3 Things You Should Know About Chinese O2O
- May 6th, 2015
- in Ecommerce
1. It Covers A Lot of Ground
Tech In Asia hates the term ‘O2O’ – online to offline, because it’s too vague. It refers to online location, promotion, and payment services that enhance the user’s offline experience of a product or service, be that through improved choice, discounts, convenience, or quality.
Maybe ‘O2O’ isn’t a perfect term, but it is the most accurate one we have for what is increasingly the default mode of consumption in China.
2. It’s Appening in China
Because more than 80% of China’s 700m people online access the Internet primarily via mobile devices, apps are driving China’s O2O commerce transformation.
From the business side, O2O enhances engagement with and retainment of Chinese consumers. Walk through any Chinese Mall, and notice the inevitable branded placards with QR codes. Passerby and customers both can scan to join the stores’ loyalty programs: discounts, events, freebies, new product updates, and the like.
Of course, companies ensure that they can also be found on relevant Chinese apps, or create their own apps and promote them to the same purpose.
One such relevant app is Ele Ma (“Are You Hungry?”), listing more than 180,000 restaurants in 200 Chinese cities, with more than 10 million users and over one million daily food orders.
Ele Ma’s tech helps hungry Chinese find nearby restaurants. Its ratings and reviews help them select. It’s promotional services help Chinese restaurants (including chains like KFC), attract new customers. If it sounds like GrubHub, or other growing food ordering apps in the West, that’s because it is, only with the vast scale and advanced integration that defines the China app ecosystem.
Then there’s Gen Shui Xue (“Study With Whom?”), which helps students find tutors. Barely a year old, the app already has 70,000 registered teachers in major Chinese cities, for all ages and subjects, and has already raised $50m in Series A funding, a sign that tech which helps solve China’s problems moves fastest.
Those two examples also show that, right now, O2O is primarily about networking and enhancing local services, be they healthcare or nail salons. But Chinese O2O is already showing potential for more international functionality.
3.It Can Definitely Drive Your Western Brand in China
One could argue that O2O covers traditional ecommerce. “Chinese consumers go online and search Tmall for a product, read the ratings and reviews, pick a store with delivery close by, or with a discount. The product is delivered offline.”
The difference lies in two factors:
1.The potential for innovation & integration that huge sites such as Alibaba can’t keep up with
2.The focus of a good O2O-enabled platform, which drives customer adoption.
Alibaba can’t match the latter, either, although it is acquiring new business categories at an astonishing rate.
Consider O2O’s potential to judo flip the brick and mortar nightmare of ‘showrooming’, wherein shoppers go to the physical store, find products they like, then go online to find them at a cheaper price.
The phenomenon of showrooming is especially egregious to brands renting premium space in first tier Chinese cities, where traffic is usually confined to food courts , and where rents can broach $400/sqm per month.
For an established, iconic brand with online options galore, such as Nike, the situation is grim. But for a quality western brand less known in China, there is an opportunity: rent small boutique spaces (perhaps in tandem with other aligned brands), display product samples rather than carry massive inventory, and let visitors fulfill online.
“The Chinese want instant delivery! The Chinese won’t pay more unless it’s a brand that gives them face!” Pshaw. The Chinese consumer is a global consumer, demanding a range of western products that domestic supply, both on and offline, simply can’t keep up with, in terms of variety and quality.
Chinese O2O is about solving consumption problems. If your company fulfills an under-supplied demand, you’re solving a problem. An O2O platform that networks lesser-known western products/services with focused consumers also solves a problem.
Two tips for moving forward with O2O:
– Get programmatic data that reveals the China market for your product: competitors, price points, consumer profiles. Good data-driven partners can get granular, all the way down to projected CPA (cost per acquisition) and revenues vs. marketing budget.
– O2O is about scale, selection, and alignment. Align with similar brands (Brand USA, Organic Fruit Growers, Atlantic Colleges, etc) to present a unified O2O offering that Chinese consumers will appreciate for delivering on those three requisites.
– Familiarize yourself with WeChat, the default Chinese O2O platform.