---
title: "Instant Retail Heats Up: How Can Distributors Catch the O2O Home Delivery Wave?"
description: "Since the start of the O2O era in 2014, O2O home delivery has become a key driver of new retail channel revolution. Accelerated by the pandemic, it has grown into a new consumption scenario and a trend optimizing consumer experience. On July 27, the China Chain Store & Franchise Association (CCFA), along with Dada Group and JD's Consumer and Industry Development Research Institute, released a white paper on instant retail open platform models, indicating that instant retail, a key part of O2O home delivery, is set to exceed one trillion yuan by 2025, reaching 1.2 trillion yuan. This article uses three key questions—What, Why, and How—to guide distributors on leveraging O2O for growth."
author: "李文君Wendy"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2022-10-08"
language: "en"
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# Instant Retail Heats Up: How Can Distributors Catch the O2O Home Delivery Wave?

> Since the start of the O2O era in 2014, O2O home delivery has become a key driver of new retail channel revolution. Accelerated by the pandemic, it has grown into a new consumption scenario and a trend optimizing consumer experience. On July 27, the China Chain Store & Franchise Association (CCFA), along with Dada Group and JD's Consumer and Industry Development Research Institute, released a white paper on instant retail open platform models, indicating that instant retail, a key part of O2O home delivery, is set to exceed one trillion yuan by 2025, reaching 1.2 trillion yuan. This article uses three key questions—What, Why, and How—to guide distributors on leveraging O2O for growth.

**01**
## **Channels Are Always Evolving**
Since the start of the O2O era in 2014, O2O home delivery has been a major driver of new retail channel revolution. Accelerated by the pandemic, O2O home delivery has become a new consumption scenario and a trend optimizing consumer experience, continuing to grow rapidly. On July 27, the China Chain Store & Franchise Association (CCFA), along with Dada Group and JD's Consumer and Industry Development Research Institute, released the "White Paper on Instant Retail Open Platform Models." The white paper points out that as a key part of O2O home delivery, "instant retail" has arrived, and the open platform model (platform-based O2O) is expected to exceed one trillion yuan by 2025, reaching 1.2 trillion yuan. If the "online-offline channel integration" represented by O2O marks the full arrival of the FMCG channel 3.0 era, then the current boom in "instant retail" is undoubtedly another acceleration and upgrade of the channel 3.0 era.
On July 26, the Ministry of Commerce's official website released the "2022 Semi-annual Report on China's Online Retail Market Development," which states that new consumption scenarios such as "instant retail" are leading market transformation and building a new consumption landscape. Capital has poured in, and the instant retail track is heating up. FMCG new retail has undergone another baptism, opening the door for distributors to overtake on the curve. How can distributors catch the O2O home delivery wave in this round of channel acceleration? This has become a common concern. In this article, let's reveal the answers with the golden three questions: What is O2O, Why should distributors do O2O, and How can distributors do O2O.

**02**
## **What: What is O2O**
**Broad definition of O2O: Local services e-commerce.** In the mobile internet new retail era, consumer behavior is fragmented and borderless, leading to the two major industries—online e-commerce and offline retail—to penetrate, compete, and cooperate with each other. This process has given rise to a new business model of "online marketing, offline experience, and transaction integration," which is O2O. There are three models: **Online-to-offline traffic**, mainly platform models such as Meituan, Ele.me, Dianping, and Koubei; **Offline-to-online traffic**, with the core being "offline experience + online sales"; **Dual online-offline retail**, which many traditional enterprises are currently using for channel upgrades.
**Traditional definition of O2O: Online marketing and purchasing driving offline operations and consumption.** O2O stands for "online to offline," referring to a transaction where goods or services are booked or ordered online and delivered offline (in-store or at home). Offline delivery includes "in-store immediate enjoyment/consumption" or "instant home delivery." The delivery time standard for home delivery is 30 minutes to 1 hour.
**O2O home delivery industry data, consumer profiles, and main shopping behaviors:**
**Classification of O2O:**
**Value of O2O:** O2O complements offline retail with shared traffic. Overall, if O2O is well-run, it can achieve a "four-way win." For consumers, O2O meets convenient shopping needs, being both convenient and affordable. For O2O platforms, it brings large-scale, high-loyalty consumers, and by mastering vast consumer data, it can provide value-added services to merchants, thereby securing more local resources. Brands and distributors can leverage O2O to expand sales channels, improve channel efficiency through precise consumer targeting, and achieve secondary growth. Retailers can use O2O to upgrade and empower themselves, resisting the impact of e-commerce.

