On 19 March 2019, the EC103 class on Understanding O2O, held at the Selangor Digital Creative Centre in i-City, Shah Alam, saw a turnout of 110 people. Coach Adrian Oh spoke about the various types of E-Commerce, O2O, the universal formula for E-Commerce and future trends in O2O.
He shared about the five e-Commerce types – B2C, such as Amazon (Business to Consumer); C2C, such as eBay, Lelong and Carousell (Consumer to Consumer); B2B2C, such as Rakuten (Business to Business to Consumer); O2O, such as Groupon, Fave (Online to Offline), and Mobile-first, such as Shopee.
He also shared about the concept of ‘New Retail’, which is where online, offline and logistics converge, in a unification of demand. The concept is encapsulated by the ‘C2B’, or, Customer to Business innovation: Where businesses use customer insights, largely generated through digital interactions, to inform product development, instead of the other way round, which is how it’s traditionally done. This means that sellers seek to give consumers what they want, wherever and whenever they want, however they want it, whether physically or online.
He then shared a set of ‘critical factors’ for C2B innovation. They include Customer Data collection, Access to Distribution, Flexible Manufacturing, and Agile Product Development.
A case study of New Retail innovation such as Alibaba’s Hema was then explored. Hema stores are the future of retail, as they are supermarkets, restaurants and a fulfillment warehouse all in one.
They uses electronic shelf labels in Hema stores in China. This innovation can help the store easily change prices and sync this display across physical stores, on both online and offline platforms, taking only 23 seconds to update 1,000 labels. Hema also takes payment only via the Hema app, removing the hassle of paying by cash or card with an efficient, secure and smooth digital transaction.
Customers can place orders and pick them up in under seven minutes, using the app to shop. Physical wise, it has around 3,000 SKUs in store, where 80% are food and 20% fresh foods, but has over 50,000 SKUs on its digital platforms. It also offers delivery for customers within a three kilometre radius, promising a delivery time under 30 minutes.
It was found that Hema’s online delivery orders account for half of total orders, although that number can go up to 70% for some stores. They are aiming for online orders to make up 80% to 90% of orders.
On the topic of O2O, Oh described it as a process whereby customers purchase the goods or services online, but redeem the services or goods offline.
There are 2 ways this can be done: A) Where the services come to you (E.g. Grab, ServiceHero, Kaodim), or B) You go to redeem the goods or services (e.g. TGV, Fave, Watsons).
Some examples include Transport (Uber, Grab); Services (Maideasy, ServiceHero, Kaodim), Booking/Ticketing (TGV, Airasia), Daily Deals (Fave), Retail (Watsons).
On the topic of e-commerce share of retail sales, figures in the US put it at 11.5% for 2018, but there is an expected growth to 14.6% in 2020. For China, those numbers are way higher, at 28% in 2018, with an expected growth to 33.6% in 2020.
Below, you can find the chat of the top 10 countries with retail e-Commerce sales as a percentage of total retail sales:
According to Oh, there are eight reasons for brick and mortar stores to go online:
- Easy expansion (not restricted by geography)
- It complements the brand (offline customers already trust the brand so are likely to go online)
- Cheaper (up to 20% cheaper than owning a physical store)
- Great way to clear stock
- Ability to offer the most comprehensive catalogue as you don’t need the physical retail space to store them
- Ability to cross sell and up sell
- Enhances product visibility online
- In-store pickup reduces delivery costs, contributes to foot traffic and helps customer service
Oh also brought up a case study of the brand Warby Parker, an optometrics retailer. Their strategy was to ship 5 pairs of frames to the customer to try at home for free. They operate a retail space that costs USD 3000 psqft, where 85% of customers will visit the website later, increasing the Customer Lifetime Value.
He also touched on Amazon Go, with its ‘just walk out technology’. With no queues, checkout or cash register, it uses AI facial recognition and sensors so that customers can merely scan their phone as they enter, grab what they need, and walk out. These sensors and cameras will detect what the customer takes off the shelves and put in their carts (or what they put back), and then deduct the costs from their account.
Challenges of the O2O Retail System
The O2O-Retail system is not without its challenges, however. Operations issues like real-time stock availability, the syncing of member and loyalty systems such as points and vouchers, or Point-of-Sale integration with the storefront, accounting and app can and often do crop up, and can cause quite a hassle for the business.
It is also worthwhile to consider whether the business is able to give shoppers a seamless shopping experience, and to look out for any issues within the organisation such as internal conflicts, or inability of staff to adapt quickly enough to changes in the system.
Future of O2O
The answer, according to Oh, lies in omni channel retailing.
Omni channel retailing is where customers can purchase anything anywhere, through any means, digital or otherwise, and have their products or services delivered to them through any channel, whenever and wherever they want.
Nearing the end of the course, Iylia Fahmi shared tactics to grow and sustain using O2O, while Elaine Tham spoke about Shopline an omni-channel platform and cross-border service for brands. Dr Tom spoke about building sustainable businesses in the age of innovation.