The popularity of new retail O2O is undeniable to practitioners in the frontline market. In 2016, Jack Ma first proposed the concept of 'new retail,' and with the catalyst of this year's COVID-19 pandemic, new retail has been pushed to unprecedented heights. Similarly, over the past two years, FMCG manufacturers have not been idle, engaging in cooperation with new retail O2O to varying degrees and in different forms. In 2018, Dmall and P&G reached a 3030 strategic cooperation, setting goals for online sales to account for 30% and full-channel sales to grow 30% annually. During the 2018 Double 11 promotion, P&G's East China full-channel sales on Dmall grew 151% year-on-year, online sales grew 458% year-on-year, and online sales accounted for 31%. In February 2019, Andrew Kennedy, Vice President of Unilever China Customer Development, led his team to meet with Dmall President Zhang Feng and his team, reaching an agreement on cooperation for 2019, which would deepen cooperation in brand precision marketing, home delivery business solutions, member big data, and other areas, laying out O2O distributed e-commerce to enhance consumers' 'home delivery' service experience in O2O shopping. In January 2020, Mars Wrigley, the global confectionery giant under Mars, officially signed a cooperation agreement with JD Daojia, a leading local instant retail platform in China. They announced a three-year strategic cooperation vision: focusing on scenario building, new product co-creation, member operations, and data cooperation, to jointly enhance the sales growth of the confectionery category on JD Daojia, explore a new three-party cooperation model of brand X retailer X JD Daojia platform, and create a new benchmark for instant retail business models for FMCG brands. In July 2020, Meituan Dianping and Coca-Cola China signed a strategic cooperation agreement, and the two parties will jointly explore new digital business models that lead industry transformation. In August 2020, Alibaba's three retail platforms, Tmall Supermarket, Taoxianda, and Ele.me, jointly announced an upgraded strategic cooperation with Yili, cooperating in marketing, services, and other areas to accelerate home delivery services. In August 2020, PepsiCo Foods (China) Co., Ltd. and Dada Group (JD Daojia), a leading local instant retail and delivery platform, announced a deepened strategic cooperation. In September 2020, Mengniu and Dada Group (JD Daojia) announced an upgraded strategic cooperation to jointly explore innovation in instant retail business models and a new model of integrated online and offline omnichannel marketing. I believe the cooperation between the aforementioned brand owners and various platforms is sufficient to verify the importance brand owners place on new retail. Of course, although they value it, they may not have fully figured it out, or clarified what they want to achieve and what goals they aim to reach. Today, let's return to fundamental thinking: how should FMCG manufacturers correctly understand the surging 'new retail O2O'? -01- New Retail? O2O? What's the Difference Many people often confuse the concepts of new retail and O2O. Are they the same concept, or is one contained within the other? What is the relationship between the two? Let's first look at some concepts. New retail is generally defined as: New retail is a model where enterprises rely on the internet, use advanced technologies such as big data and artificial intelligence, upgrade and transform the production, circulation, and sales processes of goods, thereby reshaping the business structure and ecosystem, and deeply integrating online services, offline experiences, and modern logistics. From the comparison between traditional retail and new retail, we can clearly identify a core keyword: 'comprehensive.' Through advanced technology and data, channels that were originally parallel or had some overlap are connected, and through analysis of consumer demand, single consumption scenarios are combined and upgraded, thereby driving new consumption growth. Now let's look at the concept of O2O. O2O, which stands for Online to Offline, refers to combining offline business opportunities with the internet, making the internet a front-end for offline transactions. This concept originated in the United States. The concept of O2O is very broad; as long as a business involves both online and offline aspects, it can be called O2O. It can be seen that a very important point in the O2O concept is 'combining offline business opportunities with the internet.' Unlike the early retail industry where offline and online were parallel, now O2O includes both the offline extension of the internet and the online expansion of offline retailers. These are the changes that O2O has brought to the retail and offline service industries since its development. In summary, the definition of new retail is broader, and O2O can be seen as an important component of new retail. However, because O2O involves a lot of organic integration of online and offline, and its model differs from the original retail format, most new retail is presented in the form of O2O to some extent. For FMCG manufacturers, among the currently popular new retail models, there are mainly the following six types that are highly relevant to brand owners: 1. Innovative cross-border supermarkets, such as Hema, 7Fresh, Super Species 2. Fresh food community stores, such as Linli Fresh, Yipin Fresh, etc. 3. O2O platforms, such as JD Daojia, Meituan/Dianping, Ele.me/Koubei, etc. 4. E-B2B platforms, such as Alibaba Retail Link, JD New Channel 5. Community group buying platforms, such as Shihuigou, Xingsheng Youxuan, etc. 6. Fresh food platforms, such as Dingdong Maicai, Miss Fresh, Meituan Maicai, etc. △Source: New Distribution Consulting '2019-2020 China FMCG Distribution Channel Report' For O2O platforms, if further refined, they can be divided into O2O home delivery platforms (multi-customer platforms: JD Daojia, Taoxianda, Meituan Flash Purchase, Ele.me, Dmall, etc.; retail customers' own platforms: Walmart Home, RT-Mart Youxian, Yonghui Life, etc.), and O2O store visit platforms: Dianping, Koubei. Due to the impact of the pandemic, new retail and O2O have experienced rapid development (in Q2 2020, the growth rate of various O2O platforms was more than double that of the previous quarter), and various brand owners have quickly attached importance to new retail and O2O. Back to the main topic: how should FMCG manufacturers correctly view this hot new retail O2O, especially in terms of its position and role in the current channel matrix? Should brands continue to increase investment in new retail O2O channels? To answer the above