**03**
## **Why: Why Distributors Should Do O2O**
In 2020, the pandemic severely impacted the global economy, tightening consumer wallets and changing consumption mindsets. Lifestyle changes under the pandemic also gave rise to new consumption and new trends. Offline retail, limited by geographic location and space, has limited foot traffic and has been increasingly impacted by e-commerce in recent years, with store closures accelerating. Pandemic-related travel restrictions have made offline business even more sluggish. The combination of O2O with offline formats has found a win-win breakthrough for both e-commerce retail, which is hitting traffic ceilings, and offline retail. Distributors and small stores can successfully resist the dual impact of continued online consumption and pandemic policies by leveraging O2O. **Actively expanding O2O has become the second growth curve that all players in the FMCG channel urgently need to seize.** According to the "New Distribution 2021-2022 Distributor New Retail Cooperation Survey" and the "New Distribution 2020-2021 Downstream Market Small Store Survey," O2O business has been continuously penetrating brands, distributors, and retail small stores in recent years, and practice has shown that O2O can effectively drive new growth for distributors.
**As the efficiency of deep distribution continues to decline, online-offline integrated operations, represented by O2O home delivery, have gradually become an important way for brands and intermediaries to implement BC integration and empower small stores in lower-tier markets.**

**04**
## **How: How Distributors Can Efficiently Operate O2O**
Let's elaborate from four aspects: **strategic positioning, core strategies, pricing system**, and **building execution capability**.

**1. Clarify the strategic positioning and significance of O2O**
Strategic positioning is the ultimate direction, directly pointing to the North Star goal. All tactical design, execution, and review must serve the strategic goal. This is what we often call "doing the right thing" and the "end" in "begin with the end in mind." Before launching O2O operations, distributors must first clarify the strategic positioning of O2O. Currently, there are many reasons for distributors to enter O2O, which can be summarized into three models:

**Model 1: Passive—Natural Sales**
This type of distributor is numerous, with varying sizes and qualifications, and internal awareness and participation in new retail are chaotic. Some of these distributors know that brands and downstream retailers are cooperating with O2O platforms but believe their business is still offline. Apart from cooperating with brands to execute O2O locally, completing orders and after-sales for retail stores, they have little other involvement in O2O. **These distributors have no clear strategic positioning for O2O**, no unified market plan, no product strategy, and lack a corresponding new retail marketing team, remaining in a natural offline sales state.

**Model 2: Trial—Channel Expansion**
This type of distributor usually represents leading FMCG brands with certain brand power and a well-established channel layout. The brands they represent are actively operating O2O. Guided and driven by upstream brands, these distributors cooperate in executing local self-operated O2O key accounts, while actively using brand promotional resources to guide downstream small-format stores to join O2O platforms, allowing them to share in O2O results. They use O2O to empower small-format stores, activate downstream channel shipments, and drive sales circulation. They have found new growth from practical O2O operations. **Their strategic positioning for O2O is to use brand resources to guide and cultivate small-format store development, compensating for offline sales losses.**

**Model 3: Innovative—Model Upgrade**
This type of distributor typically entered new retail earlier, accumulating experience in FMCG B2B, community group buying, and other new retail e-commerce businesses, and has developed professional teams. They are more open and receptive to O2O. Their online-offline integrated market layout is mature, with strong brand, product, and channel capabilities. Some have become regional category distributors and regional partners for brands. These distributors can start from O2O C-end user needs, create exclusive O2O channel products and packaging, create channel scenarios, capture consumer mindshare, and gradually evolve into brand O2O operators, dominating the local O2O category. **They position O2O as an extension to the C-end in their business territory, using new retail O2O to build a complete upstream-downstream ecosystem, continuously strengthening their channel and supply chain capabilities.** Distributors must clarify their O2O positioning based on regional market characteristics, business types, and core capabilities to develop effective tactics and execution to achieve their ultimate goals. **Currently, most distributors lack clear purpose and positioning for O2O. It is recommended to prioritize participation over results, not seeking scale or profit, but merely trying to enter.**

**2. Develop three core O2O strategies: product strategy, customer cooperation strategy, and marketing strategy**
The three core elements determining O2O sales are: **Product × Customer Cooperation × Marketing**

