Trend Alert: O2O Online-to-Offline Commerce in China

o2o ecommerce - online to offline shopping in China

O2O online-to-offline commerce is the latest trend in Chinese online marketing that takes business strategy to the next level, channeling the power of online business with physical location presence. Discover the online-to-offline O2O business model that brands in China and around the globe are utilizing to grab hold of key markets.

China Gravy breaks down the key takeaways of O2O online-to-offline commerce trending in China and transforming the shopping experience for millions of consumers.

What is O2O Online-to-Offline Commerce?

As a business strategy, O2O is online-to-offline commerce that relies on identifying and drawing potential consumers found on online channels and funnels them into actual customers at a traditional brick-and-mortar store. Various approaches make it attractive for consumers to purchase at the retail store over the online store. 

This not only includes taking advantage of promotions offered through online channels for in-store purchases, but also in-store pick-up of purchased online orders, return of orders from online, and online sales while at the retail store.

The rise of e commerce online retailers has caused concern about the role of traditional retailers with physical stores, namely with the high fixed costs of a physical location and the limit on space and quantity of goods. O2O online-to-offline commerce has demonstrated that most brands do not have to separate strategies between online channels and offline channels when marketing. Already the concept has spread to travel, ride services, grocery stores, and even haircut and dry cleaning services in China.

While e commerce still enjoys huge benefits, O2O businesses can also compete by focusing on targeting the right consumers who are willing to make the trip to the store to compare products, test or try on the products, or save on delivery time when they buy the product. These customers accounted for 626 billion Yuan (96.65 billion RMB) in 2018 (in regards to online reservation systems and in-store pick-up), and while the Covid-19 pandemic has slowed this trend down with the temporary closures of many physical stores, O2O online-to-offline commerce is slated to make a comeback.

China’s Leading Company Started the Concept, Chinese Business is Adopting It

In 2013, GMIC Beijing made O2O marketing one of the most talked-about trends during the conference. Fast forward to 2015 and an entire O2O Expo was hosted jointly by the World O2O Organization (WOO) and Guanghe Capital, with more than 2,000 global companies representing 15 countries in attendance. 

The true revolution of O2O online-to-offline commerce began to take hold with market giant Alibaba in 2016. During a conference in Hangzhou, Jack Ma of Alibaba announced the creation of “New Retail” and demonstrated a commitment to turn the e commerce online retailer into a new business model with the addition of a physical store location. The idea weaved together offline, online, and logistical components into a single chain of data.

At the 2021 China International Retail Innovation Summit, Dada Group, the leading on-demand and retail provider, opened a talk with the prediction that by 2024 on-demand and O2O online-to-offline commerce will close in on 1 trillion RMB (154.5 billion USD). As the concept continues to take hold in China and worldwide, the Chinese government is encouraging the business shift in order to maintain the lead in market landscapes.

Why the Model Works and Marketing Opportunities

Businesses adopting O2O marketing principles are strengthening their ability to target more consumers in China and provide a better overall shopping experience. Learn about why it works and how to incorporate the strategies into your business model.

1. Provides for Shoppers Interest

Studies have shown that 61% of consumers prefer online brands that also have real locations, lending credibility to the companies’ authenticity and trustworthiness. A physical location allows for potential customers to take advantage of the opportunity of interacting with sales representatives and the products when first getting to know the business. These in-store experiences generate key first impressions and make it more comfortable for shoppers to understand their preferences in the marketplace.

Suggested Marketing Strategies

Retailers can offer loyalty reward points and coupons on online channels for use during the in-store experience.

2. Widens the Scope of Targeted Consumers

Traditional retail stores rely on customers that make the choice to come into the store whereas online stores rely on individuals comfortable with making online purchases, possibly from brands they have never interacted with before.

O2O online-to-offline commerce business strategy not only provides for both of these groups of consumers but also entices individuals who enjoy the personal interaction with a brand’s products and may be hesitant to go through with purchasing a product online. 87% of shoppers use the internet to help make decisions about purchases, but there are still a considerable number of consumers that rely on hands-on research.

Suggested Marketing Strategies

Use customer information to personalize marketing campaigns and product offerings to target customers based on their preferences and interests at the local level and the individual level.

3. Reduces Some of the Costs

E commerce in China is driven by its logistics chain and partners. Third-party logistics partners are key players in the success of an online retailer. O2O online-to-offline commerce allows for in-store pick-up and saves on some of the costs and reliance on third-party partners.

Brick-and-mortar stores that have rents and other related expenses can continue to operate and make gains through sales by encouraging more foot traffic. Moreover, traditional marketing outlets, which may be costly, can be supplemented with online O2O marketing campaigns that reduce advertising costs and still generate sales.

Suggested Marketing Strategies

Offer rapid pick-up options on stocked goods for same-day or next-day pick-up for local markets. Another approach is to better match inventory based on regional trends in China or Chinese communities globally to efficiently utilize space and inventory layouts.

4. Encourages Shopping Willingness

Chinese consumers have become accustomed to seeing online products every time they log into social media and online channels. As more digital marketing techniques are integrated into the daily lives of internet and mobile users, brands need to compete to keep the interest and engagement behavior of potential consumers. O2O businesses have a variety of tools to entice individuals to seek out the shopping experience, at both an online store and retail store.

Suggested Marketing Strategies

Limited time offers and same-day discounts are useful approaches for capturing the audience’s attention. Other opportunities might be providing in-store product testing or knowledge workshops offered to online members or with online enrollment. These O2O campaigns provide consumers in China with quality content as well as more firsthand experience and information on the brand and its products. In other words, more of the type of content consumers polled wished to see.

Where is O2O Online-to-Offline Commerce Marketing Going?

Although the global pandemic has set many industries back temporarily, the world is beginning to open up again. The significant influence of online platforms and online marketing strategies in China specifically defined much of the success during the past two years.

Looking forward, brands in China can capture the advantages of online marketing and funnel them into offline success using the principles of O2O online-to-offline commerce. As this type of marketing is relatively new, the trend provides many unique opportunities for businesses to brand their own tailor-made innovative strategy for marketing and sales in the next few years.

O2O Online to Offline Commerce – The Takeaway

Get help with your O2O online-to-offline commerce approach with the expert knowledge of a Chinese business consultant like China Gravy. Our digital marketing experts can help you research the market in China and hone in on the best digital practices for your business as well as create highly effective O2O campaigns to bring Chinese customers to your front door.

Contact the team today and get started turning O2O online-to-offline commerce tools into successful customer engagements and sales.

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