December 07, 2017

Owning a bike is oldfashioned – sharing like in China is the future!

Wherever I walk these days in Shanghai, I become aware that now as the ride-hailing wars have disappeared, the latest war is bike-sharing or better bike-rental. Mobike (摩拜单车), launched in April 2016, and Ofo (共享单车), which was launched five months later, are leading the pack. Their business models rely on bikes that can be ridden and left anywhere in the city; i.e. there is no need for traditional – and costly – bike terminals and stations. The user looks for nearby bikes or geo-localizes them with his smartphone, then scans the QR code of the selected bike. For Mobike, the QR code instantly unlocks the bike. Ofo users must additionally enter a four-number code sent to their phones via the app to unlock it.

Both players aim to control a very promising market – so promising that bike sharing has already more than doubled the usage of brightly-colored bicycles in China. In doing so, the two innovative start-ups have grown rapidly since their inception, with Mobike accumulating a total of 3.65 million bicycles, and Ofo building a fleet of 2.5 million.

The three-year old boom is so buoyant in China it is reducing car use in cities and even leading to forecasts that less fossil fuel will be burned in the future. The release-by-app GPS-trackable modem-equipped bikes are cheap and simple to use, even attracting ‘newbies’ to cycling. Hence the companies can be described as classic tech disruptors in ‘access and convenience’. New digital and mobile tools (mobile payments, software, apps, smart locks, GPS etc.) have enabled businesses to provide a new level of convenience for riding bicycles. It is a disruption based on superior convenience, not price.

What people simply love about these companies is they have exposed how inconvenient owning and/or renting bicycles has always been. It is obvious now that owning a bicycle, storing it in your apartment and locking it up around town on the few days per year is simply a pain. Mobike and Ofo have permanently changed people’s expectations. Try convincing someone to buy a bicycle and store it in their apartment in Shanghai or Beijing. It turns out that there is a ton of latent demand. By removing the inconvenience of ownership, people have begun renting in huge numbers. Mobike and Ofo – nicknamed by the Chinese “小黄车” (“little yellow bike”) – have given people what they never knew they always wanted – the smartest Marketing & Sales strategy you can think of!

Mobike and Ofo are separately backed by China’s two biggest e-commerce giants – Alibaba (阿里巴巴)and Tencent (腾讯). Tech companies love bike share companies because of data-mining. The bikes are used by smartphone-wielding millennials. Bloomberg just stated in a report

What attracts investors is the integration of rental services with the Internet or mobile Internet, such as GPS and mobile payment.“

It is still to be seen if the rumor is right that investors in both companies – which would have a combined value of $4bn – are really helding pre-merger talks.

Thanks to the two flagship mobile payment applications, WeChat Wallet and Alipay, the emergence of new business models in China is much faster than in other countries. The latest example is 魔力伞 (Molisan, meaning “magic umbrella”) a start-up from Guangzhou (广州). Since March 2017, you can rent umbrellas from a simple scan of QR code for 2 RMB a day. Currently, 1,000 rental umbrellas are available in six subway stations. The concept has already attracted more than 4,000 users with the plan to upscale the distribution to 1 million umbrellas!

According to the Chinese government, the collaborative economy is expected to grow 40% annually until 2020. So let’s see what comes next!

» view LinkedIn article