Is it possible to share everything?
Umbrellas? Molisan, E Umbrella, OTO
Power banks? Meituan-Dianping, Xiaodian, Jiedian
Bicycles? Ofo, Mobike
Above are a few examples of China’s recent headline startups that seem to believe so. They’re banking on a collaborative economy in order to build sustainable businesses.
“Ridesharing, apartment/home lending, peer-to-peer lending, reselling, coworking, talent-sharing, etc. The sharing economy or collaborative economy, is taking off in all sorts of niches.” – Forbes
Cars and homes made sense, not at first, but Uber and Airbnb have clearly been very successful platforms that connect users to existing resources. But these are success stories siloed in developed markets, not Southeast Asia or China.
The basis for these models seem to be the same: consumers are willing to pay to ‘borrow’ services/products for a period of time and eventually, there is profit to be made in the distant future and companies can collect valuable user data.
Critics may be skeptical that any of these power bank or umbrella sharing startups can be successful but there has been no lack of capital backing, currently around $25 billion in total.
The sharing economy also reached a staggering 4 trillion yuan last year (USD $502 billion).
Chinese basketball sharing startup Zhulegeqiu was recently injected with a $1.4 million venture investment from Modern Capital, a Shanghai-based venture capital firm, in May. But raising capital is not a strong indicator for a good business model.
Have we not learned from the fall of “Uber for X” business model fad?
Let’s say we forget about profitability or the fact that these startups incur high costs by owning the inventory – what other factors are required to make a sharing startup tick? And is the industry conscious of the longevity of these startups suddenly popping up in China and Southeast Asia?
Trust ‘em or clean up the mess
A share economy relies heavily on a trust system. If someone is borrowing a bicycle for a rate of 5 THB (USD $0.15) per hour, what is the likelihood a USD $300 bicycle will be returned in perfect condition or be left in a convenient location for the next rider?
Zhuang Ji, director of a social media ‘bike hunter’ group in China recently inspected 983 Ofo bikes in six cities (Beijing, Shanghai, Guangzhou, Shenzhen, Wuhan and Chengdu) and discovered the following:
- 19 percent were damaged
- 15 percent were unlocked
- 12 percent had been stolen for private use
- 2 percent were being ridden by children under the age of 12
Dump of broken bicycles from multiple share economy bike businesses in China.On the other hand, Umbrella sharing startup, E Umbrella, in China suffered a loss of almost all 300,000 of its umbrellas across 11 cities.
Let’s do the math:
Loss → Cost of umbrellas: 300,000 x USD $8.82 (cost per umbrella) = USD $2,626,000
Gain → Customer deposit: 300,000 x USD $2.90 (customer deposit) = USD $870,000
Gain→ Raised capital: USD $ 1,470,000
Total: minus USD $286,000
The loss isn’t too shocking when the business model relies on what Vox calls, “unpredictable weather and forgetful people”.
But founder Zhao Shuping is certain to succeed and plans to introduce 30 million more umbrellas across China by end of year. And like most of the other ‘share companies’, E Umbrella says advertising will be the main driver of revenue after announcing a partnership with ride-hailing app Didi Chuxing.
Southeast Asia’s not ready.
Chinese bike-sharing giant Ofo recently entered Thailand by introducing its bikes to Bangkok university campuses. A brave move after competitor oBike was deemed a scam by the Bangkok Metropolitan Administration (BMA) soon after its launch and never took off.
The opposite can be said for the region, where the Philippines and Vietnam are propelling the region’s 5% average real GDP growth and Myanmar alone is expected to grow by more than 7% in 2017 and 2018.
“After all these years, China is finally embracing its communist roots,” said Andy Tian, an entrepreneur and co-founder of Asia Innovations Group in Beijing. “That’s the essence of communism: communal sharing.”
“But there’s no question that it’s a bubble,” he added. “It may have roots in something valuable, but can you really share everything?”
China’s booming sharing economy is said to be attributed to a “surplus of money and shortage of good ideas” so it’s probably best not to follow in their footsteps.