Sharing is big business in China and is forecast to get even bigger.
Loosely defined as the renting out of products and services instead of ownership, the sharing economy started out with the idea of renting out personal cars that sit idle in garages or homes that are empty during long vacations – think Uber and Airbnb – but has since evolved into businesses providing to consumers who are content to pay for what they use.
In China, one in two of the country’s technology unicorns – private companies valued at more than US$1 billion – are in the sharing industry, according to a report by the State Information Center. The biggest of these 31 sharing unicorns, Didi Chuxing, defeated Uber Technologies in a fierce ride-hailing war and is now the most valuable start-up in the world. Other sharing unicorns include bicycle-sharing firms Ofo and Mobike.
“The sharing business model essentially enhances the resource utilisation by providing an alternative to ownership,” said Xue Yu, analyst at research firm IDC. “Since the business model can be achieved by technology, investors in China acknowledged this way of doing business, which renders these sharing startups high valuations.”
Competition is about to get even stiffer, with more mergers and acquisitions seen occurring as smaller plays bow out or get taken over by bigger companies looking to increase their scale, according to the report. About 700 million Chinese, or half of the country’s population, used sharing services last year. That compared with the 26 per cent of US adults, according to a report by eMarketer.
Meituan-Dianping, sometimes described as China’s answer to Groupon and Yelp, took five years to become a US$10 billion start-up, with news aggregator Beijing Bytedance Technology’s Toutiao taking the same time. Didi Chuxing and online wealth management start-up Lufax took just three years to hit the same mark.
As they expand, China’s sharing giants are also treading into each other’s turf. Meituan and Didi each entered the other’s core businesses, hoping to carve out a larger slice of the pie of sharing economy. Meituan rolled out ride-sharing business in seven Chinese cities, while Didi launched an app seeking couriers for its upcoming food-delivery business.