China O2O Industry Report 2014 01/13/2015 Industry Overview   O2O, an abbrevia-on for Online To Oﬄine, is now an increasingly popular business model in China that combines the online shopping and the front line transac-ons. The business adop-ng an O2O mode usually provides informa-on, services, booking discount and push the messages to Internet users, who in return will be converted into the customers of the par-cular oﬄine business partners.   The business model is par-cularly suitable to consumer goods and services, such as food and beverage, ﬁtness, movies and beauty salon. An example of O2O would be group buying sites like Groupon; they provide online discounts for real-‐world shopping experiences like restaurants and movie theaters.
  In 2014, O2O has played an important role in closing the loop for the mobile payment war between Alibaba and Tencent. The inclusion of this payment ability makes the scalability of the system really powerful.   Advantages that businesses in China are gaining from adop-ng an O2O marke-ng strategy: More marke-ng opportuni-es and ability to aMract new customers; Measurable marke-ng achievements and transac-ons; Direct communica-on with customers to be able to understand their exact needs; Eﬃcient online booking to help decrease opera-onal costs; Useful marke-ng tools for store expansions and product launches
History and Milestones   Stage 1: 2004 – 2008, B2C Mindset, Workshop Style Online Seller
• Key Word: Internet; In the babyhood of O2O, those who could understand Internet can get advantages in O2O. Low Cost; Rely heavily on consumer, hard to copy.
• Examples: Shanghai Liba, Spontaneous group buying base on BBS; 365 Jiajubao, Local
Lifestyle business circle(no online payment).
  Stage 2: 2008 –2011, start of mobile Internet; O2O model established; Internet Giant stepped into O2O local service; func-ons came ﬁrst; (Group Buying Age, break the border of B2C, start to integrate with tradi-onal industry; easy to copy and lead to “1000 regiments group buying website” in 2009-‐2010.
• Keyword: Resources, merchants and consumers are the key resources; O2O companies
tried to control merchant’s marke-ng and sales channel through O2O.
• Examples: Meituan; Dianping; 99% Group buying website shut down ager 2011;
  Stage 3: 2011–2015, mobile Internet age, personalized marke-ng age, fans economy, WeChat/ Weibo and other SNS age;
• Keyword: Mobile, mobile apps, mobile payment playing key roles in O2O business model
• Examples: Wechat Payment; Didi Dache; Baidu Map; Cloud Helpers, etc; Free Wi-‐Fi enables users to connect Internet through mobile devices anywhere any-me; Mobile Internet let O2O go into daily life of around 700M ne-zens in China; Market ﬂaMer and ﬂaMer.
• China's Wanda, Tencent, Baidu team up to invest in a $814 million O2O company.
  Stage 4: 2015—2020, outlook
• Keyword: Cloud
• Possible Ideas: New marke-ng method come out? Mobile cloud smart technology?
Mobile Ver-cal Community spring out? O2O Business Model/ PlaAorm Structure (P1) O2O Business Model/ PlaAorm Structure (P2) Partnered merchants will be able to precisely target their customers based on the user informa-on on O2O plauorm. On one hand, O2O plauorm transforms user inquires into actual user consump-on of products and services of the partnered merchants. On the other hand, O2O plauorm can be beMer performing by improving its provision of informa-on to users according to the recommenda-on tes-monies given by the partnered merchants.
O2O Business Model/ PlaAorm Structure (P3): Major Players Map Detailed analysis of O2O industry in 2014 (P1) Trends of China O2O categories
Online to Oﬄine
Category
2013 GMV (mn Yuan)
2017 GMV
(mn Yuan)
CAGR
(2013-‐2017)
Catering
66,520
201,700
32%
Ticke-ng
45,200
124,100
29%
Beauty salon
4,030
8,200
19%
Group-‐buying of bou-que or physical commodi-es
3,570
16,200
46%
Detailed analysis of O2O industry in 2014 (P2) •  Using mobile devices to access to O2O plauorm is more favorable amongst the users nowadays in China. Many enterprises and commercial plauorms provide online payment services (payment APP) to facilitate O2O transac-ons among the O2O users in order to aMract more users to engage in accessing through mobile devices. •  Research has shown that the majority of mobile device users access to O2O through 3rd party plauorm, since a 3rd party plauorm exposes the users to a variety of categories by just a single plauorm thus simplifying the procedures.
