The Rise of Online to Offline Marketing in China

In China, online to offline (O2O) marketing is on the rise. Chinese brands are increasingly using digital methods to reach consumers in person. This trend is being driven by a number of factors. These include the growth of mobile commerce, the rise of social media, and the growing popularity of experiential marketing.

In this blog post, we will explore the reasons behind the growth of online to offline channels in China and discuss some examples of how Chinese brands use digital methods to reach consumers in person.

With online to offline channels being used in marketing efforts, it was reported recently that online retail sales of physical goods topped 10 trillion yuan. In USD this is the equivalent of 2 trillion USD. This is according to data from the Ministry of Commerce (MOC) in China.

Still though, 63 per cent of China’s Gen-Z inform their brand purchase selections at shopping malls. It implies that many Mainland Chinese consumers – especially Gen Z and Millennial consumers – make their purchasing decisions offline and online through an omnichannel process.

Furthermore, these figures highlight why retailers are quickly adopting online to offline marketing in China. Online and offline purchasing cycles are no longer separate.

Instead, they have merged to form a customer experience-focused “new retail.”

What is online to offline marketing efforts?

Online to offline marketing efforts allow brands to connect with and reach their consumers through online channels to activate an offline retail experience.

Therefore, it encourages consumers to connect with retailers and take their online connection offline.

Brands can also use O2O marketing in China in the reverse. However, because the retail journey begins on online channels for most Chinese consumers, the purpose of online to offline marketing in China is to encourage consumers to interact with retailers offline as well.

The advantage of using this marketing strategy

The success of online to offline marketing depends on the digital ecosystem. Over 99.1% of consumers have access to mobile internet and spend an average of five hours and 50 minutes online. Therefore, the easiest, most effective way to target this digital consumer is online.

However, the advantages of online to offline marketing in China far exceed increasing sales and profits and extend to other valuable aspects of business, including:

An increase in brand appreciation and loyalty

Three core factors encourage consumer spending, especially in Millennials and Gen Z consumers:

  1. Convenience;
  2. Inclusion; and
  3. Validation or approval from peers.
Gen Z China's Household Spending

An online to offline marketing strategy enables you to answer these customer pain points during the consumer purchasing cycle.

Convenience: At the beginning of the online purchasing cycle, consumers can browse and gain data about a product. They can then test or purchase the product in-store.

Inclusion: Retargeting and personalizing the experience to each customer’s preferences will motivate them to develop loyalty for your brand.

Validation: Taking the online experience off-line means that the experience can become more communal.

Enhancing the customer journey

Millennials (400 million of the Chinese population) appreciate an interactive, personalized customer journey. Their younger counterparts – the Gen Zs – mirror these sentiments. Enhancing the customer journey improves retention rates and increases your customer’s lifetime value.

This without a doubt inspired local and luxury brands to improve the customer journey as a driving factor of growth. Brands like Apple, Burberry, and Alibaba were all early adopters of enhancing the customer journey through online to offline marketing.

The Customer Journey
The Customer Journey –

The Customer Journey –

Thanks to online to offline marketing enabling your business to create a personalized experience for each customer by using their purchase history, their location, and payment preferences, you can create hyper-focused recommendations that can entice your customers back to your store.

Driving high-intent foot traffic

Online to offline marketing increases foot traffic to a brick-and-mortar store. However, unlike other foot traffic, foot traffic gained through online initiators like advertising, incentives or completing the purchasing process through in-store inspections or checkouts is high intent. This means they’re more likely to make a purchase.

Most importantly, when you introduce a customer to a physical location, you also increase the likelihood of them continuing to return to the location without being prompted online.

Gaining access to big data

Data is always touted as an accelerator of growth because it gives you insight into your customers that you don’t have access to as a traditional retailer.

These key insights reveal who purchases at your store, how they progress through the customer journey, and what they’re buying and considering purchasing.

Big Data from Multiple Online and Offline Marketing Sources
Data comes from many sources –

Having this data enables you to make better marketing and business development decisions to further expand on the growth achieved through O2O marketing.

Data comes from many sources –

Having this data enables you to make better marketing and business development decisions to further expand on the growth achieved through online to offline marketing.

How are retailers implementing this channel?

Businesses and retailers are already redistributing their advertising spending so that the lion’s share goes to digital marketing. Part of that strategy requires that you implement effective online to offline marketing.

However, online to offline marketing isn’t limited to pop-up ads or prompts reminding customers of an annual or seasonal sale. Instead, it is far more interactive and customized.

Therefore, to successfully implement online to offline marketing, businesses and retailers should consider including the following in their strategies:

1. How can geo-tagging improve online to offline marketing?

The most effective means of implementing online to offline marketing is to enable geo-tagging. This allows you to base marketing prompts and recommendations on a customer’s precise location.

Yum! China (which owns KFC and Pizza Hut) successfully implemented geo-tagging to its online to offline marketing strategy. It created a customized menu for its patrons, increasing revenue by 19% in a single year.

2. What role do offline experiences play in online to offline marketing?

In 2011, Alibaba’s Taobao launched its first in-store experience, enabling customers to complete the purchasing cycle after testing its furniture products in store.

It took this online-to-offline experience further during Singles Day of 2018 with brand collaborations that allowed customers to do digital try-on in-store.

This example shows that customers are more intent to go to a physical location if it completes or adds to the online experience through a meaningful offline experience.

Any business can achieve the same results if it makes the offline experience valuable or crucial to the customer’s purchasing cycle.

3. Where can interactive applications be used in online to offline marketing?

Consumers want to interact with a product before making a purchase. That is to say, this allows them to do product research and compare prices while understanding what they’re buying before they make a purchase.

QR codes popular in O2O Marketing in China
QR codes to scan products and get info –

This can be achieved through implementing QR codes to facilitate information sharing about a product. Consequently, this can assist in building trust or simulating the entire purchasing experience from browsing and research to checkout.

The Future of O2O Marketing in China

To understand the effectiveness of online to offline marketing, you must understand the scale of this growing retail experience.

Over one billion of the Chinese population have access to the internet and mainly via mobile, and of those, 60% make decisions based on prior research.

Additionally, 69% of customers purchase items online after viewing them in-store. This is commonly referred to as “showrooming”.

For Millennial shoppers, the online to offline experience means they can compare prices in-store, complete click and collect, or purchase items as they’re browsing or arrange delivery.

To clarify, the online to offline experience also works for basic transaction methods such as booking spa appointments and calling cabs.

To conclude, the entire online to offline market is gearing up to surpass 1 Trillion Yuan by 2022, so retailers and businesses that implement O2O marketing sooner will receive greater rewards.