

Startups That Merge Online and Offline Services Are Sweeping China - scapbi
http://blogs.wsj.com/digits/2014/04/04/online-services-go-offline-in-china/

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rahimnathwani
'Groupon'-style daily deals are popular here in China, especially for high-
margin offline services like restaurants and massages. It's so popular that
it's worth checking if there's a deal, once you've arrived at a restaurant and
before you place your order, as often you'll save 10-15%.

Both taxi-hailing and Uber/Lyft-like services are popular here also. Discounts
for users and incentives for drivers helped to drive initial adoption.

The article mentions Dianping, which is equivalent to Yelp. It used its
comprehensive database of restaurants to create a niche when 'daily deal'
sites became popular.

Uber also operates here, with three services:

\- People's Uber (ride-sharing; about half the price of UberBLACK)

\- UberX

\- UberBLACK

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fookyong
Restaurants are "high margin"?

I don't think restaurants pervasively discount because they can afford to - I
think it's more to do with it being a brutally competitive industry.

That said you may be right in that the type of restaurants that use daily deal
sites tend to be the higher profit ones, the corporate-run chains that have
economies of scale or the ones that have lower running costs like Korean BBQs
where the customer cooks their own food.

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rahimnathwani
> Restaurants are "high margin"?

Yes, restaurants are high margin. I didn't say they are high profit.

Restaurants have high fixed costs (rent and staff) and low variable costs (the
ingredients and beverages cost 30% to 50% of the price paid by the customer).
Because they have high gross margins, they are still better off with an
additional customer who pays 20% less than the sticker price of a meal. It's
better than an empty table.

To understand the difference, compare this with a high _profit_ but low
_margin_ business like UK supermarkets. Tesco makes about 5bn USD per year,
but its gross margin is less than 7%. If Tesco gave a 20% discount to entice a
customer away from a rival supermarket, Tesco would lose money on the sale.

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seanmcdirmid
> It's better than an empty table.

This only applies to restaurants that have empty tables. Try going to Sunshine
Kitchen around lunch or dinner...they aren't going to give us a deal (but
there is delivery via online services so...).

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rahimnathwani
I am in Sunshine Kitchen on Chaoyang Lu right now (12:40pm) and I can see 5
empty tables.

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reedlaw
Not only that, but the trend is to pay users for adoption. When all the apps
in a sector (e.g. taxi-hailing) are free, there can't be competition on price
so they give customers cash back. Sometimes the payback can be more than the
taxi fare if you include the rewards your friends get. For online auctions,
Taobao set the trend of free auctions for both buyer and seller (including
free payment processing through Alipay). All of the competition followed suit
and now Taobao offers cash back. I believe they make money through featured
listings and seller registration on their premium platform, TMall.

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haosdent
This story is long time ago. China O2O is more crazy than one year ago.

