even like something smaller, like the Super Bowl, where there might be a lot of people coming to town. Do you view those events as a customer acquisition channel? I think it will be more and more as we grow and as e-bikes adoption grow. So today, what we see is that those events are a time when people ask themselves questions that they don't ask themselves, you know, day to day. So they wonder, okay, I might have new issues or I might have new problems, you know, moving around. What are the best ways? What are the best tips?