Compared with the volatile community group buying, O2O has maintained steady growth. Kantar Consulting's 2021 O2O report predicts that O2O sales will account for 8% of the overall retail market in 2021, with growth significantly outpacing overall online sales. Since 2020, FMCG giants like Mars and Coca-Cola have increased their O2O investments, highlighting the channel's vitality. However, as an emerging model, O2O faces a series of issues, such as how brands, retailers, and platforms can collaborate better, how to leverage data, how to ensure fulfillment, and how to balance online and offline pricing. In the fast-paced development, problems are inevitable. How to address these issues and achieve a win-win for brands, retailers, and platforms is the top priority for the O2O channel. Why are brands increasing O2O investment, even elevating it to a strategic level? Before 2018, O2O was barely mentioned in the FMCG industry. At last year's New Distribution O2O salon, an O2O head from a leading FMCG brand joked that when platforms like Meituan and Ele.me first approached them in 2019, they didn't even know what O2O was. But now, many leading FMCG brands have elevated O2O to a strategic level and increased resource investment. O2O has gradually evolved from an uncertain retail trend into a definitive business model. What factors have driven this explosive growth in just a few years? First, the pandemic has accelerated a large-scale shift of consumers online. For the O2O channel, the pandemic was undoubtedly a turning point, as recurring outbreaks accelerated the migration of consumer groups. Offline traffic has gradually shifted online, not entirely, but a significant portion of consumers now engage in hybrid shopping. These consumers are mostly young, representing an opportunity for incremental demand for brands. Second, traditional e-commerce traffic is declining, and the dividend is peaking. Through exchanges with leading FMCG brands, New Distribution found that customer acquisition costs on traditional B2C e-commerce are extremely high, with some top brands spending 600-700 yuan per new customer. For traditional FMCG brands, achieving sales growth through e-commerce has become difficult. Moreover, in traditional e-commerce, price is the core factor influencing purchases, and user loyalty is very low. For brands, offline remains the foundation, and frequent promotions on platforms could disrupt the overall pricing structure. In contrast, O2O offers channel advantages; price is not the primary factor, but rather the immediacy and convenience of shopping. Especially for FMCG products, which often involve impulse purchases, O2O's half-hour to one-hour delivery better meets consumer needs. These external changes have driven O2O channel development. Additionally, O2O has shifted from a supporting function to a strategic channel for brands, with a key element being the lever for omnichannel marketing. O2O has the capability to connect online and offline, and we can see that brands, retailers, and platforms can all deeply participate in O2O. In the past, traditional offline channels involved brands and retailers, while traditional B2C e-commerce involved brands and platforms, rarely achieving tripartite collaboration. O2O, through internet + digitalization + scenarios, allows brands to get closer to consumers, drive sales growth, and enhance retailers' digital capabilities to empower business growth. Take beer as an example: channels are broadly divided into on-premise (dining) and off-premise (non-dining). On-premise scenarios are closely tied to platforms like Meituan and Ele.me; when ordering takeout, many restaurants offer beer combos, presenting potential sales opportunities for brands. Off-premise channels, such as hypermarkets, convenience stores, and even mom-and-pop shops, can also list products on platforms like Meituan and JD Daojia. This also offers retailers a chance to digitize. From this perspective, O2O can empower traditional retail and effectively help brands achieve omnichannel reach, marketing, and business growth. This explains why many traditional brands have elevated O2O to a strategic level. In O2O, what roles do brands, retailers, and platforms play? For brands, the importance of O2O is self-evident. But before entering, it's crucial to understand the roles of each party in this tripartite channel. First, look at brands. At the 2021 New Distribution O2O salon, a head from a leading O2O platform suggested that in the O2O business model, brands are the weakest party. When O2O first emerged, brands were not part of the model; the logic was that retailers listed products on platforms, and consumers purchased. The retailer holds the title to the goods, and the transaction occurs between the retailer and the consumer. Thus, in the O2O channel, the brand is merely a trademark holder. Therefore, the brand's role is mainly product endorsement and brand influence. Currently, brands' participation in O2O is relatively limited. From a brand perspective, the biggest advantage of O2O is the ability to get close to consumers and obtain precise user profiles. Next, retailers, as mentioned, own the goods and physical stores serve as product carriers. For retailers, the essence is to move offline shelf products online, using platform traffic to cover consumers within a 3-5 km radius. Finally, platforms are traffic aggregators and data supporters. They fall into three types: internet