O2O Commerce in the age of Amazon - TradeGecko

QuickBooks Commerce

O2O Commerce in
the age of Amazon

Table of contents
1.   The numbers are stark...                                3
2.   Amazon’s move into brick and mortar                     4
3.   Integrating O2O Commerce: examples & options            7
4.   Reliance on data for inventory and buying behaviours   16
5.   eCommerce and retail: a united future                  18

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The numbers are stark...
Already, Amazon controls 49.1% of the U.S eCommerce
market. Last year, Bezos’ beast became the second public
company in history to be worth $1 trillion.

And, by 2025, Bloomberg forecasts Amazon will officially break the
trillion dollar barrier in gross revenue. However, while Amazon’s online
presence dominates headlines, it’s the company’s offline activity that
may usher in the most seismic changes.

Just as Amazon created a new normal in eCommerce, it’s positioned to
do the same in offline retail as well.

The question is: What can you learn from Amazon’s journey
into brick and mortar to prepare your business for the future?

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Amazon’s move into brick
and mortar
Explore the current and future landscape of O2O commerce
through the lens of Amazon, particularly the role of fulfillment
and customer data.

Since Amazon’s birth in 1995, eCommerce has exploded. Current
data still places online sales at roughly 10-12% of the entire B2C retail
market, but its growth rate and the digitally connected nature of in-
store shopping have reshaped consumer habits along thoroughly
Internet-based lines.

Courtesy Allbirds

In the early days of online shopping, many legacy businesses saw the
Internet as an experiment and cautiously built their online channels
separately from the offline parts of their operations. Unfortunately, pure
eCommerce sellers took the opposite extreme: going all in online.

Therein lies the problem.

If you want your business to survive, you need to start working towards
not only a seamless buying experience but — perhaps even more

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importantly — a single view of your customers. Given its dominance,
Amazon’s shifts toward online-to-offline (O2O) commerce serves as an
exemplary illustration of how to begin making this transition yourself.

Businesses of both types have by-and-large failed to integrate
their online and offline channels into a unified whole.

Amazon’s 2017 acquisition of Whole Foods for $13.7 billion made huge
mainstream headlines. The purchase immediately added 464 brick and
mortar locations to the company, which means the online giant can
now integrate these stores with its eCommerce presence and use them
for click-and-collect pick up and as warehouses to improve fulfillment.

On the competitive side, Amazon dropped prices on some of the
bestselling grocery staples which was said to have increased foot traffic
by 33% one week after the acquisition.

Amazon Prime Members can also take advantage of two-hour delivery
services from Whole Foods Stores for orders over $35.

The result is a combination of online and in-store goods where
customers can come into local Whole Foods to pick up their Amazon
order whether it be food, books, electronics, home goods… the list
goes on.

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Customers also don’t need to worry about forgetting their grocery
lists, because Amazon Alexa will sync their lists across devices. When
it comes to at-home fulfillment, customers also want and expect their
fresh food delivered quickly.

Amazon’s strategy of acquiring all of those physical spaces means
they can use them to set up each as distribution warehouses. There’s
no question that Amazon wants to make organic produce affordable
and carve out its share of the grocery market, but those considerations
aren’t the only reasons for acquiring Whole Foods.

Grocery buying habits, patterns, and preferences now enable Amazon
to build upon what it set out to do from day one — focus relentlessly on
their customers by tailoring the entire shopping experience.

No doubt, those 464 physical stores will provide a wealth of new
data for its already existing private label products across health and
household, home and kitchen, clothing, shoes and jewellery. Shortly
after the acquisition of Whole Foods was announced, Amazon hit the
retail industry with more of the unexpected.

A futuristic convenience store, Amazon Go, that uses artificial

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intelligence and cameras to track what customers are taking off the
shelves, and automatically charging the cost to the customer through
their Amazon Go app.

There’s been debate over whether this acquisition and the move into
brick-and-mortar will play out well for Amazon, given its approach
of selling high-quality goods at a lower-price point to customers
accustomed to the ‘high-price, high-quality’ mentality.

But there is one thing we know for certain: shopping habits
will continue to evolve, which means business models and
technologies need to evolve with them.

Amazon thinks three steps ahead, so the quicker other retailers can
start to harness the right tools and technology in their business to
support the customer buying journey of the future, the better chance
they have of surviving the changing face of retail.

But… how?

                                                                       7

Integrating O2O Commerce:
examples & options
Learn how your business can bridge the fundamental
disconnect between eCommerce and traditional retail
regardless of your size.

