Thursday, October 29, 2015

O2O Commerce in China

Online to Offline commerce or O2O is being heralded as the next big thing in China’s e-commerce landscape. In simple words, O2O is about directing online users to physical stores.
 
The term O2O was first coined by Alex Rampell, CEO and founder of TrialPay, in a 2000 TechCrunch article – he wrote: “The key to O2O is that it finds consumers online and brings them into real-world stores. It is a combination of payment model and foot traffic generator for merchants (as well as a ‘discovery’ mechanism for consumers) that creates offline purchases”.
 
O2O has also given rise to businesses like Groupon and LivingSocial. Brick and mortar retailers like Nordstrom and Walmart have also evolved O2O models to help combat the ill-effects of ‘showrooming’ – wherein customers come to the store to just look at the product and then go back home and buy it online, or what is referred to as reverse O2O.
 
As mobile apps and online transactions gain currency, it is fueling the rise of O2O.

O2O helps marketers to close the loop between product ‘discovery’ and the actual transaction. I had read this China Daily article “Fast food gets even faster” (October 2-8, 2015, p 22) that in China alone, in 2Q15, the online-to-offline catering industry transactions hit 8.2 billion yuan, up by 89 percent from last quarter, according to Beijing-based Internet consultancy Analysys International.
 
In case you get the wrong idea that the bulk of this O2O business relates to fast food, the fact is online food ordering accounts only for a small (unspecified) proportion.
 
 
 
 
 
 
 
 
 
 
 
Still, as more people turn to mobile apps and websites for food delivery services, its market volume is expected to hit 40 billion yuan in 2017, iResearch Consulting Group forecasts in one report.
 
It is interesting to read that this surging growth is fueled by a price war led by the Internet companies. Obviously big players like Baidu and Alibaba wield considerable power to win business but lest we forget, these online platforms are offering similar services in terms of partnered restaurants and delivery qualities. Even if companies have deep pockets, there will come a time when they must look for profits.
 
A business is still a business, after all.
 
I have always said this in my Marketing class, winning an increased market share purely through burning cash is not a sustainable strategy.
 
Anyway, Liu Xuwei, an analyst with Analysys International said: “Customers have no loyalty. They just choose platforms that offer the biggest discounts. When subsidies disappear, consumers are also likely to return to the traditional way of eating at brick-and-mortar restaurants”. 
 
Competition is one thing. But businesses have to be profitable. That's the business of business.
 
Last Sunday, Celtic bounce back from their midweek Europa League disappointment to put five past bottom of the table Dundee United in the Scottish Premiership. It was clearly a one-sided contest.
 
And in an EPL match on the same day, Reds striker Christian Benteke headed in against Southampton at Anfield in the seventy-seventh minute but Saints forward Sadio Mane made it 1-1 when he levelled in the eighty-sixth minute.
 
Yesterday, Celtic continued their winning ways when they reached the Scottish League Cup semi-finals with a 2-1 victory yesterday. Leigh Griffiths opened scoring in the seventy-first minute and then quickly created the second for Tom Rogic in the eighty-second minute.
 
And Liverpool’s Jurgen Klopp finally tasted victory at the fourth attempt as his side edged Bournemouth 1-0 in the League Cup fourth round. Thanks to Nathaniel Clyne's maiden Reds goal in the seventeenth minute.
 
The Reds, who have won the League Cup on a record eight occasions, move into the quarter-finals for the second successive season.

No comments: