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Bicycle rental company ofo reportedly scaling back in India

Beijing-based bicycle rental start-up ‘ofo’, which announced the launch its services in India in February, is reportedly scaling back its operations in India.

According to this report on TechNode, ofo has laid of resources concerned with operations in India, owing to a cash crunch. The company entered in India early this year starting with Pune, Coimbatore, Indore and then expanded to more cities like Ahmedabad, Bangalore, Delhi, and Chennai. It has reportedly shut down its operations in all cities except Pune. In a statement shared with MediaNama, Ofo’s spokesperson said that

 Our rapid expansion last year gave us the opportunity to better understand the international business. Our focus now is on our priority markets and moving towards profitability. We are communicating with our local markets about our plans to move forward.

The company did not answer our question on whether they are shutting the shop in India, neither did it provide any further details. Started in 2014, ofo claims to have the operations in 250 cities across 21 countries including India and claims to have 200 million users globally.

The company, which raised $866 million from Alibaba Group & others in March is reportedly going through a major cash crunch and hence laying off and scaling back operations in other countries as well. There are reports that it has shut shop in Australia, Chicago,  Israel as well as in other Middle Eastern countries.

Why?

As we earlier pointed out, that despite the fact that bicycle sharing was a million-dollar business in China, and recently started following the same boom in India with the launch of‘ Ola PedalYuluZoomcar’s PEDL etc,  these companies should be watchful for some of the following issues:
Lack of civic sense: People were parking the bikes anywhere. (Because most of the new-age bicycle sharing companies work via an app, and users simply locate the bike via app, unlock it with QR code or something, pay via wallet etc, and go ahead with the ride, and supposed to park at the destination). Apparently, that does not happen. People were parking cycles anywhere, blocking the way for pedestrians and traffic, and authorities in China found bicycles dumped in rivers, abandoned anywhere on land, hanging in trees, etc. Also, many startups lost their bikes because they didn’t have a GPS tracking device. Via Business Insider.
– Does not make financial sense: According to a story in Fortune, the business of bicycle sharing does not improve with scale as it does in case of cab aggregation or other businesses. Because scale ‘doesn’t create a much lower cost structure per unit,’. For instance, if Ofo gets more customers then it has to buy more bicycles. Also, since rentals are low, these businesses are either unprofitable or have thin margins. And, paying employees, finding abandoned bikes, tackling thefts (Wukong lost 90% of its vehicles to theft), etc comes at a cost.
– Competition, but no difference: The same Fortune story mentions that competitors keep on increasing, but it is very hard to differentiate the service. What different will you offer in a bicycle sharing service?

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