Hellobike- the survivor of China's bike-sharing endgame

A year ago, the outside world was surprised and questioned when Hellobike's CEO Yang Lei said that Hellobike had become the No.1 in bike sharing industry. But a year later, the outside world has acquiesced in the status of the latecomer.

According to official figures: Hellobike has been stationed in more than 360 cities with an average daily order of more than 20 million. Meituan, by contrast, disclosed Mobike's average daily order at 8.4 million times when it went public. After 2018, the  bike sharing industry financed only the Hellobike, billions were raised in September last year, and in July this year, a new round of financing of about $300 million to $400 million came out again.

Hellobike is a typical reverse case. Is it good luck? You can't deny that there's a fortune in it, and when Alibaba and Ofo Inc are in the wrong place, it gets the support of Ant Financial Services Group; when ofo and Mobike are in crisis, it has launched an attack on the market.

But why did this "good luck" happen to Hellobike?

The significance of this case is not only how to reverse the attack, but also to prove whether the business model of the bike sharing is set up, and it also provides a set of operational methodology: when the dividend disappears, all the internet companies need to return to the management of the refined management. The operation methodology of Hellobike is useful for reference, especially for medium-sized companies with a large number of people and requiring strong and offline operation.

First, on the bike sharing model, can it become a business?

Over the past year, Hellobike's management team has been asked a question: "is the business model for bike sharing valid?"

Looking back at the tragedy of the bike sharing industry in 2018, it is not difficult to understand questions about the only survivor: after Mobike sold Meituan, he dragged down Meituan's overall financial results, and ofo was in a state of half-death after his failure to sell.

The answers vary. In 2016 and 2017, with the booming of the industries, the bicycle industry practitioners and investors are willing to use the "months back" to persuade the media and the public.

Zhu Xiaohu calculates that suppose each ofo uses eight times a day, costs 200 yuan per car, rides 0.5 yuan once, and returns two months, after which the revenue of a bike is almost equal to the net profit. He calculates that the campus can reach 2 million yuan a day, with an annual income of more than 300 million yuan and a profit of 30 million to 40 million yuan.

However, this algorithm ignores the operating costs of bicycle out of campus, such as scheduling, maintenance and so on, as well as the depreciation and loss of vehicles.

Mobike, who has been operating in the city, uses another set of algorithms to calculate more clearly:
The cost of a mobike is 1800 yuan, which is calculated by three years of bicycle life and 150 yuan of residual value. mobike's depreciation cost is 550 yuan a year, 1.5 yuan a day, and the daily operation and maintenance cost of a car is 0.6 yuan. In this way, a car can ride twice a day, one yuan at a time can do not lose money. If there are more than two times, the more times you can make is the money you can make.

It doesn't seem to be a problem to make a profit, but can mobike do it twice a day?

It was not until Meituan went public and the IPO disclosed Mobike's business data  which make the outside world know the truth:
"As of April 30, 2018, Mobike had 48.1 million active cyclists and7.1 million active bicycles. In the first four months of 2018, mobike rode 260 million times, earning 0.56 yuan per ride, with a total income of 147 million yuan. The depreciation of bicycles and cars was 396 million yuan, and the operating cost was 258 million yuan."
That is, an active vehicle of Mobike is rode 0.3 times a day, the corresponding operation cost of each riding is nearly 1 yuan, the depreciation is about 1.5 yuan, The total is 2.5 yuan, and the user only takes 0.56 yuan for the service.

These figures are exposed: the number of riding bike sharing is not expected, the cost of operation is high, and the ride is low.

So, can the sharing bike make money? The theory can still make money on the premise that improvement the number of turns of the vehicle (the number of cycles per day) and the riding price, reduction the loss rate of the vehicle and the operation cost.

The reason for Mobike and ofo's huge losses is that under the stimulus of capital, each company is crazy about pursuing scale, neglecting efficiency and income, rather than  the bike sharing model itself.

