Lowhub, a post-mortem.
29/01/2013 § Leave a Comment
Functioning for 3 years as a low carbon distributor for London’s wholesale markets, Lowhub undertook to revolutionise distribution techniques and methodology with a electric and bio-diesel vehicles. Utilising EV’s, Lowhub’s per mile carbon output was 16% of that of a comparable diesel powered vehicle. Using the resources in our environs, Lowhub created a closed-loop feedback system, collecting (otherwise wasted) cooking oil from our customers, and using it to produce biodiesel, to power its bio-diesel vehicles. Lowhub encouraged collaborative behaviour from customers, reducing costs to the customer and increasing distribution efficiency, minimising wasted mileage and associated carbon output.
But! Lowhub operated through the beginning of the financial crisis, as margins on luxury items and (as UK economic figures can attest to) across sectors were squeezed to historic lows. Therefore, when Lowhub, as an alternative service provider, arrived in the industry, without an obvious ‘bottom line’ cost saving, barriers to entry were quite strong.
Behavioural change is difficult to overcome in all industries, but Lowhub was a game-changer, asking/requiring its customers to share client information previously considered sacred. After group meetings and enthusiasm from some members, customers did share this information. With shared information, Lowhub created highly efficient distribution routes which grew on the basis of contracted geographic areas. However Lowhub needed to find kindred spirits who had the inclination to deal with, and appreciation for, carbon ‘issues’ within the food industry. As an industry, the food sector has gained an incredible awareness of its carbon impact, but in early 2007, in the small geographic area that Lowhub was operating, the number of people willing to participate in collaboration was not large enough to sustain the momentum required.
Specialisation: Lowhub took the ‘vanilla’ function of the delivery of produce and became a specialist in the area, as well as introducing low carbon techniques. The drivers were trained by the suppliers to give advice and information regarding the products – this deepened the relationship between supplier and buyer though something as simple as delivery. This skill-set incurred costs of time and training, which although gave a handsome return to the customer, was not a cost that could be passed through to the client, which decreased Lowhub margins.
Industry recognition: The SRA (Sustainable Restaurant Association) was set up eighteen months after Lowhub, and has since taken the restaurant industry into new and exciting realms where carbon IS addressed at all levels, from provenance, supplier accreditation, kitchen design, restaurant energy consumption, to making the general public aware of progress within the industry. Lowhub consulted with the SRA and worked alongside many other representative bodies such as Foodshare, Sustain, WASTE etc. Each body contributed something unique and worthwhile, but Lowhub was unable to harness all of the potential because of its relatively small size in a vast industry with so many strands of energy consumption.
Externalities: The influence of government affects every newcomer to any industry. However, a lack of uniform direction in London’s low-carbon strategy left Lowhub without a clearly defined infrastructure in which to operate. Ken Livingstone’s policy direction pointed to the creation of a hydrogen fuel infrastructure across London, but this direction was abruptly changed by Mayor Johnson’s support for electric vehicles within London. Lack of policy uniformity left Lowhub without the knowledge that it had support from local government policy.
Differentiation: Lowhub operated in the very specialist market of produce delivery. The existing methods of transport were hugely wasteful in terms of energy, and inefficient in terms of distribution. Shared distribution, operating on behalf of multiple suppliers, was very rare before Lowhub. Despite the low-carbon motivation and the increased route efficiency that it brings, that differentiation was not sufficiently demanded from, or aspired to by the industry, to the extent that Lowhub required in order to create a sustainable business model. Maybe the model was before its time, or maybe the model just needs tweaking?
As a result Lowhub, despite various awards and many supporters, ceased delivery operations. Lowhub continues to provide consultancy advice and support through the Chi Group network.