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Fear as much as greed drives China’s online to offline commerce craze

  • Author:naky
  • Source:www.diecastingpartsupplier.com
  • Release on:2015-08-12
Sometimes, simply invoking the latest hot consumer internet trend is not enough.

learnt that late last month, as its deepening investment in so-called “online to offline” commerce, or O2O, left a chill on its stock price.

In China, O2O has been all the rage. But the term has been slapped on such a broad range of businesses that it has become meaningless. Chinese consumers, for instance, think the most useful aspect of O2O is going to a physical store to pick up and return things bought online, according to consultancy firm McKinsey. Others use the term to describe online ordering of local services from independent suppliers. Elsewhere in the world this is known as the “on demand” economy.

Low labour costs in China have made this model particularly attractive, according to its supporters. Local media enthuse breathlessly about manicurists who can make a multiple of the median wage and tour guides who are suddenly a hot commodity.

Investor wariness is therefore understandable. Some of the old categories of the consumer internet are breaking down, and it is not entirely clear what lasting new business models will emerge — let alone who will come out on top.

O2O, internet plus, on demand, full-stack start-ups — all of the half-formed jargon being applied to these new approaches is one indication of the definitional vagueness. It also leaves room for plenty of hype.

Of the many different O2O services being promoted, the most effective seem to link an online user interface to a service or product that has not been deeply touched by the internet.

Silicon Valley venture capital firm Andreessen Horowitz calls these “full-stack start-ups”, because they offer a more integrated style of commerce.

Companies claiming part of this new market come in many shapes but they share two broad aims. One is to vacuum up online orders in volume, giving them extra clout in negotiations with real-world retailers or service providers. Dominant digital platforms that are able to aggregate large numbers of users — a trend accelerated by the shift to mobile apps — have been the main forces behind this.

In China, all but one of the 15 most actively used mobile apps is owned by or associated with one of the three leading internet companies: Baidu,