Shopping in China is not a necessity but a lifestyle. It is a hobby Chinese consumers pursue with a passion, particularly as online shopping becomes increasingly popular. 67% of Chinese purchased goods online in the past three months according to McKinsey.
Chinese consumers often look for a product in stores and end up buying it elsewhere. Armed with smartphones, a third of shoppers research goods on their mobile in stores, and just 16% of them end up purchasing the product in the store. Following this trend, the industry is hastening to meet Chinese customers’ expectations, creating a multichannel shopping experience with the well-used catchphrase being “O2O” (Online-to-Offline).
Integrating online elements into offline retail and services was estimated to generate an additional ¥240 billion ($38.4 billion) in 2014, growing 20% from a year earlier according to Analysys International. 71% of online Chinese consumers have used O2O services. A 2015 McKinsey study found that customers particularly like offers where they can purchase a good online and return or exchange it offline. More than half of Chinese consumers are also interested in services allowing them to buy online and pick-up offline or using online coupons in physical stores, with services such as discounted cinema tickets being especially popular.
For smaller businesses, O2O could be a route to stand out from the crowd. A nail specialist states that offering her services through the O2O beauty service app Helijia earns almost doubled her salary when working in a physical nail salon, with the average online order exceeding ¥150 ($25). Helijia recently raised ¥312.5 million ($50 million) investment to to attract more makeup artists and expand into new cities. Whether it is buying medicine, washing laundry or cooking – China’s online landscape can serve nearly every purpose.
Investments from China’s online giants indicates the importance of the online-to-offline business model in the Middle Kingdom. Early this year, Alibaba invested in an Israeli O2O and QR Code startup which improves the efficiency of scanning QR codes 400%. At a similar time, Tencent and Baidu teamed up with Wanda Group to invest ¥20 billion ($3.2 billion) developing O2O shopping malls on steroids. Wanda’s 1.5 billion customers is the largest offline consumer network globally and, coupled with Baidu’s and Tencent’s strengths (Wechat in particular), signals that massive potential in the O2O business.
The integration of online into offline services is expected to grow rapidly. Two out of three Chinese consumers would like to get more O2O offers in entertainment, while almost half expect extra O2O healthcare services. Online payment systems like Alipay and Wechat Payments are profiting from this development, as more customers expect to be able to use one of those platforms for paying in physical stores. O2O is a convenient concept for consumers living in remote rural areas as well as white collar workers in cities.
With China’s growing middle class, rising smartphone penetration and more and more consumers seeking information and shopping online, retailers should consider including O2O in their marketing and sales strategy to satisfy their customer’s expectations in the services and shopping experience. Contact us for assistance in your China marketing to meet the trends and stay on track.