Sunday, September 28, 2014

Dianping’s Challenge After Buying Shares of ERP Service Providers

Nearly 2 months ago, I arrived at Pittsburgh for the first time and looked for a restaurant by Yelp. Disappointedly, Yelp could not offer the total information of the average consumption price, purchase benefits, group-buying, E-membership and reservation, all of which could be provided by an application, Dazhongdianping, known as Dianping, only serves in China. Consequently, I did not benefit from Yelp and the chosen restaurant turned out to be barely satisfactory. I really miss Dianping!

Actually, Dianping was set up in April 2003 as the first independent third party consumer comments website in the world. After 11 years development, it has grown from a company focusing on exploiting local life mobile applications to a mobile Internet company. Its mobile client has become an essential application for local life. Dianping not only provides users with merchant’s information, consumption comments, consumption benefits, but also informs users with group-buying, reservation and delivery service and other online to offline (O2O) services.

On this September, Dianping bought shares of two ERP service suppliers, Shich Technology and Tiancaishanglong, successively. Shich and Tiancaishanglong are two of the largest ERP service supplier for catering industry in China, serving over 20,000 and 50,000 commercial tenants respectively. Dianping’s investment action is aimed at connecting its O2O service products with ERP system, thus achieving the cut-through both online and offline. In this circumstance, after user makes an order via Dianping, the order will goes straight to the ERP system of the particular restaurant.

In the recent two years, Dianping made improvement in O2O by introducing online reservation, online ordering food, group-buying and delivery, however, it went slowly in this way. In a gesture to acquire its goal, Dianping has to joint online O2O services with offline ERP system. Specifically, Dianping has to cooperate with a large number of ERP suppliers, after which upgrade the ERP systems as well. These offline restaurateurs should pay the upgrading fee to ERP suppliers. All the situations discussed above obstructed Dianping’s progress.

Assuming that one company introduces a powerful ERP system for catering industry and offers free use for restaurateurs and also invests huge amount of money in promoting. Here comes the problem, how to convince the restaurateurs to give up the ERP systems they already paid for and replace they with the new one?

Dianping’s solution to the problem is to buy shares of ERP suppliers. Frankly speaking, taking advantages of upgrading the current ERP suppliers with great number of users can connect those users with Dianping’s O2O system swiftly. There is no doubt that this idea will rocket the number of support users of Dianping’s O2O in the short run. Nevertheless, neither Shich’s 20,000 users nor Tiancaishanglong’s 50,000 users occupies huge percentage of Chinese catering market. Dianping is facing great challenges now, should they introduce the two ERP systems to more restaurateurs? What about the competition between Shich and Tiancaishanglong?

As far as I am concerned, even the whole catering industry should consider these challenges seriously as the ERP system for catering and O2O for local life are promising market with enormous opportunities. There is sufficient space for different teams to compete and develop. As long as there are benign business competition relationships, it is beneficial to industrial development.

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