The epidemic has prompted brands worldwide to rely heavily on their online channels, bringing e-commerce at the forefront of retail spaces. However, as the situation in China keeps normalizing at a faster pace than the rest of the world, some brands have already started resuming their Online-to-Offline (O2O) strategy.
Online-to-Offline is not a novelty. Born in the second half of the 2010s, the term used to raise eyebrows for its confusing definition. Online-to-Offline used to signify e-commerce or online stores that could drive consumers to physical stores and motivate their offline purchases, and vise versa. With the introduction of Alibaba’s “New Retail” in 2016, O2O has taken the expanded meaning of a seamless and mutual integration between a brand’s online and offline channels. Nowadays, O2O has become an integral part of the omnichannel retail strategy and a necessary step to bridge offline and online environments, especially for those brands who were born online and now wish to create an all-round experience for their customers. The purpose of new O2O strategy is to offer a consistent level of interaction with the brand by way of experience and retail design.
In 2020 this process was partially disrupted, with offline retail enduring the consequences of social distancing norms and post lock-down regulations. Despite the difficulties, O2O strategy is appearing to be making a come-back in the Chinese retail ecosystem.
Planning for a Future O2O
One of the last examples of Online-to-Offline strategic implementation comes from Alibaba Group, which has confirmed its investment in Helijia (a Chinese booking-platform for beauty services) and has resumed the efforts to bring the start-up´s offer of on-demand manicures and beauty treatments in its TMall Beauty kiosks around China.
Image Source: Alizila
After a fall of 10% in retail sales during the first quart of the 2020 (National Bureau of Statistics of China), the Beauty Industry in China has experienced a faster recovery than other sectors. While international players like Sephora were still aggressively promoting their online retail spaces, domestic beauty brands like Harmay, The Colorist, and Perfect Diary were laying out their O2O strategy to create or expand their offline network. According to CBN Data, The Colorist has opened more than 100 offline stores in benchmark shopping malls and has plans to open 200 by the end of 2020, and Perfect Diary has planned to open 600 stores in Chinese lower-tier cities over the course of the next three years. O2O planning is also extending beyond the Beauty Industry: this is the case for C2C platform Ymatou, which has built a name on bringing foreign luxury goods to Chinese consumers through live commerce broadcasts and fast delivery. The company recently announced the planned expansion to open 1000 offline retail spaces across 100 cities in China.
Benefits of going Offline
What are the benefits of entering the physical retail space through O2O strategy? We have identified the main three:
– Improving Overall Consumer Experience
– Shrinking of Offline Operational Costs
– Leveraging on the “Net-Celebrity” Status
Improving Overall Consumer Experience
Integrating online and offline channels improves the overall experience consumers have with the brand. For example, the Beijing store of cosmetic company Harmay reflects its uninterrupted consumer experience even on the design level. The industrial design of the location gives the feeling of peeking behind the curtain and into the cosmetic brand’s warehouse: this enhances the sense of continuity between a visit to the store and the online platform, but makes the two experiences different enough to keep consumers entertained and feeling they are at two complementary steps of the same journey.
Image Source: Arch Daily
Shrinking of Offline Operational Costs
Brands investing into an offline retail space can benefit from the shrinking costs gaps between operating online and offline channels. According to an interview to Ymatou CEO Zeng Bibo, traditional stores used to have high operational costs but after the epidemic there has been a substantial decrease in rent costs. At the same time, logistics costs in first- and second-tier cities are currently rising, making online operations less convenient than before and opening up new possibilities for offline spaces.
Leveraging on the “Net-Celebrity” Status
Brands can leverage on their successful online presence to stimulate consumers brand recognition and endorsement. For example, Chinese aromatherapy and lifestyle brand To Summer is widely considered a “Net-Celebrity” brand and has opened its first pop-up store in Beijing on the 12th of September 2020. Thanks to an extensive online campaign, To Summer high-end room fragrances and rough crystal diffusors have become a successful presence on social media in the past. Despite not having opened a Tmall store, the brand is already widely sold through the self-operated WeChat mini program. Plans to open a permanent retail location in Beijing’s popular Sanlitun district are already in the making for December of this year.
Image Source: Jiemian
While the global pandemic seemed to have had unfavourable outcomes on brick-and-mortar stores, Online-to-Offline strategy and its enhanced role in the New Retail is providing the answer to guide brands in reclaiming their physical presence. Treating online and offline channels as complementary instead of as competitors has proven to be a successful strategy in the past, and Chinese domestic brands have already resumed their efforts to provide a better integration between the two channels.
This blog post was originally published by Melchers’ Retail Partner 5 Star Plus Retail Design, an interior design company specializing in the branded design of retail stores and restaurants. The original post can be found here.