What is the O2O Strategy? The Future of Retail

The shift where online retail is growing, and offline retail is contracting is happening. In the retail industry we are seeing a change in balance of the old sales channels, where there is an advancement of the largest online brands. Organisations can now go digital overnight, and can bring both engagement and higher conversion rates into stores.

Companies are chasing innovative strategies to engage with customers online and encourage them to interact with offline channels. In this article, we break down what O2O actually is and why you should introduce it to your brand.

What to expect

What is an O2O Strategy?

An O2O or ‘Online to Offline’ commerce is a business strategy that draws potential customers from online sale channels to make a purchase in a physical sales channel – i.e. in-store. 

The data is collected on online customers, where their digital system is accounted for, to entice them into using offline channels, such as phone calls and stores.  

There is a constant battle between e-commerce and physical, where e-commerce represents 17.5 per cent of the global retail market.

Consumers are actively looking for an emotional investment with a brand. The expectations that customers have in physical retail are being transferred to the digital space.

Why are Companies Merging the Digital and Physical Channels?

Since the introduction of e-commerce, there was a threat to conversion rates in physical retail. However, the O2O strategy gives companies an opportunity to utilise both spaces. It has connected the offline services with online spaces, where it draws the audience into physical stores to increase conversion rates.

Companies are now blended digital and offline channels to also form an entirely new experience for customers regardless of which channel they use. Whilst O2O helps manage the customer journey from online discover to offline transactions, phygital allows businesses to recreate IRL experiences in a virtual environment. If this aligns more with your goals then head over to our article on why retailers should get phygital.

Here we highlight a few advantages of the O2O strategy: 

1) Exposure 

When brands merge both online and offline channels, it gives them the chance to present themselves to their audience a lot more frequently. It can increase the chances of having a larger presence in your market area, and subsequently reaching a larger customer base.  

By being able to connect the dots between the two sale channels, brands have an opportunity to have a bigger presence in the overall market and therefore higher conversion and engagement rates. 

2) Higher Average Order Value  

By increasing the companies market exposure, a higher conversion rate, engagement rates and average order value follow.

The O2O strategy allows companies to reach a larger audience, and a more engaged one, to then transfer to physical retail.  

When using the O2O strategy it allows the opportunity to increase the number of customers in brand’s offline stores, and the amount the spend when entering.

The more comfortable a customer is with a brand and their offline and online presence they are more likely to increase their budget and stay longer.  

By having an online presence, it introduces the consumers to the brand where they become a potential buyer, increasing the possibility of them buying offline too.  

Having an online presence is vital for brands in the 21st century to reach a variety of audiences, but customers also enjoy the experience and human connection with physical retail.

By combining the two with an O2O strategy, companies and customers get the best of both worlds. 

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3) It’s Becoming a Necessity  

Most customers now search for a brand’s online presence before entering the physical store.

The online branding is often used for reviews and building a trusted emotional connection with the brand.

Nearly every brand in the 21st century exists online, with a considerable amount of stability, therefore if a brand doesn’t exist online in this age, it’s more likely to fail.  

4) Accurate Customer Profiles   

By using online data, companies are able to more easily create buyer profiles and accurately analyse data.

Once these profiles of the customers exist for online traffic, personalised offers are able to be distributed and drive people into the physical stores.  

With physical stores, it’s much harder to analyse what the customer looks at and what they are looking for, e-commerce allows this data to be much more easily available.

Customers are then able to be targeted using their own preferences and choices using online strategies. 

Examples of O2O Strategies

1) Commerce Festivals 

Hypefest was an example of a commercial festival that happened in 2018, demonstrating a large variety of different O2O strategies.  

For those who don’t know, Hypefest is a two-day streetwear celebration featuring art, music food and copious amounts of shopping.

With attendees like Jonah Hill, Jaden Smith and Travis Scott, it was an event for the hippest where even the “toddlers are cool and rich”.

o2o strategy at hypefest

But aside from our mass jealously, it demonstrated the power O2O has on people.

An article by Shopify stated, “the principles of Hypefest could be stretched out and made to fit any O2O retail industry – through brand activation and online-to-offline transitions, the experience is what matters above all.”  

Nike x Alyx hoodie through the Shopify POS booth

Nike collaborated with designer Matthew Williams’ Alyx to reimagine the classic Air Force Ones.

A super rare custom design where only ten pairs were ever produced.

Demand was high and supply was low so Alyx decided to raffle off the sneakers. But only to those who purchased a Nike x Alyx hoodie through the Shopify POS booth.

Customer information was collected from every sale and resulted in the following:

  • Increase numbers in email customers who entered Alyx’s sales funnels
  • Mass press exposure following the festival with sneakerheads making their way to resale sites regardless of cost
  • the O2O strategy generated astounding levels of buzz which operated currency

This is a perfect example of how an experience is truly unforgettable when it comes for retail, hence why an O2O strategy suggests the perfect blend of both online and offline presence for brands.

The ability to build an audience and support system online is possible, whilst then encouraging customers to shop in-person for particular advantages, such as personalised signings. 

2) Tommy Hilfiger Digital Showrooms 

Tommy Hilfiger is one of the fashion brands that as explored the advantages of video commerce, and conveniently introducing different O2O strategies.

tommy hilfiger o2o strategy

It launched it’s first digital showroom in 2015, says Cate Trotter for Insider Trends. It also launched a chatbot in 2016 via the social media platform of Facebook Messenger.  

They have also introduced a loyalty programme – which a lot of retail stores and commercial brands have integrated.

This allows customers to receive personalised messages, promotions and specific event invitations, therefore giving them a reason to go into the store – a perfect example of an O2O strategy. 

With the integration of both an O2O strategy and video commerce, it gives customers the ability to browse specific items in thorough detail, before placing an order, whether that be online or in store.  

Recap and Key Findings 

With the explosion of e-commerce retail, the idea of an O2O strategy provides a medium for brands to utilise with their business.

Customers are able to use both the online and the physical space, and the brand is able to optimise engagement and conversion rates.

With the introduction of a digital space, it allows efficiency and productivity, which is also supported with the security of a  physical store.  

There is not often a brand that does not exist online – it is becoming more and more vital for every business to exist online, or have some kind of online voice.

Customers are increasingly having the same expectations that they have with physical retail, and by using both the online and physical space it starts to build a trusting bond between the consumers and the experts.  

An O2O strategy is about merging the online and the physical world to optimise, engagement, conversion rates and average order value.

By utilising the advantages of online space, customers are able to be converted into physical retail too.  

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