GMV and PenetraMon of Local Lifestyle O2O Market 2010-‐2017 Number and PenetraMon of Local Lifestyle Service Users 2010-‐2017 BAT Map in O2O Industry BAT Map in O2O Industry
Alibaba
Tencent
Baidu
Map
AutoNavi
SosoMap
BaiduMap
Search
TaoBao, Tmall
SOSO
Baidu
Social networks
Weibo, Laiwang, Wangwang
Wechat, QQ
Group-‐buying
Meituan, Juhuasuan
Gaopeng, QQtuan
Nuomi.com, Baidu tuan
E-‐commerce
Taobao, Tmall
Yixun, PaiPai, Wanda E-‐commerce
Weigou, Wanda E-‐commerce
Lifestyle Informa-on
Taodiandian, Koubei, ddmap, weitao
dianping.com
E-‐hailing
kuaidi Dache
Didi Dache
Travel
Alitrip
Ctrip
Qunar
Payment
Payment tools
Alipay
Wechat payment
Baifubao
Partnered Merchants
Partnered Merchants
Yintai, Meiyijiabianli, etc
Wangfujing, Xinbaigo, Haidilao
Food and Beverages, Hotels based on LBS
Scenarios Involved occasions
Directories
Drawing Consumer Traﬃc Catering, Clothing, Department store, Catering, Clothing, Department store, Convenient store, E-‐hailing, Movies, Movies, E-‐hailing, travel
Travel, Lifestyle services, Supermarket, Vending machine Catering, E-‐hailing, Hotels, Movies
*JD.com intends to integrate online sales with 11,000 physical convenience stores. This allows customers to obtain their purchased products at a physical loca-on (Oﬄine). Selected O2O TransacMon/Deals Summary 2014 Date
Company
Background
# of Ac-ve users
Market value per user
Amount USD
Type
Investors
Baidu, Google Ventures, NEA, Lone Pine Capital
535,000
$31,775.70
2014/12
Uber
Transporta-on App
$600M
Venture Round
2014/9
Nuomi
Group Buying Company
160M
Acquisi-on
Baidu, Renren
3.8M
42.1USD
2015/1
Kuaidi Dache
Global car service app
700M
Series D
Alibaba, Tiger Fund
67.57M
59.2
14.448M
266.67
2014/5
Meituan
Group buying website
300M
Series C
Alibaba, Sequoia Capital, General Atlan-c
2014/4
Lyg
Transporta-on app
250M
Series D
Alibaba,|Fund, GSV Capital
2014/3
ByeCity
O2O services for tourism
20M
Series B
Alibaba, JAFCO Asia, CBC Capital
500000
2014/12
DiDi-‐Dache
Taxi hailing App
700M
Series D
Tencent, GGV Capital, DST Global
100M
2014/9
Woqu.com
Travel website
20M
Series B
Tencent, Morningside
2014/9
1jiajie
Housekeeping service app
4M
Series A
Tencent, Shanda Capital
2014/9
e-‐Home Clean
O2O home cleaning services
4M
Series A
Tencent
2014/7
e-‐Bag
O2O laundry service plauorm
3.226M
Unknown round
Tencent
2014/3
LeJu
Real estate O2O Plauorm
180 M
Pre-‐IPO
Tencent
O2O plauorm shopping mall
2014/12 Wanxie Cloud mall
$19.5M
NA
Bofu Group
Case Study: Dianping, Industry and Category Expansion   Launched in Shanghai in April 2003, dianping.com started with online-‐only business. In 2006, Dianping launched marke-ng services which became its major source of revenue by 2008. In June 2010, Dianding rolled out group-‐buying services and began rapid expansion. In 2014, Dianping entered into deeper strategic partnership with Tencent and ele.me.   At present, the main source of revenue of Dianping comes from marke-ng and group-‐buying services which make fairly equal contribu-on to Dianping’s revenue.
  As of December 2013, merchant base of Dianping exceeded 8 million, covering more than 10 countries and regions world-‐wide and providing 12 categories of services including food, entertainment, shopping, movies, beauty, wedding, paren-ng and more.
  Business Model
Case Study: 55Tuan (WOWO), Shopping Mall + APP + Service Manager   55tuan.com went "live" on 15th March 2010 and is one of China's ﬁrst group deals website like Groupon to turnover a proﬁt. In 2011 July, 55tuan received $200m series A funding from CDH Investments, Zero2IPO Capital, Goldman Sachs, and Sky Blessing Investment.
