Devott Insights: Capital for Life Service O2O, How to say “I Love You”
Source: Chnsourcing.com.cn View: 289 Date: 2015-07-29

The news on Homejoy, the originator of housekeeping O2O will close down brings fierce reaction and makes people sad. Homejoy founded in 2012, which concentrates on local service of hourly employees, has rapidly developed at the beginning of found; however, it will close down four years later. The official interpretation is that the legal dispute of “classifying the employees into contract labors not formal employees” made it in the weak position of financing. However, some relevant analysis believed that the actual reason was its single business line (focusing on cleaning) difficult to find profit point that provided gradual decline of financing (there wasn’t any news after the two round of financing in 2013); therefore the company provided smaller and smaller commission for hourly employees, which made losing of supply-end and service-end tending to “acquaintances”. The changeable services declined the quality of consumers’ experiences then lost more popularity of investors. That vicious cycle made an obvious result. Whether what kind of reasons, it never can leave capital that means capital can support you and also can hinder you. How to say “I Love You” for Capital?

Housekeeping O2O is a segmentation of life service O2O that also includes many types of catering, entertainment, hotel, tourism, wedding, parents and children, movie and massage. The close-down of Homjoy provides a warning for currently popular life service O2O industry. Actually, there are three big elements for O2O platforms: capital, entrance and technology. Money is not almighty tool, but without it is not doing anything. That is bloody lesson once showed or showing in competition of internet enterprises. The competition of Taxi software was a typical example. Currently, Meituan, Dianping, Baidu and Nuomi are showing competition between life service giants that actually is the next competition driven by capital. For example, the high-profile cooperation of Dianping and YUM! Restaurants (China) Investment Company Ltd; Yanhong Li invested 20 billion RMB for Baidu & Nuomi and rare “Whole Leadership” of Meituan published data for investors to improve their confidence. The quantity of financing actually determines expanding speed and scale of enterprises; however the truly supporting operation of enterprises should be self-capital of enterprises that is profit model. From current situation, life service O2O begins transformation from subsides & price war & high “losing money to earn crying” with high frequency and low amount to the entrance of flow/platform, explores the mode of sustainable development. In the fact, “entrance” means the breakthrough point of business models and profit models for enterprises. The management service of B-end (business) will be the next entrance for enterprises. For example, the strategy of “membership +” produced by Baidu & Nuomi that means to co-build membership system which breaks through membership system of Baidu & Nuomi and CRM management system of merchants, and provides precise decision-making basis for merchants management and marketing via big data and data of users’ behaviors, as well as constantly increase retention rates and consumption frequency of customers. However, fundamentally, the fail of Homejoy isn’t finding better “entrance” to improve its own competitiveness. Actually, the essence of O2O platform is to meet human’s demands; the key of succeed is services that is win-win result between users and merchants. Of course, technology is the basis and key element to promote innovation and to improve consumers’ experiences.

The failed cases always can provide more enlightenment for people than successful cases. The fail of Homejoy no doubt provides an active lesson for the giants in currently popular life service O2O industry. Water can support ship and also can destroy it. The capital is similar that can promote you further development and also can make you lose everything. Therefore, enterprises may compete concentrating on clear profit models, good customers’ experiences and grasping entrance as well as innovating technologies, based on promotion of capital.

This post is a personal or group view of Research and Advisory members and don't necessarily represent Devott's positions, strategies or opinions.

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