During the year of 2014–2016. The famous O2O (online to offline service application) war had began in China. Many companies die mercilessly and only the strong ones survived. Well during 2015, Chris (close friend of my) and I had this idea of O2O chef to home cooking idea. (And of course it die off quite quickly like other start ups.) I decided to come to Beijing, and try to jump into the war as well. When I got here in Beijing, I was shocked by the amount of “O2O” companies that is already in the market. I am not a winner in this war but here are some very interesting things that I observed and I would like to share in my experience.
Money is everywhere
During this crazy time, there are so much money that flowing into the market, that the amount of project is not even enough for the investors to throw money at. When the peak time of O2O (sometime around the end of 2014), some people where just getting rich by fund raising, and they don’t even have a solid project to use the fund for. All they had was a speech and the fund goes to their own pocket. It was messy situation for sure.
Burn money to “maybe” make money
After all it is an internet business, you have to create the demand before you can actually start the supply. To create the demand, O2O strategy simply choose to let user to use their service for free and hoping later one when people get use to this service they will actually pay for it. But what if this service cannot become a demand? Then all the money is burnt and wasted, and lead to an fail of an start-up. (like O2O nails, message etc) Some of them did manage to create the demand they are the ones that stand to the end. (like Elama(food order service) DiDi (Taxi order services))
It is a power and money driven war
If you know some history, is not hard to understand that. During a war, who ever has the most resources wins. In this war, the survivors are back by richest of the rich. Their backers not only has to be rich but also have to be influential. For example, in the O2O food industry Elema (food delivery service) is back by Alibaba 90 million dollars. Meituan is back by Tencent. DiDi is back by both tech giant Tencent and Alibaba. DiDi CEO is the Lenovo CEO’s daughter, which makes it hard to fail. All these companies I had mention are doing very well now.
Only one will survived
This is quite an funny observation. Unlike many other O2O in other countries (like Lyft and Uber in US), which things tend to co-exist. In china there is only one survivor in each O2O sector. For example food delivery services. There was Baiduwaimai, Mifeng, Elama, Meituan ..… there was at least 10 unnamed ones. After the merge of Meituan and Elama pretty much ended the war in the food delivery O2O. Another example is Uber and DiDi war on taxi. In the end DiDi brought Uber by exchanged 5.7% share of DiDi, and “chase” the Uber International team out of China. So in china there is no such thing as healthy competition or co-existing, there is only one winner.
The biggest loser Baidu
During the war, the biggest loser I will said is Baidu. Baidu have two major investments one is Baidu Waimai which is the competitor of Meituan and Elama. And there is Uber which was later brought off by DiDi for cheap. Well for Baidu Waimai they come in the war late. They only got less than 20% of the market share which is nothing compare to Meituan and Elama. And for Uber lets just said that was a tragedy. Right now Baidu Waimai still “running” (just not much people using it) and Uber has the similar fate as Baidu Waimai.
Consumer is the benefiter
Quite honest. I feels like the consumers has benefit a lot during and after the war. The life here in China are now incredibly convenient. If you are hungry, take out your phone and open an app and in 30 mins you can have your hot steaming food. (super useful during the bad weather) You can get a truck to move your house or a taxi to go the place you want using DiDi. When went back to US. I feel lost with out all these great services. Not to mention when O2O was the peak there were so much app that you can use and they were all giving major discounts and some are even free. For example my friend get her nails done for 6 dollars at the comfort of her house. You can also order a massage to your house as well (even though the app looks like a prostitution app, which I don’t think is a bad idea just is not legal).
The real winner
History repeat itself. If you look at the gold rush happened in the west. People who got rich are not the ones that dig for gold. People who got rich are actually the ones that selling the tools for digging. So the real winner in this O2O war are the payment providers. They are Tencent’s WeChat Pay and Alibaba’s Alipay. You can not order something without using either of them. So there you go the winner of this war.
Well O2O services are still exist in China in fact some there are some mutate in this field. I will call it O2O 2.0 generation. They call it sharing economy but to me it just another version of O2O. I will cover that next week.
Hope you like what you read and feel free to give me feedback.
C’est La Vie