**(1) Product Strategy:**
New retail requires precise matching of people, goods, and scenes. O2O channel product selection should align with the behavioral characteristics of its mainstream consumers, using innovative products and services to lead new consumer experiences. **First, O2O requires stronger brand power. Distributors must assess whether their brands are attractive enough for consumers to choose them independently.**
**Second, Kantar consumer research tells us that an average O2O consumer shops across 7 to 9 shopping scenarios simultaneously, spanning multiple spaces including home, office, hotel, dining, and school. Therefore, O2O product selection must meet consumers' multi-scenario needs.** Finally, O2O consumers also have significant regional differences. Whether they can create regional popular products based on local market consumption characteristics is also an important product strategy.
In summary, when formulating O2O channel product strategies, distributors must clarify channel characteristics, consumer needs, brand positioning, platform requirements, competitive landscape, and small store demands to achieve precise and efficient product selection. **Products must fit channel characteristics:** Not all categories and products are suitable for O2O channels. Choose products that match different O2O consumption scenarios, are hot-selling, and have relatively high average order value and gross margin. **For example, use multiple packaging specifications to match different scenarios: large packs, combo packs, portable packs, small packs, gift boxes, etc. High gross margin supports various O2O platform marketing activities.**
**Products must meet the needs of segmented market groups:** Based on city tiers, regional attributes, and shopper profiles, precisely distribute, design, and even develop products and packaging that meet the intrinsic needs of different consumer groups in local markets. **For example: trend products, regional specialties, fun packaging, seasonal internet-famous items, multiple specifications, small packs, etc.**
**Products must align with brand positioning:** The O2O channel is generally a "mid-to-high-end" channel, with consumers having certain economic power and quality demands. When selecting products, carefully benchmark against brand positioning to avoid affecting the image of leading high-end main brands. **For example: high-quality and high-value products are more popular among O2O consumers.**
**Products must have complementarity and differentiation:** Large and small formats have their own trade area populations, product positioning, and offline advantages. Choosing suitable products and using differentiation strategies to complement different formats' advantages with O2O business in consumption scenarios and shopping experiences can not only activate sales in different formats but also avoid price competition. Differentiated product strategies can solve investment efficiency issues from the source of precise distribution. **For example: large formats are suitable for large pack combos (virtual), co-branded exclusive packs, and even front-warehouse online exclusive packs; while small packs, portable packs, and scenario packs are more popular in small formats.**
**In O2O product selection practice, most companies currently choose to list offline mainstream big sellers online.** Nielsen research shows that O2O product concentration is high, with half of the items overlapping with offline, and prices are relatively higher. **To improve channel efficiency, companies tend to invest resources in products with growth potential in O2O marketing. Use low-end products to drive traffic, mid-to-high-end products to boost sales, and exclusive products to create differentiation, continuously building product competitiveness barriers.**

**(2) Customer Cooperation Strategy:**
In O2O operations, the industry generally divides O2O customers into three types: platform-based O2O, KA self-operated O2O (supermarket self-operated platforms), and local small formats.
**Platform-based O2O is usually operated directly by the brand, with distributors not touching the goods. Their main responsibility is to assist the brand in establishing execution connections with O2O platforms.** For retailer customers' O2O operations, distributors need to implement online-offline integrated operations according to brand requirements. When formulating O2O cooperation strategies for retailer customers, distributors must differentiate based on customer format and nature. **By integrating platform, brand, and their own resources, distributors can achieve more customers and stores going online, continuously increasing active online stores, and thereby driving overall channel empowerment and upgrade through O2O.**

**Customer Type 1—KA Self-operated O2O (Supermarket Self-operated Platforms):**
**Representative customers: Walmart, RT-Mart, Metro, Hema Fresh, Sanjiang Shopping, Bubugao, etc.**
**Cooperation strategy: Coordinate resources, actively link up.** Supermarket self-operated platforms account for about 20% of the O2O market share, with entry points being self-operated apps and mini-programs. Offline stores are deeply bound to online self-operated platforms, with full product listings and a certain proportion of distinctive private labels, strong private domain operations, and data circulation within the system. For such self-operated O2O platforms, **distributors need to actively link with KA stores to implement digital transformation and access, with offline stores actively coordinating online O2O business, and coordinating brand KA business investment plans, thereby riding the wave of retailers and brands to achieve sales growth. For new O2O-integrated formats, such as Seven Fresh and Hema Fresh, given the uncertainty of platform strategies, it is recommended to proceed cautiously if the path is unclear.**

**Customer Type 2—Large Formats:**
**Representative customers: Walmart, Carrefour, Yonghui Life, RT-Mart, Auchan, Century Mart, Jiajiayue, Lotus, etc.**
**Cooperation strategy: Leverage strength, follow closely.** Large formats accessing open O2O platforms account for about 30% of the market share, with entry points being the six major O2O platforms. These are national chain hypermarkets and warehouse club stores, with product operation and supply chain advantages, strong product operation capabilities, and diverse digital marketing plans. **For this type of large format customer, distributors need to closely follow their O2O business pace, cooperate closely to promote refined online-offline integrated store operations, and coordinate brand O2O platform investment plans, leveraging strength to drive sales.**

