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Is making business profitable realistic for bike-sharing services?


09-27-2016 16:37 BJT

Two Chinese startups want to add bieks to car sharing and riding hailing services. Can they make the effort profitable?

Daily commuters and students, the two groups of people who desperately need a faster travel solution for the last mile of their trip.

From the subway station to the office, from a dormitory more than two blocks away from school to the main building in the deepest corner of the campus. Walking would be a bit too far, and taking a taxi isn't economical.

That's where shared bicycle service finds it niche.

Mobike is a venture capital backed bike service. You scan the QR code on the bike, ride on it, and lock it up again on the side of the road to finish the service.

Ofo, meanwhile, focuses exclusively on students.

"So far we haven't thought too far on our business. I believe the more people use our products, the more valuable our business is," Hu Weiwei, the Mobike founder, said.

Ofo co-founder, Xue Ding, said, "We have tens of thousands of orders per day. I believe the user base will generate handsome profits soon."

Mobike claims that it has received 200 thousand subscriptions on its first 100 days online. The aevrage charge for each ride is less than three yuan, or about 50 cents.

Ofo has a similar business model, with very low fees for the service as well. For Mobike, the cost of each bike is around 500 US dollars while for ofo the cost is around 30 dollars. That doesn't sound like a recipe for profit.

Bao Ran, secretary general of Zhongguancun consumer industry association said, "I haven't seen any clear business model for bike sharing business. The model now is still the same old path of getting venture capital in, using the money to circle more consumers with ultra cheap services and hoping to profit from such a user base. Bikes are mobile advertising boards. Data collected from the services will also be valuable. "

Bike-sharing in China, however, is already competitive.Besides the two companies, China has some 80 percent of the world's top urban bike-sharing schemes, mostly government funded. And the challenge is huge, as bikes are already cheap assets consumers can own.

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