The Once Raring Chinese Bike-Sharing Startup Ofo Now Facing Tough Times

The Chinese bike-sharing firm Ofo is now having a tough time just to afloat even though not so long ago it was flush with cash and was being termed to be a game-changing tech startup.

The dockless bike-sharing concept which had gained tremendous popularity in recent years in China was created by Ofo with the help of investment of billions of dollars from high-profile investors like Alibaba. According to the concept, a smartphone app can be used to lock and unlock the bikes anywhere which meant that the bikes could be left where ever the users wanted to instead of the designated stations.

The company fought dozens of rivals emulating its business model. However that promising startup now faces the prospect of being the latest casualty in an intensely competitive industry. The company has been hounded by large number of angry customers demanding refunds.  The Chinese government has blacklisted the company and its founder for unpaid debts.

“They snapped defeat from the jaws of victory,” said Jeffrey Towson, a private equity investor and professor at Peking University.

A huge amount of cash was burned up by the bike-sharing startups in China in their effort to start services in a large number of cities in China as well as in foreign market. A series of bankruptcies and very large piles of impounded bikes resulted from such a chaotic expansion.

While being able to survive that scare, it has not been able to cope up with its rivals.

Analysts say that despite being great standalone service at the time of its launch in 2015, dockless bike sharing concept now needs to be clubbed with other transportation platforms.

According to Tu Le, founder of consulting firm Sino Auto Insights, today, people are demanding one single app which can be used to “hail a scooter or a bike or a car. That’s where the sweet spot’s going to be.”

That shifting customer taste has already been adopted by some of the rivals of Ofo.

while Hellobike joined forces with digital payments giant Ant Financial, Mobike was acquired in April by a bigger tech startup, Meituan Dianping. A wide range of services are offered by both Meituan and Ant which has assumed popularity among hundreds of millions in China.

The rivals of Ofo gained access to greater number of users and the opportunity to offer users a wider range of services such as ride-hailing and food delivery because of the partnerships.

There was talk of the Chinese ride hailing company Didi Chuxing, that forced Uber out of China through competition, would acquire Ofo. That however never happened.

Instead, Didi acquired another bike-sharing company, Bluegogo.

“When Didi suddenly bought Bluegogo and launched their own bike-sharing service, that was a red flag,” Towson said. “That’s like when your wife tells you she’s starting to date again.”

Another blow from its rivals was dealt to Ofo after Mobike announced in July that its users no longer needed would be required to make security deposits to avail its services. Hellobike soon followed suit.

Ofo however could not make the same offer to its users because of the absence of a deep-pocketed partner. There was depleting enthusiasm among investors about the company and its costly global expansion depleted it of cash resources. Additionally, suppliers had laso started demanding payment.

According to Xue Yu, an analyst at research firm IDC, the startup also struggled to repair damaged bikes. Hence its customers decided to switch to rivals because users were unable to locate available bikes.

Ofo is now “suffering the most serious consumer crisis of trust,” Xue said.

(Adapted from CNN.com)

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