O2O is an opportunity to outperform

The rise of e-commerce…and the problem it creates

2014 was a record year for ecommerce revenue. Sources estimate that US holiday season shoppers spent over $50 billion online, while sales in the UK exceeded £100 billion for the full year and totaled almost $450 billion in China for 2014. There’s no doubt that a percentage of this growth comes at the expense of offline stores and brands with multiple channels are struggling to decide how to support all outlets.

Enter O2O: “online-to-offline commerce.”

Since the rise of e-commerce in the 1990s, retailers have experimented with ways to connect dot-com to legacy offline stores. In those days, brands would occasionally offer web-only coupons that could be printed out and redeemed in-store. Twenty years after Amazon.com first went live, the most effective tactic for driving online eyeballs to offline stores is still the coupon, albeit evolved via Groupon and LivingSocial. Other contemporary O2O tactics are also derivative from the days before e-commerce existed, like publishing weekly sales circulars online as PDFs or highlighting a brand’s latest TV commercials on its website. It’s time for these tactics to evolve.

Retailers have been the earliest to embrace O2O, but digital disruption has impacted companies of all kinds, from advertising to venture capital. Uber and Lyft have changed the way people (and regulators) think about hiring cars. AirBnB and HomeAway have changed behaviors around renting a room for the night. Nest and SmartThings have changed how people interact with their homes. Warby Parker has changed how people shop for eyewear. Kickstarter and Indiegogo have changed how business ventures obtain funding. The list goes on and on.

Risk adverse companies will take small, incremental, and defensive steps to integrate digital methods into their business models. These firms, many of them industry incumbents, will slowly fade away. Brands that survive and thrive will embrace three key principles of O2O:

1. O2O applies to three primary venues: retail, home, and office

Korea is one of the most wired countries on the planet and ground zero for O2O innovation.

In June 2014, Starbucks launched its Siren Order app in Korea, bridging the gap between office and retail by enabling customers to order and pay in advance. After a successful rollout, the app was rebranded “Mobile Order & Pay” for launch in the U.S. in December.

Starbucks Siren Order

Also in December, Burberry opened a “Burberry Beauty Box” store in Seoul, including an RFID-enabled “Digital Lip & Nail Bar” to help customers match products to their skin tone.

Burberry Beauty Box Seoul via Wardrobe Trends Fashion

Beyond retail and office, the “Internet of Things” has captured mainstream awareness and companies including SmartThings/Samsung, Nest/Google, and Quirky/GE are enabling digitally connected home environments.

2. O2O works best in both directions

O2O is most commonly an abbreviation for “online-to-offline” and the reverse should also be true. Circuit City, Borders, and Blockbuster have all disappeared after being unable to implement effective offline-to-online strategies. Today’s operating environment contains increasingly powerful personal computing devices, widespread broadband connectivity, and changes in consumer attitudes towards sharing and engagement.

Nordstrom Pinterest via Business Insider

Nordstrom takes advantage of these trends by investing in technology to enable sales associates to deliver more effective customer service, integrating in-store merchandising with social media content, and offering free wifi to improve in-store customer experience. Success – and perhaps survival – depends on merging channel service levels to deliver customer experiences that meet and exceed expectations.

3. O2O is a business strategy

Making O2O work effectively requires commitment and coordination across internal departments approaching programs as part of strategy, not as seasonal campaigns. A single department might champion O2O initiatives, but success requires collaboration from IT, supply chain, marketing, and customer service. The unifying focus for these efforts should be how to deliver the best user experience optimized for customer segments, supported by process improvements and technology infrastructure. Solid use cases are required prior to implementing O2O strategy.

For example, Samsung created a B2B product called CenterStage, displaying appliances in life-size 4K UHD at retailers including Best Buy, Dixons, and Boulanger, reducing inventory carrying cost and floor space typically required by traditional white goods displays.

Strategies can benefit brands in industries far beyond retail

Over the course of 2015, the lines between online and offline will continue to blur. As revenue from online retail continues to grow, brands must be careful to not get distracted by the larger opportunity. Brands that build their business models around an O2O approach will create consumer value in the three key venues of shop, home and office. These brands will be the best prepared to increase market share while defending existing business from new digitally disruptive entrants.

