Now more than ever customers have a huge range of options when it comes to who they shop with and even how they shop. They can order online and pick-up in person, order in store and have it delivered to their doorstep; set up a recurring payment for a regularly used product, or make one-off purchases. The experience of shopping with a merchant has in some ways become blended beyond omnichannel.
A major driver for this blending of online and retail was the offline-to-online movement in ecommerce that occurred in 2020; changing how brands sought to meet the changing needs of their customers. Now, we’re seeing a new strategy in action - Online-to-Offline, or O2O.
How offline-to-online changed ecommerce
Increased focus on customer needs
What became clear early on the pandemic response was the need for brands to become hyper flexible and adaptive, and fast. Differing nationwide lockdowns and government responses meant that people were restricted in different ways around the world and in order to continue to service customers, brands had to put greater emphasis on meeting the changing needs of their customers. Brick-and-mortar retailers had to get online to meet those needs, and merchants with an existing online presence had to put greater focus on their online fulfillment and experience.
Brick-and-mortar retail brands entered the online space
There are a couple of ways in which traditionally brick-and-mortar retailers entered ecommerce. The first is small to medium sized retailers who had a physical presence, but not much in the way of an online presence started to focus more on online retail. This is due to the fact that in regions around the world, non-essential retail outlets were closed or if they were open, consumers were more wary of visiting physical stores. Therefore there was a huge increase in competition across categories in all sizes of online business. The second is in how large brands using traditional routes to market such as grocery and department stores had to adapt and get online. This increase in the online retail ecosystem was exemplified by the massive growth seen at Shopify in 2020 compared to 2019.
As retail stores have opened back up, these online arms of those businesses have been retained and grown further so as to adapt and work into merchants’ brick-and-mortar strategies. This means that those brands who already existed online prior to this boom have had to re-strategize to account for this increased competition in the long-term.
Subscriptions and recurring payments
2020 was the year of subscriptions and recurring payments. According to ReCharge’s annual report, there were around 6000 stores using ReCharge in 2019 and this increased to over 9000 in 2020. This huge spike can be attributed to merchants offering that reactive flexibility we mentioned earlier. Customers were looking for experiences to enjoy at home, gifts to send to family and friends, refills on products they use regularly, and more. In order to facilitate this, merchants had to adapt and develop a strong subscription and recurring payment proposition that meets those customer desires and needs where they were. This trend also includes some of the aforementioned physical retail brands who had to pivot their offering to remain competitive with online brands. To use ReCharge’s example, oat milk brand Oatly developed a strong subscription service to retain those customers who would typically purchase in-person.
Adaptive response to order fulfillment
As restrictions changed in different cities and regions, merchants had to be quick to adapt their order fulfillment strategy. Examples of this include the rise in Third Party Logistics to meet growing demand, and the growth in merchants offering curbside pick-up. Merchants had to figure out new ways to get products in customers’ hands. This has now led to increased expectations from customers over how their orders should be fulfilled and the options open to them. Having access to everything from local delivery, to pick-up, to next-day delivery, they now want these options to remain a normal part of their ecommerce experience.
A new strategy: Online-to-Offline
2020 saw many traditionally offline brands go online, and a massive growth in online sales around the world. More people were shopping online than ever before, and these online experiences became increasingly blended with offline experiences. As restrictions eased and people started returning to retail stores, we’ve started to see a reverse in strategy: online to offline or O2O.
What is O2O?
Put simply, Online-to-Offline (O2O) is a strategy which drives customers from the online space, to a physical retail space. It has similarities and overlaps with omnichannel marketing, but there are some key differences. With O2O, you’re using your online channel to identify and drive customers to your offline channel. That may be through browsing your store, email, social media etc. but the key is turning them into brick-and-mortar customers. Omnichannel on the other hand focuses more on behaviours across and between channels and incorporating them into the one fluid experience. The goal with O2O is to turn ecommerce browsers into physical retail customers by using the marketing techniques of both online and offline.
Why is it becoming more popular?
The reason many merchants are starting to look at an O2O strategy is almost precisely the same as why many developed a more robust Offline-to-Online strategy back at the start of the pandemic - they want to continue to meet their customers’ needs where they are at any given moment. As the lines between online and in-person retail become more blurred, customers expect brands to adapt. Rather than your online and retail channels being treated as separate entities, they’re treated as the same channel.
Without this approach, for example, it may be that a customer can order an item online but the physical store doesn’t carry stock. 80% of customers will visit a store to make a purchase for an item they want to buy immediately, and 61% would rather shop with a brand that has a physical store instead of online-only. It’s clear that despite the huge growth in ecommerce, physical retail has a huge place in the customer experience. If a customer sees a product online, and goes to your store only to find it isn’t in stock there, that’s a poor experience. If instead they see it online, and your store is able to order it there and then to their doorstep, that’s a great experience. And it’s an Offline-to-Online experience. Another example would be offering curbside pick-up for online orders from specific locations, showing customers which retail outlets have stock of items they want to buy even if that item is out of stock online.
In essence, it’s a way for merchants to drive even more sales through both channels. They can accommodate a positive customer experience wherever that customer happens to be at any given time.
How to make use of O2O
Buy online, pick-up in-store
The first way you can really make use of O2O as part of your strategy is to offer “Buy Online, Pick-up in-store”. It’s convenient for customers who want to get those products the same day, and don’t want to wait for delivery.
If you want to really drive more customers to your store from online, you should show if an item is out-of-stock online but available in-store. 6 in 10 internet users check whether a product is available in a local store before visiting that store. Your customer won’t be upset that the item is out of stock online, because they can simply go down to your retail store and make the purchase there.
Buy in-store, ship to customer
A sort of reversal of “buy online, pick-up in-store”, this method allows the customer to make a purchase in your physical store and have it shipped directly to their home address. This is especially useful if for example your retail outlet doesn’t carry your full catalog due to warehousing constraints or deliveries have been delayed from your primary warehouse. Rather than putting the responsibility on the customer to go online, look for the item, then purchase, you’re offering them a convenient option to order right there and then, ensuring you get the sale.
Geo-targeted Email and SMS
Owned marketing channels like email and SMS give you a direct channel to your customers. Combined with your Shopify store data, you can create campaigns specifically targeted to customers who are within a certain proximity to your retail outlets. You can tailor flash sales, discounts and coupons, and even special offers that are exclusive to physical stores nearby the customer. If you’re making use of Shopify POS, you can even tailor content based on their behaviours both online and in-store to really ensure the success of your campaigns and drive customers to your store.
Investing in local SEO is a major part of any O2O strategy. Many customers will use local search to find brands and products they’re looking for. 76% of people who conduct a local search on their smartphone visit a physical place within 24 hours and 28% of those searches result in a purchase. Develop a local SEO strategy that makes use of tools such as Google My Business, and include details for each physical store on your Shopify site to capture search users who may be looking for where to buy your product category in your local area.
Customer expectations from brands are higher than ever. They want brands that will meet their needs wherever they are, and who will offer them a seamless and convenient experience wherever they want to shop. O2O was largely driven by the changes brought about by Offline-to-Online, putting flexibility and adaptability front and center. By making use of Online-to-Offline strategies, merchants can deliver the experience that customers want and drive not only conversions, but loyalty and satisfaction too.