O2O (Online-to-Offline) and the New Retail Revolution

What Is Online-to-Offline Commerce?

In the past, offline and online customer experiences and interactions have been distinctly separate. Although there have been some cross-channel options, such as click-and-collect service, it has still been very limited.

Thanks to technology development — such as in-app or location-based experiences using Virtual Reality (VR), Augmented Reality (AR), and Artificial Intelligence (AI) — many businesses are now smoothly merging  the two commerce types. This business strategy can be referred as online-to-offline (O2O) commerce.

How Does Online-to-Offline Commerce Work?

For starters, O2O involves engaging with your customers online using multiple approaches — social media, email, or website advertisements — to draw them out to brick and mortar locations.

In other words, O2O commerce lets companies incorporate online marketing techniques with offline marketing approaches, treating online and offline channels as complements rather than competitors.

Customers can now not only buy products online and choose to pick them up in-store,  they can also browse and purchase products online while at a physical store. O2O commerce companies also allow online purchases to be returned to physical locations. These are some of the common approaches retailers take as an attempt to compete with e-commerce brands. 

Consumer Behaviour and Retail Trends

Retail is in the midst of a radical transformation. Technology advancements continue to change the way businesses and consumers engage. Having 24/7 access to global information and digital resources, consumers are undoubtedly more educated, knowledgeable, and self-reliant in deciding which products and services to choose or which brands to support.

Global retail spending is poised for solid growth across all channels in 2019, and projected to reach £21.20 trillion in revenue by 2020. E-commerce continues to thrive and is expected to grow to £3.17 trillion by 2020, accumulating 15% of total global retail revenue.

For years, we have heard stories of the apparent fall of physical retail and the subsequent rise of online shopping, as if it was set in stone. However, according to researchers, its is predicted that more than 80% of retail sales will still happen in physical stores in 2020, as the desire for physical experiences rises — 67% of surveyed Gen Z claimed to prefer shopping in-store to online most of the time.

In the US market only, brick-and-mortar is continuously proving resilient while contributing more than half of overall 2019 sales growth, contributing 89% of total spending.

Now, consider Amazon acquiring Whole Foods in 2017 for a staggering £10.47 billion. The world can see where the retail leader in online commerce is placing its bets: in physical space. This also marks the beginning of online-to-offline (O2O) commerce popularity.

Amazon even rewards  their customers 5% off for using their Amazon Prime card when shopping at Whole Foods Market. Besides Amazon, there are many other enterprises that have made efforts to bridge the gap between online users and retail locations, such as Wal-Mart and its e-commerce Jet.com’s acquisition.

Another great example of O2O commerce is Alibaba, China’s e-commerce giant.  Having an 80% market share, Alibaba is the largest e-commerce company in China. It has invested more than  £7.7 billion to acquire retail brands throughout China, becoming the largest retailer in the world, surpassing Wal-Mart in 2017.

This giant believes that a foothold in traditional retail is the key to future retail development. Alibaba has its own O2O plan, calling it “new retail”, involving technology advancements to upgrade experiential retail.

How Can Businesses Optimise the O2O Experience?

O2O commerce is truly a retail revolution of how consumers shop traditionally, and a gateway between the virtual and real world.

“No one consumer experience has to be the same as any other, anymore — that is New Retail.” – Forbes 2018.

With the development of technology and widespread connectivity, it is safe to say that the success of this new form of commerce depends heavily on improving consumer experience to exceed their expectations. Any inconvenience, delay, or misstep will cause delay in purchasing processes or even losing a potential customer. 

Despite the ultimate trend, statistics emphasise that 91% of brands fail to meet expectations in digitally integrated in-store experiences, consequently falling short in the ‘new retail’ race.

There are numerous ways your business can optimise the online-offline convergence.

1. Permit Online Activities to Happen Offline

First thing’s first: your business needs to enable online activities to happen offline. These simple marketing techniques feed directly into the demand for instant gratification. This will entice more customers to visit physical retail locations, which then boosts the chances of impulsive spending.

2. Personalise Customer Experience

Living in the digital age, shoppers become more skeptical and practical when it comes to their shopping experience. They start to show less and less interest and trust in traditional marketing campaigns.

As 80% of consumers are more likely to buy from businesses that cater to their exact interests, strive to meet their exact demand; personalisation counts for a lot. In other words, to move, engage, and forge a bond with customers, retailers need to be more real and inclusive in the way they do marketing.

One way to do this is by using customer data gathered online to improve the offline shopping experience. Nordstrom, one of American’s biggest fashion retailers, has introduced data-driven personalised experiences at their retail stores. One of their unique techniques is an opt-in-app that delivers the online profile of shoppers who are in store to that specific store’s sales assistants, so that the sales assistants can help create a better shopping experience for the customers.

3. Harness the Potential of Technology Advancement

As shoppers also are getting more tech savvy, they expect your business to provide better shopping experiences that integrate available technology. Starting with boosting convenience by simplifying purchasing, delivery, return, and refund processes. For instance, enabling ePOS systems or mobile payments using mPOS, or pay-in-aisle technology to facilitate a speedy, cashless checkout.

With the growth of using mobile phones, it is also important to design the shopping experiences with mobile-first and “phygical” (physical-digital) mentality. Leverage voice and facial recognition, Augmented Reality (AR), and Virtual Reality (VR) to boost interactive shopping experiences, allowing shoppers to engage whenever and wherever they want.

Using the same example of Nordstrom’s opt-in-app, this app also allows customers to reserve items to try on in-store later. Furthermore, its functions also include taking photos of any items to find similar ones using AI power, as well as scanning to learn more about stock availability and reviews.

One of the other great technology integrations that your business can deploy is quick response (QR) code. They can be displayed on screens and printed on receipts to give customers access to information. They can also be used to connect with loyalty programmes, or to bookmark items that they like.

The Bottom Line

O2O commerce is a natural step forward if brick-and-mortar retailers want to compete in the digital age. Rather than sticking to the traditional principles with physical or local opportunities, businesses can bridge the gap and offer both the virtual and real world in a more convenient approach.

There are numerous ways retailers can apply O2O to keep customers satisfied and increases profits, and if companies like Amazon and Alibaba have stepped up and taken their chances, you surely should as well.

Author: Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles of partners on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to editor.webposts@gmail.com.