O2O Commerce – The Origin Story & What it Can Do for Your Business?

Customers desire convenience and don't want to struggle while shopping and ordering products. They want to shop when they want, where they want, and get what they want. Online to offline commerce or O2O commerce is meeting such needs of those customers. 

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A critical research report says 55% of shoppers who began their product search online purchased in a store. That trend is fueling a growing recognition that the combination of stores and websites produces the biggest payoff.

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The rise of online businesses utilizing brick-and-mortar store format is just one strong indication of this trend.  Let’s discuss the origin story of O2O commerce and what it can do for your business. 

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Everything About O2O Commerce – How and Why was it Born? 

How online to offline commerce came into existence and why retail brands are transitioning quickly to this trending retail strategy?

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1. Trend to achieve dominance on competitor’s channels:

E-Commerce businesses have slowly realized that solely relying on traditional online store formats and taking bold steps (price cuts, free delivery, easy returns) to expand their business would do no good in the long run. They have to experiment and grow beyond their comfort zones. 

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So, why not adopt the competitor's business strategy that gives an enthralling presence on the channels championed by them? That's the reason ecommerce stores are speedily opening retail stores to boost brand awareness, increase in-store customer footfalls, and change customer perception of their brand as the one that has a presence everywhere.

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Are you still not sure about what we have said? Check out the research below. In 2022, the online retail market share is expected to grow to 20.3% to total $5.5 trillion in global ecommerce sales. The growth is set to continue and reach 23.6% by 2025, exceeding $7.3 trillion.

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The research also means that 76.4% of all sales are still predicted to occur in brick-and-mortar stores, which is a golden business opportunity for ecommerce businesses.

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It is easy to understand why ecommerce companies like Pepperfry, Flipkart, and Amazon are opening offline stores that complement their ecommerce offerings. You can easily see that O2O commerce give wings to the retail ambitions of ecommerce businesses and helps them come true.

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2. Astonishing findings about customer behaviour

It has been found that customers do their homework for major purchases, which is the easiest online, but when it comes to making actual purchases, they do it in person at retail stores.

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Retailers indicate that customers like to browse the internet to research major products. Still, when it comes to making an actual purchase, they prefer to do it in person, in the store, according to almost half (46%) of retailers. 

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Things do not end here when customers come to retail stores for shopping. Another study says most in-store shoppers are searching online for more information about your store, brand, or the products you offer.

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In-store shoppers are 4X more likely to search on Google for the retail brand of the store they're currently in than the next highest competitor, and there are 6X more Google searches for the retailer than for amazon.

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That means customers intelligently utilize online channels to extract in-depth information about the brand and utilize it to make instant shopping decisions at the store.

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3. Pre-Pandemic Sales Trends were Found to Support O2O Commerce growth

Retail research says that brick-and-mortar stores grew faster than e-commerce for the first time, with physical stores growing at 18.5% versus e-commerce growth of 14.2%. That 14.2% growth is slightly above the typical annual growth rate but much lower than the 31.8% growth e-commerce experienced in 2020.

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This trend reports that though ecommerce businesses made a lot of money during the pandemic, brick-and-mortar stores in the present (post-pandemic) are the clear winner in the retail industry and would always thrive, survive and grow in the future.

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4. Rising eCommerce Sales Still Indicate they are far Behind Brick-and-Mortar Stores Sales

Internet sales have played an increasingly significant role in retailing. In 2022, e-commerce accounted for nearly 21 percent of retail sales worldwide. Forecasts indicate that by 2025, the online segment will make up close to a quarter of total global retail sales.

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Image: E-commerce as percentage of total retail sales worldwide from 2015 to 2025

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The above research suggests that ecommerce sales are sharply showing a Year on Year (YoY) growth. It also means that sales from retail stores would continue to dominate the scene as online sales only represent 24.5% of the global retail market. 

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This online to offline sales gap is an eye-opening trillion-dollar opportunity for ecommerce brands to quickly grab the retail store market and grow businesses by adopting the O2O commerce model.

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These critical research and studies reveal a lot about why O2O commerce became widely accepted in the retail industry. Retailers have been actively transitioning from Online to Offline commerce after noticing and studying these dynamic changes in customer behaviour and retail model adoption.

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Not only this retail strategy helps online businesses build a strong brand presence. But also allows them to upgrade the in-store experience and invest in experiential retail, giving shoppers more reasons to stay and invest time in their stores.

