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O2O Commerce: The challenges of an online-to-offline business

O2O Commerce: The challenges of an online-to-offline business

O2O has evolved with the growth of technology, allowing more sophisticated omni-channel experience for your consumers. However, this poses many challenges for the retail industry to implement.

In the midst of the booming eCommerce industry, there emerges a new mode of electronic business— online-to-offline (O2O) commerce. Despite the huge number of e-commerce volume, it only represents 11.9% of the global retail market. This goes to show that brick-and-mortars have big business opportunities by combining their offline business to web strategies that can drive more footfalls to their stores.

What is O2O Commerce?

Online-to-offline commerce is a business strategy that uses digital channels to drive foot traffic to physical brick-and-mortar stores. Generally the company will use digital promotional techniques such as email, display advertising or social media campaigns. The goal is to entice prospective customers to visit the company’s physical stores and buy its products or services.

A typical model would look like this.

O2O Business Model

Over here, it is apparent that online-to-offline is no longer just research online, purchase offline (ROPO). It also marks the end of the Groupon days of buy/order online, collect offline.

As technology becomes more advance and people spoiled for choice, attracting and retaining customers have become a problem for all companies.

In this article, we will examine the industry challenges you will face in planning and implementing an omni-channel strategy. We will also share tips and tricks for the online-and-offline operating flow so that you can overcome potential pitfalls.

Challenges of omni-channel commerce

O2O Marketing: The challenges of O2O Commerce

  • Breaking the traditional enterprise

Nobody likes change.

The traditional business model has been established for many decades. Adopting multi-channel means breaking the solid structure of a conventional enterprise—from traditional sales channels to an execution plan.

The retail industry’s outdated thinking of how we used to make money has to go and decision-makers need to understand the profit pattern of an online-and-offline strategy.

You have to be clear that these things need time to show results and prove its effectiveness. Below are some points to consider:

  • Practical ways to bring physical-world promotions and sales onto the internet
  • Understanding key sales drivers
  • Knowing the most effective channels
  • Selecting the right index to measure results
  • Promotional campaigns and activities that work
  • Changing user flow led by habits

For years, users have been led by a fixed set of consumption habits. Customers feel more at ease at a local store when they browse for products. This makes them more willing to spend money in a brick and mortar compared to making their orders online.

To change this user flow and to persuade the change of this consumer’s behavior, there are certain factors you’ll need to consider.

  • Commodity prices
  • Emotional care
  • Price vs experience

The traditional user flow is simple: it is straightforward but slow.

Turn a visitor into a buyer> turn the buyer into a regular > make them a VIP member

Consumers who purchase online, on the other hand, can’t experience the face-to-face service of a real-life store assistant.

An online user flow could look like this.

  • Make a website visitor stay > turn the visitor into a purchaser

We all know that these days, there is little shopper loyalty. Moreover, be it digital or in-store, churn rate is high.

Combining in-store commerce and digital promos, a user journey could go one way or another, with a lot of variables. A typical one would look like this.

  • Convince an online visitor to stay > turn the visitor into a purchaser> make her come back to the website> turn her into walk-in client > convert the walk-in to a regular

Despite different user flows and long journeys, you’ll notice that you can yield better results with this new user strategy. This is because your audience segments grow more extensively on the Internet.

By focusing on reducing the churn rate, you’ll be on the right track to solve the challenge of retaining customers from a large pool of prospects.

  • The cost performance of online vs. offline

The Cost Performance Index (CPI) is a method used to assess earned value over the actual cost of your products and services.

In other words, it refers to the ability of your products to deliver its performance for its price.

Generally, products with lower price/performance ratio are more desirable.

Thus, when it comes to e-commerce, there are a few significant points in the shopping experience that could quickly impact the cost performance.

One consideration is in the missing early appreciation and cognition of new products. Without seeing and feeling the products physically, there’s a cold touch to the entire ecommerce shopping experience. With this in mind, you’ll need to think what activities in the physical world that can be used to replace the e-commerce experience.

Due to the cold online shopping feel of e-commerce, consumers become more calculative. Every price differential is being calculated while the real value of the product and service are not fully appreciated.

This calls for a need to flatten the effects of online and offline shopping experience with a better or personalized experience for your consumer segment.

Omni-channel, when done right, is the answer to the trials of these cost performance factors.

  • Logistics, inventory & supply chain management

The multi-channel model focuses on online and real-world experiences. It lacks in the department of delivery services and commodity experience, thus, retaining or increasing user’s trust is a challenge.

Secondly, it emphasizes a high degree of localization and requires durable process flows to support the volatile multi-channel commerce.

What about market positioning, market demand, quality assurance, and user consumption habits? These are the areas that need to be looked into when evaluating, planning and implementing your combined online and brick-and-mortar sales models.

  • Knowing which in-store visit came from which online promos

Online-to-offline attribution is one of the most important KPIs in the process.

