Recently, community group buying has become very popular. A couple of days ago, I saw a report titled "If You're Not Doing Community Group Buying, You Can't Call Yourself a Giant," and it seems that overnight, community group buying has become the biggest trend. In contrast, another track that was equally hot during the pandemic, O2O home delivery, seems to have quieted down in the industry, but this does not mean that brands can afford to ignore the O2O channel. Compared to the current unclear overall situation of community group buying, O2O has actually formed a large-scale track, becoming a comprehensive channel for offline supermarkets to regain growth and for products to be distributed from online to offline.
Let's look at some data. According to public information from early 2020, Meituan had 290 million monthly active users, 5.8 million annual active merchants, covered 2,800 counties and cities, and had over 15 million daily orders. Ele.me had 60 million monthly active users, 3.5 million annual active merchants, covered 2,200 counties and cities, and had over 15 million daily orders. These two sets of data are from the food delivery O2O platforms dominated by Meituan and Ele.me. In terms of order volume, Meituan and Ele.me's order volumes far exceed those of current community group buying platforms. There are also platform-based O2O like JD Daojia and Taoxianda, as well as supermarket self-operated O2O like RT-Mart, Yonghui Superstores, and Suning Carrefour, and O+O new formats like Hema Fresh, Xiaoxiang Fresh, and Super Species, and internet self-operated O2O represented by Miss Fresh and Pumu Supermarket, all of which have developed rapidly in the past two years with obvious growth momentum.
Image source: New Distribution Consulting Team
The rapid development of O2O presents an opportunity for brands to reach more business. According to research data from the New Distribution Consulting Team, FMCG products now account for more than 10% of O2O platform transactions, with a growth rate exceeding 130%. Through a series of data, I think both practitioners and brands should understand that in terms of localization and interactivity, O2O is a major trend. O2O can bring more business opportunities, not only increasing sales but also providing more scenario-based marketing and opportunities to activate new consumers.
-01- What O2O Platforms Bring to Brands: More Than Just Incremental Sales
From e-commerce to the current new retail, digitalization is rapidly changing consumer shopping habits. In the past, consumers shopped online and delivery took about 3 days. For FMCG products with strong immediate needs, physical stores were a better choice. O2O, on the other hand, builds on e-commerce to achieve immediate delivery. Currently, mainstream O2O platforms can basically deliver within 30 minutes to 1 hour. Compared to other channels, this is more competitive and can greatly shorten the consumer's purchase path and decision time.
After the baptism of the internet and the catalyst of the pandemic, online shopping has established awareness in consumers' minds, and O2O's rapid response can better meet consumers' online shopping needs. In other words, the development of O2O will definitely be disruptive to the retail industry in the future. Currently, many brands are gradually recognizing the importance of O2O, either setting up dedicated new retail departments or placing it under other departments to cooperate with O2O platforms. However, most brands only treat O2O as an incremental channel and have not truly tapped its inherent potential.
From the brand's perspective, the value of O2O platforms is far more than that. It is not only a channel for rapid business growth but also an excellent digital omni-channel marketing platform. Traditional marketing expenses are difficult to quantify. For example, if you invest 3 million yuan in advertising on a variety show, it is hard to see data feedback on how many people watched, how many purchased, and how many shared. The same applies to offline channel expenses: brands invest in display fees, end-cap fees, and promotion fees, but the conversion rate and effectiveness are difficult to evaluate.
The ultimate destination of products is consumers, so marketing activities must be based on the consumer dimension to be most effective. In contrast, advertising expenses on O2O can provide more accurate and timely data feedback. O2O can provide complete data from the start to the end of a transaction. Through this complete data chain, brands can obtain touchpoints that traditional channels cannot see, as well as areas for optimization. For example, if a brand runs CPC ads on an O2O platform, it can quantify results through click-through rates: how much money was spent, how many users saw the ad, and how many transactions and sales were generated, all with timely data feedback. Of course, the value of data is not limited to result feedback. During cooperation with platforms, brands can accumulate data for long-term tracking.
With this data, brands can know who the users are, their attitudes toward the product, and their repurchase rates, clearly depicting user profiles and thus precisely formulating consumer decisions. For example, if Coca-Cola launches a new product, through O2O platform data feedback, it can accurately depict user profiles and make it easier to go offline. If it's Ele.me or JD Daojia, brands can also create deeper links, through data backflow, converting to Taobao or JD for further operations.
For example, when a consumer purchases a daily chemical product on Ele.me, the brand can know which store, which user, and through what marketing method the single item was purchased. These user tags are collided within the Alibaba ecosystem, and the differences in user group characteristics, online and offline consumption behavior differences, and correlations are clear. After brands have a deep understanding of user profiles, the services and products they provide will inevitably better fit the needs of different levels of customers, achieving a "1+1 >2" effect. From this point, O2O is similar to e-commerce platforms and has great brand marketing value. So for brands, it can not only bring incremental sales but also serve as a digital omni-channel marketing platform.
-02- Selling Channel vs. Marketing Position: Which Does O2O Lean Towards?
