What is OMO? Differences from O2O and omnichannel, benefits of starting, and payment integration strategies

The term "OMO" is rapidly gaining importance not only in the retail and e-commerce industries, but across all face-to-face and non-face-to-face businesses. With the spread of smartphones, the evolution of infrastructure of payments, and changes in end-user lifestyles, the era of choosing between 'buy online or in-store' has come to an end.

Modern end users visit physical stores with smartphones in hand, scan product barcodes in-store to check reviews, or pick up products ordered from e-commerce sites at physical stores after work, seamlessly and unconsciously moving between online and offline spaces. In such an environment, for companies to achieve sustainable growth, they must build a new business model that integrates both channels, rather than thinking in isolation.

In this article, we thoroughly explain the essential basics of OMO, the clear differences from O2O and omnichannel, and the specific advantages and disadvantages of implementing OMO, for businesses promoting digital shift and store reform, as well as accounting and payment staff responsible for sales management and practical operations amid channel diversification. Furthermore, from the perspective of payment experts, we will delve into the integration strategies for the "payment System (PX)" to lead your OMO to success, as well as the criteria for selecting a trusted payment processing company company (PSP).

What is OMO (Online Merges with Offline)? Basic Knowledge and Definitions

The Meaning of OMO and the Concept of Business Models

OMO (Online Merges with Offline) is a business concept in Japanese that means "the fusion of online and offline." This refers to the philosophy of redefining business not as separate channels that view the internet world (online) and the physical world (offline) as separate channels, but rather as a single digitized world where both are fully integrated and merged.

In an OMO environment, end users visiting physical stores are constantly connected to the internet via smartphones. Therefore, physical differences such as "whether you are currently on the sales floor of a store" or "browsing an e-commerce site on your sofa at home" are not important. At the core of OMO is building a system where all customer behavior is integrated as digital data in real time, providing end users with a consistent, optimized brand experience (UX) at any moment.

Why OMO is indispensable in business right now?

The reason OMO has become so prominent is the dramatic evolution of device environments and infrastructure of payments surrounding end users. Smartphone ownership in Japan has reached saturation, and even at physical stores, it has become common to pay with cashless payment such as QR payment (QR code payment and barcode payment for in-store use) instead of cash. This enabled the establishment of infrastructure that allows online data to easily capture and integrate offline customer behavior (which store, when, and what purchases), which was previously difficult to capture, as digital data.

Moreover, as the market matures, simply "selling products cheaply" or "delivering quickly" is becoming increasingly commoditized, making it difficult to differentiate from competitors. Modern end users are increasingly choosing brands that offer a "seamless customer experience" that allows stress-free shopping at their convenience, without feeling the barriers between online and offline, so each operator must be aware of the implementation and improvement of OMO.

Clear differences between easily confused "OMO," "O2O," and "omnichannel"

To properly translate OMO into practice, let's clarify the key differences between the commonly confused similar marketing term "O2O" and its predecessor, the strategic concept "omnichannel."

Difference from O2O (Online to Offline): The shift from "inducing" behavior to "integration"

O2O (Online to Offline) refers to mainly one-way marketing strategies and promotions that "attract end users to physical stores (offline) through the internet (online). From a corporate perspective, the focus is on "how to get e-commerce customers to physical stores and generate sales," focusing on cross-channel movement.

In contrast, OMO is designed not to view online and offline as opposing or complementary relationships, but with both sides centered around the customer from the outset (where offline is embedded within the online system). The goal is not simply to encourage store visits, but rather the philosophy of continuously providing the most comfortable experience to end users through an integrated environment.

Differences from omnichannel: From enterprise channel integration to the "core of user experience"

Omni-Channel is an "evolved multi-channel strategy" that interconnects all sales and contact channels a company has—such as stores, e-commerce, social media, and catalogs—so that end users can purchase products from anywhere. Standardizing inventory management on the backend and centralizing customer data form a very important foundation for the system structure.

