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Bike-sharing firm Ofo’s dramatic fall a warning to China’s tech investors

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BEIJING/SHANGHAI (Reuters) – On the sidewalks of Shanghai and Beijing, once bright-yellow Ofo bicycles lie in varying states of disrepair – chains unhooked, wheels buckled and paint starting to fade – reflecting the quick rise and sharp fall of the Chinese bike-sharing startup.

An Ofo bike-sharing bicycle is locked for personal use outside a dwelling in a village on the outskirts of Beijing, China December 22, 2018. REUTERS/Jason Lee

Millions of Ofo users are clamoring for their deposits to be returned and the firm’s founder has admitted considering bankruptcy.

Ofo’s plight is a warning for China’s tech investors, who have plowed tens of billions of dollars into loss-making businesses such as bike sharing, ride hailing and food delivery. Not long ago, Ofo was racing into markets overseas and raising billions from backers including Alibaba Group Holding Ltd (BABA.N) and Didi Chuxing.

“It now appears bike sharing is the stupidest business, but the smartest brains of China all tried to get in,” Wu Shenghua, founder of now bankrupted bike-sharing company 3Vbike, told Reuters. “It really now seems ridiculous.”

Ofo was a phenomenon. Its dock-less bicycles, which could be picked up by scanning a QR code and left anywhere, grew from Beijing campuses to become an icon of young, urban cool. The firm garnered a valuation of $2 billion.

Its bicycles – and those of main rival Mobike – could be found on almost every city street corner, often in staggering numbers. Ofo’s advertisements featured major Chinese popstars and showed trendy youngsters pedaling around the hippest areas of town.

Dozens of smaller rivals emerged in China over the last two years, only to go out of business, leaving Ofo, fellow Alibaba-backed Hellobike, and Mobike, backed by Chinese social media and gaming giant Tencent Holdings (0700.HK), as the major players.

But costly battles for market share have meant Ofo and its rivals have struggled to turn popularity into profit. Ofo’s very survival is now at risk as debts to suppliers have come due and user demands for deposits have mounted.

“It’s a very tricky business, all the profits are eaten away by competition. It’s something that really needs to be part of a bigger business,” said Maxwell Zhou, founder of tech startup metaapp.cn and a former employee of Mobike in China.

“It’s very similar to email in that way. It has a lot of benefits for society, but none of the email providers were able to create a barrier to entry, so anybody could host emails, and eventually nobody could make any money.”

GLOBAL EXPANSION

At its peak, Ofo had bike fleets in more than 20 countries, from France to Australia and the United States. Company insiders, however, said it tried to grow too fast, and found itself facing a wide array of hurdles, from traffic regulations to vandalism, as well as spiraling costs.

“In retrospect of course there was problem with management, and we were expanding too rapidly,” said a former Ofo executive who worked on international expansion, asking not to be named.

The firm has pulled back from markets like Israel, Germany and the United States, and has been forced to sell assets, including some bikes for as little as $2, the person said.

Ofo and Alibaba did not respond to requests for comment.

The former executive pointed to an unsuccessful push into Japan, where the firm had looked to expand in a partnership with SoftBank Group Corp (9984.T). That plan went sour after a breakdown in takeover talks with SoftBank-backed Didi Chuxing, said the executive.

With bikes sitting in storage, fees piled up. “We lost a lot of money, and now the bikes are still stuck in warehouses,” said the executive.

Didi declined to comment but pointed to earlier statements saying it had never intended to buy Ofo and promised to keep supporting its “independent development” in the future.

CREDIT BLACKLIST

In China, once-loyal users have turned on Ofo, lining up at its offices in Beijing to demand the return of deposits paid up-front to use the service. Over 12 million people have so far requested repayment online.

Jiang Zhe, 21, a university student in Beijing, said he usually bought a month pass for Ofo bikes, but has lately struggled because so many are broken. “I haven’t used Ofo recently because I can’t find any working bikes,” he said.

He is now one of the many seeking a refund.

In a letter to employees last week, Ofo CEO Dai Wei said the company was struggling to resolve a cash shortage, in part because of user refunds as well as payments to suppliers. He said the firm was battling on amid “pain and hopelessness”.

