During “618”, offline traffic increased by 30% over the week prior, with online orders also jumping by 20%. Another partner retailer, Beijing’s Easyhome, a seller of furniture and home remodeling supplies, topped 100 million yuan (US$15.7 million) in sales by 1 pm on the first day of “618”, while Alibaba’s Fresh Hema saw sales increase to seven times what they were in the same period last year.

Tmall’s June 1-18 2018 promotion pulled in offline stores, including 70 New Retail stores from around China, along with 100,000 Tmall smart stores, Intime department stores, Hema supermarkets and superstore chain RT-Mart.

Along with its usual array of coupons and discounts, this year’s festival offered up physical interactive pop-up stores, red packets, and free shipping.

This year’s shopping festival also targeted consumers outside of China. Product sales in apparel, beauty, and food & beverage shattered last year’s records in just minutes. This year’s shopping festival hit during the World Cup and Dragon Boat Festival, helping boost sales in several categories. Below are highlights of Tmall’s 618 promotion.

With the increasing utility and availability of mobile payment methods, store-based O2O commerce has experienced steady growth, with total sales of US$91.1 billion in 2016, a figure which is projected to reach US$143.6 billion in 2019.

Online-to-offline (O2O) commerce has long been more prevalent in China than in the developed world, leading to China becoming the largest and most developed O2O market in the world.

With consumers having largely bypassed credit and debit cards in a rush to mobile payment apps, O2O maintains a strong position and strong prospects for growth within China’s consumer markets. Still, the industry is witnessing disruption and structural shifts in response to changing buying habits.

AS STORE-BASED O2O COMMERCE IN CHINA MAINTAINS STEADY GROWTH…

Because of its early start and ability to fill an important niche within e-commerce, store-based O2O commerce has long held a leading position in the O2O space within China.

With the increasing utility and availability of mobile payment methods, store-based O2O commerce has experienced steady growth, with total sales of 612.4 billion yuan (US$91.1 billion) in 2016, a figure which is projected to reach 964.8 billion yuan (US$143.6 billion) in 2019.

… HOME-BASED O2O COMMERCE FILLS A NICHE…

Meanwhile, home-based O2O, which includes sectors such as food delivery, online provision of home services, at-home spa and health services, and home delivery of groceries and goods, has begun to catch up rapidly. With shifts in preferences and a willingness to pay a premium to bring goods and services to their door, consumers have rapidly embraced the home-based O2O model.

From a low starting point, home-based O2O commerce came to take up 19.6% of the O2O market in 2016, a whopping 149.6 billion yuan (US$ 22.3 billion), and is expected to grow to more than a third of the market by 2019, with expected sales of 505.4 billion yuan (US$75.2 billion) that year.

… WHILE LAGGING IN SOME AREAS

At present, the home-based O2O market is greatly dominated by two services: delivery of prepared foods, and online education; in 2012 education accounted for 46% of the O2O market, with delivery in second at 27.4%.

By 2016, their positions reversed, with food delivery holding 54.9% of the market and education only 20.5%. Meanwhile, other fields like home repair, at-home health services, grocery delivery, and laundry services have grown less rapidly and still have some distance to go to make up ground on the major players.

WeChat recently upgraded a store management feature, originally part of WeChat Official Account, to Store Mini-Program. Retailers can use this type of mini-programs directly. It costs almost nothing and requires no programming knowledge although the capability of Retail Mini-Program is limited.

It’s been over four months since WeChat has officially launched its mini-program platform. The number of daily active users on WeChat Mini-Programs sees much faster growth since the last week of March 2017.

This week, WeChat team just rolled out a new feature on Mini-Programs that could be very useful to retailers.

Mini-Programs are located under “Discover” on WeChat. And, the new feature sits under “Mini Programs”, where users can search for Mini-Programs nearby. Both retail store mini-program and other types of mini-programs can be discovered using this function as long as it’s enabled.

The mini-program publisher must be registered businesses or organizations to qualify for “Mini Programs Nearby” feature. And, documents such as the business license are required to get approval.

What eventually encourage some users to naturally check out the nearby mini-programs  could be discounts and coupons, which are included in Store Mini-Program:

Retailers can integrate store information like the address, contact information, photos, and operation hours as well as special offers to customers including membership card, coupon, voucher, and etc.

One store mini-program can support multiple stores; but, one store can offer one type of card promotion only.  And, one mini-program can only link up to 10 locations. You can send a request to WeChat team to increase the limit.

One location can only be linked to from one unique mini-program. So, it could be a problem if you share the same address with others.

WeChat membership card guide and case study

Starting on 29 April 2017, users can easily rent a bicycle from one of the six leading bike-sharing companies in China via Alipay without installing additional mobile apps.

Alipay’s “Scan & Ride” function connects six bike sharing brands including Ofo, Youonbike, Bluegogo, Hellobike, Funbike, and Ubike, offering a total number of over six million shared bicycles across 50 cities in China.

Currently, shared bikes on the streets require the download, installation, and registration of mobile apps; some may ask for cash deposits. Skipping all these delivers better user experience and convenience. These bike-sharing apps sitting on top of Alipay app achieves that; and, the idea is very similar to WeChat launched Mini-Program.

All the six bike-sharing companies but Hellobike also joined Alipay’s riding protection program, which offers insurance to bike riders.

China bike-sharing market is estimated to reach US$1.5 billion (+735.8%) and 209 million users in 2017. Read China bike-sharing market insights in Q1 2017 →

Update (30 April 2017): Mobike reported an addition of 24 million newly registered users on 28 April 2017 after being integrated with WeChat since 29 March 2017, an increase of over 200%.

Check out the UN report: The growth of digital payment ecosystems in China: what it means for other countries

Baidu Tongji, or Baidu Statistics, announced an additional product “Store Statistics” for offline retail stores.

Baidu Store Statistics provides traffic analysis, source, interests and targeted marketing on the store level or business district level by integrating online users’ interest attributes, complete user visiting path with offline visiting behaviors.

It offers real-time and historical traffic data covering various industries including restaurants, entertainment, hotels, retail, real estate, cinemas, etc. Devices will be installed in stores to monitor and collect the traffic information.

