Riders left in a lurch as they line for refund

Ofo, the shared bike service which originally targeted college students, was in the spotlight again recently when hundreds of users lined up at the firm’s headquarters in Beijing, hoping to get their deposit back. But they were told they would all be in the same queue along with those who had forwarded requests online.

Two Shanghai users told Shanghai Daily that they had applied for a refund through its official smartphone application, only to be told there were more than 12 million riders seeking refund ahead of them! Neither of them has been given an update on how long the refund process would take.

Cut-throat competition has left smaller ride-sharing players bankrupt as they have little to offer riders with limited operation network and less-than-satisfactory riding experience. But ofo was one of the country’s two leading players.

Those who have gone bankrupt in the past include Beijing-based No.1 Bicycle and Bluegogo and at least a dozen smaller regional players.

The mishandling of users’ deposits is a myth since the bike rental companies such as ofo and Mobike demanded deposits before the public could use their services.

Court records also reveal that ofo is being sued for labor disputes as well as overdue payments to suppliers.

Signals of ofo’s risky financial status emerged in mid-2018 when it began to charge deposit after it canceled a deposit-free scheme that collaborates with Alipay’s commercial credit service system. In February, it obtained a 1.77 billion yuan (US$257 million) loan by using its bicycles as collateral, according to the National Enterprise Credit Information System.

Its biggest rival Mobike waived deposit for riders in July, three months after it merged with lifestyle services platform Meituan Dianping.

China has been hailed as the country with the most enthusiastic entrepreneurship spirits with tens of thousands of newly established companies providing new services based on the highly developed Internet and mobile payment infrastructure. Some argue that ofo’s failure would be a major blow for entrepreneurs who are working on innovative technologies and services. Some have even called for more users to put deposit back into the ofo business to keep the company running.

Some praised ofo’s founding team’s unbending spirit in the current situation. But what they failed to see is that ofo had transferred the deposits for other purposes, and deposits belong to customers and should not be withdrawn without prior notice to users.

The abuse of deposits

The 199-yuan at most deposit for a rider might not seem like a huge loss compared to the falling stock market valuations, but for those who rely on the public rental service for daily commuting, it is unfair for them to have their money in the deposit without the promised services.

Ofo’s credibility is suffering not only because of its failure to live up to customers’ trust but also for its inability to repay suppliers.

Ofo founder and Chief Executive Officer Dai Wei was recently listed by the Beijing Haidian Court as a person who has failed to respond to law enforcement agency’s requests to repay debts to a Hangzhou-headquartered logistics company. He will be banned from making high consumption purchases such as buying business or first class plane tickets or staying at luxury hotels or buying property.

Dai admitted recently in an open letter that he had thought about filing for bankruptcy, but decided that “we have to carry on with our work because riders still rely on our services.” He said that employees will hold their ground and face whatever difficulties might lie ahead. But if the company really wants to hold on to its commitment to its users, the wise move would be to liquidate, or let go of some of its staff so that some customers can get their deposits back.

There has been speculation about the long-term development and outlook of shared bikes. It’s one thing if a startup can’t turn into a long-standing and profit-making business, but it’s another thing to keep the business running at the expense of its customers.

The Ministry of Transport said last week it’s urging the company to expedite the refund process and protect consumers’ lawful rights. Ten million people still use shared bikes daily. But the lack of proper supervisory measures leaves many wondering who is the governing body of innovative business models.