Home Retail The O2O Retail Model: Will the reverse strategy work?

    The O2O Retail Model: Will the reverse strategy work?

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    “Shopping is as much an experiential occasion, as it is a transaction comprising products and money. It is a social participative activity, which is not replicable to the same degree by online social sharing of browsed products, wishlists and purchases,” says , CEO of retail and market analyst firm Third Eyesight.

    Dutta’s analysis appears to be echoed in today’s retail environment, where several e-tailers are increasingly looking at establishing offline presence.

    In the past few years, a slew of pure-play e-tailing companies, including Lenskart, Healthkart, Fabfurnish and Caratlane, among others, have already or are in the process of opening physical stores.

    So why are these online retailers embracing offline stores? Also, will this Online to Offline (O2O) model be an important game-changer for the future of retailing in India?

    Why are the reverse traffic?

    In the current retail scenario, where developing an omnichannel identity is a must-do for most brick-and-mortar retailers, the rationale for the reverse can be to either their online sales or to deliver a more real, ‘five-senses’ experience for customers.

    “For products that have a touch-feel element, the physical retail environment continues to be attractive for the customer. Also, an offline store can help to create more credibility and a more direct customer connect, especially in an environment where online sales are dominated by discounts and deals,” explains Dutta.

    For instance, for the five-year-old kids’ products’ portal, FirstCry, the offline store serves the purpose of providing a ‘touch-and-feel’ experience. “About 85 per cent market is going to remain offline even after five years, however hard we try to push e-commerce. Online shopping is convenient but it does not give that touch and feel experience, which customers in my segment would want,” , CEO and Co-Founder, FirstCry, was quoted as saying recently.

    FirstCry started its online portal in 2010 and soon went on to launch its first brick-and-mortar store in 2011. The company currently operates through 100 offline franchise stores and has recently raised Series C funding of Rs $ 10 million to fuel its plan to set up 400 offline stores by December 2017.

    Given the more engaging experiences that an offline store provides, experts too are convinced about the superior draw of physical stores.

    “There are more offline consumers today than online ones,” asserts Harminder Sahni of .

    “While retailers can choose to be exclusively online or offline, the consumers aren’t going to get classified like that. Consumers will shop across offline as well as online. Thus retailers will have to have a mix of both and find their own profitable balance,” Sahni adds.

    Where FirstCry has opened stores to induce brand trials in a touch-and-feel environment, others have used marketing kiosks in high footfall strategic locations in malls and office spaces. There are other players who have incorporated “try at home” for consumers, prior to making a purchase decision.

    E-retailers like Caratlane (jewellery) and Lenskart (eyewear) have opened offline stores to provide hassle-free online purchase options. Through Lenskart’s offline stores, consumers can get their vision checked and enjoy the freedom to buy products from either channel. The modus operandi at Caratlane is similar.

    Both Lenskart and Caratlane also provide ‘try at home’ facilities to customers; a customer can choose products online, try some options at home and then place the order online.

    O2O Retailers

    NameYear of InceptionOffline LaunchOffline Presence
    FabFurnish20122012Operates 4 offline stores
    Healthkart20112012Operates 4 offline stores
    FirstCry20102011Operates more than100 physical store through the franchise model
    Lenskart20082012Runs 100+ stores through franchise model
    Caratlane20082012Operates 10 experiential lounges. Offers “Try-At-Home” option to consumer before buying

    Best of both worlds

    While some e-retailers are trying their hand at offline retail, experts feel that merely opening offline stores will not deliver substantial benefits; e-tailers must sync online convenience with offline experiences in a useful way.

    “Online retailers need to ensure two things before opening offline stores. First, it is imperative for an online retailer to define whether the offline channel’s primary objective is to complement and/promote the online channel or it being a sales driver in itself a primary objective. The offline experience will then need to be built-up accordingly. The other important factor for players will be to figure out the ways in which the offline and online channels can leverage each other and can operate as an integrated multi- channel business,” explains retail analyst firm Technopak in India Retail Report 2015.

    While time will tell how the O2O model may evolve, experts feel that the future lies where offline and online shopping aren’t two separate business models.”The split between offline and online channels is visible currently because traditional offline retailers have been slow to adopt online and mobile shopping environments,” Dutta points out.

    “As more and more brands and retailers move online, there is bound to be a convergence between channels. Retailers need to — and will — see themselves logically serving customers across multiple channels that are appropriate for their product mix as omnichannel evolves from being a buzzword, to being a reality.”