27 March 2014
Innovations drive growth of consumer services platforms
|Scanning QR codes with a smartphone can trace production sources.|
In the last five years, total retail sales of consumer goods in Shanghai grew at an average rate of 13.86% a year, whereas the average rate of growth in sales on consumer services platforms was as high as 60.9%. Advancements in mobile technology, cloud technology and the Internet of Things (IoT) as well as the ubiquity of 3G and 4G networks have laid a foundation for innovations in e-commerce, while innovations in operating format have in turn fuelled the exponential growth and upgrade of e-commerce.
I. Technology innovations in tandem with format innovations
1. Technology innovations
a. Mobile consumption a new growth area for e-commerce in last two years
Online shopping platforms have been developing new operating formats by maximising the use of new technologies such as IoT, cloud technology, Wi-Fi, GPS and QR codes. Yihaodian, an online grocery retailer, has launched a mobile app that allows consumers to browse and buy during fragmented time-slots. For example, when commuters at the metro station spot some items they like on an ad poster, they can scan the QR codes with their smartphone and buy them straightaway.
Ctrip, an online travel agent, is very focused on wireless applications. Its mobile download function is now applicable to all of its products and services, so much so that products and services available for booking through PCs can also be booked through a mobile device. Currently bookings through mobile devices are equivalent to 14% of those through PCs, which is the highest in the industry.
In WeChat 5.0 released by Tencent, a new code-scanning shopping service is added. With the “scan QR code” feature, a user can find out the online selling price of an item by scanning the QR code with his smartphone. He may then proceed to buy it by clicking the shopping link provided.
b. Whole-process tracking via IoT
Shanghai Fresh on Demand e-Business Co Ltd (962360.com) is an e-commerce company in Shanghai specialised in the provision of fresh food ingredients. To ensure food quality, the company, using the trade name Caiguanjia (meaning "grocery housekeeper"), places great emphasis on logistics and distribution. Through IoT, the company tracks merchandise quality and orders from production to sales and distribution. This encompasses the tracking of the entire cold chain logistics process including refrigerated warehouses and refrigerated lorries; the whole-process tracing of agricultural produce including standards in quality, packing, storage and distribution; and the inspection of agricultural produce in the field, on entering a warehouse, during warehouse storage, during transit and upon goods receipt. As most of the data obtained through the company’s whole-process tracking are also available to consumers with maximum transparency, customers can shop with complete ease of mind.
2. Online-to-offline e-commerce (O2O) innovations
NGS Supermarket (Group) Co Ltd boasts 2,000-odd outlets in Shanghai, more than 1,000 direct-operated chain outlets in Jiangsu and Zhejiang, as well as a modernised distribution system. Leveraging on these advantages, the supermarket giant collaborates with online shopping and logistics portals such as Tmall, Taobao, SF Express and Bianlitong (chblt.com) in running a "buy online pick up in store" business model. Compared to express delivery, this model has obvious advantages in that it does not require consumers to wait at home (greater flexibility) and offers greater privacy (data security) while distribution costs are greatly reduced. With more than 3,000 NGS direct-operated outlets, logistics centres and customer service centres integrated together, a consumer who has placed an order can choose to pick up in person at any one of the nearby convenience stores, discount stores or community supermarkets, or request home delivery by a nearby store.
Uniqlo has extended its operation from offline to online within a short time. Targeting young consumers, it rolled out the "Lucky Line" (virtual queuing) campaign on the most popular social media websites by randomly giving away free gifts and discount coupons. With all coupons given out in the campaigns redeemable at its physical stores, and with a rich array of merchandise showcased both online and offline, Uniqlo manages to direct online consumers who are mostly of the younger set to its physical stores. Whenever a new Uniqlo physical store opens for business, there will be a promotion campaign that is run concurrently online. It has also developed mobile marketing games that draw consumers to its physical stores to participate with their mobile phones. Uniqlo adopts the "buy online pick up in store" business model across the board. Consumers place their orders online, the online store will ship the merchandise by express delivery to the specified outlets and the outlets will inform the consumers to collect in person in due course.
Yixun.com, a shopping site under Tencent, has taken a critical first step in O2O operation by collaborating with department stores including In-time and Rainbow. Presently more than 3,000 merchants have gone online to offer WeChat membership services. Yixun.com has also started a "cloud" distribution business in which, through "cloud" distribution enterprises, consumers can enjoy selections of products and product types which are much larger than those available at traditional physical stores.
3. Business expansion innovations
Online travel website Ctrip is painstakingly developing associated businesses. Its hotel booking services have extended from the mainland to overseas. By being able to offer mainland travellers booking services covering 230,000 hotels in 172 countries and regions, it is now the undisputed industry leader in China in the online booking of overseas hotels. Its services in booking air and train tickets have also been extended to insurance.