Nearly 60% of Chinese respondents said they used their mobile devices in-store to check and compare prices according to a study by JDA and Centiro.

Almost half respondents read products or service reviews using their mobile devices while shopping in-store.

Quality issue is the top reason digital buyers in China are less likely to make another purchase from a retailer.

E-commerce retail sales account for over 50% of China’s total product value in lower tier cities; online shoppers growth rate is 61%, higher than that of the first-tier and second-tier cities.

The number of online shoppers in third-tier cities and below reached 257 million.

The proportion of WeChat online shoppers doubled in 2016 with 31%.

Users who shop on JD.com via WeChat account for 32%, slightly more than that of other shoppers on WeChat.

Cross-boarder online shoppers in the first-tier and second-tier cities are more than shoppers from the third-tier and fourth-tier cities.

Shoppers from the first-tier cities spend 40% of their total expenditure on health care products, while shoppers from the second-tier cities tend to spend 50% of total expenditure on luxury goods.

Over half users in China’s first tier cities use O2O travel service.

63% China online shoppers are willing to pay more for guarantee tickets.

67% consumers use catering service. More Chinese consumers from third-tier cities and below are willing to pay more on catering service.

Convenience and price subsidies are main reasons for customers to choose O2O catering services.

54% Chinese consumers from the first-tier cities are likely to use O2O mobile sharing service, followed by users from the second-tier cities (43%).

After using O2O mobile sharing service, Chinese consumers drive less per week is down to 3.26 times compared with 4.04 times before.

77% Chinese consumers’ actual consumption on travel services could be increased in the future, followed by foods (65%). Consumers who expect lower prices while using travel service on O2O platforms account for 59%.

The third-tier cities and below own a huge room of O2O market. China O2O companies were busy expanding to tier-3 and tier-4 cities in 2015.

Also read: Chinese online shoppers insights 2016

Offline merchants hoped to get more consumers and profits by accessing to the O2O platforms in China in 2015. Tier-3 and tier-4 cities have been a new expanding regions for the O2O platforms. Meituan maintained a prominent position in the less developed cities.

China O2O companies were busy expanding to tier-3 and tier-4 cities in 2015 as more consumers accessed to the service according to Tencent. For example, 36.8% of total transaction values of Meituan came from tier-3 and tier-4 cities in early 2015 and over 80% once came from tier-1 cities in 2010.

China O2O market entered a white-hot competition period in 2015 and companies tried hard to win consumers. The number of merchants on Meituan was only 780,000 in 2014 and the number increased to 1,600,000 in 2015.

Major catering O2O apps were Meituan, Dianping, and Nuomi in China in 2015. Penetration of Meituan in tier-3 and tier-4 cities was far higher than that of other catering O2O apps.

About 50% users would use catering apps less than five times per month according to Tencent and the usage frequency of tier-1 and tier-2 city users was higher than that of tier-3 and below city users in 2015.

About half users spent 100 yuan to 300 yuan each time. 35.4% tier-3 and below city users spent less than 100 yuan and 28.7% tier-1 and tier-2 city users spent less than 100 yuan when catering with O2O apps. However, 10.4% tier-3 and tier-4 city users spent 300 yuan to 500 yuan higher than 8.7% of tier-1 and tier-2 city users.

Competition among food-delivery O2O market also was fierce in 2015. Meituan played a more prominent role in tier-3 and tier-4 cities and the penetration rate surpassed others with a large gap. Penetration rate of food-delivery O2O apps didn’t have much gap in tier-1 and tier-2 cities.

The monthly usage of food-delivery apps came more frequently in advanced cities than less developed cities in China in 2015. The overall usage frequency of food-delivery O2O apps was fewer than the catering O2O apps.

Ctrip was more active in tier-1 and tier-2 cities and Meituan was more active in tier-3 and tier-4 cities when booking hotels online.

36.0% couples in tier-3 and tier-4 cities would reserve hotels online for dating and 38.2% users in tier-1 and tier-2 cities would book hotels for neighboring travel.

Low price, rich hotel resource, and perfect function of hotel O2O apps was the major reasons for users to reserve hotels online in China in 2015.

The increasing travel needs boosted the intense competition of hotel O2O apps. The top seven travel apps were Ctrip, Qunar, Meituan, Alitrip, Tuniu, CY, and eLong.

Rich resource was more important towards tier-1 and tier-2 city users than the less developed city users. Tier-3 and above city users concerned more on low price than other city users.

Catering O2O market developed into a mature stage in 2015. 72.0% merchants surveyed engaged in the catering industry in China in 2015.

The recent two year had witnessed the fast development of the O2O market. 63.0% merchants accessed to the O2O market in 2015 and 21.0% accessed in 2014.

42.0% of offline merchants surveyed accessed to the O2O platforms because of the large orders online and 13.0% because of the quick payback speed. Promotion of salesman was also an important reason for the merchants to access to the O2O platforms.

By accessing to the O2O platforms, offline merchants hoped to get an increase in turnover, profit, and brand public praise.

About 50% of merchants surveyed believed their turnover increased by 10% to 30% after accessing to the O2O platforms and 32.0% believed their turnover increased by 30% to 50%.

Some merchants terminated their cooperation with the O2O platforms. 50.0% terminated because of the loss of consumers and 33.0% because of the decrease of turnover.

The current cooperation mode of merchants and O2O platforms is subsidy plus discount which is expected to upgrade to maintain and draw more merchants and users. The O2O platforms could bring in more traffic and consumers for merchants while how to manage the merchants is still a severe challenge for O2O platforms.

Also read: China B2B Market Insights 2016

Total retail sales of China consumer goods were 26.24 trillion yuan (US$4.11 trillion) in 2014, an increase of 12% compared to the previous year. The growth rate of the Chinese retail market has dropped for five consecutive years. More than two-tenths of responding retailers have reduced opening new stores and the average number of employees fell by 0.8% and 1.2% respectively in 2013 and 2014 according to Deloitte.

