Fancy
shooting some hoops, but don't have a basketball? Caught in the rain with no
umbrella? Smartphone run out of juice?
China's
rapidly expanding "sharing economy", which already provides car rides
and bicycle hire on demand, can help.
For just 2
yuan ($0.30) an hour, Nate Liu, a student at the Beijing Language and Culture
University, rents a basketball from a court-side vending machine by scanning a
barcode on his smartphone.
"I
didn't want to ask around and borrow a ball after losing mine, so I decided to
give it a try," Liu told Reuters.
Far away, in
China's wetter south, some 20,000 umbrellas have been released on to the
streets of Shenzhen, and can be rented - unlocked by another smartphone barcode
scan - for just half a yuan ($0.07) for 30 minutes.
The
umbrellas can be dropped off "wherever convenient", though users are
encouraged to keep them, says Zhao Shuping, founder of E Umbrella Sharing, one
of a handful of start-ups offering the service.
China's
government has taken notice, and expects the "sharing economy" to
grow about 40 percent this year to 4.83 trillion yuan ($705 billion). By 2020,
it should account for around one tenth of GDP, illustrating China's aspiration
to become a sharing economy leader on a global scale.
PricewaterhouseCoopers
predicts five sharing sectors - car sharing, travel, finance, staffing, and
music and video streaming - have the potential to increase global revenue to
$335 billion by 2025 from $15 billion today.
Most of the
money behind China's ballooning sharing economy comes from angel investors and
venture capital firms.
At least
1.69 billion yuan ($247 million) in mostly series-A, or early stage, funding
was invested in April-May in over two dozen start-ups offering sharing
services, according to Reuters calculations based on data from Chinese data
firm IT Juzi.
Twelve firms
renting out power banks - typically compact, mobile battery chargers - secured
1.13 billion yuan, while newer businesses such as basketball and
umbrella-sharing took in about 25 million yuan ($3.65 million) combined.
While
mobile-savvy, convenience-obsessed Chinese welcome the innovations, some
critics question whether the demand is real, or sustainable. They say the
low-revenue, capital-intensive model means profitability can be elusive.
"Young
people are embracing renting as a way of life instead of possessing
things," said Emma Zhu, investment director at Beijing-based Innoangel
fund, who has held off investing in any of these start-ups. "But the
sharing model won't work in every situation. In some cases, they're trying to
meet genuine demand, while in others they're not."
Some
investors say the funding frenzy recalls the spectacular boom and bust of
hundreds of Chinese Groupon apps in vogue in 2010-12, noting that most
ultimately collapsed after fierce price wars, with losses of around $1 billion.
"In
China, the only barrier to entry is who can raise the most capital - that's
good and bad," said Xu Miaocheng, an investment manager at Unity Ventures
in Beijing.
"The
upside is, there are funds available to launch a bunch of companies. You may
not need a lot of specialization or new technology. The downside is a lot of
money could be wasted."
"SPEED
IS EVERYTHING"
Cai Min,
founder of basketball rental firm Zhulegeqiu, says he wants to expand
nationwide, and quickly, offering the service at all of China's estimated
100,000 basketball courts, and growing into a multi-billion yuan business,
eventually offering all "sharable" products.
The Zhejiang-based
start-up received 10 million yuan ($1.46 million) in early funding from
Shanghai-based Modern Capital on May 5, less than two months after Cai came up
with the idea.
"We are
expanding at all cost, because speed is everything," Cai told Reuters.
"Of course this means costs have been very high at the early stage because
we have to make everything in a month."
He declined
to give specific figures, but each of the solar-powered basketball rental
machines - currently in Beijing, Shanghai, Hangzhou, Tianjin and Chengdu –
costs "a few thousand yuan."
"The
key to success is to get more money than your competitors and to expand faster
than them," he said.
Even some
keen players, though, have their doubts, saying balls are only used
occasionally, so the need to rent is marginal.
All sharing
services require a one-time deposit - from 99 yuan ($14.45) for a shared
basketball - that gives sharing companies a one-off financial buffer that
critics say won't be sufficient in the longer run if profits are slow to take
off.
The latest
wave of "sharing" entrepreneurs has been largely inspired by the
rapid rise of Chinese bike-sharing firms such as Mobike and ofo, which have
together raised close to 13 billion yuan in a little over two years, extending
their services to more Chinese cities and international markets including
London and Singapore.
E Umbrella's
Zhao said he came up with the idea after his three young children rushed to try
out the rental bikes that mushroomed across Shenzhen early this year. "I
thought: they're just normal bikes, if this could work, why can't shared
umbrellas?" he said.
Zhao, who
patented his coded lock umbrellas in March, said umbrella and lock
manufacturers are fighting for his orders, offering him payment exemption for
as long as 30 days.
"My
cost for the umbrellas is basically zero right now," he said, adding he
hopes to release a "modest" 30 million umbrellas across southern
China this year.
He says his
business has already attracted interest from potential partners such as China
Life Insurance Co 601628.SA, which wants to replicate the model in markets from
Hong Kong to Singapore.
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