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Umbrella-sharing Startup Loses Nearly All of Its 300,000 Umbrellas In a Matter of Weeks (shanghaiist.com) 159

With bike-sharing companies like Mobike becoming incredibly successful in Chinese cities, a few startups have decided to mimic the concept with shareable umbrellas. The only problem: most of the umbrellas have gone missing, reports local media. From a report: 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. The Shenzhen-based company was launched with a 10 million yuan ($1.5 million) investment. The concept was similar to those that bike-sharing startups have used to (mostly) 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.
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Umbrella-sharing Startup Loses Nearly All of Its 300,000 Umbrellas In a Matter of Weeks

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  • by bobbied ( 2522392 ) on Monday July 10, 2017 @10:47AM (#54778329)

    You don't lose anything if you keep the deposit... Just buy new ones.. Right?

    Seems like a great way to sell umbrellas to me... Here borrow this, but if you don't bring it back I'm going to charge you...

    • by bill_mcgonigle ( 4333 ) * on Monday July 10, 2017 @10:48AM (#54778339) Homepage Journal

      You don't lose anything if you keep the deposit... Just buy new ones.. Right

      TFA says the deposit is half the cost of the umbrella.

      Sounds like they need a flashing LED handle that says "Stolen" if the umbrella isn't returned on time, otherwise there's an incentive problem.

      • by Chris Mattern ( 191822 ) on Monday July 10, 2017 @10:55AM (#54778399)

        Too complicated; just make the deposit twice the cost of the umbrella, and the incentive is gone.

        • by AmiMoJo ( 196126 )

          The deposit is twice the cost of the umbrella. It's about $3, which should cover the cost of a cheap umbrella at least four times over, considering they sell for $1 in shops even outside China.

          The problem is that umbrellas are too cheap. If they make the deposit any higher people won't use the service out of fear of losing it, but at the same time it's not enough to motivate them to return the item.

          Maybe they could be more like a library, with fines if you don't return it and no more books until you do.

          • by Chris Mattern ( 191822 ) on Monday July 10, 2017 @11:43AM (#54778815)

            The deposit is twice the cost of the umbrella. It's about $3, which should cover the cost of a cheap umbrella at least four times over, considering they sell for $1 in shops even outside China.

            Then there's no problem. Use the deposits to buy new umbrellas, and you've got yourself a nice little business selling overpriced umbrellas.

            • Only if more people keep subscribing to your business than you lose umbrellas. Has the hallmarks of a Ponzi scheme.

              • Not really, because you get your deposits up front. You give somebody an umbrella only after they give you enough money to replace it. You give them the deposit back only after they give you the umbrella back, but even in that case you keep the rental fee. Unlike a Ponzi scheme, you don't have any unacknowledged obligations piling up that you can't cover. Now, if you can't get people to rent your umbrellas, you have a problem, just like any business that can't sell its products has a problem. But peopl

                • Everybody assumes that these umbrellas disappear while "on rent". I think it's quite safe to assume they disappear while "off rent", as otherwise there wouldn't be an issue with losing umbrellas as they would know who had the missing umbrella in their possession.

                  • otherwise there wouldn't be an issue with losing umbrellas as they would know who had the missing umbrella in their possession.

                    Good luck with chasing 300,000 particular people in China, even assuming they all gave their names, addresses, phone numbers, social security numbers etc just to hire an umbrella.

                    • You don't have to. Just charge the credit card provided with their registration (the same card used to charge the deposit and rental fees).

                  • The nature of a deposit is that it is compensation to cover loss of or damage to the product. Knowing who rented the bumbershoot is immaterial - keeping their deposit is your only recourse.

                    • But is it deposit payers that kept the umbrellas? Or other passers-by that just picked one up (mind: no fixed deposit locations, hang them at any convenient roadside railing)?

          • by Wycliffe ( 116160 ) on Monday July 10, 2017 @11:53AM (#54778897) Homepage

            The problem is that umbrellas are too cheap. If they make the deposit any higher people won't use the service out of fear of losing it, but at the same time it's not enough to motivate them to return the item.

            This hasn't stopped Redbox in the USA. Redbox doesn't even charge a deposit but they will continue to charge you for 30 days if you don't return it. After that, it's yours.

            • by AmiMoJo ( 196126 )

              How much is 30 days rental? I'm guessing it's more than $2.75, which is what these guys are charging.