However, many omnichannel platforms tended to remain solely from the supplier's perspective and convenience: "How to manage and integrate multiple channels (distribution channels) built by the company." OMO brings this back to the user side, starting from the "end-user's everyday life experience (UX)." In pursuing thorough, user-driven experience value that smartens payment and information acquisition, without making end users aware of the channel itself, it can be considered an upward compatibility concept of omnichannel.

Four Decisive Benefits for Businesses Implementing the OMO Model

We will explain the decisive business benefits that e-commerce businesses and physical store operators can gain by actively promoting the OMO model from four perspectives.

1. Maximizing LTV through enhanced cross-channel customer engagement

Various market data have shown that "cross-channel customers," who seamlessly use both channels, have dramatically higher purchase frequency and annual purchase value (LTV: customer lifetime value) than when end users are split into "customers who buy only from e-commerce" or "customers who buy only in physical stores."

By implementing OMO, you can cover flexible purchasing behaviors that cater to end users' whimsical lifestyles, such as "checking products on an e-commerce app during weekday commutes, checking the texture of physical products at physical stores on weekends, performing app payment (online payment) on the spot, and having products delivered to their homes empty-handed." As a result, brand loyalty strengthens, preventing them from leaving competitors.

2. Centralization and hyper-personalization of customer data (first-party data)

In traditional business, POS data from physical store registers and purchase data from e-commerce sites were managed by separate systems, often not linking the actions of the same individual. For accounting staff, it was just a list of numbers, and for the marketing department, it was low-resolution data.

In the OMO model, information about end users' member IDs (such as apps), in-store payment, and online 〇〇Pay / ID payment is fully centralized. For customers who scanned the barcode of this product in the store (became interested) but did not purchase on the spot, it becomes possible to pop-up discount coupons or reminders for related products on the e-commerce site three days later.

3. Eliminating friction for end users (seamless payment experience = delivering PX)

Offline shopping brings a lot of 'friction' for end users, such as long lines at the register, the hassle of taking credit cards or cash out of wallets, or the burden of carrying heavy purchases home.

OMO eliminates these frictions through the power of digital and payment. Platforms such as "Mobile Order," where customers can place orders and payment in advance within smartphone apps and pick up products at a dedicated counter in stores, and systems where payment are completed simply by scanning a QR code at the store, provide an overwhelmingly smooth payment experience (PX) that greatly enhances customer satisfaction.

4. Streamlining Inventory Management and Smartening Store Back-Of-Your-Mouth

Promoting OMO brings significant benefits to back-office and on-site operations. Because store inventory and e-commerce inventory are centrally managed in real time within the system, mismatches can be avoided where "there is inventory on the e-commerce site but it is sold out at the physical store, causing the loss of sales opportunities to the customer in front of you." Additionally, by utilizing in-store displays as "showrooming" experiences, with actual shipments carried out directly from large warehouses to end users' homes, there is no longer a need to hold massive inventory in the back-of-store stores, effectively utilizing store space, and reducing the workload of on-site staff during inventory checks.

Practical Disadvantages and Challenges in Promoting OMO Business

Although OMO offers many innovative benefits, there are unique hurdles and organizational considerations that need to be addressed before it can be realized in practice.

Massive initial investment and development effort required for system and data integration

The biggest challenge is the cost of renewing and integrating legacy systems. To seamlessly integrate previously isolated systems such as physical POS systems, e-commerce site management screens, CRM (Customer Service System), and ERP (Inventory and Core Systems), advanced system architecture design and appropriate development periods and initial costs are required. payment Responsible parties and IT departments need to carefully design the grand design to determine which data to integrate as the main axis.

Eliminating evaluation systems and organizational barriers (internal cannibalization) between physical stores and the e-commerce department

Not only the system aspect but also the transformation of organizational structure and mindset within the company is essential. In many retail companies, the physical store division and the e-commerce division have independent P/L ratios and pursue their respective sales targets.