What I saw at CES

I was at CES 2015 last week. Here are some reflections, in no particular order:

1. The Internet of Things was Everywhere.

From the opening CES keynote to every 20 feet on the show floor, IoT was everywhere. But while there may be “infinite possibilities of IoT,” the question everyone will start asking in 2015 is, “but why?”

If IoT ecosystems become truly pervasive, analysts will become the most in-demand professionals out there.

2. Wearables, but why?

I was speaking to a 20-something professional about new products and he said, “Watches? I don’t get it. My generation is the one that stopped wearing them; we use our phones to tell the time. So why do all these companies think that everyone is suddenly going to buy smartwatches?”

The variety of wearables businesses plays out like a Mad Lib. I saw wearables for fitness. The elderly. Kids. Babies. Dogs. Cats. You name it and if it moves, then there’s a business that wants to put a sensor on it to collect data.

3. Surf like nobody’s watching.

But when you’re demoing VR on the CES floor, everyone is. Except at the Oculus booth, which had the longest lines that I saw at the show.

4. Give me a break.

Walking around the show can get so tiring for some people that they just fall asleep in the middle of the day. Some booths facilitate this.

5. Mirror, mirror on the wall

Some solutions like virtual fitting tech sounds great in theory but the demos show that there’s still a long way to go.

On the other hand, other offerings that focus on a smaller, more specific application work very well.

6. The Connected Car

There were more automotive manufacturers at the show than ever before, with a heavy focus on connectivity and automation.

7. Physical to digital to physical

The transition from the industrial to information age is entering a new phase, where we are digitizing our physical world.

8. 3D TV won’t die

I was surprised to see that every major manufacturer was showing off some sort of “glass-less” 3D TV. Even in the sweet spot, they seem like an awesome UHD TV got messed up somehow with a blur effect around the edges. 8K, yes. 3D, no.

9. Robots and the uncanny valley

Easily the creepiest thing I saw was Toshiba’s “Communications Android,” which had disclaimers posted around it like “robot does not interact with you.” Even so, when she turned and looked in my direction, I felt a chill run down my spine.

On the other hand, fake robots like Alibaba’s interacted with the crowd and were entertaining.

10. Times they are a-changin’

After recent years of backlash, booth babes have almost entirely disappeared from CES, in exchange for slightly more practical robots and people working out. Moreover, people dressed in cartoon costumes seem to have disappeared from the Strip as well. Here are two types of people you probably won’t see at CES 2016:

When I visited the Intel booth, I looked across the aisle and the old Microsoft space was now occupied by two Chinese manufacturers, Hisense and Changhong. Sign of the times.

However, what hasn’t changed is that the floor is primarily for media and spectacle, while business gets done behind the scenes and off the floor.

I’ll be keeping an eye on how these trends of digitization and connectivity play out over the year, with visible checkpoints at MWC, SXSW, and IFA.

Everyday digital in Korea

South Korea is one of the world’s most wired countries (if not THE most). While living here, It’s easy to overlook the extent to which technology is just a part of going about your business every day. For example:

Easy in and out of parking garages

Most parking garages have license plate scanners, at apartments, department stores, and office buildings. Almost all cars have European-style plates with black type on a white background.

No need to pull a ticket when entering a garage; a computer will track when you enter and exit.

A national NFC payment system

A national stored value contactless payment system called T-money enables people to pay for public transportation with a tap. T-money is also accepted in taxis, eliminating the need for cash or credit. Beyond transportation, convenience stores and some other small shops accept T-money as well.

Widespread wifi coverage

High-speed broadband and wireless LTE network coverage are widely available; so is wifi.

Screen Shot 2014-11-28 at 10.13.57 PM

In subways, many riders pass the time by streaming video to their mobile (usually Samsung) devices.

Wifi restaurant service

Dining in many food courts is a modified cafeteria-style, where patrons place their orders at a centralized location and pay in advance, then pick up their food when ready from a specialized outlet. In some upscale food halls, patrons place their order and then find a seat, then place a wifi beacon on the table so servers know where to deliver the meal.

Keyless building entry

Most people don’t carry around keys, because most apartment buildings are accessed by a NFC device, while apartment units use a keycode or fingerprint to unlock the front door. I guess young people never have to ask to get a key back if they break up; just change the code.