Consumption in education, travel, culture, entertainment and others gradually occupied more share on consumers’ expenditure in the past few years. In the next 6 months, customers tend to spend more on food and beverage, travel, entertainment, investment, investment, home appliances and so on.

State-owned enterprises managed China’s industry in most aspects with overwhelming advantages. In recent several years, state-owned enterprises have given up much control to promote more dynamic market.

The growth rate of Chinese consumer goods market has declined following the slowing macroeconomy and residents’ income. Total retail sales of Chinese consumer goods were 26.24 trillion yuan (US$4.11 trillion) in 2014, an increase of 12% compared to the previous year. About 23% companies didn’t open any new stores in 2014 according to Deloitte.

Bricks-and-mortar retailing has become fragmented under the booming of China’s online shopping market. The growth rate of China’s top 100 chain retailers slowed down. 27% companies surveyed maintained negative growth in 2014.

The larger companies are, the more transactions companies may have. Chinese companies with national-wide operating scale gained an average revenue of 26.5 billion yuan (US$4.16 billion) and an increase of 9.6% in operating revenues compared to the previous year.

Shopping malls, convenience stores, and hypermarkets maintained growth in operating revenues in 2013 and 2014 compared to supermarkets, department stores, and specialty stores. Major retailers dropped in sales such as Sun Art, Carrefour, Lianhua, Yonghui, and Lotus.

Although the offline market in China didn’t see any significant improvement, the online shopping market maintained a steady momentum of growth in the recent several years. Overall transaction values of online shopping market reached 2.81 trillion yuan (US$0.44 trillion) in 2014, representing a growth of 48.7% compared with the same period the previous year and 10.7 percentage points slower compared with the growth rate in 2013. Overall online retailing sales accounted for 10.71% of the whole retailing market in China.

Many large offline retailers developed online shopping platforms in 2014 that the transaction values of O2O market in 2014 exceeded 300 billion yuan (US$47.07 billion) and was expected to reach 465.54 billion yuan (US$73.04 billion) in 2015. Lower price and good deals remained an important driver of online shoppers while product variety also saw more importance. Overall transactions of chain retailers’ online shopping market totaled 6.1 billion yuan in 2014.

Chinese mobile shopping market reached 928.5 billion yuan (US$145.67 billion) in 2012, reflecting an increase of 240% compared the previous year. In the first quarter of 2015, the mobile shopping market reached 362.34 billion yuan (US$56.85 billion) accounting for 47.8% of the overall internet shopping market and was expected to exceed 50% in 2015.

Skin-care products, milk and infant formula sold best online. Tmall, Taobao Jingdong, Jumei, Vipshop and others were major shopping platforms while when purchasing those products offline users were more likely to buy in Watsons, RT-MART, War-Mart, Carrefour and CR Vanguard.

Chinese cross-border e-commerce market saw much potential that the transaction values reached 4.2 trillion yuan (US$0.66 trillion) in 2014 with YoY growth of 33.3% and realized a 26.2% CAGR (compound annual growth rate) over the past five years. However, China was still new to cross-border e-commerce concluded by the relatively low import transaction values.

As high as 93.5% transactions were dealt on B2B platforms in 2014 in China and 6.5% on B2C platforms. However, with speedy development of logistics and overseas online shopping market, B2C market would increase in online transactions in the future. Tmall, Jingdong, Suning, Gome, Vipshop and Yihaoian were major B2C online shopping platforms.

Also read: 22% Online Shopping Spend Are Newly Created Demand

Recently, Alibaba announced that it would launch Tmall Supermarket across China in several stages. It would invest 1 billion yuan (US$160.78 million) targeting consumers in Beijing in the first phase.

Tmall Supermarket is like an online supermarket, focusing on FMCG products and was only available to consumers in Jiangsu, Zhejiang, and Shanghai with fast delivery and discounted price. After adding all products from Tmall Supermarket to shopping cart, they will be packaged together and send in one package.

Besides Alibaba, Jingdong and Yihaodian are also competing for the actual market share of offline supermarkets while offline commercial supermarket companies were on the transformation to the online market. For example, Wal-Mart acquired Yihaodian and launched O2O service platform.

Tmall Supermarket uses the same day delivery service of Cainiao network in Beijing. By late July, data showed that sales of Tmall Supermarket in Beijing region grew by 740% year over year, of which 90% transaction volume was from the mobile client.

However, most offline commercial supermarket companies were reluctant to cooperate with Jingdong or Alibaba. The storage and purchasing capacities of large online markets and advanced logistics had a powerful hit on offline traditional companies. This year, Tmall put forward many important initiatives, including the duty-free shop project in China partnering with Shilla Group and King Power, who were the largest duty-free groups in South Korea and Thailand respectively. Compared with Tmall global and other online supermarkets, offline supermarkets didn’t have more competitiveness.

Also read: China Online Shopping Accounted for over 10% of Total Retail in Q1 2015

Kuaidi and Didi mobile car calling apps still rank first in China’s car calling market by usage rate according to iiMedia Research. Carpooling will become the next focus of competitions in China’s car calling market.

Public transportation is primary transportation in China’s first-tier and second-tier cities when mobile phone users go to work, which accounts for 42.8%. Public transportation system in first and second-tier cities is more sophisticated and less expensive, thus it is the main means to go to work among most mobile phone users.

Brand awareness of Kuaidi ONE and Didi cars lead the market, but China’s mobile phone users’ overall awareness of the car calling mobile commerce has room for improvement. Uber ranks next to Kuaidi and Didi, accounting for 13.0%.

Also read: Baidu’s Global Market Share Decreased to 7.52% in June 2015

In Q1 2015, China mobile internet users reached 740 million with increase of 1.6% QoQ and 10.27% YoY, which showed stable growth in the mobile internet market according to data from EnfoDesk.

Also read: 24% of Top Global Mobile Internet Unicorns from China

In Q1 2015 in China, the top 3 private car service apps were Didi private car (including Yihao private car), Yidao yongche and Uber by total number of active users. EnfoDesk estimates that China private car service will strengthen its service and become the first choice for tier-1 and tier-2 citizens in the near future.

