Hong Kong News

A whole world on a single island
Friday, Jul 17, 2020

No more shared karaoke booths and massage chairs in China as Covid-19 takes the shine off sharing economy

The sharing economy was once seen as an indelible part of China’s future - but Covid-19 has changed that perception. Now that the spread of the novel coronavirus has been contained, the government has been taking steps to revive consumption

Not so long ago, the shared karaoke booths next to the Shenzhen restaurant where Liu Lijuan works were packed at the weekend with young people looking to blow off some steam after working long shifts in China’s southern tech heartland.

By scanning a QR code on the door, the tiny booths allowed groups of friends to enter and sing their favourite songs together for a few hours. But times have changed since the Covid-19 pandemic.

“They’ve been empty most of the time since February,” said Liu, a 28-year-old cashier at a restaurant near Shenzhen North Railway Station. “I wouldn’t use them either. The mic, the screen, the chairs – who knows who has touched them before, no one wants to touch anything that could possibly infect them.”

The sharing economy was once seen as an indelible part of China’s future. For many of the younger generation, owning a house, a car or even a bike was not seen as a prerequisite for everyday life – why buy when you can rent? And as such, many turned to the likes of home-sharing platform Airbnb, ride-hailing giant Didi Chuxing and bike rental firm Mobike.

In 2019 China’s sharing economy was estimated to be worth 3.28 trillion yuan (US$460 billion) with around 800 million users and employees and 78 million service providers involved, according to China’s 2020 Sharing Economy Development Report published by the National Information Center in March.

Buoyed by the success of these car- and bike-sharing companies and fueled with investor cash, Chinese startups even deployed phone chargers, massage chairs and make-up booths in restaurants, malls, and subway stations for people to share, to catch the “sharing economy” wave.

Now abandoned bikes are strewn across the streets, the leather-covered massage chairs are empty amid worries over cleanliness and people are ordering more of their daily necessities online and avoiding malls altogether. After weeks of lockdowns and social distancing measures to combat the spread of the virus, many people are asking whether this fabled part of China’s shiny new tech-driven economy will ever recover its former glory.

“The sharing economy requires people and properties to interact, share, and circulate. It integrates online [platforms] and offline [distribution],” said Wang Jianming, a professor at the Zhejiang University of Finance and Economics, who specialises in consumer behaviour.

“But most sharing economy businesses rely heavily on offline consumption scenarios, which have been heavily affected due to the pandemic’s social distancing measures.”

To comply with the lockdown policies of local governments, shared karaoke firm UCM-Bar announced on February 14 that it had suspended operations in all 31 provinces where it operated. By late April, some shared karaoke booths were still unable to resume operations due to local rules and business considerations, UCM-Bar told the South China Morning Post.

Meanwhile, shared phone charger businesses – which rely on local restaurants, train stations, hotels and shops to install their chargers for customers to rent – have been hit hard.

“Our business has a heavy reliance on upper stream merchants and stores. A large number of participating merchants have been unable to resume their business … causing a huge impact on our business,” Tang Yongbo, CEO of shared phone charger firm Xiaodian wrote in an open letter in February.

He added that Xiaodian had experienced a big “battery drain” with reduced revenues and pressure on expenses, increased supply chain costs and rent issues in several cities because of the pandemic.

Larger sharing economy firms have not been spared.

Data from industry research firm QuestMobile in March showed that daily active users (DAU) of ride-sharing giant Didi during the 2020 Lunar New Year holiday amounted to 5.73 million, a decrease of 59.7 per cent compared to 2019.

Data from another agency, Analysys, showed that the daily loss of direct orders in the Chinese car-hailing market a whole exceeded 580 million yuan (US$82 million) during the same holiday.

Airbnb bookings in China in February and March cratered by more than 90 per cent from the same period last year, according to Bloomberg News in March.

Tujia, a Chinese online accommodation-sharing platform, has laid off 800 employees, representing around 40 per cent of its total staff, according to a report by The Beijing News citing information on career community platform Maimai.



Now that the spread of the novel coronavirus has been contained, the government has however been taking steps to revive consumption, such as offering digital vouchers and encouraging online platforms to help the offline economy.

Data from Airbnb shows that bookings increased 200 per cent month-on-month in April in China, and 99 per cent of hosts in China felt positive about engaging in the short-term rental market now that Covid-19 cases have receded.

Didi’s President Jean Liu also said in a CNBC interview in April that ride volume on its platform had returned to 60 to 70 per cent of pre Covid-19 levels, and was five times higher than the lowest level recorded in February – at the peak of the outbreak.
Meanwhile, Chinese bike-sharing firm Hellobike said it has recorded more rides and longer trips around China after lockdowns were lifted.