Hellobike, who had no money to take, was blessed by the pressure to live from the beginning.

According to the official data, its operating cost (maintenance, handling, warehouse, etc.) is 3 cents a day, half of that of its peers; the cost of the vehicle is currently 600 yuan to 800 yuan per vehicle, with an average daily depreciation of about 6 cents according to its three-year service life. In this way, one yuan per car a day can make no loss.

Hellobike, in areas allowed to operate on a trial basis in first-tier cities such as Beijing and Shanghai, the average vehicle turnover rate can reach five to six times (an average of five to six times a day), compared with 97 percent of the country's seven-day activity rate, while Beijing's bike sharing activity was less than 50 percent a month, according to data disclosed by the Beijing Transportation Commission in April.

The outside world is willing to attribute Hellobike's counterattack to finding a blank market in the third or fourth line. When the giants are playing hard in the first and second tier cities, Hellobike quietly tears open a hole and then gains the favor of the giants with the third and fourth tier market.

But why did the first-head player ignore the three-four-line city? Let Hellobike grab the market. The reason is that the three-line city is not a high-output city. Since the population is limited, the order density is small, and the vehicle is easy to damage and lose, the third four-line city is not the ideal place to share a single cycle.

The key for Hellobike to survive in the fierce battle of ofo, mobike is that it can find a refined operational methodology by constantly trying, even in third-and fourth-tier cities, without losing money.

"To see if the bike sharing model is valid, it would return to if this demand exist. This is a real demand, and the user demand is so great. I believe in companies that can't do well, but I don't believe the business doesn't exist. " Hellobike’s CEO Yang Lei said.

In April this year, the price of bike sharing was increased, and the president of the Hellobike, Mr. Li, told the Huxiu that the price adjustment was no effect for the riding volume and the user activity.

"From the perspective of the enterprises, it is difficult for the free or very low-cost biking card to keep the model work healthily, so we'll adjust the cost. Of course, we have to consider from the user's point which offers the final service, and the price is not more expensive than the metro and bus, so the user can accept it.".

Mr Li described bike sharing as "a dry towel squeeze business that requires great efficiency. "The early cost-free investment and operation of the peers made it difficult to support them at a later stage." But when he turned back, he seemed a little afraid. "in the long run, the rules of business must work, but in the short term, it may also be that you respect the laws of business and are burned to death by your opponents. This is cruel. " After all, Yongche is a living case, with the healthiest ride-hailing software dying in the subsidy war.

It is reported that Hellobike's business is already profitable in half the cities and is expected to make an overall profit by the end of this year. Huxiu learned unconfirmed news that after Meituan took over Mobike, he reduced costs and raised prices, and is expected to breakeven in the fourth quarter of this year.

Second, how do you squeeze water in a towel?

Bike sharing is a population business with huge orders, but the passenger bill is very low only about 1 yuan, and also has to bear complex operating costs. The latter is mainly caused by scheduling, maintenance and vehicle loss.

So how to improve operation and management efficiency and squeeze water out of dry towels?

Generally speaking, there are two sets of management systems, one is the management of vehicles, the other is the management of people.

The management of the vehicle is to connect the data of the vehicle through the intelligent lock, and judge the dispatching, maintenance and loss of the vehicle according to big data.

How detailed is this data? Zheng Zeng, Hellobike Beijing manager, uses the background BOS to scan the QR code on the body in the Huilongguan East Street subway station in the Beijing trial operation area. Huxiu saw the specific location of the car, the number of batteries, the name of the operator, SIM card status, solar panel status on his mobile phone, and so on. Behind this information is a data system called Hubble, which records the track of each car, the status of the vehicle, and the heat map of the city, which is beneficial to the improvement of the bike turnover. 

The number of vehicles needs to be moderate, there will be no excessive number of idle vehicles which causes waste of resources and the needs of users can not be met.