          • by mspohr ( 589790 )

            They really should just call it an "umbrella store". Have a "deposit" which is enough to cover the cost of the umbrella. If they return it, no problem. If they keep it, just replace it from the deposit.

          • Cheap umbrellas are not likely to survive in the rental market. According to the article, each umbrella cost 60 yuan to replace - three times the deposit.

        • The incentive to overpay for umbrellas while buying from your uncle?

          This was just a 'short con'. I bet _everybody_ who got paid out, kicked back to the operator. I also bet they haven't paid _any_ bills to anyone not kicking back.

          Rent, power, wages, all overdue. Bank in the red. Cops paid off and happy though. Investor is just 'fat of the land'.

        • Or, just buy an umbrella instead of renting one. Problem solved.
        • More complicated but in a service like this you have to replace the "product" every so often anyway. Far better to let the lazy folks pay for them with their deposits instead of replacing them with your own capital. Further, every umbrella in service (even if it's kept) is free advertising for your company.
        • I'd bet that it's not so much explicit theft, but go to someone's house and you may find a closet full of unreturned umbrellas.

          A bicycle is something that's easier to leave at the rack when you get to your destination. An umbrella is something you'll typically take all the way to the door. And you might expect to take with you when you leave, but oh, you forgot - it's stopped raining. Kind of like with ball-point pens, only more cumbersome.

          Possibly the best solution is to simply make disposable umbrellas. A

      • by tripleevenfall ( 1990004 ) on Monday July 10, 2017 @11:01AM (#54778451)

        Umbrellas are cheap and available anywhere, there's no problem with access or cost.

        The problem they're trying to solve is that people haven't carried an umbrella with them at the necessary moment.

        It would seem to me that rather than banking on people going out of their way to return a cheap item in order to receive a deposit back, less a significant fee, maybe they should be selling umbrellas an offering a small deposit return if the umbrella comes back, similar to soda cans and bottles in the 70s and 80s.

        The business model is upside down for low-value goods that people might well just keep instead of walking down the street to return.

        • by DontBeAMoran ( 4843879 ) on Monday July 10, 2017 @11:13AM (#54778545)

          What do you mean by "offering a small deposit return [...], similar to soda cans and bottles in the 70s and 80s."

          This is still true today.

          • by Anonymous Coward

            Depends where you live. Most states don't mandate a deposit.

            And bottle deposits go way back before the 70s.

            • C'mon Newman, we have money to be made!
      • Way cold! So dude, I also get a bonus flashing LED that can be removed from my stolen umbrella? Score!
      • by Zocalo ( 252965 ) on Monday July 10, 2017 @11:30AM (#54778683) Homepage
        Actually, it sounds more like they need to figure out how to bill their customers for the *on-going rental* of their non-returned umbrellas. At 50 jiao (5 yuan) per half hour, they're going to be making a pretty good RoI given each umbrella only costs around 60 yuan - including the 19 yuan deposit you're in the black after about 8 hours of rental. They've got an app that makes the initial payment, so surely that includes such on-going billing, right?

        Oh, wait, "startup". Maybe not...
      • "everything on the street can now be shared."

        Definitely true. So far I've shared with other people two bicycles (bolt cutters), the contents of my wallet (twice), my mobile phone (grab-and-run), and numerous umbrellas (those were mostly my fault).

        Sheesh, what did they think would happen with an umbrella-sharing service?

      • How many hours do they charge them for before they consider the umbrella "lost"?
    • by elrous0 ( 869638 )

      According to the article, it costs 60 yuan to replace an umbrella, but the deposit is only 19 yuan. But no worries ;-) , they plan to make up for their losses in volume:

      but Zhao has not yet given up hope. He reportedly plans to release another 30 million umbrellas by the end of the year.

      On a related note, anyone know what 41 x 30,000,000 adds up to?

      • by Dunbal ( 464142 ) *
        On the bright side when everyone has one or more umbrellas, no one will need an umbrella anymore and he'll stop losing money...
      • According to the article, it costs 60 yuan to replace an umbrella, but the deposit is only 19 yuan. But no worries ;-) , they plan to make up for their losses in volume:

        Google tells me that 60 yuan is $8.82. $8.82 for an umbrella, in China, when you are buying 300,000 of them? That seems to be a bit high. I'm sure I can get 300,000 umbrellas from Alibaba delivered to my home (whole neighbourhood covered by umbrellas :-) for a lot less than that.