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O2O commerce is the stepping stone to omnichannel retailing that helps online and offline retail brands build a staggering brand presence across all channels. Retail stores can study omnichannel data of customers and launch customized marketing strategies and a loyalty program for every customer.

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What can E-Commerce Businesses Achieve from O2O Commerce?

Quicker hyperlocal delivery: By sourcing products directly from local vendors, hyperlocal delivery can provide eCommerce brands with lightning-fast deliveries within a limited geographical area.

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That can save e-commerce brands time and money by eliminating the need for warehousing and transportation and provides a effective tool against shopping cart abandonment by getting quick business from nearby customers.

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Get in-store foot traffic: Customers feel excited when they come to know that the ecommerce brand they have been doing business with for years has opened a retail store nearby their location. It can help offline, and online customers connect with the brand and grow customer footfalls in the retail store.

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Cut down the fulfillment cost: We have an excellent example of Nykaa. The omnichannel beauty retailers saw an increase in fulfillment cost, especially with the impact of Covid. 

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So, it opened more warehouses to reduce air and shipment costs. This reduced their fulfillment cost to 9.7% in the March quarter under review, which is very similar to pre-Covid levels.

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Restore the touch-feel experience missed by the customers: Though digital shopping experiences may be convenient and there is a massive rise in ecommerce business around the globe, reports have found that an overwhelming 92% of customers still miss in-store shopping.

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However, with the advent of O2O commerce, shoppers can now enjoy the best of both worlds – the convenience of online shopping, with the bonus of being able to touch, feel and try the products they are interested in purchasing.

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Increase customer lifetime value: O2O commerce motivates customers to visit brick-and-mortar locations because customers who shop in-store tend to have higher spending and conversion rates. Simply put, by getting an online customer to visit a physical store, businesses can expect a higher overall lifetime value (LTV) from that customer.

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Save money on logistics: An O2O commerce strategy can help retailers reduce their reliance on third-party logistics (3PL) partners and offer same or next-day pick-up for customers. 

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Buy Online Pickup In-store (BOPIS) helps retailers reduce logistical costs by allowing them to regionalize their inventory and dedicate store space to top trending products that have been sold online.

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Shop 24by7: O2O Commerce allows customers to shop anytime and anywhere, giving them the freedom to browse at their convenience. It also offers the flexibility to choose whether they want to pick up their purchase from the store or have it delivered to their doorstep.

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Famous E-Commerce Brands that Successfully Implemented O2O Commerce Strategy

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CARATLANE

Caratlane started as an online jewellery business in 2008, effectively disrupting the existing jewellery retail business model. After ten glorious years, it has become recognized as one of India's top 20 e-commerce portals. 

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Steadily growing from strength to strength since its inception, CaratLane has also established 100 physical stores across the length and breadth of India. This has resulted in their online influenced orders at stores standing at 60%.

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Online and offline retail combination grew Caratlane searches by 48 % last year; new customer acquisition has grown by 105 %, demonstrating increased brand awareness and high brand intent.

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Image: A Caratlane store

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FYND

Fynd operates as an online-to-offline (O2O) model and aims to help businesses grow and expand their market influence in online and physical retail. It offers a unique fashion e-commerce portal that brings the latest in-store fashion online.

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The O2O company directly sources products across various categories, including clothing, footwear, jewellery, and accessories, from over 8000 outlets in India. Fynd's in-house product, the 'Fynd Store,' helps brand stores save their in-store sales data.

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Fynd store helps store managers place orders on behalf of walk-ins in case the desired product is not stocked or available in the store's correct size.

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Image: Fynd O2O model 

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AJIO

AJIO started as an online fashion shopping portal that seeks to make runway fashion more accessible to working women. It uses the O2O business model to connect local businesses and buyers through a marketplace. Buyers can view product listings, make inquiries, book orders, and collect orders offline.

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The retail brand uses in-store couponing and aisle kiosks to strengthen the O2O model and does direct deliveries from 350 trends and 70 trends footwear stores.

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Image: Ajio products in Reliance Trends store

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Signing Off

We have revealed many unknown secrets about the origins of O2O commerce that point out how this retail strategy came into existence and how it has been helping ecommerce companies fill the bigger gap in online and offline sales. 

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If you are interested in learning more about O2O retail, book a demo with Fynd to know how you can use the strategy to gear it specifically towards bringing online customers into the physical store environment.

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Fynd is trusted by over 600 brands and 10,000 stores and has been recognized as the top 10 most innovative company in the Asia Pacific region in 2022 by Fast Company.