questions, I suggest considering the following three dimensions. -02- Product and Category Fit The products sold on O2O and the consumer profile differ somewhat from offline: 70% of O2O online consumers are aged 25-35, two-thirds are women, have families and children, and over 50% have a monthly household income exceeding 12,000 yuan. Overall, they are 'younger, buy more, and have more money.' At this time, the challenge for enterprises is whether they have sustained and rapid product innovation capabilities to cater to the ever-changing consumer market. If enterprises and brands lack suitable products or innovations to meet these consumers' needs, then doing O2O will only solve certain problems in the short term; in the long run, they will still hit a bottleneck. What channels and consumers are suitable for the category the enterprise is in? O2O platforms and fresh food platforms belong to 'high frequency, high stickiness, medium to low average order value.' On O2O, about 70% of sales come from daily distribution of chilled and fresh products. In contrast, large segments of traditional offline retail, such as daily chemicals and alcohol, account for a smaller proportion. Community group buying platforms mainly sell fruits, fresh food, and daily necessities; pharmaceutical O2O is 'essential, low frequency,' and restaurant O2O is 'high frequency, low average order value.'** Different brands, especially those covering multiple offline formats, such as beverages covering supermarkets and restaurants, should make reasonable layouts based on their brand characteristics and consumers' shopping paths and behaviors in different channels. -03- Network Coverage and Price Control For manufacturers whose main channel is offline, have they optimized their offline network? A major feature of O2O is 'the online extension of offline retailers.' Currently, the coverage of offline by various mainstream platforms is in a 'camp-based' situation. For example, JD Daojia mainly covers retailers that cooperate with Tencent, Taoxianda mainly covers Alibaba-affiliated retailers led by RT-Mart, while Dmall covers local retailers that cooperate with Wumart. Meituan and Ele.me have half or more of their stores as small and medium outlets and scattered stores. Consumers' choice of O2O platform APP is generally a single-choice behavior, that is, after comparing multiple APPs over a period, they choose the APP that can meet their product needs and has the best services in all aspects. This means that for offline network coverage, if only selective distribution was done in the early stage, it will inevitably fail to cover consumers across the entire network. The second issue is whether the channel price control is strong enough to achieve unified online and offline prices. During the shopping process, a considerable proportion of consumers will compare prices across the entire network (concentrated in stockpiling or replenishing, but non-urgent items). If the brand cannot achieve strong price control, then after investing a lot of manpower and resources on O2O platforms, consumers will still jump away, losing existing volume in other channels and causing a waste of resources. At the same time, with JD and JD Daojia's 'Wujing Tianze' plan and Alibaba's same-city retail model, consumers can more easily compare product prices on the same page. Price confusion will cause consumers to distrust the channel or brand, leading to loss. -04- New Brand Customers or Existing Brand Customers? Brands need to clarify the source of business on O2O and new retail platforms. We can simply divide it into new brand customers, who come from competitors or are completely new to the category; and existing brand customers, who are platform brand loyalists or come from other channels. If the platform can help bring in a large number of new brand customers, then undoubtedly, this is a business worth doing long-term for the brand. But if viewed from a broader perspective, especially through platform big data, such as classifying consumers through a data bank, and finding that the platform's business mainly comes from repeat purchases by existing brand customers, how should the brand make decisions? My suggestion is to first look at whether shopping frequency and basket size have increased. In new retail O2O, can investment increase the original shopping basket and frequency? For example, a certain food brand's offline shopping frequency is 2.6 times a year, with an average purchase amount of about 11 yuan, but O2O consumers buy this brand 8.6 times a year, with an average purchase amount of about 15 yuan. At this point, the brand can continue to invest on the platform and convert offline consumers to online. At the same time, it is also necessary to pay attention to the actions of major competitors to prevent existing brand customers from being lost after transferring to O2O. Balancing long-term and short-term, the emergence of new channels will inevitably mean increasing investment in the short term to gain new business growth points, such as platform heavy coupons, flash sales, ultra-low prices on community group buying platforms, etc. For enterprises, it is necessary to define clearly what the main purpose of various practices is: is it short-term sales explosion, recruiting consumers, or preparing to enhance long-term consumer stickiness. At the same time, it is also necessary to think about how to optimize the overall investment of the enterprise when investment cannot be increased, and where the optimization opportunities are. △Source: New Distribution Consulting '2019-2020 China FMCG Distribution Channel Report' From 2020 to 2023, some research companies predict that new retail O2O will maintain a compound annual growth rate of over 25%, and various platform retailers are also optimistic about O2O business. In this process, enterprises need to have a more open and urgent mindset to understand and explore the value of new retail to the enterprise, thereby helping brands achieve stable and sustainable development. Summary: The outbreak of new retail O2O, and how the future battle will unfold, is still unknown. But no matter what, every brand owner must always stay vigilant and follow up in a timely manner. How to lay out the product structure, how to reasonably control prices, how to choose the focus of different types of platforms, whether it is incremental or existing volume, and how to upgrade frontline organizational capabilities to match the changes in new retail—these are all issues that every brand owner needs to ponder deeply. To this end, New Distribution will also open article columns and special communities to discuss and exchange ideas with everyone!