Since the introduction of the bike sharing economy, major players like ofo, Mobike, and oBike had engaged aggressive marketing efforts to gain users. In June, oBike announced its exit, citing that it had problems complying with new LTA rules on parking. Users found themselves losing their deposits, and the company was under police investigation for misappropriation of funds. Months later, work is still in progress to remove the fleet of bikes from the streets.

Read this article: More than 58,000 oBikes removed from public spaces after company went into liquidation

Watch this video: How did bike-sharing schemes in China fall apart?

 

In 2017, it was reported that there were previously 40 of these bike sharing companies providing the service in China, and the competition whittled it down to 3 main players. The sustainability of this business model is still questionable as prices were low for consumers but companies bear the brunt of high cost prices and maintenance. Watch the video for an explanation on how the bubble had burst.

Analysis:

The bike-sharing industry is relatively new, along with the proliferation of technology-enabled services like Grab and Uber. Initially, they positioned themselves to help consumers reduce carbon footprints by increasing efficiency of sharing resources otherwise underutilised.

The public saw the benefits of using these bike-sharing and carpooling services as they were cheaper alternatives to the existing modes of transport with additional convenience. Prices were artificially low due to the promotions handed out by these companies to gain users and market share. It became a race to the bottom, without an end in sight. It seemed that whoever had more capital to outlast their competitors could stay in the game. (Read this commentary on lessons new companies could learn from the oBike exit.)

In a bid to become profitable, fleets of bicycles increased, but problems arose. The bicycles were vandalised, abused, and strewn across public spaces, creating an unsightly mess and obstruction to traffic. New business ideas can solve certain market inefficiencies, but it is rather inevitable that unintended consequences arise, requiring new regulations and interventions.

Questions for personal evaluation:

  1. Is the new sharing economy as green as they first marketed it to be?
  2. To what extent should consumers trust startups to remain accountable?

Useful vocabulary & phrases:

  1. ‘Liquidation’: the conversion of assets into cash (i.e. by selling them); the clearing of a debt.
  2. ‘Misappropriation of funds’: unauthorised use of money; embezzlement

Photo by VizAforMemories … on Unsplash