Posted by Quick question, what can you buy with 5 euros in a Belgian supermarket? The answer is – not much. Since the pandemic and the energy crisis in Europe, inflation has been soaring. However, with this (relatively) new e-commerce platform – Ochama, you can get 5 home cleaning items (worth more than 20 euros) for just 5 euros!
Today I would like to write a bit about Ochama’s business model and how they sell at a cheaper price while still making it profitable.
A bit about Ochama
People might be familiar already that digitalization and e-commerce have been popular in China for more than a decade now (even grandparents can order online), with 3 giants leading the markets: Alibaba, JD.com, and Pingduoduo. While the e-commerce market in China is quite saturated now, JD.com is expanding its offerings overseas.
Ochama, a contraction of “Omnichannel” and “Amazing”, is a subsidiary of JD.com, aiming to conquer the European e-commerce market for food and non-food items. By leveraging JD.com’s extensive retail and supply chain experience, Ochama has developed a unique business model that integrates an online shop, automated warehouse, and offline pick-up points, to offer a full range of quality products at competitive prices.
It started in 2022 in the Netherlands with 4 robotic pickup points and a local management team. But it had a bumpy start, in the first year, 2 board members left the company, and 3 out of the 4 pickup points got closed down. Very quickly it pivoted by collaborating with third-party pick-up points and managing the company directly from China, since September 2023, it has been offering deliveries in 19 European countries.
What are Ochama’s strategies?
1. Utilise JD.com’s experience
Founded in 2004, JD.com is now a very successful e-commerce company with deep knowledge and experience in retailing, supply chain management, and related technology, the expansion of its subsidiary Ochama is greatly backed by the experience and capital of JD.com, and on top of it, innovate to make sure it fits the European markets.
2. Robotic warehouse
Ochama uses automation to pick up orders and deliver the goods to the pickup points. This not only sounds futuristic but also reduces packaging, handover, sealing, and thus the likelihood of damage. Most importantly, it reduces the labor cost which is why they can afford to offer competitive prices.
3. No stores but many stores – the biggest innovation of Ochama
In May 2022, 5 months after Ochama started operation in the Netherlands, it started collaborating with one of the biggest household goods stores – Blokker.
The cooperation benefits both partners: Ochama is gradually gaining national coverage and more exposure, while Blokker is attracting new customers and earning a fee for the collection points. Meanwhile, Ochama also sells part of the Blokker range in its app. As Ochama mainly sells food and Blokker has an extensive range of cookware, the offerings are complementary.
With the success of the collaboration with Blokker, Ochama took one step further, it closed down 3 out of 4 of its flagship pickup stores and focused on collaboration to set up pickup stores, this allows low-cost quick expansion and national coverage. In Belgium, there are more than 500 pick-up stores operated by SMEs such as restaurants, supermarkets, or even individual houses.
4. Quality control
For years China has been badly famous for selling cheap but crappy stuff. I bought something on Alibaba overseas and never did it again, it was too cheap that they could not invest in quality (also because it was a C2C platform, making quality control harder).
JD.com is different, they control everything from sourcing to delivery, which enables them to supply products with solid quality and authenticity. They optimize the supply chain process to make it cheap but do not compromise on the quality of the products.
5. They supply A-brand products
All of the products available on Ochama and JD.com are sourced directly from world-leading global brands and reputable merchants. They offer products with normal brands that we use every day, even luxury ones.
6. Innovative Delivery Solutions
Offering fresh food via e-commerce is a challenge, if you order fresh vegetables and fruits or frozen things on Ochama, they only offer free pick-up service, but no delivery. I think there are a few reasons:
- Quality concerns
Delivering fresh things door to door takes lots of time (which reduces the freshness of the food), and has a risk of customers not being at home. I used to get rotted fruits delivered to me by a Belgian supermarket and since then traumatized by grocery delivery. 🙁 - Cost saving and sustainability
By offering products at the pickup points, the packages for cooling down can be reused, thus cutting the cost and also reducing the carbon footprint.
7. Utilise network effect
With the process in place to set up third-party pickup points easily, the network effect quickly applies. The more customer demands encourage more pickup points are set up, thus attracting even more customers. I expect very quickly there will be more and more pickup points coming up.
8. Referral bonus
Word-of-mouth marketing is still the most powerful marketing tool there is. Ochama offers vouchers for both the newly registered users and the person who invites others. This is a very common strategy used by many companies.
9. Huge deals to capture markets
Offering huge deals to capture the customers and then later normalize is a very Chinese way to quickly expand. It is also the most efficient way to promote the digital product and its features.
I remember when Didi (Chinese Uber) first entered the market, they offered coupons so that people could take a taxi ride with 1 yuan (0.14 euro)! Alibaba also gave crazy coupons back in the early days. Now that the Chinese market is saturated, the prices are a bit normalized.
This explains the 5 euros for buying 5 products (for now).
I hope this gives you a bit idea of what is Ochama and what innovation it brings. On top of acquiring end customers, Ochama is also looking for collaboration with more pickup points and suppliers, check their website for more info!
If you are wondering how to get the above 5 euros and 21 euros deals, check out how to use the app to get the best deals! Also check my previous blog post about Ochama from a consumer perspective: Big discount for your groceries – Ochama!
Feel free to share your idea in the comment about what makes Ochama a success (or a failure)!
References:
https://shoptalkeurope.com/speakers/ling-lei#:~:text=Mr.,giant%20JD.com%20in%202022.
https://www.retaildetail.eu/news/general/chinese-webshop-ochama-opens-50-new-pick-up-points-in-dutch-blokker-stores/
https://jdcorporateblog.com/blokker-and-ochama-exceed-collaboration-ambitions/
ochama.com
https://corporate.jd.com/commitmentToQualityAuthenticity
Your posts provide valuable perspectives.