Why the Future of Online to Offline Commerce Model
Originally Posted: Indian Retailer
Online to Offline (O2O) commerce is one such business strategy that is resulting in a major shift across the retail industry.
Varun Garg, Senior Vice President, Business Head and Analytics at Polestar Solutions
As the e-commerce world innovates and radically changes every day, it is important for retailers to stay tuned with the latest, and implement practical strategies to ride the wave in this fast-evolving market. Online to Offline (O2O) commerce is one such business strategy that is resulting in a major shift across the retail industry.
An O2O business strategy is one wherein businesses find consumers online and bring them into the real world to make purchases in a physical store. Let’s say if you have placed an order to a local mom-and-pop store online and got it delivered to your doorstep or picked up the products from its physical location, then it was an O2O model at play. These seem like new shopping trends, but in recent months many of us shopped this way (especially, because of the ongoing pandemic) - be it buy online and pick up in-store (BOPIS), or research online and purchase offline (ROPO). The seismic events of 2020-21 have given shopping a whole new meaning. Today, in order to buy a tee-shirt from H&M or Zara, a consumer can check out their latest collection online and get it delivered to their doorstep based on what is available in the store near them.
The Invisible O2O Model
The O2O process might seem invisible to consumers but it is already creating huge ripple effects on the future of e-commerce behind the scenes. It enables retailers to find consumers online, and further influence their purchasing decisions through email campaigns, KOL (key opinion leader/ influencer) campaigns, online ads, etc. and drive consumers to make a purchase. Consumers make the purchase for a variety of reasons such as convenience, safety, competitive pricing, frictionless flow, and an unlimited selection choice as well as the possibility of returning purchased items.
Take a customer, for instance, who spent weeks parsing through reviews, then abandoned his cart on the website and finally made the decision to purchase it because of an email offer with a discount code. A lot of brands, such as Steve Madden, offer a one-time-use discount on joining the email list which is also a way to boost loyalty. The physical store, in turn, may also have promotions to entice customers to make a purchase and drive sales.
In a sense, O2O commerce applies to multi-channel marketing and even omnichannel commerce. By looking at online and offline channels as complementary, companies can treat both as convenient strategIES to raise awareness online, encourage customers to purchase offline, and drive sales.
The rise of online to offline commerce doesn’t mean that purchases won’t be made online - after visiting a store, or comparing prices, the customer will still make the purchase - be it online or offline. For example, Glossier uses Instagram to steer customers to its offline stores - whether the purchase takes place in-store or online is up to the customer. The idea is to give the customer the choice or control to decide where they would like to make the purchase. Those businesses which design a cohesive customer experience at various touchpoints will succeed in the long term.
Take, for instance, the click-and-collect strategy; Ikea is a great example, the website doesn’t allow customers to filter based on which products are available to buy online or pick up in-store. Only when customers choose a particular product they are given the information on whether it is available for click-and-collect. Of course, Ikea’s key differentiator is its in-store experience. So, they have rolled out many initiatives such as supplementing the in-store experience on their website - streamlining digital features has been especially important for them in the context of the ongoing pandemic when customers were forced to stay home and browse through their website/ mobile apps to make a decision on a purchase.
For an operation to feel truly online to offline, many processes can be incorporated into the strategy, such as:
- Research online and pick-up in-store / purchase offline after seeing the product in real-time.
- Place an order online from the brick and mortar store’s website or mobile app.
- Exchange or return products bought online and returned to the nearby physical store Introduce store’s mobile apps and, or retail in-store kiosks.
- Interpreting Intent and Analytics to Boost Sales .
Interpreting Intent and Analytics to Boost Sales
We are currently witnessing a radical shift in shopping experiences such as the rise of expectations from consumers of hyper-personalized, dynamic, flexible, and curated experiences and a move towards relationship-based shopping. By focusing on hyper-targeting consumers, focusing on segmentation, and introducing endless aisles or smart stores, brands with a direct-to-consumer relationship will have an unmatched advantage. Here’s how:
Personalization: When brands utilize real-time analytics of consumer’s digital behavior they are presented with actionable insights needed to make personalization a breeze.
Segmentation: Segmentation enables brands to offer promotions, understand customer trends/ patterns based on a variety of characteristics such as gender, location, age, shopping history, etc, which will help predict future customer behavior.
Intent-Driven: By understanding intent, brands can better understand individual motivations such as whether a customer is price-conscious, or whether they prefer a discount or free shipping, etc.
Analytics: With sales analysis, trend identification, supply chain analytics, sentiment analysis, scenario analysis, heatmaps, fraud detection, and recommendation engines, retailers can derive powerful insights which will further enhance the end-user experience.
What the Future Holds In-Store
We will continue to witness the convergence of online and offline commerce channels. Brands will have to think about how discoverability, advertising, payment, and performance measurement can happen across channels. This will eventually have a deep impact on the whole industry as consumer spending increasingly happens across various channels.