        Just checked: Yes, I can get 1000 umbrellas to my home for less than 19 Yuan each.

        • by stooo ( 2202012 )

          Yeah.
          Except this is an umbrella with a GPS-GSM-Battery combo inside it, I suppose.
          Costs a little more.

        • by AvitarX ( 172628 )

          I assume much of the cost is getting the umbrella to the rental device.

          even so, it seems high, considering they placed the initial 300,000 for 10 million, and they also used that money to develop and place the infrastructure,

        • Yeah, shipping it to your house in (I'm assuming) the US is one thing, but this guy had to have them shipped to China!

          </s>
    • You don't lose anything if you keep the deposit... Just buy new ones.. Right?

      Seems like a great way to sell umbrellas to me... Here borrow this, but if you don't bring it back I'm going to charge you...

      You hope the company was smart enough to charge a deposit. TFA doesn't say.

      It does say that they ordered 3million more umbrellas though, so either they like giving away cheap umbrellas, or they are charging a down payment and this isn't the disaster the article makes out.

      • Don't know about the article but it was right in the summary: "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."

    • by Anonymous Coward

      Except the deposit is less than the replacement cost (19 yuan vs 60 yuan). So the indefinite half hour usage fee I guess would have to make up the difference. The internet says 1 yuan = 10 jiao, so I'm not sure if there is a typo and it should be 5 jiao per half hour or if you're paying 5 yuan (50 jiao) per half out. Worst case break even is after 2 days.

    • Re: (Score:2, Interesting)

      by Anonymous Coward

      My father once worked at a convenience store (Circle K), where people would run out of gas and ask if they could borrow a 4 gallon gas can. At the time, this made sense - they didn't have a gas can, just walked a mile or two, and needed to get gas back to their car. ...
      Later, driving in a car with a) gas and b) a gas can, they would neglect to return it. ...
      In the days before debit/credit cards, my father's store had a "deposit" required (in cash) of $10 for the gas can. ZERO gas cans were ever returned.

      • In the days before debit/credit cards, my father's store had a "deposit" required (in cash) of $10 for the gas can. ZERO gas cans were ever returned. They also sold gas cans for $10.

        Your father was a dumbass. He should have charged $12 deposit. A lot of people would have paid that thinking they'd get the money back. Later on they'd figure that it wasn't worth $2 to drive back and return it.

        Result? $10 can sold for $12.

        • You Dumbass - then they'd just BUY the can for $10.
      • by fisted ( 2295862 )

        Same in Germany, they used to give you a can for a small deposit, didn't get them back and stopped doing it altogether now. One time I ran out of gas, I ended up leaving my entire wallet there to make them believe me that I will actually return the can. Another time they didn't even accept that, so I ended up buying a 2,5L bottle of water, emptied it outside and filled it up with gas. And then they had the nerves to tell me I can't actually do that (fortunately after it was too late). Geez.

        Now why I'm t

        • You either know your plastics, or got lucky. Gasoline melts through a lot of plastics.

          You can make neat plastic sculptures that way. Dissolve the right plastic in gasoline, sculpt it into things, let the gas evaporate out.

        • by trg83 ( 555416 )
          If you've run out of gas more than once and were unprepared to deal with it again, you really should run for political office. Seems such forward-thinking individuals are in high demand.
          • by fisted ( 2295862 )

            I'm pretty sure you've made dumber mistakes in your life, and you seem to be stupid enough to not realize having a full tank of gas isn't always possible for everybody at every time.

            But hey, you're showing a great ability there to quickly jump to conclusions without consideration at all. Or were you just looking for an opportunity to say something publicly appealing (to the /. crowd in this case) for the sake of doing so? Talk about requirements for political offices.

      • by AvitarX ( 172628 )

        That's kind.

        Gas cans are way over priced at any gas station I've been to. Something about, you just walked two miles here, and you don't want to walk ten more to somewhere else.

    • Seems like a great way to sell umbrellas to me... Here borrow this, but if you don't bring it back I'm going to charge you...

      The bit that comes after the ... is "1/3rd of the price that it costs me to replace it".

  • The company owns them, it charges a fee for you to take it for a period of time. This is called renting.
  • Did they make money by selling them at 17 yuan (about $2.79). Made in China - good chance they did.
    • They claim it costs 60 yuan ($US 8.82) to acquire an Umbrella, in China. You can get a 'Rolex' for that kind of money.

