Sharing Economy: This fever has to stop

If you still remember an old post I wrote about a stainless bike company called OFO, let me tell you that those dockless bike companies are having a hard time…

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The reason is simple. They don’t have enough cash to burn, and getting new investments is as extremely difficult… By looking at the business model, there are two ways for companies to generate revenue. The first one is basic fee that charges users hourly when they use a bicycle. Second is the security deposit where companies can take advantage of. The reality is that operation is extremely difficult, hard to brake even from basic fee. Many bicycles were broken, destroyed…

Yet for the past few years, station-less bike companies just came out from everywhere. If you search “bike” in Apple App Store (Chinese store), you can have apps laying out two full pages.

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That looks like an app logo design contest…

Yet, now they are just falling down one after another. 

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Companies listed above are at least ones that has some social awareness, there are numerous ones that you may have never heard of. Anyway, a majority of them are either broken or in the process of falling down…

Companies breaking down is not the only problem, the subsequent confidence is that customers were not getting their security deposit back. 

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There was a customer of Kuqi company came all the way from a province to another, just to get to the place which the company claimed to give back their deposit.

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With the majorities of companies going down, the remaining ones are two companies that the earliest starters- OFO and Mobike. At the very beginning, the founder of OFO indented to do a sharing back in college campus whereas the founder of Mobike wanted to deliver a “smart” kind of bicycle into the market. Coincidentally, they became the trending business in China- Stationless bicycle. 

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It is a great idea to solve the “last mile” problem when you want to go somewhere not too close to walk but too far to call a uber. Riding a bicycle is a perfect solution. Yet it is not a small item to carry on with you wherever you go. There come station-less bicycles. The problem is solved seamlessly by spending only a yuan (16 cents USD) or two (32 cents USD). 

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Not only the idea is good, the initial reaction of people to this stainless bicycle is good as well. One would stand out and stop someone who is trying to lock a dockless bicycle with private lock. Any act that is harmful to the sharing bikes will be stopped once spotted. It is the social responsibility that maintain the concept of sharing.

I think the guy who came up with this sharing idea are genius. Yet that genius did not anticipate how business would go bad. 

Why would say the business get distorted? The messy online business (deposit issue) is described above, yet the offline business is even worse. 

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While you think it is convenient when you take a ride, but it is not that good when you don’t need one.

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The main problem for sharing bicycle is its difficulties to manage. A lot of users just leave them wherever they finish their ride, since the bicycles are not theirs anyway. The situation is not that bad when the number of outstanding bicycles are limited. Yet when the number goes up, things just go bad as the picture shown above. Only companies with enough funding can afford the cost of maintaining and have teams to dispatch bicycles with scientific methods. 

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In fact, I think the market sharing bicycles is close to be saturated. Everyone wants to get his foot in the door for a good business opportunity, yet it is not easy running the business. 

99% chances of good business with bad operation results in the consequence that people’s life get affected. In this case, roads get blocked, people need to walk around to bypass those bikes. Regulations followed afterwards, and numerous sharing bike companies are falling down. 

The same rule applies to other industries, once the fever is over, what is left are mergers and acquisitions or closing the business. What is going on for sharing bicycles is a good example.

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The “winter” of sharing bicycle makes me think that the environment of entrepreneurship is a little bit impetuous. Some entrepreneurs although did not participate in the craziness of sharing bicycles, they instead targeted in the word “sharing”

For example, I do not think the sharing power bank is a must. Scale from 1-10, the customer need for sharing power bank is like 5 maybe, 6 the most. Not to mention the necessities of getting one from the user stand point, there are securities concerns as some hackers implanted virus to steal users information once these “public” power banks get connected. The reality is that the business of sharing power bank has been falling down even faster.