**Customer Type 3—Small Formats:**
**Representative customers: FamilyMart convenience stores, Lianhua Supermarket, Hongqi Chain, Meiyijia convenience stores, community fresh supermarkets, mom-and-pop stores, etc.**
**Cooperation strategy: Go with the flow, actively promote.** Small formats achieve online-offline integrated operations by accessing open O2O platforms, with entry points being the six major O2O platforms, accounting for about 50% of the market share. There are over 3 million small retail stores nationwide, with a large base and more down-market reach, driving employment for 300 million people and accounting for 40% of FMCG shipment share. They are called the capillaries of urban commerce. Small stores have closer relationships with local communities, and owners have stronger offline customer operation capabilities. Some stores' O2O online sales even exceed offline store sales. **Distributors use O2O business to actively promote regional small stores to go online, fully utilizing brand and platform O2O resources to coordinate downstream small format development and activate downstream sales. Among the many small formats, community fresh supermarkets and chain convenience stores are particularly noteworthy for distributors in terms of expansion speed, per-store output, and return on investment.**

**(3) Marketing Strategy:**
Before formulating O2O marketing strategies, distributors must first understand the O2O marketing ecosystem. O2O has typical e-commerce retail characteristics, where traffic determines sales, but also has offline retail advantages, namely immersive shopping scenarios. **Therefore, O2O marketing strategies must be implemented from four aspects: online, offline, on-platform, and off-platform.** Typically, multi-channel off-platform media traffic generation is handled by the brand's marketing department, while on-platform APP marketing is often invested by the brand's new retail and KA departments. **In most cases, distributors need to combine O2O platform major promotions, coordinate offline to create benchmark stores, and promote online-offline integrated linkage through in-store traffic-driving activities.** Some distributors take on the overall operation of local LKA customers or undertake brand agency operations, requiring comprehensive O2O omnichannel online-offline integrated marketing implementation. **When conducting O2O online marketing, distributors must first clarify the decision factors (touchpoints) in O2O shopping, lock onto these key elements, and efficiently stimulate consumer demand.** Efficient O2O online marketing can be summarized in three points:
**Focus on necessary paths:** O2O consumers have strong shopping planning and fast decision-making, leading to limited effective touchpoints. Focus on necessary shopping paths, such as platform homepage, supermarket channel homepage, and store homepage.
**Lock onto search hotspots:** Platform homepage search box, supermarket channel homepage store list area, store homepage search box, and product list area: prioritize product display in the first three screens when searching category keywords, related categories, and competitors.
**Precise user marketing:** Use platform big data analysis to develop omnichannel integrated marketing plans and diverse marketing strategies for precise user marketing. Use word-of-mouth marketing to stimulate user reviews and build product popularity. **Currently, common marketing methods include live streaming, full reduction, and coupon distribution.**
**Finally, it must be emphasized that building online execution capability requires professional product descriptions and main image details.**
**The most effective marketing implementation is for distributors to combine brand, platform, and their own resources based on O2O platform and store promotional calendars and themes.**

**3. O2O Pricing System and Precautions**
When pricing O2O products, distributors should set reasonable prices without competing on low prices, maintain prices, preset costs, and monitor budgets. **The primary driver of the O2O channel is "convenience," so products do not need to compete on low prices; reasonable pricing is more important than low-price promotions.** "Affordability" is an important shopper driver for O2O channels, so strengthen price maintenance to **ensure O2O product prices are not higher than offline physical stores.** Preset reasonable channel gross margins and return rates, and calculate on a monthly cycle, per promotion cycle, and per SKU to avoid budget loss of control.

**4. Building Execution Capability**
Distributors should build O2O execution capability from the following three aspects:
**1. Precise distribution:** Based on analysis of trade area consumer needs, combined with scenario matching, conduct precise channel product selection. Set up outlet (community) tags for precise (outlet) distribution matching. Appropriately layout and develop channel potential products.
**2. Prevent out-of-stocks:** Relevant consumer research shows that a clear pain point in O2O is that stores, as front warehouses, often have insufficient inventory, leading to product out-of-stocks. Distributors should make sales forecasts and inventory preparations based on sales history to ensure sufficient inventory for promoted and potential products.
**3. Professional marketing:** Combine platform tools (LBS) to mine user needs and develop highly adaptable precise marketing plans. Explore consumption scenarios and customize online integrated omnichannel marketing plans. Use integrated marketing activities to improve omnichannel penetration.

