- Bike-sharing service ofo have ceased operations in a number of countries including Malaysia, with official statements referencing their intent to focus on mature markets with more potential for growth.
- An inside source wtih information regarding ofo’s operations approached us to provide some details regarding why the company from China is actually shutting down in so many markets.
Right at this moment, any attempt to use the ofo app in Malaysia will result in zero bikes available as well as an interface that is no longer functional.
While there has been very little noise regarding their closure, a quick glance at their Facebook page will show a curt post warning against the resale of their bikes—an indicator of a business in some state of transition (with a takeover by Didi rumoured), or in this case, closure.
This sequence of events follows the demise of oBike in Singapore just recently, but only this time, ofo’s Malaysian closure joins the shuttering of its business in a number of other markets worldwide, including India, Thailand, Australia, and a large portion of the USA.
Aiming to provide a clearer story of the struggles plaguing ofo as a whole, an anonymous inside source well-versed with the workings of the company shared with us some exclusive inside knowledge of the problems it faced locally and globally.
Do note that our other attempts to contact company representatives have gone unanswered, so we were not able to verify or corroborate the account fully.
More Than Enough Problems
According to the source, the root cause for ofo’s exit from so many markets is a corporate strategy that is without a clear sense of direction in addition to poor communication and non-transparent business practices.
For starters, ofo was recorded as attributing their market exits as a tactic to focus on more mature locales with higher opportunities for growth and profit.
However, this contradicts some of the moves they’ve recently made, with their exit from India coming as one of the more questionable actions they’ve chosen to take.
To underscore the point, the source verbally confirmed reports that ofo received over a million orders over a period of 10 weeks despite only introducing 3,000 bikes to the market.
Exiting from an Indian market with encouraging response is nothing more than puzzling from a company that claims to want to target markets with high growth opportunities.
The source also highlighted various other problems including ofo’s struggles to make payments as one of the most serious issues faced. They said that despite managing to pay employer salaries on time, ofo consistently struggled with payments owed to third party vendors including bike suppliers, logistics partners, printing service providers, and on-ground crew.
It was explained to us that in many of the cases, third party vendors were forced to wait months for payments that ran into five figures and beyond. Any requests for the release of funds were met with long delays caused by bureaucratic practices and multiple levels of approval—all this signalling a serious financial problem within ofo’s overall operations.
To make matters worse, the source also relayed to us reports of ofo engaging in non-transparent business practices, such as jumping from one bicycle manufacturer to the next to avoid having to make prompt payments (in turn, accruing more debt).
The strange handling of their leftover bikes was also brought up; some were being sold in Singapore for SG$50, while bikes in Malaysia were sent straight to the scrapyard to be disposed of, just like what ofo did in Dallas, Texas.
Finally the source also revealed how ofo’s Malaysian staff only managed to find out about the closure of the business from HR managers instead of having the news directly communicated to them by their superiors, leaving many initially uncertain about their livelihoods.
A Hammer Blow For Bike-Sharing
Now while the source declined to give specific details regarding ofo’s financial health, they did reiterate the point that most of ofo’s international difficulties were probably down to a lack of transparent communication, bureaucratic top-down management, and overall questionable handling of the business.
To illustrate this, the source pointed to the conflicting news surrounding ofo’s COO Zhang Yanqi and his tenure with the company, as well as the large number of layoffs that reportedly happened in their headquarters in China.
All of this happening so quickly after oBike’s fiasco in Singapore is quite unfortunate for the bike-sharing market to say the least.
With as much promise as when they arrived in Malaysia just a year ago, ofo have in equal measure befuddled the Malaysian market (as well as other markets) with the strange nature of their exits.
If anything, the case of ofo only goes to show that being backed by a giant like Alibaba means nothing in the context of good governance and long-term sustainability.
- You can read more about our coverage on bike-sharing in this region here.
Feature Image Credit: ofo Malaysia