Few will survive inevitable consolidation of sector, analysts say
Online-to-offline (O2O) car wash company woixi.com has stopped operating, an employee told the Global Times on Monday, as it joined the growing ranks of failures in the O2O sector.
"Our office is empty," a woixi.com employee surnamed Liu, who formerly worked in the customer service department, told the Global Times Monday.
Liu said that she hadn't been paid since August and neither had many of her colleagues.
Calls to the company went unanswered on Monday and its social media platform WeChat account was idle as of press time.
Woixi.com, which was based in the Haidian district in Beijing and mainly provided door-to-door car wash services, was established at the end of 2014. The company only had about 70,000 users, according to a report by the Beijing News on Monday.
The company received angel investment of about 5 million yuan ($786,000) and a subsequent loan of 1.7 million yuan from company shareholders, but it failed to secure further financing and went bankrupt, the Beijing News reported.
The newspaper also said that CEO Li Dongjin had vanished, leaving behind a debt of about 2 million yuan.
"The cost of door-to-door car wash services is very high and the business model requires ongoing financial support," said Wang Guoxin, deputy secretary-general at the Industrial Alliance of China Auto O2O Ecosystem, a Beijing-based association that represents more than 50 companies that have invested in the auto O2O sector.
Liu said that woixi.com customers could get 10 door-to-door car wash sessions for a total of just 190 yuan - much lower than the average of about 30 yuan for each car wash at brick-and-mortar stores.
Analysts said low prices are a common tactic in the O2O sector to win customers, but even woixi.com's cut-range services weren't the cheapest. On the e-commerce website taobao.com, door-to-door car washes are offered for as little as 2 yuan each.
Han Feng, a Beijing-based engineer who ordered car-tinting services online in October, said that the low price was the major reason why he chose an online service over brick-and-mortar stores.
"The service only cost me 500 yuan, while at a brick-and-mortar store, it would cost me over 1,000 yuan," he said.
But just like in the taxi-hailing sector, where Didi Kuaidi survived at the expense of its rivals, only one or two door-to-door car wash firms will survive, Liu Xuwei, an analyst at Internet consultancy Analysys International, told the Global Times on Monday.
According to media reports, woixi.com is not the first in the segment to fail - at least six online car wash service providers have gone bankrupt this year.
"The bubble is bursting in the whole O2O sector and consolidation is ongoing," Liu said.
Car wash services alone offer very little growth potential and woixi.com-like O2O companies should expand to other car-related services to survive the cut-throat competition, Liu noted.
Internet giants have also shown an interest in vehicle-related O2O activity. Media reports said that leading e-commerce firm JD.com Inc invested in online car maintenance services provider bopai.com in May.
Despite this powerful backer, bopai.com announced in October that it had halted services in five out of its 22 cities due to limited funds, according to the reports.
Internet giant Alibaba Group Holding established an auto business unit in April, which has partnerships with about 1,000 auto dealers throughout the nation.
"Beside car-related services, the Internet giants are also eyeing the broader market of selling cars online," said Liu.
It is natural to see some O2O companies in the auto sector fail, because the market was overheated, according to Wang.
"Eventually some firms will survive, given that the automobile after-market services provides a huge market," he said.
