
Chinese umbrella-sharing startup loses most of its 300,000 umbrellas in 3 months - eplanit
https://www.theverge.com/tldr/2017/7/10/15947590/chinese-umbrella-sharing-startup-lost-300000
======
Havoc
>E Umbrella doesn’t appear to charge users an unreturned umbrella fee so most
users just end up keeping their rentals.

That's hilarious. They basically invented an umbrella shop. A loss making one
by the looks of it.

~~~
tuna-piano
1\. You don't understand the economies of scale.

2\. Umbrellas are just the first step. First it was umbrellas, but next
they'll do water bottles, etc.

3\. Amazon didn't make a profit for the first 10 years, they're just focusing
on growth.

4\. It's recurring revenue, so it's actually worth more than one-time sales.

5\. They're not an umbrella company, they're a tech company.

~~~
chad_oliver
Was that meant to be parody? That's an honest question; I'm not sure whether
you're serious or not.

~~~
tuna-piano
I'm honestly not too sure myself.

Like I mean they all seem like stupid reasons that are used to justify loss-
making companies that have no chance at success. At the same time, for the
right company, they are pretty logical reasons. That said, loss-making
umbrella shop really seems like a better explanation than a "a growth focused
tech company with massive economies of scale, recurring revenue, and huge
potential in a wide variety of other markets."

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yogenpro
Those umbrellas look cheap, and definitely don't worth 19 yuan if bought from
taobao.com, or even less if it's a bulk order [1].

It's possible that they're making a profit even by selling the umbrellas at 19
yuan, not to mention users' personal information they've collected, which
worths at least 5 yuan/entry.

[1] Lowest price of Umbrellas on alibaba.com (wholesale version of taobao.com)
is $1/pc (6.8 yuan/pc):
[http://www.alibaba.com/trade/search?fsb=y&IndexArea=product_...](http://www.alibaba.com/trade/search?fsb=y&IndexArea=product_en&CatId=&SearchText=umbrella)

~~~
dna_polymerase
The article clearly states how much an umbrella costs them. They are losing
money.

~~~
z2
Although, suppose they manage to average 3 rentals before someone decides
they're not parting with it. That would mean they break even. Add in potential
for advertising as another post mentioned, and maybe there's actually some
viability to this crazy half-disposable-item for super expensive rent scheme!

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jimrandomh
> The founder discloses that an umbrella costs the company 60 yuan ($8.82 USD)
> each to replace

Last time I bought an umbrella (in the US), it retailed for $5. It sounds like
the rental aspect is just making the umbrellas unnecessarily expensive to
produce; the true form of this business would get rid of the whole rental
aspect and make vending machines.

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ww520
"charged customers 19 yuan ($2.90 USD) per umbrella deposit and an additional
half yuan ($0.07 USD) per 30 minutes"

"an umbrella costs the company 60 yuan ($8.82 USD) each to replace"

They have just sold 300,000 umbrellas. This is a brilliant
sales/marketing/distribution disguised as sharing. The cost of the umbrella is
for sure lower than 19 yuan. They save money on not having stores and sales
personnel. Distribute the product via sharing and collect the money via the
app. That's why once they have "lost" all the umbrellas, they will do it again
with another batch.

~~~
seanmcdirmid
When it rains, 7-11 always gets out the cheap ass umbrellas that it charges
40-60 kuai for (> $5!), they were definitely into gouging. Compare this to
Japan where you can always get an umbrella for 100 yen.

~~~
jpatokal
Konbini umbrellas in Japan are 300-500 yen. You need to find a 100 yen shop to
get them for that price, although Japan's ruthless demographic, economic and
deflationary spiral is solving this problem through the recent trend of 100
yen konbinis.

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GuiA
Japan has the original umbrella sharing economy. All umbrellas look the same
(black handle, white or transparent top), are very cheap (a few hundred yen =
a few dollars at any convenience store) - as a result, people aren't attached
to theirs. Leave yours at the door when you enter a store or some such, take
one when you leave - it might be yours or not. If it's not raining anymore
when you leave, just leave it there.

It's wonderful - I've had many nights leaving a bar late when it was pouring
and hadn't brought an umbrella with me, and the empty bar had a half dozen
available by the door.

Turns out that it's very rare that you arrive with one, need one when you
leave, and can't find one.

~~~
dpatrick86
So one of the acceptable scenarios is also that you arrive at the bar and it
begins to rain... then you take an umbrella even though you didn't deposit
one? Is that right?

~~~
anigbrowl
Precisely. A proper sharing economy means doing away with the pointless
accounting that dominates an economy based on property rights. What we call
the 'sharing economy' in the US isn't, it's a rental/service economy. The
people who call it a sharing economy are essentially trying to redefine the
word to mean something else. A five-year old could tell the difference, but
many adults seem to have lost the ability.

OK, you're vulnerable to umbrella-horders in this example, but how many people
are going to hoard umbrellas for no good reason? Probably a small number of
people with mental illness issues.

