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Startups That Merge Online and Offline Services Are Sweeping China

25 points by scapbi 12y ago

rahimnathwani 12y ago
'Groupon'-style daily deals are popular here in China, especially for high-margin offline services like restaurants and massages. It's so popular that it's worth checking if there's a deal, once you've arrived at a restaurant and before you place your order, as often you'll save 10-15%. Both taxi-hailing and Uber/Lyft-like services are popular here also. Discounts for users and incentives for drivers helped to drive initial adoption. The article mentions Dianping, which is equivalent to Yelp. It used its comprehensive database of restaurants to create a niche when 'daily deal' sites became popular. Uber also operates here, with three services: - People's Uber (ride-sharing; about half the price of UberBLACK) - UberX - UberBLACK
- fookyong 12y ago
  Restaurants are "high margin"? I don't think restaurants pervasively discount because they can afford to - I think it's more to do with it being a brutally competitive industry. That said you may be right in that the type of restaurants that use daily deal sites tend to be the higher profit ones, the corporate-run chains that have economies of scale or the ones that have lower running costs like Korean BBQs where the customer cooks their own food.
  - rahimnathwani 12y ago
    > Restaurants are "high margin"? Yes, restaurants are high margin. I didn't say they are high profit. Restaurants have high fixed costs (rent and staff) and low variable costs (the ingredients and beverages cost 30% to 50% of the price paid by the customer). Because they have high gross margins, they are still better off with an additional customer who pays 20% less than the sticker price of a meal. It's better than an empty table. To understand the difference, compare this with a high _profit_ but low _margin_ business like UK supermarkets. Tesco makes about 5bn USD per year, but its gross margin is less than 7%. If Tesco gave a 20% discount to entice a customer away from a rival supermarket, Tesco would lose money on the sale.
    - seanmcdirmid 12y ago
      > It's better than an empty table. This only applies to restaurants that have empty tables. Try going to Sunshine Kitchen around lunch or dinner...they aren't going to give us a deal (but there is delivery via online services so...).
      - rahimnathwani 12y ago
        I am in Sunshine Kitchen on Chaoyang Lu right now (12:40pm) and I can see 5 empty tables.
haosdent 12y ago
This story is long time ago. China O2O is more crazy than one year ago.
reedlaw 12y ago
Not only that, but the trend is to pay users for adoption. When all the apps in a sector (e.g. taxi-hailing) are free, there can't be competition on price so they give customers cash back. Sometimes the payback can be more than the taxi fare if you include the rewards your friends get. For online auctions, Taobao set the trend of free auctions for both buyer and seller (including free payment processing through Alipay). All of the competition followed suit and now Taobao offers cash back. I believe they make money through featured listings and seller registration on their premium platform, TMall.

25 points by scapbi 12y ago

'Groupon'-style daily deals are popular here in China, especially for high-margin offline services like restaurants and massages. It's so popular that it's worth checking if there's a deal, once you've arrived at a restaurant and before you place your order, as often you'll save 10-15%. Both taxi-hailing and Uber/Lyft-like services are popular here also. Discounts for users and incentives for drivers helped to drive initial adoption. The article mentions Dianping, which is equivalent to Yelp. It used its comprehensive database of restaurants to create a niche when 'daily deal' sites became popular. Uber also operates here, with three services: - People's Uber (ride-sharing; about half the price of UberBLACK) - UberX - UberBLACK

fookyong 12y ago
Restaurants are "high margin"? I don't think restaurants pervasively discount because they can afford to - I think it's more to do with it being a brutally competitive industry. That said you may be right in that the type of restaurants that use daily deal sites tend to be the higher profit ones, the corporate-run chains that have economies of scale or the ones that have lower running costs like Korean BBQs where the customer cooks their own food.
- rahimnathwani 12y ago
  > Restaurants are "high margin"? Yes, restaurants are high margin. I didn't say they are high profit. Restaurants have high fixed costs (rent and staff) and low variable costs (the ingredients and beverages cost 30% to 50% of the price paid by the customer). Because they have high gross margins, they are still better off with an additional customer who pays 20% less than the sticker price of a meal. It's better than an empty table. To understand the difference, compare this with a high _profit_ but low _margin_ business like UK supermarkets. Tesco makes about 5bn USD per year, but its gross margin is less than 7%. If Tesco gave a 20% discount to entice a customer away from a rival supermarket, Tesco would lose money on the sale.
  - seanmcdirmid 12y ago
    > It's better than an empty table. This only applies to restaurants that have empty tables. Try going to Sunshine Kitchen around lunch or dinner...they aren't going to give us a deal (but there is delivery via online services so...).
    - rahimnathwani 12y ago
      I am in Sunshine Kitchen on Chaoyang Lu right now (12:40pm) and I can see 5 empty tables.

haosdent 12y ago

This story is long time ago. China O2O is more crazy than one year ago.

reedlaw 12y ago

Not only that, but the trend is to pay users for adoption. When all the apps in a sector (e.g. taxi-hailing) are free, there can't be competition on price so they give customers cash back. Sometimes the payback can be more than the taxi fare if you include the rewards your friends get. For online auctions, Taobao set the trend of free auctions for both buyer and seller (including free payment processing through Alipay). All of the competition followed suit and now Taobao offers cash back. I believe they make money through featured listings and seller registration on their premium platform, TMall.