A Detailed Guide to Online-to-Offline Commerce (O2O)

By Indeed Editorial Team

Published 10 May 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Businesses implement various strategies to compete in their market and provide excellent services to their customers. They may use online-to-offline (O2O) commerce, which integrates in-person and online business strategies. Understanding this commerce strategy can help you excel as a sales, retail or marketing professional. In this article, we define online-to-offline, review how it works, discuss its benefits, examine who can use it, highlight its steps and analyse its strategies.

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What is O2O?

O2O, an acronym for online-to-offline, is a marketing terminology that highlights the relationship between in-person shopping and online sales strategies. People often use this term when discussing online marketing methods that influence clients to buy items in a physical shop. Online-to-offline may also describe how a customer orders online and collects the product at a physical shop.

How does O2O work?

E-commerce companies often offer special product prices and selections, which is often a concern amongst their competitors, such as physical retail stores. Physical retail stores may struggle to compete with online businesses due to higher fixed operational costs, such as rental fees and front-line staff salaries. These factors often affect their capacity to provide similar product pricing and variety as e-commerce enterprises. Online-to-offline retail enables them to be more competitive by synchronising online and offline retail. It allows them to have both an offline presence through their physical store and an online presence.

This business model enables them to increase brand and product awareness online, allowing prospective customers to research various product offerings before visiting the physical shop to buy an item. Companies using this method can employ different techniques, including:

  • in-store collection of products bought online

  • permitting customers to return items they purchased online at a physical shop

  • allowing clients to order products sold out in the physical store online

  • installing a digital product catalogue in stores

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Online-to-offline benefits

Companies implementing this business model may enjoy these benefits:

Greater audience reach

Potential buyers can research products online before visiting a physical shop. Businesses can also use their online presence to motivate leads to buy goods in their physical shops by promoting in-store events and unique features. Retailers may also analyse data from their online consumers and use the insights to shape their marketing initiatives for various customer demographics.

Possible savings

Using online-to-offline retail can help the business save money by synchronising in-person and online shopping experiences. For example, a brand can offer general products online and localised items in-store based on the analysis of their customers' purchasing habits. A business may also save funds by restructuring its physical space to accommodate products customers buy online and collect from a physical store.

High consumer conversion rate

Motivating customers to visit a store can help a business secure more customers because in-store shoppers often have a higher conversion rate and may make impulse purchases. For example, a brand can convince customers to visit a physical location through in-store discounts. The business can enjoy a higher overall lifetime value (LTV) from a consumer that visits a physical shop, increasing its sales and the customer's total purchase amount. LTV is an approximation of the average profit that a customer may generate throughout their lifetime.

Meet customer preference

Many consumers prefer businesses that provide both an online and an in-store retail space, because it provides them with more flexibility. They can also browse a store's catalogues online and view a physical item in a shop before buying it. Customers may appreciate the augmented experience and enjoy its unique offers, such as rewards initiatives and coupons, in a mobile app.

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Increase brand recognition

Using in-person and online marketing strategies through online-to-offline retail can increase consumer awareness of a business. For example, consumers are likely to recognise a brand has a cohesive shopping experience if its image and branding is consistent across its online and in-store locations. Increased brand awareness may increase a company's sales volume and revenue.

Saves time

This model can save consumers time as they browse a store's catalogue online. They can identify items they need and order them before visiting a physical shop. The business can select and package these items, enabling the customers to collect them when they arrive. The online catalogue can also help the prospective customer know about product availability before they visit a physical store, if they don't want to purchase online. This can prevent consumers from wasting a trip if the product they want is out of stock.

Who can use online-to-offline commerce?

This retail model can help various organisations, regardless of size and type. For example, a small business can create an online product catalogue on social media. Large retailers can leverage their online presence to support their in-store businesses. International enterprises may also employ this model by setting up regional stores to take advantage of local trends.

How to implement O2O

Here are steps for employing the online-to-offline commerce strategy for a business:

1. Identify objectives

Identify the brand's objectives for its online-to-offline retail strategies. It can target developing a successful online presence to increase sales if the business has little online presence. If the company has a site and considerable online presence, it can employ online-to-offline sales strategies to attract more customers to stores. You can use metrics like key performance indicators (KPIs) to identify quantifiable objectives. You can use the SMART goal framework to set specific, measurable, attainable, relevant and time-based goals.

2. Brainstorm strategies

You can brainstorm strategies to improve a brand's online-to-offline presence. It's important to collaborate with different departments, such as IT and customer services, to develop a more comprehensive strategy. Ensure you have data to inform your strategic choices and have various alternatives to facilitate discussion.

3. Measure outcomes

You can use the pre-defined KPIs to measure the success of any strategies used. Notice trends or patterns in consumer habits and observe how they suit the in-person and online marketing initiatives. You can use data visualisation software for examining sales pattern changes that you can use to present information to a company's stakeholders and senior management.

4. Adapt strategies

Use the information obtained when gathering online-to-offline data to adapt strategies to trends. For example, you may identify certain types of social media posts that attract more views. Companies can also determine which products customers prefer to buy online or in-store. Businesses can use this data to determine which products to stock in stores versus warehouses. You can also set additional goals when you accomplish a strategy's initial KPI objectives.

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Strategies to implement online-to-offline commerce

Here are strategies to implement this commerce technique:

Provide in-store collection

Allowing consumers to buy online and pickup in-store can simplify the customer journey by allowing them to pick up or return products easily. Customers can spend less time in the shop, as they've checked the brand's catalogue through its online shop or app and ordered before reaching the physical shop. Businesses can also offer discounts for customers that choose to pickup in-store.

Offer appointment booking

Service-based companies, such as hairdressers and private clinics, can offer online appointment booking systems. This can help customers better manage their schedules and prevent them from wasting time if a store has no available service professionals. This can also help a business manage its operations better. For example, a business can arrange for additional staff if they receive a lot of appointment requests.

Connecting online buyers with sales professionals

New customers may hesitate to visit a physical shop. A store's employees can help manage their concerns and inform customers about a brand's in-store offerings. Businesses can also use in-store employees to assist online customers during non-peak hours, such as addressing customer enquiries and issues.

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Marketing a store on packaging materials

Quick response (QR) codes can help businesses provide helpful information to their online customers. Companies can add a QR code to their product packaging to help clients discover more details about a product or their brand, including where the consumers can engage a brand online and in person. They may encourage customers to scan these codes by offering promotions that the clients can redeem in-store.

Displaying specific inventory

Brands can satisfy clients' urgent shopping needs by displaying products available on their e-commerce platforms in local areas of target customers. They can analyse customer demographics to understand what target consumers that reside near a store are most interested in. Businesses can use this data to identify which products are most likely to attract customers to enter a store.

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