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Another example is sharing umbrella. I first thought that it was okay, but after a second thought, I think it is unnecessary since umbrella can be carried with very easily. There is no need to share idle umbrellas. Purchasing one when needed does not make much difference either. Yet in this case, the company is purchasing umbrellas on their own and  put them in the streets…

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There is also “sharing girlfriend” which turns out to be “sharing” sex dolls. The business was turned down with no doubt…

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As for sharing basketball, I just want to say that usually we are looking for basketball court. Basketball is not a big problem…

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So when we take a step back and reflect, what really got misunderstood is the word “sharing”

Does “sharing” just equal leasing?

In order to succeed in entrepreneurship, one has to sell what others don’t have. It could be a product or an idea. The reason why sharing bicycle became a trending business is not just because the word “sharing”. It is because there were no bicycles that can be get and parked wherever you want. This cost-effective and convenient means of transportation solves the “last mile” problem. 

Yet leasing business has been long existing. Just adding the word “sharing” does not add any innovation into it. 

When we look at great companies like Uber and Airbnb, they started the business without purchasing inventories on their own, but using the idle resource to add values for society.

Remember, the definition of Sharing economy is that it is “an economic model often defined as a peer-to-peer (P2P) based activity of acquiring, providing or sharing access to goods and services that are facilitated by a community based on-line platform”.

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Sharing bicycles inevitably have problems because they take public resource – blocking roads, which is the primary problem companies have to deal with. The business operation has to be improved under regulations. The organic growth is the right strategy companies should consider taking.

And RED FLAG ALERT: the fever of “sharing economy” has to stop.

Sources:

http://www.scmp.com/tech/start-ups/article/2099399/how-china-bike-sharer-becomes-first-go-under

http://finance.sina.com.cn/roll/2017-12-18/doc-ifyptfcn1921805.shtml

http://www.pharmaworldmagazine.com/mergers-and-acquisitions-for-big-pharma/

http://www.sohu.com/a/139755331_116132

https://www.ft.com/content/5c1f5fcc-e47b-11e7-97e2-916d4fbac0da

http://www.pharmaworldmagazine.com/mergers-and-acquisitions-for-big-pharma/

https://www.investopedia.com/terms/s/sharing-economy.asp

2 comments

  1. NeroC1337 · ·

    I remembered when we talked about the share economy in class before, an good idea of sharing economy is the ability to create a healthy cycle by allowing users to also be part of service providers. I think that’s what most of the sharing-economy Chinese company got wrong. Like you mentioned Airbnb and Uber all have thought through their operation. With more people sharing their space, more people would start using the app; and because the rise of the demand, the platform would attract more people to share their space. The increase user-base could positively feedback into the system, providing greater value. However, what station-less bike requires is simply renting out company-owned bike. It is not sustainable when more users do not create a high value-proposition from the company.

    And now I’m just going to rant about this jumping on the bandwagon behavior that many of the Chinese “entrepreneurship” have. With what is happening with so many rent-bike apps appear, it is clear that many of the companies do not even bother to think through the business model. All they want is to grab a slice from this huge-growing pie, and get the F-off. It is really irresponsible things to do, and I don’t just blame them, because apparently they could get outside investment just fine, if they could just grab a bike, put on their logos and market them the same way that everyone else is doing. (FacePalm)

  2. thebobbystroup · ·

    I have personally never used a bike share service, but I have some relatives in Dallas who say they have seen some funny incidents. Apparently it became somewhat of a popular prank to just leave the bikes in the medians of freeways and other extremely inconvenient places. The problem with parking the bikes anywhere is that the supply and demand ends of chain often do not connect. As you mentioned, users have no incentive to park their bikes back in the dock. However, it surprises me that users are not charged with the cost to replace the bike if they fail to dock it again just as you would have to do with library books or Blockbuster VHS tapes (am I dating myself?).

    In regards to the “sharing economy,” I think it doesn’t qualify as sharing if a regular owner doesn’t normally consume the product. E.g. are Uber and Lyft drivers who are supplied with vehicles by the company actually “sharing?” Maybe, because they are not prohibited from using the vehicles for personal use. However, what about the landlords who are buying property for the sole use of renting it out for Airbnb (https://qz.com/1084108/1084108/) ? Truly, they aren’t really sharing, even though others using the same platform might be.

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