The question about effectiveness, regarding the channels you market in, tactics and software invested, data warehouse, and predictive solutions, never fall far from an omni-channel playbook.

Otherwise, you wouldn’t know:

  • How many consumers still want to shop in my physical stores
  • Why would consumers walk into my retail store
  • Who and what types of visitors shop at my store

Ultimately, do people still want to shop at my brick-and-mortar?

Subsequently, this attribution should include, but not limited to:

  • How many patrons walk in today because of a specific campaign executed online?
  • Which ones were hooked in by which specific messaging?
  • How much does it cost to acquire an online client?
  • What is the cost performance of a specific product and service?

As most businesses do not create the online and offline solution by themselves, this means choosing a platform that fits your goals, needs and requirements are the keys to your implementation success.

Developing an O2O Business

Although many companies have made the multi-channel business look simple, they are in fact not. But to say it is difficult, that isn’t true too.

Online-to-offline commerce can be pretty straightforward and you can always start simple and improve over time. Here are some considerations when developing a multi-channel strategy.

Data architecture

Data is the primary component of an omni-channel retail business. In this area, there are two key factors to overcoming the challenges of an online-and-offline business model.

Big data allows you to have comprehensive insights of the customers for your company. This allows you to research and understand them better (consumer segments or products and services), which in turn helps in the future expansion of your business.

With sufficient data, you can implement predictive analytics that allows you to learn from your past campaigns. Then, research insights to user buying patterns, and strategize for your next omni-channel go-to-market plans.

O2O Commerce Model

Caveat

Commonly, companies fail in omni-channel implementation when getting all their collected info into the data warehouse at once due to time and capital investment. Furthermore, this action is yet to bring business results as at the beginning of data collection, the system has yet to identify what works and what does not.

Big data solutions need some time to build upon the feedback loop so that insights become more actionable.

To overcome this, you will need to implement data warehousing together with your marketing efforts. Over time, with more data coming into the system, the results become clearer and more defined.  Using this, businesses can make more informed decisions and take actions with better results. Then, you can see the returns on your investment, allowing your team to prioritize and re-strategize for effectiveness.

Personalization

Consumer data is your trump card. With it, you can personalize your online and offline sales, for each consumer.

How do you go about using those information?

  • You can use it to search and identify different buyer personas.
  • Analyze the insights for the best products and services to recommend to the right target, at the right time and location.

And you can do it all in real time in conjunction with the purchasing history of your consumers. Such personalized recommendation and messages are a compelling way to appeal to your demographic.

Based on their interest and behaviors, you will individualize your one-to-one messaging, making it super effective. With the right delivery channel, it completes the entire buying cycle of your targeted audience.

Sounds like a lot of efforts for one buyer? Of course not, with technology, you can replicate the same tactics for all your different buyer segments with personalized promo messages for each of them.

Why Customer Persona?

A customer persona is an almost fictional representation of your ideal buyers, based on real metrics and market research on them. With this built-up persona, you can group your consumers with similar shopping patterns and interests, then, using the persona to plan your O2O go-to-market strategy.

Strategizing your promotions using customer persona has enormous benefits.

O2O Marketing: Benefits of Customer Persona

Source: Altitude Labs 

Engaging web customer segments

Here are some examples of how you can engage web consumers with effective targeted and personalized ads.

Targeting game type ad to gain access to the audience that plays games.

O2O Marketing: Engaging online customers through game ads

Directing specific video ads based on past browsing history.

O2O Marketing: Engaging online customers through video ads

Provide interactive options to your target audience to personalize their ad experience.

O2O Marketing: Engaging online customers through interactive ads

Driving footfall to stores

With your tactics via online campaigns, you can link them to your offline channels. For example, running an online survey that leads the visitor to your nearest brick-and-mortar for gift or coupon redemption.

O2O Marketing: Driving footfall traffic to physical stores

Summary

Bringing targeted consumers from the online space to your retail store may seem like a daunting process. But as long as you keep the following factors in mind, you will find that the implementation of online-to-offline promos can be fun and fruitful.

  • Changing the mindset of decision-makers to adopt the new money-making O2O commerce
  • Breaking the retail industry’s traditional user consumption habits
  • Understanding the differences between offline and online sales, and streamline processes between them
  • O2O model should include your logistics, supply chain and inventory management system
  • Acquiring the most appropriate solution for tracking/attributions to fit your business goals
  • Data is the new currency in a successful online-to-offline model. It enables accurate predictions, and persona building through an understanding of consumer behavior, interest and buying patterns
  • Getting innovative with reaching out, contacting and engaging your targeted audience segments online
  • Crafting and designing a close looped marketing cycle that drives foot traffic from online channels to your offline stores

What other methods can you think of to enhance omni-channel commerce for retailers?

If you like the information in this article, do comment below. Also, do share it and link back to the article from your blog!

 

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