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The Formula to succeed in the Trillion-Dollar O2O Industry

According to Techcrunch, O2O is a trillon dollar industry. With the rise in take-up of cashless payment systems, switching between online and physical commerce offline is becoming more and more seamless.

The term "Unicorn" is the holy grail for tech startups. It refers to companies who have a valuation of over a billion dollars. In 2017, 41 global technology companies have reached unicorn status, according to data intelligence platform CB Insights. Of those, 15 are from China. Europe, by contrast, has hatched just 5 unicorns this year.

The United States remains on top with 17 new unicorns. Since 2009, the US has dominated the global startup scene. There are now 215 unicorns globally, with the United States claiming 107 of those, according to CB Insights. The majority are based in California. China is catching up, there are now 56 Chinese unicorns today.

But now imagine a much larger number, like one trillion. If you are an investor, this number makes your ears perk up. There are still no trillion-dollar companies, but there are several trillion-dollar industries and many of them are still in their infant stages, just beginning to sprout wings and grow.

One of those industries is the Online to Offline Commerce industry, otherwise known as "O2O."

A few years ago, TechCrunch published an article that declared the industry a trillion-dollar opportunity. The writers used a simple formula: The average American earns $40,000 per year and spends the majority of that income locally, with only 9 percent spent on the internet. Multiply that budget by 127 million working Americans.

With surveys showing that on average, 96 percent of consumers will research a product online before going into a store to buy it, and more and more consumers using smartphones to research, business owners are realising the importance of online marketing to draw in these customers.

Online marketing was expensive and can be challenging technologically for the small-business owner a few years ago. Ideas like Groupon and LivingSocial were thought to be the next big thing, but in recent years, marketing spent has decreased (Baidu charges only a few cents for one CPC), and software dashboard applications making technological operations easier, E-commerce medium platforms they have lost their sizzle.

So a trillion-dollar industry is just sitting there waiting for solution to access it

One factor driving the O2O industry to realise its full commercial potential is the advent of cashless payments.

After 10 years in development, PayNow and PayLah, two cashless payment systems launched in mid 2017 in Singapore. The cost and ease of use and implementation will drive the adoption of cashless payment behaviours, just like what WeChat Pay and Alipay have led consumers in China to do.

In October 2017, PM Lee challenged tech industry leaders in Singapore to provide proposals that will increase digital uptake of e-payment systems in Singapore. So far Riazer and Carousell have responded.

theAsianIR's cashless idea

source: theAsianIR

"I'm the queen of analogue, but I think we need to move into the digital world," said Association of Banks in Singapore (ABS) director Ong-Ang Ai Boon in a media briefing on Tuesday. "Customers have been asking for something more convenient... everybody has a handphone."

CEO and co-founder Jon Carder of Empyr, which enables other businesses to use their technology to bridge the offline-to-online gap, offered his views on what it takes to be successful in the O2O industry. Empyr's partners include Microsoft, LivingSocial, Virgin Airlines, and over 10,000 other businesses.

Joe Carder's take on the foundation of O2O businesses

  1. The Offer - Something that motivates consumers to make a purchase at an offline business.
  2. The Tracking - How the consumer redeems the offer and how the offline business tracks where the online business originated from.
  3. The Monetisation - How online business equip themselves with functions and features to drive consumers to the offline businesses

So according to Joe, the formula to succeed in the trillion-dollar O2O industry comprises of:

  1. A compelling offer for consumers that is sustainable for businesses, such as 10-20 percent
  2. A frictionless way to track the offline purchases, such as using credit/debit card tracking
  3. A huge monetisation opportunity to attract online companies who promote the offers

theAsianIR's take on formula for successful O2O, studied directly from successful O2O case studies from China

According to theAsianIR, an O2O technology solutions provider based out of Singapore, the formula to succeed in the O2O industry are;

  1. The Subject Matter - The greater value the business provides to its consumers the better. And to do that the business must own the subject matter first, so that it can engage its target audience with that subject matter
  2. The Technology solution - Usually an APP or a Dashboard solution, which has to be loaded with; 
    • enough functions to allow the consumer to complete an entire transaction
    • features to take the consumer across an entire sales, supply or operations cycle
    • interactive and engaging content to keep the user from going back to the tech solution for anything related to the Subject Matter
    • notifications (especially custom-made ones) to get the message (campaigns) across to the right person at the right time
    • sufficient ease in using the functions and features and the experience from using them
  3.  The Brand - Offline businesses, especially established ones, will get a better following than online businesses with no track record, if they engage directly with their followers. According to a recent survey, 59% of respondents preferred to do research directly on brand sites and 55% want to buy from brands directly (vs. multi-brand retailers). For brands who go direct, they enjoy; 
    • better brand control
    • ownership of the sales experience
    • direct access to customer data
    • direct relationship with customers and their buying patterns
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