12 Oct 2016
Online Pairing and Support Boosts Growth of Mainland Nanny Sector
With increasing birth rates, nannies have never been more in demand across the mainland, with many operators now offering parents the chance to vet potential carers online, while also offering smartapp monitoring and support services.
The mainland maternity care sector is growing up fast. Overall, though, the market is becoming increasingly segmented and standardised, with accredited baby-rearing specialists and lactation consultants gaining increasing recognition. To date, however, brand awareness is low in this referrals-dominated business.
That regardless, there is a high level of consensus as to the robust nature of the mother and baby care market, with clear signs of growing demand. According to recent research by Roland Berger, a Munich-headquartered management consultancy, the mainland's mother and baby care market will grow at an annual rate of up to 16% over the next five years. This growth is being driven by China's new two-child policy, as well as the coming of age of a new generation of parents born in the 1980s and early 1990s.
As a result, a number of players in the mother and baby care industry have begun to actively explore new business models, a development further stimulated by the internet plus trend – the growing popularity of combined on- and offline offerings. This has seen a number of the more established players quick to embrace online marketing channels – including mobile apps and social media – while several new mother and baby care O2O (online to offline) platforms have also begun to appear.
Confinement Clubs: O2O Trend
According to industry statistics, Beijing currently has more than 3,000 postnatal care 'confinement clubs'. Among their operators are a number of the more established businesses in the sector that are all keen to expand on a chain basis, as well as several new O2O businesses. The real growth, though, has come from the ever-expanding number of unregulated small companies operating in the sector.
At present, the pricing structure of these businesses is showing signs of convergence, irrespective of the chosen marketing channel. Confinement nannies (yuesao) charge an average of around RMB10,000 (US$1,490) a month, while baby-rearing specialists' fees are in the RMB5,000-8,000 range. In the case of lactation consultants, they charge between RMB300-1,000 for a one-time service, while a steam treatment for new mothers typically costs RMB600-1,000.
On account of the rising number of new-borns in recent years, high-quality confinement nannies are very much in demand. On many online booking platforms, such a service now requires booking at least six months in advance.
According to one operator, the more highly rated nannies have at least 10 clients lined up at any one time. One service provider in the sector said: "It's a lucrative business. In every city, across every tier, confinement clubs are in great demand."
Despite this surge in demand, no brand leader has yet emerged. According to market analysts, this is down to the peculiarities of the sector, which is seen as very much dominated by referrals. While the market currently largely consists of small, local operators, many believe that the larger brand-name companies will take an increasingly significant share in the future.
Against this backdrop, many of the established players are seeking to grow through the internet plus model. This has seen a number of them introduce online booking services. These allow clients to reserve their chosen nanny or to check out a potential nanny's credentials and social media feedback.
The cost of creating and maintaining mobile apps and social media accounts – such as WeChat and Weibo – typically represents 30-50% of the operating costs of a conventional confinement club. The largest proportion of the overall cost, however, is taken up by property rental and personnel training.
According to a Mr Rao, the Manager of an established confinement club, Fuyingle (Happy Mother and Baby), his company has adopted the O2O business model, working on a chain basis and utilising internet plus as a key part of his operations. Summarising the success of his business to date, he said: "Over the past five years, my company has opened 46 stores across the country, including 11 in the Beijing area. The government has also announced its commitment to support the company and to help us establish our brand."
At present, the Beijing Municipal Government is giving considerable support to a number of consumer services chain businesses and other companies adopting the internet plus model. According to figures on the Beijing Municipal Commission of Commerce website, funding for internet plus projects is currently capped at RMB2 million. In the case of consumer services chain businesses participating in co-operation projects in the Beijing-Tianjin-Hebei region, some RMB5 million-worth of funding is available.
Emerging O2O Platforms: Matching Clients with Nannies
While the more established players are looking to dominate the sector, a number of new O2O platforms are also beginning to emerge. One such company is Sinovation Ventures.
An early-stage investment company founded in Beijing by Kai-fu Lee, the American venture capitalist, in 2015 Sinovation Ventures invested in a specialist mother and baby care O2O business. The company – Putiguo – takes a very different approach to conventional chain store businesses. It has only one office – in Beijing – with all of its activities carried out online.
Compared with traditional companies' online channels, O2O platforms can do far more when it comes to matching clients with the optimal nanny, with neither party restricted to a particular physical location. Clients can screen nannies online in terms of location, price, experience and age. At the same time, nannies may be hired across a wide geographical area, as long as they meet a given client's expectations.
As part of the process, clients and nannies can vet one another via video interview. These videos, along with the client's comments, are then filed online for reference by other prospective employers. This arrangement is an online take on traditional offline selection methods, making full use of the internet to save time and ensure a successful match.
The O2O platform eliminates the traditional role of intermediaries, allowing clients and nannies to make direct and individual agreements. The facility to make such bespoke agreements has proved a real challenge to the traditional confinement nanny business.
The better quality nannies are often keen to make their own arrangements, often contrary to the interests and protocols of the company they work for. At the same time, while hiring a nanny through a private deal – missing out the cost of paying a middleman – can be cheaper, it can also leave clients feeling insecure. In the case of a Ms Lu, for instance, who hired a nanny through just such a private deal, she found that the arrangement ultimately failed to safeguard the interests of both the baby and the nanny. In the case of any dispute, she felt that any resolution would have proved difficult.
Chen Guo, the Chief Executive of Putiguo, however, believes that his platform allows nannies to take on their own work, while both parties are still clear as to exactly what is on offer. He said: "We provide a level of reassurance by ensuring service standards and monitoring performance." In effect, clients pay for this reassurance, while the platform operator does not charge a traditional commission fee.
As well as matching clients with nannies, another advantage of using O2O platforms is their facility to set service standards. Explaining his company's strategy, Chen said: "We market via WeChat, then offer our support services through the same intermediary."
A popular social media channel, WeChat is said to easily facilitate the screening process. Once a nanny is selected and a contract signed, the full package of standard services is then also delivered via the app.
Once employed, the nanny is required to make daily records of the baby's progress via the app. This includes details of temperature, bowel movements and sleep. This enables the company's support staff to remotely assess the health of the baby, promptly alerting the nanny of any potential concerns and, when required, providing additional guidance.
According to Chen, some 40% of Putiguo's clients come as the result of referrals, despite the growing number of O2O platforms in the sector. In spite of the increasingly competitive nature of the market, the success of its model and the wider uptake of its services has seen Putiguo raise the average charge for one of its nannies by 30% year-on-year. This is seen as a sure sign of both the robust nature of the market and as an endorsement of its particular operating model.
Li Nan, Special Correspondent, Beijing