Why your company needs a hybrid online-offline strategy to win the digital disruption battle.

Esade Entrepreneurship Institute

This article is based on knowledge insights by Xavier Busquets, Josep Lluís CanoJaume Hugas

Companies that focus solely on their digital strategy may get into trouble. Esade Associate Professor Xavier Busquets and his research colleagues Josep Lluís Cano and Jaume Hugas reveal why firms need to adopt a hybrid online-offline strategy in Harvard Deusto.

Picture yourself in front of a smart digital mirror that could not only suggest the type of clothes that look best on you but also give you access to a virtual closet filled with infinite options. If you enjoy shopping, this may sound like the ideal scenario to avoid the frustration of not finding your size or favourite colour in the real world.

Shopping clothes
Companies must overcome the online-offline duality

"In the digital era, customer relations must overcome the online-offline duality and take advantage of both strategies to make users feel unique," says Busquets. "Companies that combine online information with physical experiences are the ones that will win the digital disruption battle."

A study by Google reveals that 84% of consumers search for information online before visiting a store and 71% of buyers admit that their smartphone has become the most important device for their offline purchases.

shopping online
71% of buyers admit that their smartphone is the most important device for offline purchases

"Customers are one step ahead and are already trying to use the best of both worlds. This behaviour is what we call ROBO: research online, buy offline." In their study, the authors warn that companies must implement hybrid strategies that include both the online and offline worlds if they are to offer their customers rich and unique purchasing experiences.

Click-and-mortar strategies

Companies that have an online presence and also sell physical products face logistical challenges such as implementing the right distribution channels, finding the right time for physical home delivery or facing the costs of failed delivery attempts.

"Keeping customers happy can result in higher costs if both online and offline strategies are not met. Click-and mortar strategies have the potential to minimise the negative impact of these logistical challenges," state the authors.

Click-and-mortar strategies combine the virtual world (online channel) and the physical world (offline channel) by following a hybrid strategy in which consumers buy their products online and sellers use their own or third-party distribution systems for physical delivery.

A successful example of a click-and-mortar strategy was the one adopted by the Belgian company Kiala. The firm established its own delivery points and third-party distribution stores in cities across Europe. It also developed a powerful technology that ensured and optimised its distribution systems and the efficiency of its deliveries. This hybrid strategy was so successful that in 2012 the company was acquired by the American logistics giant UPS.

For many customers, the boundaries between physical channels and digital ones have disappeared

Omni-channel customers

Omni-channel was invented in 2003 by the American company Best Buy when it integrated its offline and online strategies.

In 2010, several other American companies started adopting this hybrid strategy ("buy online, pick up in store") after realising that their main competitor was no longer same-sector companies but the titan of e-commerce: Amazon.

"Today omni-channel strategies are becoming the king of modern logistics and e-commerce. The first to adopt a real omni-channel strategy in their sector will become dominant players and win the global market war," predict the authors.

"This is why e-commerce leaders such as Amazon, Alibaba and JD.com are opening physical stores and leading physical stores such as Walmart, Macy's and Inditex are investing and buying e-commerce businesses to integrate these into their physical stores."

Digital transformation

For many customers, the boundaries between physical channels and digital ones have disappeared. Technology is no longer an added value; it has become a part of who they are and how they think. "Many companies still have a lot of room to interact with their customers through both physical channels and digital ones in a symbiotic way.

In this quest to develop new predictive and personalised experiences, firms are facing a heavy legacy of often obsolete systems, processes and culture," warns Busquets.

The authors claim that implementing a hybrid online-offline strategy is the key for companies to succeed in their digital transformation and meet the expectations of consumers.

Implementing a hybrid online-offline strategy is the key for companies to succeed in their digital transformation

Data is the future

In the near future, a growing number of companies will see their core business shift from post-sales services to a data-driven approach based on customer interactions. Firms will need to focus their efforts on data analysis to build predictive and personalised experiences that improve the efficiency of their business models.

In this new digital scenario, reactive strategies will no longer work and experts will need to implement new strategies that involve transforming their marketing efforts into predictive tools thanks to dynamic microsegmentation.

The authors predict that, in the near future, companies will be able to access their ideal customer, with the ideal message, at the right moment, with the right offer and the right personalised price.

Digital acceleration

Nevertheless, data isn't valuable to customers without powerful visualisation tools that can help them understand it intuitively in order to support real-time decisions.

"Mixing data with predictive patterns will be among the most powerful ways for companies to support hybrid business models. The Internet of Things combined with physical sensors placed in the real world and the many possibilities of big data will be the key accelerators of digitalisation in companies," state the authors.

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