China’s O2O and What It Could Mean for Western Brands

Nanette George, Senior Product Marketing Analyst

Nanette George, Senior Product Marketing Analyst

Author Bio

Nanette connects great companies with smart solutions. A trained journalist, she shares information that engages brands meaningfully with technology they’ve purchased, so they can achieve higher ROI. With more than 20 years of experience in strategic communications, technology marketing, product launches and events, Nanette is Bronto’s senior product marketing analyst.

In China, apps have transformed the mobile phone into a virtual remote control for products and services. Consumers there can order and pay digitally for products and services to be delivered. It’s called online-to-offline (O2O), and it’s where online discovery meets physical commerce.

In the United States, O2O is limited and includes on-demand services such as Uber, Groupon and Airbnb. In China, consumers use it to do much more – have their car washed several blocks away, summon a personal chef or have laundry picked up and returned clean – all with a few taps on their mobile phone. And they can use the same mobile apps to pay for it all.

Consumer adoption of O2O is growing rapidly in major Chinese cities, where high population densities create economies of scale that drive down delivery and other costs. O2O sales for local services, such as dining and medical care, increased 38% in 2015 compared to 2014, and they are projected to increase by more than 20% year over year until 2018, according to eMarketer.

Here’s a closer look at O2O and what it might mean for Western commerce marketers.

In China, Mobile Rules

Email arrived late to China, which left an opening for messaging applications. And, in the absence of a personal credit rating system in China, credit cards never took hold, so payment apps proliferated, giving rise to mobile commerce. It’s not surprising that about half of online sales in China are transacted via mobile, compared to a third in the United States. Chinese consumers are more likely to own and use multiple mobile devices, and apps like WeChat create a single digital identity across multiple devices.

Convenience and Innovation Engage Consumers

ShakeIn crowded cities, where few consumers own cars, O2O is a great way to have goods and services delivered to your door. Chinese consumers can use the instant messaging app WeChat to shop, place orders and pay for O2O transactions. Created by Chinese company Tencent, its developers use innovation to engage the app’s more than 700 million users and make it one of the world’s most popular messaging apps.

WeChat users can enter a mode called “Shake” to identify nearby people or beacons in or using Shake mode. By physically shaking their devices, users can make new friends with other WeChat users or engage with beacon technology, which allows users to connect with nearby brick-and-mortar retailers. Doing so makes product details, offers and other information available to the shopper. It invites them to participate in an offline shopping experience.

Direct Sales Channel

WeChatOne important reason for O2O adoption in China is the eagerness of entrepreneurs to embrace the technology to market and grow their businesses. Chinese commerce marketers use O2O to attract shoppers, educate them about their brand and offer discounts. Chinese merchants use O2O as a direct business-to-consumer sales channel. And it’s working: Purchases initiated from WeChat doubled in one year in 2016.

What Western Brands Learn from China’s O2O

Broader adoption of O2O in Western countries anytime soon is unlikely. The political, geographic, social and economic conditions in China – as well as widespread retail and consumer adoption of the QR code technology that enables O2O – spurred it to quick growth.

Here are a few lessons Western brands can take from the rise of O2O in China:

  • Shoppers value convenience. Western brands can use commerce marketing automation to deliver timely messages and highly personalized product recommendations based on consumers’ personal preferences and shopping behaviors. Shoppers expect brands to cater to their needs. If you haven’t already, now is the time to begin incorporating personalization in your messages to customers.
  • Innovation online engages shoppers offline. The use of geotargeting by brands in China to engage consumers offline is a promising nod to augmented and virtual reality technologies, which many Western brands are incorporating into their marketing strategies. Consumers continue to value the tactile in-store experience, and these techniques offer the best of both worlds.
  • Consumers are embracing technology. Half of US internet users surveyed say they don’t mind being monitored by beacon or WiFi technologies while shopping, as long as it benefits them in some way. Those technologies are not yet easy to implement, but they are likely to advance in the coming years as brands adapt to the always-online consumer.

The Bottom Line

Innovation, convenience and customer experience are important to consumers and critical for brands, whether you sell online, offline or both. If you want the growing number of online consumers to interact with your brand, now is the time to add tactics to your commerce marketing program that deliver on these consumer expectations and will build your brand’s foundation for success in today’s growing omnichannel marketplace.