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In the context of increasing digitalisation of commerce, the development of O2O services (online to offline and offline to online) is the relevant answer for brick & mortar players in the face of the growth of pure players.

If the benefits are established, O2O mixes differ between countries, a legacy of different lifestyles and habits. What about China, the largest digital market in the world? What are the relevant O2O strategies and what are the particularities to integrate?

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O2O and reverse O2O
O2O services can be understood as either services offered online to generate traffic or store sales (online to offline); either as services offered in store and generating traffic or online sales (offline to online or reverse O2O). In both cases, these types of services make it possible to go beyond the traditional opposition between the physical and the virtual world to make only one form of commerce: connected commerce.
These O2O services cover all stages of the purchase process (pre-sales, sales, after-sales) and all digital tools: the mobile, O2O consumer’s best friend, but also computers, tablets and interactive kiosks.
While mobile services with a large portfolio of features are on the agenda of many brands in China, other initiatives connecting online and offline also have great potential, such as omni-channel switching to generate traffic between channels, QR codes , withdrawal services or in-store exchange of products purchased online, or digital devices in-store. Advanced omni-channel platforms such as hybris enable rapid delivery of these services, with unified management of interactions.
Key benefits
The benefits of O2O are many:
For customers, an improved service, with the ability to seamlessly switch from one channel to another. This is evidenced by the success of pre-purchase information search services, called ROPO (Search Online, Purchase Offline), which already represents more than 5% of total consumer spending in China1, or the popularity of QR codes. Before being a project, O2O is therefore first and foremost a reality.
For distributors and brands, the model is also virtuous, with more profitable customers. At John Lewis, an omni-channel customer spends £ 824 a year, compared to £ 264 for a brick ; mortar customer and £ 168 for an online shopper. In addition, the rate of transformation of physical trade is 30% to 70% in outlets, against 1% to 3% on digital channels, encouraging the development of online services generating traffic in stores. Finally, O2O is the lever to differentiate itself from pure players, capitalizing on their main assets, stores and sales teams. Web only actors understood this, as the Alibaba CEO recently explained: “One of our major opportunities is to extend our e-Commerce platform to physical commerce, by developing a more engaged shopping experience, omnichannel, and connected “.
O2O in China: where are we?
As the world’s largest e-commerce market with 8% of total online sales, China’s digital leadership is reflected in O2O services across six key features. Let’s go over them:

1. To the mobile only?
The majority of online connections are now from a mobile, and more than 30% of e-Commerce transactions in value are already made from a mobile (up to nearly 45% on 11/11/2014). In addition to e-Commerce, the development of mobile services with added value (information, payment, reservation, loyalty card, geolocation, etc.) is key, because mobile terminals allow online and offline meetings. We therefore recommend that mobile development be a priority, or at least as important as mobile computers

2. O2O 360 degrees
Paradoxically, the most advanced players in O2O are precisely those who do not have (yet) points of sale. The leaders (Alibaba, Tencent …) have indeed invested for two years in online services to connect the physical and virtual world: group shopping to generate traffic in stores, sites recommendations and opinions on physical stores , booking of taxis to get there and payment on mobile in store. More recently, partnerships have been made by digital leaders in distribution networks to develop hybrid models. We discover here a strong feature of China in terms of O2O: where in the West O2O focuses primarily on the online link – point of sale, China offers an extensive definition of O2O, including all services related to the process of purchase. Our recommendation: act as leaders thinking globally, including O2O services throughout the purchase cycle.
3. Social commerce exists
The separation of uses is much less in China, and social commerce is an effective route to online sales and O2O, unlike most countries.
Like Wechat and its 600 million users, Chinese consumers mix different uses in the same service: instant messaging, social network, commerce, payment and O2O services. The brands present on Wechat offer real stores online, but also use their account to push alerts to their subscribers generating point-of-sale traffic (promotions, events …). All brands and distributors are present, making Wechat a global channel with a strong O2O dimension. Our recommendation: be present on all channels, including social networks, major lever to generate offline traffic. Approach all the more strategic when you know the difficulty of being profitable in a model only e-Commerce with marketing costs that can represent up to 35% of turnover …
4. Breaking out of marketplaces dependence
80% of e-commerce in China today passes by marketplaces that do not have strategic interest to develop services O2O for the brands, the turnover generated in store escaping them. Faced with this difficulty, it is urgent for brands to master their online distribution platform, for reasons of image and rebalance of revenues between e-commerce and e-Commerce via marketplaces. Our recommendation: deploy a dedicated omni-channel platform. Without control of this platform, the O2O will remain limited for a brand to some basic services, thus continuing the current operation in silos (online on one side, offline on the other).
5. A fragmented distribution landscape
The distribution landscape in China is highly fragmented, with major distribution networks having limited market share: the market share of the top 20 distributors in China is less than 12%, when it reaches 40% in the US . The actors often remain regional and small. Probable consequence: a majority of e-traders will quickly make up the majority of the top 10 distribution in China. The traditional distributors must absolutely take the turn of O2O services quickly, because it is their main lever to return to the race, facing concentrated pure players so powerful.
Our recommendation: connect and connect the points of sale as much as possible with your online activity, by multiplying the marketing links and the hybrid services (multichannel couponing, advanced store locator, QR codes in stores …).
6. A China, consumers
Consumption patterns differ by region. While the largest cities (Beijing, Shanghai, etc.) are well equipped in sales outlets, the same is not true in smaller cities (Third and Second tier). Globally, given the recent arrival of China in the consumer society and the size of the country, distribution is less developed: there are thus 5 times less commercial space per person (in m2) in China than in the United States, and 3 times less than in Germany2. This delay will never be filled: the country is so vast that certain regions can be addressed only online.
The O2O scenarios must therefore be approached differently. We identify at least 2, to adapt according to the stakes:
Where distributors are very present, in large cities, they have an interest in promoting online to offline approaches, to generate traffic and sales in stores. These O2O services must be targeted to pre-sales and sales, but will not be very relevant if they are in the delivery segment, efficient and fast.
In smaller cities, if the distributor, If there is no presence or limited presence, offline to online models should be preferred, for example from QR codes in the media, or in existing outlets, redirecting part of store traffic to online. On the delivery link, however, the online to offline is relevant because the delivery is often average, for example via agreements with convenience stores. Three conditions are therefore necessary to take advantage of O2O: develop a suitable strategy to its challenges, have an advanced omni-channel platform to take advantage of the speed and scalability they bring, finally overcome the opposition between online and offline. Faced with an omnichannel consumer, O2O is the key to continue to develop in the digital era

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In the context of increasing digitalisation of commerce. (2019, Apr 09). Retrieved January 27, 2021, from https://midwestcri.org/in-the-context-of-increasing-digitalisation-of-commerce/

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