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Comments Off on 4 BEST CASES OF O2O-ECONOMY: BURBERRY, LINE, TESLA, CHEBANCA! Columns, Fintech news, news

4 BEST CASES OF O2O-ECONOMY: BURBERRY, LINE, TESLA, CHEBANCA!

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By Igor Pesin, Partner at Life.SREDA

O2OHYPE FROM CHINA

New online services flourishing in Asia not just let you do even better what has been done well before (like in the West), but for the majority of new users these services are a real “leap” of the Past to the Future. There are a lot of unbanked people in Asia with a low level of technical expertise and the surrounding traditional retail infrastructure hasn’t been yet established by the time of Online. The growth of mobile-only services is limited in Asia – at a certain stage of development you just have to learn how to combine offline experience with new online technologies (O2O – online-to-offline).

On 28 August 2014 Chinese Internet giants Tencent and Baidu were teaming up with conglomerate Wanda to form an RMB 5 billion (about $814 million) joint venture in a bid to challenge Alibaba’s dominance. In a joint statement, the companies said “the JV underscores Tencent’s commitment to enriching our O2O ecosystem.” Online-to-offline purchases are especially important to Tencent as it seeks to capitalize on the 396 million users of its popular messaging platform WeChat.

On 31 of March 2015, online retailer JD – Alibaba’s arch-rival – announced it would establish an independent subsidiary specifically for online-to-offline businesses. The new division was headed up by Wang Zhijun, who report directly to JD CEO Liu Qiangdong.

Ecommerce titan Alibaba announced 23 of June 2015 that it’s forming a RMB 6 billion (US$970 million) joint venture company to focus on O2O-services, such as food delivery. Alibaba is forming this joint venture, called Koubei, with its affiliate company Ant Financial, which operates the Alipay epayments system that’s integral to Alibaba’s ecommerce sites.

Baidu is focusing aggressively on online-to-offline (O2O) sales, one of the hottest forms of e-commerce in China. On 30 of June 2015 they announced, that they would invest 20 billion yuan ($3.22 billion) over the next three years on online-to-offline services.

I want to show last references from US and Europe – how best brands changing their understanding of offline distribution in new online world. In Burberry you could not buy any item in their offline-shop – any consultant (not sales-manager) will open your account on their online-shop (if you do not have – will open it to you), choose interested item, and only after that sell it for you. LINE wants to be not just one more messenger – they took their heroes\characters and create with them “the world of LINE” via LINE Friends shops. Italian CheBanca! understood very well that future of banking business will be in online, but their customer still in offline, but how to transform them from offline-to-online (O2O too)? They changed their business model from sales of physical products to educational center of online-services (also they gave their space for different independent musicians, painters, photographers, producers of vine and coffee to organize for free their events\exhibitions\concerts in their branches). Tesla not just created electric-car, which managing though tablet, they also exclude dealers from distribution channel and organized direct online-model of sales, and their showrooms are just about their brand, values, history, knowledge about cars.

  1. Burberry

Two years ago (October 2013), Apple announced that Ahrendts would be joining the company as senior vice president of retail and online stores, a newly created position, reporting to CEO Tim Cook. The Apple Stores’ annual revenue of just over $20 billion is more than six times Burberry’s, its 30,000-strong staff is almost three times as large, and—due respect to the trench coat—its products have insinuated themselves more thoroughly into consumers’ daily lives. As envisioned and created by Apple mastermind Steve Jobs and his retail lieutenant Ron Johnson, the stores’ design and customer experience were radical, “but they haven’t progressed that much in the past five years. If you’re not reinventing your experience every five years, you’re behind the curve,” says a longtime member of the retail team. A beloved manager, she transformed Burberry’s culture, more than tripled earnings, expanded its global footprint, and helped to restore its historic reputation as an innovator. All Apple wants her to do is exactly the same thing. In a companywide email announcing Ahrendts’s hiring, Cook wrote that she “places the same strong emphasis as we do on the customer experience.” But he also added, significantly, that “she cares deeply about people and embraces our view that our most important resource and our soul is our people.” One Apple Store employee says the focus on customer service, on “enriching people’s lives,” was wonderfully relentless at first. He recalls enjoying the luxury of taking time to walk people through their problems and think through possible solutions. “But when the first iPhone came out, things started to change to make us more of a typical retail establishment,” he says. At the Genius Bar in his store, early expectations were that you would help three customers an hour if you were working on Macs, four if you were working with iPods and iPhones.

