Mention O2O and you could be saying the magic word in the venture capital market.
It’s short for online-to-offline, a business model that combines technology and bricks-and-mortar retailing that has excited venture capitalists in the past three years.
Use this buzzword in your proposal and you’re likely to get a fund manager to bet on it.
However, behind the media hype, many O2O projects have ended with a whimper, Hong Kong Economic Journal blogger Chung Yan writes.
There are two key reasons for their quiet demise.
First, there are too many of them. Being a hot investment in the capital market is both a blessing and a curse.
More than a hundred O2O apps have been released in the past two to three years in the restaurant and catering sector alone.
Many won a few million dollars in funding from angel investors who saw potential in the service from food delivery to chef on demand.
The entry barrier is low but competition is brutal, so naturally, many had to go.
And second, if the O2O idea attracts the big boys, that usually is bad news.
Discount promotion is typically the easiest way to gain clients. We have seen plenty of those in taxi-hailing apps.
Because big firms have easy access to funding, they can splash out on marketing campaigns.
Small startups are no match for them and they end up being swallowed or going out of business, Chung writes.
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