Retail Industry Welcomes O2O Generation

Intelligent Retailing Creates New Shopping Experience

With the trend toward O2O (Online to Offline), which represents integrating physical stores and online shopping, the question of how retailers make use of information technology to move toward an intelligent system, enhance consumer experience, integrate multiple channels, and improve store management efficiency will be the keys to maintaining market competiveness.

 Writer | Liao, Pei-Chun

Shopping is something that everybody does almost every day. Over the past few years, e-commerce has become increasingly prevalent, and physical store operators are facing significant challenges to their survival. However, in recent years, there has been a change in the ide

a that competition exists between physical and online stores. Today, retailers emphasize integrating the characteristics of virtual and physical stores, and make use of IT to develop intelligent retailing. This increases store management efficiency, and also gives consumers a new shopping experience.
For the last eight years, IBM has been publicizing their “five future innovative technologies (IBM Next 5 in 5)”, which are five innovative developments that are predicted to change how humans work, live and interact within the next five years. One of 2013’s five innovative technologies was “Buying local will beat online”. IBM believes that physical stores will once again ignite shopping booms, especially after integrating online transactions, which will make physical stores more competitive.

Indeed, the O2O business model of integrating online and offline stores has become very popular throughout the world, especially for China’s e-commerce or physical retailers, who crossed over to the O2O market through mergers and acquisitions. For example,e-commerce giant Alibaba invested 5.37 billion Hong Kong Dollars for a stake in a large departmental store, Intime Retail Group. Both parties announced that they will build an infrastructure that integrates online and offline business. The biggest electrical retail chain, SUNING Commerce, made a 100% acquisition of wellknown group-buying website, Mazuo.com, promoting the O2O business model.

In the beginning, O2O was an online-to-physical e-commerce model, where discounts are offered on the Internet, and consumers make online orders, then collect products or receive services from a physical store. Group meal vouchers are one such example. Afterwards, O2O evolved, and started to include Offline-to-Online, linking physical stores back to the Internet. Examples include using mobile phones to scan barcodes and comparing prices on the Internet, checking in on Facebook to receive gifts, etc.

Be it online-to-physical or physical-to-online, the spirit of O2O is to link up virtual networks and physical stores. It provides consumers with a pleasant shopping experience, and thereby stimulates consumption. David Lai, Chief Operating Officer of AdvanPOS Technology, said that in the past, most people believed that competition existed between virtual and physical stores; the bigger the scale of the virtual transaction market, the more unwilling the consumers were to visit physical stores. From what we can see today, virtual and physical stores seem to have an integrated relationship, which stimulates consumption. For example, consumers select products through the Internet, and receive discounts if they pick up the products from a physical store.

O2O Integrates Online and Physical Stores, Creating a New Consumer Experience
When O2O becomes an inevitable development trend, how should retailers integrate the advantages of the Internet into the physical channels? This is not as simple as merely setting up a shopping website. They have to think of a way to create a new consumer experience. Joy Chiu, senior manager of Advantech Service Automation Group, said that online shopping is very popular in China. Though the business of physical stores has been affected, they have not disappeared completely. It shows that there is still a purpose to their existence, as they provide consumers an environment in which to try the product personally.

In the traditional consumption experience, consumers can try the products that they are interested in. Today, with the application of information technology, the scope for consumers to try becomes more comprehensive and instant. For example, when a consumer picks up a ladies blouse and walks to a mirror, an RFID sensor on the front of the mirror can read the RFID tag on the blouse and display relevant information, such as the available colours, current inventory level, size, other products with similar designs, matching bottoms, etc. Consumers do not have to physically try items on to be able to see the overall effect.

Of course, apart from the capacity for virtual clothes fittings, other ways of creating a consumer experience include providing multiple shopping channels and creating comprehensive retailing (Omni-Channel). Omni-Channel refers to allowing consumers to shop at any time and at any place, as well as to switch swiftly between different systems, and achieve an uninterrupted shopping experience. Chiu said another advantage of Omni-Channel development in the retail industry is that it gathers big data, and makes use of analysis to translate the data into usable information. It integrates data from different shopping platforms (such as tablet PCs and mobile phones) and channels (such as physical channels and shopping websites) and further identifies an individual’s buying history, analyses his or her preferences, and launches unique promotions, creating a unique, personalized shopping experience.

Recently, more retailers have been leveraging the advantages of online stores and physical stores to complement each other, creating higher revenue and proving the feasibility and infinite business opportunities of O2O. For example, UK’s leading supermarket, Tesco, created an interesting and trendy O2O application in South Korea, and Tesco launched the first virtual grocery store, Home Plus, in a South Korean subway station. The digital advertising wall in the waiting hall displays various types of product photos. The public can make use of their waiting time to scan QR codes on the virtual shelves with their mobile phones, and then use the product photos on their phone to place orders. The customers then complete their payments through mobile banking. They may choose to collect the products from a store or request them to be delivered to their homes. Such a highly efficient and convenient shopping method has allowed Tesco to gain a wider customer base, expanding the market rapidly and efficiently.

In addition to O2O applications, IT management concepts were introduced to add value to retail operations and transform them, and this has become a big trend. Eugene Deng, former senior vice president of eFuture, said in this year’s Advantech Intelligent Services retail application forum and partner conference that traditional retailing is moving toward the networked generation. Making use of IT for smooth operations transformation has become the key for physical stores to break through and to find room for growth under the impact of e-business. Deng took the international renowned coffee chain Starbucks as an example, and highlighted the fact that Starbucks is already a technology company instead of just a company selling coffee. In the Starbucks HQ in Seattle, there is a big display screen tracking discussions by North American consumers on Starbucks on social media platforms such as Twitter and Facebook at all times. The color immediately changes to red when unfavorable topics appear, to alert the service staff to rectify the issues as soon as possible. With such a monitoring system, it becomes easy to satisfy consumers. Starbucks’ gold card users also receive SMS birthday wishes and two cups of coffee for free on their birthdays, which increases brand awareness and loyalty.

The business model of the retail industry is in the process of a paradigm change. In the past, IT investment was to reduce manpower and cost. Today, it is used to enhance the consumer experience and create revenue. Chiu emphasized that the consumer experience is an important key for intelligent retail development. The purpose of retailers bringing in IT equipment or even integrating different retail channels is to create a better consumer experience, and thereby to increase sales and service satisfaction. Such information can be accumulated and fed back to the retailers for big data analysis, with results applied to improving product quality and service.