**05**
## **What Core Capabilities Do Distributors Operating New Retail O2O Need?**
Distributors primarily operating traditional channels, modern channels, comprehensive e-commerce platforms, and new retail channels have distinct core capability requirements; one set of methods cannot work for all. For efficient O2O operation, focus on capability building using the Five Forces Model:
**1. Product capability: Achieve precise distribution and precise matching.** A complete product line meets the precise distribution needs of O2O shoppers across different formats; rich categories and product combinations meet consumers' multi-scenario shopping needs; diverse products and packaging specifications meet the listing needs of different platform promotion cycles.
**2. Channel capability: Achieve online-offline integrated omnichannel penetration.** O2O is an online-offline integrated business. Distributors can only operate O2O well across the entire domain through online-offline integrated network layout, multiple store coverage, and touchpoints.
**3. Build digital innovative marketing capability.** Distributors operating new retail need capabilities in digital information collection and integration, digital marketing promotion, and integrated marketing. With customer linkage and omnichannel marketing thinking, they can implement online-offline integrated mutual traffic generation. Through customized, precise regional activities, improve marketing investment efficiency.
**4. Operational capability: Build professionalism and efficiency.** High-quality after-sales service; strictly comply with brand systems and policies, cooperate with brands in regional platform and KA customer cooperation; precise sales forecasting, professional warehousing and logistics order management, improve logistics order fulfillment capability; effective investment and financial analysis, timely reconciliation and settlement, reasonable budget control.
**5. Organization: High openness and flexibility.** In implementing innovative retail new business, give the team space, freedom, and tolerance. Promote small steps, fast runs, and rapid iteration in new retail business.

**06**
## **How Should Distributors Do O2O Well in 2022?**
Distributors doing O2O well in 2022 need to focus on the following three things:
**1. First, update cognition**
**1. Firm attitude:** With deep omnichannel integration, the O2O track has basically taken shape, generally clearer and with more growth prospects than FMCG B2B and community group buying. Distributors should seize the instant retail opportunity and actively try new channels and ecosystems. **Enter early, adapt early; the game of give-and-take is not zero-sum but a series of model iterations.**
**2. Personal participation:** Bosses must be hands-on to understand the real business and make correct decisions. For innovative new retail businesses and channels like O2O, **from general manager to shopping guide, everyone should be online, deeply understanding every key link.**

**2. Must strengthen professional construction**
**1. Strengthen professionalism:** O2O platforms have clear tactical standards for precise matching of consumers (people), products and packaging (goods), and consumption scenarios (scenes). Distributors must continuously strengthen precise product selection, precise distribution, precise forecasting, and supply chain management capabilities. **In management, de-experience, establish related processes and models, and achieve high efficiency through templates (SOP) to continuously play the innovative track.**
**2. Cultivate organization:** As a new form of new retail e-commerce, although the model has been rapidly matured by capital, supporting talent resources have not kept up. Distributors must continuously build organizational structure and organizational capability. **Currently, [platform + small organization] is a favored organizational model for distributors dealing with new business.** The platform's value is empowerment; small organizations liberate human nature. Small organizations with independent accounting and profit/loss responsibility can maximize organizational motivation and improve front-line work efficiency.

**3. Continuously forge operational capability**
**1. Know yourself and your enemy:** O2O platforms, retailer self-operated O2O, and O2O-integrated new species have different playbooks, and each customer has its own characteristics. Distributors must deeply understand various playbooks and related data, and do homework before entering.
**2. Clear goals:** Centered on O2O strategy goals for different markets and customers, KPI design and use should serve the achievement of strategic goals, being a breakdown of strategic goals. **If distributors position O2O as supplementary sales, be sales- and profit-oriented; if positioned as building a business model, goals need to be more refined and mature, focusing on speed, scale, effectiveness, share, and other details.**
**3. Professional operation:** Due to the generally fast pace and high competitive pressure of e-commerce new retail operations, distributors should be performance-oriented, integrate omnichannel resource investment, leverage their strengths to build the market, and gradually accumulate capabilities to empower all channels through O2O.

**07**
## **Closing Remarks**
Distributors who have already mastered O2O generally remain optimistic about future development trends. Following the industry trend of instant retail O2O home delivery and seizing operational dividends, many distributors optimistically expect O2O sales to double in 2022. With the rapid pace of channel fragmentation, transformation and upgrading, and penetration and integration, if distributors do not seize emerging channels now, they may lose the entire market in the future. Distributors' business leaders must actively understand national policies and industry changes, adopt an agile attitude toward new things, and actively try emerging channels like the little horse crossing the river.
In the continuous iteration of consumption, markets, and channels, distributors who seize opportunities can always ride the wave of the times, achieving transformation and upgrade after transformation and upgrade.

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