What you need to know
Fairweather investors and ill-considered business models are putting a damper on the industry’s future growth.
As the first city to run Mobike, one of China’s top bike-sharing companies, Shanghai attracts tech startups looking to strike oil by dealing in shareable commodities, from electric cars and washing machines to batteries and basketballs. But none has been more controversial than shared umbrellas, which came to town in late May.
About 100 such umbrellas, code-locked to curbside railings, first appeared in the Lujiazui financial district on May 23. Within a few days, though, they were nowhere to be seen. Some believe city management officials ordered their removal, since it’s illegal to tie the umbrellas to public infrastructure without the prior consent of the government. A representative from an unnamed company, though, said they had not received any official reprimand, nor had they retrieved the umbrellas voluntarily. “Our customers took them all and haven’t returned them yet,” he said.
According to the company’s current promotion, customers can rent an umbrella free of charge as long as they pay 20 yuan (US$3) as a refundable deposit. However, it seems most people have opted to keep the umbrellas rather than go out of their way to return them.
Lujiazui’s experience strikes a chord with Shanghai Metro, the company that runs the city’s vast subway network, and which had deployed about 100,000 shared umbrellas years ago at its stations for passengers who find themselves caught in the rain. The service was canceled, however, since most umbrellas were never returned. The same went for large-scale city malls and hotels, as customers gallivanted off with their “complimentary” umbrellas.
Currently, there are about 15 players in China’s shared umbrella industry. Some Shanghai-based startups, particularly OTO and Molisan, have exercised more caution in developing their rentable umbrella businesses. Unlike its peers in southern cities like Fuzhou and Shenzhen, OTO and Molisan have been around for four and three years, respectively. The latter company test-ran its business by deploying rental stations in malls and subways in Fuzhou in the east and Guangzhou in the south. Molisan’s chief concern today is somewhat more prosaic: Wet floors from drippy umbrellas pose a hazard to passersby.
OTO, meanwhile, targets large outdoor landmarks in Beijing and Shanghai, though its success will largely depend on whether it can fulfill its promise not to disturb public order as it rolls out its products in areas where big crowds gather — for government scrutiny will be sure to follow.
But the real challenge is how companies like OTO can turn a profit from a business that hinges upon a variable as fickle as weather. Rainfall is largely seasonal — most of the aforementioned cities are wettest in the summer — and regional, with the southern and northeastern parts of the country receiving the most rain. This constrains the business in terms of scope. In addition, residents of places prone to precipitation often carry umbrellas with them, which means the business must grow in a niche populated by the few who find themselves ill-prepared.
A further issue is that rentable umbrellas no longer lie in the conventional camp of the shared economy, which is usually defined as the redistribution of otherwise idle resources at bargain prices. This is the philosophy driving ride-hailing apps like Uber and Didi Chuxing, as well as room rental site Airbnb and its Chinese counterpart, Tujia.
In the wake of China’s bike-sharing craze, however, the commodities being shared are no longer privately owned secondhand items, but rentable corporate items. No matter where you borrow them from, shared umbrellas require a deposit — between 19 and 99 yuan per registered user. That’s pretty much the price of an average umbrella, leading some to suspect that manufacturers have merely thought of a more innovative way to sell their product. Esan, a Shenzhen-based operator, charges the highest deposit, on the grounds that its umbrellas are more than a just shield from the sun and rain — the company markets them as canes for the elderly or even music players, given a plan for each product to come with an embedded music player.
A more feasible extension of the business is for Esan to turn its umbrellas into mobile advertisements. The company has already made inroads in that direction: It is reportedly negotiating the placement of 1.75 million public umbrellas, each of which will bring 10 yuan in ad revenue. Molisan, too, has courted advertisers for its umbrellas in Guangzhou. Most umbrellas last no more than two years, and with such a short life span, there are hopes that a combination of rental and advertising income may provide the most sustainable business model for such companies.
The venture capitalists who sunk huge amounts of money into bike-rental companies have been lukewarm at best toward suppliers of rentable umbrellas. So far, only three players — Chunsun, Esan, and JJsan — have received angel funding in excess of 5 million yuan. In contrast, investors that missed out on the shared bike bonanza have poured their enthusiasm, and their yuan, into shared batteries for charging cellphones and other devices — so much so that earlier this year, the new industry raised 1.2 billion yuan in a little more than a month.
Like shared batteries, which have limited practical use, rentable umbrellas also provide solutions to uncommon scenarios, many of which hinge on whether people own cars, whether they checked the weather report, or whether they left their own umbrella at the restaurant where they had lunch. The fact that shared umbrella companies are betting on such unpredictable situations means their clientele is unlikely to grow to truly substantial numbers.
It’s fair to say the chilly investor sentiment toward rental umbrellas marks an apex in the growth of the shared economy. Investors are no longer blind to the now-familiar model’s potential pitfalls; instead, they have become more circumspect when it comes to parting with their cash. Without a truly viable business model — in this case, a tremendously difficult prospect — shared umbrella companies will do little more than burn their investors’ funds before going belly-up themselves.
The News Lens has been authorized to repost this article. The piece was first published on Sixth Tone here. Sixth Tone covers trending topics, in-depth features, and illuminating commentary from the perspectives of those most intimately involved in the issues affecting China today. It belongs to the state-funded Shanghai United Media Group.
TNL Editor: Olivia Yang