Who’d be the Next Taobao for Offline Services?

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When O2O (online to offline) commerce became the next hot topic, after group-buying, in China, it was taken by a lot of failing or declining businesses as life-saving straw, especially those who have anything to do with local economy, say, group-buying or classifieds services. It’s not hard to come up with a dream of becoming the next Taobao for offline services.

Group-buying Service Turned Platfrom

55Tuan, one of the surviving group-buying sites in China, launched 55 Mall, a platform for local offline services to set up online stores, in November 2011. 55 Mall claims it has had over 30 thousand offline stores joined in. There has been more than ten categories, restaurants, cinemas, hotels, health & beauty salons, auto service, photographic studio, etc..

Unlike online stores we know about that sellers take care of the online store themselves and communicate consumers directly, 55 Mall operate stores for offline merchants, editing content and checking on prices. The company explains that’s for the sake of service quality, where problems often emerge in group-buying market.

Xu Maodong, CEO of 55Tuan, encouraged his employees to build the biggest local life service platform after, like many others, realizing that the low-margin — even no margin — group-buying business couldn’t go any further. The company charges merchants who are in need of in-site marketing.

“For merchants, doing daily deals is like nomadic or hunting that you’d move around. 55 Mall is different. We are meant to build a virtual city gathering service providers who serve our offline lives. It’s a new one-stop e-commerce city”, the company said so.

Classifieds Service Turned Platform

58.com, a classifieds site, is also encouraging offline service providers, food delivery services, moving companies, appliance repair services, decoration companies and hourly workers, set online stores there. To equip end-to-end transactions, 58 is introducing third-party payment systems and logistics services, to have merchants and consumers finish deals online.

Online Neighbor Express is a subscription-based profit model, facing both merchants and consumers. While subscribed users can enjoy some service privileges, merchants on board can have higher placements in search results, marketing placements, virtual items for online store decoration, and the like. A separate marketing program, Store Recommendation, is another revenue generator. Those sound like the exact revenue sources of Taobao’s.

Yao Jingbo, CEO of 58, said they’d not take commissions in three years and would pay the transaction fees charged by third-party payment services.  That also sounds like the strategy Alibaba’s Jack Ma adopted when Taobao was faced with competition from eBay’s entry to China.

Alibaba Takes It All?

One year later, 55 Mall joined Juhuasuan, the former group-buying platform Alibaba relaunched in the past July into a 55 Mall’s competition. Divisions related to offline commerce, including Taobao Life,  were combined into Juhuasuan which now works exactly the same with Taobao, but for offline service providers.

“Less than one tenth of Taobao users ever purchased offline services online. Juhuasuan team strongly believe that it will be the next two-trillion yuan market”, said president of Juhuasuan.

Other well-known group-buying services, Groupon China or GaopengManzuo and Qianpin, also joined Juhuasuan. 55 Mall now allow users in 36 cities to use its services on Juhuasuan.

55 Mall’s choice sounds like Dangdang’s joining in Tmall. It’s not hard to imagine Alibaba will take it all again in the new O2O sector considering its brand name and the well-built ecosystem. Or there will be another 360Buy or Suning Yigou?