/ Predictive Analytics

Starbucks brewed an O2O retail revolution. You can too.

Going offline to online saved Starbucks.

Following the economic slowdown in 2009, the retailer experienced a brutal 28% decline in profit and had to close 600 stores. Senior management took action. Seven years later, the company announced a mind-blowing 20 consecutive quarters of growth and a record $4.9 USD billion annual revenue.

How did they do it?

This is Part 1 of a two-part series. We show you how to bring your business offline to online (and vice versa) through the lens of Starbucks. First, we talk about what O2O is and why it is important. Next, we take you through each stage of the customer purchasing process and explain, using Starbucks, how you can bring that experience from offline to online.

In Part 2 of this series, we outline the steps you’ll need to take to bring your business offline to online.

Enjoy the article and hope it inspires you to pursue your own O2O revolution for your business. Look forward to hearing your comments and feedback at the end!

1. Why O2O

O2O can either stand for online-to-offline or offline-to-online. O2O strategy is about bringing physical store customers to your online stores and the process of bringing online consumers into real-world stores. Yes, I know, it's a confusing term.

O2O is a necessary ingredient to omnichannel retail, which is about creating a consistent experience for your customers in retail stores and different online channels.

Today most people buy stuff based on a combination of online and offline interactions with a brand. Accenture found that 88% of potential buyers browse for a product online before purchasing it from a physical store. Online shoppers don’t want purely online experiences because they miss physically handling products. But they also don’t want purely offline experiences because that limits how they can shop. Their top priority is convenience.

That’s where O2O comes in. Nowadays, people expect to be able to learn about your brand anytime, anywhere. A successful O2O strategy will combine your brand’s offline and online channels into one seamless purchasing journey.

2. How to create the customer journey online

The customer purchasing model can be broken into 4 stages: Awareness, Consideration, Conversion, and Evaluation:

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Each step of the purchasing process has online and offline components that customers can engage with.

The success of going O2O depends on how well a brand can recreate their offline experience in the online space. Starbucks has done this very well. Each of their physical retail shops is designed to be a “haven, a break from the worries outside”. Going offline to online meant extending this store philosophy into the digital world.

Said Adam Brotman, Starbucks Chief Digital Officer:

"Digital has to help our store partners and help the company be the way we can tell our story, build our brand, and have a relationship with our customers"

Now let's dive into how Starbucks created each of the stages of the customer journey online.

a. Awareness

The key to maximizing interest and demand for your brand is multi-channel traffic (mobile, web, physical).

Nowadays shoppers flow effortlessly between online and offline channels in the process of making just one purchase. Companies with omnichannel customer engagement strategies typically retain 89% of customers while companies with weak omnichannel engagement only retain 33% of customers.

That’s why mobile and web applications are at the center of the Starbucks O2O strategy. These platforms centralize product and store information, online payment platforms and personalized promotions all in one space.

Here are some examples of what Starbucks does on their website, mobile and physical stores:

Website: The website has e-commerce, product how-to-guides, foods nutritional information, CSR initiatives, mobile application instructions and online communities.

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Mobile: On mobile customers can view menus and previous orders, track promotions, find nearby stores, buy gifts and order ahead of time.

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Physical Stores: The Starbucks Digital Network delivers exclusive content to customers in the form of free news, films, videos, e-books, and music.

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b. Consideration

The Internet makes it unbelievably easy for your customers to scan through the many online reviews and resources written about your products. About 94% of online shoppers and 40% of in-store shoppers do online research before purchasing.

That’s why you need to be offering helpful resources to these actively researching customers. The easier they can find information on your products, the more likely they are to buy from you. Around 75% of consumers said product information on social channels influenced their shopping behavior and enhanced brand loyalty.

Starbucks became popular on social media because they made customer content (photos, videos etc) the bulk of their online posts. They’ve also found cool ways to interact with customers using social media campaigns, contests, giveaways, and polls. These O2O strategies have built the company a loyal following that wants to regularly interact with the brand online.

Said Ryan Turner, Starbucks director of Global Social Media:

"These narratives write themselves if you really pay attention to how people are interacting with the beverages as part of their lives. That’s the simple secret of what we do with all our social channels. We listen”

Here are some ways that Starbucks guides customers through the consideration phase on social media channels:

Facebook: Custom tabs have helped Starbucks become the second most “liked” consumer brand on Facebook.
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Instagram: On visual driven Instagram, Starbuck’s carefully curated feed highlights customer-submitted Starbucks photos that show their offline experience online.

