Chinese Umbrella Sharing Startup Loses Nearly All Their Umbrellas

I’m a big fan of the “sharing” economy, whether it involves rides, cars, bikes, or whatever. Well, maybe not quite whatever, after reading this story.

Shanghaiist reports on a Shenzhen-based umbrella startup, Sharing E Umbrella, that launched in April with an investment of 10 million CNY (~1.5 million USD). The startup founder saw how well the sharing economy worked otherwise, and figured he’d try his luck in the umbrella sharing economy. The company started with 300,000 umbrellas in 11 cities, and now almost all of the umbrellas are missing.


Shenzhen, China

As far as the (theoretical) business model goes, users have to pay a 19CNY (~2.75USD) deposit to use umbrellas, plus a fee of 5CNY for every half hour of use (~0.75USD). There’s only one small problem:

While Sharing E Umbrella gave out their umbrellas at train and bus stops, they soon realized that getting users to return the umbrellas would be a problem. “Umbrellas are different from bicycles,” Zhao said. “Bikes can be parked anywhere, but with an umbrella you need railings or a fence to hang it on.”

The SCMP reports that Zhao concluded that the safest place for an umbrella would be at the customer’s home, where it would be safe and undamaged. But, apparently, customers have skipped the final step of then returning the umbrellas, simply keeping them for themselves.

Now there are virtually no umbrellas left, and most bizarre of all, each lost umbrella costs the company 60CNY. Why wouldn’t they make the deposit equal to (or more than) the cost of the umbrella?!

But the company isn’t giving up, and plans to release another 30 million(!!!!!) umbrellas by the end of the year.

What a concept, and that’s not even accounting for how highly seasonal this will be. If this goes as planned, presumably for months at a time will there just be 30 million umbrellas sitting on the streets, until they’re useful again in summer, or…?

There are a lot of areas where the sharing economy works brilliantly, but this doesn’t seem like one of them.

(Tip of the hat to Andrew)

Comments

  1. Oh bless them. The logistics of locating and returning that many umbrellas is mind boggling. People would need to be really motivated to return an umbrella somewhere after they have used it. How do start-ups get this amount of funding without stress testing their business idea?!

    Correct me if I’m wrong but doesn’t Japan actually have an honour system of sharing those clear umbrellas where you simply take one from the bins inside a store and return them to any other store? And it works? Or was I just borrowing someone’s illegally when I was there?!

  2. This is actually one of the best marketing – each umbrella costs maybe RMB9 and they are effectively selling at RMB19, and no cashier needed!

  3. People use umbrella more in China to protect in rainy seasons and from oppressive sun in summer so it’s more popular in China. It sounds like a stupid idea. The comparison to bikes is dumb. Bikes are big and you can’t just throw them in the closet at home. That’s why people don’t keep those. The deposit is another reason. If this was done in most countries the user would have a credit card on file instead. Besides umbrellas are cheap. It’s one of the travel things that even Rick Steve’s says not to pack because you can buy one super cheap almost anywhere.

  4. DaninMCI is correct, umbrellas are used just as much if not more to protect from the sun rather than the rain.

  5. Sounds like a stupid idea. If the deposit is only $2.75 people will be inclined to keep them. It’s like buying an umbrella for only $2.75.

  6. Lol. Even if they geo tag the umbrella, there’s tiny possibility the user would return it. Those living in chinese and know well their culture surely understand this.

    However, keep investing after losing money without preparing a remedy or solving existing problem sounds like they like the money gone.

    Money laundry perhaps?

  7. I will say in the US this could work but only if credit cards were required to rent them. I don’t know if the demand is there though. It could be set up like a red box. If you don’t return it after so long your card is charged something like 30-40 dollars. Strange they wouldn’t have tried something like that. Then again I am not sure how popular credit cards are in China for locals.

  8. There is no possibility that each umbrella costs 60 RMB. From the look of these umbrellas and what I have heard, each costs no more than just 10 RMB. This is a great way to sell something without anyone realizing it.

  9. Another idea gone awry from the umbrella corporation. At least Milla Jovovich does not have to clean up their mess this time around.