During her long tenure as the head of Burberry, Ahrendts managed to roughly triple revenue, while launching novel digital initiatives with the luxury brand. In a separate statement, Burberry sought to ease shareholder concern over the move, announcing that revenue had shot up 14% for the half-year through September 2013.

Before moving to London in 2006 to lead Bur­berry, she had a long lunch with Christopher Bailey, who had joined the company five years earlier. They spent most of it talking about the need for a new corporate culture. At the time, “nobody talked about culture, and nobody talked about brand,” says Ahrendts. The whole operation—a business that was built largely on licensees and franchisees—felt fragmented and siloed. She and Bailey decided empathy and trust would be Burberry’s new cornerstones. When Ahrendts first came to Burberry, she was faced with a unique challenge: How do you breathe new life into a 158-year-old brand without disrupting its underlying DNA? She wanted the customer experience to be seamless, consistent, and brand-centric. The emphasis, Ahrendts says, is on creating an inviting atmosphere free of the pain points common of traditional retailers: “Everything we’ve done is counterintuitive to traditional selling organizations, with their traditional training. My dad used to always say that he could teach anything but he couldn’t teach how to feel. That’s the hardest part when you have 11,000 people: How do you teach them to feel how we feel? The thing is, I don’t want to be sold to when I walk into a store. I want to be welcomed. The job is to be a brilliant brand ambassador. Everybody is welcome. Don’t be judgmental whatsoever. Look them in the eyes. Welcome them. ‘How are you?’ Don’t sell! NO! What we have wanted to do is build an amazing brand experience and an amazing way that people can engage with the brand. Then it will naturally happen. And then I don’t care where they buy. I only care that they buy the brand.”

She said: “If you want to keep the next generation and if you want them to be united, you have to see this is how they live. You have to blow up all your existing policies—everything!—and rebuild them around this.” Mobile is transforming retail in ways that she finds essential but at times difficult to comprehend. She muses on how rapidly the technology has been changing—and how quickly tech-addicted shoppers are changing their behavior, too. “They’re just moving.”

We’ve never been finance first. We’ve always been instincts first,” Ahrendts said. “My dad used to always say he can teach you anything but he couldn’t teach you to feel. And so that’s the hardest part.” “We have always said actually this isn’t about money, it’s not about price. This can be an experience. It doesn’t have to be about buying something. And hopefully one day we would love it if you might buy something but it’s okay if you go onto Burberry.com and you just want to listen to Burberry Acoustic, you know? Because you start to feel the soul of the brand, you feel it.” “Soul is the word,” Ahrendts added. First, if you see the stores as brand ambassadors, this isn’t primarily about sales in the current fiscal year; it’s about investing in brand awareness and prestige over the next 10 or 15.

True to her word, during her tenure at Burberry Ahrendts made Apple a centerpiece of the retail experience, from the iPads that store associates carry to the digital initiatives she’s empowered through apps like Instagram. In September, the company partnered with Apple to hold a runway show and film the entire event using the iPhone 5S. Ahrendts pointed to the company’s flagship Regent Street store as being the benchmark for success. At Burberry, she pushed for a seamless consumer experience between online and brick-and-mortar. Everything about the messaging was unified, from the music played on the website and in stores to the photography and displays, all of which Bailey’s team curated and produced in-house.

With Bailey, she has spearheaded storytelling that creates a halo around Bur­berry and technology that gives customers shopping experiences at every price point, even if they might never spend a penny. For instance, the Art of the Trench website is Bur­berry’s selfie central, where those who have coats can show off how they wear them and those who want them can imagine which of these people (thousands have uploaded photos so far) they would like to be.

