TechNode reported ‘ofo’ a Beijing-based bicycle rental startup will launch its services in India from February and will be scaling back its operations in India.
TechNode reports suggest ofo owing to a cash crunch has already lead of resources. The bicycle rental startup started operations early this year with cities like Pune, Coimbatore, Indore and then later moved to cities like Ahmedabad, Bangalore, Delhi, and Chennai. Currently, it has shut down operation in all cities except Pune stated ofo spokesperson while talking to media.
The bicycle rental startup was not able to answer a question asked by media if they are shutting down operations entirely in India. The bicycle startup operates in 250 cities across 21 countries including India and has a client base of nearly 200 million users globally.
Being able to raise a capital of around $866 million from Alibaba Group and others in March has been witnessing a major cash crunch. As a result of which it has been laying off and scaling back operations in India and few other countries as well. Reports suggest it has already shut down in Australia, Chicago, Israel and in other Middle Eastern countries.
Bicycle sharing startups need to watch out
We have seen in China where bicycle sharing was a big million dollar business and the same trend is seen in India with the launch of Ola Pedal, Yulu, Zoomcar’s PEDL etc. These companies need to better watch out for some of the following issues:
- Lack of civic sense: Most of the modern bike sharing companies use apps that make it easier to locate them via an app. You simply need to unlock the bikes with a QR code or something, pay via wallet etc and start your ride and later need to park at the destination. But this does not happen as many people just park the bicycles anywhere. Bikes are parked anywhere blocking the path or pedestrians and traffic. Reports were also published in China where bikes were dumped in rivers abandoned anywhere on land, hanging in trees, etc. Some of the startups lost their bikes as they had no GPS tracking device on the bikes.
- Make no financial sense: Fortune had reported earlier the business of bicycle sharing does not improve with scale as it does in case of cab aggregation or other businesses. The reason behind this was it doesn’t create a much lower cost structure per unit. For example, if Ofo gets more customers then it has to buy more bicycles. As the rentals are low, these businesses are either unprofitable or have thin margins. With expenses like paying employees, finding abandoned bikes, tackling the etc also have to meet and it all costs money.
- Competition, but no difference: Fortune in the same article also mentioned competitors are increasing, but it is very hard to differentiate the service. As there is not much of a difference in the services being offered by various bicycle startups.