  55tuan currently serves over 3.6 million registered users, has more than 6 million page views per day and operates in 200 ci-es in China. The website has approximately 150,000 diﬀerent brands to date.
  In recent news, 55tuan.com plans to launch an IPO under the stock code "WOWO" on the NASDAQ, and Boston-‐based Axiom capital management Co will serve as the underwriter for the lis-ng, according to the ﬁling. The group-‐buying site reported net losses of $32.4 million in the ﬁrst nine months of 2014, up 53.6 percent from the same period of the previous year.
  Business Model
Case Study: Small but CreaMve O2O Projects in 2014 Projects
Descrip-on
Ayibang
LBS Family Helper O2O; Besides the role of agent, provide more service like training, management and ra-ngs. Get A Duck
F & B O2O to provide duck related food, launched in 2014/3; valua-on RMB@50M, $6M Angel Funding closed at July; Daily Orders: over 20,000 Love Fresh Bee
Community Fresh Food Delivery service, guarantee 1hr delivery within one hour; integrate community merchants and build plauorm to users, small merchants and supplier.
Aiwujiwu
Launched in 2014/3, team of 1,500 staﬀ, double payment compared with tradi-onal house agent; O2O plauorm for ren-ng and trading house.
Helijia
Nail beauty O2O launched in 2014/4; Valua-on @ RMB 1b by venture capital;
Yangche Diandian
Car service O2O launched in 2014/3; $4M Series A Funding @2014/6; 1 Yuan Car Cleaning service to acquire users; guide users to oﬄine shops through its online APP
E-‐Bag Wash
Mobile O2O Clothes Cleaning; Daily orders: 1,000; Community Crowdsourcing Model
Jike Academy
Launched in 2014/1, O2O Educa-on for IT and the biggest IT online educa-on plauorm; ac-ve user: 120,000
Huliji
Wedding O2O, full chain service for wedding including ver-cal E-‐Commerce
Baojia Zuche
Car ren-ng service launched in 2014/5, P2P based Car ren-ng plauorm; Registered private car over 20,000
Future Trends: Mobility   Along with the rapid expansion of mobile Internet popula-on, service industry is in urgent need of integra-ng online with oﬄine, which provides a favorable context and broad prospects for O2O business.   On the one hand, O2O plauorm helps merchants who oﬀer services to consumers reach mobile users in a convenient and eﬃcient manner. On the other hand, merchants may upgrade to mobile business processes via the plauorm to provide beMer service experience to consumers. Meanwhile, as informa-on technology advances, the cost and threshold to apply technology will be lowered. Therefore, O2O Plauorms empowers merchants with strategies for customer expansion, brand marke-ng, membership management/maintenance and real-‐-me inventory management, improves their cost structure and enhances their proﬁtability.
Future Trends: IntegraMon with TradiMonal Industry (P1) Catering   Ordering foods online and ge‚ng food deliveries are the most common method of O2O. Consumers nowadays are looking for a comprehensive catering experience. Enterprises should provide catering informa-on to their customers at a more personalized basis, for example results should be derived from users preferences.   Users preferences can be collected from the search history, preference of cuisines and dishes and geographic informa-on and etc. The results should be also combined with other users tes-monies and the restaurant itself overall ra-ng therefore giving authen-c informa-on to the customers. Ager customers experiencing the restaurants, the restaurant can get the feedbacks from the customers for further improvements in opera-ng their business. Living   O2O facilitates the provision of informa-on about buying and selling property, ren-ng houses and apartment and home decora-on.   O2O can gather informa-on such as availability of property, average property price of the market and etc. for both buyers and sellers.   In terms of home decora-on, O2O provides informa-on about how other people decorate their home and crea-ve idea of decora-on.
Future Trends: IntegraMon with TradiMonal Industry (P2) Transporta-on/ Travel   Transporta-on Sector: Public Transporta-on, provide detailed and precisely informa-on so that users can beMer arrange their schedule; Taxi, booking func-ons; Private Car, ren-ng and road guiding. In future, more compe--on and conﬂicts between O2O and tradi-onal transporta-on may arise and by solving those conﬂicts, O2O plauorm will become more and more mature in transporta-on sector.
