How Online-to-Offline (O2O) Business Model Helps Small Merchants Grow

Published at May 28th, 2021

It is a fact nowadays that e-commerce has successfully gained momentum in capturing a portion of the market share, especially in retail sales. In the United States alone, it is said to reach a 14.5% total in spending, considered as an all-time high and forecasted to grow as we get more acquainted with how it works paired with the convenience it provides the consumers. With this projection, many businesses are considering migrating their platforms and transforming them from offline to online.
 

E-Commerce has become increasingly the choice of customers given the current situation but the remaining 85.5% of the market share when it comes to sales comes from Brick-and-Mortar stores. As SMEs, these figures are vital when it comes to considering plans on how to take on both markets in the foreseeable future. It is true that building an e-commerce platform for your business can be less costly especially to overhead expenses because you need less manpower to fulfill your orders and would only need to get in touch with a logistics company to handle your shipping method successfully. It is still prudent to know, however, that having a physical store represents a larger portion of the market share for retail sales. Instead of completely choosing one platform over the other, wise businesses opt to adopt the Online to Offline or O2O business model.
 

What is Online-to-Offline (O2O) Business Model?

Online-to-Offline (O2O) business model is a strategy designed to attract potential customers from the digital space to go to your physical store to fulfill the purchase. This kind of approach aims to seamlessly blend both platforms - digital space and brick-and-mortar - to effectively target prospects and fulfill the order through their physical store.
 

In essence, what the O2O business model does is they first target their audience online through marketing campaigns and ads with a set goal - brand awareness, customer engagement, social media presence, promotions, etc. Next, customers are invited or attracted to head down to their physical store to complete the purchase. The physical store may have its own promotion as well to upsell to the customers once they get there.
 

Examples of Businesses Using O2O Strategy
 

Supermarkets - In 2016, the supermarket giant, Walmart, completed its acquisition of an e-commerce company named Jet.com for a whopping $3 billion worth. What attracted Walmart in acquiring Jet.com is its solid user base of about 400,000 new audiences on a monthly basis. Walmart seized the opportunity to make itself known to Jet.com's netizens especially in the millennial generation who are very much tech-savvy. Through this, Walmart can leverage on launching marketing campaigns online and attracting customers by making a curbside pickup or contactless pick up a thing of the present. The same strategy was done by Amazon when it purchased Whole Foods in 2017 for a staggering $13.7 billion.
 

Clothing - Back in 2018, Zara launched a new concept store in London with a whole new upgrade in the customers' shopping experience. Besides the self-checkout and smart tech features that the store boasts, customers can quickly get their purchased item through a click-and-collect setup which is manned by an automated robotic arm system. In this way, the marketing campaigns of Zara would be more focused on the digital space where they can reach more audiences while fulfilling their orders in the store.
 

Food Service - Who said restaurants cannot use the O2O strategy? If so, then take a look at how Burger King in Spain successfully maximized the online and offline platform. The food service giant created a burger customization tool that rode on Instagram. Through this, customers can create their own Whopper by answering poll questions and receiving a voucher to collect at a store. The fact that they were able to make customers head to their store is already a win for Burger King!
 

Conclusion

Given the current pandemic situation, it is important to strive for innovation and think of ways to help the business survive. As small merchants, the thought of completely migrating online is so attractive to us because it is much less costly to operate. Based on the facts, however, face-to-face transactions will never go away - specifically in the foreseeable future - considering that there are businesses that serve customized products and services based on the customer's appetite and preference. Ultimately, it works best to utilize both online and offline platforms through the O2O business model.