The Indian e-commerce industry has been on an upward growth trajectory and is expected to surpass USA to become the second largest e-commerce market in the world by 2034, as per an IBEF Report. Online retail is continuing to grow at an astounding rate, yet the majority of consumers still prefer brick-and-mortar, to touch and feel the product before purchasing it.
To encash in on this never-ending opportunity – many retailers who started as e-commerce players – have begun to venture into the offline space. This business strategy of shifting customers from online channels to offline stores is known as O2O (online to offline) model. In this article, IMAGES Retail explores how adopting the O2O strategy has helped several brands chase and achieve profitability and build a loyal set of customers.
Understanding O2O Strategy of Brands
Online-to-offline commerce is a business strategy that draws potential customers from online channels to make purchases in physical stores. It is a combination of payment model and foot traffic generator for merchants (as well as a “discovery” mechanism for consumers) that creates offline purchases.
Online-to-offline commerce, or O2O, identifies customers in the online space, through the help of emails and Internet advertising, and then uses a variety of tools and approaches to entice the customers to leave the online space. This type of strategy incorporates techniques used in online marketing with those usedin brick-and-mortar marketing.
The goal of online-to-offline commerce is to create product and service awareness online, allowing potential customers to research different offerings and then tempting them enough to visit the local brick-and-mortar store to make a purchase.
Highlighting the O2O strategy of Vajor, Nathasha AR Kumar, Founder and CEO, Vajor shares, “Our online model gave a kick-start to our offline channel. When we analysed our online model, we managed to come up with a physical extension of our presence. Depending upon the organic market flow we received from different parts of the country, we were able to plan out the placement of our store openings. Delhi, Pune, Bengaluru being our largest incoming markets, the first set of stores were launched here and now the same model is being used strategically to plan further store openings. And in no time, we could see the two mediums reaping benefits from each other not only in terms of increased sales but also in almost a 20 percent more organic traffic generation at both ends.”
“As an online-first brand, we are armed with data on our customers’ location, down to silhouette and colour preferences. And most importantly, the stores allow us to engage with customers and build a community through in-store events like styling master-classes, collection launches, book readings, Christmas markets, and more – leading to double the average order value, an 80 percent conversion rate and endless customer feedback that fuels our direct-to-customer brand strategy constantly,” says Yashika Punjabee, Co-Founder & Creative Director, The Label Life.
The O2O strategy complements both online and offline channels. Customers can walk-in to the store to try items and place their orders online if say a particular size or colour is unavailable. Also, in case customers have seen items online and would like to try those in store, that can also be done.
“For our loyal customers, O2O was a good transition as they were already familiar with the brand and the quality, the touch-and-feel was an add on experience,” shares Vishwas Shringi, Founder, Voylla.
“As the product-market fit has been a roaring success for us and the feedback and customer response/retention has been epic. The focus now is primarily to meet demand and ensure growth on all channels of distribution. We are currently expanding both in the online and the offline space with equal vigour and as we evolved our focus was reaching out to the customers through an Omnichannel strategy and be present at every customer touchpoint. The fun for a brand is to understand the audience and nuances of each channel and ensure a true Omni-experience for the customers and the sellers,” says Neha Kant, Co-Founder and CRO, Clovia.
Online to Offline – Why was There a Need?
Different customers not only have different shopping needs, but also different channel preferences. This is reason why the digital and physical worlds are truly blending, and the purchase journey is no longer linear. To win and maintain business, retailers must facilitate a seamless online-to-offline experience that mirrors the way consumers naturally navigate the shopping journey.
“Vajor, an e-commerce fashion and lifestyle brand, forayed into offline largely to give its customers an experience of the products and its lifestyle on a whole. The stores are a physical render of the website,” shares Kumar. The stores are clean, fuss-free, effortless to browse, equipped with the most coveted modern bohemian fashion and lifestyle products. Vajor stores converge nature with a next Gen Omnichannel experience, hence, blurring the lines between online and offline.
Resonating the same thoughts, Amisha Jain, CEO, Zivame says,“We, being the largest online intimate wear destination in India, wanted to stay true to our proposition by enabling consumers to experience the brand through whichever channel they are most comfortable on. There are also a lot of consumers who straddle between different platforms at different points of time. This was one of the key factors to go offline. Offline opens a large consumer base for the brand considering 75 percent of organised retail, though quickly moving online, is still offline.”