platforms like Meituan and JD Daojia; internet retailer self-operated platforms like Hema and Miss Fresh; and traditional retailer self-operated platforms like Walmart and Yonghui. One notable point is that traditional retailer self-operated platforms differ significantly from internet platforms, akin to regional B2B versus national B2B. Internet platforms have large field sales teams and app downloads often reach hundreds of millions, giving them a huge advantage in customer acquisition. Additionally, internet platforms connect brands and retailers, accumulating vast data that can provide digital and intelligent solutions for both, helping them jointly serve consumers. Traditional retailer self-operated platforms are more of an offline supplement, focusing on providing better services to nearby consumers. In simple terms, internet platforms attract traffic, while traditional retailer self-operated platforms focus on service. What issues should FMCG brands note when entering O2O? Although O2O is in a high-growth phase, it is still a new business model, so issues exist in both its model and cooperation among parties. Let's look at some key issues and solutions: 1. Pricing issues During major promotions, platform subsidies, retailer subsidies, and brand activity subsidies can combine, leading to price chaos that disrupts the brand's market foundation. Solution: Promotion is just a tool; O2O meets higher-level consumer needs like immediate service, scenario-based demands, and efficient fulfillment. All parties should remember that O2O is not a battlefield for price wars; discounts are just one part of the purchase process for immediate needs. For example, a rice brand offered a 3-yuan coupon, but when consumers urgently need rice, they will buy regardless of coupons. Therefore, O2O should not pursue low-price strategies; brands should set minimum prices, and even during big promotions, listing prices should be agreed upon in advance. 2. Product issues Currently, products on O2O platforms are mostly from offline stores, meaning online and offline products are the same. This raises two issues: First, product matching—best-selling offline products may not suit online. Most brands lack a clear product selection strategy for O2O, simply listing offline products, such as 500ml bottled water that sells well offline but may not be ideal online, where larger sizes are preferred. Second, sales attribution—with the same products, there can be channel cannibalization, making it hard for brands to distinguish whether new sales come from online or offline. This is the least desirable scenario, as moving sales from one pocket to another is meaningless. Solution: For product matching, brands should analyze platform data to understand consumer profiles and behavior, then decide on online hero products and whether they differ from offline. For sales attribution, brands can adopt differentiated product strategies, even creating channel-specific products for O2O. For instance, if regular channels sell 500ml bottled water, O2O could offer 450ml. 3. Duplicate marketing investments There is overlap in marketing spending between online and offline. For example, during 618 or Double 11, brands invest in offline key accounts (KA), and O2O operations also invest in KA during promotions, leading to overlapping investments and resource waste. Solution: As mentioned before, O2O must be a top-priority project, connecting sales and marketing departments for coordinated efforts. When allocating resources and marketing budgets, especially during big promotions, ensure consistent information across channels and avoid blind spending. 4. Lack of digital content The retail industry often talks about "people, goods, and places," which is equally important in O2O. Brands need data on when, where, and what consumers buy for consumer insights. For example, what do consumers buy in the morning, for afternoon tea, or after work when tired? The finer the data granularity, the better. However, O2O data in some scenarios is not yet comprehensive, and brands need this data for consumer mindshare research, creating more scenarios, acquiring new customers, and achieving higher conversion. Solution: In traditional e-commerce, brands operate as "store-brand integration," with data based on consumer-store relationships, like Alibaba's data bank. In O2O, the brand is just a brand, and the store is operated by the retailer, so it's necessary to build a people-product relationship. (Image source: CSDN-Luojia Xiaoshan) The complete data chain for people-product relationships is: insight into consumer needs → meet consumer needs → based on omnichannel data and complete ecosystem data → create demand. This requires brands to deeply engage in O2O and discuss with platforms, not just invest money. Second, brands should leverage platforms' public traffic; private traffic is limited, and using public traffic for customized operations and outreach is a more efficient way to acquire customers. Final thoughts: For brands, in the game of stock competition, the key is insight into channels and consumers. O2O's rapid growth presents an opportunity to gain incremental growth from existing stock, which is why traditional FMCG brands are increasing their investment. Of course, while entering, the issues cannot be ignored. This requires brands to elevate O2O to a strategic level, coordinate internal and external resources, and truly unleash O2O's potential. -END-