When it was founded in 2003, dianping.com was the first website in China providing information and reviews of restaurants. From then on, the types of goods and services have extended to leisure and entertainment, child care and children’s products, fitness, cars, etc. Its contents cover more than 6 million merchants in over 2,300 cities (almost all cities above the county level) in China. There are now more than 2.6 million consumer reviews on the platform, accessed by more than 80 million users via mobile devices.
4. Service innovations
Ctrip is now showing room rates, reviews, photos and other information of 230,000 overseas hotels on its site. The information items are arranged according to the habits and needs of mainland consumers while all texts are succinctly given in Chinese. Its 2,000-plus hotel booking specialists provide 24/7 services. Different payment methods are accepted, including over-the-counter cash payment and prepayment.
Hualian Jia Wei Technical Services Co Ltd (Hualian Jia Wei) in Shanghai started out as a company providing home appliance maintenance and repairing services. It has since developed into a platform in community e-commerce services. The domestic services network centre it establishes in Shanghai is now offering all sorts of services related closely to the everyday life of residents such as domestic help, old age care, health care, real property management, guided shopping within communities, housing leasing, personnel recruitment, legal services, etc. In domestic help alone, the range of services covers nanny services, home tuition, home refurbishing and cleaning, home appliance and household maintenance and repair, used-goods trade, etc. The domestic services platform not only offers convenience to residents in different communities, but also markedly expands the business of Hualian Jia Wei.
5. Marketing innovations
Dianping.com does not limit itself to providing merchant information and reviews, it also sends out privilege coupons, free-trial coupons and discount coupons from merchants or put up advertisements for them. In addition, it organises group buying on behalf of merchants and consumers. There are other innovations, one of which is "e-loyalty card". This is a way of storing physical store membership status into mobile phones so that consumers will only have to bring along their mobile phones to enjoy privileges at any collaborating store. Dianping.com has also added a booking feature in its restaurant information enquiry service. With this new feature, consumers can book tables in restaurants online without making phone calls. As a result, it brings more business to participating restaurants while offering convenience to consumers. Currently, for participating restaurants, one-third of the bookings are by phone and two-thirds are made online.
6. Mining of big data
Yihaodian already has 30 million website users and 7 million mobile phone users in the five-odd years since it has come online; Tencent has 800 million accounts for its QQ (instant messaging) service and 600 million WeChat accounts; Ctrip has in its possession countless high-quality data on users, flight tickets, train tickets, hotel bookings, group buying and payments. Consumer services platforms are now intensively mining such big data for advertisement targeting and customer segmentation purposes so that more targeted marketing campaigns can be carried out. Some of them use big data for conducting brand studies and implementing made-to-order production; others make use of big data to better target the right customers when distributing trial samples and placing advertisements; still others use them to identify customers’ potential needs.
7. Cooperation and cross-selling
Different types of companies have different advantages and, during the development of consumer services platforms, the cases for cooperation among companies have increased considerably. In some cases, online companies are cooperating with offline ones; in others, platform operators are cooperating with logistics companies. For example, alading.com, an online shopping platform from Taiwan, is cooperating with various convenience store chains including FamilyMart, Lawson and 7-11 on the one hand and with banks and insurance companies such as Pudong Development Bank, China Guangfa Bank and Ping An Insurance on the other. Tencent also has ongoing cooperation with department stores such as In-time. Private enterprises have assumed important roles in the founding stage of platforms. Now that state-owned enterprises are speeding up their transformation, they are increasingly cooperating with private enterprises when building their platforms. Thus we find that the Shanghai hotel group Jin Jiang is cooperating with Ctrip in developing the tourist market, while the privately-run Caiguanjia is cooperating with Haibo Logistics of Shanghai, a state-owned logistics company.
II. Problems and challenges
Problems and challenges faced by the rapidly growing consumer services platforms include:
First, a lot of people are jumping on the bandwagon, resulting in the proliferation of platform companies overnight. As they have similar positioning (most aim to be the comprehensive type), their offerings are highly homogeneous. There are still potentials in the consumer services market, but the market needs to be segmented for better targeting. Blindly venturing into the market without analysing will result in oversupply. In fact, presently not many of these platforms are actually making profits.
Second, standards for agricultural and sideline products. In contrast to industrial products for daily use, standards for agricultural and sideline products are much more complicated. For example, everyone has different requirements and feelings about the maturity and sweetness of fruits.
Last, inequality in taxation. Sales in physical stores have to be taxed, but a considerable proportion of online sales are exempted.
Qi Xiaozhai, Special Correspondent, Shanghai