The Breakdown of the O2O Model
Online-to-offline (O2O) – simply put is using online channels to drive customers to physical retail stores while creating a seamless customer experience. With the advent of online sales, retailers were quick to adapt to e-commerce but now with it reaching a certain overfilling and facing its own challenges – the question arising is physical retail the ultimate revenue generator.
Why? Because even though consumers are getting used to buying online – 82.5% of all retail sales will continue to take place inside physical stores until 2021. And the majority of those sales, nonetheless, will be driven by digital touchpoints. As per Business.com, 94% of the total retail sales in the US take place in physical stores. This number speaks volumes in terms of shopping preferences in spite of online commerce being marketed more in recent times.
Mobile has blurred the line between the digital and physical worlds. While most purchases still happen in-store, people are increasingly turning to their smartphones to do research before heading to the store. Google introduced ‘store visit measurements’ back in 2014 to help marketers gain more insight about consumer journeys that start online and end in a store and they are soon rolling out ‘store sales measurement’ which will allow measuring in-store revenue in addition to the store visits delivered by Google search and shopping ads. To attract consumers and guide their decision making, marketers are using tools like promoted places in Google maps and local inventory ads to showcase products and store information to nearby shoppers searching with Google. Now, customers can even find a store from YouTube video ads using location extensions.
1) The retail momentum
O2O uses constructs to make online and offline channels complementary to each other rather than treat them as competition. The ideal scenario is to successfully synergise the two worlds of online and offline in a manner that is coherent and beneficial to both – taking the best practices from each to create a fine customer experience. By leveraging online marketing and advertising methods, brands tap into potential customers online, raise their awareness of products and services, and draw them to make purchases in their physical stores.
Virgin Holidays revealed when factoring in-store sales, its search campaigns generate double the profit compared to looking at online sales alone. A customer purchasing in-store after clicking on a search ad is also three times more profitable than an online conversion.
The leaders in e-commerce are fast to adapt to the O2O strategy, in 2017 Amazon acquiring Whole Foods for an astounding $13.7 Billion made an exciting news. This month Bloomberg reported, Amazon is considering opening 3,000 of its cashierless stores by 2021.
2) The necessity of O2O retail integration
Collecting lead and customers data for marketing purposes is much more effective via online channels while combining real-time data analytics for better efficiency. On the other hand, especially for product lines like fashion and accessories, in-store buying is a preferred method, for the need to touch the material and try the fit. Today’s shoppers are in a habit of searching online before buying in-store.
Other keys factors that make physical stores become powerful compliments of e-commerce is that it saves time and money with more efficient logistics methods, keeping in mind the high return rate and the cost involved with it which the customer usually does not like to pay.
The supply chain is a demanding proposition for retailers, and it’s even more complicated regarding digital retail. With the large scale of an e-commerce business, retailers must guarantee a flawless management of inventory and order fulfilment over various localities. Store-to-door is a better and more cost-effective solution for retailers. A brick-and-mortar store serves as a warehouse and a fulfilment centre, which help retailers improve their distribution system.
With limited budgets, brands can reach out to a wider audience online compared to walk-ins at physical stores. In addition, these customers are better identified and targeted online based on their profile and preferences – this helps in creating more potential customers than traditional (less targeted) marketing.
3) Benefits of O2O commerce
The online conversion rates still remain under 1%. The shortcoming with e-commerce is – it does not provide a complete involvement scenario for the customer, it is not a great service experience which forms a major basis for shopping, especially when consumers are unable to try or touch items before buying.
As the world becomes more tech-centric, it is expected for brands to provide better shopping experiences that integrate available technology. One of the most desired services is a personalized shopping experience, which includes customized offers and tailored suggestions based on each consumers’ specific desires and their location. Many retailers have acknowledged this demand and are starting to use customer data gathered online to improve their offline shopping experience. They then improve the customer engagement strategy of the brands, leading to a higher level of customer loyalty.
Nordstrom has introduced data-driven, personalized experiences at their retail stores. The company tracks, follows and analyzes every move their online customers make to decide what products to promote at their physical stores.
4) Online discovery channels
There are many ways in which the O2O strategy could be devised to benefit retailers.
- Reserve and collect at store
Click and collect has proved to the most beneficial model for retailers. To order online and pick up in-store is not only convenient, it also fulfils the need for instant gratification. In a world where everything is available on demand, the conclusion to get things when desired is now considered to be the norm. Click and collect is a not only a chance to bring online customers to offline stores but an opportunity to have those customers buy more, as face to face customer service has proved to boost sales.
- Making the most of location through Search
Searches for ‘nearby’ and ‘near me’ have shown a substantial increase according to Google. Hubspot stated 50% of consumers who did a local search on their phone visited a store within a day. Brands are actively exploring ways to deliver location-based offers to customers nearby.
- Social channel engagement
Social media has been the biggest game changer in today’s times of deep brand engagement. The success stories of brands like Glossier built on social channels is well known, these brands create product hype online and convert it to in-store traffic. Social media is an excellent brand building tool that helps brands to create an emotional connect with their customer.
- Using Chat technologies
Chatbots, messenger and voice are a great way to start a conversation with the customer that ends in the store. As consumers are increasingly active in using these features, it becomes an ideal channel for pre-sales advice and recommendations.
O2O creates an opportunity for brands to streamline customer in-store journeys. By giving customers the ability to design their in-store experience before they even get to the store, for example, reserve a fitting room or product to try, book a personal shopper, make a service appointment or any other services to personalise the experience. Retailers can make the in-store shopping more enjoyable and create a memorable interaction for the customer, for them to keep returning to the store.