o2o Commerce in the Age of Amazon Table of Contents

Amazon’s Move(s) into Brick and Mortar 2 Explore the current and future landscape of O2O commerce through the lens of Amazon, particularly the role of fulfillment and customer data.

Integrating O2O Commerce: 7 Examples & Options Learn how your business can bridge the fundamental disconnect between eCommerce and traditional retail regardless of your size.

• Allbirds: Start Small with Owned Retail Locations • b8ta: Instead of DIY, Use Retail-as-Service (RaaS) • Pop-ups: Connect with Customers via Micro-Retail • The 5TH: Go Global through Localized Experiences

Reliance on Data for Inventory 20 and Buying Behaviors Discover the pivotal role of data in creating a single view of your customers for more efficient inventory management across acquisition channels. eCommerce and Retail: A United Future 23 Peek into the new normal of customer expectations and get your business ready for the future before Amazon beats you to it. The numbers are stark...

Already, Amazon controls 49.1% of the U.S eCommerce market. Last year, Bezos’ beast became the second public company in history to be worth $1 trillion. And, by 2025, Bloomberg forecasts Amazon will officially break the trillion dollar barrier in gross revenue.

However, while Amazon’s online presence dominates headlines, it’s the company’s offline activity that may usher in the most seismic changes. Just as Amazon created a new normal in eCommerce, it’s positioned to do the same in offline retail as well.

The question is: What can you learn from Amazon’s journey into brick and mortar to prepare your business for the future?

Table of Contents o2o Commerce in the Age of Amazon 1 Amazon’s Move(s) into Brick and Mortar

Explore the current and future landscape of O2O commerce through the lens of Amazon, particularly the role of fulfillment and customer data. Amazon’s Move(s) into Brick and Mortar

Since Amazon’s birth in 1995, eCommerce has exploded. Current data still places online sales at roughly 10-12% of the entire B2C retail market, but its growth rate and the digitally connected nature of in-store shopping have reshaped consumer habits along thoroughly Internet-based lines.

Courtesy GeekWire

In the early days of online shopping, many legacy businesses saw the Internet as an experiment and cautiously built their online channels separately from the offline parts of their operations. Unfortunately, pure eCommerce sellers took the opposite extreme: going all in online.

Therein lies the problem …

Businesses of both types have by-and-large failed to integrate their online and offline channels into a unified whole.

Table of Contents o2o Commerce in the Age of Amazon 3 Amazon’s Move(s) into Brick and Mortar

If you want your business to survive, you need to start working towards not only a seamless buying experience but — perhaps even more importantly — a single view of your customers.

Given its dominance, Amazon’s shifts toward online-to-offline (O2O) commerce serves as an exemplary illustration of how to begin making this transition yourself. Amazon’s 2017 acquisition of Whole Foods for $13.7 billion made huge mainstream headlines. The purchase immediately added 464 brick and mortar locations to the company, which means the online giant can now integrate these stores with its eCommerce presence and use them for click-and-collect pick up and as warehouses to improve fulfillment.

On the competitive side, Amazon dropped prices on some of the best- selling grocery staples which was said to have increased foot traffic by 33% one week after the acquisition. Amazon Prime Members can also take advantage of two-hour delivery services from Whole Foods Stores for orders over $35.

The result is a combination of online and in-store goods where customers can come into local Whole Foods to pick up their Amazon order whether it be food, books, electronics, home goods … the list goes on. Customers also don’t need to worry about forgetting their grocery lists, because Amazon Alexa will sync their lists across devices.

Table of Contents o2o Commerce in the Age of Amazon 4 Amazon’s Move(s) into Brick and Mortar

When it comes to at-home fulfillment, customers also want and expect their fresh food delivered quickly. Amazon’s strategy of acquiring all of those physical spaces means they can use them to set up each as distribution warehouses.

There’s no question that Amazon wants to make organic produce affordable and carve out its share of the grocery market, but those considerations aren’t the only reasons for acquiring Whole Foods.

Businesses of both types have by-and-large failed to integrate their online and offline channels into a unified whole.