Thankfully in my daily life, none of this technology is used to serve ads or otherwise overtly monetize interactions for brand exposure. On the other hand, monitoring technologies like CCTV and internet filtering are also in use, so it’s likely that the digital enablers of everyday convenience have a latent governing and compliance purpose as well.

The “Big Six” digital marketing trends

I’ve been getting up to speed with Cheil’s global digital capabilities, visiting with our teams in Korea, the US, China, the UK, and India. In speaking with our professionals around the world, my beliefs are further confirmed that there are six key digital marketing trends that all brands must master in today’s operating environment:

Brands are back in the driver’s seat.
I’ve always believed that this notion was a bit sensationalist but today, organic reach has plummeted and brands with big budgets are the highest priority for sites with investors in mind.
Everything is shoppable.
From Instagram to Pinterest to Twitter to Facebook to YouTube, all sites are adding functionality to shortcut the path to purchase.
Show me, don’t tell me.
We have seen the shift from blogs to Twitter to emoji. People prefer snackable pictures to the fine dining of text.
Data drives mass personalization.
Curation and customization can happen today at a fraction of the cost to serve, but yesterday’s service models must evolve.
The Internet of Everything.
Just now beginning to become commercialized and show its true potential in the Age of Context.
The sharing economy.
Old business models and human behaviors are new again, but this time brands are powering their collaborative economy efforts with new technology.

While the impact of these digital marketing trends may differ by country and industry, they are all relevant now. The Big Six are here today and will absolutely evolve tomorrow. Smart marketers will get to the front of the curve and have a front-seat view as new trends emerge.

Six years, $60 million, and all I got was this stupid hoodie.

Voting for SXSW 2015 sessions has started.

If I get the chance to speak next year in Austin, I’d like to tell you about the last six years of my working life.

Between 2008 – 2014, I committed my time, energy, and intellect to build a startup company as the first employee into a multi-million dollar, multi-national social business advisory and big data analytics company. We received quite a bit of funding from Austin Ventures along the way. The company was ultimately acquired by Sprinklr and the only tangible reminder of my experience I have left is the classic cliched symbol of a startup company: a logo hoodie.

I could probably write a book on what I wish I knew then. (Maybe I will someday.) In the meantime I’d like to share the highlights of what I learned about startup life. The great reads out there make even more sense to me after having lived the experience.

I guess it’s only fair to disclose that I don’t intend this to be a sixty minute smack-talk session. Even without the snark, somewhere in between the trips to Las Vegas, managing people managing their personal brands, working with acquired companies under earnouts, writing a book, and creating an entirely new category of advisory called “social business,” there are some lessons worth sharing.

This would be my seventh year speaking at SXSW Interactive; if you’re interested in hearing more, I’d appreciate your vote.

After a month in Seoul

It’s been a month since I left Austin and started as chief digital officer at Cheil Worldwide. I’ve been almost entirely focused on work and in many ways, “the work is the work.” Strategy formulation, change management, and matrix operations are fairly straightforward. Of course not everything is the same and after a business trip to New York last week, here are some differences that surface in my mind, in no particular order.

Social media is a lot less active when most of your connections are time shifted 13 to 16 hours from regular business hours. More signal, but lower volume.

I’ve been consuming most of my English-language news from BBC and CNN. Lately most of the coverage has focused on Gaza and Ukraine. Korea’s English-language media outlets focus very little on these topics and instead discuss regional politics, e.g. relations with China and Japan, celebrity dating gossip, and continuing Sewol ferry issues.

There are many, many coffee shops in Seoul. Some of them have outlets in the US, mainly California. One popular chain is called Paris Baguette; recently, it opened a store in Paris.

Seoul has a lot of traffic. You can expect to spend a lot of time sharing the road with many other Hyundais and Kias.

Korea is one of the most wired nations in the world. Broadband internet penetration is almost 100% and high-speed wireless is almost everywhere. Subways tend to be quiet with every other person watching TV on a Samsung mobile phone. Step into an elevator and most of the younger people will be KakaoTalk-ing. A mobile phone number is the key to making many services work.

