SLASSCOM holds CXO Briefing on future of e-commerce and O2O conversion

• O2O Online share-of-wallet only 2.2%

By David Ebert

In 2012, B2C e-commerce sales grew 21.1% to top US$ 1 trillion for the first time, according to new global estimates by eMarketer. This year, sales are expected to grow 18.3% to US$ 1.298 trillion worldwide, eMarketer estimates, as Asia-Pacific surpasses North America to become the world’s No. 1 market for B2C ecommerce sales.

Growing internet penetration particularly on mobile platforms as well as developments in payment gateways, legal frameworks and delivery systems have created an ecosystem that is poised to finally deliver the full potential of e-Commerce.

The SLASSCOM CXO Briefing with Leapset Senior Vice President of Product and Operations Jim O’ Connor examined the future outlook for e-Commerce in the world.

O’connor in his presentation highlighted startling figures on the huge discrepancies that exist between online and offline purchases in the US market. He pointed out that the US offline market was worth a staggering US$ 4.4 trillion last year while the e-commerce market was only worth a meagre US$ 224 billion in comparison.

This was further demonstrated by online retailer Amazon’s FY 2012 revenue figures of US$ 61 billion in sales in stark contrast to offline retail giant Walmart’s massive FY 2012 revenue of US$ 469 billion.

These alone highlight the potential that exists for e-commerce to make its presence felt among consumers by converting offline purchases to online purchases with the use of innovation and ease of purchase systems for traditional consumers.

In addition statistics show that US consumers spent an average of US$ 29,400 on services and US$ 15,120 on offline purchases while only dishing out US$ 1000 on online purchases of goods and services.

He pointed out that e-Commerce is big and getting bigger with mobile commerce grabbing increasing share, accounting for 11% of all transactions in 2012 and revealed that smart phones and devices are driving growth, allowing consumers to discover, research, and purchase seamlessly while apps and mobile-friendly websites have unchained consumers from the browser to meet their commerce needs. In addition, innovative platforms will also continue to drive mobile commerce such as Apple Passbook and Google Wallet.

Another comforting aspect of e-Commerce is that the industry will continue to grow at dramatic rates, but the most important aspect won’t be its 20% YoY growth rates, but it will be the actual figuring out of how to crack the trillion dollar offline, real-life market that will be the difference that counts eventually.

Converting offline to online

Offline purchases are defined as a consumer making a purchase at a traditional physical outlet such as a grocery store and an online purchase would be someone buying a book off Amazon. A simple example of a conversion to online would be the purchase of a redeemable coupon online from a consumer’s favourite restaurant which can be redeemed using the paper certificate in person. A more complex offline to online purchase would be in an instance where a bar has location-aware point-of-sale (POS) where customers can check-in and share info in order to receive rewards/discounts, and customer check-ins, where a friend sees the check-in through Facebook or other newsfeed services and buys the checked-in consumer at the location a beer directly through the merchant POS.

The possibilities are endless and the push for offline to online conversion needs to happen now or risk delaying the inevitable.

However O2O is still in its infancy, but several companies are making inroads like big box retailers such as Target and Best Buy now allowing for in-store pickup on web purchases. Starbucks has also developed a hugely popular gift card program that seamlessly bridges virtual and real-world and also leverages third-party apps like iOS Passbook.

In addition, passport and wallet services like Google Wallet, iOS Passbook and Paypal here help close the O2O loop and group couponing businesses like Groupon and Living Social have created new billion dollar O2O markets.

Why is O2O ripe now?

The number on reason is that trillion dollar market opportunities don’t come along every day. Also, the fact that it offers ubiquitous connectivity for merchant and customer is a good enough reason for companies to be open to the concept with a growing tech savvy consumer presence being more receptive through their smart phones and tablets. Another aspect that adds to this is that consumers today are more willing to share information and access in return for better service while rising core costs are driving merchants to seek out more innovative ways to drive their top line and attract ‘Good’ customers.

In terms of unexploited opportunities, O2O initiatives are being driven by two main constituencies in that large retailers are able to build customised solutions (Starbucks, Walmart, etc.), while start-ups are focused on the consumer experience and not the merchant and that medium and smaller merchants cannot afford to build customised merchant focused O2O applications. This also shows that consumer tilted offerings leave little economic upside for merchants (Groupon) and that disparate applications lead to complexity and exhaustion for merchants.

The downside of O2O can be detailed as follows;

Parallel Processes: It is inconvenient for merchants to process and manage a system and can be prone to breakdowns (redemption, campaign management, funding, accounting, etc.), sticker fatigue, which would lead to employee and consumer confusion, merchant fatigue, where consumer-targeted initiatives typically favour consumers to the detriment of the merchant and finally consumer fatigue, where when the merchant loses interest, the consumer is soon to follow.

What is the solution for SMBs?

SMB solutions must be seamlessly integrated into current workflows with no parallel processes and one centralised platform (POS). The whole process must be simple to use for non-technical managers whose first priority is real-world management. It must be accessible from anywhere, regardless of the consumer’s preference of device. It must give merchants greater control over their online footprint, if not self-service. They have to include publish-once capabilities and they must be open platforms that allow third-party applications to augment and expand their individual core platform features.

Summary

e-Commerce is big, but O2O is massive and it is imperative that today’s merchants embrace the next generation of consumer reach systems. O2O, at its core, is connecting and converting online actions or behaviour (on browser, device and app) to a real world transaction. The O2O market is still in its infancy, with most attempts focused on consumers or large corporations building custom solutions, hence SMBs get left out in the cold and merchant driven O2O solutions must start with the core merchant operating system, the POS.

Speaker profile

Jim O’ Connor is the Senior Vice President of Product and Operations at Leapset and has over 12 years of Internet Product Management experience. He is responsible for all new product design as well as

Customer Service and Client Operations at Leapset. The Leapset platform originates from the Silicon Valley, the home of disruptive giants such as Facebook and Google. Leapset enables retailers to engage customers on a virtual platform and conducts sales by connecting the two parties seamlessly. The platform can run on a variety of hardware and enables third party developers to create custom applications based on individual business needs. Leapset bridges the gap between the online or mobile consumer and the offline merchant making the interaction more efficient while driving more revenue to the merchant. Leapset is headquartered in Redwood City, California with an R&D centre in Colombo, Sri Lanka.

Jim has extensive experience in financial services and e-Commerce and was Vice President of Product at Monvia LLC prior to joining Leapset. He was also Director Product Management at Yahoo! and led the Yahoo! Finance product team and contributed to their rapid growth over a period of seven years. He was also an Associate at Rothschild, a financial advisory firm that operates in over 40 countries and worked as an Analyst at Chase Manhattan.

Jim is an alumnus from Georgetown University in Washington DC and holds a BSc in Science, Technology and International Affairs.