Grocery buying habits, patterns, and preferences now enable Amazon to build upon what it set out to do from day one — focus relentlessly on their customers by tailoring the entire shopping experience.

No doubt, those 464 physical stores will provide a wealth of new data for its already existing private label products across health and household, home and kitchen, clothing, shoes and jewellery.

Shortly after the acquisition of Whole Foods was announced, Amazon hit the retail industry with more of the unexpected. A futuristic convenience store, Amazon Go, that uses artificial intelligence and cameras to track what customers are taking off the shelves, and automatically charging the cost to the customer through their Amazon Go app.

Table of Contents o2o Commerce in the Age of Amazon 5 Amazon’s Move(s) into Brick and Mortar

There’s been debate over whether this acquisition and the move into brick-and-mortar will play out well for Amazon, given its approach of selling high-quality goods at a lower-price point to customers accustomed to the ‘high-price, high-quality’ mentality.

But there is one thing we know for certain: shopping habits will continue to evolve, which means business models and technologies need to evolve with them.

Amazon thinks three steps ahead, so the quicker other retailers can start to harness the right tools and technology in their business to support the customer buying journey of the future, the better chance they have of surviving the changing face of retail.

But … how?

Table of Contents o2o Commerce in the Age of Amazon 6 Integrating O2O Commerce: Examples & Options

Learn how your business can bridge the fundamental disconnect between eCommerce and traditional retail regardless of your size. Integrating O2O Commerce: Examples & Options

Despite the rise in eCommerce capabilities, more than 55% of consumers visit stores before buying online indicating that shoppers still want to see, touch and feel products.

What’s more, considering 82.5% of all retail sales will happen inside physical stores as late as 2021, there is a powerful incentive beyond Amazon for online retailers to consider what their options are in the offline space.

Table of Contents o2o Commerce in the Age of Amazon 8 Integrating O2O Commerce: Examples & Options

Allbirds: Start Small with Owned Retail Locations

As a test-case, consider Allbirds. In just two years, Allbirds has gone from an idea to selling over one million pairs of shoes. The brand is fiercely passionate about not only learning from their customers to improve products and services, but it’s also fiercely protective of the brand itself.

Courtesy Allbirds

Allbirds is changing how the world buy sneakers.

Initially launched as a direct-to-consumer eCommerce business, Allbirds has quickly grown in reverse by introducing two brick-and-mortar stores, the first in their San Francisco headquarters.

Table of Contents o2o Commerce in the Age of Amazon 9 Integrating O2O Commerce: Examples & Options

In an interview, Allbirds co-founder Joey Zwillinger explained that they carved out about 400 square feet just so they could learn from customers who visited their store everyday.

In addition, the brand differentiates itself in two ways.

First, with its product. Allbirds uses wool as the main material for its sneakers (the founders originated from New Zealand). A clever natural material to use for shoes as it keeps customers’ feet warm in the colder seasons but wicks moisture in the warmer months.

Its shoes are unisex, and the latest design they’ve introduced is the navy- hue-colored sneakers called Starry Night, which was inspired by New York, the city that never sleeps.

Table of Contents o2o Commerce in the Age of Amazon 10 Integrating O2O Commerce: Examples & Options

The Allbirds shopfront in Soho. Courtesy Allbirds

Second, Allbirds has staunchly refused to enter traditional big-box stores. As Zwillinger explained to Footwear News:

“If we went and did omnichannel, we would sell more shoes, but we would get into discounting. We don’t want to do that. It would commoditize a product we think is really special.

Instead, Allbirds has remained fully in control of both its online and offline expressions, merging the two on their own terms by owning its brick-and- mortar stores. Thankfully, for small-to-medium businesses, owning brick-and-mortar stores is far from the only path to offline success.

Table of Contents o2o Commerce in the Age of Amazon 11 Integrating O2O Commerce: Examples & Options b8ta: Instead of DIY, Use Retail-as-Service (RaaS) b8ta is an innovative technology start-up that has revived retail, offering a new retail-as-a-service concept. b8ta helps people discover and try new products on the market from brands and makers that don’t have direct access to storefront real-estate.

b8ta stores are designed for discovering, trying and buying the latest innovative products. Courtesy b8ta

Table of Contents o2o Commerce in the Age of Amazon 12 Integrating O2O Commerce: Examples & Options

Since the company was founded in 2015, they have already received $35 million in funding and have more than 78 locations.

