Future of O2O Commerce

Udana BandaraRakuten Inc.

Contents

• Introduction

• User Needs in the Mobile First World

• Driving Forces of O2O Commerce

• Case Study: Apple

• Rakuten & O2O Commerce

• Conclusion

Introduction

Past Present Future

WWW/ Browser based

Applications

World Wide Web

Smart Devices/ Wearables/PC based

Web Services

Browser based Applications

Wearable Computing

Internet of ThingsContext-Aware

Services(Ubiquitous Computing)Smart Devices

3D Printing/Open hardware

Users need with Mobility

1. Genevieve Bell, Director, Interaction and Experience Research, Intel Labs at the Intel Developer Forum, SF Sept. 10-12, 2013

trulypersonal unburdened

more & better

keep in the flow

What is Online to Offline (O2O) Commerce?

Commerce that is not Restricted by Online/Offline Boundary

O2O Commerce is a User Requirement

Ease & Efficiency

Seamless Shopping: Mixing Online & Offline

Navigating Information/Service Overflow

Personalization

Driving Forces of O2O

Mobility

Sensing

Electronic Currency, Credits & Points

Novel Business/Service Models

Case Study: Apple

source: iTunes US

PickUp EasyPay

O2O requirement: Integration & Simplification

manufacturing

logistics

retailer salesOnline sales

Rakuten and B2B2C model

•Rakuten’s roots:

• Merchants first

• Online Platform serving both online customers & online merchants

potential of becoming O2O platform

Landmark

Why Landmark?

4

Newspapers 10.6%

Magazines 4.3%Radio 2.1%

Television 30.2%

Direct Mail 6.7%

Free Newspapers/ Free Magazines 4.0%

POP 3.1%

Exhibitions/Screen Displays 4.4%

Flyers 8.8%

Transit 3.4%

Outdoor 5.1%

PROMOTIONAL MEDIA 36.4%

INTERNET 14.7%SATELLITE MEDIA-RELATED 1.7%

TRADITIONAL MEDIA 47.2%

2012 Advertising Expenditure Component Ratios by Medium

Total¥5,891.3billion

Telephone Directories 0.9%

Advertising Production 3.5%Advertising Placement 11.2%

II. 2012 Advertising Expenditures Classified by Medium

Satellite Media-Related advertising up sharply; Internet remained strong

Broken down by medium, advertising spending in Television, which accounts for a large proportion of spending, rose (up 3.0%), as did spending in Newspapers (up 4.2%). Spending in Magazines edged higher (up 0.4%), and in Radio fell slightly (down 0.1%). As a result, for the first time in eight years total year-on-year advertising expenditures for the traditional media increased (¥2,779.6 billion, up 2.9%), due in part to the rebound effect from the March 2011 earthquake.

Satellite Media-Related advertising expenditures rose sharply (¥101.3 billion, up 13.7%), with another year of double-digit gains on positive results from the London 2012 Olympic Games and other programming.

Internet advertising expenditures continued their steady rise (¥868.0 billion, up 7.7%), and now account for 14.7% of spending in all media.

Promotional Media expenditures increased for the first time in five years (¥2,142.4 billion, up 1.4%). Spending was up year on year in Outdoor, Transit, Flyers, Direct Mail, POP, and Exhibitions/Screen Displays. Spending in Free Newspapers/Free Magazines fell for the fifth consecutive year, while spending in Telephone Directories was down for the 14th successive year.

Key trends for each medium are summarized below.

4

Newspapers 10.6%

Magazines 4.3%Radio 2.1%

Television 30.2%

Direct Mail 6.7%

Free Newspapers/ Free Magazines 4.0%

POP 3.1%

Exhibitions/Screen Displays 4.4%

Flyers 8.8%

Transit 3.4%

Outdoor 5.1%

PROMOTIONAL MEDIA 36.4%

INTERNET 14.7%SATELLITE MEDIA-RELATED 1.7%

TRADITIONAL MEDIA 47.2%

2012 Advertising Expenditure Component Ratios by Medium

Total¥5,891.3billion

Telephone Directories 0.9%

Advertising Production 3.5%Advertising Placement 11.2%

II. 2012 Advertising Expenditures Classified by Medium

Satellite Media-Related advertising up sharply; Internet remained strong

Broken down by medium, advertising spending in Television, which accounts for a large proportion of spending, rose (up 3.0%), as did spending in Newspapers (up 4.2%). Spending in Magazines edged higher (up 0.4%), and in Radio fell slightly (down 0.1%). As a result, for the first time in eight years total year-on-year advertising expenditures for the traditional media increased (¥2,779.6 billion, up 2.9%), due in part to the rebound effect from the March 2011 earthquake.

Satellite Media-Related advertising expenditures rose sharply (¥101.3 billion, up 13.7%), with another year of double-digit gains on positive results from the London 2012 Olympic Games and other programming.

Internet advertising expenditures continued their steady rise (¥868.0 billion, up 7.7%), and now account for 14.7% of spending in all media.

Promotional Media expenditures increased for the first time in five years (¥2,142.4 billion, up 1.4%). Spending was up year on year in Outdoor, Transit, Flyers, Direct Mail, POP, and Exhibitions/Screen Displays. Spending in Free Newspapers/Free Magazines fell for the fifth consecutive year, while spending in Telephone Directories was down for the 14th successive year.

Key trends for each medium are summarized below.

(Dentsu Report: Advertising expenditures in Japan 2012 **)

promotional media spending > Internet marketing spending

These days, a “Smartphone App” for sales promotion information management can replace or compliment most of

the traditional sales promotional media

flyers

outdoor advertising

direct Mail

free magazine/newspaper

Exhibitions

Screen Display

Potential Market Size > 250 billion JPY **

* conservative assessments

Buying Process in O2O commerce

Discovery

Buying

Sharing

Evaluation

Recording

promotions associated smartphone app

alerts

QR codesBeacons

Geo-fences

Landmarks (video)

Landmark - Scenarios

16

Merchant creates a

Campaign

App usersparticipate the campaign as:

Consumers

&Affiliated

Marketers

Merchant achieves

sales targets+

App users receive

discounts and super points

Landmark App

Ubira

online/offline partnership

Real shop market share = more than 80% ;User need for a both online and offline

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Conventional Approach

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“Online/Offline conflict of Interest”

Amazon etc. Wal-Mart etc.

Amazon Price Check App.

Ubira: Ubiquitous Rakuten

“Online/Offline partnership”

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Ubira: Core Concepts

“The real-shop competing with online-shops within the same mobile platform with advantage”

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Patent Granted Technology

USELES

USLES: Ultrasonic communication in Smartphones

• Is secure (range can be programmed)• Works on smartphones iPhone/Android• Avoid patent licensing and protection around

RFID based payment systems.• Works on 200+ million iOS devices sold over the

world as well as millions of Android smart phones• Does not require hardware modifications• Can replace or co-exist with RFID payment

systems

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Payment platform:• Online/Offline transparency• Location aware• All cards in Phone• Online syncing• Ultrasonic payment

Competition:Square,PayPal, Google Checkout,...

Rakuten advantages:• Proven ultrasonic

communication technology• EDY• Rakuten Bank• Rakuten Credit Card• Existing market and

customers• Global distribution channels• Easy way to expand abroad

due to lack of patents in the area

pre transaction data-system

Secure verification protocol

Patent granted

Secure verification protocol

UltrasonicProtocol

USELES payment system demo (video)

Online Offline

1) User Data:- Social Data- Historical Transaction Data

2) User Behavioral Models

1)Real time Sensing (Location, orientation, movement, etc.)

2)Novel Interface

Partnership

O2O Future