If OMO is introduced in this state and "a customer who enthusiastically served customers in-store ultimately payment the app on an e-commerce site and makes a purchase," internal cannibalism arises over which department will be the result of that sales, and on-site staff often refuse to recommend the OMO app. It is necessary to shift the evaluation system toward a company-wide optimal system based on "contribution to overall channel sales" and "improvement in LTV."

The Integration and Importance of the 'payment System' That Determines the Success of OMO

If the infrastructure of payments that serves as the exit for the purchase process is not properly established, no matter how much you try to put on the front app, true OMO cannot be established.

Integration of QR payment in physical stores and 〇〇Pay / ID payment in e-commerce

The "QR payment" used when end users pay at physical stores and the "〇〇Pay / ID payment" when paying on e-commerce sites generally differ in the backend systems, payment processing routes, and payment cycles to merchants, even within the same brand (such as PayPay or d Payment).

To succeed with OMO, it is essential to have a system that allows the business operator to centrally manage and consolidate transactions (transaction data) obtained from the payment method of each channel under a single customer ID. Only by doing this can you accurately understand the customer that "this customer made two purchases at the store and once on e-commerce this month, all using the same Pay payment," which can be connected to the next marketing action.

Effectiveness of linking end-user member information with payment data

Not only enhancing the convenience of payment, but closely linking the payment with the "membership program (app)" is key to OMO marketing. By establishing a system where member information is automatically verified when members present their membership barcode within the app to payment or payment, end users benefit from points and automatic coupon application, while businesses can see "which customer bought it, when, where, what, and payment method." This will reliably accumulate valuable first-party data.

Criteria for selecting payment processing company companies (PSPs) to realize OMO

To build a robust OMO payment foundation that integrates online and offline channels, selecting a partner "payment processing company Company (PSP)" is extremely important.

Scalability of "Comprehensive payment Services" Covering Both Physical and Online Stores

When choosing a payment processing company company (PSP), you should select one that offers a true "comprehensive payment service" that offers not only online payment for e-commerce sites but also terminal payment and QR payment solutions for physical stores.

If you contract separate online PSPs and offline (face-to-face) PSPs, not only will the workload for system integration double, but the contract procedures, fee negotiations, and payment cycles will be completely fragmented, making it extremely difficult to achieve the main goal of OMO—'data centralization.'

A centralized management dashboard that reduces the man-hours required for accounting and payment staff

In OMO business, which spans a wide range of channels and payment method, designing without increasing the burden on back-office accountants is essential. Choose a PSP that allows you to view and integrate all payment method sales, refund, and payment cycles in one dashboard. By streamlining practical operations such as sales clearance and monthly closing tasks, businesses can focus on "proactive tasks" such as strengthening product advantage and advancing OMO marketing without worrying about cluttered system operations.

For building OMO infrastructure of payments, GMO Payment Gateway is the way to go.

Introducing the OMO model is an essential Management Strategy for achieving sustainable growth in the retail and distribution industry going forward. At the core of seamlessly connecting online and offline is a stress-free, excellent "payment Experience (PX)" and a robust "comprehensive payment system" capable of centrally managing vast amounts of data.

At GMO Payment Gateway (GMO-PG), as a leading company in payment processing industry, we have continuously supported Japanese infrastructure of payments from cutting-edge e-commerce payment to physical store Card Present Transactions.

Our "PG Multi-Payment Service" covers a wide variety of domestic and international 〇〇Pay / ID payment, CVS Payment, buy now pay later payment, and more, including Credit card payment, and provides a payment experience that is consistent both online and offline.

If you are a business about to actively promote your OMO business, or if you are struggling with integrating online and offline transaction data in accounting or payment, please feel free to contact our extensive Actual of GMO-PG. We propose the best infrastructure of payments for your business phase and future vision.