Online-To-Offline Commerce

What is 'Online-To-Offline Commerce'

Online-to-offline commerce is a business strategy that draws potential customers from online channels to physical stores. Online-to-offline commerce, or O2O, identifies customers in the online space, such as through emails and internet advertising, and then uses a variety of tools and approaches to entice the customer to leave the online space. This type of strategy incorporates techniques used in online marketing with those used in brick-and-mortar marketing.

BREAKING DOWN 'Online-To-Offline Commerce'

Retailers once fretted that they would not be able to compete with e-commerce companies that sold goods online, especially in terms of price and selection. Physical stores required high fixed costs (rent) and many employees to run the stores, and because of limited space, they were unable to offer as wide a selection of goods. Online retailers could offer a vast selection without having to pay for as many personnel, and only needed access to shipping companies in order to sell their goods.

Some companies that have both an online presence and an offline presence (physical stores) treat the two different channels as complements rather than competitors. The goal of online-to-offline commerce is to create product and service awareness online, allowing potential customers to research different offerings and then visit the local brick-and-mortar store to make a purchase.

Techniques that O2O commerce companies may employ include in-store pick up of items purchased online, allowing items purchased online to be returned at a physical store, and allowing customers to place orders online while at a physical store.

The rise of online-to-offline commerce has not eliminated the advantages that e-commerce companies have. Companies with brick-and-mortar stores will still have customers that visit physical stores in order to see how an item fits or looks, only to ultimately make the purchase online (referred to as “showrooming”). The goal, therefore, is to attract a certain type of customer that is open to walking or driving to a local store rather than wait for a package to arrive in the mail.