Ten domestic companies have now entered the race to capture a significant share of this lucrative and exploding mobile biking market in China. The concept is simple. Scan the QR code for a bike to start using and scan again to lock the bike and end your journey, payment is then made via Alipay or WeChat (linked to the app). The key feature is that you can leave the bike anywhere, there are no locking stations required. Users then access the app to locate bikes parked near their current location and can reserve the bike ahead of use.
It is a simple yet innovative concept with a huge uptake already which demonstrates the power of digital business in today’s climate. The breakneck speed at which this market is developing is fascinating yet not unusual in the economic miracle that is modern China. This new development is also indicative of the growth of China’s creative market economy, digital start-ups are being promoted and assisted in a state sponsored move to promote the creative industries. These latest start up success stories partly demonstrate the effectiveness of the Chinese states’ new initiatives and policies.
Mobike VS Ofo
Mobike (backed by Tencent, the company behind WeChat) and Ofo (backed by Didi Chuxing, the largest taxi hailing app in China) are the largest players so far. “Tencent and Didi each picking a different winner makes the competition much more unpredictable and interesting,” said Cao Yang, Beijing-based analyst at internet consultant IResearch. “It really comes down to which founder can adapt faster and leverage resources better.”
A former Uber executive ‘ Hu Weiwei’, in China was behind the bike sharing network Mobike. Mobike launched in Shanghai at the end of last year and then expanded to China’s capital, Beijing. The bike-lending service costs just US$0.15 per hour, along with a US$45 security deposit. The low cost incentivizes users to frequently ride; additionally short journeys in congested Chinese cities are often quicker by bike.
Mobike were first to market which is key, they have an advantage with being initially associated with the concept before Ofo (their key competitors) launched within a month. Ofo are however closing the gap fast with all to play for in the fiercely competitive, yet undeniably lucrative Chinese market. Ofo started by entrepreneur and Peking University Phd student ‘Dai Wai’ won a $100 million backing in September valuing the company at $500 million, they also have the support of Didi’s taxi hailing network.
It will certainly make for an interesting competition with each company targeting a slightly different market. Mobike has gone for high-end branding with bikes that cost as much as 3,000 yuan ($440) to build and which boast striking orange wheels, solid-core tires and satellite navigation. Ofo however is targeting students with bright yellow bikes costing only 250 yuan that don’t have GPS and rent for just 1 yuan per hour, typically half that of Mobike.
A business perfectly made for success in China
By combining Chinese online payment systems with the strong QR culture implicit to WeChat usage as well as the preference for scooters and bikes in congested Chinese cities this formula has proved incredibly successful. The digital marketing efforts behind the launch of such APP platforms were also very effective on the main Chinese search Engine ‘Baidu’ as well as on WeChat, the key social media platform in China. Low crime rates in China also contribute to success, there is little vandalizing of the bikes because of the Government’s tough stance on crime and law enforcement.
The companies are also on the cusp of reversing the decline of biking in China, the state have prioritized vehicle usage over the last 10 years but with environmental concerns growing now is a great time to capitalize on eco-friendly travel. China had 670 million bikes in 1995 but nowadays there are only 370 million. With the trend towards cycling increasing again this shortfall can be made up by the services provided by such bike sharing applications. As with everything it is partly a case of right place, right time.
It is important to analyse the success of these APPs and look at how they have become successful as a blue print for western business expansion into China:
1) First to market
As already mentioned being first to market is key. To be the leading innovator behind a trend will always give you the advantage in China, regardless of how many competitors spring up (and yes in China there will be many). It sets you apart as the original, as the authentic product and instils trust from Chinese consumers. It also gives the expert advantage of knowing the market best as long as you are able to respond to the changes and challenges presented by both engaged consumers and domestic competitors.
2) Act strategically, decisively and FAST.
The Chinese market moves at a breakneck speed, this needs to be factored into your business expansion goals. Typically western businesses take longer to act and make decisions when what is required for success in China is strategic yet decisive action. The pace of growth and development needs to be quicker. This we have seen constantly, with whole cities being built in a number of years, Shanghai was transformed into a world leading cosmopolitan hub in just 10 years. Shenzhen, an economic centre for mainland China, was built in just 5. The new mobile biking APP trend exploded and within a week the streets of Shanghai were flooded with Mobikes on every corner of the central district. The key take home lesson is to act quickly.
3) Innovative business ideas have traction
Consumer uptake of this concept has been huge, this demonstrates the citizens willingness to adopt new practices and ideas when presented with practical and intelligent solutions. This is a very positive thing for businesses looking to expand into China, but you need to ask the simple question: what problem are you solving for the Chinese? And how are you going tailor your business proposition to this unique market?
4) Digital in China is key
Growth on this scale can only happen by digital means. A whole host of factors facilitated the growth of this phenomenon with mass market, affordable smartphone technology producing a highly technological, smartphone centric population. There is also a strong social networking culture with consumers engaging with digital content ‘on the go’. The APP based market therefore represents tremendous potential. This concept relies on the majority of the middle class population in China all owning a smartphone and utilizing social networks and digital payment systems such as AliPay and WeChat pay. A take-home for western business is that via digital means you also capitalize on this favourable climate for businesses that utilize the Chinese digital infrastructure in the most effective way.
5) Social network marketing has been key
By linking the payment system to WeChat Mobike successfully tapped into WeChat’s vast network of over 700 million active user accounts. WeChat is the largest and key platform in China for Businesses to grow on. After a Mo-Bike ride users could post their route via their WeChat moments (akin to Facebooks news feed), this led to a lot of interaction with users questioning the new brand and engaging with fellow users. Peer to peer recommendations on social networks are incredibly powerful and facilitated the vast uptake of Mobike itself. Large WeChat groups were created to spread the message with incentives such as ‘hongbaos’ (red envelopes) on offer to the first users to grab a bike. The company successfully created a strong buzz on WeChat.
6) Search Engine Marketing and e-reputation
Search engine marketing on Baidu is integral. Baidu dominates 75% of online searching and research in China. It is therefore the key site to develop paid advertising with PPC (pay per click links) and banner adverts. The exposure is incredibly high with paid efforts on Baidu more effective than Google for example, Chinese consumers are not as dissuaded by advertising with more paid links and a higher click through rate.
This is a typically aggressive market strategy which improved the reputation of Mobike and Ofo. Natural optimization is also important, ensuring positive and official results appear over time after the searching of keywords. In China forum marketing remains very important with users often browsing peer to peer reviews before using a service themselves. In this highly competitive environment e-reputation and visibility are everything and will dictate which project ultimately comes out on top. Both Ofo and Mobike have engaged in covert strategy to boost their reputation and undermine the others with fake user accounts created to start and contribute to forum and social media threads. It is vital to manage such sentiment and up promote positive content.
Further Expansion Required
Both companies need to expand vastly in order to cater for the Chinese market, Ofo claim they currently have 85 000 bikes whilst Mobike aim to increase their numbers to 100 000 this year. The issue both companies face is they will have to invest hugely and burn a lot of money in order to later make money, it is a significant risk but I certainly wouldn’t bet against them, especially in the new creative drive funded by such established digital giants as Tencent and Didi.
Do you have a project for China? We are digital marketing specialist agency who can facilitate your growth in this lucrative market. We can be your partners on the ground in China representing and growing your business. For more information please do not hesitate to contact us.