ofo: the Rise and (final?) Fall
20 December, 2018
It is in the air for months, and every piece of news is confirming that ofo is in really bad situation, and maybe close to bankrupt. You see, even the website is dead… Let’s try to figure out what led to the current situation.
ofo was funded in 2014, and expanded at very high speed from its first launch in Beijing in 2015. In 2016, it entered in hundreds of Chinese cities, before starting its international expansion in 2017 with Singapore, UK, USA or Australia to cite a few.
But the company was clearly relying on funding, and never had enough cash to burn. More than US$2B (ofo raised a total of US$2.2B) vanished in a couple of years due to the fight for market they entered against Mobike, with uncontrolled expansion speed and a crazy pricing war. It was something like that:
The financial management of the firm lit a couple of fires in different corners of their headquarters. While struggling to pay their suppliers (it has been sued by Shanghai Phoenix Bicycles for US$10M unpaid bills), they have certainly choose to use their user deposit to keep the company afloat…. Creating a new scandal, with millions of Chinese users waiting to get their deposit back.
An interesting interview of a former ofo City Manager (must read!) is giving interesting clues on how the local branches were creating. To be short, there was no uniform strategy, as each City Manager was more or less operating his own way! With no top-down management, it did not take long before reprehensible behaviours emerge: suppliers intimidation, destroying competitors’ bicycles, exploitation of the loose policy regarding bills of expenses, buying of new bikes instead of maintaining the existing…
The cash burning strategy created a vicious circle. It led ofo to cut down on the local staff (from 50 to… 1 for a third tier city, according to the testimony). Which led to bad or no maintenance or redistribution. Which led to less or no customers. Which led to income loss.
It is therefore no surprise to learn that in China, ofo is stopping services in most third and fourth tier cities. It is pushing thousands of customers directly to ofo’s headquarters in Beijing to ask for their deposit refund, in addition to the +8M virtual queue when users ask for refund online.
On the international market, the situation is bad as well. In june, CEO Dai Wei announced that they were focusing on promising markets, stopping operations in Australia, Austria, Czech Republic, Germany, India and Israel. Twitter accounts for ofo US, Spain, Italy and Japan are all inactive since summer. And just 3 days ago, ofo France confirmed that the operations in Paris are “on pause”, a collateral damage from ofo’s parent company’s situation, as a reliable source confirmed.
Le service #ofo est malheureusement en pause ????
Nous vous tiendrons au courant, entre-temps aidez-nous à repérer d’éventuels vélos abandonnés (envoyez-nous les adresses en DM, merci ????????) https://t.co/89rGBc8LiV
— ofo France (@ofo_fr) 17 décembre 2018
— michal Naka⚡️ (@michalnaka) 14 décembre 2018
Some photos of ofo-branded E-scooters appeared on social network as well, but it seems more likely that the company will have to focus on the Chinese bike-share market to try to reach on healthy and stable condition… or just survive.