(Chinese Version)

On March 5, 2016, China’s premier Li Keqiang delivered the annual report on the work of the government at the opening ceremony of the Fourth Session of the 12th National People's Congress of the People's Republic of China. In the report, Premier Li provided various pieces of information, from macro-level policies to new directives for different industries, etc. As a long-time observer in the macro-level policies for the Chinese O2O industries, I specially pick three sentences in the work report and advise every people in the O2O industry to ponder over for a while.

Three key messages

1. “We will encourage interaction between the online and the offline and encourage physical stores to transform themselves through innovation.”

In 2015, the concept “O2O” was included in the annual government work report for the first time. This year, “O2O” was mentioned in the government work report for the second time. However, the way “O2O” was mentioned is slightly different, which is worthy of your attention.

To be more specific, last year’s government work report referred to “the Internet as a platform”; in 2016, however, the report stated that “we will…encourage physical stores to transform themselves through innovation”. As far as I see it, this slight change means a great deal: the government might devote more efforts to offline, instead of online, and the role of Internet to boost economic reform.

2. “We will relax restrictions on market access to the service sector, and ensure greater specialization in producer services and higher refinement in consumer services.”

Please pay attention to the concept “higher refinement in consumer services”, which is coined by this year’s annual government work report. Such concept dates back to the “Guidelines on Expediting the Development of Consumer Services and Promoting the Upgrade of Consumption Structure” issued on November 22nd, 2015:

“We should explore the needs of the public for food, clothing , shelter, transportation, and from birth to death, find new service markets, expand the range of Internet services, expedite the interaction and integration between offline and online, nurture new types of consumption and boost the development of emerging industries.

“We should expedite the construction of service-oriented infrastructure, enhance service and management levels, expand the scale of services, refine service procedures and provide smart services. Services should be improved and consumers’ choices should also be diversified via modern technologies such as IT. We should nurture the need of information-oriented consumption, diversify the content of information-oriented consumption, improve the environment for life services, enhance rules and regulations over life services and consolidate the protection system of consumers’ interests. In addition, we should further explore traditional Chinese culture, ethnic diversity, regional characteristics, and even expand to overseas markets.”

I want to point out here that the document stressed that services should be improved via modern technologies and consumers’ choices should also be diversified, which coincides with the concept mentioned in this year’s government work report.

3. “We will carry out the "Internet Plus government services" model and promote better information sharing between government departments.”

Although this might not have direct correlation with O2O, this is the second time this year’s government work report mentioned “Internet Plus”. It is worth mentioning that the government didn’t mention concept such as “big data” and “cloud computing”, but instead “Internet Plus government services”, which might reveal to us the new types of thinking of the Chinese government.

After the State Council issued “Several Proposals on Enhancing Service and Regulation of the Market via Big Data Technologies” last July, Shanghai took the lead and made some trials. By displaying the hygiene level of O2O restaurants in Pudong New District on their websites, the government got to raise its influence significantly over O2O platforms.

At last, I advise you to understand these three sentences against the background of the Chinese government’s efforts to boost consumption, upgrade consumption structure: the government wants to boost the quantity and quality of consumption via the Internet industry, but it doesn’t wish to see traditional companies be challenged, even replaced but emerging Internet companies. Co-existence and co-development is the best result the government wish to see.

Three new trends in the Chinese O2O market

Based on the above three sentences, we can actually make some analysis over the future Chinese O2O market: Although commercial behaviors should be the dominant force in the O2O market, the Chinese government does have some crucial impact on the market, whether we admit it or not.

1. Training laborers from traditional industries

“Not merely a platform for craftsmen, but rather an open school similar to Lanxiang Vocational School”, this is the slogan Daojia.com has been highlighting since last year. It is reported that Daojia.com plans to train as many as 10 million Internet laborers. While the government encourages physical stores to transform themselves through innovation, Daojia.com goes one step further and directly trains laborers from the traditional industries, which to some degree coincides with the concept mentioned in “Guidelines on Expediting the Development of Consumer Services and Promoting the Upgrade of Consumption Structure”.

2. Adding low-frequency services to O2O platforms

In the sentence “services should be improved and consumers’ choices should also be diversified via modern technologies”, you should pay special attention to the concept “consumers’ choices”.

Although it seems that the Chinese O2O market is quite heated for a while, only apps that provide high-frequency services, such as takeaway delivering, movie ticket booking, restaurant booking and house-cleaning service, etc. However, there are lots of services in modern society that are needed less frequently. Although an ordinary person might only need such services for once or twice in a lifetime, these low-frequency services should also be added to the O2O market.

Comparatively speaking, it’s quite easy to develop an app providing high-frequency service, but pretty difficult to develop an app that provides services less needed. However, interaction between offline and online in these low-frequency services should also be encouraged.

Some companies have already made some attempts:

For example, users could book some low-frequency services on Daojia.com, and Shanghai citizens could book neighborhood low-frequency services via WeChat or the website. However, in both cases, users could find the information of these services via the Internet, but they also have to make a call to book the service.

In addition, Baidu launched Baidu Express last year, and helped individuals or companies who provide low-frequency services (such as unlocking, moving, draining sewage, domestic appliances fixing services, etc.) to advertise themselves via Baidu’s various search portals, such as Mobile Baidu, Baidu Map, Baidu Nuomi.

Baidu’s attempt may help us wonder if service providers of low-frequency services really need to develop an app of their own and advertise themselves to the public, so that they can think of the apps when they need relevant services. Instead, they could just advertise them through various search portals, which saves cost while reaching as large a crowd at the same time.

In the future, if Baidu Express allows users to not only pay for such services, place orders, make comments totally via Baidu Nuomi, these services will be fully added to the O2O market, which also answers to the call for “smart service” of the Chinese government.

3. Sharing user base and information with offline business owners

In today’s O2O market, while O2O platforms gather a huge crowd of users, it seems that physical stores are merely service providers. If O2O platforms could share their user base with physical stores, then physical stores will be much more willing to share their resources with O2O platforms and transform themselves through innovation and technology.

As a matter of fact, there are already some attempts in the online movie ticket-booking sector. For example, Maoyan and Baidu Nuomi have already started to provide co-branded card for regular consumers, so that movie theatres can know which users on Maoyan and Baidu Nuomi go to the theatre more often, their cycle, preference and age and develop marketing strategies that are more targeted and focused. This wouldn’t be possible if Maoyan and Baidu Nuomi refused to share their user base with theatres.

What will happen if such sharing and cooperation will spread to other sectors in the O2O market? As far as I know, this might be a great challenge in the transformation of traditional businesses, but also a great opportunity.

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[The article is published and edited with authorization from the author @Zhang Yizhen, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.