This is a great TED talk by Edward Glaeser about why it is time to embrace our cities. If you can’t see it below, click here.

[youtube https://www.youtube.com/watch?v=ILDwnzQNlGc&w=560&h=315]

The talk was filmed in 2012 – right around the time that Triumph of the City was released – but the video was published at the beginning of this year.

It is also a good add-on to yesterday’s post about transportation costs and cities. I love how passionate Glaeser gets about these topics.

Today I was surprised to learn from Charlie Gardner’s blog that groceries now represent 56% of Walmart’s sales. This is a huge number that I frankly wouldn’t have expected. 

Groceries have relatively low online penetration, which makes them great for brick-and-mortar retailers. I’ve written about this topic before in the context of big box stores and online shopping. But I clearly didn’t realize that it had become such a big segment for Walmart. 

What’s also noteworthy about grocery shopping though, is that customers appear to be less likely to travel far distances for it, even for lower prices. This means that the radial impact of Walmart the supermarket is less significant and far tighter (~2 miles) than Walmart the discount store. Click here for that study.

This is important because a big catchment area has been central to the Walmart model. They consume cheap land on the outskirts of cities and then offload the transportation costs (indirect costs) to consumers in exchange for everyday low prices (direct costs). Studies show that we, consumers, typically undervalue indirect costs.

Charlie argues in his post that this does not mean that we should write off big box retailing. And I would agree. The Walmart Express concept may have failed, but they are clearly looking for ways to rethink their model. Urban stores will need to form part of that.

A few days ago, Bill Gurley – who is an investor in Uber – wrote a really fascinating blog post called, Uber’s New BHAG (Big Hairy Audacious Goal): UberPool. Bill doesn’t update his blog very often, but when he does it’s incredible stuff.

I’ve touched on UberPool briefly before. But basically it’s a true “ride sharing” service where people with overlapping routes can easily share the same car – much like people do today informally. The obvious advantage of this is cost. It’s cheaper to share.

What’s most fascinating about this service though is how it fits into Uber’s larger mission to drive transportation costs down. And there’s a specific reason for that (via Bill Gurley):

When Uber launched its low-cost UberX offering in the summer of 2012, the company quickly realized that the demand for its transportation services is HIGHLY elastic. As the company achieved lower and lower per-ride price points, the demand for rides increased dramatically. A lower price point delivered a much better value proposition to the consumer, yet still remained a great business decision due to the remarkable increase in demand.

So what Uber quickly figured out was that if they could increase the utilization rate for drivers (the time actually spent with passengers), they could charge consumers lower prices while at the same time maintaining driver salaries. Prices went down, but volume went up.

One way to do that is to obviously decrease driver downtime by improving liquidity on the marketplace. But another way is to simply increase the number of passengers being transported at one time. Hence the creation of UberPool.

But it doesn’t stop there.

Because of all the transportation data that Uber now has (the company has a data group called the “math department”), they can fairly accurately predict what a price cut will do to their ridership levels. This allows them to “forward invest” their capital in new services – such as UberPool – before they even have the revenue from the anticipated increase in ridership.

So what does this all mean?

It means that Uber is going to get cheaper and cheaper and cheaper. Uber is trying to get to what they call “The Perpetual Ride”, which basically means that drivers will always have customers (100% utilization). That’s quite a goal, but it would mean the absolute lowest prices for consumers (barring any other changes to their cost structure). 

Dirt cheap transportation is a pretty compelling value proposition, which is why I continue to believe that cities should be hard at work trying to figure out how to harness this transportation shift.

If you’re interested in this topic, I would encourage you to give Bill Gurley’s blog post a read.

This is a great TED talk by Edward Glaeser about why it is time to embrace our cities. If you can’t see it below, click here.

[youtube https://www.youtube.com/watch?v=ILDwnzQNlGc&w=560&h=315]

The talk was filmed in 2012 – right around the time that Triumph of the City was released – but the video was published at the beginning of this year.

It is also a good add-on to yesterday’s post about transportation costs and cities. I love how passionate Glaeser gets about these topics.

Today I was surprised to learn from Charlie Gardner’s blog that groceries now represent 56% of Walmart’s sales. This is a huge number that I frankly wouldn’t have expected. 

Groceries have relatively low online penetration, which makes them great for brick-and-mortar retailers. I’ve written about this topic before in the context of big box stores and online shopping. But I clearly didn’t realize that it had become such a big segment for Walmart. 

What’s also noteworthy about grocery shopping though, is that customers appear to be less likely to travel far distances for it, even for lower prices. This means that the radial impact of Walmart the supermarket is less significant and far tighter (~2 miles) than Walmart the discount store. Click here for that study.

This is important because a big catchment area has been central to the Walmart model. They consume cheap land on the outskirts of cities and then offload the transportation costs (indirect costs) to consumers in exchange for everyday low prices (direct costs). Studies show that we, consumers, typically undervalue indirect costs.

Charlie argues in his post that this does not mean that we should write off big box retailing. And I would agree. The Walmart Express concept may have failed, but they are clearly looking for ways to rethink their model. Urban stores will need to form part of that.

A few days ago, Bill Gurley – who is an investor in Uber – wrote a really fascinating blog post called, Uber’s New BHAG (Big Hairy Audacious Goal): UberPool. Bill doesn’t update his blog very often, but when he does it’s incredible stuff.

I’ve touched on UberPool briefly before. But basically it’s a true “ride sharing” service where people with overlapping routes can easily share the same car – much like people do today informally. The obvious advantage of this is cost. It’s cheaper to share.

What’s most fascinating about this service though is how it fits into Uber’s larger mission to drive transportation costs down. And there’s a specific reason for that (via Bill Gurley):

When Uber launched its low-cost UberX offering in the summer of 2012, the company quickly realized that the demand for its transportation services is HIGHLY elastic. As the company achieved lower and lower per-ride price points, the demand for rides increased dramatically. A lower price point delivered a much better value proposition to the consumer, yet still remained a great business decision due to the remarkable increase in demand.

So what Uber quickly figured out was that if they could increase the utilization rate for drivers (the time actually spent with passengers), they could charge consumers lower prices while at the same time maintaining driver salaries. Prices went down, but volume went up.

One way to do that is to obviously decrease driver downtime by improving liquidity on the marketplace. But another way is to simply increase the number of passengers being transported at one time. Hence the creation of UberPool.

But it doesn’t stop there.

Because of all the transportation data that Uber now has (the company has a data group called the “math department”), they can fairly accurately predict what a price cut will do to their ridership levels. This allows them to “forward invest” their capital in new services – such as UberPool – before they even have the revenue from the anticipated increase in ridership.

So what does this all mean?

It means that Uber is going to get cheaper and cheaper and cheaper. Uber is trying to get to what they call “The Perpetual Ride”, which basically means that drivers will always have customers (100% utilization). That’s quite a goal, but it would mean the absolute lowest prices for consumers (barring any other changes to their cost structure). 

Dirt cheap transportation is a pretty compelling value proposition, which is why I continue to believe that cities should be hard at work trying to figure out how to harness this transportation shift.

If you’re interested in this topic, I would encourage you to give Bill Gurley’s blog post a read.