In 2012, Ahrendts shook up the traditional, often-siloed nature of Burberry’s retail stores. No longer would a store manager in Detroit only focus on Detroit in-store sales, for example, nor was a digital sales manager there allowed to ignore sales at brick-and-mortar shops. The disparate elements needed to speak to each other. “Traditionally, wholesale is wholesale. Digital people are incentivized to drive digital. And store managers are interested in the store. We blew that all up. I said, No, no, no, store manager in Detroit: You’re responsible for digital too. You’re telling me nobody in Detroit is shopping online? Wrong! Now London, for instance, every week has to report their online traffic and their offline traffic and what was their crossover. I hired a chief customer officer who came from Lloyds who built us a huge insights and analytics department. We put in traffic counters in all the stores, because I could get traffic online but I couldn’t get traffic offline and so I couldn’t get any crossover behaviors.”

During the 2012 year, the company has activated a system allowing all associates, in all 330 Bur­berry stores, to have at their fingertips, on their iPads, all relevant customer information gathered from their activities at Burberry.com as well as in-store. She saw a wealth of information in that flurry of flashes—what did customers respond to? What did they like or dislike? What did they share on social media? She thought there must be a way to collect and share such data with the whole Burberry team, as well as combine all six of Burberry’s consumer-intel databases into one salesperson-friendly interface. “She wanted to merge the digital experience with the in-store experience”. “We’ve got ten thousand iPads out there in the stores. And we’ve built this clienteling app. So if you buy in Hong Kong or if you went and bought online or even if you are just window-shopping and have stuff in your basket—we’ll know. Offline stores will be able to see all your behavior online. We are blurring the physical and digital, and it’s not just the retail experience. It is the service.” At Burberry, the digital experience extended beyond retail. “We know that 70 percent of them are going to go onto Burberry.com before they travel, before they even walk into a store. So we feel that the most vital thing is whatever they see on that landing page, they also see in the windows. Online, offline, it’s gotta be the same.”

2. LINE

Once just digital stickers that users of mobile messaging app Line send to each other like emoticons, the bear, the bunny and their seven friends will soon be unleashed through stores, virtual reality and possibly an animated film. For smartphone users in Asia where most of Line’s 205 million monthly users are located, the characters are as familiar as old school icons such as Hello Kitty and Disney’s animated stars. As Catherine Shu wrote on TechCrunch: “I live in Taiwan, where many WhatsApp users switched to WeChat and Line about three years ago, thanks in large part to stickers and emojis. At first I thought stickers were pointless—why waste time flipping through a library of cutesy pictures when you can type a response in seconds? Then I saw that twisted party sticker above and realized I was wrong. Like symbols in Renaissance paintings, Line stickers express a wide, complex, and often bemusing array of ideas and emotions–and some are just really messed up, in an awesome way.” Many people in the U.S. and other Western countries make the same mistake I did of assuming that messaging app stickers are just cute. “No matter how its business strategies perform, however, Line’s stickers are an example of how tech companies can influence and reinforce cultural trends, as characters created to sell a product take on a life of their own.”

Line plans to open 100 stores selling Brown dolls and other cute ‘Line Friends’ paraphernalia worldwide over the next three years. They are not well known in America or Europe but owner Line Corp. hopes to change that. It has already opened two stores in Seoul and its first Shanghai and New York stores will open this year. Though partly an accidental strategy, the company says the bricks-and-mortar presence will draw more users to the app and help replicate its rapid Asian success in other regions.

The popularity of the Brown and Cony stickers has shaped a new trend in mobile communication. Instead of typing messages, many users simply tapped a sticker showing a coy-looking Brown sitting on a toilet or eating a bowl of ramen. Users began to associate themselves with certain characters and the lineup now includes a bespectacled middle-aged man named Boss and James, a blond narcissist. Larger and more expressive than emoticons, the stickers have been a draw card for Line whose users are mostly in Japan, Thailand, Indonesia, India and Spain.

Line Corp.’s net profit jumped 50 percent in 2014 to 126 billion won ($112 million) on revenue of 670 billion won ($594 million), according to its parent, South Korea’s Naver Corp. Its Creator’s Market, which lets third-party designers upload and sell stickers, made $75 million during its first year in business. The company released for its fourth anniversary, up to 2.4 billion stickers and emojis are sent each day by its users. Almost half, or 48 percent, express happiness, but the rest reflect emotions ranging from sadness (10 percent) to anger (6 percent) and surprise (5 percent).