However, when it comes to tech infrastructure, especially e-government, Korea is stuck in the days of internet past. As described in this blog post which Jeremiah Owyang pointed out to me, Microsoft Windows, ActiveX, and Internet Explorer are still the only way to get many sites to work. Even running a virtual machine on Mac won’t work in many cases. Maybe Seoul could follow in New York City’s footsteps and hire a chief digital officer, or learn from Code for America and start up a Code for Korea.

There’s a lot of baseball on TV in the evenings, showing Korean professional league games. During the day, there are LA Dodgers and Texas Rangers games. If the Red Sox picked up Ryu or Choo, it would save me the cost of a MLB.TV subscription.

It seems increasingly strange when I read articles in the marketing and advertising trade press mentioning “global” topics. Usually, these articles are mostly about a US topic, with mention of a foreign country. It’s one thing to be a business tourist — it’s quite another to do business globally.

The cost of living here for an expat is steep and surprisingly higher than New York and San Francisco, but more affordable than Beijing and Shanghai. Times have changed quickly.

I wonder what will seem different after I’ve been here for a quarter…

Week One at Cheil

Today marks the beginning of my first full week as chief digital officer at Cheil Worldwide. I arrived in Seoul last week and have been getting settled into my new role, meeting the teams resident at headquarters and starting to plan forward.

As word got out last week regarding my change of scenery, I appreciated all of the kind words and mentions on the interwebs. Now the hard work begins.

So what exactly is the role of a chief digital officer? Broadly speaking, this executive’s charter should include formulating digital strategy, implementing operational initiatives, and managing organizational transformation, all with a particular focus on emerging technologies. In a service-based company like Cheil, a top priority for a CDO like me is to expand our digital proficiency across the global network in order to deliver innovative client work. A related goal is to harness the inherent talent, creativity, and curiosity of our people and give them pathways to bring great ideas to life.

For further exploration on the role of a chief digital officer, you can request a copy of a related report I wrote for Constellation Research.

I’ll continue to publish thoughts here as we build, change, and explore the future of digital ideas that move.

Following footsteps, in reverse

Decades ago, my parents left Korea and immigrated to the United States. They were 30 years old, had no family in the US, and left almost everything behind in the country where they had grown up.

I have always respected the courage they had and wondered if I could hypothetically do the same. When I turned 30, I was working at PUMA in charge of global marketing operations as well as digital marketing, living in a Boston suburb with a top-rated school system, and making a decent salary (but shoveling a LOT of snow). I was settled and to follow in my parents’ footsteps seemed infeasible and inadvisable for the path that I appeared to be on.

But now, a half-century later, I have the opportunity to follow in the footsteps of my parents. It just happens to be walking back the way they came, as I’m moving to Seoul.

Adios, Austin

I moved to Austin four years ago to grow a company and it was acquired earlier this year.

The skyline has changed a bit since I’ve been here and it’s already very different from four months ago when the picture above was taken.

Thinking about the four years I spent in Austin, here’s what I’ll

Miss:

the people. For the most part, they are still laid back and a little bit weird. This is awesome and refreshing, especially when engaging with the service industry.
the food. I’m not a foodie, so my favorites include Tacodeli, Home Slice, and Rudy’s. Still surprised that I came to accept buying BBQ at a gas station.
the convenience. Austin is small and easy to get around. I only put 6,000 miles on my car a year. The traffic lights go flashing red at night. 10 – 15 minutes to get anywhere unless it’s rush hour.

Gladly leave behind:

the allergies. No one tells you that there’s a different type of nature to make you sneeze, cough, and losing hearing in an ear, all year long.
the bugs. Scorpions belong in cartoons, not in your sink. Roaches that live in trees and attack from above. Mosquitoes that are everywhere and draw blood like little piranhas. In fact, I just killed one on this airplane.
the heat. Although everyone gets used to it after a while, it’s still unpleasant to bake like a chicken tender under a heat lamp every time you walk outside from May through November.

More next week. But for the last week I’m here, I’ll enjoy some breakfast tacos, barbecue, and local brews.

For Sale: A Craigslist Story

I put an item up for sale on Craigslist. This is what happened.

