O2O is a growing business model where companies who were once purely online leverage brick-and-mortar stores to enhance their consumers’ experience—and grow their profits.
O2O is the New Way to Reach Customers
Online retailers have come a long way since e-commerce shook up the way people shop. Ten-day shipping became two-day, and two-day almost unthinkably became same-day. Yet, despite a respectable attempt to redefine the way we shop for goods, research shows that 90% of sales in the United States still occur in physical brick-and-mortar storefronts. This has influenced internet-only retailers to re-strategize, resulting in a new way to do business: Online-to-Offline (O2O). O2O is a growing business model where companies who were once purely online leverage brick-and-mortar stores to enhance their consumers’ experience—and grow their profits.
Fostering Customer Relationships
Case in point: Warby Parker. The successful eyeglasses retailer revolutionized the shopping experience with their “Home Try-On” program, where consumers choose five pairs of glasses online and return the pairs they don’t want (all with free shipping, of course). As successful as their model has proved to be, face-to-face interaction with clients was a priority for the company’s founders. Before the group had acquired a formal office space, they were selling glasses out of an apartment because customers asked to come shop in person. The founders obliged, recognizing the importance of creating relationships and how that could influence word-of-mouth advertising. A few years later, after running a string of pop-up shops, the company signed a ten-year lease for a flagship store in Manhattan, located across the street from big names like Apple and Ralph Lauren.
Not Just for “The Little Guy”
In Warby Parker’s case, a storefront helped create relationships with their clients, which proved valuable for the fledgling company in its formative years. But what about an already-established household name like Amazon?
Since their founding, Amazon has successfully pioneered a number of industry game-changers: same-day delivery in certain cities; lockers where items can be picked up within hours; and keychain-like devices that let consumers order specific items at the literal push of a button. Yet, they too have backpedaled, opening a brick-and-mortar bookstore in Seattle last November with two more to come this year. Meanwhile, a rumor to open 300-400 more stores over time is still up for debate. The decision seems absurd during a time where national chains like Borders have shuttered and Barnes and Noble struggles to stay in the game. At the end of the day, consumers still want to inspect goods before they make a purchase and take them home the same-day, ensuring an engaging shopping experience—and Amazon’s bottom line is to give customers the best shopping experience possible.
Using Showrooms to Boost Online Sales
Similar to Amazon’s bookstore, Birchbox—a subscription service where customers receive a box of sample-sized beauty products at their door monthly—opened a retail store in NYC’s Soho neighborhood. The store has a number of attractive qualities that sets it apart from competitors in the beauty industry, but the core philosophy of the company—“Try, Learn, Buy”—is inherent in the setup. In addition to à la carte makeup, a variety of Birchboxes are on display for purchase (or you can build your own). Customers who leave with a positive experience wanting more may be more inclined to sign up for the subscription service. This is in line with the findings of A.T. Kearney’s study, “On Solid Ground: Brick-and-Mortar is the Foundation of Omnichannel Retailing,” which concluded that the value of stores are far greater than the sales that happen within them—in other words, physical stores help retailers sell more online.
A Global Trend
One Chinese retailer has been paving the way for the O2O revolution overseas. Alibaba, an Amazon-like internet giant, recently invested $4.6 billion to partner with Suning Commerce Group, an entertainment retail chain that has brick-and-mortar stores across the country. The partnership allows the internet giant to supply customers their goods with a two-hour delivery window in many areas of China, with the stores serving as distribution hubs of sorts. Not only that, but they also recently invested $1 million into Koubei, a digital platform which connects local food merchants to consumers (much like Seamless does in the United States). By utilizing their digital presence and leveraging already-established retail locations, Alibaba is able to offer goods and services in a way that was unheard of a few short years ago. Since O2O can take various forms, we will likely see more and more companies adopt similar strategies and tailor them to suit their needs and their customers.
O2O will be the theme this year at the international retail event, MAPIC
Image credit: Franklin Heijnen – Flickr