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SMC invested Mokard captures big business opportunity: Consumers shop with virtual cards in smartphones

Andy Xue sees a business opportunity in helping consumers pack their membership cards for a smart and light shopping experience

As consumers weary of carrying bulky membership cards in purses or wallets, Chinese entrepreneur Andy Xue, 37, takes advantage of a blossoming business opportunity.

A year ago, he opened his own mobile application business called Mokard – pronounced similar to "no card" in Chinese. To date, the company has helped around 700,000 consumers to enjoy a smart and light shopping experience by morphing their smartphones into digital membership card packs. 

Consumers can "virtualize" current cards by uploading their barcodes through the phone camera, which can be scanned into their shopping profiles in store archives. They can also create on-screen barcodes for new memberships straight on the widget's user interface.

After three months of trial and a word-of-mouth campaign, Mokard received market hits on the application download platform for Google's Android and Apple's iPhone operating systems. More than 60 percent of its registered users are currently active. 

"It is time to join the big digital trend because a card's physical existence is nothing but a token presence, and it's very often an obstacle to improving the shopping experience," Xue said.

Rooted in an information technology background, Xue had long dreamt of ways to leverage mobile technology into making daily life easier. He hit upon the idea of Mokard in 2009 and set up the business in a creative park on Wanhangdu Road. Joining him were five friends or former colleagues. 

The group, before setting its hands to application development, spent three months observing the card behavior of people in shopping malls and out on the streets. They wanted to understand the daily rhythms of card use so that it could be melded smoothly into a virtual mode. 

Xue recalled meeting one girl who carried more than 30 cards in a special purse whenever she went on shopping. He met people so vexed by handling multiple cards that they often didn't bother pulling them out even if that meant missing benefits available with the cards.

Limited wallet space, coupled with unpredictable frequency of shop visits, leaves many cards collecting dust back home when they are needed to chalk up reward points or receive discounts at the cash register. 

More than 300 companies have embraced the virtual membership cards offered through Mokard, after paying service fees. Restaurant chains, department stores, and specialty shops are among the most proactive businesses promoting this new age system in outlets across China. Mokard doesn't manage any pre-paid cards because of safety concerns.

Xue said 80 percent of Mokard's users are aged between 20 and 35, which matches the demographics of China's smartphone users. That's a prime consumer group for retail businesses.

"With a mobile gateway to information, young consumers have raised the bar for making informed purchases, and that is going to change the way marketing and promotions are crafted," Xue said. 

Retailers used to targeting middle-age and or elderly customers are now seeking more flexible ways than traditional posters and product catalogues to reach out to the younger generation of shoppers. 

Many supermarkets, for instance, have begun to send out sales pitches to their members via Mokard. It helps them promote real-time special deals with location-based services. Keeping consumers up-to-date anywhere, anytime has become part of the business drill in this information age.

Xue admitted the discounts on Mokard are not as huge as those offered by group-buying websites, but he said he remains confident that it's a value-added service for his company.

"Group-buying deals are more likely to involve faulty products and sloppy services because they are mounted only to catch attention," Xue said. "The real business game is how to win the hearts and minds of consumers in a long-term relationship." 

Before starting Mokard, Xue worked at several international information technology outsourcing companies. He sees a big scope for improvement in managing customer loyalty in China, especially in the areas of acquiring and processing data.

Compared with counterparts overseas, many Chinese companies are less aware of the privacy issues their membership application questions might pose for consumers.

Height, weight, gender, marital status, income, educational level statistics seemingly relevant to lifestyle do not always correlate to shopping preferences, Xue said. 

Mokard only requires gender, age, and contact information when consumers register on the application's user interface. The information is shared with all subsequent membership accounts the user may seek to spare repetition of registration procedures. 

"Gender and age are the key variables defining target consumer groups, while contact information provides opportunities for future interaction to try to ascertain needs better," Xue explained. 

Traditional e-mail promotional blasts are greeted with opt-out requests on a large scale nowadays. Consumers are shying away from content that isn't tailor-made and is pushed with annoying frequency. 

To avoid such a backlash, Mokard chooses to analyze consumers' purchase records as feedback for recommended deals. Promotion selection and frequency of contact are fine-tuned according to individual preference profiles.

"Database management is now at the core of consumer loyalty because it facilitates a well-grounded analysis of consumer behavior and provides a quantitative measure of the marketing performance," Xue said.

It is also what Mokard really gets paid to do. Many business clients have reported higher returns on their marketing investments. Xue declined to go into details about Mokard's fees, saying the price varies according to the industry and the service package.

But he reckoned that this tiny application has pulled in millions of yuan in revenue since its debut last year. Even though the company is far from breaking even on the initial 700,000 yuan (US$110,000) investment, it's a solid start for such a new idea in the Chinese market, Xue added.

Mokard's fortunes began to take off seriously when Xue nailed down a deal with Coffee Bean & Tea Leaf, an international chain eager to make its name in the local market. Other household names, such as Starbucks, Pizza Hut and City Shop, soon joined in.

Though more companies are willing to try out virtual membership cards, the future of Mokard still rests on their decision of whether to stop issuing the physical cards and entrust their membership recruitment to a third-party digital account operator. 

If applications like Mokard eventually develop into a new source of loyal consumers, they will have leverage to elevate their bargaining power, which business clients might not be happy to see. 

But since Mokard is still a one-of-a-kind on the Chinese market, the start-up hasn't met any serious competition yet.

The company currently is exploring more opportunities in smaller-tier markets in talks with regional companies. It currently employs 10 sales people across China, in addition to nearly 30 technicians based in Shanghai. 

The technical team has just launched an elevated version of Mokard to improve the user experience and is planning to develop social media functions to help cement loyalty in the future. 

"No matter how Mokard evolves over time, loyal users will always be our most valuable asset," Xue said.

Business Profile 

Company Name: Mokard

Business: Virtual membership card management 

Started: One year ago

Owner: Andy Xue

Age: 37

Initial investment: 700,000 yuan

Current status: Yet to break even

Future expectation: Expanding the client portfolio to attract more consumers.


SOURCE. Shanghai Daily
UPDATE. 2011-12-05
VIEWS. 4093