But some experts have cautioned against reading too much into short-term bounce-back trends, and say that consumer behaviour has changed irrevocably as a result of Covid-19 – and that the sharing economy must adapt.

“After experiencing such a large-scale public health incident, people will remain vigilant about items that have been used by others, which could pose a big challenge to shared economy businesses such as phone banks and bikes,” said Zhang Yi, chief analyst at Beijing-based research firm iiMedia Research.



The problem with sharing now is that someone has literally ‘touched it’ first. Shared rides, houses, and karaoke booths have suddenly turned into hotbeds of potential infection – never mind how much disinfecting is carried out.

“The pandemic has made hygiene a top priority for consumers. They now prefer safe, healthy, responsible consumption. People want the consumption process to be as easy and quick as possible to reduce potential contact, while greatly reducing unnecessary entertainment consumption and shared consumption,” said Wang,

“This is how the pandemic has changed consumer behaviour more profoundly and even permanently.”

Masks, rubber gloves, alcohol spray, and sometimes disposable raincoats are now necessities for many people as they seek to avoid person-to-person contact.

“Before the pandemic, consumers would choose sharing over owning because shared items were convenient and low in cost. But after the pandemic, safety and hygiene are the top concerns for consumers,” said iiMedia’s Zhang Yi.

On March 15, China introduced its first national hygiene and safety standard for the shared bike industry, requiring that in the event of a public health emergency, bike-sharing firms must clean handlebars, baskets, and locks no less than once a day. Didi has also introduced a series of measures, including plastic shields between drivers and passengers.



Shenzhen-based Didi driver Pang Zhonghua pays strict attention to the new rules, checking and recording his body temperature on Didi’s platform before clocking on.

Every day, he is also asked to make a short video of himself disinfecting his car, and has to submit photos to Didi of the gloves and bottles of disinfectant he carries in the boot.

“The sharing economy has been the kinetic energy for China’s economic development in recent years by optimising the use and allocation of idle resources and bringing great convenience to consumers,” said Wang. “But … the pandemic will further accelerate the retirement of some smaller players.”

Truth be told, some elements of China’s sharing economy were already under attack before the pandemic took hold.
Investments in the industry declined 52.1 per cent in 2019 from 2018 due to a cooler venture capital market and greater scrutiny over the sustainability of business models amid a slowing overall economy, according to the 2020 Sharing Economy Development Report.

China’s bike-sharing industry borrowed heavily to fund overproduction of bikes that ended up cluttering up streets, which led to crackdowns by local governments and millions of bikes being tossed away, polluting cities across China with unsightly piles of tangled metal.



The ride-sharing industry was also hit by Didi’s safety problems in 2019 after two female passengers were raped and killed by rogue drivers – resulting in months of safety upgrades and self-reflection by one of China’s biggest tech start-ups.

But the weeks of lockdowns and stay-at-home consumer behaviour brought about by Covid-19 have now ushered in an existential crisis for many sharing-economy companies.

According to China’s Sharing Economy Development Report, the overall growth rate of the sharing economy is expected to decline to between 8 and 10 per cent in the country in 2020, from 11.6 per cent in 2019 and 41.6 per cent in 2018.

“The battle against the pandemic is still ongoing, the overall impact on the economy is yet to show completely,” said Yu Fengxia, deputy director of the Sharing Economy Research Centre under the State Information Centre, a government think tank, in a recent interview with state-owned Xinhua News.

Some companies have already pivoted towards other industries.

Wei Dong, chief executive of ride-hailing service Shouqi, said the company has used its idle cars and drivers for deliveries, working with food delivery platform Meituan and Alibaba’s supermarket chain Freshippo.

Freshippo itself has introduced an “employee sharing plan” to borrow employees made temporarily redundant from jobs in restaurants, hotels, and cinemas as a result of Covid-19 and train them to work as either goods sorters or packagers.

But for some consumers, life will never be the same.

After being a loyal user of bike-sharing brand Mobike for years, 23-year-old graduate Zhai Xiaoyan bought her first bike in March after returning to her home city of Chengdu.

“It was a bit troublesome at first. My friends complained about having to walk with me to where I had parked and locked my bike, accusing me of being old-fashioned,” said Zhai.

“But it’s also safer and a bit nostalgic. I think maybe ownership is not yet a thing of the past.”

Newsletter

Quote of the Day

I am patient with stupidity but not with those who are proud of it.

Edith Sitwell
Related Articles

Hong Kong News
×