‘We never intended to do a character business,’ Yoon Sunmin, who oversees Line’s character business. Visitors to the newly opened flagship shop in Seoul’s trendy Gangnam district screamed with delight when they saw an outsized Brown bear greeting them near the entrance of the three-story store. Locals and tourists from Vietnam, China and Hong Kong queued to take a picture with Brown and other human-size cutout Line characters, as if they were pop stars. Line also cashed in on the rock star popularity of its animal characters through mobile games and an animated TV show in Japan.

The first Line Friends store in China opened in Shanghai’s Xintiandi shopping district in May 2015, selling Brown dolls, Cony pens, Sally mugs and other goods such as kitchen utensils, stationary, jewelry and toys. ‘We hope that in the countries where the Line app is not used actively, Line characters would promote the app.’ Over 700 types of items are on display on shelves around the store. Customers can taste cartoon cakes, egg tarts and many other desserts that are made specially for the Chinese consumer.

Line is also negotiating with Hollywood producers to turn its cute characters into an animated film for theaters or series for TV. ‘There is clearly an opportunity to take existing mobile properties to other channels and generate revenues,’ said Jack Kent, director of mobile media research at IHS Technology.

3. CheBanca!

CheBanca! is the digital first bank launched in 2008 by Mediobanca.  Mediobanca provides merchant bank services in Italy and had never had a retail bank before.  Therefore, it made sense in the post-meltdown digital age to implement a fintech bank fit for Italy, and CheBanca! claims to be that bank.

Anyways, being a digital first bank does not mean being a digital only bank. A digital bank with a branch?  Yep.  CheBanca! has launched almost 50 of them so far, with more to follow.  This has proven critical in getting trust and deposits, with the main aim of achieving three things that digital only does not achieve: Trust, Brand, Service. These three things are harder to achieve when you are unseen, unproven and unknown, although some are bound to disagree

For example, once you get inside, it looks a bit empty (PDF-presentation). All you can see is a concierge with an iPad, a machine that looks like a teller (but isn’t) and something at the back that might be a Star Trek transport station (and is). Looking back the other way across the branch (which is in an L-shape), you see a few teller stations. These are stations to chat with people about account opening, service and advice, and the typical staff member here is from Gant, Massimo Dutti, PC World or similar retail stores by background.  They’re not bankers, but customer agents who are enjoying the experience of joining a bank that helps people live their lives, or so they tell me. Finally, at the back of the L-shape are a few rooms with frosted windows.

These are the serious advice stations.  They operate by customers making appointments to see wealth managers, mortgage advisors or similar and then, when they turn up, they check-in and can see which pod they’re going to go to and who they’re going to meet. However, you don’t need to wait if it’s about advice, as you can go to the transporter room.  The transporter room is this weird funky station at the back. Once you sit at the station, it’s got all sorts of cool features like biometric recognition using digital signature and shared screens with video operators.

This particular small branch serves around 259 customers a month at these videostation, and it has proven successfully at broadening and deepening customer relationships using those old bank metrics of cross-sell and up-sell.  According to the bank, the service videostation has a 15% cross- and up-selling success rate. Finally, if you just want to deposit a check or cash, you use the funky self-service machine.

CheBanca! boasts over half a million customers overall, since the bank opened for business in 2008, and is now rolling out its digital branch formats.  Today, there are four branches based on the new format. By the end of September 2015 it is already eight in a selected sample of medium and big towns.  Equally, the bank intends to roll-out the videostation experience via Skype from September. All in all, there’s lots of things I liked about the digital branch concept.

CheBanca! is gaining 4,000 new customers per month with 45% from branches and 37% from remote contact (the bulk, 30% of that 37% is generated by the internet).  The remaining balance of 18% is generated by third party physical channels.  That means a whopping 63% today is coming from direct physical contact. Third, customer behaviours demonstrate that, for service, they prefer digital with 37% of customers handling all of their transactions and operations just through digital access.  Then there are a second group of customers, 26% of the total, who deal with CheBanca! purely through remote servicing via the web and call centre.  A third group that represent around 28% of all customers, use all the access points (web, call centre, branch). 89% of all contact is via digital access, three times the volume of contact that takes place in a branch.

