[Opinion] O2O and O4O

Professor Seoyonggu, Department of Business Administration, Sookmyung Women's University

[Asia Economy Reporter Minyoung Cha] O2O (Online to Offline) refers to the phenomenon of combining online and offline. The O2O service began to be actively promoted thanks to the spread of social commerce and mobile phones. Social commerce, known as "half-price group buying," became a new business model by combining e-commerce and marketing. The application service "Baedal Minjok," which allows users to freely search and order all flyers advertising offline food service businesses on their smartphones, has been recognized with a corporate value exceeding 5 trillion won and has grown into a representative unicorn company in Korea. Brands such as "Yogiyo," "Uber," "Dabang," and "Kakao Taxi" represent O2O services.

O2O services connect the online world and the offline world through apps installed on smartphones, which is similar to the philosophy of the Internet of Things (IoT) that connects all digital devices. Like IoT, which connects the real world and the virtual world, O2O ultimately connects online and offline as if they were one.

O2O has also dramatically improved the quality of offline services. As seen with Baedal Minjok, Yanolja, Uber, and Didi Chuxing, users evaluate service providers, and these evaluations influence the purchasing decisions of subsequent users in real time, creating a world where user reputation is directly linked to sales. This is why the competitiveness of self-employed stores and shopping districts, which used to do reasonably well due to good store locations and high foot traffic in surrounding commercial areas, is gradually weakening. The nemesis of the Chungmuro print district, whose main business is creating advertising flyers, is O2O.

Taking one step further, O4O (Online for Offline) is a service that increases offline store sales based on customer data and technology tracked online. A representative example of an O4O service store is Amazon's unmanned convenience store "Amazon Go." After installing the smartphone app and entering the store, there are no employees or cash registers. Customers simply take the products and leave, as it is an unmanned store. China's leading e-commerce company Alibaba also operates digital fresh food stores called "Tao Cafe" and unmanned convenience stores called "Bingo Box." Customers scan a QR code to enter, pass through two doors, and automatic payment is made through the online payment system "Alipay." There is also a curated store called "Amazon 4 Star," which only sells products rated 4 stars or higher by Amazon.com customers. By selling only popular products already verified by online customers, Amazon enhances its reputation as the world's strongest e-commerce company and observes offline store customers to reverse-utilize the data for online service development.

O4O stores suggest that platform retailing, which fully utilizes artificial intelligence (AI), has begun. It is not just an unmanned store that reduces employee labor costs, but a retailer that understands customer needs better than the customers themselves by utilizing customer data. Amazon, through its big data analysis affiliate Amazon 9, understands the every move of nearly 160 million paid "Amazon Prime" customers better than the customers themselves. The digital revolution, or the Fourth Industrial Revolution, has begun to completely disrupt the foundation of offline retail.

In conclusion, the future of analog stores not equipped with O2O and O4O services is bleak. Strategic exit strategies and job transition training, among other policy efforts, are urgently needed. However, these stores still have analog nostalgia and silver customers such as the elderly and baby boomers, who are affected by the widening digital divide. We wish for the survival of analog stores.