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O2O Commerce in China

O2O Commerce in China

O2O in China: Brings great changes to Chinese daily life

As the keyword of Chinese internet, O2O never leaves out of sight in recent years. Model of the internet and its e-commerce have revolutionized the Chinese life. The appearance of O2O meet citizen’s rising demands for consumption and change Chinese living style as well. In order to share this huge market, BAT (Baidu (Chinese: )- Alibaba (Chinese:阿里巴)– Tencent (in Chinese腾讯控股有限公司) have thrown a great amount of money in O2O in China, which strongly promote its development.

Urbanization increases the demands for O2O

Urban population accounts for 54.77% of the total population at the end of 2014 and China won’t stop its urbanization so that more and more people will use O2O to meet their increasing demands. With the rising disposable income, citizens have more consumption willingness and O2O platform provides them with convenient and quick consumption channels without going to physical shops. People can now, not only purchase traditional E-commerce products, such as books and clothes, but also food and fruits with developed express industry in China. In order to catch up with the rapid pace in cities, citizens prefer quick services offered by O2O. For instance, people can call a taxi via Uber or Didi (Chinese: 滴滴打) within several minutes. The map app enables users to locate themselves and gives a trusted route within several seconds, which gives those who don’t have a sense of direction, a great help.

A rising number of Smartphone users 

Chinese smartphone users have already exceeded 0.5 billion in 2014 and it has an annual growth of 20%. Moreover, mobile internet users accounting for 91.38% of netizen scales in 2015 have become the majority of Chinese netizens, which provides the O2O market with constantly increasing users and urges O2O operators to develop its mobile terminal market. Improving internet environment facilitates mobile users to get access to the internet more easily. Nowadays, people can even be connected to the underground realizing peoples’ dream of the uninterrupted network. Lower mobile traffic and quicker speed offer a comfortable online experience, which encourages mobile holders to surf online at anywhere and anytime. O2O operators took advantage of the developed mobile network to promote their products via mobile platforms. Just pick out the smartphones from the pocket and click the APP, users can buy food and clothes through TABAO and JINGDONG within several minutes. Such convenience releases the users from carrying heavy laptops and save time from opening the PC. Thanks to the advanced IT technology, these APPs also record every operation and analyze consumer’s habits so as to provide information wanted by the users. This amazing function extremely enhances the user experience and increases the operators’ benefits as well.

BAT’s heavy investment brings new living style to Chinese

Three biggest Chinese internet companies BAIDU, ALIBABA, and TENCENT have greatly invested in O2O industry, which brings a giant reform in Chinese living style. ALIBABA has invested 6 billion in a various domain including electronic commerce and express industry in 2014 while TECENT has invested 2.5 billion RMB and expand its service to medical care. Baidu also expended 1 billion RMB to increase its market in travel and taxi. Various E-commerce platforms have cultivated Chinese habits of online shopping. For instance, the online sales of the 11th of November this year broke the record once again, which shows a great growth of the Chinese online shopping. Also, Chinese travelers nowadays prefer to book all the tickets through websites like Ctrip. Young generation can easily find a good property without meeting different real estate agencies. E-learning enables students to learn at home. O2O products permeate nearly every aspect of Chinese life as people now can buy anything on the internet, whatever they are tangible goods or intangible services.

Online payment changes the consumption model

Chinese have been shocked and even suspected since the appearance of Alipay and Wechat Payment. However, more and more people now use these electronic payments not only online but also offline because of its great convenience. Alipay has more than 0.27 billion active users, whose market share is more than 80% in mobile payment. Meanwhile, WeChat Payment has more than 0.2 billion users who have added their credit cards to their WeChat Payment account. Most E-commerce has opened the payment channels from Alipay or Wechat Pay which accelerates user’s payment procedure. Using electronic payment can also bring discount, which attracts a lot of consumers. Moreover, the higher interest offered by Alipay attracts more and more people to put their money in the electronic payment account instead of their bank account. Therefore, users of electronic payment rarely carry cash or bank card with them when they go out because they only need their Smartphone with those payment APPs. Indeed, only showing their bar code to the merchant can complete any payment in a supermarket, cinema, and other public places. Transfer between friends becomes much easier thanks to electronic payment while Wechat red pocket changes Chinese traditional behavior once again.

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Posted by Daxue Consulting China on Tuesday, December 8, 2015