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One of the more luxurious on-demand companies out there, valet parking app Luxe, is moving into Los Angeles come December. That will be its second market, only a month and a half since launching its first publicly in San Francisco.
That’s a speedy expansion rate for an app with very complicated technical, data, and operational challenges to overcome. But Los Angeles, land of cars, is the perfect landing pad for it.
If you haven’t heard of Luxe, and you’re rolling your eyes at the thought of on-demand valet parking (I know I did), here’s the rundown. You order it off a mobile app when you leave home, and when you’re ten minutes away a Luxe driver traveling by foot or skateboard shows up at the specified intersection. They take the car, with a $1 million company insurance policy to cover any potential damages or theft, and drive it to one of the city’s many underutilized parking lots off the beaten path.
You pay $5 an hour for the privilege, with a max fee of $15, cheaper than most of the city’s parking lots. When you’re ready to pick your car up, the Luxe drivers bring it to wherever you are, even if it’s a different part of the city than where you dropped it off.
Drivers go through two weeks of training, learning how to operate different types of cars. There’s bound to be a few bumps along the way, but that’s par for the course with these new on-demand and marketplace startups — the best ones learn from their mistakes, develop systems to deal with such incidents, and introduce white gloved customer service to keep people happy.
The real question with Luxe isn’t whether it’s a good value for the consumer — at that price point it obviously is. Luxe’s challenge will be surviving on the revenue it generates. All day parking, with the cost of employing drivers, for only $15 a car doesn’t seem sustainable. Like many on-demand startup founders, Luxe’s CEO Curtis Lee believes that at scale the company will be profitable.
It has a number of competitors, some of which charge far more (ValetAnywhere), and others of which charge about the same (Zirx). For these companies, there’s a lot of moving parts, which will make them fascinating to watch from a data science and operations perspective.
Luxe has hired engineers — including one of Lyft’s data scientists — to analyze city demand patterns. That way, the company can predict where it needs most of its valet drivers at what time of day and minimize their travel time to reach each vehicle.
Luxe also has one unexpected element on its side: Parking lot space. Although you might think all San Francisco lots are filled at all times, Lee claims there’s plenty of other lots that stay half full, losing their owners money. Luxe struck partnerships with these lots for highly discounted rates. Since the valet drivers can return cars to people wherever they are, the lots used don’t need to be in prime foot traffic areas.
Once upon a time, Uber marketed itself as the option for “baller” passengers who wanted to treat themselves. Now, largely thanks to Lyft, the on-demand economy prioritizes accessibility over luxury. That model — cheaper prices in exchange for more customers — allows these companies to scale. It also appeals to the “everyman” value of Silicon Valley, land of t-shirts and hoodies.
But with its dirt cheap price, Luxe has some major, potentially impossible hurdles to overcome in its first few years. The fact that it has already expanded to Los Angeles might bode well. Either the company is feeling comfortable enough with its process to move to the next cash-cow location…or it’s about to fall flat on its face by expanding too quickly.