  10. As living in China for most of my life. I don’t even know there is a umbrella sharing thing going on. There are lots of sharing programs going on in China, and this is the few that didn’t work out. Why it’s so hard to write neutral?

  11. If they had lost $1.5 million the first time around, I really doubt they would repeat it. But if as some here are commenting, the “deposit” was greater than the purchase price, then they pocketed the profit from the first cycle, which proved that their marketing plan works, and of course they are repeating it. 😉

  12. First of all I am curious where Lucky got the 60 yuan number from. As far as I heard, they admitted that event though they lost all initial inventory, they did manage to have a profit already which is kind of rare for a startup.

    Umbrella in China is much cheap than US. You can get a very decent quality one for 20 yuan on Taobao and they buy it directly in bulk so you can image how cheap it could be.

    Also no one mentioned, they made sizable money from advertising. For advertisers, as long as people use them, they are happy. They really don’t care if they are returned or not.

    Someone mentioned Japanese model. I just return from Japan. From my observation, it also got “stolen” a lot. But the transparent umbrellas are really bulky and when it does’n rain, it actually make sense to return them instead of carry it around.

    This also happen to shred bikes, initially a lot of people try to take the bike to their own home and locked with their own locks. But soon people realize it make too much trouble for nothing. take it form street when you need is much easier.

    I suspect if the shared umbrella thing continues, it will workout well. stay tuned.

  13. I don’t know how the investor would think the Chinese in china will return the umbrellas, he’s kidding himself. Majority will take whatever they can inside and outside of China, there know of no giving, only taking.

  14. Well… seeing as you can buy an umbrella in a dollar store here already, for $1 or $2 , that is made in China and likely costs $.40 to $.50 USD to make there , then I’m sure Chinese consumers can already buy an umbrella for a few RMB . I don’t see the value in this . I have been caught in a Rain storm many times in China and the street vendors “instantly” have umbrellas for sale ,cheap for westerners even cheaper if you are local. ( westerners pay more)

    Yvonne is right as well….. there is no “sharing economy” in China . Every person for themselves and takes what they can get .

  15. The problem with this deal is that you have to actually return it somewhere, unlike the bikes where people can leave anywhere. With this said, the bikes will have some other issues soon because now pedestrians are beginning to not be able to walk in some areas with the bikes crowding off the sidewalk and people riding everywhere thinking they are “King of the Road”! The umbrellas well at the company level would be an expense or a rental or sharing if returned. People naturally always seem to forget umbrellas in places.

  16. i think the cost of umbrella is much lower than 60 yuan. probably less than the deposit amount of 19 yuan.
    may be this was what he wanted all along.

  17. @Ben – My experience in Japan reflects yours. There were freely available umbrellas of all kinds everywhere, and people used and returned them to a nearby bin constantly. To me, this just reflected a larger sense of politeness in Japan that I really enjoyed, and I can’t wait to return there.

  18. You can buy an umbrella for 10 rmb at every corner of the street. So this umbrella cost 60 rmb? I guess it has wifi too.

  19. Mainland Chinese usually have no shame when it comes to personal gains.
    They’ll go to great lengths for even small sums.
    I’m not surprised at all of the outcome.

  20. They made a profit on the umbrellas and they made a profit on the advertising too. Good business model so they decided to repeat the exercise a second time.

    Possibly they may even get more tax efficient treatment by disguising these bogus sales as ‘rentals’. Wise guys for sure.

  21. The entitled a-holes here have no issue generalizing people from other countries and being dumb at the same time.

  22. This blog is getting way off topic. I signed up to read about I-was-in-the-seat premium class travel, lounges and hotels and how to play credit cards to achieve same.

    First hand accounts. Not second hand, irrelevant, poorly sourced ‘news’ about Chinese umbrellas, eclipses, veterans affairs and pilots’ navigational errors which are not your speciality. I can get that crap elsewhere.

    Stick to the knitting, Lucky. When you do, you’re a great read.

  23. The racist and utterly rude comments of the China bashers are really what motivate the Chinese to work harder and become better… Give it a few more years and see where China will get (pathetic if you only have nasty comments to fire back).

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