When a customer walks into a b8ta store, all of the products are unboxed and ready to be tested, felt, and touched. There are b8ta testers in all stores — who are trained by all the partners of the products — to assist with any queries.

Their store-as-a-service solution keeps costs low with a flat monthly fee and no overhead. For any eCommerce businesses wanting to trial the in-store concept, this is a good option that offers flexibility to meet your needs.

Another option that’s proving its worth for many eCommerce-based retailers are pop-up shops.

Table of Contents o2o Commerce in the Age of Amazon 13 Integrating O2O Commerce: Examples & Options

Pop-ups: Connect with Customers via Micro-Retail

According to Pop Up Republic, the pop-up industry has seen a rise in sales to approximately $10 billion. While not a new phenomenon, smart retailers are tapping into the power of a pop-up shop to build one-on-one relationships with customers and conduct on-the-ground R&D. Compared to the “online only” and traditional “brick and mortar” approaches, pop-up shops offer retailers important face-to-face time with customers.

Designer eyewear manufacturer Warby Parker is a great example moving from exclusively online to building out the idea for a showroom and pop-up store strategy.

When the company first launched their website, they offered “try before you buy” options for cautious shoppers. This strategy received such an overwhelming response the team soon had to suspend at-home trials.

In its place, the company began inviting customers into the apartment they were working from and decking out the dining table with glasses that could be tried on.

What’s amazing about this story isn’t that Warby has expanded to nearly 100 stores across the country, but rather how organically the eyewear retailer spearheaded their move from online to offline. The lines blurred, and Warby was able to prove the viability of in-person experiences with almost zero initial investment.

Table of Contents o2o Commerce in the Age of Amazon 14 Integrating O2O Commerce: Examples & Options

Courtesy Warby Parker blog

Warby Parker Class Trip was an endeavor to bring the showroom experience to a variety of cities across the country.

Most traditional pop-up strategies look at ways brands can set up in a store-within-a-store, gallery or event space, shopping malls or vacant street level retail spaces. But brands are also creating their real- world footprint and encouraging consumer interaction through brand activations at IRL (in-real-life) events.

Table of Contents o2o Commerce in the Age of Amazon 15 Integrating O2O Commerce: Examples & Options

Each year, 32 million people attend a music festival in the U.S. Those events contain lucrative IRL opportunities to engage a receptive crowd of festival-goers.

H&M is a brand that continues to merge the worlds of fashion, music, and art with the ultimate interactive experience. For the 2017 Coachella Music Festival, H&M created an interactive tent experience of the Palm Springs House where the original campaign for the H&M Loves Coachella Collection was shot.

A birds-eye-view floorplan of H&M’s Coachella Tent Experience. Courtesy International Business Times

The green energy powered tent featured multiple customer touchpoints across video, creative photo backdrops, showcasing H&M’s eco-conscious initiatives, a rest stop to hydrate and charge electronics, and a pop-up store featuring the latest collection.

Table of Contents o2o Commerce in the Age of Amazon 16 Integrating O2O Commerce: Examples & Options

H&M’s wall message reads “Thank you for reusing your water bottle and reducing waste.” Courtesy International Business Times

H&M creatively merged an IRL experience with a traditional pop-up store approach in order to create a memorable experience, drive sales, and raise awareness of H&M’s eco-conscious initiatives.

But they don’t have to always go hand-in-hand to offer valuable face-to- face time with your customers, nor does it need to involve an on-the-go showroom such as the Warby Parker example.

In fact, there are brands who have found incredible success purely by adopting the traditional pop-up strategy …

Table of Contents o2o Commerce in the Age of Amazon 17 Integrating O2O Commerce: Examples & Options

The 5TH: Go Global through Localized Experiences

The 5TH — an Austrialian fashion accessories brand — launched with a focus on building their online presence, primarily through social media.

