In major cities across China, it feels almost virtually impossible for modern consumers to function in their daily lives without the use of Chinese social media. Every day, millions of Chinese consumers use different Chinese social media apps that fulfill different utilities. This dependence on social media apps amongst the general population has allowed the Online-to-offline (O2O) e-commerce business model to flourish in China.
The O2O Business thrives in China, particularly in major cities such as Shanghai, Beijing or Shenzhen where there is a heavy consumeristic culture. The abundance of online brands, physical stores, and pervasiveness of technology in society means that the O2O market in China has grown by leaps and bounds ahead of other markets. Companies based in China are heavily incentivized to enter and expand this market.
This article will cover the different types of O2O business models in China, as well as the most popular apps that facilitate O2O business in China. Foreign brands looking to enter the Chinese e-commerce market with a product, service or even a physical store should understand this industry to stay ahead of the game.
What is O2O?
O2O stands for Online-to-Offline. The definition of O2O is broad but is more commonly understood to reflect the strategy of bringing customers from the online world to the offline world. Given the fact that more consumers increasingly prefer the convenience of making purchases online, it’s important that brands do not neglect their physical stores. To combat this imbalance, brands bring customers to enter their physical store and purchase products/services through a variety of incentives.
For example, brands will inform their online consumers of exclusive sales/items that can only be purchased in-store. Brands may also limit the number of these exclusive items that are in-stock, in order to create the illusion of scarcity and increase the item’s exclusivity.
In late 2019, British streetwear brand Palace Skateboards launched its official Tmall store. As part of this announcement, the brand also announced that a special pop-up store would open in Shanghai. For a limited time only, Palace fans would be able to grab their hands on a number of exclusive and limited-edition merch that they wouldn’t be able to get online. This saw hundreds of Chinese shoppers line up in droves outside the pop-up store.
Saturnbird is a Chinese coffee brand that sells high-quality but affordable instant coffee powder online, packaged in cute plastic cups. ‘Project Return’ is their recycling initiative that creatively encapsulates the O2O business model. Saturnbird partners with multiple coffee shops around Shanghai that customers can go to and hand over their plastic coffee cups. In exchange for their coffee cups, customers can redeem gifts, rewards, and discounts off their next purchase.
Marketing products this way to your customers gives them a strong incentive to visit your physical store and make purchases, rather than keeping them 100% reliant on your online store.
The Strength of O2O in China
Many sectors in China employ O2O business model, and there are many cultural and technological reasons for this.
The amount of smartphone users in China is huge. In 2020, the number of smartphone users in China reached around 970 million – and given China’s population density – this number will continue to grow annually. Combined with the country’s cheap and lightning fast internet, China has cultivated a culture in which the majority of people now use their smartphones as their primary device for making purchases.
Speaking of online purchases, mobile payment systems such as Alipay and WeChat Pay have become the predominant choices of online and offline payments in China. It’s extremely rare nowadays to see a customer hand their credit card to a cashier! And thanks to the proliferation of QR codes in China, Chinese customers enjoy the convenience and speed of paying for items with a simple scan on their smartphones.
Types of O2O Business Model in China
But as stated at the beginning of this article, the definition of O2O is broad and encapsulates a range of different initiatives and strategies that bring customers from the online world to the offline world. These primary sectors are: travel, mobility, and dining.
Unsurprisingly, travel is one of the most popular O2O categories amongst consumers in China. That’s because the modern Chinese consumer loves to visit new destinations and explore. And given China’s dense population, apps are needed to facilitate such high demand.
Ctrip and Qunar are the most popular travel service apps that allow users to purchase travel tickets to their destinations – whether it be plane, train, or bus. Moreover, users can also use these apps to book hotels and activities ahead of time. This can all be scheduled and paid for instantly, and users can ether collect their tickets in-person or be sent to them electronically.
In China, there are a range of transport services for consumers so that they can arrive from point A to B in quick and timely fashion. Given the large size of China’s mega cities, it is essential that its inhabitants can navigate the city with ease. There are many apps that provide this service.
But what if you don’t want to order a taxi? Well, there are many bicycle-sharing apps that you can use to rent and ride a bicycle. The most popular bicycle-sharing mini-apps can be found inside Meituan and Alipay respectively. All you need to do is find an unused bike parked on the street closest to you (which isn’t hard to find in China!), scan its QR code, and voila! Upon successful payment, you’ll have unlocked the bicycle – ready to be ridden.
In China, O2O shines the brightest in the dining sector, where everyday millions of users use apps to order and collect their food & beverage. In case you weren’t aware, there is a huge takeout and delivery culture in China. The most popular food delivery apps, Meituan and Ele.me, offer its users a plethora of restaurants and supermarkets that they can order from.
If you’re at home, you can use Meituan or Ele.me to order food from your favourite restaurant and have it delivered to your door in 30 minutes or less! Or, if you’re getting dressed for work and craving a morning coffee, you can use these apps to order a coffee beforehand from that exact coffee shop near your office, and collect it when you arrive
Or what if you fancy eating at that restaurant that’s always busy with your friends after work? Apps like Dianping allow you to get a queue ticket beforehand so that by the time you arrive, you won’t have to wait for an hour to be seated.
If you’re looking to execute the best O2O business strategy for your brand, contact Gab China and get your free consultation.