Why Is Shared Power Bank A Bad Idea?

摘要: Recently, it was reported that Jumei’s CEO Chen Ou has invested ¥300 million in the shared power bank ANKER, now holding 60% of the company’s shares. Chen Ou will become the company’s board chair. Chen also revealed in the phone interview that Jumei would pour in another several billions in the upcoming three months to push the establishment of ANKER, the infrastructure production and distribution. JD’s founder and billionaire Wang Jianlin’s son Wang Sicong subsequently commented on this new move: “If shared power bank could take off, I will eat some turd.”

(Chinese Version)

Recently, it was reported that Jumei’s CEO Chen Ou has invested ¥300 million in the shared power bank company ANKER, who now holds 60% of the company’s shares. Chen Ou will later become the company’s board chair. Chen also revealed in a phone interview that Jumei would pour in another several billions in the upcoming three months to push the ANKER's operations, the infrastructure production and distribution. JD’s founder and billionaire Wang Jianlin’s son, Wang Sicong, subsequently commented on this new move: “If shared power bank could take off, I will eat some turd.”

Chen Ou responded to Wang’s comment that he appreciated Wang’s comment, and that not every project could eventually take off as kickstarting a business and making it succeed in the end is very rare. If the shared power bank business failed in the end, it could become a non-profit project, Chen added. “I just hope that your personal opinion will not get in the ways of this project entering Wanda.”

Although netizens are really wishing to see Wang Sicong swallow some turd, it’s very unlikely it would happen since he is betting on shared power bank. Many might think that Wang Sicong is one of those rich brats that only knows to party and make sarcastic and over-the-top comments on news events. But in fact, Wang Sicong does have a business mind and his asset has grown to ¥4 billion after investing in ¥500 million to establish five strong companies that later became listed. It’s unlikely that Wang’s comment on shared power bank is merely random. Perhaps Wang believes shared power bank projects are absurd at nature.

From investors’ perspective, shared power bank business can generate return fast with low attrition rate and cost. This business model of shared power bank needs cooperation, or exclusive agreement, with offline infrastructures like shopping malls and subways etc. to thrive. It’s a fierce competition in which shared power bank providers race to spread out their products in the market, penetrating offline scenarios and acquiring users. Whoever achieves that first will win the fight. However, this logic here is quite superficial.

I have written many articles regarding why shared power bank would not take off, listing out reasons and judgment that are very easy to see if with rationality and common knowledge:

Firstly, all phone users need to recharge their phone, however it doesn’t necessarily make shared power bank a rigid demand. We already have mobile power banks that are light and small to carry around. And phone batteries are getting better. In most use cases, a smartphone can last through the day.

Secondly, it’s not common for users to encounter situations in which their smartphones run out of battery entirely. The rising shared power bank business is targeting such unusual demand.

Additionally, almost every phone user has a power bank. They can always just bring their own power bank with them if they fear their phone will run out of battery. Why go to a mall for shared power banks then? Some investors argue that consumers today don’t even bring a wallet bring them, let alone a power bank. Such belief is not the story at all. Again, shared power bank is not a rigid demand.

What’s more, the phone industry is developing more advanced wireless charging and fast charging technologies, while the batteries are becoming better. It’s only a matter of time that smartphones can last for two days or even a week.

At the end of the day, it’s evident that investors and entrepreneurs in the shared power bank business are betting on the unlikely future where battery and charging technologies won’t make any major progress. In this case, shared power bank business is not a model that can last long, but more of a short-term business that attracts investment.

Some say that the advancement of fast charging technologies will bring about charging stations that allow consumers to plug in and charge for a couple of minutes, then they will be ready to go. This makes charging station a so much better investment field. If consumers are able to reach a charging station in a 500m distance and charge up their phone by 30%, it makes no sense to have shared power banks.

Apart from that, shared power banks and shared bikes are different at nature compared with shared cab platforms like Uber and Didi. What Didi and Uber do is integrate private car resources into an Internet sharing platform, meaning all the cars are shared by the car owners themselves. In this case, Didi has zero marginal cost.

Didi’s operation fits the sharing economy model, which is the core driving force that pushed Didi to form momentum fast after it accumulated scale.

In comparison, shared power bank and shared bike businesses rely heavily on assets. Both businesses need to pour in money to manufacture hardware aside from running an Internet platform. In addition to that, shared power bank providers have to promote their hardware to shopping malls one by one. The cost can climb up as they spread to more shopping malls due to the rise of maintenance cost and risks.