Didi private car (including Yihao private car) ranked the top with 80.9%, followed by Yidao yongche  (17.5%) and Uber (8.1%).

Also read: Business Car Renting Services’ Potential in China

2014 is a booming year for programmatic buying in China advertising market. Further, programmatic buying is rebuilding digital advertising market as well as influencing China advertisers. With mobile internet’s rapid development, there are also some challenges for mobile advertising.

It is estimated that in 2017, the total transaction value of mobile programmatic buying will be RMB3,830 million (US$626.27 million) with an increase of 82.6%.

Percentage of RTB in mobile programmatic buying is decreasing year by year according to iReasearch.

Programmatic buying is popular among consumer-oriented industries as well as traditional industries. GEO, a data-driven media which aims at data for solutions, is using non-cookie technology to target user by their games, mobile device, shopping habits, payment habits and so on, reported Cecilia from CIW Team at Ad:tech China 2015 in Shanghai.

There are still 3 big challenges in mobile advertising market in China according to James Duan, Geo’s CMO, interviewed by Cecilia at Ad:tech China 2015.

1. Mobile ads can not replace all PC ads, and high-quality native ads are in great demand
2. Big data can help advertisers locate potential consumers which are applied in O2O market in China. Besides, time is another important element for advertisers to target consumers.
3. Big data’s application on cross-screen marketing is not mature in China nowadays

Also read: China Mobile App Advertising Market in 2014

WeChat team launched “Shake – Nearby” platform on 12 April 2015 to merchants targeting China’s O2O market.

WeChat Shake feature needs to access location data and helps users find people shaking their phones as well.

WeChat “Shake – Nearby” is based on Bluetooth technology offering offline merchants to connect with mobile users; it also provides features that help merchants to offer custom personalized marketing and push messages.

Also read: WeChat Wi-Fi to Step on A New Stage in China

China online travel market experienced overwhelming development on mobile device in recent years. EnfoDesk believed that 2015 will be a significant year for mobile device to surpass the desktop. At present, online travel providers are implementing O2O strategy and it is estimated that China online travel market will transform from mobile device to O2O and then be in stable development in 2016.

Also read: 80% Willing to Travel During Chinese New Year Holidays 2015

In Q3 2014, total transaction value of China group buying market was RMB22.96 billion (US$3.74 billion) with an increase of 43.6% quarter on quarter.

The group buying orders were 31.3 million with an increase of 20.4% from the same period of prior year; the number of group buying users was 340 million with an increase of 30.8% YoY; per customer transaction was 67 yuan, which increased by 11.7% YoY in Q3 2014 in China according to data of EnfoDesk.

It is estimated that in the second half of 2014, transaction value of China group buying market will exceed RMB46.2 billion (US$7.53 billion) and total transaction value will be RMB75 billion (US$12.2 billion) in 2014. China group buying market is performing continuously well and it has stepped into a new stage for rapid development.

Meituan, Dianping and Baidu Nuomi were top 3 group buying providers in China in Q3 2014 by transaction value. It is believed that fierce competition for market share will be among the top 3 providers in the future.

China group buying market’s major revenue was from food, entertainment， hotel & traveling service in Q3 2014. Food accounted for 57% with an increase of 7% while entertainment service accounted for 21% with a decrease of 4%. In the first half of 2014, China group buying websites obtained more market share of online food ordering market comparing with other channels. The top 4 group buying websites in China online food ordering market are Meituan.com, Dianping.com, Nuomi.com and Lashou.com.

In Q3 2014, market share of tier-3 cities accounted for 35% with an increase of 3% YoY and tier-4 & lower cities increased by 2%. Besides, different group buying websites focused on different tier cities since first half of 2013 in China which changed market share in August.

China group buying market has become the arena for internet giants since first half of 2014. With powerful technology of search and LBS, Baidu Nuomi are making efforts in lifestyle O2O market. And, Tencent is creating lifestyle O2O ecological system based on Wechat as well as groupon, Dianping.com and 58.com. Wechat POS is consisted of customized POS machine and Wechat payment, targeting offline stores’ payment solution which means it is ambitiously boosting O2O service.

Also read: 10 Case Studies for Wechat Marketing

In a travel survey conducted by Tencent, 23% respondents said they “often” making hotel and/or air ticket bookings online while 34% “occasionally” do that. Slightly over half of China internet users are used to make travel bookings online.

According to Tencent’s research, 31% of people engaged considered online travel service more convenient and cheaper than service offline. Only 4% of them considered online travel more expensive than offline. 35%  are worried about their safety about making bookings online. Safety issue is urgent to be solved in China O2O market.

Among all online travel companies in China, Qunar.com, Ctrip, eLong and LY.com are the most popular ones by total number of reached users nowadays. The total number of mobile internet users have reached 857 million in China, more and more users are likely to book online travel service on mobile device.

Also read: Here Are Top 12 Most Interested Topics of Chinese Online Travellers

In June 2014, mobile Internet users exceeded 530 million, accounting for 83.4% of the total Internet users in China. More than 60% of China mobile users are using mobile social apps nowadays, which are indispensable mobile apps in China according to Nielsen.

Location based service (LBS) on mobile device provides much convenience in China’s O2O market. Strong social needs and LBS’s power stimulate interest-based social networking’s development in O2O market.

Over 90% of mobile social app users are using mobile social apps every day with an average of 1.5 hours per day. And over 70% use social apps during their leisure time. The peak usage period is between 8pm and 11pm as well as between 12pm and 1pm.

Location-based services (LBS) are a general class of computer program-level services that use location data to control features. Most mobile social apps in China have such features which can make social networking more convenient and popular for China mobile internet users.

China mobile Internet users use social apps to make friends who share the same interests. With LBS, they can be in touch online or offline. Popular social apps in China include Wechat, Momo, Weibo, Douban, which are easy to build interest- based social network to conduct offline events.

Total number of Weibo (Sina Weibo) mobile app’s active users was 67.53 million in August 2014, down by 10.95% according to Chinese research company EnfoDesk.

