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Online-to-offline commerce
By : Ravikeerthi Rao
O2O
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The various Retail options
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 The retail scene is a dazzling array of :
 independent shops,
 department stores,
 discount enterprises,
 corner cafes, &
 national and regional chains,
 conventional supermarkets, and
 other large-scale enterprises.

3.
Traditional brick-and-mortar retail sales
 In the early days of online retailing, the phrase
"brick and mortar" came to mean “a retail store
with a physical building”, as opposed to one that
conducts sales entirely online.
 Bricks and mortar, of course, are traditional
building materials.
 But the term has taken on a less positive
connotation in the Internet age, usually meaning
"old-fashioned."
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4.
 Those huge number of e-commerce’s revenue**
and how fast it is growing are really worrying
traditional retail.
 The belief among some that :
 the days of going to a store to do shopping are
numbered, and
that most shopping will be done from the home
computer or cell phones.
 Recent store closures involving major retailers
like Sears and Macy’s are adding to the that belief
.
 **In the financial year ending March 31, 2018, Flipkart had a revenue of $3.8 billion
(Rs26,925 crore) (excluding subsidiaries Myntra and Jabong), and that of Amazon $3.2
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 But the reality is that the traditional brick and
mortar retailer is not going away anytime soon,
and
 the scenario of online channels wiping out offline
ones seems to be impossible.
 Why?
 People still wants to shop and buy in a store.
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6.
Why?
 Customers like to shop in bricks and mortar
stores for a variety of reasons.
 A lot of consumers still prefer stores because they
may need their products immediately.
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Why?
 The feeling of trust and satisfaction when a customer
sees and touches a product is still a major deciding
factor.
 Convenience of e-commerce can not replace this
feeling.
 This is because, we value relationships. We trust
people, not online reviews.
 Shoppers have learned that what is posted online is
not necessarily true anymore.
 What was once considered fact because it was7

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Other reasons:
 Online business is flooding the courier companies
so much - that resulting in packages delivered
late or sometimes, not delivered at all.
 Customers may also not want to risk getting the
wrong product, or damaged goods.
 Delivery fees for online purchases and security
concerns are among the factors that drive almost
as many shoppers to check out a product online,
then visit a brick-and-mortar store to purchase.
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Why?
 Finally, shopping, to some extent, also remains a
desirable leisure activity for many consumers.
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Showrooming
 There are many customers who will browse in a
retailer's physical location to check out the
merchandise, but make their purchase online.
 This practice is known as "showrooming."
 Opposite to this is “O2O”
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So, What is O2O?
 Online to offline (O2O) is a business strategy,
 that discovers customers in the online space,
through emails and online advertising / web
marketing, and
 then uses a variety of tools and techniques to
persuade the customers :
 to leave the online space, and
 visit the merchant’s offline premise.
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Online-to-offline (O2O) commerce
 Customers rely more and more on internet :
 to research products, and
 gather more details before making a purchase.
 Hence, the retailers are making the contents (of
their website) attractive for the online users to
make a buying decision.
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The strategy of online-to-offline
commerce
 The strategy of online-to-offline commerce is to :
 create product and service awareness online,
 allowing potential customers to research different
offerings, and
 then visit their local brick-and-mortar store to make
a purchase.
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O2O Techniques
 Techniques that O2O commerce companies may
employ to attract the potential customers into the
store (from Online), include :
 in-store pick-up of items purchased online,
 allowing items purchased online to be returned at a
physical store, (Statistics show that customers who order online and
pick up in store, or exchange items in store, tend to buy extra things and
generate high revenue for the store), and
 allowing customers to place orders online while at a
physical store (may be, when the product has to be delivered
to a different person and/or location).
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The goal of online-to-offline
commerce
 However, their main target is to attract a certain
type of customer who is open to walking or
driving to a local store rather than waiting for a
package to arrive in the courier.
 Ex: Type of customer include, one who may
indulge in “showrooming”.
 A traditional store can leverage digital marketing
ideas to get more such walk-in customers.
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Other benefit of O2O retail
 O2O retail strategy accelerates retailer’s 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 -
from a product being 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.16

