Chinese umbrella-sharing startup loses most of its 300,000 umbrellas in 3 months | Hacker News Reader

Chinese umbrella-sharing startup loses most of its 300,000 umbrellas in 3 months

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121 pointseplanit93 comments

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>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.

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.

Yes, it's an example of https://en.wikipedia.org/wiki/Poe%27s_law but it is, in fact, a parody. These are all justifications that companies tell their investors.

You say parody, but all I hear is business plan that's going to get $2 million in funding if the right keywords are attached.

What if you had...VR umbrellas?

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

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."

The first one gives it away. It's a rephrasing of "we'll sell at a loss and make it up in volume".

We lose a dollar on every sale, but we'll make it up on quantity!

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

Well given that their tech-y umbrellas seem to cost more than normal ones and aren't returning anyway maybe they should just use normal ones while they're working out the kinks in the business plan. Cost cutting measure so to speak.

--Management consultant

Ah, of course. They're disrupting the sharing economy, starting with umbrellas.

Step 1: distribute umbrellas

Step 2: ?

Step 3: Profit!

Is this satire?

Sharing Waterbottles?! Yikes.

What if there where a app on the market for sharing herpes. They stole my idea!

Not necessary. Though it is quoted "an umbrella costs the company 60 yuan ($8.82 USD) each to replace"

It doesn't mean they are going to replace it. The 60 yuan probably factor in cost like manpower etc rather than just the cost of the umbrella.

So like some of the readers pointed out, it could possibly be a good way to sell umbrellas whilst crying out wolf that they are losing money as a way to prevent copycats

If they raised only $1.5M then it stands to reason that either the umbrellas didn't cost $8.82 or they didn't acquire 300,000 of them.

But look at all the revenue!

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_...

These umbrellas have a lock in the handle and a QR code that presumably gives you the code to the umbrella once scanned.

Which adds to the company's cost, but doesn't add any value to the umbrella's user.

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

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!

If you take their word (and accounting) at face value. In all likelihood they have fleeced both the investors and users.

> 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.

"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.

> despite the losses he plans to add 30 million more available across China by the end of the year

Those 300,000 umbrellas "sold" were just the loss-leading initial 1% of the batch for sale. Having proved the concept of getting his umbrellas into people's homes and gained first-hand experience in the execution, he's now looking for advertising revenue from Chinese corporates. Ads replacing those rainbow colors on the umbrella tops will have better reach than web ads.

30 million walking ad display platforms, renewed at every raining season. Oh Yeah!

It may seem hard to believe but China is much more "late-stage" than the West. Or at least that's what it feels like when living there.

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.

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.

Meanwhile in HK, the seven-eleven charges 80HKD plus...:(

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.

I hate it when people make it sound like it's ok in Japan to knowingly just grab someone else's umbrella. You're right, they're cheap. You're right, they all kinda look the same. And yes, if there's 10 of the exact kind you left behind you may just grab one. But if you just steal someone else's umbrella, you're still an asshole. Yeah there's plenty of those in Japan as well. This is the real reason for why people aren't particularly attached to their umbrellas. Not because they're cheap* and replaceable, but because they know an asshole will come along and steal it at any moment.

* Those 600 yen actually matter to a lot of people

I had bought one of the nicer ¥1500 umbrellas because I'm quite tall and the bigger size gives me more coverage, only to leave from lunch with coworkers and be completely umbrella-less because someone in the group that left before us grabbed my umbrella. That means some jerk showed up without an umbrella and decided to grab whatever was available because it started pouring.

I don't bother buying the nicer ones anymore because they'll just get stolen eventually.

Having never seen the umbrella pot at my local bar go below 5 umbrellas, I'm going to safely disregard your comment that goes against everything my Japanese friends have told me over the past 2 years since I first set foot there ¯\_(ツ)_/¯

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?

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.

> doing away with the pointless accounting that dominates an economy based on property rights

Good luck with that. Owners of property will fight to protect the system that benefits them. Even those who don't own much will, like people regularly paying off a house loan from their wages hoping they can resell at a profit.

