O2O: A breakdown of online-to-offline business

As it’s easily noticed, O2O stands for online to offline (or online-to-offline).

This is a new business model in which retailers use both online and offline channels as an intensive strategy.

Using online marketing and advertising, retailers find potential customers online. Their awareness of products and services raises, and as the result, they make purchases in brick-and-mortar stores.

A popular example of this: When a customer receives an email offering a discount code, then visits the store to use this code and make a purchase.

This concept was raised for the first time a few years ago. In the context of online channels expanding their popularity, but becoming complements of physical stores instead of competitors.

Starting an online sales channel, for example, store owners gain a bigger customer pool.

Turns out: Retailers can reach more customers than those who would ever come across their doors. Moreover, those customers are identified online based on their profile and favor, which helps generate more potential customers than traditional marketing.

Other benefits of having a website have been recognized by store owners, which incentivizes them to start an O2O business.

This strategy also attracts digital-born retailers, resulting in a new revolution in the retailing sector. Initially, the O2O revolution was led by Alibaba, the second worldwide eCommerce giant.

In a conference held in Hangzhou in 2016, Jack Ma, the founder and chairman of Alibaba Group Holding coined the concept of “New Retail” which is driven by “The integration of online, offline, logistics and data across a single value chain.”

As for the reason, he pointed out that “with eCommerce itself rapidly becoming a ‘traditional business’, pure eCommerce players will soon face tremendous challenges”.

Recently, Amazon’s acquisition of Whole Foods also shocked the world, signaling its extending footprint into offline sales channels.

Now: That the two largest e-retailer on earth showed their interest in O2O commerce is the strongest evidence of how powerful this retail model is.

So what does Magento or Magento POS have anything to do with this?

Back in 2010 (2 years after Magento was born), people started to highly regard the potential of online to offline commerce calling it a “trillion-dollar opportunity”.

So what is Magento?

Magento is a platform with built-in PHP, which helps programmers create eCommerce websites. It was Varien released it on March 31, 2008, and developed it on Zend Framework.

In short, Magento is the best open-source to build an online store. But the vital thing is it’s very professional and free.

So back to the online to offline idea: At the very first stage, the main core of this strategy was “to find customers online and bring them to the real-world store”. 

Based on this idea, retailers have improved the O2O strategy, making it more efficient and powerful.

To seek customers online, retailers use online advertising or marketing tactics such as promotion emails, social campaigns, or blog posts.

Those methods help identify the target customers and draw them to visit your physical stores.

But here’s the kicker: Magento does not offer it all originally!

BUT

It comes with an amazing ability to be customized to tailor to each business’s needs and requirements.

To encourage online shoppers to make purchases offline, retailers need to offer them benefits.

This ranges from in-store pickup to in-store cash payment, testing, and fitting, free shipping, web-returned center, pick-up location, or a center for online sale in their actual retail stores.

This idea brings out the best of a combination of offline and online: Magento eCommerce website with the rise of Magento point of sale system.

Retailers can now manage real-time retail operations across channels (omnichannel) with designed features to transform and automate retail activity daily.

The strategy can vary depending on the product lines the retailers are selling.

The first and most important benefit that O2O brings out to retailers is the brand reputation.

Branding is much simpler and more efficient with online capabilities like advertising, social media, mobile wallet, SMS, mobile app, push messages, and proximity services, combined with real-time data analytics, system integration, and AI.

Here’s an example:

A man goes online and searches for a gift for his girlfriend on Christmas Eve.

Right in an article giving recommendations for Christmas gifts, he can see a picture of a Christmas set from a cosmetics brand.

If the man clicks on the picture, he is showing his interest in the products and consequently becomes a potential customer of that brand.

Those kinds of marketing tactics these days help create the brands, products, or services awareness with less time and money spent.

Another key factor in the success of the O2O business is that it enhances customers’ loyalty and increases revenue at the same time.

O2O commerce follows a strategy that allows the retailer to optimize the customer experience.

What’s the bottom line?

During their shopping journey, customers are provided with online and offline benefits that they can’t resist.

With all the information about the brands, products, or services available online, customers can make quicker and smarter decisions on what they’re gonna buy.

Moreover, purchasing is much more convenient and personalized making customers feel it’s so enjoyable to buy something.

O2O commerce also lets retailers build up a database of customers’ information including their name, age, address, interests, and even shopping behavior.

It then improves the customer engagement strategy of the brands, leading to a higher level of customer loyalty.

Once a company earns engagement from customers, it will see a dramatic increase in revenue, both short-term and long-term.

When used effectively with an advanced POS system equipped with complex reward point features, retailers can also freely exploit and develop the built database of customers.

One more benefit of O2O retail is that this strategy accelerates your speed to market by minimizing the time to market.

Collecting customers’ interest and shopping behavior online, O2O helps reduce the length of time it takes for a product to be conceived until its being available for sale.

For example:

Online channels can let a fashion brand know which items, colors, or styles are the most-searched, helping them anticipate the demands of customers and avoid out-of-stock status.