  Travel: travel is the early trial ﬁeld of O2O plauorm; in mobile age, O2O will enable travel industry to another boom; future trend: master helper in all aspects of trip, from Visa, ﬂight, hotels, schedules, shopping, ﬁnd travel partners to sharing. Beauty   For certain group target consumers, beauty services are rigid requirement. O2O plauorm can narrow the space between service providers and users, save -me to get more conveniences to consumers.   For service providers, it can realize more precisely marke-ng, improve the net income and get more opportuni-es to rela-vely small merchants with good skills.
  Future trend: ra-ng and checking system to ensure user experience; standard service; online showing; more regula-ons. Future Trends: IntegraMon with TradiMonal Industry (P3) Fashion   Private service, customized design is the new trend of O2O in fashion industry
  O2O in fashion industry can meet the special needs of certain group of people that can hardly fulﬁlled in tradi-onal oﬄine shops
  Online marke-ng and promo-on to target group of consumers provide more opportuni-es to niche fashion design shops and SMEs in this industry
  Tradi-onal players in fashion industry like JoeOne, LaCheplle also launched their O2O business, for example, integrate their oﬄine inventories with online shops, provide more ager-‐service oﬄine to consumers online, redeem online tokens/discounts oﬄine, etc. Consul-ng   Consul-ng Industry sector: legal consul-ng, mental consul-ng, etc;
  This industry is rela-vely new in China, which means huge room to grow up; Oﬄine, ge‚ng a lawyer or psychological counselor are not cheap and easy; for users in less developed area or countryside, it can be worse. Those problems can be solved by introducing O2O plauorm.
  Sample: Fazhixing, Legal Wenwen, etc.
Challenges Challenge for Oﬄine Providers
  China’s economic structure is unbalanced, oﬄine service providers have varied service capabili-es
  Regulatory policies for diﬀerent oﬃce segments vary signiﬁcantly, entailing certain risks for e-‐
commercializa-on: For instance, short lease service requires the authen-ca-on and archiving of consumer informa-on by Public Security Bureau. Therefore, merchants are vulnerable to policy risks when dipping their feet into online business of such segments.
  Oﬄine services exhibit regional characteris-cs, online channel delivers varied results to merchants
  Numerous ver-cal segments of oﬄine service sector and diﬀerent business procedures pose serious challenges to e-‐commerce expansion
  Low informa-za-on level of local service providers makes online penetra-on diﬃcult
Challenge for O2O Plauorm Operator
  Huge requirement of Capital to integrate resource and acquire user
  Traﬃc: guide and crea-ve high traﬃc volume and raise the traﬃc transferring rate
  Team: professionals required for both oﬄine marke-ng and online opera-ng in detailed sector
  Management: capabili-es to manage huge oﬄine merchants and huge base of consumers
  Business Model: O2O is a general idea; detailed model based on understanding of certain business is of great importance for the success of O2O plauorm
O2O Business Closed in 2014: Fanshigang(饭是钢), Haozhekou(好这口), Pinpin Meishi(品品美食), Jiazhuang 360 (家装360), Tingnaer (停哪儿), Weiniu Xiuche(威牛修车), etc.
For more InformaMon ●  h^p://www.consumerstrategist.com/o2o-‐online-‐oﬄine-‐big-‐deal ●  h^ps://www.palmity.com/o2omore.html ●  h^p://www.powerretail.com.au/mulMchannel/retail-‐buzzword-‐o2o ●  h^ps://www.chinaabout.net/o2o-‐stand-‐for-‐diﬀerences-‐o2o-‐b2c-‐c2c/ ●  h^p://www.tmogroup.asia/china-‐online-‐to-‐oﬄine/ ●  h^p://www.crunchbase.com/organizaMon/55tuan-‐com ●  h^p://thenextweb.com/asia/2012/12/27/55tuan-‐claims-‐to-‐be-‐ﬁrst-‐chinese-‐
groupon-‐clone-‐to-‐turn-‐a-‐proﬁt/ ●  h^p://www.nanjingmarkeMnggroup.com/blog/chinese-‐internet-‐users/e-‐
commerce-‐trends-‐china-‐how-‐o2o-‐developing ●  h^p://www.bjd.com.cn/10beijingnews/business/201501/12/
t20150112_8641094.html ●  h^p://www.iresearchchina.com/views/4644.html