Hellobike, according to the cycling data, constantly adjust the amount of delivery. According to previous data, 30: 1 is a more appropriate ratio, that is to say, if there are 30, 000 people in the center of the city, 1000 cars will be thrown, and the turnover rate will be the best. But depending on cycling habits in different regions, as well as changes in weather and climate, the ratio is changing dynamically.

This is also conducive to vehicle scheduling.

To facilitate management, a city can be cut into a number of grids of 2 km by 2 km. According to the population density, an operation and maintenance personnel is responsible for one or more grids.

Huxiu sees from Zheng Zeng's backstage, clicking on a vehicle parking hot spot, backstage will show how many cars in that location, how many cars need to be transferred in or out of how many. The BOS background data is refreshed every 15 minutes, and when the required scheduling value is reached, the operator in charge of this block receives a take-out-like reminder:" Check out your new scheduling task. "
This can also prevent the loss of vehicles.

The key to reduce vehicle loss is positioning. Hellobike has three positioning methods. The location of the most recent sweep action, the GPS positioning of the intelligent lock itself, and the intelligent lock with SIM card. When the bike is out of power or enters an area where there is no signal, the SIM card automatically sends the location to the system before it disconnects.

In the maintenance, Hellobike mainly depends on the user's barrier and system judgment. However, because of the prior user's barrier, the riding cost can be eliminated, so many false obstacles appear. Therefore, the Hubble system, based on the credit of the barrier and the state of the vehicle itself, can remove false barriers, and the accuracy of the current barrier is increased from 50% to about 90%. The system can also initiate a suspected fault work order to the operation and maintenance personnel according to the state of the vehicle, such as the reduction of the electric quantity, the long time no movement in one place, and the like.

The management of people is based on this set of data, after the system determines the scheduling or the maintenance requirements, it is sent to the operation and maintenance personnel in a similar form of delivery order.

Because the maintenance cost of the fault into the warehouse is much higher than that of the on-site maintenance, Hellobike establishes a set of very fine maintenance rules, which divides the maintenance items into more than a dozen categories, such as pedals, chains, seats and so on, which must be repaired on the spot. Only a major failure needs to be pulled back to the warehouse. The operation and maintenance personnel confirm the specific repair items and carry out repairs in the system.

Operation and maintenance personnel are mainly part-time, this kind of task-led, according to the mode of settlement of wages by work order, can put an end to corruption and is easy to manage.

In fact, bike sharing and takeout have similarities. Small profits require a huge ground team. Whether you can squeeze water out of a dry towel depends on whether you can find a balance between cost and efficiency, which tests the management wisdom of managers.

Compared with Hellobike and Meituan takeout, their practices are similar: they have  detailed data collection and detailed operating standards (Hellobike can be meticulous to what kind of damage site repair, what kind of shipment back to the warehouse; Meituan can be meticulous to how to open early meeting), all use piece-by-piece settlement to avoid greed and inertia of human nature.

And these are company's general methods which are suitable for companies with a large number of people and need strong offline operation.

Third, where is the future of bike sharing?

In addition to the fine operation, Mr Li does not deny that they are lucky.

In the middle of the gap between Alibaba and Ofo Inc, Hellobike got the support of Ant Financial Services Group in December 2017, and then Ant Financial Services Group took the lead in several rounds of financing. In March 2018, the credit deposit allowed the number of users and orders of Hellobike to soar, which is an important turning point for Hellobike to become the first in the industry from the third.

At present, Ant Financial Services Group has become the largest institutional shareholder of Hellobike. However, Hellobike said that Ant Financial Services Group do not control, the founding team has decision-making power.

Why is Alibaba giving so much support to a bike sharing startup? Some people say it is for the mobile payment scene. But the mobile payment environment in 2017 is very different from that in Diditaxi, and mobile payment has been popularized. Bike sharing is mainly concentrated in city center which is difficult to bring new users.

Others say it is offline traffic. The whole Internet online dividend is almost exhausted, and the low cost of bike sharing is the killer. But from the data of the Alipay released, Alipay acts as a flow entrance which shares the flow of bicycles.