      They are a bunch of big fat liars, they are buying the Umbrellas from a relative's company, the investor is a chump. This was a 'short con'.

    • Your chances of turning this into a successful business get lower as your motivation to read TFA article increases.

      If you ever get to that point you'll find out they made a 41yuan loss on every stolen umbrella.

  • Yuan and jiao (Score:5, Informative)

    by bmomjian ( 195858 ) on Monday July 10, 2017 @10:49AM (#54778345) Homepage

    I guess everyone else knows how to convert yuan and jiao , but I didn't. Ten jiao equals one yuan, so 50 jiao equals 5 yuan. The story probably would have made more sense in uniform currency units. The idea is that if you had the umbrella for less than four hours, it was worth returning it.

    • The TFA is trying to be smart by converting to jiao. The original post from South China Morning Post [scmp.com] in TFA stated the difference.

      In principle, the scheme works by members of the public borrowing umbrellas – from stands located mostly at subway and bus stations – for a deposit of 19 yuan and a fee of 0.50 yuan for every 30 minutes, it said."

      Is it 10 jiao is equal to 1 yuan or 100 jiao is equal to 1 yuan?

    • And that is why the system failed.

      a) Something that becomes essentially free if I have it for 3 hours is not worth the effort of returning.
      b) What if it rains after I return it. A crappy day is often a crappy day, chances are I'll need the umbrella again.
      c) Oh look I thought about it too long so it's not worth returning anymore.

    • by repka ( 1102731 )

      Can I stay ignorant and just get umbrella deposit -to- USD conversion ratio? Bonus points if you google what is jiao for me.

  • by Anonymous Coward

    But they need to tweak it. Customers buy the umbrellas on the street using their credit card. Then they can return the umbrellas to some depot (possibly unstaffed?) and get most of the charge refunded.

  • by elrous0 ( 869638 ) on Monday July 10, 2017 @10:53AM (#54778381)

    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.

    Yeah, apparently the customers agreed.

  • by Anonymous Coward

    ...share only things which are too big to steal effectively.

  • At least they didn't name themselves Umbrella Corps.

    • Hopefully their umbrella policy from Traveller's Insurance will cover their losses.
    • It would have been a lot more interesting had they called themselves the Umbrella Movement, especially if they would be selling yellow umbrellas (honestly I'm not sure if it's nowadays OK again to walk around the mainland with a yellow umbrella).

  • by Opportunist ( 166417 ) on Monday July 10, 2017 @11:37AM (#54778745)

    I mean, umbrellas are one of those things where EVERYONE in a certain area needs one or NOBODY needs one. It's not like bikes where I want to go now and you want to go later.

    Or, in other words, it's a bit like those time-sharing deals where, oddly, everyone wanted the house during the Summer months and nobody took care of it in Winter.

    • by Anonymous Coward

      Whoever figures out how to position a cottage in walking distance of a beach and a ski-slope will make crazy money though.

  • Math failure! (Score:5, Insightful)

    by cyn1c77 ( 928549 ) on Monday July 10, 2017 @01:10PM (#54779459)

    All you need to know are two clauses from the article:

    1. "Customers ... pay a 19 yuan deposit fee for an umbrella"

    2. "Each lost umbrella costs the company 60 yuan to replace"

    I think we can safely conclude that the business owner had a good idea, but needed to take just one more economics course.

    • by green1 ( 322787 )

      Exactly this. People keep talking about how it was a horrible business idea, but it doesn't sound like that to me.

      It sounds like it was a good idea, but that they didn't get the pricing model right. Now there may be cases where umbrellas are damaged or stolen that you don't have control over, but most of the time the person who stole the umbrella is the person who you rented it to. In those cases it should be easy enough to make your money back, you just need to price it right. If you're charging a deposit

  • Sounds like they just "pivoted" from the Umbrella rental business to the umbrella selling business. They got deposits.
  • Most bike sharing programs or companies in Europe or the US are publicly funded or publicly subsidized. I'm not aware of any that have made a substantial profit. In China, they have attracted lots of investments, but the financials are at best unclear. So, care to give examples of "successful bike sharing startups"?

    • I knew I guy in High School who made a few bucks 'sharing' other people's bikes/car radios. But after his 'state sponsored vacation' the hourly was terrible.

    • From TFA:

      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.

      • From TFA:

        "With bike-sharing companies like Mobike becoming incredibly successful"

        But they don't seem to be making any profit right now.

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