Behind the ofo deposit being doubled: a tug-of-war over shared bike prices

The competition in the bike-sharing industry seems to be more intense than in any other industry. On June 20, an official from ofo confirmed to reporters that the deposit amount would be increased from 99 yuan to 199 yuan.

"Currently, the situation of bicycles being damaged is quite prominent. The increase in deposit is to strengthen the constraints on users. The company is building a new intelligent credit system. In this system, users' daily bicycle usage habits and credit ratings will become reference factors for the deposit." The above person said.

According to reports, the 199 yuan deposit charged to new users is part of this credit system. Because new users have not accumulated enough credit behavior, they need to use it for a period of time to join the credit system. However, since Alipay's strategic investment in ofo, users in Guangzhou, Shanghai, Hangzhou and other places can be exempted from the deposit with their Sesame Credit scores, and will not be affected.

For a long time, ofo's yellow bikes have been criticized by users for their high damage rate, which has also increased the company's operating and maintenance costs. In the early days of competing for the market, acquiring users at low prices was an important means for ofo and Mobike to differentiate themselves from each other. This move may mean that blindly investing in shared bikes is no longer lethal. In addition, the yellow bikes that forcibly "bombard" the market with low costs and large quantities are facing an upgrade and transformation model.

The Debate on the Pros and Cons of Models

The reporter noticed that old ofo users do not need to pay additional deposits, and the deposit is still 99 yuan. However, once the original deposit is returned, they will need to pay a deposit of 199 yuan the next time they use the small yellow bike. In the state of multiple brands of shared bicycles, this method can be said to be to retain users. After all, high deposits also increase the cost of users switching platforms.

More importantly, the mechanical lock and the low threshold for use make the operating costs of ofo bicycles high. However, changing the form of mechanical bicycles and adding intelligent systems will inevitably increase the company's costs.

What is dramatic is that before the deposit of ofo was raised, the company's investor, Jinshajiang Venture Partners partner Zhu Xiaohu, and Mobike's largest investor, Tencent CEO Ma Huateng, had a debate in WeChat Moments. Ma Huateng believed that "Token (security token) is not smart, it must have two-way communication." Zhu Xiaohu believed that the yellow bikes have already realized smart locks, and the cost-effectiveness is the most important.

"Two-way communication" is the core of bicycles becoming smart terminals. The operator can accurately locate the location of each bicycle, and the user can provide timely feedback to the operator for automatic deduction of fees after locking the bicycle. Behind it is a huge database and artificial intelligence platform.

However, Ofobi gave up this model at the beginning. It uses mechanical locks, and the password for each bike is fixed, so users can easily skip the APP and use the password to ride for free. In the first half of this year, Ofobi began to install electronic locks that are compatible with mechanical locks, and issue passwords in the form of password tokens. However, due to the lack of GPS positioning, Ofobi still finds it difficult to avoid being privately occupied by users, and there are difficulties in operation and maintenance.

An industry insider who declined to be named told the 21st Century Business Herald reporter that ofo's operation and maintenance costs are almost 10 times that of other bikes. Although the cost of the bikes is low, as the number of bikes increases, management is also out of control. "Zhu Xiaohu said that the battle of shared bikes will end in 6 months, which is impossible. It is difficult for ofo to form a closed loop, and most orders cannot be paid. In addition, it lacks data and capital accumulation, which is a defect of the inherent model."

Regarding ofo's decision to increase the deposit, she believes it is the first step in adjusting the model and a choice that must be made.

Industry competition is stalemate

Low cost did make ofo taste the sweetness in the beginning. Transformation means higher costs and challenges in technical capabilities.

Jiang Wei, co-founder and CTO of Hellobike, revealed in an interview with a reporter from 21st Century Business Herald that the cost of a lock accounts for almost 30% of the cost of a bicycle, and it is a very important component. "Generally, there are more than 300 kinds of bicycle parts, and the price of each one is about 2 yuan to 15 yuan."

According to his experience, the bulk purchase price of a lock for a bicycle with a production cost of 1,000 yuan is nearly 300 yuan. This is a huge cost for any company that wants to transform an existing product.

According to iResearch's latest data, ofo has deployed more than 6 million bicycles in 5 countries and more than 120 cities around the world. The cost of the overall transformation of smart locks is at least 3 billion yuan, which is equivalent to its total financing amount. At the beginning of this year, ofo also revealed that the total number of bicycles deployed this year is expected to be 10 million.

From this, it seems that ofo will also conduct new financing. On June 16, Mobike confirmed a $600 million E-round financing led by Tencent, and the financing war between the two parties entered a new stage. For ofo, increasing the deposit can also alleviate the cost pressure to a certain extent.

In fact, the two companies also have contradictions in their disclosure of market share. Recently, ofo announced that DCCI research data showed that ofo's active user share was 39.8%, while Mobike's active user share was 36.4%. Ofo's active user share far exceeded Mobike's, ranking first in the industry. However, Mobike disagreed with this data and repeatedly claimed that it was the market leader.

In the face of fierce competition, ofo has taken the initiative to increase the deposit, which is also a proactive transformation and change. Wang Fuzhong, a professor at the Central University of Finance and Economics, believes that shared bicycles do not make profits by charging for riding, but rely on deposit investment income to make profits. This has become a consensus in the sharing economy field. "Market competition is also a good thing, at least it can make the industry progress faster."

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.