“The Label Life has always been an experiential brand. From the UI/UX of the website to the personal styling approach and even the packaging – the only way to round off the complete brand experience was to go offline,” states Punjabee.
To test the model, the brand strategically launched hundreds of pop-ups across the country throughout 2017-18. The overwhelming response from consumers coupled with the imperative feedback set them firmly on the path to opening their first flagship store in Bandra, Mumbai. Apart from standalone stores, the brand is also available store-in-store with Reliance’s Project Eve allowing an expanded distribution. Similarly, Voylla decided to go offline because fashion jewellery is a very personalised category that gives instant gratification upon possession.
“We started with an online store initially to understand customers’ need and started catering to them as per first-hand response. Gradually, when the business started to grow, we realised that we are missing on a huge chunk of customers that are not on the internet or may not be comfortable buying online. That’s when we decided to foray into offline retail,” says Kant.
At times, the customers feel the need to try before they buy, and this is what triggered the idea of going offline for Lenskart. The first store was an instant success and then the brand went on to open more stores.
O2O strategy is picking up as a trend among many online retailers, however, there are a few common challenges which every retailer faces while opening offline stores like finding the right store locations, setting up the right supply chain and standardizing the brand language across stores.
Along with this, when a brand shifts from online to offline, the reach is limited to the local catchment for offline. However, if the offline is used as a hub-and-spoke model, it also serves as an advantage.
“The biggest challenge we faced was to set-up the right inventory allocation and replenishment framework for the stores. The complexity of this problem is magnified in the case of intimate-wear because of intricate products and width of sizes. We heavily leveraged our online data to define the right mix for any location and came up with data science led models to drive our Omnichannel inventory allocation,” states Jain.
Another brand, SALT Attire, which runs on purely on-demand model, does not have any inventory at all. It keeps a limited set of items and sizes at its offline stores so customers can try those on, and they keep replenishing stocks as per the demand.
Similarly, apparel brand Mustard faced the issue of inventory update and order processing. “We solved the problem through live inventory updates and smart order allocation technique using effective technology,” states, Saurabh Gupta, MD, Mustard Fashions.
However, the biggest challenge for Vajor was to get the right location and geographies. The brand took the help of data to identify the locations. “Also, the physical render of fuss-free seamless experience at stores like the online was also a challenge but sticking to the route and values helped us overcome this hassle as well,” Kumar says.
For The Label Life, logistics and replenishment for the physical locations was new to them. With limited storage, their stores carry only 30 percent of the online inventory – but backed with data, the brand has been able to forecast the width and depth of styles hitting stores to ensure their customers always find what they are looking for.
Integrating Both Online and Offline Channels
Integrating both online and offline channels, helps retailers build insights, manage the manufacturing and overall makes the customer experience better. The mediums should definitely talk to each other, the future is about online and offline mediums talking to each other on a day to day basis. As it helps in ensuring a seamless shopping experience to the consumer.
“We have integrated both the channels via Omnichannel platform powered by Tata Unistore. It enables our organisation to work as a single unit with unified objectives,” says Gupta.
“Precision analytics has allowed us to launch collections at both the channels simultaneously, while tech has facilitated easy exchanges and returns, wallet access, and at lot more. Along with this, store managers have on hand-on access to a customer’s order history, which aids them in understanding a customer’s preferences more seamlessly,” Punjabee states. Technology is the biggest enabler and it facilitates the smooth integration of both online and offline channels.
“Our homegrown ERP solution allows us to track every step in the supply chain to end customer experience – be it offline or online. While the product speaks for itself, brand loyalty comes from customer experience. Hence, it is important to know the journey of customer with the brand and for that there is a need to integrate all retail touch points,” says Shringi.
The integration also offers customer the freedom to order either from online or offline channels and pick the product from wherever they prefer.
Online & Offline Channels – Complementing Each Other
The best example of how online and offline channels complements each other is that the brands can have a centralised consumer analytics framework which gathers signals from all channels and powers the consumer experience for all touch points. Other big advantage to be drawn is in terms of inventory efficiency.