“We were a business that was born inside the matrix of Instagram,” says Alex McBride, co- founder of The 5TH, “and we were global from day one. We shipped globally from Melbourne, but we had to connect better with our international audiences.

To do that, The 5TH started collaborating with other creatives and companies to create concept stores in temporary retail spaces across Melbourne and New York. Its first-ever pop-up happened inside a small, independent bicycle store in NYC called Tokyobike. Showcasing The 5TH’s latest watch collection, visitors could see and hear more about the inspiration behind the range.

The 5TH inside the Tokyobike store in SoHo, NYC (2017).

Table of Contents o2o Commerce in the Age of Amazon 18 Integrating O2O Commerce: Examples & Options

Today, The 5TH continues to host pop-ups in collaboration with other retailers as well as stand-alone storefronts. These temporary locations within its key international markets lets the brand go global while at the same time staying local and deeply connected to its shoppers:

Inside The 5TH’s stand-alone pop-up in NYC during the 2018 holiday season.

Embracing pop-up stores gives brands real-time feedback from customers, another channel to sell products offline, and the opportunity to collect and monitor data from these stores to help with inventory management decisions.

Table of Contents o2o Commerce in the Age of Amazon 19 Reliance on Data for Inventory and Buying Behaviours

Discover the pivotal role of data in creating a single view of your customers for more efficient inventory management across acquisition channels. Reliance on Data for Inventory and Buying Behaviors

Historically, brick and mortar owners relied on a mix of old-school ledgers and gut feelings to stock their shelves.

Today, it’s crucial that retailers and brands learn to not only gather the right kind of data that helps them to understand their customer but also know how to harness its power to ensure the buying experience meets expectations both online and in-store.

Along these lines, Alibaba’s Ling Shou Tong (meaning, “retail integrated”) program has upgraded China’s neighborhood convenience stores in a big way.

The custom-built app digitizes the inventory management of each store to make it easy for the owners to know at any given time what they need to order, how much, and when. It’s also tied to a central warehousing and logistics system.

The app’s customer insights help brands make smarter and strategic choices on what products they should stock. For example, the snack company Mondelez knew there was a market for sweet-tooth customers upon check out, therefore they produced a single-serving Oreo cookie that stores strategically placed near the cash register.

Table of Contents o2o Commerce in the Age of Amazon 21 Reliance on Data for Inventory and Buying Behaviors

Alibaba is reinventing China’s mom-and-pop stores. Courtesy Quartz

While the Western World thinks this is still quite innovate, this isn’t up for discussion in Asia. Shoppers have the flexibility to buy online, pick up in store, return in store, and a multiplicity of other combinations.

Again, centralized data is critical.

For example, if someone browses online but purchases in-store, first touch attribution must be categorized as “online engagement,” while the actual contribution to revenue is offline. Retailers need to have both retail and eCommerce tightly linked so acquisition channels are always accounted for.

Having an inventory management system integrated into both point- of-sale (POS) systems and eCommerce technology provides customers with a seamless experience. While at the same time, providing important information about their purchasing behaviors.

Table of Contents o2o Commerce in the Age of Amazon 22 eCommerce and Retail: A United Future

Peek into the new normal of customer expectations and get your business for the future before Amazon beats you to it. eCommerce and Retail: A United Future

Amazon is here to stay, whether small-to-medium businesses like it or not.

When ambitions as big as Jeff Bezos’ begin to infiltrate the business of worldwide retail, innovation and change will continue to evolve how brands should connect with customers as well as sell and manage their products.

It’s crucial that businesses of all sizes begin working towards a single view of their customers and learn how to analyze and leverage data more effectively within the business.

Look at ways to build better integration between the online and offline channels to give customers more choice and a better purchasing experience all-round. Focus on the resurgence of product uniqueness in a heavily commoditized market, and build a buying experience that customers will go to the ends of the earth to get.

Table of Contents o2o Commerce in the Age of Amazon 24 Give your brand the commerce superpowers it needs to become an amazing business!

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