Overview
As smartphones spread, the line between online and offline commerce blurred. Two concepts describe this shift: O2O (online to offline) and omnichannel retailing. O2O usually refers to a way of connecting customers to services, while omnichannel refers to a retailer's strategy of integrating its channels.
The O2O concept
The term was coined by Alex Rampell, founder of TrialPay, in an August 2010 TechCrunch guest post. He called businesses such as Groupon and OpenTable, which find customers and collect payment online and then send them to restaurants, spas and other physical businesses, "online2offline" commerce. Because payment happens online, marketing performance can be measured precisely, and because offline spending dwarfs online spending, he saw a huge growth opportunity. Food delivery, ride-hailing and booking apps for lodging or beauty services are typical O2O services. The reverse flow, in which a store visit leads to an online purchase, is sometimes called offline to online.
Multichannel, cross-channel and omnichannel
- Multichannel: the firm runs stores, catalogues and websites, but stock, prices and customer data are managed separately for each channel.
- Cross-channel: some links exist between channels, such as buy online, pick up in store.
- Omnichannel: all channels are integrated into one customer experience. Darrell Rigby (2011) used the term for retailing that blends digital and physical experiences, and Brynjolfsson et al. (2013) argued that technology is erasing the distinction between physical and online retail, turning the world into a "showroom without walls".
Verhoef, Kannan and Inman (2015) summarised the difference: multichannel management optimises each channel separately, whereas omnichannel management handles channels and customer touchpoints together to optimise the overall customer experience and performance.
Showrooming and webrooming
- Showrooming: examining a product in a store and then buying it more cheaply online.
- Webrooming (reverse showrooming): researching online and then buying in a store.
An omnichannel strategy does not try to block such channel switching; it aims to keep the customer with the same firm whichever channel they buy through, effectively redesigning the whole consumer decision process around channels.
Enabling technologies
- Smartphones and location-based services deliver nearby store information and coupons in real time.
- Beacons (Bluetooth Low Energy signals) and NFC send tailored information to shoppers in a store or process payments.
- Mobile payment and unified membership and inventory systems link payment, points and stock across channels, making CRM data a core asset.
Limits and debates
O2O platforms tend toward market concentration through network effects, so commission fees for merchants and the working conditions of delivery riders and drivers have become public issues. Privacy concerns over location and purchase data and the digital divide for older consumers are also raised. Omnichannel retailing requires heavy investment in integrating inventory, logistics and information systems, and firms must resolve conflicts over how channel performance is measured.
References
- Rampell, A. (2010, August 7). Why Online2Offline commerce is a trillion dollar opportunity. TechCrunch.
- Rigby, D. (2011). The future of shopping. Harvard Business Review, 89(12), 64–75.
- Brynjolfsson, E., Hu, Y. J., & Rahman, M. S. (2013). Competing in the age of omnichannel retailing. MIT Sloan Management Review, 54(4), 23–29.
- Verhoef, P. C., Kannan, P. K., & Inman, J. J. (2015). From multi-channel retailing to omni-channel retailing: Introduction to the special issue on multi-channel retailing. Journal of Retailing, 91(2), 174–181.