Decoding The Reliance O2O Model
While I have been writing blogs on products, channel, brands and other major happenings in the smartphone industry, it seems channel as a subject has got the maximum blog posts. Well, I couldn’t stop myself from writing on channel again. This time I’m going to talk about something called O2O model which seems to be pacing up quite fast in China already.
With the new online press note announced, which hopefully should get implemented by February 1st, the #O2OModel seems to be a strong choice for Reliance and online players.
Advantage for #Amazon and #Flipkart
The online players may have an edge over #Reliance with the abundance of customer data on user behaviour and location related data available with them which Reliance may not have.
Advantage for Reliance
· Reliance has the advantage of reach of its 10,000 odd retail outlets dotted around the country spanning across 5000 cities which the Flipkarts and the Amazons do not.
· With the restrictions on FDI online players presently not applicable to Reliance or any other Indian company, Reliance is not bound by the Press note and has much more freedom of operation.
“In this new world, data is the new oil. Data is the new wealth. India’s data must be controlled and owned by Indian people and not by corporates, especially global corporations,” Mr. Ambani said at the #VibrantGujaratSummit. “For India to succeed in this data-driven revolution, we will have to migrate the control and ownership of Indian data back to India, in other words, Indian wealth back to every Indian,” he added. When Mr. Mukesh Ambani makes this statement he is pushing the system to take away the only key advantage left with Amazon and Flipkart (after the regulations enforced through the press note), which should then give him an uninterrupted run in the execution of his plan of the O2O model.
One should keep in mind that for the brands launched by the online players on their own they would surely have used this data to come up with the “right” products. The products not doing well enough is another story.
I am trying to think like the FDI governed online players and also read between the lines of what Mr. Mukesh Ambani said during the Vibrant Gujarat Summit.
The model seems like this:
· Online does tie-ups with existing organised retail or leading Mom-and-pop stores in localities, offering online payment services, orders and delivery integrating online’s digital eco systems with physical retail locations. While organised retail may be ready, the Mom-and-pop stores will need to be ready for online transactions, and fast execution of orders.
· Online leverages the existing data about Indian customers to equip the stores with whom they have location based product offerings, targeted marketing and well established networks. New data generated by these stores’ consumers will be expected to further improve merchandising, distribution, channel efficiency and user experience in a timely way.
· A smartphone is all it takes for walk-in consumers to make purchases at these stores. Consumers living nearby can also make their purchases through a mobile app at home and enjoy expedited delivery right to their location. To improve their customers’ shopping experiences, these stores adopt a variety of new technologies such as VR, AR, Holographic and smart displays that let consumers run through the device virtually before they buy.
· Additionally, the online companies start providing retail solutions to existing mom-and-pop retail stores to help digitize their inventory management and make operations more efficient.
· This concept has been readily embraced by conventional retailers of all sizes in China, many of which have introduced technological solutions to their stores, undergone strategic investments from tech companies or altered their business models. #Alibaba’s Ling Shou Tong (LST) – end to end retail solution has hundreds of thousands of small stores on board. Through a mobile app, registered stores have access to Alibaba’s data insights, online marketplace suppliers, logistics services and even finance offerings provided by Alibaba’s digital finance arm. The software system even recommends items to both shop owners and shoppers based on data from local consumers. #JD also launched a similar solution and had aimed to have one million small retail stores adopt the solution by the end of 2018. To differentiate from Alibaba’s service, JD partnered with #Tencent. The “JD-Tencent Borderless Retail” initiative (not an official translation) provides retail solutions based on data from not only JD’s online/offline channels but also Tencent’s social platforms, which has the greatest number of Chinese active users. Apart from receiving insights about consumer behaviour, businesses will also have access to customized marketing campaigns across JD’s online marketplace, JD’s platform on Tencent’s WeChat social app, and offline stores of JD’s brand partners.
· To execute this O2O Model model standalone tech brands that have both an online and offline presence have to redesign their distribution channels. #Lenovo, the leading consumer electronics brand that has both online sales channels and more than 10,000 retail stores across China, plans to upgrade around 1000 stores to a new data-centric design by 2020. #Xiaomi, that previously relied entirely on online sales channels, is now renovating its concept stores across China. The 500 Mi Preferred Partners and the 5000 small format stores being opened by them in rural areas in India are possibly a first step towards it.
· Technologies created for shopper identification, checkout, and security may vary, but almost all enable consumers to shop completely through their smartphones.
While there may be scepticism regarding the efficacy or maturity of the newly digitized store solutions, Reliance which has committed huge investments and the online companies which have already made huge investments in the country will make all efforts to further disrupt the conventional retail industry if the press note does get executed the way it has been drafted.
And while it evolves, as an interim and possibly even a long term strategy, why not try some of these to key concepts as per one of my blogs: https://www.sharmaajay.com/home/rewriting-rewiring-reviving-offline. All the concepts mentioned in the blog post cannot be executed overnight due to issues at macro or micro level, more so for the Mom-and-pop stores. However, most of the ones selected below will prepare them for the O2O Model and let them run their business at a reasonable scale till then.
· Discourage the offline channel to buy from online and sell offline. For starters, it does not show in their revenues, and is an evasion of tax and indirect promotion of online leading to self-destruction. The channel has to be educated through workshops that today’s culprit is going to be tomorrow’s victim. This could bring down the online contribution immediately as close to 50-70% of the online sales is actually going offline.
· Just as Oyo has brought together a whole lot of hotels of different categories under their fold, AIMRA could also do the same. Act as an umbrella for buying and selling for these stores – making it a kind of organised channel. With physical stores running into thousands, one could work with brands for special pricing and offers and delivery could be almost immediate with the customer deciding the nearest pick up point. The mobile would be delivered by a trained sales people from stores, who will offer much more value added service than any e-commerce website can do at present.
· With customers upgrading, offering Buy Back of old devices.
· Opening a Facebook page for their respective outlets, for customers to share the great shopping experience they had at the stores along with the special offers/freebies, if any at that time, for them to avail. This could lead to an increase in overall walk-ins.
· Running loyalty programmes for customers to acquire and retain them on all offline purchases. Points to be redeemed only against purchase of mobile phones brought from a standard retail outlet.
· Going digital – create a free business profile with Google, complete with your location, phone number and updated business hours. Let customers check in. Be present on social media. Encourage customers to post on them creating an electronic word of mouth effect.
· Having the right kind of cordial and trained staff that is motivated to provide an excellent in-store customer experience. I would go to the extent of the ISD concept taking away the “Personal Touch” earlier associated between a retailer and the customer. The retailer in most cases just cuts the bill and collects money with no verbal exchange of even basic pleasantries with the customer. Is the retail not to be blamed for creating this gap.
· It’s not just about staying on top of mind, it’s also about staying in touch. If you host an event that brings in new customers, encourage them to sign-up for your e-mails. A little incentive, such as a free giveaway in exchange for an email address, is always effective. Set-up an e-newsletter program, send out regular updates about new product lines, company news, and events and start to engage with your customers via social media. Keep in touch!
· Another effective and time-tested strategy is to incentivize referrals. This not only gets the word out to non-customers about your brand, but the referring individual is likely to return because they want to use the discount or gift card that they received as the incentive. These referrals are very impactful as studies by a leading India agency prove that potential customers value recommendations by a friend or family member the most.
One can anticipate that the vast majority of physical retail stores in India will transition to full autonomy in the near future, driven by digital services integration built on the foundation of consumers’ data. Physical retail isn’t dying, it’s evolving!