A high percentage of its users decide to keep the umbrella instead of returning it.
Last month, a bicycle loan company had to close after 90 per cent of its bikes were stolen.
While Sharing E Umbrella gave out their umbrellas at train and bus stops, they also deduced the safest place for users to temporarily store their umbrellas would be in their homes.
Following the success of Uber and Airbnb, startups around the world are desperately searching for a place in the booming sharing economy space, but one company in China is having its dreams rained on. Bicycle and auto sharing companies have been a success in most countries but the umbrella idea hasn't been bad either, with thousands of umbrellas being rented since April.
The concept was identical; consumers pay a small deposit and borrow the umbrella from a communal rack later leaving it at another one in the city when they had finished with it.
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E Umbrella had an investment of 10 million yuan (approximately $1.47 million USD) when it launched in April, and charged customers 19 yuan ($2.90 USD) per umbrella deposit and an additional half yuan ($0.07 USD) per 30 minutes.
In theory users would scan a code with their smartphone and receive a code to unlock a combination lock built into the handle.
The company was founded by Zhao Shuping, who the South China Morning Post reports as saying he "thought that everything on the street can now be shared", after being inspired by China's successful bike-sharing model.
Each lost umbrella costs roughly 60 yuan - $9 - to replace.
It's having a problem getting people to return the umbrellas once they're done. The company plans to ship 30 million more umbrellas across the country by the end of the year. But the launch was less than three months ago, so the company is going to have to come up with some ideas to reduce its inventory loss.
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