O2O market needs more than novel concepts

Sometimes too much technology can kill one's appetite for food.

Last week I tried a new restaurant serving Sichuan-style noodles and wonton near my office. I thought I was lucky to find a seat during dinner time because there were long lines outside it in the first few days since it opened.

After a while, I found out why about half of the tables were empty that day.

Two waitresses were standing next to me, doing nothing. No one would hand me a menu. After seeing my surprised face, one of them finally gave me the instruction: First, I have to search and subscribe to the restaurant's public account on WeChat, a mobile messaging app developed by Tencent; second, read the menu on my cell phone and order online; and finally, pay through WeChat. And that was the only way to get my food.

But after staring at my computer for a whole day, I just wanted to keep my sore eyes from any electronic devices. All I wanted was a bowl of noodles.

The fancy concept of O2O suddenly killed my appetite.

The model of "ordering online and being served offline", or O2O, is blossoming in China. Apps that connect technology and daily services, have brought offline services－from cooking to housekeeping, from manicures to massages, and from taxi hailing to car washing－to our doorstep. O2O is transforming the operation of traditional industries.

Even when delivering his annual government work report in March, Premier Li Keqiang said the government would encourage emerging consumer sectors that combine online and offline services with the help of Internet.

It seems that the spring of the O2O market has come.

But I don't think an O2O business can survive by just relying on a novel concept. The secret of a successful business, no matter whether it is online or offline, is always the same－a better customer experience.

In the first four months of this year, more than 10,000 O2O apps and products were created, according to statistics from Sootoo.com, a Beijing-based research house. The O2O market was worth 235.08 billion yuan ($37.87 billion) in 2014, compared with 44.7 billion yuan in 2010. Fueled by growing demand and the huge amount of capital being bet on the rosy future of this industry, the market is expected to reach 309.18 billion yuan this year, according to Sootoo.com

But after explosive growth in 2014, this year could be one of reshuffling for the O2O businesses. Many are expected to die due to homogeneity, lack of sufficient offline services and capital chain ruptures.

I recently read a list of O2O businesses that died in the past six months. The businesses, located in East China, were categorized into nine industries, including catering, beauty treatment and education. Each category has a list of at least 20 O2O apps that closed due to poor business. Another survey found that nationwide more than 60 O2O apps in the education industry have died since the beginning of this year.

"The death list will be longer this year. The window of opportunity for starting an O2O business has disappeared," said Meng Xing, founder of Helijia app, which provides on-demand manicure services, with several thousands manicurists and pedicurists available for booking. The app, founded in March 2014, recently completed C series financing of nearly $50 million and its daily orders exceeded 10,000.

The company said recently it would spend 100 million yuan to subsidize manicure services in major Chinese cities. The price of a manicure could be as low as 19.9 yuan, while it usually costs at least 100 yuan in brick-and-mortar nail shops.

Helijia is not alone. Didi Kuaidi, China's largest taxi-hailing app provider by market share, said it spent 1 billion yuan providing free rides to commuters from its chauffeur services every Monday in 12 cities for one month starting from May 25.

A large number of similar app services will be kicked out of the game as big players are burning capital to become leaders in their respective niche market.

I am not sure whether that Sichuan restaurant, by using an O2O concept, could prevail or survive the cut-throat competition where numerous rivals nearby vie to please diners. As far as I am concerned, I care most about the food itself.

That evening, I didn't take out my cell phone. Instead I strolled into an old-style restaurant serving Lanzhou hand-pulled beef noodles just 20 meters away. The noodles, with clear broth, shaved beef, tender radish slices and lots of scallion, were so tasty.