O2O: How to Combine Online and Offline Retailing

The combination of digitalization and e-commerce has exerted significant influence over the retail landscape, with online-only dealers rising in prominence and traditionally offline outlets working hard to compete in the online space. Despite this online explosion, McKinsey & Company estimates that in 2020 about 80 percent of US retail sales will still happen in brick-and-mortar stores.

The potential lure of offline sales is so strong that, as competition stiffens and retailers seek new avenues of growth, more retailers are realizing the benefits of having a physical store and are making moves to head in this direction.

Amazon is one of the most recent examples. The company’s experiments with Amazon Go highlight an interesting point for other online retailers looking to get in on the brick-and-mortar game: online retailers know the online shopping habits of their customers, but may not possess the information about their offline shopping behavior.

In order to complement their online success with offline success, here are 5 ways retailers can leverage data to maximize the potential of their prospective physical stores:

Understanding Business Value: Offline vs. Online Channel?

Before planning for their offline retail stores, online retailers need to understand the business value of their offline strategy. To get a sense of whether an offline approach would be worth the effort, answering a few key questions is important:

1. Why are they worth the investment?
2. Will you have more returns? By when?
3. Do your consumers mostly prefer online?
4. Would it be easy to poach your competitors’ consumers?
5. Will your products have the same appeal to consumers offline as they do online?
6. What is the sales split you expect across channels — in both volume and value?
7. How do you see this changing in the long term?
8. Are you setting up the store as a sales channel or a product experience channel?
9. How will you capture data from your offline consumers, and tie it back to your online consumers? Will this help you provide an omni-channel experience to your existing, as well as new consumers?

Setting up an Offline Store

Once online players have a firm grasp of the value their storefront will provide, they need to identify the right place to open up shop. Data will allow them to analyze vital information, such as:

• Their competitors’ store footfalls
• Their competitors’ audience
• Digital behavior vs. offline behavior of their own consumers
• Where their consumers live
• The commuting patterns of their consumers
• How far their consumers travel to get to their store vs their competitor’s stores
• The affluence level of their consumers

These insights can help retailers decide whether they should set up their store in areas with higher rents and property value or those with lower rents and greater access to different brands. Finally, the footfall information can help them determine if they should be negotiating on store rent costs.

Hiring Right

Data can help retailers inform on staffing decisions – quality as well as quantity. If the foot traffic is high in the area, they’ll need to have more talented staff members. If the store will experience higher footfall on weekends, they can consider hiring skilled staff for that time or moving their high-skilled staff to the respective stores on weekends.

Online retailers can capitalize on the data they’ve collected from their online store to achieve quicker success in their offline forays. For instance, they can cull insights from their online data to educate their in-store staff about the profile of shoppers, informing staff about the types of products customers prefer so that their staff can creatively engage each shopper as an individual.

Going Omni-Channel

Once they establish their offline store, retailers can use the data they collect to run timed promotions in areas where the majority of their consumers are located, and targeted to their audience. Going omni-channel (online and offline) provides even greater value as it expands the amount of information available to the retailers and gives them access to deeper insights into their customer base.

For instance, let’s say as a retailer, you know from online data that “Shopper A” searches for sports clothing apparel on a particular day in the morning and does the same in the evening from home. Combining this knowledge with offline data, you can start to build a deeper profile: a professional, interested in sports, in the 25–35 year old age bracket, visits sports centers on the weekends. With this information at your fingertips you can now engage in some clever marketing, such as showing Shopper A tailored product offerings on an internet-connected device when he is seen at your competitors’ stores. First-party data makes this possible, so it is imperative that you collect and utilize it to its full potential.

Remember to Invest in a Data Intelligence Tool

Consumer data is exploding. Retailers need to have the right tools in place to make sense of consumers’ online and offline data so that they can make smart marketing and business decisions. Investing in data management tools that can integrate diverse data sets relevant to your business so you get the actionable intelligence necessary to gain a critical business edge in not just retail, but every industry.

Contact Us to use data for superior decision-making.

Also published in Retail TouchPoints.