Alibaba and KFC China just partnered to allow KFC customers to pay by scanning bar codes using Alipay’s smartphone app, reports the Financial Times. KFC follows in the steps of Walmart and Carrefour which each began accepting Alipay in 2015. With 5,000 restaurants across 900 cities, KFC is the largest food delivery business in China.
As online retail sales in China are expected to fall from a growth rate of 70 percent in 2011 to 16 percent in 2018, Chinese eCommerce giants are investing more and more in the O2O market. According to the Financial Times, analysts believe O2O services will become the next major growth area in the country’s Internet economy. In fact, a recent Barclays report states that the Chinese O2O market is forecasted to grow 32 percent in 2015 to 309 billion yuan ($49.8 billion).
The race to win over China’s mobile payments audience is therefore fierce among retailers, mostly because China has high smartphone penetration and a massive population who embraces mobile payments as their preferred payment method. Alibaba, for instance, has a lead via Alipay, which boasts 50 percent online payment market share.
In this context, the growing tendency is for Chinese Internet giants to go offline.
Walmart’s customers, for instance, can use Alipay across 25 of its southern China stores, but the American retail giant wants to expand the service to its roughly 400 Walmart and Sam’s Club stores in the country.
And Alibaba and Ant Financial — the maker of Alipay — are betting big and investing almost $1 billion in a joint venture called Koubei. Koubei seeks to blend the “real world” and “online” shopping experience into a single, fluid, commerce event — mainly by focusing on restaurants and brick-and-mortar stores.
But it wouldn’t be a race if Alibaba was on its own.
Baidu, the Chinese equivalent of Google, announced yesterday (June 30) that it would invest 20 billion yuan ($3.22 billion) over the next three years in O2O services. Currently, Nuomi is present in over 330 Chinese cities but wants to operate all across the country by the end of 2015. It has a monthly turnover of nearly 2 billion yuan.
Will Tao, of iResearch, told the Financial Times: “It is like the early days of eCommerce in China, with the rollout of Taobao [Alibaba’s eBay-like marketplace website in 2004]. There are a lot of small players getting online.”
However, he said the data are patchy as “most of the players are so small, it’s hard to count them.”