Explaining this further, Jain says, “Different styles have different visibility, elasticity on different channels,a data science driven inventory allocation and replenishment model helps Zivame keep a SKU at the place where it has the best consumer match. Apart from these there are numerous other avenues where offline and online platforms complement each other, like deciding offline store locations, unlock geographies with a preference for one platform, capturing trend and demand signals, estimating latent demand, price elasticity of a style etc.”
“We have a lot of customers who sample products offline and place their corresponding orders online and vice-versa too. We ensure our product quality and service is exceptional both online and offline,” shares Dipti Tolani, Founder, SALT Attire.
As both channels complement each other, it helps brands to reach a wider customer base and a medium to attract like-minded community at personal level.
“At Vajor, we are using every medium from SMS, emailers, Facebook, Instagram, web and stores to enable customer to buy directly from whichever device he is logged in, in a seamless format,” shares Kumar.
Stores help brands engage and enable higher retention along with aiding emotional shopping. While shopping online helps the brand gather vital data about customers. “In today’s world, the ability to engage with and influence customers throughout their journey is paramount for continued success. Our online and offline behaviors of customers feed into each other, affecting the overall customer journey. Brands today can no longer restrict themselves to a single or limited number of channels as they will miss out on providing their users with a seamless brand experience they deserve and desire, and thereby the opportunity to make a sale,” says Kant.
Building a Loyal Customer Base
Acquiring new customers is easy, retaining them is hard but customer retention depends on mainly two things: product delivery and customer experience. The customer will remember the brand from the customer experience because the choice of product is made by him/ her, but the delivery of experience is by the brand. So, to enhance that experience, the brands are using different marketing strategies to engage customers on both online and offline platforms.
“We rely heavily on word-of-mouth publicity. We track our NPS score (which is a gauge of how likely our customers are to recommend us to their friends) on a daily basis, track our performance on product acceptance, in-store service and score of other parameters. Over 30 percent of our purchases are generated from these recommendations,” Neha Kant, Co- Founder and CRO, Clovia.
In 2019, Zivame will continue to emphasize on traditional digital marketing, as we increase our presence on social media and content marketing. “Our blogs and social media focus will be developing on informational, educational and relatable content to simplify the consumer journey and help her navigate the lingerie category,” says Jain.
The marketing strategy of The Label Life revolves around brand’s Omnipresence and offline stores being an experience centre, they plan a lot of activities and workshops at stores complementing the campaigns running online.
“Offline enables us to explore the customer loyalty to physical format like workshops, campaigns and offers. We keep tracking and building the sticky factor to the brand. The increase in community is vital for the brand and stores are a great platform to build upon this community,” explains Kumar.
Incorporating innovation that is both interactive and engaging has changed the dynamics of retail. Today, introducing innovation in day-to-day operations is not just about enhancing business functions, it is about providing an incomparable shopping experience as well.
“Our stores have an endless aisle format which helps consumers access our entire range available online while standing in one of our stores. At Zivame, if a consumerwalks into a store and goes through a fit consultation, we can be very sure that we have reached their correct size and body profile; this can then help us personalize other touch points for the same user.
The same consumer if goes through our proprietary ‘Fitcode’ product online (apart from giving us other browsing signals), we know with a high degree of confidence their profile and fit preferences, which can then be leveraged once they walk into a store,”shares Jain.
Apart from this, the brand leverages technology-led solutions so that consumers have access to the same inventory, payment modes, price and delivery options across all platforms.
“Fashion is no longer a simple commodity, hence Vajor reaches out to its consumers by providing a 360-degree experience. The stores are a physical render of the Vajor website, clean, fussfree, effortless to browse, equipped with the most coveted boho fashion and lifestyle products. Each store incorporates a www.vajor.com touch-screen where customers can actually take a virtual tour of the brand and make any and every form of transaction. One can browse products online, get the touch and feel of the merchandise in store and then order at their convenience online or offline. Apart from this, all stores have a dedicated tablet with an e-feedback form that covers all types of questions ranging from store staff conduct to products,” says Kumar.
“For the store, we have a personal styling service that allows customers to get personally styled by our team of in-house stylists, thus ensuring customers find their perfect fit, always,” concludes Punjabee.