~~~
jpttsn
A six-year old could tell the five-year old they're being naive, and that
adults using buzzwords like "sharing economy" aren't worried about accuracy.

~~~
anigbrowl
That's the problem, isn't it? Deep down, people dislike bullshit* and
tolerating it as a normal mode of discourse is toxic to the health of a
society.

* [http://www.csudh.edu/ccauthen/576f12/frankfurt__harry_-_on_b...](http://www.csudh.edu/ccauthen/576f12/frankfurt__harry_-_on_bullshit.pdf)

~~~
jpttsn
I think that ship has sailed. Society as we know it is built on bullshit.

Evaluating its health by comparing against an imagined non-bullshit-based
society seems unproductive. Why presuppose that this alternative society is
feasible/possible let alone better on the whole?

~~~
anigbrowl
The whole body of contract law stands in contradiction of your assertion. We
also privilege facts and verifiable events in history and science,
notwithstanding the existence of bullshit. I don't share your fatalistic view,
not least because any undertaking whatsoever could theoretically be dismissed
with the more-or-less similar argument of 'well we're all going to die, so
what's the point?'

I agree with you that much of society is based on based on bullshit, but not
that it's pointless to do anything about it. I used to smoke cigarettes but
gave them up because they were making me feel bad. While I have most likely
shorten my life by the time I _did_ spend smoking and won't be able to recover
that lost time, I still cared enough about the quality of life that was
available to not want to shorten it further. Likewise, insofar as bullshit
deems to be destructive of trust and social relations, I'm arguing that we
would be better off with less of it.

~~~
jpttsn
I don't believe society is based on bullshit alone; there's just a lot of
bullshit in the mix.

I suspect a society without bullshit is not as simple as it sounds. Seems we
would have to somehow get by without a lot of things ranging from white lies
to political and religious beliefs.

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BlackjackCF
This headline reads like an Onion article about startups...

~~~
rosser
This morning, a FB friend shared an article about some startup raising a $17mm
round for an app that's supposed to make buying lotto tickets more appealing
to or easy for millennials, or something.

I'm not sure which is Onion-ier, frankly.

~~~
tyingq
It's not legal in many US states to buy lotto tickets with a credit card...has
to be a debit or gift card.

Hmm.

~~~
balls187
Not to dissimilar to credit card companies not supporting Online Gambling.

~~~
rosser
I have a pretty strong hunch that has more to do with fraud prevention than it
does consumer protection.

EDIT: Not to imply either is solely one or the other. Just, on a spectrum with
those motives as the poles, "can't buy lotto tickets" is probably closer to
the "consumer protection" end, and "no online gambling" to the other, purely
as a function of the volumes of money that can be moved that way.

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DustinOfDenver
alternate Headline:

"Chinese start up finds innovative way to sell 300K umbrellas in just 3 Months
- But in Silicon Valley style - does not understand unit economics."

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WheelsAtLarge
I've noticed that a lot of new companies start business with the idea that
people are fundamentally good and will do the right thing. Unfortunately,
there's a subset of people that will always take advantage if there are no
consequences. Here's one more proof. Booie for human nature.

~~~
ninjaroar
I used to think that, but AirBnb's success seems to be a huge counterexample.

There are occasional problems caused by that subset of people taking
advantage, but that hasn't stopped AirBnb's growth.

~~~
esrauch
I'm curious what you would have expected self-serving airbnb users to do that
they apparently are not?

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razzaj
"charged customers 19 yuan ($2.90 USD) per umbrella deposit and an additional
half yuan ($0.07 USD) per 30 minutes"

So customers holding on to their umbrellas are bring charged 3.36$/day? I've
paid that much to buy umbrellas in london on rainy days. How is that not an
incentive to return it? Or are the umbrellas just being stollen from the
rails?

~~~
tomtang0514
I think that's exactly the case. From the picture there seems to be a
mechanical password lock on the umbrellas. I guess how it works is: You can
the QR code -> pay thru app -> received password, input the password on
umbrella -> unlock umbrella. But since it's mechanical lock, I assume the
password doesn't change every time. Then whoever returns the umbrella knows
the password and can just take it away directly. The company can't prove they
steal it.

~~~
Bakary
This is exactly what happened to a lot of ofo bikes. They then scratch off the
serial number and qr code so that no one else can use it.

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honestoHeminway
Umbrella cooperation: The early years. Founders develop a hatred on humanity.

