Uncovering the power of O2O economy

Image from O2Oxuetang

What is O2O?

O2O, online to offline, is an ecommerce model that combines offline business opportunities with the Internet. The core of the O2O movement is the potential for integration between e-commerce and physical retail shopping because such unique ecommerce platforms attract customers online, but the real consumption of services is experienced by the customers offline. In recent years, the shift in online retail has moved from being focused on the channel to delivering an experience that combines ease of use and value.

As connected mobile devices become a norm, their potential to transform the shopping experience (both in the store and online) is an enormous opportunity for enterprises especially brick-and-mortar retailers to automate key aspects of physical shopping to digital. A good O2O enterprise looks at the entire digital journey, starting from when a customer goes online to discover products and continues when the customer makes the purchase, completes the transaction, and then goes back online to share their experience.

What I foresee is the main difference for O2O to be different from traditional e-commerce is that O2O offers the unique opportunity to market not just physical goods but also social experiences like going to restaurants, bars and museums, or signing up for a yoga class or tennis lesson. Hence, the key enabler of this trend is improved logistic infrastructure and rapid mobile Internet speed to drive the growth of information consumption and also thereby building a strong online community to market physical goods and services.

China is leader in O2O economy

China is currently the world leader in digital retail, with sales growing at an annual rate of 15 percent. This phenomenal growth comes from traditional categories like consumer electronics, but newer territories are making ground thanks to mobile apps and improved logistics, which have helped ecommerce companies reach new customers in smaller cities. This is propelled by three of China’s biggest companies – Tencent, Baidu, and Wanda – united to create an O2O ecommerce joint venture estimated at close to $1 billion. Another important reason is that China shifts the balance of its economy away from investment and import/export business models and towards domestic consumption, therefore the combination of information consumption and urbanization encourages creative e-commerce in China and further driven by online-to-offline (O2O) retail consumption.

I foresee that as the O2O model gains momentum in China, we can expect to see O2O companies focusing on providing high-quality services – including improved logistic and after-sale services – as well as trying to optimize in store user experience, to their user bases. This will in turn lead to the creation of numerous startups focused on leveraging the consumer interest in this economy as O2O basically means attracting retail customers online, and then directing them to real-world, physical stores.

Future of O2O economy

The key implications for retailers in O2O economy will be to invest in key technologies such as mobile payments and analytics to gain holistic customer insights. They must also work and integrate technology with channel partners which are critical to building and growing O2O services. Customer acquisition will be key as their expectations and behaviour are constantly re-shaped by mobile and digital capabilities. More importantly, retailers have to be more agile and also fluid in the future to adapt to fast changing market trends and emerging technologies in tandem with the the evolution of O2O initiatives and also changing customer expectations.

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