16 July 2019

O2O business model not as seamless as you think

O2O became a major buzzword in China last month as brick-and-mortar businesses and online channels scrambled to extend their reach into each other’s turf ahead of the big online sales promotion on November 11, aiming to carve out a larger slice of the nation’s vast retail market.

Despite having many virtues in theory, the O2O — which refers to “online to offline” and vice versa — business model has shown up its shortcomings in the aftermath of the “Double-Eleven” online shopping festival. An anticlimax seen in new car sales offers a good example.

E-vendors were swamped by a flood of preorders on that day. Auto sales platform alone reportedly sold a total of 90,466 vehicles worth a combined 11.7 billion yuan (US$1.92 billion). Tmall also said its car sales on the so-called Singles Day jumped five-fold from a year ago.

However, most of the preorders didn’t translate into actual sales. After placing the orders online, customers were supposed to settle their bills in person subsequently at the showrooms. In reality, however, less than 30 percent of the online buyers showed up and actually drove away with their cars, Beijing Business Today reported, citing dealers at the 4S auto shops. 

Reasons behind the high failure rate of O2O auto sales are plenty. The principal one is that prospective buyers do not have to suffer any big penalty even if they change their mind after placing the preorder. Offline channels usually harbor the illusion of hot sales in the cyberspace and place high hopes on the follow-through effect. Since 4S stores usually procure their supplies from carmakers based on the number of preorders, a low pick-up ratio eventually means a pile-up in unsold inventory. 

– Contact the writer at [email protected]


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