Despite the rise in eCommerce capabilities, more than 55% of
consumers visit stores before buying online indicating that shoppers
still want to see, touch and feel products. What’s more, considering
82.5% of all retail sales will happen inside physical stores as late as
2021, there is a powerful incentive beyond Amazon for online retailers
to consider what their options are in the offline space.

Allbirds: start small with owned retail locations

As a test-case, consider Allbirds. In just two years, Allbirds has gone
from an idea to selling over one million pairs of shoes.

Courtesy Allbirds

The brand is fiercely passionate about not only learning from their
customers to improve products and services, but it’s also fiercely

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protective of the brand itself. Allbirds is changing how the world buy
sneakers - initially launched as a direct-to-consumer eCommerce
business, Allbirds has quickly grown in reverse by introducing two
brick-and-mortar stores, the first in their San Francisco headquarters.

The Allbirds shopfront in Soho. Courtesy Allbirds

In an interview, Allbirds co-founder Joey Zwillinger explained that they
carved out about 400 square feet just so they could learn from
customers who visited their store everyday.

In addition, the brand differentiates itself in two ways.

First, with its product. Allbirds uses wool as the main material for its
sneakers (the founders originated from New Zealand). A clever natural
material to use for shoes as it keeps customers’ feet warm in the colder
seasons but wicks moisture in the warmer months.

Its shoes are unisex, and the latest design they’ve introduced is the
navyhue-colored sneakers called Starry Night, which was inspired by
New York, the city that never sleeps.

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Second, Allbirds has staunchly refused to enter traditional big-box
stores. As Zwillinger explained to Footwear News:

“If we went and did omnichannel, we would sell more shoes,
but we would get into discounting. We don’t want to do that.
It would commoditize a product we think is really special.”

Instead, Allbirds has remained fully in control of both its online and
offline expressions, merging the two on their own terms by owning its
brick-and-mortar stores.

b8ta: Instead of DIY, use Retail-as-Service (RaaS)

b8ta is an innovative technology start-up that has revived retail, offering
a new retail-as-a-service concept. b8ta helps people discover and try
new products on the market from brands and makers that don’t have
direct access to storefront real-estate.

Since the company was founded in 2015, they have already received
$35 million in funding and have more than 78 locations.

                                                                         10

b8ta stores are designed for discovering, trying and buying the latest innovative products.
Courtesy b8ta

When a customer walks into a b8ta store, all of the products are
unboxed and ready to be tested, felt, and touched.

There are b8ta testers in all stores — who are trained by all the partners
of the products — to assist with any queries. Their store-as-a-service
solution keeps costs low with a flat monthly fee and no overhead.

For any eCommerce businesses wanting to trial the in-store concept,
this is a good option that offers flexibility to meet your needs. Another
option that’s proving its worth for many eCommerce-based retailers
are pop-up shops.

b8ta: Instead of DIY, use Retail-as-Service (RaaS)

According to Pop Up Republic, the pop-up industry has seen a rise in
sales to approximately $10 billion. While not a new phenomenon, smart
retailers are tapping into the power of a pop-up shop to build one-on-
one relationships with customers and conduct on-the-ground R&D.

Compared to the “online only” and traditional “brick and mortar”
approaches, pop-up shops offer retailers important face-to-face time
with customers.

                                                                                              11

Designer eyewear manufacturer Warby Parker is a great example
moving from exclusively online to building out the idea for a showroom
and pop-up store strategy.

Courtesy Warby Parker blog

When the company first launched their website, they offered “try before
you buy” options for cautious shoppers. This strategy received such
an overwhelming response the team soon had to suspend at-home
trials. What’s amazing about this story isn’t that Warby has expanded
to nearly 100 stores across the country, but rather how organically the
eyewear retailer spearheaded their move from online to offline.

In its place, the company began inviting customers into the
apartment they were working from and decking out the
dining table with glasses that could be tried on.

The lines blurred, and Warby was able to prove the viability of in-
person experiences with almost zero initial investment.

                                                                      12

Warby Parker Class Trip was an endeavor to bring the showroom
experience to a variety of cities across the country.

Most traditional pop-up strategies look at ways brands can set up in a
store-within-a-store, gallery or event space, shopping malls or vacant
street level retail spaces. But brands are also creating their realworld
footprint and encouraging consumer interaction through brand
activations at IRL (in-real-life) events.

Each year, 32 million people attend a music festival in the U.S. Those
events contain lucrative IRL opportunities to engage a receptive crowd
of festival-goers. H&M is a brand that continues to merge the worlds of
fashion, music, and art with the ultimate interactive experience.