Momo users are the most enthusiastic ones about social events in China’s O2O Market and more than half Momo users often take part in online and offline social events for interest. Momo recently launched ad platform for retailer taking ride of this trend.

Also read: China’s Top Mobile Social Apps by Time Usage

Over 600 million internet users and an annual ecommerce revenue growth rate of 120%, makes China the fastest growing and soon-to-be the largest ecommerce market in the world.

In this Fleishman Hillard China report, sponsored by CDNetworks, readers will get a deeper understanding of e-commerce market and insights on how global retailers were able to achieve success.

Key topics explored in this report include:

• Characteristics of Chinese online shoppers
• Mobile & Social commerce in China
• Buyer preferred market places: TMall & Taobao
• China’s online payment platforms
• Keys to success in China’s e-tail market

The report also shares four key platforms in China:

1. Marketplaces that provide companies with the tools to display and sell products through an online storefront. The largest marketplaces are Alibaba.com (chiefly B2B), Tao Bao (C2C), and TMall (B2C)
2. Online retail sites such as Jindong Mall/JD.com (formerly 360Buy.com). These are basically online department stores that sell a variety of different branded goods.
3. Online brands such as VANCL, an online apparel company. For a long time, VANCL sold only its own branded clothing. Recently it has begun selling other brands.
4. Offline-to-online (O2O) commerce. Allows skeptical Chinese consumers to see and handle the merchandise in a physical store before they buy it online. Chinese B2C merchants Suning and Guomei exemplify the O2O model, which currently appears to be China’s most promising type of ecommerce.

You can click here to receive the report.

Previously it has been disclosed on Weibo that  Tencent is connecting its “QQ Marketing” to Wechat Official Platform, so that its enterprise clients can reach their customers through both mobile terminals.

As it turns out, WeChat launched the new “QQ Marketing for WeChat” on April 16, 2014. This new version of “QQ Marketing” came with an enhanced backstage management system, allowing enterprise clients to sync QQ with WeChat in customer management, as well as to use new functions such as image display, client communication, interactive marketing, online sales, tracking analysis, etc.

QQ Marketing mainly targets companies dealing with online customer service or product marketing. It comes with various built-in management functions based on Wechat Official Platform, including online call center, CRM, user tracking, user information storage, mobile site developing, etc. What’s remarkable about QQ Marketing is that whether or not the users initiate voice counselling on Wechat Official Platform, companies can always track user behavior, set up user behavior database, thus classify and label their customers by “value” according to their levels of activeness, frequency of interactions and clicking rates of different contents. This is certainly an important step toward customized marketing and long-term maintenance.

The fact that one of Tencent’s enterprise marketing product is connected to Wechat Official Platform exemplified the platform’s remarkable business value with its public account system and over 600 million users. As mobile marketing is leading the trend, the advantages of big data become all the more prominent. This, for Tencent, means popular mobile apps it owns such as QQ mobile and WeChat. Earlier this month, Tencent announced that the number of its mobile users simultaneously online topped 200 million, among which QQ mobile users accounted for 70%. In the meantime, Tencent’s financial report revealed total WeChat active users, in domestic and oversea markets combined, had reached 355 million by the end of last year. With this enormous user base, Tencent is confident enough to announce its plan to launch a self-service advertising platform, where verified public account owners and advertisers will have direct access.

However, on the part of WeChat, the team seems more interested in creating a better platform for service, as oppose to for marketing. The objective is to provide a new mode of interaction between businesses and customers, and thus materialize Tencent’s ambitions in O2O development. In line with this motive, WeChat team has just adjusted its group messaging policies for service account on the public platform, allowing verified service accounts to send at most 4 group messages per month to every follower. WeChat team insiders expressed that WeChat public account is designed to serve as  CRM platform. It is now moving from stage one, i.e. “interactive communication”, towards stage two, namely “user management”. By the time it reaches the third stage, WeChat will start cooperating with banks and institutions of such kind, providing its users with customized services.

The question of how to balance service with marketing in O2O business might pose as a major challenge for WeChat in the future.

AutoNavi is almost sure to become food on Alibaba’s plate. According to latest news, the two companies has already nailed an acquisition agreement, meaning that Alibaba will acquire the remaining 72% of AutoNavi’s stake, with an evaluation of around $1.5 billion, up more than 40% from last May when Alibaba first bought AutoNavi’s shares. At the moment, AutoNavi’s board of directors has already approved the transaction, which is to be completed in the third quarter this year.

Alibaba became AutoNavi’s largest shareholder last May when it bought 28% of AutoNavi’s stake with $294 million. By February this year, Alibaba had decided to take over AutoNavi, making the digital map and navigation service provider one of the subsidiaries of the e-commerce giant family.

In the 10 months following Alibaba’s first move to procure AutoNavi, the two companies had put in considerable efforts to fit in, especially on “double 11” last year, when AutoNavi made its official debut within Alibaba Group on the occasion of Alibaba’s first trial in O2O business with Yintai department store. Since the openning of 2014, Alibaba and other Chinese internet giants are becoming increasingly ambitious in O2O business. AutoNavi announced its integration with one of Alibaba’s affiliates, Taodiandian, introducing location-based food ordering service for the first time.

Following Alibaba’s announcement of its acquisition plan on 10 February in 2014, AutoNavi’s CEO Cheng Congwu remarked at the company’s quarterly financial report analysis conference in February, that AutoNavi had become Alibaba group’s vanguard in O2O business, closely cooperating with entities under Alibaba Group such as Ali Cloud, Taodiandian and Alimama. The lastest version of AutoNavi’s map app features an integration with Alipay, allowing users to pay taxi fares through Alipay while enjoying a discount from Kuaidi Taxi, a popular Alibaba-backed taxi hailing app.

Statistics show that by the end of last year, AutoNavi’s map/navigation app had achieved a total installation of 300 million. Users can enjoy some 500,000 group purchases, buy coupons, booking rooms in 100,000 hotels, reserving tables at 200,000 restaurants, buying film tickets in over 400 cinemas, checking out apartments for rent or sale in over 35,000 residential quarters or buildings, as well as looking for cleaning service or designated driving service.

