High-tech scooter sales stuck in transit

Summary:It was supposed to revolutionalize transportation but now "slow" best describes the speed and sales of the much-touted Segway two-wheel Human Transporter.

>Segway's Human Transporter, the high-tech scooter that captured the nation's imagination two years ago, is proving to be an easier device to drive than to sell.

Fourteen months after being marketed to businesses and five months after sales to individuals commenced, the Transporter remains more of a novelty than the revolutionary transportation device trumpeted by tech industry luminaries and others. You can usually spot one being demonstrated at an amusement park, or your postal carrier may be testing one, but city streets and factory floors are practically devoid of the gizmos. The device has a top speed of 12.5 miles per hour, up to three to four times the average walking pace.

"I think people are surprised that commercial orders are not picking up as fast as everyone thought they would," said Richard Doherty, research director with the Envisioneering Group, a technology research firm based in Seaford, N.Y.

While it's too early to write off the Segway as yet another over-promised invention, clearly the 83-pound, gyroscopically controlled scooter is taking a while to match its early expectations.

The hype started in January 2001 when details about a potentially revolutionary device leaked out through a book proposal and patent application.

The attention grew as Inside.com released details culled from a book proposal by author Steve Kemper. The author, who was given access to the birth of "Ginger," cited breathless praise from tech executives who previewed the device during a presentation to potential investors.

Apple Computer CEO Steve Jobs, for example, reportedly said, "If enough people see the machine you won't have to convince them to architect cities around it. It'll just happen." Amazon.com CEO Jeff Bezos, who reportedly attended the same meeting, was quoted as saying: Ginger "is a product so revolutionary, you'll have no problem selling it. The question is, are people going to be allowed to use it?"

Initially, Bezos appeared to be correct. Shortly after the Transporter was unveiled in December 2001 (almost a full year after the speculation began), three of the gizmos were sold on his company's Web site as part of a charity auction, with bids reaching more than $100,000.

A year later, roughly 200 companies have purchased Transporters, but the orders have been relatively small--often just a couple of units, said a source familiar with Segway.

Indeed, of 13 companies and organizations that last year publicly announced plans to test-drive the devices, only three have finished their evaluations and purchased additional units. Nine of the companies are either still in trials or did not purchase additional devices beyond the test units. The remaining tester, a police agency, never got around to evaluating the scooters.

Stacey Ferguson, Segway's director of public affairs, declined to comment on whether sales are on track with initial expectations, but she said demand is growing.

Executive exodus
Meanwhile, four top Segway executives have departed in the past six months, citing personal reasons or a desire to seek new opportunities. The list includes George Muller, Segway's president, Peter Poulin, vice president of sales, Gary Bridge, senior vice president of marketing, and Tobe Cohen, director of marketing and brand strategy.

"I think people are surprised that commercial orders are not picking up as fast as everyone thought they would."
Richard Doherty, research director, Envisioneering Group.
In September, when he was still at Segway, Cohen told CNET News.com the company anticipated shipping 50,000 to 100,000 units annually to the commercial market by Jan. 1, 2003. As of now, the company is well below that figure, according to a source familiar with the company's sales.

One reason is that companies are taking longer than initially planned to test the units. For corporate buyers, the Segway is pitched as an $8,000 device that can save time and money by allowing employees to move across large distances quickly and with little effort, hence the initial interest by the U.S. Postal Service, police departments and similar groups.

The National Park Service in Washington, D.C., for example, completed testing last June. But only two of its 380 national parks, which serve millions of visitors, are planning to purchase units. The organization's park facility management department also bought a unit, for a total of three.

"We were recently asked by Segway how many more of these do we think we'll buy in the future," said Lou DeLorme, team leader for transportation and facilities at the National Park Service. "They're anxious for the Park Service to buy more of them...but each park is allowed to make their own purchasing decisions and (they) have their own independent budgets."

Other potential customers already know they'll forgo large fleet orders, even though their testing is not completed.

Boston Emergency Medical Services--ranked the 20th largest emergency medical services organization in the nation--does not anticipate buying more than 16 Transporters once it completes its tests this year.

"We have 16 mountain bikes, less than a dozen electric cars and two all-terrain vehicles as alterative systems. It's a fair assumption we won't buy more (Transporters) than the 16 mountain bikes we use," said Neil Blackington, deputy superintendent of the Boston Emergency Medical Services.