H&M’s wall message reads “Thank you for reusing your water bottle and reducing waste.” Courtesy
International Business Times

H&M is a brand that continues to merge the worlds of fashion, music,
and art with the ultimate interactive experience.

For the 2017 Coachella Music Festival, H&M created an interactive tent
experience of the Palm Springs House where the original campaign for
the H&M Loves Coachella Collection was shot.

The green energy powered tent featured multiple customer

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touchpoints across video, creative photo backdrops, showcasing H&M’s
eco-conscious initiatives, a rest stop to hydrate and charge electronics,
and a pop-up store featuring the latest collection.

H&M creatively merged an IRL experience with a traditional pop-up
store approach in order to create a memorable experience, drive sales,
and raise awareness of H&M’s eco-conscious initiatives.

But they don’t have to always go hand-in-hand to offer valuable face-
toface time with your customers, nor does it need to involve an on-
the-go showroom. In fact, there are brands who have found incredible
success purely by adopting the traditional pop-up strategy…

The 5TH: go global through localized experiences

The 5TH — an Austrialian fashion accessories brand — launched with a
focus on building their online presence, primarily through social media.

“We were a business that was born inside the matrix of
Instagram, and we were global from day one. We shipped
globally from Melbourne, but we had to connect better with
our international audiences.

To do that, The 5TH started collaborating with other creatives and
companies to create concept stores in temporary retail spaces across
Melbourne and New York.

Its first-ever pop-up happened inside a small, independent bicycle
store in NYC called Tokyobike. Showcasing The 5TH’s latest watch
collection, visitors could see and hear more about the inspiration
behind the range.

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The 5TH inside the Tokyobike store in SoHo, NYC (2017).

Today, The 5TH continues to host pop-ups in collaboration with other
retailers as well as stand-alone storefronts. These temporary locations
within its key international markets lets the brand go global while at the
same time staying local and deeply connected to its shoppers.

Embracing pop-up stores gives brands real-time feedback from
customers, another channel to sell products offline, and the opportunity
to collect and monitor data from these stores to help with inventory
management decisions.

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Reliance on data for inventory
and buying behaviours
Discover the pivotal role of data in creating a single view of
your customers for more efficient inventory management
across acquisition channels.

Historically, brick and mortar owners relied on a mix of old-school
ledgers and gut feelings to stock their shelves.

Today, it’s crucial that retailers and brands learn to not only gather the
right kind of data that helps them to understand their customer but also
know how to harness its power to ensure the buying experience meets
expectations both online and in-store.

Along these lines, Alibaba’s Ling Shou Tong (meaning, “retail
integrated”) program has upgraded China’s neighborhood
convenience stores in a big way.

The custom-built app digitizes the inventory management of each
store to make it easy for the owners to know at any given time what
they need to order, how much, and when. It’s also tied to a central
warehousing and logistics system.

The app’s customer insights help brands make smarter and strategic
choices on what products they should stock.

For example, the snack company Mondelez knew there was a market
for sweet-tooth customers upon check out, therefore they produced
a single-serving Oreo cookie that stores strategically placed near the
cash register.

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Alibaba is reinventing China’s mom-and-pop stores. Courtesy Quartz

While the Western World thinks this is still quite innovate, this isn’t up
for discussion in Asia. Shoppers have the flexibility to buy online, pick
up in store, return in store, and a multiplicity of other combinations.

Again, centralized data is critical.

For example, if someone browses online but purchases in-store, first
touch attribution must be categorized as “online engagement,” while
the actual contribution to revenue is offline.

Retailers need to have both retail and eCommerce tightly linked so
acquisition channels are always accounted for.

Having an inventory management system integrated into both pointof-
sale (POS) systems and eCommerce technology provides customers
with a seamless experience. While at the same time, providing
important information about their purchasing behaviors.

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eCommerce and retail: a
united future
Peek into the new normal of customer expectations and get
your business for the future before Amazon beats you to it.

Amazon is here to stay, whether small-to-medium businesses like it
or not. When ambitions as big as Jeff Bezos’ begin to infiltrate the
business of worldwide retail, innovation and change will continue to
evolve how brands should connect with customers as well as sell and
manage their products.

It’s crucial that businesses of all sizes begin working towards a single
view of their customers and learn how to analyze and leverage data
more effectively within the business.

Look at ways to build better integration between the online and offline
channels to give customers more choice and a better purchasing
experience all-round.

Focus on the resurgence of product uniqueness in a heavily
commoditized market, and build a buying experience that customers
will go to the ends of the earth to get.

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