The sharing economy’s troubles have been brought into the limelight again by a protracted patent dispute between two power-bank sharing companies.
Guangzhou's intellectual property court at the end of last year ordered Jiedian, a power bank-sharing company owned by New York-listed online beauty retailer Jumei, to compensate rival Laidian for two patent infringements of its charging devices.
A file of the December 28 verdict seen by FinanceAsia shows the payment was reduced to Rmb30 million ($4.4 million) from an initial Rmb36 million because Jiedian was said to be making a loss, which is interesting given Jumei's interim report in 2018 described it as a profitable business.
Jiedian has yet to reply to FinanceAsia's emailed request for further comment.
According to the verdict, each Jiedian kiosk made about Rmb2.4 in sales per day during the peak season but paid Rmb3.3 a day in rent.
The court added that power-bank sharing businesses were prone to losing money while still at the stage of trying to seize market share, making significant investment necessary.
But that is unlikely to eliminate the nagging doubts over the long-term sustainability of China's power-bank rental startups, given the amount of capital being thrown at the sector, the thin pickings so far, and the problems besetting the bike-sharing sector, where Alibaba-backed Ofo has reportedly considered bankruptcy.
Two venture capital investors told FinanceAsia that the power-bank sharing business model in China remains a viable one but also warned that the market appears a bit saturated.
Another challenge for the sector is the lengthening battery life of mobile handsets, which is making power-bank recharging less urgent for retail customers, they added.
And as the court case shows, there are also questions over ownership of some of the technology being used.
CROWDED
But the phone-battery bank-sharing sector in China looks crowded after a flood of investment in 2017. Back then, it wasn't just bike-sharing that was grabbing the attention of investors; at times it seemed almost anything linked to the sharing economy would attract repeat funding.
That included Laidian and Jiedian, who were both capital-market favourites at the time.
Laidian got $20 million in Series A funding in April 2017. In the same month, Jiedian received over Rmb10 million via a Series A fundraising from IDG Capital and Shenzhen-listed Sunwoda Electronics. It then received a strategic investment worth Rmb300 million in May 2017 from Jumei, which acquired Jiedian three months later.
And they were not the only two power-banking sharing firms to attract investment capital.
Another power-bank sharing company, Energy Monster, raised over Rmb100 million in a Series A fundraising in July 2017 and a further Rmb200 million in a Series B fundraising in November 2017, though nothing since then. It is backed by smartphone maker Xiaomi.
In addition, Xiaodian raised Rmb500 million over three funding rounds in 2017. It too has several big backers including Tencent, Sequoia Capital, CMB International, CDH Fund and GSR Ventures.
And Xiaodian, notably, is the only power-bank sharer to get funding in 2018 when it completed a follow-on Series B fundraising in March that is believed to have brought in at least Rmb300 million.
“It is not an inelastic demand for customers,” one of the venture capital investors said. "And there will be more challenges as some big companies such as Xiaomi have started to sell very cheap power banks."
At some point it may well be that something has to give, as is being seen in the bike-sharing sector -- whether that entails consolidation or a bursting of the wider sharing-economy bubble is unclear. But it could also mean that operators of mobile phone power banks have to figure out other ways of making money.
As the second venture capitalist pointed out, that traffic volume made through people’s borrowing and returning is more valuable than the actual profit on each power bank.
But if no one is able to work out how to profit from that data, it could prove hard for those companies to survive merely by renting power banks.
