CEO & Co-Founder
February 4, 2021
Let’s set the scene—the pandemic hits in early 2020, lockdowns sweep the country, and the once-sprawling city streets are barren. As businesses closed down and social interaction waned, demand for parking followed suit. All the while, we saw categories like ecommerce, grocery delivery, and meal delivery skyrocket in popularity. What do all of those have in common? They use the curb.
Something doesn’t add up. Before the pandemic, commercial vehicles were already estimated to make up 30% of parking activity1. Not only did that number rise as citizens stopped parking during lockdowns, but the actual number of commercial vehicles also increased with demand for the previously mentioned markets. The perfect storm of less citizens parking, lower parking revenues, and increased commercial parking activity made one thing clear: mobility has changed, and cities need to adapt.
Effective curb management and monetization of commercial activity could unlock billions in revenue… $7B according to my math (keep reading). For context, estimates for total parking-related revenues by cities in the USA range from $5B2 to as much as $10B3, which implies that cities are taking at least a 50% haircut!
Deep dive on the math follows. As per usual, take it with a grain of salt—I find enough reputable sources to make a point, but I don’t shy away from making assumptions based on intuition when necessary. After all, these are meant to provoke thought and start conversations. If you like what you read, please share and subscribe below!
I’m particularly interested in this topic because there’s an undertone of equality and fairness. Why should I pay $5 to park downtown while commercial fleets pay little to nothing and make billions in profit? As a starting point, if commercial vehicles make up 30% of parking activity they should also make up 30% of parking revenue. Eventually, it should probably be based on the relative impact on turnover, congestion, and availability during peak hours… but we need way more data to do so.
The following sections walk through the bottoms-up math behind my $7B claim. I’ll explore 3 primary categories of commercial vehicles: parcel delivery, rideshare services, and on-demand food delivery.
There’s a good reason for the COVID pandemic being deemed the Great Accelerant. Slow-but-steady trends like ecommerce saw 10 years of growth in a matter of months, and with that growth came a whole lotta packages being delivered.
For the sake of this post, I’ve decided against using COVID-induced growth for ecommerce. That’s partially because there was less data available, but also because ecommerce is the oldest of the three categories, and thus the least likely to see the recent growth stick around—as indicated by the dip in the graph.
There’s roughly 25B parcels delivered annually in the USA4. In order to avoid a deep rabbit-hole of granularity, let’s assume the average stop includes 5 parcels. While the average dwell time in NYC is upwards of 45 minutes5, let’s make the safe assumption that NYC is an outlier and the real average dwell time is 30 minutes.
As for pricing, fortunately there are a few (and only a few) cities that do charge for commercial loading by the hour that we can reference. DC charges $2.30/hour, Chicago charges a whopping $14/hour, and Seattle charges $3-$4/hour6. Pricing power likely drops off significantly outside of the largest cities, so let’s be abundantly conservative and assume the average rate is $2/hour.
25B parcels / 5 parcels per stop = 5B stops
5B stops * 0.5 hours per stop = 2.5B hours
2.5B hours * $2/hour = $5B revenue
Summary: 25B parcels delivered annually -> $5B in potential parking revenue
Rideshare is among the best counter examples to calling the pandemic an accelerant. Despite sharing many themes with ecommerce and on-demand food delivery, the rideshare market saw revenue drop 70%-75% YoY thanks to the unique requirement of being in a stranger’s car that a lot of others have recently shared7. That said, I do think rideshare will eventually see a strong U-shaped recovery as more people are vaccinated and we approach herd immunity.
Going into 2020, rideshare services were providing ~2B rides each year in the United States8, representing 4B stops including pick-up and drop-off. As for pricing, we have a few examples to work with including cities that charge a percent of fares or a flat fee per trip. Despite the different models, most end up around the $0.20-$0.50 range, so let’s assume a fee of $0.25 per curb space stay9.
2B trips * 2 stops per trip = 4B stops
4B stops * $0.25/stop = $1B revenue
Summary: 2B rides annually -> $1B in potential parking revenue
Our last category is the combination of grocery delivery and meal delivery. The on-demand food delivery market is not only the youngest category of the three, but also the fastest growing. Uber mitigated some of their rideshare losses with new demand for Uber Eats, Instacart started growing 5X faster, and DoorDash IPO’d and saw its market cap reach over $50B.
By mid-2020, on-demand grocery delivery had grown to 1B orders per year10 and meal delivery was up to 1.25B orders per year11. The combined 2.25B orders represent 4.5B stops just like with rideshare, but we’ll round down to 4B stops to factor in restaurants and grocery stores with private parking and to have a nice clean number as our assumption.
2.25B orders * 2 stops per orders = 4B stops (rounded)
4B stops * $0.25/stop = $1B revenue
Summary: 2B orders annually -> $1B in potential parking revenue
There you have it: with absolutely perfect curb management and 100% compliance, commercial vehicles represent $7B in potential city parking revenue. But not really.
While some of that variability can be solved for, it’s really not worth it to try and calculate the exact potential revenue number. These categories are growing so fast that any estimation would be wrong in 5 years, plus new categories will emerge that aren’t on our radar yet. And as we saw last year, black swan events happen and are unpredictable by nature.
I can confidently saw that over the next 10 years, implementing effective curb management and monetizing commercial activity at the curb will generate billions of dollars for cities. At Vade, we developed a 3-phase process to help cities as they navigate the future of urban mobility:
The first step is to setup processes to track the demand for curb space in your city—as they say, you can’t improve what you can’t measure. On top of understanding when and where commercial vehicles are using the curb, it’s important to distinguish who is using which curbs for which use cases. Most importantly, measuring curb utilization on an ongoing basis is necessary to evaluate and adapt future policy.
After understanding demand, the second phase is to improve the operations and processes currently in place. This includes optimizing the quantity and locations of commercial zones around your city, efficiently allocating curb spaces to specific use cases like passenger-loading or freight-loading, and increasing compliance by monitoring those zones and identifying public safety violations.
The third phase is monetizing those commercial zones. Many cities will need to pass new policy to enable this, as well as adopt new technology. Commercial drivers, whether full-time employees for UPS or a gig-worker for Uber, are different than regular citizens. Paying at a kiosk or even mobile app wouldn’t be worth the hit to efficiency, so cities should look at new innovative payment methods and incentive structures that are likely to last for many years.
Thank you for reading! Please share and subscribe if you enjoyed.
- Matty Schaefer