On the other hand, sharing economy models like Didi don’t provide hardware themselves, and therefore they prevent their assets from being overused or even destroyed.

Shared power bank and shared bike providers inevitably face asset loss as their power banks and bikes are shared by the users, and they are powerless to stop people from overusing them. This leads to the cash burn from the maintenance cost.

However, compared with shared power banks, shared bikes are highly usable in many use cases while being large in size which makes them difficult to be stolen and lost. But as for shared power banks, it’s quite the opposite. Consumers just won’t really use them that often and they are not fitted for mass promotion. Like what HiDian’s founder and CEO Liu Wenyuan had said: “shared power banks that come with a station are just like station shared bikes.It’s hard to spread them in the market. And users find it inconvenient to return the power banks to a proper station.”

On the other hand, currently shared power bank business still doesn’t have a clear profit model while the demand is not rigid. Although this business does generate income from advertising and users, it’s still uncertain how shared power bank business can make up the cost and keep the business running and profiting.

Besides the profit model, shared power banks also have safety issues. At present, there are concerns about bad quality power banks that might explode and cause fire hazard. In addition, some worry that power banks would stead their private information or infect their phones with virus. If the shared power bank business goes nationwide, the risk of having safety issue will go up.

In short, shared power bank business is not an actual shared economy model, but rather a hardware rental model that’s highly reliant on assets. This rental model doesn’t build an Internet platform and encourage people to share their resources for profits, but rolls out hardware that not many people will frequently use. It doesn’t utilize the existing power bank resources in the hands of users, but rather manufacture its own power banks, wasting money and production power. This will naturally result in the growing cost and eventually possible cash plunge.

It’s interesting that Mobike’s founder had once stated that "if Mobike failed, it could turn into a non-profit project", a statement which has now ready become a popular phrase in the hardware rental sector. Chen Ou and Laidian’s founder Yuan Bingsong had also expressed the same idea.

In my opinion, every time a hardware rental company faces doubts from the industry, it can always use this as an excuse. “If it failed it could turn into a non-profit project.” Of course, this is a great excuse for future failure.

One of the reasons why shared power bank business is absurd is that the earlier O2O scene had heralded the ending of similar business models. These O2O models were also driven by the capital and had a very different profit model, not following the development pattern of the Internet industry.

These hardware rental businesses pump in speculations into the tech startup scene. Even though they positioned themselves as tech or Internet startups, they paid little attention to technology, but made use of the shared economy concept and provided rental service. They cared little about using new technologies to bring out amazing innovative products. At nature they lured capital with the shared economy concept they invented.

Some investors believe that shared power banks are not that frequently used and have low user retention rate for its low accessibility. But when shared power banks become more common in cities, it would also mean technological advancement would eliminate many of these power banks, or, batteries. So who will be responsible for recycling them and preventing possible pollution? And who should be responsible for the space burden in commercial and public space cost by these power banks?

At core, the shared power bank business is about taking chances. Some investors argue that the demand of power banks comes from the fact that people nowadays need their phone fully charged all the time, which doesn’t really make sense.

It’s undeniable that on some occasions users would need power banks, however, just like what I have mentioned previously, it’s not a rigid demand. When shared power bank providers make their power banks more accessible, the user base will certainly go up. VCs believe the risk here is low because they can always find other investors to take over when the business reaches their expectation. Still, they are not taking the cost, technological advancement, portability, and demand per hardware that might cause serious troubles into consideration .

As early in 2012 when O2O projects were incredibly heated, investors were swarming in this particular sector. But the reality is countless O2O projects had failed and died. When we look back, we can find all kinds of O2O projects as absurd as we can think of.

The most peculiar model might as well be the community fresh produce fridge. Some entrepreneurs launched fridges in residential communities, packed with fresh produce. Users could purchase the fresh produce on a website or app, then pick up the fresh produce in the fridge. Such absurd O2O model is in fact similar to the shared power bank model today. They are both about serving the "lazy" users, setting up stations in a certain area and have users paid for the service. Unfortunately none of these O2O models survived.

Without proper reasoning, most Internet startup projects end up dead in the end. We already have tons of examples from the O2O and P2P era, and now we are still going on the same path waving the flag of shared economy. That’s why this time, we won’t really see Wang Sicong eat turd.

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 [The article is published and edited with authorization from the author @Wang Xinxi, please note source and hyperlink when reproduce.]

 Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.

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