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Online-to-Offline Commerce Trends
 Despite the best efforts of e-commerce sites, only
around 18% of retail sales currently happen
online.
 And, it is projected that, more than 80% of retail
sales will still happen at physical locations in
2020.
 Consider that about 80% of consumers research
items online before making a purchase, and one
can see that the future lies in a convergence
between online and offline sales.
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Current scenario
 Annual e-commerce sales growth has been
averaging around 15% for some time now.
 And while e-commerce growth could continue at
a similar rate over the next several years, total
penetration is expected to trend to around 30%
over the next few years.
 In other words, 70% of sales will still be made in a
physical store.
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19.
https://medium.com/fitch-blog/why-brick-and-mortar-retailers-arent-going-away-6bde7582950
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Current scenario
 Even if e-commerce demand growth accelerated
significantly from current growth rates, distribution
infrastructure may not be able to handle increased
volumes.
 Fulfullment and shipping logistics are much more
complex when considering sending boxes with just a
few items to individual homes, (versus larger amounts
to centrally located brick-and -mortar stores).
 These limitations will impact e-commerce growth
rates, especially in more logistically challenging areas
like grocery and large scale consumer electronics and
home improvement.20

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Current scenario
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 While e-commerce will continue to grow, a
corresponding rise of damaged products during
the delivery process is adding to the fulfilment
challenges faced by e-commerce companies.
 For a long time now, the amount of loss due to
damaged goods during the shipment cycle is
ranging anywhere from one to eight per cent.

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Current scenario
 To maintain the growth and sustain with the large
scale of an e-commerce business, the e-retailers
must guarantee a flawless management of
inventory and order fulfillment over various
localities.
 Strategically, a brick-and-mortar store can serve
as a warehouse and a fulfillment center, which
help e-retailers improve their distribution system.
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Current scenario
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Another big hurdle faced by online retailer is:
Returns
 Last year (in 2018), customers returned a
whopping $369 billion worth of merchandise in
the US alone.
 And the issue is worsening as more people shop
online, where the return rate is nearly double
what it is for purchases made at physical stores.

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Current scenario
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 The major concerns of the e-commerce business
model are the energy and packaging materials
used by the logistics networks for product
fulfilment and delivery.
 The environmental cost of online retail,
particularly when it comes to packaging is huge.
 As reported in some news article, about 165
billion packages are shipped in the US each year,
with the cardboard used roughly equating to more
than 1 billion trees .

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Current scenario
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 On the other hand, the logistics for traditional retail
were simple and linear – goods were shipped in bulk
to a warehouse and then to the store. Packaging
waste is not a big issue.
 E-retailers are aware that the environmental impact of
packaging is weighing on consumers' minds.
 Brand-owners, and e-retailers alike all need to take
responsibility for reducing the impact of packaging on
the environment.
 Convergence between online and offline sales is the
best way out.

26.
Future
 It’s obvious that O2O business is now one of the
most popular strategies throughout the retail
industry and no one wants to be the outsider of
this race.
 Ref: https://blog.magestore.com/online-to-offline/
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Future
 The challenges of opening a brick-and-mortar
store in the Internet age are similar to what
they've always been: It's just more expensive to
have a physical presence.
 But that's not the end of the story. Amazon.com is
now opening its own brick and mortar stores.
 They have learned that a significant portion of the
population will only buy in s store and so the once
giant of online is now a brick-and-mortar retailer,
as well.27

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Amazon has opened 'Instant Pickup' points in U.S.
as a part of brick-and-mortar push
 At “pickup points” the shoppers can retrieve items
immediately after ordering them Online,
shortening delivery times from hours to minutes.
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Summary
 While e-commerce continues to take share of
overall retail sales, there is still a place for bricks
and mortar retailers.
 In fact the vast majority of purchases are
expected to be made in-person for the
foreseeable future.
 Turning online researchers into offline customers
is the ultimate goal, and the O2O model allows
brands to capture new business.29

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