For a long time, digital retail was considered a competitor of the traditional one. However, the two business models are treated as compliments now.

Retailers realize that the integration of online and offline channels brings out much higher revenue than one channel stands alone. For store owners, online expansion is inevitable to improve their business in the age of digitalization.

First and foremost, online channels make collecting lead and customers’ data for marketing purposes much easier and more effective.

Most of the time, customers who make purchases at physical stores leave with no or little personal information gathered.

It always takes time for store staff to collect very detailed information after purchase, not to mention prospective customers who leave without buying anything and will be left unreported.

On the other hand: Gathering customers’ data is much more effective since customers do it on their own time on your website.

With visitors who don’t buy any items for the first time, information can still be collected and converted into leads to be nurtured.

With a rich database of customers, retailers can use marketing methods, like email marketing, to convert leads to customers or enhance customers’ engagement with their business.

Online channels help retailers reach new prospective customers when they use search engines.

The possibility that someone finds your online store through search engines is much higher than their walking across your front store.

Especially, in the “Internet of Things” era when half of the global population owns a smartphone, shoppers are searching for products online before buying anything daily.

Therefore, selling in physical stores only will miss out on many potential customers and lessen the revenue.

Another factor that makes a website important to the retailer is that it allows customers to shop where and when they are, and in the way they prefer.

Online channels make your business available 24/7 for customers.

But here’s the kicker:

They don’t have to wait until 8 AM the following day to buy a dress that they fall in love with or rush after working hours to queue up for lipstick.

Moreover, customers are empowered to choose a method of payment and shipping, which makes purchasing more enjoyable.

Again, with an omnichannel point of sale system, retailers can have the best of both world systems syncing streamlining both offline and online business.

This system offers in-store cash payment or payment booths for simpler payment methods, and free shipping, in-store pickup, pickup location, or center for online sale for more convenient delivery.

Last but not least, customers will be served more professionally with online customer support.

Online methods allow retailers to communicate better with customers.

Here’s why:

They segment customers into different groups based on personalized information.

Customers will get information and services that are designed to target them.

This brings about more effective support while at the same time avoiding wasted time and money on unnecessary service.

Furthermore, online channels will increase the visibility of store promotions, and make them available to every customer just by an email or a push message.

Customers will have various ways to access the promotion program rather than only be informed about them when being in the store.

However fast eCommerce growing, and more than 80% of purchasing is still happening in brick-and-mortar stores.

This is because no convenience can replace the feeling of trust and satisfaction when a customer can see directly and touch a product.

In some product lines like fashion and accessories, for example, shoppers still prefer buying items in-store rather than online.

Why?

They want to touch, feel and try them on.

Though shoppers are in a habit of searching for an item online before buying, it’s unsure that they place an order right on the website.

Therefore, a physical store that customers can visit and buy things directly will build brand trust in them and make them feel more likely to come back.

Remember the role of a good Magento website and Magento POS?

These combined systems will come in handy especially when customers can check for the exact stock in real-time.

These simple things can boost your image greatly in the eye of your customers.

Physical stores also create high revenue since statistics show that customers who order online and pick up in-store, or exchange items in-store tend to buy extra things.

The in-store pickup seems to be one of the hottest features that e-commerce businesses offer these days, especially with the COVID pandemic.

Remember that you can find this in only some of the advanced Magento POS systems.

It allows customers to start their buying journey online and finish it offline, as long as they are satisfied with the products and have a convenient shopping experience.

Besides, the in-store return is also a popular tactic of retailers since they realize that most of the customers find it so complicated and time-consuming to send back an item via mail or courier.

In both cases, when customers visit a brick-and-mortar store, most of them tend to buy extra things rather than their first concerned products.

One more reason why an e-commerce business needs a physical store is that face-to-face customer service is proven to boost sales.

Though customers now can search for information online, they’re still interested in receiving product advice from store staff.

A survey of Time Trade’s State of Report points out that 30% of customers want to get suggestions from sales assistants.

While 90% of them tend to buy after receiving a reliable recommendation from staff in-store.

Other key factors that make physical stores become powerful compliments of e-commerce are that it saves time and money with better logistics, and boost traffic to the online shops.

The supply chain is always the Achilles’ heel of retailers, and it’s even more complicated regarding digital retail.

With the large scale of an e-commerce business, retailers must guarantee flawless operations of inventory management and order fulfillment over various localities.

A brick-and-mortar store will serve as a warehouse and a fulfillment center, which help retailers improve their distribution system.

Best of all:

Opening a physical store increases the number of visits to the e-commerce site, according to a report by Death of Pureplay Retail.

These factors significantly facilitate digital retail.

As the retail world is transforming and innovating every day, retailers must stay tuned and keep themselves updated with all the latest revolutions.

It’s obvious that the O2O business is now one of the most popular strategies throughout the retail industry and no one wants to be an outsider in this race.

Are you interested in getting more details about this through a free consultation with our experts?