China has a peculiar habit of taking the latest and greatest financial innovation available, and then taking it too far. The latest example is the startup Sharing E Umbrella, which hoping to follow in the footsteps of successful bike-sharing startups, decided to – as the name implies – provide shareable imbrellas. There was just one problem: as the Shanghaiist writes only a few weeks after starting up operations in 11 cities across China, Sharing E Umbrella announced that it had lost almost all of its 300,000 umbrellas.
While the details are probably superfluous at this point, it all started with a 10 million yuan investment – arguably by a rich, if not too intelligent investor – into the Shenzhen-based company. The concept, at least in theory, was to create a “sharing” ecosystem similar to those that bike-sharing startups have used to great success. Customers use an app on their smartphone to pay a 19 yuan deposit fee for an umbrella, which costs just 50 jiao for every half hour of use. The South China Morning Post reported that company CEO Zhao Shuping said that the idea came to him after watching bike-sharing schemes take off across China, making him realize that “everything on the street can now be shared.”
Everything… except umbrellas as it turns out, although, in retrospect, that may not have been apparent. The reason for that is that a cornucopia of different companies have been able to take advantage of China’s sharing economy craze. While foreign enterprises like Uber and Airbnb have managed to make inroads in the Middle Kingdom, their Chinese rivals (Didi Chuxing and Tujia, respectively) have fared even better. And, with the help of mobile wallets and barcode scanners, Chinese residents can now rent anything from bikes to basketballs to cell phone chargers. Naturally, this has attracted many tech startups to experiment in Chinese urban centers.
However, as the Shanghaiist adds, some ideas have turned out better than others.
Sharing E Umbrella was among the latter. The company initially gave out their umbrellas at train and bus stops, but 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.”
There was another major difference: according to SCMP, CEO Zhao concluded that the safest place for an umbrella would be at the customer’s home, where it would be “safe and undamaged.” Unfortunately for the company, they would also be “unpaid, because apparently, customers skipped the final step of then returning the umbrellas, simply keeping them for themselves.
Each lost umbrella costs the company 60 yuan to replace, but Zhao has not yet given up hope. He reportedly plans to release another 30 million umbrellas by the end of the year.
There is another problem.
As pointed out by Sixth Tone, even if Sharing E Umbrella figures out a way to force its customers to return its products, for a business that depends on rain, finding a steady profit might prove challenging. China receives the most rain in the summertime, leaving little interest in the business during drier months. What’s worse, in regions with frequent rain, people are more likely to just buy their own umbrellas
Umbrella renting schemes aren’t the only sharing businesses suffering from problems with theft in China.
Last month, shared-bike startup Wukong Bicycles went out of business in Chongqing after nearly all of its bikes were stolen following just six months of operation. Shortly afterward, Beijing-based 3Vbike followed suit.
So even though it would be nice to grab an umbrella when walking home in a downpour, one thing seems clear: if sharing economy companies don’t change the way that they keep track of their products, they won’t stick around long — whether it rains or not.
And while the the umbrella-sharing economy may have died before it was even born, in an economy with $30 trillion in bank deposits, one just needs to wait a few hours for the next “extreme” financial engineering idea to emerge.