Online to offline commerce is a business model that draws potential customers from online channels to physical store. Over the years, this idea has evolved with the evolution of e-commerce industry. Currently, e-commerce companies are highly investing in acquiring clients as a part of Omni channel strategy, in order to enhance customer experience. Few of the e-commerce companies having both online presence and offline presence are leveraging two different channel as a complementary to each other. The idea behind online to offline e-commerce model is to create awareness of product and services, allow potential customers to search different offering online and then purchase the product in brick and mortar stores. The online to offline e-commerce have attained new heights in the recent past with e-commerce companies making their presence in hyper-local service category, online booking of movie and passenger tickets, and booking restaurants. Recently, market has witnessed e-commerce players slowly and gradually launching their own brick and mortar stores and vice versa. In-fact, e-commerce companies which were merely a marketplace (platforms) are now establishing their delivery centers to enhance customer experience.
Online to offline Commerce Market: Drivers and Challenges
A consumer in online to offline model searches for the product online; however, purchases it through an offline channel. A local store which hesitated to sell their products online due to the discounting nature of online marketplaces, finds this model lucrative. Additionally, few products such as jewelry and electronics products are explored by customers online; however, due to the dynamics of certain products and its associated price are purchased offline. “Touch and Feel” factor is driving the online to offline commerce market. Irrespective of these facts, the road ahead is not as smooth as it seems for e-commerce players, as the e-commerce industry is facing challenges on multiple fronts. E-commerce is relatively new industry as compared to brick and mortar stores owing to which the majority of online retailers lack digital marketing skills and do not have a proper governance structure to operate. This has led to certain significant challenges in the e-commerce industry especially, in the emerging economies, where consumers explores products on a particular online platform and eventually purchase it from a different well-established brick and mortar store.
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Online to Offline Commerce Market: Segmentation
Segmentation of Online to Offline Commerce market on the basis of sectors:
E-Tail industry includes selling of goods such as mobile phones and apparels through online channels. It can be business to business or business to consumer business. E-tailers are not restricted solely to the internet based models, they have established brick & mortar stores in order to reach to customers in a more effective way.
- Travel & Tourism:
Online travel & tourism industry includes online booking of bus, train, flight, and hotels. In this model of e-commerce, a consumer explores all the possible option of travel & accommodation, and eventually book the entire itinerary with the most convenient and affordable options available.
- Restaurant & Hyper-Local Service:
Online restaurant business allows a consumer to order food online, book a table at restaurants or hotel, and avail this services through cash less payment. Hyper-local services are nothing but fulfillment of domestic needs of consumers on timely basis. Few of them includes: grocery delivery, laundry, and plumbing.
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Online to Offline Commerce Market: Key Deals
- In December 2015, Alibaba group acquired South China Morning Post (SCMP) and other media assets of SCMP Group Ltd. This acquisition would combine Alibaba’s digital strength with SCMP’s editorial excellence. This deal is paving the way for 112 year old newspaper to transform into global media entity.
- In October 2015, Flipkart.com partnered with Spice Retail Limited (Spice Hotspot Stores), wherein Flicart’s exclusive portfolio of phones are showcased in the retail outlets.
- In October 2015, Wal-Mart Stores, Inc. launched Walmart Exchange which helps its suppliers to understand which of their advertisements displayed across several websites would lead to sales conversion in Walmart’s physical stores.
- In September 2015, Flipkart.com raised US$ 700 million in order to strengthen its supply chain & logistics, and to establish its own data centers.
In the North America region, entire e-commerce ecosystem is well established. E-Commerce has led the way and established a surrounding ecosystem that is encouraging to include online to offline commerce. With the presence of leading e-commerce players in the U.S., North America represents potential opportunity in online-to- offline e-commerce market.
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Asia-Pacific region holds the largest market opportunity for online to offline e-commerce business models during the forecast period. Increasing penetration of smartphone and growing internet infrastructure in the countries such as China and India are paving the way for the growth of online to offline commerce market. Significant private venture capital investments to the start-ups in this regions has led to increased expenditure on marketing and promotional activities with an aim of acquiring customers, which would facilitate customers’ loyalty and in turn customer retention.
Alibaba Group Holding Limited, Amazon.com, Inc., Wal-Mart Stores, Inc., Flipkart.com, and IKEA are some the key players of the global online to offline e-commerce market.