Map data is of vital importance in this age of moblie technology. Whoever obtains map data will have a greater hold over the market, and a more solid foundation in O2O business. While AutoNavi is falling into Alibaba’s pocket, its major competitor in the field, Navinfo, is going through a trade suspension at the A-share market. The two companies together account for over 90% of market share in the business of pre-installed onboard navigation system for cars.

Navinfo is now trying to introduce strategic investors. Speculation among insiders has it that the company is very probably being contended by two other internet giants, Baidu and Tencent. In its invitation for bids, Navinfo provided that the bidder should have a registered capital of no less than 1 billion yuan (USD 161.76 million), a net asset of no less than 1.5 billion yuan (USD 242.63 million) and most specifically, a direct or indirect possession of internet resources that can serve as a solid support for the company’s current operations.

Navinfo has worked closely together with Baidu, providing significant parts of Baidu Map’s base data. Meanwhile, A new figure has just appeared among Navinfo’s independent directors – Wang Xiaochuan, CEO of Sogou, a search engine company which merged with Tencent’s Soso last year. Navinfo is also going to establish connected transactions on a regular basis with companies such as Sogou, with estimated value no more than 110 million yuan (USD 17.79 million).

The war on map data launched by Alibaba’s acquisition of AutoNavi has just begun and is sure to escalate once Navinfo brings in new investors.

Right after Didi Taxi released its data on Wechat Official Account, Kuaidi announced its first quarter financial performance on March 2, 2014.

By March 31 in 2014, Kuaidi Taxi had covered 261 cities including all the provincial capitals, with 650% QoQ growth rate. The number of daily transaction reached 6.23 million, 20.7 times of one year ago.

Kuaidi monthly revenue reached 10 million yuan (USD 1.62 million) in Q1 2014, Kuaidi Taxi claimed they had built other business models besides advertising. They expected continuing future revenue growth. Specific business models remained as a secret at present.

The total amount of drivers’ account transaction (excluding Alipay QR-code payments) hit 4.73 billion yuan (USD 766.3 million). Each driver has an independent account, customer could pay with Alipay to the driver’s account. Taxi driver could withdraw the money anytime.

Among the mobile devices installed Kuaidi Taxi app, Xiaomi accounted for 29% in android devices, and iPhone 5S accounted for 32% in iOS devices.

Earlier, Kuaidi Taxi’s CEO Lv Chuanwei revealed that Kuaidi’s monthly expenditure was about 3 million yuan (USD 486,027) which consisted of human resource cost, bonus for taxi drivers and marketing cost.

Kuaidi’s COO Zhao Dong also said that taxi app could create billions of revenue every year for the industry by reducing taxi empty cruise time. He estimated the revenue of taxi industry would be at least 300 billion yuan (USD 48.63 billion) a year, and the taxi empty cruise time was around 30%. If Kuaidi could reduce the percentage by 5 point, it will bring 20 billion yuan (USD 3.24 billion) more revenue each year.

Lv Chuanwei also regarded taxi app as a big O2O opportunity. He thought taxi app was the only first step to win customers and build brand image, the second step would be intelligent route and trip planning and the final step was to set up integrated service calling platform.

Johnny Depp came to China for the first time to promote his new movie Transcendence on March 31, 2014. On the press release, Johnny Depp used Baidu’ light app “Qing Pai” to purchase the very first movie ticket of Transcendence, represented the beginning of the ticket snap. The purchase experience stunned the audience by simply taking a picture of poster.

Transcendence entered mainland China film market with the help of Baidu light app “Qing Pai”, supported by Baidu’s new technology “image recognition mobile payment”, another breakthrough after QR-code payment. Johnny Depp’s first purchase with “Qing Pai” was a symbol of transitioning from traditional movie marketing to mobile terminal, as well as the completion of Baidu’s O2O ticket business.

Take a picture of the poster to purchase Transcendence movie ticket for 4.18 yuan

Baidu light app “Qing Pai” cooperated with Transcendence to launch a movie ticket snap campaign beginning from March 31. The campaign will last for three days, tickets are to come out at 12 am every day. There are 418 tickets in total, each ticket only costs 4.18 yuan (USD 0.68) if paid with Baifu Bao (an Alipay like Baidu payment).

First, users open mobile Baidu app and find light app “Qing Pai”, which will look like this:

Second, click on the red button and take a picture of Transcendence poster.

Third, “Qing Pai” might need you to user your finger to circle a main region for the image recognition. Then, you could click the blue button on the lower right of your screen to continue.

Fourth, the image search results are displayed like the picture above. Click the first search result, which means purchasing online movie ticket.

Fifth, the on going movie ticket selling is Transcendence, as it shows that the ticket price only costs 4.18 yuan. Then you could go on purchase the ticket and pay with Baifu Bao.

Baidu Image Recognition Mobile Payment Technology

Baidu first showed its image recognition mobile payment on Transcendence marketing campaign. “Qing Pai” uses a new generation wireless payment based on image recognition technology. Image, as the major input of “Qing Pai”, combined with LBS information could display accurate search result. The search result could be accurate and personalized, which is guaranteed by Baidu big data pool and optimized through technology.

Image recognition mobile payment will be integrated in Baifu Bao, to be a new mobile payment after QR-code. An analyst regarded “Qing Pai” as the entrance to image recognition mobile payment O2O platform, which provides the shortcut from consumers to enterprises.

Baidu O2O

The cooperation between Baidu and Transcendence is a win-win for consumers and enterprises. Chinese consumers have the chance of watching Johny Depp leading Hollywood blockbuster with the lowest price 4.18 yuan, and for enterprises, Baidu light app offers a brand new online marketing platform. Image recognition mobile payment also improves mobile payment efficiency greatly.

Baidu’s new technology may lead us into a new era, an era of “shoot and shop”. Imagine you see some very trendy clothes on a magazine, you could simply take a picture and search, even pay with your smartphone.

Baidu realizes its O2O with light app plus Baifu Bao model, and creates a new marketing approach.