Previously, I communicated with an O2O practitioner who mentioned a trend: O2O platforms like Meituan and Ele.me prefer to define themselves as LBS transaction platforms. In simple terms, they are digital marketing transaction platforms based on location positioning. Selling goods is the initial form, while marketing + selling is the future development trend. As a trading venue, the platform urgently needs a rich variety of categories. Food and beverage products are just an entry point into the market. In the future, more retail products strongly related to user integration needs need to enter to promote the platform's further development. From the brand's perspective, its ultimate goal is to win customers from similar brands or competitors, and O2O platforms themselves have huge traffic. The collision of the two needs is like a spark that starts a prairie fire. So how can brands cooperate with O2O platforms to do this channel well, both selling goods and doing digital marketing? There are mainly two dimensions.
First, establish awareness that O2O does not conflict with existing channel roles and should be treated equally. Especially for the KA channel, at present, on the platform, goods are still sold by hypermarkets, and there is no channel crossing. O2O platforms play a role in facilitating transactions, making transactions faster and more convenient. For example, after cooperating with brands, Ele.me will place building ads with platform QR codes. Users scan the code and can directly enter the corresponding venue, allowing users to complete transactions faster in different scenarios and receive quick delivery.
Second, resource activation: brands should activate and utilize the traffic and resources released by platform providers in the regional market. The key to activation lies in precise resource allocation. Based on data profiles, brands can build user models, conduct brand data analysis, predict the market, and analyze consumer behavior and psychology to issue precise coupons, which is more valuable. Recently, Coca-Cola's strategic cooperation with Meituan is a classic case of resource cooperation. Coca-Cola strongly bound with Meituan's food channel, based on data analysis, distributed 458 million exclusive coupons, with a total exposure of 2.1 billion times and over 10 million coupons redeemed. This not only achieved sales but also quickly achieved effective matching and precise interconnection with tens of thousands of merchants.
Of course, precise resource allocation alone is far from enough. For online operations, resources themselves are the embodiment of commodity monetization. Since brands cooperate with O2O, they must share resources well and achieve perfect circulation of commodity currency. For example, the use of IP: some well-known FMCG brands create exclusive IPs, celebrity endorsements, cross-border co-branding, etc., but these platforms do not have the right to use them. Once brands decide to cooperate with O2O platforms, these resources can be shared. Platforms use brand IP to create brand activity venues, which can quickly attract platform traffic, and the traffic that comes with the brand IP also follows, quickly attracting consumer attention. In addition, brands can also activate joint activities with platforms through other communication channels, such as KOL promotion on Weibo, official WeChat public accounts, and WeChat Moments, to promote joint activities and achieve efficient cooperation.
-03- What Should Brands Pay Attention to When Cooperating with Platforms?
O2O is a direction for the future development of the retail industry, and brands will face upgraded competition. At present, the O2O landscape is still a protracted war. In this long-term competition, what issues should brands pay attention to when cooperating with O2O platforms to build brand barriers?
First, brands should not treat O2O as a traditional distribution channel. O2O is essentially an e-commerce business. Each O2O platform's natural advantage is that it can bring full-scenario marketing touchpoint data. Compared with traditional offline channels, the touchpoints for consumer purchase conversion in O2O channels come from online, meaning that comprehensive online user profiles and transaction conversion data can provide more accurate reference for offline channels.
Second, the value of data is not short-term monetization but based on the long-term development of the brand. Especially for FMCG, data is extremely important for CRM. Managing data is essentially managing users and tapping into incremental growth. During communication with O2O platform practitioners, I found a problem: some brands do not attach much importance to data, and their application of data is limited to simple information such as clear accounting, verification of expenses, and coupon usage.
Brands should understand that after consumers complete a purchase, the factors determining their satisfaction come from consumption expectations. If expectations are met, consumers will be satisfied and generate repurchase behavior. And consumption expectations can be depicted by brands based on O2O platform data. In a sense, consumer expectations can be actively given by brands through the platform. This requires brands to attach importance to platform data, such as average order value, user distribution, cost-input-output analysis, and user consumption data. The platform side actually has the ability to do this, and it will be of long-term help to the brand's future development.
Third, from the perspective of catering, O2O and the catering industry are symbiotic. Alcoholic beverage brands are also sold in many catering stores, and even catering sales are several times higher than retail sales. Correspondingly, if brands can transfer marketing resources, whether coupons or full-reduction promotions, they will have a larger population and audience, and sales will grow faster. From the perspective of supermarkets, on O2O platforms, consumers are more willing to choose supermarkets because they have a complete range of products and are cheaper compared to convenience stores and small and medium supermarkets. From this level, when brands do O2O, they need the cooperation of the KA channel to maximize resource utilization.
In conclusion:
Frankly speaking, the overlap between online and offline consumers is getting higher and higher, and it is increasingly common for users to exist in multiple identities on platforms and offline stores. But there is a unique match between brands and consumers. No matter where users buy or in what form, they are the same user for the brand. Therefore, for brands, establishing a strong correlation with users is particularly important. And users' high-frequency use of O2O is precisely an opportunity for brands to build strong correlation barriers, which must be taken seriously.
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