An O2O Indicator: Entrepreneurship Wave Takes a Sudden Turn and Becomes Rapidly Worse - Increasing Integration Is the Trend
Source: tech.qq.com View: 239 Date: 2015-12-09

Internet and mobile internet are bringing impacts and influences for each industry with unprecedented speed that brings large innovative opportunities and development spaces for entrepreneurs. Thus in past two years, a batch of entrepreneurship companies appeared. Especially in the field of O2O, each project closing with people’s life has also been born. Among them, there are catering and take-out, housekeeping, door-to-door car wash and door-to-door cook.

However in the second half of 2015, the wind direction suddenly changes. The originally hot O2O market takes a sudden turn and become rapidly worse like on a roller coaster. Additionally the cold capital market also blows originally hot O2O market ruthlessly. The era only depending on a good idea to achieve financing has gone.

However from active angle, this is more like a great wave to sweep away sand and to select a batch of good O2O projects. Some investors indicated that now is a golden era for entrepreneurs; cold capital market will let really excellent modes to stand out and let investment be more rationalized. Meanwhile, integration and mergers & acquisitions will become trends of O2O in future.

Rapidly Worse Entrepreneurship Wave

In recent two years, because of influences from entrepreneurship wave and support from capital, many O2O enterprises have been established. However, over homogenized competitions and expansion only depending on money make some of them to have risk to close down.

Lu Wenyong, CEO of Daixi indicated for Tecent Technology that this phenomenon has three main reasons below:

First of all, O2O area itself needs lots of money thus enterprises that can’t find financing are difficult to support. Unless they have good enough modes and continued investment by investors.

The second one is that the demands aimed by many O2O enterprises are not rigid demands but pseudo demands. The whole environment of O2O market also needs money to support; thus of course, investors will hesitate these pseudo demands. Lu Yong believed that beside beer & skittles and basic necessities of life, many demands are not necessary; at that time, ability and business mode of groups will be important element to attract attentions of investors.

The third one is that entrepreneurs have misunderstanding of entrepreneurship & innovation concept. Slogan of entrepreneurship and innovation lets many people believe themselves to fit for entrepreneurship; however, in the fact, majority of them are not suitable. “Therefore, you can find that many people who have abilities started their own businesses but their projects even can’t continue for six months.”

Among them, door-to-door car wash is a serious area of O2O collapse wave, such as Cloud Car-Wash and Che8 published collapse. It is worth noticing that in this cold winter Guaguaxiche.com becomes outstanding, and has published information of achieving 100 million USD not long ago; then it also has finished a new round of Pre-B financing with 100 million RMB in November that is leading invested by Star Angel Fund followed by 58home and Shouruidejing.

Considering huge collapse of car-wash O2O companies, Qie Jianjun, CEO of Guaguaxiche.com believed that they go to a mislead area in that they were eager to make platforms and thresholds but ignored the most important car-wash business itself.

"Car-wash itself is a thing needs intensive cultivation, needs to ensure users’ experiences under situation of large amount of orders, for example, distributing car cleaners to reach destination in short time, dealing with limitations from different car-wash places and bad climate” said by Qie Jianjun.

Currently, Guaguaxiche.com has reduced subsidy of door-to-door car-wash service and adjusted the price of order from 25 RMB to 30 RMB.

Qie Jianjun believed that the fundamental reason of original subsidy is to achieve customers and to cultivate users’ behaviors as well as to increase users’ sense of trust; meanwhile it is also an effective promotion. The followed price adjustment will be more important. Qie Jianjun said that Guaguaxiche.com once provided subsidy, however with increasing payment users gradually increased price and reduced subsidy as well as let them be rationalized.

About criticized subsidies, Wan Yong, CEO of ayibangNaN believed that spending inefficient subsidy was more than self-operation cost of company. “No matter massage or car-wash, if provide subsidy with 100,000 or 200,000 RMB every day, a company will spend millions of RMB only in a month. While a rigid cost of dry cleaning may be only hundreds of thousands of or millions of RMB.”

"For a normal enterprise, it should clearly know how many orders and users can be brought by subsidies. You should also know how long the subsidy can be continued?” believed by Wan Yong, current O2O market has excessive force to achieve new users.

Investment Should Be Rationalized Again

Additionally from investment level, O2O area has continuous financing information from 2014 to beginning of 2015; and financing amount always are one million or more. However, with rapidly worse situation of O2O market, investors become more cautious for projects in this area.

Hu Haiqing, founder of ChinaVenture indicated for Tecent Technology from 2014 to the first half of 2015, private equity market indeed appeared some “blowing bubbles” phenomena, but now capital market begins to be rationalized.

For example, since the first half of 2015, the financing proportion achieved by 3W hatching projects has obviously declined, especially O2O projects. “Among door-to-door projects hatched by 3W, many projects have been not undertaken by investors” indicated by Qiu Binbin, investment director of 3W Fund.

Qiu Binbin also provided a data that since the year of 2014 until now, there are 15 O2O projects in 3W incubator; recently, five of them achieved Angle investment; however when cold winter of capital comes, these projects are difficult to achieve A round or Pre-A round of investment, at the same time, investors also become more cautious.

Many investment managers told Tecent Technology, their investment institutions have stopped investment for O2O projects; “we will continually consider projects but be more cautious” said by one of them.

Shuffle and Integrate

Since beginning of 2015, Didi, Meituan & Dianping, Ctrip & Qunar and other mergers and integrations are showing the trend of O2O in future: before that, enclosure way based on burning money and subsidy is not a lasting good idea. More and more companies and investment sides realized this; thus no matter provided by capital or considered from business level, they will select from “competition to cooperation.”

Small giants in each area will bring a new round of shuffling for O2O market after mergers. For example, Didi & Kuadi entered into carpooling, bus-pooling and even designated driver market after mergers, and then purchased business of Kaolabanche. Entrepreneurship companies in these areas will be at least shocked or close down at most.

For layout and trend of future market, Wan Yong believed that each industry may have this way like Didi & Kuaidi in future that is competition at first and then mergers, acquisition promoted by capital. This may be a trend. “You can’t control this trend, but the only one you can hold is providing high-quality services” said by Wan Yong at last.

However, for Sun Hao, CEO of Daojia.com.cn, he is more willing to see impact from giants faced by entrepreneurship enterprises from active angels. He said cooperation of Meituan and Dianping as “two puffiness people came tighter” but equaled to “a stronger man”. He explained that although cooperation of Dianping and Meituan accounted for more than 80% of market share in group buying market, they can’t produce a monopoly phenomenon. “This mergers and acquisition is more based on defense.”

Sun Hao believed that for example of take-out, nonstandardized life service area is difficult to appear a full monopoly platform. “Life service not only has regional attribute but also has many personalized elements to have different positions. Therefore high-end market (in take-out market) can be seen as an independent one.”

Integration also exists among entrepreneurship enterprises. According to information on December 5th of 2015, 24tidy.com the door-to-door housekeeping brand will fully purchase dudumeijia.com; after that, 24tidy.com will provide nail care service based on its own original services, to fully build a vertical “door-to-door service” brand covering middle group.

Some insiders analyzed that enterprises at preliminary stage made rational businesses and team integration can better deal with competition to some extent will be broken out at any time.

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