/Are local regulations the next big challenge for umbrella rental startups?

Are local regulations the next big challenge for umbrella rental startups?

Over the past couple of months, umbrella rentals have become the latest sharing economy fad to hit China with three umbrella sharing startups pocketing funds of several million RMB (around USD 1 million). However, local regulations may be the next major hurdle that these sharing economy players have to deal with.

Last week in Hangzhou, local officers confiscated tens of thousands of umbrellas from umbrella rental startup Esan, just a day after the startup placed these umbrellas throughout public spaces in subway stations, train stations and shopping malls. The umbrellas were initially hung on street fences, but the city’s management unit took actions to take them down under the “city’s appearance and sanitation” regulation, local media reported.

Zhao Shuping, Esan’s founder and CEO, told local press that the company is indeed facing issues over placement methods and will be trying to put these “shared umbrellas” into buckets instead.

An Esan umbrella. Screenshot from 4ygx.com.
An Esan umbrella. Screenshot from 4ygx.com.

Founded in 2017 in Shenzhen, Esan in May secured RMB 10 million (USD 1.5 million) for its angel round. Its app functions just like a bike-rental app, showing locations of nearby umbrellas. By scanning the QR codes on the umbrellas’ handles to unlock them, users can rent an umbrella at a rate of RMB 0.50 per half-hour use in addition to a RMB 19 (USD 2.70) deposit. The startup also offers users the option of either returning the umbrellas to public locations or bringing them home.

It may be a piece of cake for digital-savvy users to easily navigate the rental process on their phones which is a big plus for these startups, but “educating” the market to get used to the idea of “renting an umbrella” is rather difficult. Umbrellas are pretty affordable and accessible in China. Often times during rainy days, vendors would linger around subway stations or other transportation hubs to sell umbrellas at only RMB 10 or so. Moreover, it rarely rains in northern China such as Beijing. When businesses like these are highly dependent on weather conditions, it can be at risk in terms of demand.

Additionally, it remains unknown how these startups earn profits. Zhao told local media that the company can earn its income through advertisement space on these umbrellas. However, it has yet to announce any relevant figures about this business model.

Now, the problem is that local governments seem to start being concerned on the random placements of the umbrellas in public spaces. But if the companies fail to place their umbrellas for rental in visible public areas, their businesses might see a steep fall.

As local officers enforce regulations, umbrella rental startups have to figure out something soon. Not only to just tackle placement issues, but to also secure more users for a profitable business.

(Top photo from pixabay)

Timmy contributes at AllChinaTech. He's passionate about photography, education, food and all things tech. He holds a master's degree from Columbia University Graduate School of Journalism.