In one of the more closely watched trials, the Postal Service continues to test the devices after having purchased 40 Transporters in June. Earlier this month, the service began tests in Chicago and in North Carolina, after having completed tests last year in six other cities, said Mark Saunders, a postal spokesman for the Washington, D.C., agency.

But as with Boston Emergency Medical Services, Transporters would only be considered for select circumstances. The Postal Service has 13,500 routes where letter carriers travel by foot, out of a total of 238,000 routes nationwide.

For some potential buyers, the Transporter is more of a luxury item than a sure-fire cost-saving device.

Budget constraints, for example, were a deal stopper for the Manchester, N.H., police department.

"We would like to purchase them, absolutely," said Mark Driscoll, police chief for Manchester, N.H. "But with our budget, there's no way I can."

Segway goes to Disneyland
Against such feedback, Segway has taken several steps to spur sales.

It's now offering companies and establishments such as Disneyland in Anaheim, Calif., a four-month lease-to-buy program. The theme park was pleased with the results its security, emergency medical teams and other employees received from the Transporters, and all 12 units were purchased under the lease-to-buy program, said Charlie Lanham, manager of Disneyland's "Innoventions" program development.

And Segway is considering joining forces with large resellers, said Tom Hoenig, president of GTI Spindle Technology. GTI, which purchased two Transporters last year, was turned down on its request to be a Segway reseller. Hoenig said Segway representatives told him the company was exploring the use of larger resellers. Segway declined to comment on whether it was considering using resellers.

While commercial sales have gotten off to a slow start, the company is banking on strong consumer sales. Segway began a widespread consumer rollout this month, when orders placed on Amazon.com began to ship.

Segway anticipates the consumer market will be larger than the commercial sector, said former employees and a source familiar with the company.

Once Segway achieves its first full year of shipments into the consumer market, the source said, it has the potential to achieve sales in excess of $100 million. At nearly $5,000 apiece for the consumer version, that translates into annual sales of 20,000 units.

Eventually, the company's combined commercial and consumer sales could reach $1 billion, the source claimed. That comment virtually mirrors previous statements by Segway investor John Doerr, a general manager with Kleiner Perkins Caufield & Byers.

"We would like to purchase them, absolutely. But with our budget, there's no way I can."
Mark Driscoll, police chief, Manchester, N.H.
Doerr, when interviewed by News.com, declined to discuss Segway's sales. However, he said Kleiner Perkins is very pleased with Segway's progress and interest by consumers is higher than his firm expected.

Segway consistently ranks among the top 200 sellers on Amazon's Electronics Store based on unit sales, said Bill Curry, an Amazon spokesman. He noted the list fluctuates on a minute-by-minute basis, based on items sold by various vendors.

But analysts note the consumer market may also be a challenging one to crack in any meaningful way. A regulatory backlash is mounting; there are doubts about robust sales after the so-called early adopters have purchased their units; and training requirements may be a deterrent.

Segway won legislative approval in 33 states to allow the scooters on sidewalks, but recently San Francisco banned the machines from public sidewalks. Other government agencies including the city of Oakland, Calif., and the state of Connecticut are considering a similar ban.

Meanwhile, it's unclear that Segway can find a market for the pricey transportation devices beyond affluent early adopters. "The first 10,000 Segway customers are not sensitive to price. They're the early adopters," said analyst Doherty. "But the first 10 million will be a challenge."

The consumer units debuted in November on Amazon with a price tag of $4,950. But Segway is already looking at offering a lower-priced model, though no timetable has been set, Ferguson said.

"Usually you'll see manufacturers come out with a high-end model and then migrate down. The speed that they do that depends on whether there is tons of demand," said Stephen Girsky, an automotive analyst with Morgan Stanley. "As the early adopters fade, you want to get the mass market. And if you get a big kick in volume with the lower price, and your fixed costs are covered, then it may be worth it."

But consumers also may balk at paying the additional cost of traveling to a Segway testing center, as the company requires, before taking the device home. The company plans to offer free training only in Bedford, N.H., and Los Angeles after July 31.

"We think it's the right thing to do" to require the training, Ferguson said. "Common sense is the cost would enter into the decision, but some people may welcome the opportunity for training."

Topics: Hardware

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