One of the news on the start up market that been effect lot of people in this month will be “OFO go bankrupt”
This news had shock the sharing economy world. OFO consider to be one of the world biggest bike sharing application follow by Mobike with the valuation of the company had reach 2 billion dollar.
In the recent week more than 10 million people had been on the requesting of getting back their deposit that require for the use of bike. This amount can accumulate up to 150 million us dollar (base on the calculation of 99 Yuan per customer).
So what went wrong with OFO business model. Base on my knowledge that i have business model of bike sharing business are base on the use of bike itself and also advertisement.
Base on my calculation each bike cost around 80 usd and on average ofo charge user 50 cent for the use of bike. With the simple mathematic each of the bike require only 160 hours to be use before can recover it cost.
160 hours sound not to be a big number for the bike it self ( with the fix cost of application remain the same). But due to rapid expansion plane oversea this lead to the company need to have local operation and manpower. And due to the company unable to create the economy of scale for the location operation lead to loss of most of the city.
Add to that that the company can utilise the bike as the advertising tool such as on the bike ads, with can create certain of revenue.
Add to that most market now require government are impose the law and the regulation to control the number of bike sharing in the city / zone. Government in Singapore require bike sharing company to pay 60 sgd per bike in order to operate in the country.
So what next with OFO.
With the company mostly will go liquidation. The bike that in the market will be mostly confiscated by the local out source operator or the user.