16 June 2020

Online to Offline Commerce – the Retail’s Trillion Dollar Opportunity

Until recently, the O2O (online to offline) commerce was an unknown concept; now it’s a multibillion-dollar industry, with Amazon acquiring Whole Foods for a staggering $13.7 billion and Alibaba investing $3 billion in the industry in 2017. The ubiquity of mobile phones has boosted the online to offline measurement and marketing, enabling advertisers to refine goals, play with the creative concepts and in some cases, even rethink their media mix.

As companies are moving towards a more holistic attribution practice in the attempt of bringing together online and offline data together, major challenges remain, such as data attribution, tracking accuracy or data privacy. Bridging the digital to offline gap has become the goal of both major players and start-ups, with some of the most powerful voices in this space (Forbes, Inc.) even calling it the trillion-dollar opportunity.

The article examines how the new omnichannel and multichannel shopping behaviours have shaped the commerce landscape and created a new technology that has become front of mind for both marketeers and retailers.

Where are we shopping?

The average adult is online for almost 6 hours every day, an 84% increase in the average time spent versus 2010. When asked on a typical day when you use a mobile device, how frequently would you say you use it, 22% of the respondents said that they are checking their device every 5 minutes and another 22% claimed they’re picking up their phone to conduct various tasks every 15 minutes.[1] Pairing the two statistics together gives us a clear picture on how mobile phones have turned into frictionless, intuitive extensions of ourselves.

The rise of mobile has accelerated the growth of specific omnichannel shopping behaviours, such as showrooming and webrooming:

  • Showrooming is when a shopper visits a store to check out a product but then purchases the product online;
  • Webrooming, on the other hand, is when consumers research products online before going into the store for a final evaluation and purchase.

Most recent studies have shown that 87% of shoppers are seeking for additional information before visiting the store but what’s even more important, 79% are browsing while actually visiting the store. When it comes to preferred sources, Amazon takes half of consumers’ first product research, followed by Google and other search engines (36% of consumers) and individual retailers websites (15% of consumers).[2]

Despite the eCommerce sales representing only 12% of the global retail sales, they are still increasing significantly year over year and as proved above, online impacts offline more than ever before.

Brands and retailers need to focus on offering a seamless shopping experience and catching potential consumers not only when they are ready to buy, but when they start

researching for products. This way, they can position themselves for the best possibility of capturing that same consumer when he or she goes to spend offline.

New solutions for an age-old dilemma

The O2O commerce concept is a new buzzword but trying to establish a clear Return on Investment of various advertising activities has been on the marketeers’ agenda for years – they have used coupons or discount codes in catalogues, direct mail or other direct marketing channels to measure the impact of advertising on store or call-center sales. The advantage was not only a clear indication on the ROI, but it also enabled the creation of lists of shoppers, which were then used as a starting point for the loyalty programmes. A couple of years forward and the technology developments (cookies, advertising IDs) permitted online marketeers to extend these mechanisms to eCommerce, but a divide still existed between the online and the offline world. Online campaigns might have had a clear ROI, but the value was based only on the online sales, not necessarily on the total sales. With the bulk of the sales still happening offline, much of the impact of online advertising was lost.

The rise of mobile marked a significant shift – mobile signals enable marketeers to track people’s movement in the real world, allowing them to see which stores they’ve entered, how long have they stayed and where they went afterwards. When matched with offline purchase information, the connection between online and offline becomes clearer.

With more and more time being spent online, the path to purchase often passes through a digital touchpoint. Often portrayed as a digital-only generation, millennials actually prefer to research online and shop offline and a 2018 report by Forrester Research outlines that mobile influences 34% of total US retail sales, which translates into over $1 trillion worth of value. By 2022, the same study estimates that the percentage will rise to 42%.

Measuring the online to offline conversions is very much dependant on location tracking and consumers have become comfortable with sharing this type of data, but they are also increasingly more choosey about when they share the data. Weather, navigation, social media, dating apps – they all require consumers to share their location, but the marketeers need to offer something in return. Opt-in rates to location vary, from rates near to 100% for a weather app to between 30% – 40% for a gaming app, where sharing location does not enhance the consumer experience and therefore is not being seen as adding any value. The GDPR regulation has definitely affected and will continue to affect the way in which marketeers collect data and they will have to provide clearer opt-in and opt-out options, written in a consumer-friendly language and give extra protection to that data.

