Q&A: Ofo's Alan Jiang

Q: How did Ofo go about entering Southeast Asia?

A: Singapore was Ofo’s first international market. The founders flew in to see if the model would work anywhere else, sat in a café by the side of the street, and counted the number of bicycles that went by. There were three over the course of a few hours. However, just over a year after launch, the business has become incredibly successful in Singapore. We’ve also expanded into Malaysia and Thailand, and we are looking at other countries in Southeast Asia as well.

Q: To what extent is there concern about the previous oversupply problems in China?

A: One of the questions we always get asked is: I saw the pictures of the bike graveyards in China, are you doing to do that in my city? And the answer is no. First, we have refined our model, so we understand how many bikes we should be putting into cities. Second, we are working to improve our technology, so we can track bikes more effectively. The first iteration was a mechanical lock bicycle – you scanned the barcode, received a code, and spun the lock to access the bike. Now all our bikes are smart-locked with GPS installed, which means we can track them and understand where they are. There are bike marshals for individual zones in a city who are responsible for getting bikes moved from areas of low demand to high demand and having broken bikes brought back to the warehouse for repairs. It is an operationally intensive business. 

Q: How do you maintain the supply-demand balance?

A: We want to see a return on the capex we put out there. We won’t put more bikes on the streets unless we see the utilization rate is maintaining or improving. For example, we have deployed 80,000 bikes in Singapore and the number of trips per bike per day is increasing, so there is room to add more supply. It’s not like there is a finite pool of demand and we are chopping it up more; we are creating more demand because the service becomes more accessible. Before bike-sharing existed, about 5.5% of journeys in Chinese cities were being made on private bicycles. That percentage has since risen to 11.6%. People aren’t switching from private bikes to shared bikes; they are switching from other modes of transport to shared bikes. In a lot of cities in Southeast Asia, less than 1% of trips are on bikes, but I think it could reach a single-digit percentage.

Q: What level of local competition are you seeing?

A: There are a lot of small players in each market. One of our advantages is that we are a global company. China has some of the biggest bike manufacturers in the world and we have developed those relationships over the last three years. Production at scale means lower cost and better consistency. We have also re-engineered a lot of hardware. We have put bikes on the street, seen which parts break frequently, and our internal team has reengineered them, so our bikes are more durable and cost-efficient. For example, every bike we deploy has solid rubber tires – there is no air in them. These weren’t easy to design because the cushioning on a solid rubber tire feels weird. 

Q: What lessons did you learn about expanding into new markets from your time at Uber?

A: When a US or Chinese tech giant comes into a new market they hire local people. But localization isn’t about understanding the market so much as executing on the strategies the local team thinks are necessary. Any fast-growing company should think carefully about its organizational structure. A second lesson is the importance of working closely and in collaboration with regulators. Every city we are interested in entering, we talk to the relevant authorities beforehand and explain the benefits we think we can bring. Government officials in Southeast Asia are progressive thinkers in this area. They are open to new ideas on solving some of the congestion and pollution that swamps a lot of cities.

Q: If Ofo planning to leverage its existing customer base and enter new verticals?

A: We’ve seen an increasing prevalence of companies, once they have amassed a lot of users, rolling out related services on top. Meituan-Dianping is a perfect example of that – it had food delivery, then it went into ride-sharing, and now it’s in bike-sharing following the acquisition of Mobike. We also see companies in Southeast Asia like Grab and Go-Jek expanding into a lot of different verticals. There is such tremendous growth in the bike space that it is going to be our focus in the short term. It’s hard to predict where we will move in the future because the company is only three years old. One of the reasons I think bike-sharing has taken off so fast is it solves the problem of ownership. When someone rides to work in the morning they are committing to a two-way journey; if they want to go out with friends after work, either they are the only person on a bike or they leave it at the office and they don’t have it the next day. Bike-sharing solves a pain point. We are interested in other pain points that can be solved in terms of not owning something but using it quite frequently.  

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• Topics
• Southeast Asia
• Greater China
• Technology
• China
• TMT
• Transportation
• Ofo