Bike-sharing is the hottest sector coming out of China, but the industry is proving different than its car-based cousin

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China’s O2O market has seen quite a few companies doing interesting things, some succeeding, some failing. The latest hot vertical is bike-sharing.

According to the China’s bike sharing industry mini-report by China Channel, Mobike (backed by Tencent and Foxconn) and Ofo (backed by Didi and Xiaomi) are clear market leaders amongst growing competitors. Founded in January 2015, the orange Mobike boasts about 400K Tencent Android app store downloads, mostly in Shanghai. The Beijing-based yellow Ofo bike, on the other hand, lags behind with about 170K Tencent Android app store downloads.

Both companies have their apps, but Ofo lowers friction by linking the app to WeChat without having to download a separate app. The users can either register their mobile phone or log in via WeChat account and unlock bikes on the streets at their convenience.

While many business analysts predict how the two rivals will merge eventually, Jeffrey Towson, consultant and professor at Guanghua Peking University, thinks otherwise. He explains why bike-sharing is nothing like ride-sharing of Didi and Uber. The professor compares the bike-sharing economy to a vending machine business than a ride-sharing one.

“Unlike ride-sharing, bike-sharing does not have a network effect,” he says. “The ride-sharing experience is a two-sided network, in which additional riders increases the networks’ value to the drivers and each new driver increases to value each rider. Through customer rating and recording of wait-time, the service gradually improves as its user population grows.”

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“The problem with bike-sharing, however, is that there is no second population of drivers using the platforms and providing the bikes,” he adds. “The bikes are constantly replenished by companies themselves as opposed to each rider adding any value to the other riders. It seems that bike-sharing isn’t really part of the sharing economy.”

Bike-sharing (or more accurately, bike-rental) is simply a traditional merchant B2C service. It’s the size of the company that helps (seeing Mobike and Ofo’s leads) but does not prevent other competitors from joining the market (i.e. Bluegogo, Unibike, Ubike, WeBike, etc). Ofo and Mobike should thrive as they are in the short-term by providing innovative new service. However, unless they come up with some means to actually share, it’s hard to predict the long-run.

Another question bike-sharing companies face is their compatibility to other modes of transportation. Bike-riding isn’t the only cheapest way to run around the city. The most affordable new bike costs about 200 RMB, less than the cost of the Mobike deposit (299 RMB). The value of bike-sharing limits itself to convenience than replacement of traditional means of transportations.

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Bike-sharing is a welcome change from the usual transportation problems. The business had substantial contributions to the way people commute, reshaping the dynamics of the city. As Chinese urban population grows, there will be demand for more innovative ways to commute. Only those who adapt in the most creative and fastest ways will survive.

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The article Are China’s bike-sharing platforms really part of the sharing economy? first appeared on Technode.

The post Are China’s bike-sharing platforms really part of the sharing economy? appeared first on e27.