It may be more persuasive for ecological and defensive reasons. An Alibaba management said in an all-weather technology interview that Alibaba's layout of bike sharing is a "pure ecological approach", the word-of-mouth app only covers the "eat, drink and play" in the "life service" ecosystem, and the last kilometer of bike sharing is an indispensable scene in Alibaba's "life service" ecosystem, which can connect the eat, drink and play together.

Then go back to Hellobike itself.

With the change of the name of "Hellobike" in 2018, and the launch of the ride sharing business, it is widely believed that Hellobike is changing its original position and turning to travel, becoming a comprehensive travel platform.

Mr Li, however, denied the claim to Huxiu "We're no longer a simple single-cycle platform, we're moving to four-wheel, and our core is still two-wheeled." According to what he said the four-wheel business is just an attempt. The purpose of the attempt is to serve two-wheel travel. To be frank, the four-wheel market is more chaotic and dispersed, and we don’t make a promise that we have to achieve in this market.

The reason why we continue to focus on two-wheel is that we don't think it's smaller than the four-wheel travel market.

In addition to bike sharing, hailing and hitchhiking, Hellobike has a battery car (such as a bicycle battery car), a battery car rental, and a battery car power exchange business.

"We gradually find more opportunities in the two-round travel market, such as booster cars, which can be extended from within three kilometers of the bike to 3 to 5 kilometers, and in third and fourth tier cities, this may be the king's travel tool." Mr Li said. It is reported that the Hellobike booster has achieved a nationwide profit.

June 12, Hellobike, Ningde era, Alipay announced the establishment of a joint venture, the initial investment of 1 billion yuan is to do the second-wheel electric vehicle power exchange business. Specifically, in cooperation with the battery car factory, Hellobike output battery standard. In the city site selection to establish power exchange cabinets, centralized placement of batteries, users can scan code to change batteries.

According to Yang Lei, the reason for doing power exchange business is to see its market potential. China has 350 million two-wheeled electric vehicles, with annual sales of 40 million vehicles and an average of nearly 100 million electric vehicles a day. This number is much larger than that of cars.

The deeper reason is, Hellobike wants to build up the "vehicle networking" of the battery car. "The current battery car is not connected, and then we may be in the middle control system of the battery car." Mr Li said.

In all of Hellobike's businesses, bike sharing become a diversion business invisibly because of their higher frequency. So for Hellobike, the ideal business model is that bike sharing can cover their own profits and losses and guide power cars and battery cars. The battery car can make a profit on a large scale, and the Internet of things of the battery car is the imagination of the future.

What valuable about Hellobike is to keep his mind and survive while the industry is burning money desperately. And from the beginning of the practice, it carries out data management, and finally return to rationality in the industry, can quickly catch up.

After several changes, now the bike sharing market is separated: Hellobike first; Mobike, who is backed by Meituan, is in a state of contraction, cutting off many third-tier cities and focusing on the first-tier cities in Guangzhou and Shenzhen in the north. Didi's green orange attacks the city, and the 1,2,3,4 fifth-tier cities spread out at the same time, which has become the biggest rival of Hellobike.

In this new round of competition, Hellobike still uses the input-output ratio as the main basis for business expansion, not following Didi's fierce offensive, and seems a little conservative. And in the competition with Didi, is this still effective? Now wait and see. After all, Didi is not Mobike and Ofo Inc, it has fought hard battles, but also know how to burn money.

Finally, what Yang Lei answered can be the end "is the business model of bike sharing valid?" 
"When we first started, our peers raised all the money that the industry could raise. We couldn't raise money at all. All the investors were asking us, you have so little money, what can you do? When we gradually do it, our peers can't do it, so a lot of people were asking us that they can't do it well with so much money, why can you do it well? This shows that many people do not have the ability to judge independently, they can only judge by the direction of the wind. "

This is an article from Huxiu, translated by Chris Yuan.