+13477044073: is your [item] still for sale 11:29 AM

Me: Yes it is 11:30 AM

+13477044073: (1/3) I am pleased with the price.so I would love to pay you via PayPal,the PayPal charges is on me,If my offer is accepted, Get back to me 11:31 AM

+13477044073: (2/3) with your PayPal email and your name or send me an invoice wercation@blumail.org so i can pay you right away , i would arrange pick 11:31 AM

+13477044073: (3/3) up after payment is received. Confirm the sales to me by removing it from post. 11:31 AM

So many flags. Grammar. Punctuation. “invoice.” “pay you right away.” The email address led to some more clues and the name “Charles W. Marthenze.”

And then this happened.

+17856705185: [item] still available for sale? 1:22 PM

Me: Yes 1:23 PM

+17856705185: Are you the first owner? 6:18 AM

Me: Yes, since 2001 7:01 AM

+17856705185: I hope the condition is exactly as described? 7:03 AM

Me: Of course. You’re welcome to swing by and see it in person. 7:05 AM

+17856705185: Ok,get back to me with your paypal name and e-mail so that i can proceed with the payment. 7:08 AM

Me: No, you should really come by and see it first. What part of town do you live in? 7:09 AM

+17856705185: (1/6) I am an honorable military woman and you will receive your money cash in hand before this is picked up. However,it easy and free to 7:10 AM

+17856705185: (2/6) open a paypal account. Just go to www.paypal.com & register an account.Paypal is the world leading payment master that protects both 7:10 AM

+17856705185: (3/6) buyer/seller. We are on a secured transaction with paypal. Above all, it’s like instant cash. As soon as you open an account, get 7:11 AM

+17856705185: (4/6) back to me with the name and email that you linked with your paypal account and I will have your money sent asap.I feel more 7:10 AM

+17856705185: (5/6) comfortable sending my funds via paypal due to their various security measures at ensuring safe and secured transaction between both 7:10 AM

+17856705185: (6/6) buyer/seller. 7:10 AM

Me: What branch do you serve in? 7:11 AM

Me: Answer my question and I’ll give you my name and Paypal email. 7:16 AM

Me: Hello? 7:35 AM

Me: Are you still interested? 7:35 AM

Me: I have my name and paypal email ready for you. 7:36 AM

Me: I respect you, honorable military woman! 7:36 AM

Me: You can be the second owner! 7:36 AM

Me: What is your name and Paypal email? 7:36 AM

Me: Can I just send you the money directly? 7:37 AM

Me: I guess it would be pretty far to drive from Topeka to see the table in person, huh? 7:38 AM

Me: What do you think about the condition? 7:38 AM

Me: Why are you suddenly so non-responsive? 7:40 AM

Me: I just signed up for a Paypal account and I need you to tell me what to do next. 7:42 AM

+17856705185: Get back to me with your paypal name and email to enable me make the transfer of funds. 7:44 AM

Me: ok 7:44 AM

+17856705185: What is the delay all about I am still waiting to have your paypal email and name so that I can make the payment. 7:48 AM

Me: are you ready to receive the requested information, my official paypal name and email in order to enable you to make the transfer of funds? 7:48 AM

Me: oh, I’m so excited to sell this to you!!! 7:49 AM

Me: Can I trust you? 8:27 AM

+17856705185: Why not? of course yes. 8:28 AM

Me: OK great. So you just need my name and paypal email then and you will transfer the $500? 8:29 AM

+17856705185: Yes. 8:34 AM

Me: Charles W. Marthenze, wercation@blumail.org 8:34 AM

Me: Let me know when you’ve made the transfer! You can also text me at my other phone number: 347-704-4073 8:35 AM

+17856705185: You must be a lunatic,go jump into an active volcano and DIE. 8:41 AM

The rise of e-commerce…and the problem it creates

Enter O2O: “online-to-offline commerce.”

1. O2O applies to three primary venues: retail, home, and office

2. O2O works best in both directions

3. O2O is a business strategy

Strategies can benefit brands in industries far beyond retail

Share:

1. The Internet of Things was Everywhere.

2. Wearables, but why?

3. Surf like nobody’s watching.

4. Give me a break.

5. Mirror, mirror on the wall

6. The Connected Car

7. Physical to digital to physical

8. 3D TV won’t die

9. Robots and the uncanny valley

10. Times they are a-changin’

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