App developers rush to grab share of estimated $100b recycling industry

By Zhang Ye Source:Global Times Published: 2016-1-12 18:28:01

China's massive recycling industry has attracted many online-to-offlline recycling start-ups. The emerging businesses aim to help individuals efficiently resell their recyclable materials and boost environmental awareness. But these apps still face numerous obstacles to success, such as the difficulty of getting people to sign up and cooperating with the entrenched traditional recycling industry.

A Taoqbao employee collects recyclables in Beijing's Haidian district on Sunday. Photo: Zhang Ye/GT

Chen Qi, a 28-year-old Beijing resident who never bothered selling empty beverage bottles and used paper boxes, is learning to do so.

The change occurred in December 2015, when Chen installed a mobile application called Taoqbao, an online-to-offline (O2O) recycling service app developed by a Beijing-based Internet start-up with only 60 employees.

"The app enables me to order recycling services via my smartphone any time I need them," Chen told the Global Times on Monday.

In comparison, traditional recycling services are not nearly as convenient or efficient. "I tried a traditional recycling service once in early 2015. I called almost five times before someone finally answered the phone," he said.

The worst thing was that the recycling company's employees refused to come to his door, forcing him to haul his own bottles and boxes downstairs. It took two trips.

Like Chen, many people in China have had bad experiences with traditional recycling services. They are not easy to get a hold of, even though Beijing authorities have publicized the phone numbers of recycling companies designated for each district. The situation shows there is a need for Taoqbao.

There's money in garbage

China's recycling industry has a lot of potential, said Song Bin, Taoqbao's chief operating officer. He pointed to the Ministry of Commerce data that showed China reclaimed 245 million tons of recyclable materials in 2014, up 5 percent year-on-year. The total value of the materials was 644.7 billion yuan ($97.9 billion).

By 2020, the figure is expected to reach more than 300 million tons, the Xinhua News Agency reported in May 2015.

"Collecting renewable materials from supermarkets and office buildings has already started generating profits," Song told the Global Times over the weekend.

There's not as much money in collecting recyclables from individual households, which do not produce as much as stores and offices do, so O2O apps can't bank on making a fortune from them. However, serving households does allow the app developers to build up their user bases.

They can monetized their users by selling services, said Liu Dingding, an IT analyst with the Beijing-based market consultancy Sootoo.

Taoqbao and its peers have diversified their business into other services such as e-commerce. Sooner or later, users will be expected to buy stuff via those apps, because the money they obtain from selling recyclables cannot be withdrawn. It can only be used to pay for value-added services.

Although Chen, who usually sells at most 5 yuan worth of goods on Taoqbao every two weeks, considers this a good way to save up a little money for daily necessities, Liu questioned the business model, which the analyst said takes too long to turn a profit and is not yet mature enough for sustainable development.

Scrambling for a bigger share

Still, more than 100 O2O recycling platforms are scrambling for a bigger market share, the 21st Century Business Herald reported on Thursday.

Before Taoqbao appeared in August 2015, the Shenzhen-listed recycler GEM Co launched an O2O recycling service called Huishouge in July 2015, according to information from the company's website.

Huishouge mainly serves residents in Guangzhou and Shenzhen in South China's Guangdong Province, as well as Wuhan, capital of Central China's Hubei Province. It handles more than 300 tons of recyclable materials per day on average, the Guangzhou-based newspaper said.

Another player Zaishenghuo, run by Anewlives (Beijing) Information Technology Co, reportedly has obtained more than 200,000 users and handles an average of 10,000 recycling orders each day.

An industry insider who required anonymity told the Global Times on Saturday that domestic Internet mammoths - Baidu Inc, Alibaba and Tencent Holdings - will also dip a toe in the domestic recycling industry.

With the Internet giants looming, expansion is the top priority.

"The one that can rapidly cover as many regions as possible may earn itself the best position on the battleground," Song said.

Serving 50,000 users in Beijing and handling an average of 1,000 orders per day, Taoqbao made its resolution for 2016 to expand into a lot more markets, Guangzhou, Wuhan, Xi'an, capital of Northwest China's Shaanxi Province and North China's Tianjin.

The company said it won a 15 million yuan investment in December 2015.

Challenges ahead

O2O recycling apps are worthy of support because they can help enhance the overall service in the industry and raise awareness about environmental protection, Li Jiao, an industry analyst with SCI International, a market research firm based in East China's Shandong Province.

But both Liu and Li warned that investors need to be aware of challenges confronting those apps.

"It is not easy to persuade all consumers to embrace O2O recycling services, which now only appeal to young people," Li told the Global Times on Friday.

Also, even in the eyes of some young people like Xu Ce, apps like Zaishenghuo aren't as competitive as large Internet online shopping platforms that also recycle mobile phones.

The 24-year-old student, who lives in Beijing's Fengtai district, told the Global Times that he would only consider of selling clothing, bottles and paper boxes on apps like Zaishenghuo, but not electronics such as phones.

"I can resell a used Xiaomi Redmi 1S smartphone for about 125 yuan on [China's second-largest online retailer], but I can only get 50 yuan from the Zaishenghuo app," Xu said.

Despite of the potential competition, Taoqbao still intends to get into phone recycling, which Song said can "generate considerable profit."

Other rivals did not concern Taoqbao much. Its biggest concern is the traditional recycling companies.

"The company is still figuring how to get along with traditional recycling staff and is considering the possibility of cooperating with them," Song said.

Analysts said it won't be easy to establish cooperation between the two parties. Liu Zizhen, head of a Beijing recycling company that runs more than 10 traditional recycling stations in Fengtai district, agreed.

He said that it will likely take a lot of effort for Internet companies to integrate with traditional recycling companies because most of the latter's employees are poorly educated.
Newspaper headline: Cash for trash

Posted in: Insight

blog comments powered by Disqus