O2O is becoming a most popular term in Chinese digital economy. With the right applications, you can search for nearly all the services and products and pre-purchase them: call a cab, have a meal delivery, book a spa nearby, look for a housekeeper, and etc… With the development of all these small focused businesses, a great opportunity presents.
O2O stands for Online to Offline, which simply means establishing an online front platform for an offline business. Applying this model, offline businesses can reach their potential consumers from online distribution channel; consumers can select the ‘best’ offline services thanks to the exhaustive information online.
The O2O phenomenon has been observed in global businesses such as AirBnB and Uber in the recent years. However, a dramatic expansion is happening in China. According to McKinsey’s iConsumer 2015 study, 71% of Chinese online consumers use O2O services, and 97% of them are certain that they will continue using these services more frequently.
Geo-localization is an essential component for O2O businesses, as the final objective of this digital strategic model is to consume offline. To help consumers find the right place is the key. In general, there are two ways to participate into this developing trend:
- Deploy brand-owned applications to support online strategies
- Rely on well-organized O2O platforms that have great reputation in this two-side market
- Branded applications
Well-known brands that own powerful distribution channels prefer to build apps in-house. For this kind of brands, they have already earned loyal customers who likely search for the app voluntarily. On the other hand, their offline marketing places can promote online activities to potential audiences. In the meantime, the branded shops, stores, and franchises located in various districts allow their products or services to be easily consumed offline.
UNIQLO is one of the most successful brands in China that published their own application to establish ecosystem between online and offline. The objective of the app is more to acquire traffic than to sell, as the company doesn’t have an independent ecommerce platform but rely on Taobao back-office for the e-shops on their official website and on Tmall platform (one service of Alibaba group).
In the app, users can use a virtual “fitting room”, find the nearest shop, and study clothing math tips. The most awesome feature is the way of checking inventory of all sales points. Customers can scan QR codes on labels (in store) to get accurate information about the inventory of e-shops and all stores for a certain size or color. Combining this function with physical market places (average of 80-100 new stores annually in China), UNIQLO encourages their customers to spend time in several different stores, especially when they cannot find their desired size or color for a specific product in one store.
- O2O Platforms
The second option (relying on O2O platforms) is a good idea for small shop owners as well as more famous brands that want to focus on pricing strategies. The brands or shops can reach a large amount of audience and reduce marketing costs by joining forces with O2O platforms. Most of the largest Chinese tech companies have been taking action to catch the trend: Alibaba’s DD.taobao, Tencent’s Ftuan, Baidu’s Nuomi, and a number of platforms that are specialized in certain industries. The common characteristic of all these applications is that they all provide information based on geolocalization.
The first thing users need to do when accessing these apps is to select their region, and all localized data will be selected from a database. Therefore, users can get the accurate information they need, and on the other hand, local stores have a great chance to be presented to their potential customers.
The main characteristics of all these platforms are:
- Geolocalized search, usually with direct interaction on a map
- Integrated mobile payment solution
- Rating & Review modules
Meanwhile, from the back-end, sufficient CRM support and analysis becomes the new battle in the competition among O2O platforms.
O2O creates great business opportunities in China. How to develop blue oceans in this “big world” is the new challenge. In the future, this model may be used for government services, health, education, and so on. Don’t forget, in the online world, offline services and tangible goods still play the major role and will continue doing that. Thus, apart from the common Internet issues such as privacy and online security, for platform providers and stores’ and brands’ owners, Good Quality remains the key to long-term success.