Online to Offline – from theory to practice

Being able to track the online to offline conversions is not only about optimizing campaigns, it also enables marketeers to better understand their consumers and identify the right moment to deliver an ad.

Google Inventory Ads and new shopping tweaks

Local inventory ads are Google’s search ads that are aimed to drive an offline conversion and are currently available in Australia, Brazil, Canada, France, Germany, Japan, UK, and US. They promote the in-store inventory and monitor the impact that the digital ads have on foot traffic and in-store sales:

 

The local inventory ads have grown in popularity recently – in Q1 2018, they represented 15% of the mobile product listing ads.[1] Get location details is also on the rise, accounting for 6% of mobile clicks in March 2018, a significant increase from only 2.6% in July 2017.

Recently Google has taken new steps towards attracting online customers to retailers’ offline brick and mortar shops. The updates are designed to remove friction between the online and offline channels and address in a landscape where 80% of consumers will head to the high street when they want an item right away. On one hand, the tweaks include expanding Google’s affiliate location extensions to YouTube – retailers will now be able to list nearby outlets under TrueView In-Stream and bumpers ads that, according to YouTube’s statistics, can increase click-through rates by over 15%. On the other hand, a new display ad format will be released: the local catalogue ads, that will let retailers list a range of products in one easy to scroll ad, featuring additional information on in-store availability and pricing. It’s worth mentioning that both features will require integration with point-of-sale or inventory providers such as Cayan, Pointy, Link or yReceipts.

Facebook Offline Events

With offline conversion measurement capabilities on Facebook, marketeers can now track when transactions occur in the physical business locations and other offline channels after consumers see or engage with Facebook ads.

Facebook also offers marketeers the possibility of creating custom and / or lookalike audience from this data, which a very powerful tool for future campaigns and retargeting.

Brands are already using the new Facebook feature. In UK, Pandora has seen 40% of identified purchases during campaign being attributed to Facebook and Instagram Ads and over 20% increase in revenue attributed to dynamic ads when offline purchases were also considered. Emerging markets are also taking advantage of Facebook’s new offerings – Koçtaş, Turkey’s top home improvement retailer discovered that replacing catalogue inserts with Facebook ads was responsible for 10X more offline sales than had been attributed to it under the retailer’s previous model.

Snap to Store

In April 2017, Snapchat unveiled a new ad product called Snap to Store, which gives advertisers the ability to see whether their Snapchat ads drove users to offline locations (be it stores, restaurants, hotels) and offer a dashboard for measuring the online to offline conversions. According to the social media platform, 80% of Snapchat users snap from restaurants, 66% snap from malls, 50% from gyms and 49% from airports, so linking the online presence with the offline actions was the natural step to be taken by Snapchat. The dashboard for advertisers shows the number of Snapchat users who saw the ad campaign and the number of Snapchat users who visited the desired location. Snap also breaks down the data by gender, age, state and what product they used (lens or geofilter).

Wendy’s created sponsored geofilters in its U.S. stores that promoted the Jalapeño Fresco Chicken Sandwich. According to Snapchat’s internal data (that is verified by third-party platforms), the geofilter drove 42,000 visitors to a Wendy’s within seven days of viewing it.

Conclusions

Despite obvious improvements, online to offline data still poses a lot of challenges to both brands and retailers – visitation data can still be inaccurate and concerns around privacy have risen in the GDPR context and with users becoming more aware of the way their personal information is processed.

Without a doubt, companies need to keep up with the latest developments if they want to stay relevant for their consumers and efficiencies their advertising spends. Consumers nowadays demand seamless, omnichannel experiences and with so many options in the market, they won’t be settling for less.

 

[1] Interactive Advertising Bureau, Always On: A Global Perspective of Mobile Consumer Experience, June 13th, 2017

[2] Survata, Amazon Takes 49 Percent of Consumers’ First Product Search, But Search Engines Rebound, December 20th, 2017

[3] Merkle, “Q1 2018 Digital Marketing Report,” April 19, 2018

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