Chinese Web Users Prize Offline Marketing
By Li Yuan, The Wall Street Journal | Nov. 16, 2016
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One of the biggest hurdles to success as an online business in China is that you need to be successful offline, too.
It's a challenge that Airbnb is trying to address as the home-sharing service ramps up its Chinese operations, and one that has bedeviled other foreign internet companies that have tried to crack the market. Success comes not so much from the usefulness of a company's app or website but from the elbow grease and shoe leather of physical-world marketing and support.
The mixed approach works in China largely because web users there are generally less trusting of new internet services and more in need of education about them, making face-to-face marketing more effective. Local companies are more willing to offer such offline service because China's labor costs remain relatively low, says Edith Yeung, a partner at seed fund and accelerator 500 Startups in San Francisco.
Travel site Ctrip.com International gained users in its early days by distributing over 100 million membership cards at airports and railway stations, says co-founder and Executive Chairman James Liang. It still operates the biggest call center among Chinese internet companies because even though its users look up hotels and flights online, many users prefer to call to book them, he says.
Car-hailing app Didi Chuxing Technology recruited its first few thousand drivers by visiting taxi companies and deploying staff at Beijing railway stations so they could answer questions and demonstrate how to download its app.
Xiaomi made headway selling smartphones online only, but has been overtaken by rivals Oppo and Vivo, which have extensive retail-sales channels nationwide.
"The Chinese internet is rarely about pure online play, rather it's usually a combination of online and offline," says Wang Xiaofeng, an analyst with Forrester Research in Beijing.
For Airbnb, this could mean investing in people who can guide hosts in China -- where many apartment buildings are in relatively poor condition and modern plumbing is new to many people -- to upgrade the rooms and homes they offer travelers, and to provide services that can guarantee the accommodations that are listed on its website are clean and pleasant.
The San Francisco company is off to a promising start in China, which it formally entered in August 2015 by establishing partnerships with local venture firms. Though it employs only about 30 people and does minimal marketing in China, Airbnb says more than 3.5 million Chinese travelers have stayed at Airbnb listings around the world, and nearly one million guests have stayed at its listings in China. Airbnb China currently lists roughly 75,000 rooms and homes for rent.
The challenge is to avoid the fate of other foreign internet companies, such as eBay, that gained traction early in China but lost momentum to local rivals.
The key to extending that success goes beyond marketing and customer service. Regulation, for starters.
Requirements can vary from city to city, with foreigners in some places required to report to local police within 24 hours of checking in to a short-term rental. The upshot is that rental companies must work closely with local governments. Airbnb said recently it has signed memorandums of understanding with the governments of four big cities in China.
Local rival Tujia.com, by comparison, has signed agreements in more than 200 cities. It places staff in the most popular areas to deal with potential issues that could arise with local authorities.
Airbnb also has struggled to find a China chief executive after hunting for more than a year, and has faced complaints that it isn't responsive enough to local needs. For example, Airbnb China communicates with guests and hosts via email, even though most Chinese use chat services instead.
Airbnb says it knows China is a challenging market. An Airbnb spokesman says it doesn't comment about personnel matters, but that the company constantly works to better serve its community. He says Airbnb expects to double its investment and spending in China next year, and increase its China staff to more than 300 people over the next 24 months.
Adding more people is likely to help Airbnb contend with local rivals that focus on engaging hosts and guests offline as much as online. Tujia.com, for instance, employs over 4,000 people and features about half a million properties covering over 300 cities in China. The unit of Tujia Holdings is often described as China's Airbnb.
"In China, online and offline are equally important for a business, be it sales, quality control or customer management," says Zhuang Hai, president of Tujia Holdings.
Xiaozhu.com, Airbnb's most devout imitator in China, accepts only about half the listing applications it receives, because the rest are for properties in conditions too poor to offer, says Pan Caifu, vice president of marketing. Xiaozhu, which employs 250 people, has a 15-member team to verify the listings' authenticity.
"We're willing to do all the hard work. We run an internet company much like the traditional industry," says Mr. Pan.