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Feverish online-to-offline market raises concerns in China

Reporter: Ge Yunfei 丨 CCTV.com

10-05-2015 13:06 BJT

The size of China’s feverish online-to-offline market is estimated to reach over 410 billion RMB in 2015. While capital and talent continue to chase their fortunes in the O2O industry, many are calling for caution against a bubble. Is winter really coming for China's O2O market? 

The size of China’s feverish online-to-offline market is estimated to reach over 410 billion RMB in 2015. While capital and talent continue to chase their fortunes in the O2O industry, many are calling for caution against a bubble. Is winter really coming for China

The size of China’s feverish online-to-offline market is estimated to reach over 410 billion RMB in 2015. While capital and talent continue to chase their fortunes in the O2O industry, many are calling for caution against a bubble. Is winter really coming for China's O2O market?

Online-to-offline, is the hottest buzzword in China’s Internet industry. Miss Fresh is a perfect example of the feverish O2O market. 

It's only a half year old.  But its service of providing fresh food like milk and fruit on the WeChat store has already expanded to 10 cities.  And monthly revenue is 10 million RMB. 

Still, this promising start-up has felt a drop in temperature.

"We can feel that the investors are tightening their grip on their pockets. But we’ve prepared enough to go through the winter after having completed the A round of financing. We hope to better balance our financial targets by better management," said Yao Weihua, chief marketing officer, missfrsh.cn.

In September, a long list of dead O2O companies across 16 sectors has been growing on the Internet. In the food sector alone, over 17 companies have fallen. 

Liu Qiangdong, CEO of J-D-dot-com, China’s second largest e-commerce website, recently bashed China’s Internet mania in a speech.  He said "Right now there are over 50 companies each valued over 1 billion dollars on the private equity market. I believe that this maniac industry will go wrong."

But many still think the bubble theory is exaggerated. Stanley Wei, CO-CEO of 36Kr, an incubator for start-ups, is one of them.

"Most of the investments are spent to break the bottlenecks in key areas such as cultivating user habits and building supply chains. This is a process of educating the market and bottleneck-breaking, so I don’t think it’s a bubble," Wei said.

But Wei also acknowledges it’ll be more difficult for O2O start-ups because winners might take all in harsh situations.

"Due to the shrinking financing volume and the sluggish economy, firstly, talent and capital will concentrate on the mainstream companies like Meituan, Dianping and Baidu; and secondly, some leading companies will rise out of the fierce competition in the vertical markets like fresh food or B2B," Wei said.

As Warren Buffet said, "You never know who's swimming naked until the tide goes out."

O2O companies would be smart to exercise caution... and make sure they're covered.  

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