From China to the World: Rise of Dockless Bike Sharing

Is that a bright-yellow bike you see? Standing fixed in place with no designated bike-dock nearby? Someone’s walking up, taking out their smartphone, typing something in, and…taking the bike! Don’t worry, they aren’t stealing it, just following a trend that’s sweeping a nation. You might think it was some fancy locking mechanism, or a new way to sync your bike with your phone – and, technically, you wouldn’t be wrong. But that’s not what’s disruptive inside of what you just witnessed.

The innovation lies in the China-originated concept of dockless bike-sharing, that allows users to lock, unlock and use bikes via a smartphone app, anywhere in the designated city range. Bikes are standing on their own because the model requires no docking stations, which means riders can pick them up and drop them off wherever is convenient for them. The bright-yellow color is the trademark color of ofo, the first Chinese bike-sharing company to expand outside the borders of China and bring the concept to Europe. But let’s start at the beginning.

Although bike-sharing originated from Europe, it was in China that it met its most rapid growth and innovation. The technology and business model are far more advanced than any of the systems in the West, which mostly include deposits as a means of preventing vandalism and use of bikes that have to be returned to designated docking stations.

Even if the dockless model is a recent innovation, bike-sharing has developed faster in Chinese cities than anywhere else in the world since 2011. The reasons for this are various, the first being difficulties with travel by car in the densely populated cities across China. Bikes are practical, cheap and a less stressful option in comparison to spending hours waiting in massive traffic jams with a car, not to even mention difficulties with parking.

Furthermore, they don’t pollute – as pollution is another big challenge in cities with as many inhabitants as Beijing, Shanghai and Shenzhen. The positive effects using bikes has on the environment has drawn the attention of various government initiatives that provide considerable funding.

The concept exploded in 2017, with its revolutionary scheme providing bicycles that require no docking or charging stations. In order to use them, customers have to download a smartphone app, with which they can find the nearest available bike on GPS, unlock it and pay for it by scanning the QR code on the bike, and lock it again upon leaving the bike anywhere in the city they want to. Usually some deposit is asked from the customer, and the price of using the bike for half an hour can be as low as 15 cents.

The growth of bike sharing companies, according to investors, is even faster than that of online ride-sharing and food delivery platforms in their early days. This is not surprising, considering how increasingly difficult it is becoming to get close to your desired destination in an overpopulated city with any vehicle. Public transportation can be well-deployed, but it never gets you precisely where you want to be like dockless bikes do – plus they can be parked literally anywhere, which is why they are advertised as the last-mile transport solution and are the preferred choice of many citizens.

The dockless concept is a far more efficient means of monetising the whole service than any of the Western models developed so far. Its use of smartphone technology provides an easy way for customers to pay for their ride, and companies to keep track of their bikes. All of this reduces thefts and vandalism, and makes it possible for dockless bike-sharing companies to further evolve as viable, profitable businesses.

As one of the pioneers in this business, ofo is already a multibillion dollar-worth unicorn, and the first company to expand the dockless bike-sharing business from China to Europe. Their app has connected more than 6.5 million shared bicycles since 2015 – more than 2 billion rides have been booked through the ofo application in 2017. Despite the majority of their current business being in China, they plan expansion to over 20 countries by the end of 2017, after their successful, first foray to Cambridge, UK. Competing bike-sharing companies have also begun looking for opportunity to expand internationally – so Mobike, ofo’s largest counterpart, has successfully spread their business to Manchester, UK, releasing 1000 of their bikes on the city’s streets.

Despite its popularity and explosive growth, the concept is not without its issues. Within the borders of China, one of the challenges is how irregularly parked bikes clog the streets. Due to the numerous bike-sharing competitors, cities are full of bikes and since users can leave them anywhere, they will sometimes park them improperly and leave, causing difficulties for pedestrians and the community, instead of relieving them, which is the original purpose of the whole concept. According to Voanews.com, instances of citizen initiatives like ‘bike-hunters’ have been popping up – citizens use their free time to walk around the city, and find and report illegally parked bikes. It has become popular enough to be considered a game and a means of exercise in Chinese cities.

Of course, the government and city authorities have established rules about where it is appropriate to park bikes, as well as fines and confiscation of bikes when those rules are not respected. A solution that has proved to be even more effective is cooperation between governments and newly formed bike-sharing pioneers with the aim of forming the best practices regarding this issue together. Major players like ofo have already developed systems of self-regulating their bike fleet by rewarding users who park the bikes in appropriate zones, thus creating incentives for good behavior.

As for international expansion – going global is never easy. From adapting to local regulation, to understanding and gaining local users, companies like ofo face many challenges. As user authentication and identification is crucial to reducing the number of bike thefts and vandalism, ofo has partnered with Infobip to utilise our extensive and reliable global coverage for 2FA verification and authentication of bike riders around the world, as well as for promotional messaging and critical SMS alerting. Immediate technical support and problem resolution adds value to ofo, its users, and its business model which targets international expansion. On its quest to enable more people around the world to join the Yellow Bike club, ofo is relying on Infobip to provide effective communication channels that work in different cities and countries.

As the business model is built around phones and bikes interaction, reliable and timely communication delivery is a must for both ofo and their users, regardless of the country or city. Bike riders can’t wait for several minutes to get their authentication SMS message when downloading and activating their ofo app. Also, the company can’t afford to have its critical notifications for riders delivered with a delay, or not delivered at all.

Moving forward, it will be interesting to see how bike sharing companies will expand their channel portfolio in an effort to make their service even more convenient and friendly for the end user. Looking into some kind of omnichannel communications solution could be the next step, as companies like ofo will be working towards delivering each of their users the right message, at the right time, via the channel that the user prefers. This is what mobile-centric, on-the-go customers increasingly see as an important element of any modern service they are using.

In a column published by Chinese consultancy iResearch, Wang Yijian, a prominent online commentator, questioned how these startups can build a sustainable business out of 15 cents rides. The production of each ofo bicycle costs up to 600 RMB ($87), plus there have been instances of vandalism and misuse that lead to additional costs. However, there is another angle to this. Besides the obvious transportation benefits in complex urban settings, the smart-bikes aggregate highly valuable user data on city transit dynamics. Evidently this caught the eye of numerous investors, due to the possibility of getting valuable data on customers and their commuting habits.

According to Forbes, companies like the e-commerce giant Alibaba in China are very much interested in the information about millions of tech-savvy customers – information they might eventually monetize. Zhou Wei, founder of China Creation Ventures, points out how dockless bike-sharing services are of a high strategic importance to companies interested in getting data on frequent users.

Simple, quick and easy to use, as well as resolving the problem of having to drop off the bike at the bike station – plus a source of priceless information to gather on consumers, dockless bike-sharing is another example of capitalizing on the smartphone and mobile technologies boom; especially in China and the east, in general.