Edit: When I saw your comment was downvoted, I upvoted it so it was no longer gray. But by the time I'd typed in this, your comment had been downvoted again. I suspect many HN readers are downvoting comments based on whether they agree with the content rather than whether it fits in with HN etiquette.

The longest-lived advertisements I have seen on a regular basis are the logos printed on my Tyvek shopping bags.

But I don't use umbrellas much (full-brimmed hats FTW), so my umbrella canopies are equally long-lived, but they get fewer impressions.

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.

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...

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?

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.

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.

A seven-year old could tell the six-year old that buzzwords, and words in general for that matter, don't have a fixed definition. The English language is constantly evolving.

"Probably a small number of people with mental illness issues."

A) Most of us have no notion of how many people have mental illness issues.

B) Mental illness issues widely go unreported, so you have know idea how many people have mental health issues.

The comparison you made undermines the legitimacy of your argument.

Thank you for that devastating critique of my one-line conjecture.

Well... it was a completely unrelated comparison. One that was mildly offensive and could not be defended. Your "one-line conjecture" deserves even harsher critique imo

It's the same strategy with micro-usb chargers that I've adopted.

At some point, there are so many of them that every place that is able to charge a phone (e.g. my car, friends houses, relatives, etc.) is saturated with them, so you never go without a charger.

Yes. Most bars and restaurants have a big pile of umbrellas that people have left behind, and have no problem with that scenario. I've had business owners give me umbrellas on the street.

Most bars (in my experience) have a pretty good selection of sunglasses/hats/umbrellas that have been inadvertently left there in the past.

It would seem to be balanced out by the opposite scenario:

>>Leave yours at the door when you enter a store...if it's not raining anymore when you leave, just leave it there.

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

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.

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.

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

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.

Yeah when I first saw the headline an image of a Chinese Erlich Bachman sprang to mind. Although the absurdity of the whole thing is pretty humorous for some reason it made me sad.

dunno why.

It reminded you that Erlich, one of the more amusing and interesting characters from the show, won't be in any future episodes.

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."

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.

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.

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

Yes, it has not stopped them but initially they had the same attitude, that all people are good. After some hosts started to complain that guests were trashing or robbing their place AirBnb started to offer insurance to hosts and deposits from guests.

"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?

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.

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.

The $2.90 is a deposit though right? So it is returned?

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

"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.

That is absolutely not true. The minimum HOURLY wage in the lowest paid city in any province in the country is above 10 RMB / hour.

https://en.wikipedia.org/wiki/Minimum_wage_in_China

How many hours is a standard work week in china?

According to to this source, monthly minimum wage is as low as 1000RMB

https://www.minimum-wage.org/international/china

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.

19 kuai is almost a lunch at a xiaochi.

To a lot of people, however, 19 kuai is still a lot, especially a migrant worker or an old ayi. Also, I wouldn't call Beijing a modern safe city, Shanghai sure, but Beijing is definitely 3rd tier pretending to be 1st.

So, I know nothing much about China, but the story certainly backs this up. The 19 yuan is a deposit. If it really is a day's wages, then that would provide an incredibly strong incentive to return the umbrella and reclaim the deposit.

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

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.

In Shenzhen the hourly minimum wage is 19.5 yuan, I don't think it's less than 10 anywhere else. From what I can tell from pictures, I think the umbrella's they're using would cost 40 yuan or more in store. It seems like the issue is that they're using a similar deposit strategy as the bike-sharing companies ($50 - $100 USD), but failed to make the umbrellas difficult enough to steal.

http://www.china-briefing.com/news/2017/06/05/minimum-wage-i...

http://www.wageindicator.org/main/salary/minimum-wage/china-...

You can rent a bike for 1 RMB. An umbrella should not rent for more than a bike.

> "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?

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

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.

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!

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

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.

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

[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.)

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

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.

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.

At 300 000 units, I'm sure they can have them custom made.

Perhaps they should have started in Japan.

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

Hope it doesn't rain soon...

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