4. Tesla

As Tesla Motors’ CEO, Elon Musk, has said, he wants Tesla to be the next major American car company-shifting the paradigm of the last century from what has traditionally been known as the “Big Three” to the “Big Four.” But while the visions of grandeur may seem unattainable to many Americans given that Tesla is going to build electric cars and nothing else, the company has quietly been trying to use a perceived weakness-its lack of industry experience-to its advantage. By exploring every out-of-the-box avenue, Tesla is trying to create a model in which cars are designed, built and, ultimately, sold in very non-traditional ways.

Tesla’s goal is completely different from this traditional dealer model, says George Blankenship, Tesla’s VP of Sales and Ownership Experience. To begin with, Tesla doesn’t even have dealers. Yes, the company has retail locations, but these Tesla stores. Tesla’s new push involves opening stores in high traffic mall locations. “We want to engage with people when they are not thinking about buying a car,” said Blankenship. “Our goal is not to sell a person a car, but to educate them on what electric cars and, particularly, what Tesla electric cars can provide. At a mall, people are already relaxed and out shopping on their own. Most of them will likely never have heard of Tesla, and so we are becoming part of their daily routines.”

Blankenship doesn’t expect many vehicles will even be sold at the mall locations, instead expecting the sales to happen online after the initial mall experience. In many states, independent dealers can’t sell cars at retail locations, but there are no such restrictions to online sales. This strategy is a way for Tesla to get around what they perceive as antiquated laws and control the entire ecosystem from conception to delivery of the product-much like Apple does by building the hardware and operating systems of their products and then selling them at an Apple Store. This unique sales strategy in the automotive industry is just one of the things that makes Tesla a very different company, but according to Blankenship it’s key to their eventual success. “Eventually they will come back and buy a Tesla not because it was sold to them, but because they really want to become part of the Tesla community.”

Tesla Motors is radically rethinking the car. It’s also rethinking the way cars are sold. They worked to create a rich, interactive experience that engages the public and generates sales inside each of its high traffic stores. Tesla’s focus on vertical integration enables a unified brand experience. The company owns and manages every stage of its business model, from concept to design to manufacturing and sales.

Tesla deliberately opened its stores in high traffic retail locations. This approach lets them interact with and educate potential customers in a less formal, more experiential environment. They utilized technology to deliver a variety of informative experiences in a small space. A remotely managed network of interactive stations introduces visitors to Tesla vehicles and how they work. “Our technology is different, our car is different, and, as a result, our stores are intentionally different.” (Elon Musk, Tesla Chairman, Product Architect & CEO).

Their interactive stations are designed to draw people into the store with visuals and content that address the most common questions they have about electric vehicles. They’re intended to move visitors from general interest to real consideration. They found that in a crowded store, each station serves two audiences: the current user and the individuals observing. The scale and position of key visuals are designed to serve both parties.

Customers spend a lot of time considering the purchase of an electric car. That’s why they designed the Tesla configurator to work in-store, at home and on the go, providing continuous support and education. Prospective buyers can create, modify and save their car designs on Tesla store stations and revisit them on PCs and tablets—or vice versa. The experience is seamless across devices.

Cars are a major purchase for most people. Electric vehicles only extend the consideration cycle, which can last several months. As a result, they prioritized features that make it easy to design, save and retrieve a customized Tesla at any time during this process.

Tesla has dozens of stores and galleries worldwide, with more on the way. They developed a system that scales with company growth. A Dynamic Publishing Platform gives Tesla the ability to publish content to all stores, supporting the company as it grows and opens new locations. From its headquarters in Palo Alto, the Tesla team can push out software and content updates to Tesla stores around the world. Analytics data from stations in each store are sent back to headquarters, offering insight into usage patterns that enable continual refinement and optimization.

Digitally enhanced in-store experiences are the missing link in almost every retailer’s digital ecosystem. Since the advent of e-commerce, the ability to drive foot traffic or increase the average cart size through online initiatives has remained difficult to access. Connected stores remove this blind spot. They integrate retail shopping into a continuous, measurable service experience—offering seamless interactions with customers before they visit the store, while they’re in-store and post-purchase. Meanwhile, customers benefit from more informed choices and smarter, more efficient shopping. The introduction of digital experiences in-store also unlocks an important new tool for retailers: the same kind of real-time data and analytics insights that are central to optimizing their online channels. The integration of retail, e-commerce and digital marketing analytics will enable them to optimize the entire customer experience.

 

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