Ecommerce & Startups
O2O Commerce Is The Next Retail Revolution In India
DESPITE boasting of the world’s largest consumer base for eCommerce, online shopping portals contribute to only 4% of India’s total retail business. A recent study revealed that 96% of the marketplace prefers the traditional, offline shopping experience. Industry experts believe customers rely upon personal interaction and real time product information before making a payment.
Even in metros and tier 1 cities, eCommerce portals contribute to only 22% of total retail sales. This low number can be attributed to reluctance of customers to trust online payment methods, undue shipping charges, the lack of installation assistance, and difficulty to operate without technology, among others.
To widen their customer base, the time is right for traditional shop owners to upgrade to the O2O model, which includes all eCommerce benefits but also overcomes the drawbacks of online shopping.
Through the following points, we try to explain the significance of O2O Commerce in India.
What is O2O?
O2O (Online-to-Offline) is a business model which moves customers from interacting online (via portals, e-mails, mobile apps) to engaging offline (interacting with store owner, test product before purchase). It’s an approach to entice customers in an online environment but with the benefits of offline shopping, which includes testing/touching the product, interacting with store owner, comparing multiple products and getting real time price details, before finalising an order.
How it works
The techniques that O2O commerce companies use include in-store pick-up of items purchased online, allowing items purchased online to be returned at store and allowing customers to place orders online while at the store (using a Kiosk machine or mobile phone), among other methods. Chitrangana, the innovators of the O2O business model in India, has converted several traditional retail stores to O2O commerce with the aid of a Kisok machine, which is installed at existing stores and other retail outlets. This machine, a centrally connected LED screen, allows customers to search and browse a wide range of products with the help of multiple images and real time specifications. Several international O2O businesses work with help of voice-based apps, mobile QR codes and instant messaging.
How O2O can revolutionize India’s retail industry
As mentioned before, the majority of India’s consumer base still prefers an offline shopping experience. Also, 67% of India’s population still resides in rural areas, isn’t fluent with technology, and thus requires assistance to shop online. By switching to O2O, retailers can offer benefits of eCommerce but personal interaction and technology assistance to customers. The O2O model can serve every type of customer, be it educated or uneducated, or urban or rural. Since India has the world’s biggest consumer base, retailers can take advantage by creating product awareness online, but allowing customers to visit the store before finalizing an order. This is why O2O model can revolutionize India’s retail industry.
Why traditional retailers should upgrade to O2O
Traditional Indian retailers are running out of space, and it is difficult for them to increase the size of the store due to escalating real estate prices. Due to these challenges, they are unable to maintain a large inventory and showcase a wide range of products, which results in lower conversion rate of sales. To increase inventory, expand business or open new branches, they require significant capital investment. By adopting O2O model, they can maintain multiple stores with limited stock, manage stores with lesser employees but detailed product information. They can also reduce the Dead Stock or Non-moving stock, since the O2O model doesn’t require them to maintain mass stock.
Since the key goal of the O2O model is to attract a certain type of customer who is willing to visit the store instead of trusting online shops, India is the perfect marketplace for retailers. In overseas markets, 80% consumers research items online before making a purchase, either by visiting store or portal. With India boasting of nearly 500 million Internet users, traditional retailers can execute the online-to-offline method without much investment or technology enhancement.