A court in Beijing has placed Dai on a credit blacklist that restricts him from going to fancy hotels, traveling first class or sending his children to expensive schools, according to the court’s Dec. 4 order seen by Reuters.

The rare near-implosion of a wildly popular and innovative firm in China has spooked some authorities. The transportation ministry said on Friday it was asking Ofo to optimize its refund procedure, but also called on the public to be more “tolerant” to allow domestic innovation to thrive.

Many weren’t convinced, including the former Ofo executive.

“It would be tough for the company to get back to its golden days, I don’t think it can be like before. I think most people are really just waiting for the final days,” he said.

Reporting by Pei Li in Beijing and Josh Horwitz in Shanghai; Editing by Adam Jourdan and Muralikumar Anantharaman

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Independent Consultant Beginner – 6 Should Have Pieces Of It Technology And Software

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Prima Wireless Earbuds Reviewhttps://primawirelessearbuds.net/.

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What Make Sure You Really Know Right Anyone Decide To Travel

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When traveling with children advised plan your route in advance. Do a little research and see as relevant and fun places to stop such as parks, museums or other attractions. Once you take breaks every non-chemical hours so everyone maybe even including the children probably get out and stretch their legs.

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Majority of Canadian workers willing to take less pay for a workplace pension plan: survey

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A majority (70 per cent) of Canadians say they’re willing to forgo a higher salary in exchange for a workplace pension plan, according to a new survey for the Healthcare of Ontario Pension Plan by Abacus Data.

The survey, which polled more than 2,000 Canadian adults in April, signals an opportunity for employers to build back the post-coronavirus pandemic working landscape better by expanding access to good retirement plans — whether they’re defined benefit, defined contribution or group registered retirement savings plans, says Steven McCormick, senior vice-president of plan operations at the HOOPP.

According to the survey, a secure retirement remains of greater concern for Canadians than concerns about their health, debt load and job security. McCormick says this has been a consistent worry the HOOPP has seen in survey results over the past couple of years. Nearly half (48 per cent) of respondents said they’re very concerned about having enough money in retirement, while 31 per cent were highly concerned about their personal debt load and 26 per cent cited their job security. Close to half of respondents expressed high concerns for their physical (43 per cent) and mental (40 per cent) health.

In addition, the pandemic has harmed the finances of more than half (52 per cent) of Canadians’ surveyed and it’s had a particularly disproportionate affect on the finances of younger adults. Adults aged 44 and younger said they’re twice as likely (25 per cent) to have had their finances greatly harmed, compared to those over the age of 60 (12 per cent).

Generally, younger adults tend to work in roles that may have been impacted most by the pandemic, says McCormick, whether in service industries that were shut down or frontline health care that have been busy but don’t always come with access to a pension plan. “Affordability is an issue, so I think their worries increased during this time.”

And while almost half (46 per cent) of Canadians surveyed said they’ve saved more money than they would have since the onset of the pandemic, among these respondents, over half (52 per cent) didn’t put any of their savings toward their retirement. Overall, most (63 per cent) Canadians surveyed haven’t set aside or saved anything for retirement in the past year, a five-point increase since 2019.

McCormick says this may be due to uncertainty or hesitancy about whether people’s immediate needs outweigh longer-term needs. And with 55 per cent of respondents noting they were very concerned about the cost of day-to-day living, he adds that rising prices have fuelled insecurity and worries so people are creating their own emergency funds right now.

While there’s a segment of the population who’ve saved more and, for them, the pandemic has created wealth, he doesn’t see this as a common narrative in the survey data. “If you don’t have access to a workplace pension or the opportunity to have things like automatic enrolment, the uncertainty of the time may have you holding onto money,” says McCormick. “In Ontario, we’re more optimistic about the pandemic than we were maybe a month ago, but there are still people worrying about whether there’ll be a fourth wave.”

In addition, more than two-thirds (67 per cent) of respondents said a retirement crisis is looming and 65 per cent said saving for retirement is prohibitively expensive. It’s a common and shared dream for many people in looking forward to a secure retirement, says McCormick, noting for many, making that dream a reality remains elusive.

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