China’s sharing economy even covers umbrellas
There are funds out there for firms that want to rent stuff out – from basketballs to phone chargers and more. Critics question whether the demand is real, saying the low-revenue model means profitability can be elusive,
Fancy shooting some hoops but don’t have a basketball? Caught in the rain with no umbrella? Smartphone run out of juice? China’s rapidly expanding “sharing economy”, which already provides car rides and bicycle hire on demand, can help.
For just 2 yuan (Dh1.07) an hour, Nate Liu, a student at the Beijing Language and Culture University, rents a basketball from a courtside vending machine by scanning a barcode on his smartphone.
“I didn’t want to ask around and borrow a ball after losing mine, so I decided to give it a try,” said Mr Liu.
Far away, in China’s wetter south, about 20,000 umbrellas have been released on to the streets of Shenzhen, and can be rented – unlocked by another smartphone barcode scan – for just half a yuan for 30 minutes.
The umbrellas can be dropped off “wherever convenient”, although users are encouraged to keep them, says Zhao Shuping, the founder of E Umbrella Sharing, one of a handful of start-ups offering the service.
China’s government has taken notice, and expects the “sharing economy” to grow by about 40 per cent this year to 4.83 trillion yuan. By 2020, it should account for about one 10th of GDP, illustrating China’s aspiration to become a sharing economy leader on a global scale.
PricewaterhouseCoopers predicts five sharing sectors – car sharing, travel, finance, staffing and music and video streaming – have the potential to increase global revenue to US$335 billion by 2025 from $15bn today.
Most of the money behind China’s ballooning sharing economy comes from angel investors and venture capital firms.
At least 1.69bn yuan in mostly series A, or early stage, funding was invested in April-May in more than two dozen start-ups offering sharing services, according to Reuters calculations based on data from Chinese data company IT Juzi.
Twelve companies renting out power banks – typically compact, mobile battery chargers – secured 1.13bn yuan, while newer businesses such as basketball and umbrella-sharing took in about 25 million yuan combined.
While mobile-savvy, convenience-obsessed Chinese welcome the innovations, some critics question whether the demand is real or sustainable. They say the low-revenue, capital-intensive model means profitability can be elusive.
“Young people are embracing renting as a way of life instead of possessing things,” said Emma Zhu, the investment director at Beijing-based Innoangel fund, who has held off investing in any of these start-ups. “But the sharing model won’t work in every situation. In some cases, they’re trying to meet genuine demand, while in others they’re not.”
Some investors say the funding frenzy recalls the spectacular boom and bust of hundreds of Chinese Groupon-type apps in vogue in 2010-12, noting that most ultimately collapsed after fierce price wars, with losses of about $1bn. “In China, the only barrier to entry is who can raise the most capital – that’s good and bad,” said Xu Miaocheng, an investment manager at Unity Ventures in Beijing.
“The upside is there are funds available to launch a bunch of companies. You may not need a lot of specialisation or new technology. The downside is a lot of money could be wasted.”
Cai Min, the founder of basketball rental firm Zhulegeqiu, says he wants to expand across the country, and quickly, offering the service at all of China’s estimated 100,000 basketball courts, and growing into a multibillion yuan business, eventually offering all “shareable” products.
The Zhejiang-based start-up received 10m yuan in early funding from Shanghai-based Modern Capital on May 5, less than two months after Mr Cai came up with the idea.
“We are expanding at all cost, because speed is everything,” Mr Cai said in an interview. “Of course this means costs have been very high at the early stage because we have to make everything in a month.”
He declined to give specific figures, but each solar-powered basketball rental machine – in Beijing, Shanghai, Hangzhou, Tianjin and Chengdu – costs “a few thousand yuan”. “The key to success is to get more money than your competitors and to expand faster than them,” he said. Even some keen players, though, have their doubts, saying balls are only used occasionally, so the need to rent is marginal.
All sharing services require a one-time deposit – from 99 yuan for a shared basketball – that gives sharing companies a oneoff financial buffer that critics say will not be sufficient in the longer run if profits are slow to take off.
The latest wave of “sharing” entrepreneurs has been largely inspired by the rapid rise of Chinese bike-sharing companies such as Mobike and ofo, which have together raised close to 13bn yuan in a little over two years, extending their services to more Chinese cities and international markets including London and Singapore.
Mr Zhao, of E Umbrella, said he came up with the idea after his three young children rushed to try out the rental bikes that mushroomed across Shenzhen early this year. “I thought: they’re just normal bikes, if this could work, why can’t shared umbrellas?” he said. He said umbrella and lock manufacturers are fighting for his orders, after he patented his coded lock umbrellas in March, offering him payment exemption for as long as 30 days.
“My cost for the umbrellas is basically zero right now,” he said, hoping to release a “modest” 30 million umbrellas across southern China this year.
He says his business has already attracted interest from potential partners, including China Life Insurance Company, which wants to replicate the model in markets from Hong Kong to Singapore.
A student at the Beijing Language and Culture University rents a basketball by scanning a bar code on his phone.