------
droithomme
"charged customers 19 yuan ($2.90 USD) per umbrella deposit and an additional
half yuan ($0.07 USD) per 30 minutes"

That is a lot of money for a working class Chinese person. For some its more
than a day's wages. They might have thought they were buying the umbrella. Or
if not, they might have felt entitled to keep it because of the price. It
could sound like 19 yuan to keep it and 1 yuan an hour to rent. Since they
already spent the 19 yuan it made sense to just keep it for many.

~~~
TMBest
If you're not known enough about China, you should not claim "That is a lot of
money for a working class Chinese person." Actually, 19 yuan is ignorable for
working class Chinese person. You can only buy about 1 hamburger in McDonalds,
or buy 0.5 kilogram pork, or buy a bowl of noodle by using 19 yuan (delicious
noodle costs at least double). China has changed a lot. If you have time, you
can visit Shanghai, Beijing, and many other cities. You'll find they're all
modern and safe cities, and you'll find your claim is totally wrong.

~~~
balls187
You both likely have different definitions of "working class."

~~~
LeifCarrotson
I'm friends with a "working class" translator (4 year Business English degree)
in Shanghai who lives in a 6000 RMB/month apartment and drives a 1-year-old
VW. That's one working class. 15 years ago, though, as a child of subsistence
farmers in rural China, though, she was happy to sweep the town streets with a
bamboo-shoot broom for the princely sum of 10 RMB/hour.

There's a huge level of income disparity between rural and urban Chinese -
even more than SF vs flyover USA.

------
bpicolo
> "Bikes can be parked anywhere, but with an umbrella you need railings or a
> fence to hang it on."

When did bikes stop needing racks?

~~~
Lxr
The share bikes in China have stands and the lock is self contained (goes
through the back wheel).

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nck4222
Do they charge people an additional price if the umbrellas aren't returned
within a specified period of time? Seems like that would solve this problem,
and that's what most (all?) bike-sharing services do.

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erik-g
You'd need, like, electronic locks to randomize the unlock code or something.
Seems like a reasonable way to keep people from stealing. As-is they just gave
everyone an umbrella that only they could unlock!

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snarfy
Walk into any hotel downtown and tell them you lost your black umbrella.

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dna_polymerase
My god how could we live before shareable umbrellas? Really guys? That is just
an awfully bad idea. Someone should have stopped them instead of investing >1
Million in it.

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logicallee
There is a well-known psychological effect that something in one's possession
is valued more highly.[1]

As such, if users can easily keep these umbrellas and do not have moral qualms
about doing so, it could feel like a particularly great loss to return them.

Possible solution:

The umbrellas could have stopped working by having an electronic component
that locks them after, say, 2 days.[2]

Then the user is left with a worthless umbrella but they can return it to
receive the refund of their deposit. So they would do so _as long as the
refund is worth their trip_. (I can only assume that the endowment effect is
not high enough to make them hold onto a locked umbrella they cannot use.)

However someone said that the deposit is just the cost of a hamburger or a
cheap (not good) bowl of noodles, so this might not cover the cost in time and
inconvenience of returning the umbrellas, even if broken: they might instead
throw them out into their household trash if they don't care and have no moral
qualms.

So the two issues are:

\- Endowment effect; the user gets a full umbrella if they steal it and
forfeit their deposit, and they could value the full umbrella more.
Resolution: reduce the value of the umbrellas by breaking them after 2 days in
user's possession.

\- Direct cost of returning them. The deposit can be a sunk cost and in this
case the user might not value their trip to return the umbrella enough to get
the deposit back. Resolution: increase the price of the deposit enough to
cover _most_ people's time.

Note that under this resolution rich people (whose time is worth more) will
still fail to return the umbrellas (instead possibly even throwing them into
household trash): so if 10% of users are rich, then it is important to make
enough money off of all users to subsidize this.

This requires understanding the statistics of consumers.

So there are specific microeconomic reasons this might have occurred, that may
be resolved in a future iteration, but they require sophisticated resolutions
by the company.

[1]
[https://en.wikipedia.org/wiki/Endowment_effect](https://en.wikipedia.org/wiki/Endowment_effect)

[2] possible mechanism: it is not really realistic to keep umbrellas fully
open all the time, so the locking mechanism just has to keep it from opening
after being closed. (For example via a tab that comes up along the central
pole/tube, near the top, so that you cannot open it again after closing it.)

~~~
bllguo
the cost of a locking electronic component aside, having to modify these
generic umbrellas at all is already expensive

~~~
logicallee
If these are $8 to manufacture umbrellas, they're not "generic". That is a
huge manufacturing cost in China.

Plus they already had some sort of locking mechanism, don't they? (See second
picture in the article, which seems to show a combination padlock on the stem
- part you hold - of the umbrella.)

so these are already custom umbrellas. adding electronics may not be as
expensive as you think, especially in China.

~~~
bllguo
Thanks for noting that, you're right. I'm not familiar with how much an
electronic locking part would cost, I assumed it would be nontrivial. But
certainly the labor costs aren't going to be very high if these are already
custom.

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fourstar
Perhaps they should have started in Japan.

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Fjolsvith
Is the founder of this company a relative to the owner of an umbrella
manufacturer?

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coldtea
Hope it doesn't rain soon...

