Chinese umbrella-sharing business faces rainy days after losing most of its umbrellas: Lessons in trust for startups

A Chinese startup has found out the perils of the sharing economy the hard way, after almost all of its 300,000 umbrellas were stolen just weeks after launch.

Sharing E Umbrella launched on April 9 with an investment of $10 million yuan, or close to $AUD 2 million, and rolled out in 11 mainland Chinese cities including Shanghai, Nanjing, Guangzhou and Nanchang in June.

Despite being modeled after popular bike-sharing platforms, its financiers were left in the cold after users simply did not return the umbrellas they had rented through the app, reports news.com.au.

The app allows people to rent umbrellas — which are picked up from stands located at subways and bus stations — for a deposit of 19 yuan ($3.70) and 0.50 yuan (10c) fee for every 30 minutes of use. The issue appears to have been in the lack of fees charged for non-returned umbrellas, meaning many users simply kept the umbrellas, which cost 60 yuan ($11.60) each to manufacture.

According to a report in Chinese news publication ThePaper, company founder Zhao Shuping was inspired by bike-sharing platforms and “thought that everything on the street can now be shared”, reports News Corp.

Brellabox, a similar concept pitched on the US version of Shark Tank last year, was described by investor Kevin O’Leary as “maybe the worst idea I’ve ever heard”.

But with the sharing economy such a common model for all types of products delivery in the startups space, are there lessons here for founders on trusting consumers?

Chris King is the chief executive of Splend, a vehicle supplier for on-demand rideshare and delivery services. He believes the share economy needs to be built on trust and community expectations to prevent theft and damage to goods.

“Making expectations clear and building a community around those expectations and values has worked well,” King says.

“People act the way others do around them, so if they see people in the community or the startup itself committing to those expectations they will too.”

For startups offering goods in the share economy, King has two suggestions for protecting assets: Tracking and ratings.

“I believe that technology is the most important tool startups have to combat theft,”he says.

“At Splend, we use tracking technology so we know exactly where the cars are in case of theft. Ratings are another good way to prevent theft.”

He suggests using two-way rating systems so that both users and facilitators have a sense of accountability and identity.

While the future of Sharing E Umbrella remains cloudy, King forsees a bright future for sharing platforms that expands beyond the usual car and bike offerings.

“I’ve noticed some really great sharing platforms developing in the US around improving share-houses for younger people who can’t afford to rent or buy their own place yet. I see Australia as a big market for these platforms given how expensive property is here,” King says.

“Personally however, I’m a bit drone fan so i’d be interested in a peer to peer drone sharing platform!”

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