GMV of China E-commerce increased 21.3% last year to 9.9 trillion yuan (USD 1.63 trillion), according to iResearch. The growth was expected to slow down in coming years, and the e-commerce market will reach 21.6 trillion yuan (USD 3.53 trillion) in 2017.

As the data showed, the GMV of online shopping was estimated to account for 7.8% of the total retail sales of  social consumer goods in 2013, with a growth of 1.6 percentage point.

In terms of the structure of e-commerce market in 2013, small and medium-size enterprises'(SME) B2B accounted for 51.7%, and B2B of enterprises above designated size took up 26.2%; the proportion of B2B summed up to 77.9%. The market share of online shopping, online travel and O2O was 18.6%, 2.3% and 1.2%, respectively.

According to iResearch, the domestic and foreign trade environment would improve after 2013. In the next 3 to 4 years, SME’s B2B will expand in fields such as platform transaction, value-added service and big data of platform, and the overall B2B market would increase steady. The market share of online shopping was higher than last year. Although online travel took low proportion, it kept over 30% growth rate driven by the developing segments like air ticket and hotel booking.

Among the segments of China e-commerce market, SME’s B2B was still the largest part; the GMV of SEM’s B2B was predicted to hit 12.4 trillion yuan (USD 2.03 trillion) in 2017, with compound growth rate of 25%. Moreover, O2O and mobile shopping would be the fastest developing segments in the future.

In respect of mobile shopping, the traditional e-commerce giants were focusing on developing user habit of mobile client. As the network coverage system maturing, more smartphone and tablet users started to utilize fragmentary time, and mobile shopping was a good option for filling time. Meanwhile the growth of online shopping on PC slowed down, making mobile market the new growth point. It motivated e-commerce enterprises to seize the mobile shopping market.

For O2O, the O2O market of local service was the early starter in traditional industry and had made some development. O2O of catering and ticket service began to take shape. Reverse O2O (offline to online) service such as QR code and sound wave payment were just emerging, however, as the technology matures, the market may exceed 100 billion in the future.

Baidu recently released its Q4 financial report, which showed its thriving mobile market development. Baidu mobile search was growing steadily, it’s very unlikely that mobile search would threaten web search. Therefore, Baidu’s search concentrated business model would be sustainable. But Baidu’s solely profit pattern remained unsolved.

Baidu used to rely heavily on web search, which arouse much worries about whether Baidu could seize a large part of mobile search market share. The rising importance of mobile search was attributed to the popularity of smartphone. Baidu has made breakthroughs on several bottlenecks, which are:

1. Regain Search Users on Mobile: Because of the huge difference between mobile and web entrances, Baidu’s mass web search user base was of little use to mobile search. Now Baidu has successfully regained mobile search users, search volume in mobile end accounted for 35% to 40%. It is expected to surpass web search in the second half of 2014.
2. Mobile Customized Websites: We found that most of big websites have made adjustments for mobile devices, though it still cannot compare with PC , the browsing experience has been improved evidently.
3. Advertisers’ Willingness on Mobile Search Ads: With an increasing number of Baidu mobile search users, it will not remain as a big problem. Mobile search CPC is much lower than web search, and this is mainly because mobile search is more about local life service and business related search is mostly done in PC end.

In the past 2013, Baidu purchased 91 Wireless and PPS to grow its mobile market.

Baidu’s mobile platform revitalized its mobile search. The chart below showed Baidu’s apps downloads, most of them reached 10 million times.

The cutting-edge mobile platform could bring mobile search volume, for example, Baidu Android App Store made users more likely to install its games, music, and SNS apps because of the search convenience. More importantly, mobile users formed the habit of opening baidu.com to search information.

Baidu mobile assistant app had over 400 million registered users, increasing 70 million compared to Q3 2013. The estimated active users were between 150 to 160 million. Baidu revealed that it accounted for 41% of mobile android app distribution market share in Q4 2013. Unlike developed countries, iOS accounted for quite a small percentage in China.

Mobile Search

Baidu also improved its revenue structure, in Q1 2013, revenue generated from mobile search accounted for 10%. By Q4 2013, the percentage was increased to 20%. It was a big achievement for Baidu in mobile search field. When most people worried about the business prospect of mobile search in 2012, the percentage was merely 3%.

Goldman Sachs also expected mobile search remained high level growth rate while web search slowed down.

Baidu mobile search accounted for 57% share, lower than its web search market share. Still, it’s satisfying considered the complex mobile market competition.

Encroached by Qihu 360, Baidu web search market share was shrinking and yet it remained above 60%. But Qihu 360 faced great difficulty in making profit, Baidu could still benefit from the growing general search volume.

Changes in  2014

Baidu has made some changes in the attempt to gain real users: Baidu Tieba requires users to login when they browse some specific topics; and Baidu prepares to enter O2O payment part.

In 2014, Baidu will focus on four parts:

1. mobile search and cloud service
2. LBS service (Baidu map and groupbuy)
3. Consumer service (game, music and social network)
4. Probable overseas expansion

It is expected that Baidu would lay emphasis on fighting for mobile search entrance, that is, promoting its own apps. Baidu’s management revealed Baidu would spend a large quantity of money in purchasing, the expense would probably increase by USD 700 million. Because of huge investment, Baidu’s net profit will not grow in 2014 which is quite rare in IT industry.

Besides, the increasing traffic acquisition cost and copyright cost (iQiyi) would also lower its net profit. It’s estimated that Baidu’s net profit would begin growing fast next year.

In regards of departments, search accounted for 90% of net profit. Other products, such as 91 Wireless, Nuomi and Qunar did not bring much profit and could hardly maintain balance. But they increased the use of search indirectly, therefore, they were indispensable to Baidu. Although the growth rate of subsidiaries was not slow, it’s difficult for them to make profits. As users increased, the revenue grew as well as cost.

Potentials of O2O

In short term, O2O and LBS could not realize their business value mainly because of their scales were not large enough. For each local community, online users accounted for a small percentage. The shops would not perceive O2O as a big market, as a consequence, they were not passionate about entering the market. In return, online users had trouble finding suitable shops in O2O and could barely meet their needs. To break the dead cycle, it could only begin with increasing online users. If O2O attracts more users in the next few years and improves local merchants’ enthusiasm, its operating profit rate might reach 30%.

