Shared charger: Big data the only way to profitability

A small cabinet for shared-charger. Source: WeChat

David is set to attend a conference in the Beijing Hotel in 10 minutes and is still scrambling to find a cabinet to return the shared charger he borrowed two hours ago. The meeting may last for hours, and David is worried that he may not be able to find a shared charger cabinet of the same brand for the rest of the day.

“If a cabinet is not available everywhere for me to borrow and return the charger easily, like the shared bikes, what’s point of using a shared charger?” David asked with a bit of irritation.

After a zealous investment in shared bikes, which could be seen in almost every street in big cities in China, proved to be a great business innovation, venture capital is eying the next target: the shared charger.

Public data showed that since March this year, the three major Chinese shared charger providers, namely Laidian, Jiedian and Xiaodian, have gained a total investment of 1 billion yuan ($147 million), five times the investment shared bike companies got when they first appeared in 2015. With 35 institutions getting involved within 40 days, shared charger is definitely the next eye-catching prospect for investors.

“Charger is less affected by policies, and charging for mobile phones has a rigid demand,” said Cao Lei, director of the China Electronic Commerce Research Center.

Meanwhile, the cost of getting customers is comparatively low, and the cycle for recovering the principal is short, Cao said, adding that as the borrowing fee is usually 1 yuan (US$0.15)/hour, if each charger is borrowed for 4 hours per day, it takes 25 days to recover the production cost of one charger, which is usually less than 100 yuan.

However, many netizens have called the demand for shared chargers false. The first concern is security. There were reports about chargers exploding due to low quality. As a product to be placed in the sharing market with large volume, can the quality and safety be guaranteed?

Information security is another concern. China Central Television has reported cases of chargers being used to read users’ information in their mobile phones. A chip could be easily installed into a charger just with a few simple steps, and the chip can be bought on the Internet for a 100 yuan. Information security specialists said these chips could even be used to install Trojan Horse into a mobile phone. “I will never randomly plug in, you know, I am concerned about virus if (the charger) is not my own,” said a netizen named Luo Lizhong.

Second, although charging has a rigid demand, a shared charger may not be frequently needed. Anyway, it is a small item that is easy to carry. Even if people forget to carry it sometimes, a shared charger cabinet needs to be as easily available as a shared bike for users to borrow and return the charger.

Currently there are three forms of shared charging services being offered by the three major competitors:

Laidian requires a deposit of 100 yuan ($15), and the borrowing cost is 1 yuan/hour. The deposit could be exempt if your Alipay credit reaches 600 marks. But the data wire is not free. You have to purchase each at 10 yuan.

Jiedian requires a deposit of 99 yuan, while the borrowing fee is also 1 yuan/hour. The data wire is provided for free, but sometimes it doesn’t match your phone. Both Laidian and Jiedian use either a big cabinet, which contains 30-40 chargers and is placed in big shopping malls or stations, or a small cabinet, which contains 6-12 chargers and is placed in individual shops.

Xiaodian uses a different mode. Its chargers are attached to a table and cannot be taken away. It is installed in restaurants or bars and no deposit is needed. The fee is also 1 yuan/hour.

Profiting from data

Yuan Bingsong, the chief executive officer of Shenzhen Laidian Technology Co., said his company has nearly 3,000 charger cabinets installed nationwide, and aims to have a total of 200,000 cabinets by the end of this year. Jiedian’s CEO Yuan Yuan said his company has laid out 200,000 chargers, with each one being borrowed at 0.7 time per day on average.

Even if it takes only one or two months for a charger to recover its production cost, how about the promotion cost and the occupancy cost? Shared charger companies would continue to make losses in the near term as they are competing for the market, while the profit model is based on highly frequent usage, said industry participants.

From the shared economy’s point of view, especially the development of shared bike, the deposit and borrowing fee are not enough to support the normal operation of a platform, said Cao. Meanwhile, with the improvement of credit system, deposit exemption is a trend. In the information time, data is becoming a more valuable source. Whether for shared bike or shared charger, the profit model is based on getting user’s data. “Users’ data will be obtained on accumulated customers, and (the target) is to create value through data analysis,” he said.

With tens of millions of times of usage per day, compared with Uber’s 7 million times of usage per day, shared bikes easily obtain users’ data such as their location, their cycling time and cycling frequency. Thus their consumption habits and consumption trend could be analyzed based on these data, and advertisers could reach the target market more efficiently.

That also applies to shared charger service.

Just as Jack Ma, the founder and chairman of Alibaba Group, commented earlier: “Those who gain big data will win the future.”

But, can shared charger companies cultivate a large enough consumer group to use their services frequently before the money-burning model wanes? It is a race with the time.

Currently, some shared charger companies have entered into cooperation with wireless charging technology providers to plan for wireless products, while others are working to improve technologies such as producing chargers that are not detachable, or not allowing data wires to be used for data exchanges to fundamentally prevent information leak.

According to research by Zhidongxi, none of the three main shared-charger companies so far have big scale. Laidian, which has entered Beijing market for a year, is the earliest bird with 100 cabinets in the city, mostly small ones. Jiedian installed its cabinets at 80 merchants, while Xiaodian, although with more cooperating merchants, is yet to form a network.

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