Half a Billion Yuan Flows into a Chinese Shared Powerbank Project, SoftBank Leads
The Chinese sharing economy ecosystem's recent past has seen numerous scandals and failed projects – but shared battery businesses have proven to have agility, so far.
Neither SoftBank nor China's flourishing sharing economy startups have good track records in delivering what they've promised in the way of shared durable goods concepts. Yet, since its inception in 2017, Energy Monster (怪兽充电) has fared well.
Operating with a ‘take-away’ powerbank system, Energy Monster lured venture capitalists, attracting CNY 500 million in its Series C funding round. Numerous investors, including SoftBank Ventures Asia and Hillhouse Capital, became bettors in the battery sharing business after becoming convinced by Energy Monster.
Most startups die, simply because they pour resources into solving problems that are not, in fact, the main problems for the market they address. For shared powerbank startups, the true challenge typically lies beyond the basic idea, in areas of execution and scale — as the technical barriers are low and the idea is simple, the competition is unsurprisingly harsh. We can see the battery startups gearing up for a future scenario where the winner will have taken all.
In the second half of 2019, the lucrative market was dominated by Jiedian (街电) with 40.5% market share, followed by Xiaodian (小电) and Energy Monster with 23.6% and 20.9% respectively, iiMedia reported. There were around 300 million people in China who have used these services, the same consultancy group estimated.
For them, the pain-point is not convincing the end-users to use the service, but to convince small- and medium-sized businesses to deploy the shared powerbanks, as incentives for businesses are limited —the payments involved are so small that firms are indifferent to the machines. The three market leaders mentioned are therefore boasting about their big franchised clients, including McDonald's, Burger King, and KFC. Meituan's foray into the shared powerbank business can be understood from this perspective.
For the end-users, the price ranges between 0.5 to 1 CNY per hour with around CNY 100 readily-refundable deposits, depending on the specific brand, restaurant, and even mobile payment method. Considering the possible implementation of China-specific sophisticated personal credit systems, the pricing might get even complicated soon. The cost side, the most critical aspect, has remained an enigma so far for analysts to evaluate the business further.
Jiedian, the most significant player, has announced that it generated CNY 800 million and achieved operating income of around CNY 38 million in 2019 Sina Finance said. The data is merely firm's claim.
China is particularly feasible for the successful scalability of a shared powerbank business thanks to well-penetrated mobile micropayment systems and its scale. Therefore no North America or Europe originated firm could challenge the penetration rate of the Chinese companies so far. Yet a New York-based company RedShare and India-originated ChargeIn have tried to follow the same path as their Chinese peers, and have not yet failed so far. RedShare has been charging its users with USD 1 for per hour usage.
These batteries are relatively inelastic in price; unsurprising, perhaps, if we consider how vital it is for users to charge their phones, particularly in China. We can expect gradual price adjustments and for profitability to increase in the coming period.