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16Jan

Convergence of Physical and Digital Commerce

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eCommerce has successfully assimilated itself into our daily lives, with Singaporeans having spent an average of more than US$1000 on online purchases in 2018, putting us ahead of the global average of US$634. Despite its surging popularity, many eCommerce giants have started venturing into brick-and-mortar retail, partnering with well-established brands to set up exclusive concept outlets.

This unorthodox strategy is termed as the Online to Offline (O2O) model, and it could prove to become successful in time to come. However, this bold move sparks several questions - what was the impetus that motivated companies to adopt the O2O model in the first place, and is it sustainable in the long-run?

01

Bridging the gap

One of the greatest concerns that many consumers have when engaging in eCommerce purchases would be the inability to ascertain the quality and compatibility of the products. Although reviews are often used as indicators to vouch for the purchases, it is undeniable that a lingering sense of uneasiness still exists whenever we make our initial purchase from an online vendor.

The O2O model thus serves as a bridge which allows consumers to test and ascertain the quality of the products before making their purchases. This is especially imperative given that big-ticket items such as online purchases of furniture and electronic appliances in Singapore have experienced a substantial growth of 35% and 31% respectively from 2018. The exorbitant prices of big-ticket items translates to a greater need for consumers to verify their quality before purchasing them, and the physical stores thus serves as an avenue for their worries to be resolved.

Apart from furniture and appliances, the online purchase of personal care products are increasingly gaining traction, with a growth of 47% from 2018. The inability to test personal care products could lead to severe repercussions and medical bills if the formulas of the products are incompatible with the consumers. However, such concerns may be something of the past. Just this year, the South Korean skincare and beauty conglomerate Amorepacific Corporation inked a deal with the locally based eCommerce giant, Lazada Group to launch the first-ever concept store at Funan. The AMORE Store x Lazada houses 11 brands from the conglomerate and leverages on online and offline shopping elements to provide a seamless shopping experience to its customers. Customers are able to head down to the physical outlet to test the products and utilise QR codes to browse for products using the Lazada application. The omni-channel retail model thus provides consumers with the ability to experience the products before making prudent purchases.

02

Business benefits

The incorporation of brick-and-mortar outlets allows brands to expand their customer base and thus serves as an avenue for revenue generation. Companies are able to reach out to customers patronising the physical outlet in addition to their existing digital base of customers.

Moreover, the retail outlets could potentially act as pickup points for customers to collect their online purchases, and this could in turn encourage in-store purchases. Customers heading down to the physical retail outlets for collection could be enticed to make additional in-store purchases. Through this, there is an apparent relationship of dependency between online and offline platforms which increases the revenue that could be earned from the aforementioned channels. Additionally, with physical outlets acting as a pickup point, it reduces the need for needless waiting on the consumers end. Instead of missing a delivery at home, customers are able to head down to the physical outlet to collect their purchases when they are notified of the collection date through the eCommerce applications. The multitude of delivery and collection options such as the traditional last-mile and the new self-collection points, enhances convenience throughout the eCommerce supply chain.

Enhancing the user experience in turn helps with customer retention, and encourages repurchases through both the physical and digital marketplace.

03

Strengthening partnerships

However, the launch of the O2O retail model requires reinforcement from the existing third-party logistics companies. With the incorporation of both physical and digital platforms, companies are able to cater to an ever-increasing base of customers, leading to greater demands for fulfilment, last-mile services, and better management of self-collection systems. The increased complexity that comes with the omni-channel marketplace thus requires improved workflow processes to meet the different demands of the different platforms. Third-party logistics companies need to hold greater accountability for their actions at every step of the way to ensure that the products are delivered in a swift manner, without compromising the quality of the products.

The introduction of O2O models provide a breath of fresh air of innovation and novelty in the hyper competitive retail landscape. This could mark the beginning of a new age of retail experience, and companies should embrace the model proactively to sustain their relevance in the long run. However, the adoption of the O2O retail model requires companies to have a deeper relationship with their eCommerce platform providers and third-party logistics companies.

Choosing the right logistics provider is thus imperative for the successful integration of the new processes, and for your business to reach greater heights.

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