Warby Parker, Everlane and Bonobos are some of the most prominent examples of O2O retailers; online retailers that open stores in the offline channel. Those O2O retailers are omnichannel at heart; their offline stores extend their online brand and this extra channel allows them to offer the customer experience that they can’t offer online. Therefore, often the focus in those stores is on brand experience.
“As a business owner, your duty is, above all, to bring value to the customer in new ways. Yes, the internet will always beat retail in cost-efficiency, but it will never measure up to the rich, real-life experience of being in a physical store.” Forbes
Online vs. offline discovery – commerce in the physical world
O2O brands often recognize that a lot of the discovery happens online while the actual commerce often still happens in the physical world. Because of their innovative character those O2O brands also have an innovative approach to their retail operations with a strong focus on creating a great store experience to inspire their customers when they are in their stores and use their stores to build a community. In general, the offline locations of those O2O brands can be divided into three categories:
- Showroom: stores do not carry stock , but have some sample items that customers can discover – see and touch.
- Outlet: stores carry the leftover stock that has not been sold online.
- Retail store: stores carry stock and shoppers buy the items there and then and take them home.
For O2O retailers with model 1 and 2, the inventory management is relatively simple and straightforward. In the ‘showroom’ model, customers can order items in the store or online, which are then shipped to the store or delivered to the customers home. In the ‘outlet’ model, retailers basically push their leftover items to the stores, which are then sold at a discounted price. Typically, there is no further integration with the retailer’s online channel.
The retailers with model 3 are opting for the more traditional retail model with instant gratification – customers can buy the items right there and own them now. However, all of a sudden the O2O retailers are faced with traditional retail challenges around, for example, inventory management. They now need to make sure that the items are allocated to the right location and are available when they are needed. In fact, by opening physical stores, they are introducing a new level of chaos in their operations.
When they were operating online only, the retailers were the only ones that were touching their inventory until it was delivered to the customer straight from the warehouse. When introducing physical stores, there are now more people interacting with their items in the store. Store employees are handling the product for retail processes but also customers interact with the products which introduces even more inaccuracies.
Deal breaker for omnichannel
The chaos that comes from the offline operation is a potential deal breaker for the omnichannel ambitions of those O2O brands. Their stores need to be an extension to the online experience and are a critical touch point for those new brands. Customers that come in to try on the items they liked on Instagram will be disappointed if the item is not available in the store. The loyal customer that travels to the store to pick up their outfit for the party they will attend later that day will be a lost loyal customer if the item is not available in reality.
On the flipside, those relatively young retailers have a huge potential and an even bigger opportunity coming from their offline ambitions. The more traditional retailers have been putting systems in place over the past decades to ‘fight’ the chaos. Having no legacy systems in place creates an opportunity to choose for modern technologies and easily integrate them into their processes and systems.
One of those modern technologies that significantly reduces the chaos is RFID. RFID allows retailers to increase stock accuracy, lower safety stocks, increase product availability and enable omnichannel through perfect inventory visibility. Knowing what you have and where it is lets customers shop anywhere and return everywhere. Inventory visibility enables retailers to:
- Prevent out-of-stocks
- Offer omnichannel services (e.g. ship-from-store or click&collect)
- Offer flexible return options
In an omnichannel dream there is no place for the chaos that originates in the retail store operation. RFID helps to bring order back into the chaotic world of retail by giving full inventory visibility. O2O retailers have the opportunity to start from scratch and make their omnichannel dreams happen, as long as they choose the right technology foundation for their dreams.
Author: Hilbert Dijkstra – Director of Product Management
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