O2O business in perspective

O2O has been one of the hottest buzzword in China since 2015. Baidu (Nasdaq: BIDU), Alibaba (NYSE: BABA) and Tencent (OTC:TCEHY) , or "BAT" as an acronym, all heavily invested in this business model. In this article, I will put O2O in perspective.

#1) Definition
Simply put, O2O or online-to-offline is the link between 'online discovery' and actual commerce in the physical world.

Groupon (NASDAQ: GRPN), OpenTable (acquired by Priceline in 2014), Uber and ClassPass are examples of O2O business.

In china, the O2O market is dominated by BAT. The current landscape is as below:

(Source: Firelood)

#2) O2O in the U.S.
The Silicon Valley is always the bellwether of Innovations. However, China sees a more dynamic O2O market. Both in the size of investments and number of firms.

One reason is the higher penetration rate of mobile payment in China.

 (Source: Innovation is Everywhere)


#3) O2O vs. 'online IT system'

The service sector has following factors:
1. Lack of scalability
Humans are different from machines, who need training and management.
It also takes considerate resources to transfer a service provider from one location to another.

2. A fine line between 'shared economy' and 'pseudo e-business'
The difference is similar to those between Uber and Shenzhou Car Rental (HKG: 2312). The former benefits from 'shared economy' and a larger scale brings profits; the latter is traditional business with an online IT system, and a large scale will amplify existing loss.