Sharing economy is not for every culture: Chinese umbrella startup saga 1

Empirical evidence shows that nearly 90% of startups are doomed to fail. However, there is no single reason why startups fail. Some fail due to poor execution, others because the solution is not aligned with the context.

And then there is the cultural challenge, as a recent story shows.


This week we came across a story of a Chinese umbrella-sharing startup loosing most of its initial 300,000 umbrellas. The news first appeared in the website on Thursday and quickly went viral and was picked up by many other news outlets. The key points highlighted in the report:

  • The venture, ‘E Umbrella’ was hoping to tap into the new rental craze in China
  • The founder was inspired by the trends in sharing economy, especially the growth in bike-sharing in China.
  • Umbrellas were offered for a small hourly rate. Members of the public could borrow umbrellas from stands at subway and bus stations for a deposit of 19 yuan and a fee of 0.50 yuan for every 30 minutes.
  • Shortly after launch, many of its 300,000 umbrellas have already gone missing. It costs the company about 60 yuan, or $9, for each umbrella lost.

China has seen an unprecedented growth in bike sharing programs across the country. After seeing success of bike-sharing ventures, a Shenzhen, Guangzhou-based businessman Zhao Shuping thought the time was ripe for a new venture in sharing economy. He was hoping to tap into the growing rental market in the sharing economy, joining global giants like Uber, AirBnb and local startups like e-bikes.

The company was launched in April — with an investment of 10 million yuan — and by the end of last month had been rolled out to 11 cities on China’s mainland, including Shanghai, Nanjing, Guangzhou, and Nanchang, the report said.

Zhao was quoted saying “We were really impressed by the bike-sharing model.”

Even after losing nearly all the 300,000 umbrellas, Zhao remains optimistic. He said he still planned to make 30 million of them available across the country by the end of the year.

While the concept of the sharing economy has been gathering momentum in China, Zhao’s is not the only business venture to take a hit. Last month, a bicycle-loan company had to close after 90% of its bikes were stolen.

Business leaders and academics alike have been fascinated by the success of Uber, AirBnb and others that have been experimenting with services in the “sharing economy.” According to Wikipedia,

“Sharing economy is an umbrella term with a range of meanings, often used to describe economic and social activity involving online transactions. … Also known as shareconomy, collaborative consumption, collaborative economy or peer economy, a common academic definition of the term refers to a hybrid market model (in between owning and gift giving) of peer-to-peer exchange. Such transactions are often facilitated via community-based online services. Uberization is also an alternative name for the phenomenon.”

Some experts are beginning to wonder if the ‘sharing economy’ is overrated. Stories like these are sure to give be quoted by critics for a long time to come.

Bottomline: Entrepreneurs should do homework and market research before starting a new venture. Sharing economy may not be for all communities and all services.

The mainstream media really loved this story and journalists had a field day with creative titles:

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