55.com: China’s “Tmall in the Service Sector”

BEIJING, December 16, 2014 /PRNewswire/ — China’s group-buying pioneer Groupon recently announced its plan to transform its business into a consumer-driven e-commerce model. However, as early as 2012, 55tuan.com, also known as Wowo Limited, one of the country’s top three group-buying sites, had already begun to recast itself as a life services e-commerce platform. More recently the company has further upgraded the model in a move to help businesses engage in mobile e-commerce.

In 2010, the group buying business model had gone viral, with, at its peak, over 5,000 firms entering the business in short order on the heels of Groupon’s initial success. 55tuan.com, with its homegrown innovative "multiple products in one city and one product available for multiple days" model, became the leader of the Chinese group-buying sector in terms of transaction value. "Group-buying, while not by any means a holistic business model, is destined to become an essential part of e-commerce business," said 55tuan.com chairman and CEO Xu Maodong in a media interview at the time.

Moving into early 2012, when the industry was spilling rivers of red ink as a result of the negative gross margin and the players were going as far as paying advances in order to snatch business from their competitors, 55.com launched the mall model. The new business model provided a mechanism whereby traditional life services merchants could open online brand boutiques and extend their products and services from offline to online. Merchants could market and promote the services offered in their brick and mortar stores, including group-buying, discount cards and vouchers, flash sales and specials by displaying them in their online boutiques. They were able to price and market their products independently as well as sell online with a long-term perspective, just as merchants do on Tmall, China’s largest online retail marketplace.

E-commerce sites, which provide localized, customized and timely life services, are more complex and require more mobility than Tmall or a physical store can offer. In the last few years, 55.com is seeing nearly 70 percent of its orders coming from buyers who order through their mobile device.

55.com upgraded its service offerings in July of this year. In addition to helping merchants set up brand outlets on its PC and mobile platforms, 55.com further assisted them in building proprietary mobile store client endpoints, and in supporting the merchants in creating third-party platform stores, including on the WeChat and Baidu "Zhidahao" platforms. The new set of services allow merchants to achieve one-click management of their back end, synchronize their content on multiple platforms, interact with their users directly, drive online direct sales, launch dynamic promotions and increase the number of repeat customers.

Chinese consumers do a lot of their buying online, both from home and from their workplace, with a high frequency of repeat purchases. The services offered by 55.com allow merchants to attract users from different online channels and draw them into the physical store, as well as convert high frequency users into online members via the mobile store client endpoint. The service allows merchants to continually activate and retain their buyers as well as stimulate repeat purchases and compete with their rivals via promotions, new products and a higher level of customer service.

With an increasing number of Chinese users relying on their mobile phones, merchants have been able to create a virtuous buying cycle which encompasses both offline to online conversions as well as the reverse (online to offline), by not only convincing their online audience to visit their physical store, but also by converting their "offline" members into online ones. These efforts not only bring in new customers but also increase repeat purchases for merchants.

This form of mobile e-commerce service is well received by many life service merchants. Several of them, including New Spicy Way, South Beauty and Jourdeness, have upgraded their services while many new merchants have been persuaded to try mobile marketing. 55.com plans to offer comprehensive training and expert guidelines to new e-commerce merchants. The experience for consumers has also been significantly improved as they can now enjoy low-cost but excellent and diversified services in addition to keeping the option of paying offline for the purchase. Consumers stand to gain as they will be the recipients of superior products, service quality, payment options, timely delivery and general convenience in their communications with the merchants as compared to group-buying.

As Chinese life service merchants are still relatively unfamiliar with IT services, 55.com is now developing an online direct sales system so that local merchants can set up outlets and manage their operations based on smart phones. 55.com’s Xu is optimistic about the development potential for the concept and said "in the future, we will enable local small and medium-sized merchants to offer flexible and real-time promotions very much in the same way that the large airlines sell tickets still in inventory by dynamically adjusting tickets discounts." The number of merchants and products on the platforms of 55.com is expected to be enriched significantly and attract the attention of more users as more and more merchants become familiar with the ins and outs of e-commerce and its benefits.

Statistics show that as of March of this year, the number of individuals using a mobile device for their online activities exceeded 850 million. A large number of the country’s entrepreneurs are starting up offline to online (O2O) businesses. China’s life service market is huge, and the restaurant and foodservice industry alone has an annual turnover of 2.5 trillion yuan. Just as the purchasing of physical goods has move online, life service transactions are moving in the same direction. However, for local lifestyle merchants, a strong ability to integrate offline resources is required to enable successful online direct marketing. Many internet companies lack this ability, and this translates into an advantage of 55.com.

Currently, 55.com has on-the-ground teams serving merchants in more than 140 cities across China. 55.com has 35 million registered users and the number is increasing by nearly one million per month. The firm has 100,000 long-term online merchants, surpassing Tmall’s 70,000. China is home to approximately 50 million small and medium-sized local life service merchants. The future potential for life service e-commerce is indeed significant.

CONTACT: Guo Yanhua, +86-18612758823, +86-10-59065618, guoyanhua@55tuan.com

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