Bike-sharer Ofo has nearly 12 million users waiting for deposit refunds – more than the population of Belgium
- Ofo said this week that people seeking deposit refunds at the company’s headquarters would join the queue of those who had applied online
Around 11.7 million customers of cash-stretched Ofo are currently waiting for deposit refunds according to information on its app as of Thursday morning, which means the Beijing-based bike sharing start-up needs to return at least 1.16 billion yuan (US$168 million) back to users.
Early users of Ofo were asked to pay a 99 yuan deposit, which was later raised to 199 yuan, before they could rent a bike through the service. Users could request a deposit refund anytime via the Ofo app but there was a waiting period of 15 working days for the refund to be received, according to deposit refund instructions.
Ofo did not immediately respond to a request from comment on its current deposit returns figure.
Meanwhile, in a further blow to the cash-strapped start-up, high-profile founder and CEO Dai Wei has been placed on a blacklist of credit defaulters. A Haidian District Court ruled on December 4 that Dai must refrain from incurring excessive business expenses, after a case brought by Hangzhou Huodi, a supplier and creditor. This means, among other things, that Dai is banned from playing golf, flying business class, or staying in luxury hotels.
The ruling underlines the swift fall from grace for one of China’s most prominent start-ups.
Ofo said in a statement on Monday evening that the people seeking deposit refunds at the company’s headquarters would join the queue of those who had applied online. “Due to Ofo’s large user base, it’s possible that the number of applications for deposit refunds will surge drastically,” the company said in the statement.
“My first thought is that now we finally know [roughly] how many monthly active users Ofo has,” said Xue Yu, an analyst at industry research firm IDC, referring to the deposit return figure. “This will add more pressure on the already cash-starved company, meanwhile the large number of people waiting for refunds will hurt Ofo’s brand.”
Ofo’s major Chinese competitors – Meituan-owned Mobike and Ant Financial-backed Hellobike – both announced deposit free services this year.
Ofo was a pioneer in China’s bike sharing market, attracting US$2.2 billion of funding from big-league domestic and overseas investors, including DST Global, Coatue Management, Matrix Partners China and Alibaba Group Holding. Its business model was praised as one of the “Four Great New Inventions in Modern China”, by Chinese state media – the other three being ultra high-speed rail, mobile payments and online shopping.
But recently Ofo has been sued over unpaid bills by its suppliers, signalling the company is running short of cash. Bike makers Shanghai Phoenix Bicycles and Tianjin Flying Pigeon Cycle Manufacturing as well as logistics services providers Best and Deppon Logistics are among the firms that have recently sued Ofo.
In a letter to Ofo’s employees on Wednesday, Dai Wei said he had considered the option of filing for bankruptcy and liquidating the company’s assets to pay creditors back, but when he saw people still riding Ofo bikes he realised “surviving is the only way out”.
Ofo is not the only company facing a steep surge in deposit refund applications. China’s car-sharing start-up Togo has also seen people lining up for refunds outside its Beijing headquarters, Chinese news outlet Global Times reported this week.
Alibaba is the parent company of the South China Morning Post.
