O2O: An opportunity or a distraction for brand managers?

It would seem the hype in the lead-up to Singles Day was justified, with Alibaba posting a record $17.8 billion in online sales, easily surpassing the $14 billion record set in 2015. A startling proportion of this year’s sales were placed on a mobile device (estimated mobile purchases on Singles Day were 80 percent in 2016, compared with 68 percent in 2015 and 43 percent in 2014). And while e-commerce is getting the headlines, the interplay between online and offline shopping experiences shouldn’t be overlooked.

It is the willingness (indeed preference) of many Chinese consumers to purchase on a mobile device that enables the phenomenon of online to offline (O2O), one of the fastest growing sales and marketing opportunities in China. Fuelled in particular by the mobile payment boom, Chinese consumers are increasingly ready to engage and transact through their devices. Yet looking at recent data (eMarketer: China O2O Commerce, August 2016) it is food service, transportation and travel that dominate adoption. So as today’s marketers jump to develop O2O strategy and programs, the big question to ask is this: With current mobile payment behavior driven by services, where can or should consumer brands fit in?

We would contend that brands should look toward the existing consumer adoption of O2O, which has been services-driven, and identify where they too can provide services or utilities in order to establish engagement. To do this marketers must better understand the consumers’ product interactions in the context of their shopping missions and consumption habits.

Here are five considerations for brands wishing to exploit O2O:

Get intimate: By better understanding the target consumer’s shopping journeys and behavior, marketers can establish where opportunities exist to activate O2O. Ultimately, what O2O represents is the deliberate connection by brands of consumers’ digital actions to a physical action in-store. A simple example could be better understanding mobile search behavior and connecting “buying terms” with drive-to-store offers rather than continuing the journey with mobile content. By knowing where consumers are in the purchase path, we can activate the right content to deliver in-store traffic.

Get social: While many brands have done a great job building relationships with consumers through social channels such as WeChat, few are using this engagement to trigger purchase. Brands with great content should look to continue the dialogue further along the purchase journey. Many brands jump straight to price discounts as the most tried and tested method of stimulating O2O, but this model isn’t sustainable for long-term brand health. In its simplest form brands can formulate a dialogue with consumers that includes great product experience and highlights in-store availability. For example several brands in the cooking products category have done a great job stimulating recipe conversations—they just need a nudge to then work with a retail partner and make these recipes easy to shop in-store.

Get through barriers: Product complexity, increased competition, limited distribution, low category traffic—whatever the barrier, O2O can offer solutions for brand marketers to improve the product experience. For example, O2O can assist shoppers through range complexity, which has long been claimed by retailers and suppliers as a barrier to purchase. By arming consumers with the information they need to make an informed purchase before they go into the store, then continuing to make mobile content available at the point of purchase, the shopper’s choice is made simpler.

Get connected: One of the biggest challenges for brand marketers is their limited integration into retail channels. Yet opportunities exist to provide points of connection from online to offline. Think in terms of joining the dots with consumers through your communication channels; outdoor advertising that contains a QR-based call to action highlighting availability, in-store or on-pack materials that reinforce the offer and finally coupon recognition by the retailer's point of sale system. Once marketers get intimate with their consumers and understand their journey, they can create truly seamless and natural connections.

Get servicing: As described earlier, if service-based experiences are driving adoption of O2O, brands can look to partner with services in their consumer’s current O2O journeys. Think about a consumer using Dianping to search and book a restaurant. A beverage brand could deliver an offer associated with specific restaurants. The offer becomes a good reason for someone to choose the restaurant and creates an additional channel for the beverage brand. Taken a step further in-restaurant communications could promote the brand’s WeChat thereby driving increased engagement and further opportunity to maintain the O2O cycle.

In closing we would leave you with this key piece of advice: Use the phenomenon of O2O as a transformational agenda within your organization. Your consumers are showing you the way in terms of their behavior and readiness to seamlessly integrate their digital and physical shopping behavior. To make this an opportunity rather than a distraction providers should mirror this behavior within their organization including team structure, brand planning, and delivery through retail channels.

Gareth Ellen is the Asia Pacific regional planning director and COO China at Geometry Global