How WeChat handles O2O commerce

O2O, or online-to-offline commerce, has become a buzzword in e-commerce. Companies like Tencent Holdings and Alibaba Group are racing to roll out apps that can link the Internet to traditional businesses and to partner with physical stores and service providers.

Tencent is using WeChat, its popular social networking app, to push deep into e-commerce territory dominated by Alibaba. Millions of the app's users have linked bank accounts to its payment function, partly due to a host of promotions. Besides allowing vendors to open storefronts on WeChat, Tencent also says the app can serve as an O2O tool for traditional businesses. Caixin spoke to a few businesses working with WeChat to see how the new commerce model works and what its limitations are.

What is O2O and who benefits from it?

O2O is the activity of finding and attracting Net users and bringing them offline. For businesses whose products or services cannot be packed up and shipped to consumers, such as hotels and hair saloons, O2O helps them take advantage of the Internet. Net firms also benefit from the commerce model because it allows them to tap into the profits that used to be exclusive to offline business and service providers through partnerships.

What does WeChat offer to businesses hoping to use it for O2O commerce?

WeChat offers two kinds of tools to these businesses: public accounts and mobile payment. The former is an account that sends articles to its subscribers. Traditional businesses can use WeChat to manage memberships, interact with frequent or potential customers, and send targeted promotions. The built-in payment feature then allows businesses to track transactions and analyze customers' shopping habits and preferences. Mobile payment is arguably the most innovative part of O2O because it gives consumers of traditional businesses the same convenience of online payment.

How is this different from what Alibaba offers?

Without a star app for consumer interaction, Alibaba wants to draw attention to its ability to analyze and collect consumer data. The e-commerce giant has accumulated huge amounts of data through its two shopping sites – Taobao and Tmall – over the years and plans to share some of the information with partnered businesses. WeChat will not provide analysis on data it collects, said Liu Hantao, an executive at WeChat. In addition, Alibaba also plans to make its collaboration model with traditional business such as retail groups a template for others who want to build a closer connection with the Internet.