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Twitter: O2O social media campaigns can directly drive sales - the Starbucks Tweet-a-Coffee Campaign had users link their Starbucks account to their credit card, which eventually generating $180,000 USD in coffee sales.

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c. Conversion

In going O2O, you need to maximize how, when and where your customers can shop. This means giving consumers multiple platforms to buy from you at every stage of the purchasing process.

Mobile payments have become increasingly important for companies that go from offline to online. Worldwide mobile payment revenue in 2015 was $450 billion USD and is expected to surpass $1 trillion US in 2019.

Starbucks has experimented with various mobile payment avenues since beginning their O2O process. Currently, you can use online loyalty cards, e-gifts (online gift cards) and barcodes scanned at point of sale to buy their products. The company’s newest offering, Mobile Order and Pay, allows customers to order on mobile and then pick up their products from a physical store. It is no wonder that mobile payments made up 21% of all Starbucks transactions in 2016.

The company’s O2O embrace of mobile payments allowed it to not only find new revenue streams but improve operational efficiency. One mobile application improvement that shaved 10 seconds off each card or mobile transaction reduced customers' time-in-line by 900,000 hours per year. Lower processing times meant stores had greater capacity, higher output and more time for baristas to engage with customers.

Convenience: The menus on Starbuck’s Mobile Order and Pay update in real-time to reflect each store’s stock.

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Loyalty: In Starbucks Rewards, users directly load funds onto their loyalty card that can then be used at physical stores. In 2013, $4 USD billion was deposited onto these cards.

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Omnichannel Experience: Starbuck’s online gift cards can be bought on mobile and the website, then redeemed through the retailer’s mobile app.

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d. Evaluation

Positive customer experiences are critical to generating loyalty and repeat purchases. Online reviews now heavily influence future buying decisions. Approximately 30% of consumers say they post product feedback on online platforms like Facebook, WhatsApp, and Instagram.

The abundance of user-generated reviews means that in the O2O process, you need to be on social media sites managing content outside your control. This is also a valuable opportunity for you to put out curated content that builds social proof online.

Don’t forget traditional word-of-mouth when going O2O though: a KPMG study found that customers were just as likely to have known about a product through talking to friends and family as online shops and advertisements.

Starbuck’s two-pronged digital strategy highlights customers positive experiences while managing their negative ones. By actively engaging with their customers' social media posts, the company is showing they care about their customers' experiences. At the same time, these platforms create online communities where Starbucks fans can share their comments, pictures, and experiences with other fans.

Listening to Customers: My Starbucks Idea is a crowdsourcing platform where users can post and vote on an idea to improve Starbucks products and services.

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Being Human Online: Starbucks staff are quick to reply to the questions and comments of their customers on social media outlets such as Facebook.

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3. Conclusion

The success of bringing your business from offline to online hinges on your ability to recreate your offline experience in the online space.

Starbucks was disciplined in making sure that when they went from offline to online, they were digitally extending their brand's experience while catering to the online shopper’s demand for convenience and flexibility.

Here is a summary of some of the techniques we covered in this article for each of the stages:

Awareness

  • Make brand values apparent to customers across digital channels.
  • Maximize traffic by offering store information and products on mobile and web platforms.
  • Improve retail stores with digital technologies.

Consideration

  • Actively highlight customer content on social media channels.
  • Incentivise customers to interact with you with unique social media campaigns, contests, giveaways, and polls.
  • Build a loyal online following. Drive online shoppers to offline stores.

Conversion

  • Let customers choose how they want to pay. * Invest in mobile payment methods.
  • Consider payment options like loyalty cards, e-gifts, and barcodes.
  • Remember digital payments can improve retail operations.

Evaluation

  • Be human.
  • Spotlight positive customers experiences and respond to negative ones on social media.
  • Provide online platforms where fans can share brand-related content.
  • Don’t forget to manage customers' offline evaluations.

4. Over to you

That's it! Hope what we covered today inspires you to pursue your own retail revolution. If you have any questions about O2O and what we covered, please leave a comment below!

Justin Yek

Justin Yek

Partner & cofounder at Altitude Labs, creator of Metisa, former investment banker, public speaker, hobbyist musician

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