In the battle between online and offline retailing, online has been making extraordinary gains in recent years, largely at the expense of physical retail. Yet sales volumes offline still vastly exceed those in ecommerce. Increasingly, retailers are discovering the value of linking the strengths of online and offline, and using them in combination. The Chinese government believes in a healthy retail market which includes both strong online and offline components, so we are expecting policy announcements which will stabilize the physical retail market.
We have seen significant investment by online shopping platforms in their offline capabilities, and this is driving growth in online-to-offline (or O2O) retailing. Alibaba’s $4.6 billion link-up with bricks and- mortar electronics chain Suning Commerce Group is just one of several high-profile investments in the fast developing O2O market in China, and more are likely to be on the way. Alibaba rival JD.com had been seen to have the edge when it came to customer service, and the O2O deal puts Alibaba back in the game. The idea of O2O is to give consumers the best of both worlds – the experience of shopping in person at a store, and the convenience and competitive pricing of online.
It makes business sense for offline retailers to move in this direction, too, as cash generated online can be invested in bricks and mortar, and online browsing can drive footfall in physical stores. In the overlap between ecommerce and physical shopping, large volumes of stock can be shifted with a click – and a high-value, personal and physical experience can be delivered in the real world.