The founder and CEO of the Ofo Dai Wei said that the main source of revenue for Ofo will be the user’s riding costs at the 2017 summer Davos Forum site held on June 28th. (Chinese source)
“We now see many people in the street using Ofo, and we are confident that we can make money,” Dai Wei says. The main source of revenue is the user’s riding costs and other profit models are icing on the cake. He predicts that Ofo will reach breakeven this year and will be profitable in 2018.
Just the day before the summer Davos Forum, photo of Dai Wei and Mobike’s co-founder and president Hu Weiwei spread out in the social platforms quickly, causing rumors that “the two sides are about to merge.”
“I think there is no basis for the merger, do not need to merge, the industry is not about dominating a market, rather co-exist in the market together.” Dai Wei says. He believes that for the new businesses, it will be a better strategy for them to focus on localizing their operations.
The purpose of the deposit is to establish your own credit system
When Ofo announced that all the Ofo bikes will change to smart locks, they also said that the new registered user deposit will be increased from the previous 99 RMB to 199 RMB.
Through Sesame credit (芝麻信用), a social credit scoring system developed by Ant Financial, Ofo provided deposit service for some cities, such as Shanghai, Guangzhou and Hangzhou. By upgrading to the smart lock and the increasing the deposit at the same time, Ofo made sure that they build trust and give an image that they are financially healthy.
“In the business model of Ofo, the deposit didn’t have any meaning. In the long-term, the deposit will be entirely free.” Dai Wei said. Raising the deposit is mainly to deal with the bad credit users, to prevent and reduce their damage to the Ofo bikes.
Dai Wei said that the deposit of a 199 RMB for a user can later be transferred into 99 RMB if the user’s long-term credit is high. If their credit is good enough, they can even cancel the deposit through the Sesame credit.
“Ofo want different credit-level users to correspond to different deposits to build a more scientific and intelligent credit system.” Dai Wei says. “In the future, for those who had a low credit rating, Ofo will plan for a 299 RMB deposit.”
Third or four-tier cities will drive the rapid growth of shared bicycles
Ofo was born on campus, and a year later Ofo began to expand into the cities like Beijing, Shanghai, Guangzhou and other first-tier cities. Ofo now covers 150 cities in China, and Dai Wei said that Ofo will basically cover all the third tier cities from the end of 2017 to the beginning of 2018; then Ofo will cover the city above the county level by June 2018, .
“There are 4-5 times space we can grow in the next 12 months. First-tier cities tend to saturate, and are only a few numbers of cities.” While the third or fourth-tier city based has bigger number of cities, the future of this market is see explosive growth, Da Wei says.
The focus of overseas markets this year is mainly in Southeast Asia and Western Europe
At present, Ofo operates in four countries: United States, the United Kingdom, Singapore and Kazakhstan and has offices in more than 20 countries, with more than 50 full-time employees, responsible for local team formation, management and maintenance of local supply chains.
The reason why overseas markets are relatively difficult to expand is because the sharing of bicycles need to go through the local government’s permit, and the bicycle product specifications are not exactly the same for each country. For example, in the UK, safety lights need to be installed to bicycles.
Ofo will focus on its entry to Western Europe and Southeast Asia in the second half of 2017. At present, Ofo is in communication with many countries to carry out business permits, including: Major European countries like Germany, France, the Netherlands and Spain, Southeast Asian countries like Malaysia, Indonesia, Thailand and Myanmar.