Except for gaining revenue from shops, Baidu could also display location-based advertising to users which would bring high conversion rate. It might also take years to achieve certain effects.

Nuomi needed to work harder to compete in groupbuy market:

Baidu map had dominant advantage in LBS market:

Chinese users had great search demand in restaurant, bank, entertainment and hotel, Baidu could easily cooperate with restaurants, entertainment enterprises and hotels to generate profits.

Compared With Google

Apparently, Baidu is not so innovative as Google. But Baidu has good business sense, and a growing potential market.

Comparison of Chinese internet enterprises valuation:

On the morning of March 10, 2014, Tencent and Jingdong (JD.com) together announced that they just reached strategic alliance. Jingdong is going to buy 100% equity, logistics personnel and asset of Tencent’s B2C platform QQ wanggou (wanggou.com) and C2C platform PaiPai (paipai.com), besides, a few stake in Yixun (yixun.com) and the right to buy the remaining stake. President of Tencent, Liu Chiping, will join Jingdong’s board of directors.

Meanwhile, Jingdong will issue new shares for Tencent, and Tencent is about to acquire 15% of the stake. In the future, Tencent will subscribe another 5% when Jingdong files for IPO. Therefore, Tencent will become Jingdong’s significant shareholder and strategic partner.

Analysts put it that the merge of e-commerce business between Tencent and Jingdong is the typical alliance between the giants. Tencent has the cutting-edge in mobile end, mobile QQ and WeChat accumulated massive mobile users, while Jingdong has strength in B2C e-commerce with 10 years experience, and developed its own logistics system. The collaboration is a win-win for both sides, it will help Jingdong’s listing in the market and entering into mobile end. As for Tencent, it will help establish an empire of WeChat, QQ and open platforms.

Tencent stated that it will open WeChat and mobile QQ API and open other major platforms to Jingdong, in order to help Jingdong develop e-commerce. They will also cooperate in online payment, to improve consumer experience.

The deal continues the open strategies put forward by Tencent in 2011. In September 2013, Tecent purchased 36.5% stake in Sogou with USD 448 million, and merged its Soso with Sogou.

By the end of 2013, Tencent came up with an ecosystem strategy based on QQ, WeChat and open platforms to connect people with product and service.

Tencent began its e-commerce business in 2005, PaiPai was the first platform. Then it launched QQ wanggou in 2008. In 2012, Tencent set up a subsidiary company for e-commerce. In May 2012, Tencent bought Yixun. In February 2014, Tencent became a shareholder in Dianping (dainping.com) which was an important step to O2O development.

Jingdong will definitely help complete Tencent’s ecosystem.

Could Wechat avoid Unionpay to test its POS payment? The answer is yes. Many reliable sources indicated that Wechat POS payment will launch on 22 in March, 2014.

Though Tencent did not comment about the rumor publicly, word said that Wechat POS project was led by a team who also developed Wechat membership card. Wechat POS is consisted of customized POS machine and Wechat payment, targeting offline stores’ payment solution. When a consumer has purchased the products, the customized POS machine will generate a QR code and the consumer could scan the QR code then pay the bill with Wechat payment.

One insider from Tencent revealed that Wechat POS would work as a tool to connect offline stores with Wechat payment and Wechat membership card. Wechat membership card only had stored value and gathering points functions before, it will add payment soon.

Another relative news said that Wechat payment API is open to all verified service account, which requires 20,000 yuan (USD 3,263) deposit and 6% commission.

It means that Wechat begins to expand its payment business both online and offline. Wechat is not the first one to enter offline payment market, Alipay, 99bill and chinapnr all have tried. Offline POS payment is an essential step for third-parties such as Wechat and Alipay to enter retail payment market.

Alipay tried avoiding Unionpay to enter POS payment market, it ended badly and those banks in cooperation with Alipay got huge amount of penalties. Retail payment market is dominated by Unionpay and banks, Alipay’s entering offline payment jeopardized Unionpay’s interest greatly. Though Unionpay has no restraint on third-parties, it could stop third-parties by controlling member banks.

Alibaba claimed that its Taodiandian group would launch takeout and delivery service on November 6, 2013. Taodiandian is a mobile O2O app launched in June 2013, aims at serving local users.

There are already over 10,000 shops on Taodiandian, including small restaurants, fruit shops,Patisseries and tea shops. Taodiandian is still testing its takeout and food order services.

At present, Taodiandian’s takeout and delivery had covered Beijing, Shanghai, and other 17 big cities. Consumers need to login Taodiandian mobile app, to find restaurants nearby and make orders, then use Alipay to pay for the orders. Taodiandian would give away 10 yuan (USD 1.63) coupons to new users, starting from November 1 2013. Meanwhile, during November 1 to 30, Taodiandian would select 50% takeout orders randomly to return their money back, 50% consumers would receive cash coupons in their Alipay accounts.

Taodiandian has introduced comment and credit evaluation system for shops, just like Taobao shops, consumers could comment and rate the shops. Shops in Taodiandian will gain their credit rating cumulatively.

Double 11 is yet to come, the competition between B2C platforms has upgraded. On October 17 2013, Tmall and Yintai shopping mall reached to an agreement of developing China O2O business model. Except for Yintai, more than 30,000 offline stores would join Tmall’s Double 11 promotion.

If offline stores want to join Double 11 promotion, they will have to open an online store on Tmall first. Some thought that this year’s Double 11 promotion aimed at attracting more enterprises to open online stores on Tmall. Online stores’ annual service fee, advertising income and commission charge are the main source of Tmall’s revenue.

Alibaba focused on O2O (Online to  Offline) this year, without promoting 50% off. Other B2C enterprise began fierce competition in sales promotion. Tencent claimed that they would offer 50% off with free shipping during October 20 to October 25. Jingdong, dangdang and other B2C enterprises all had different kinds of promotion before Double 11 in October.

11 Nov is one important online shopping date in China, you can find out more here.