Yesterday The Great Wall Club hosted an event themed Online to Offline or O2O at the co-working space, Garage Café in Zhongguancun. This new strange acronym is the latest emerging trend, following LBS (Location Based Service) and SOLOMO (Social, Local, Mobile).

So what is O2O? The definition may vary, but essentially it means attracting users online and directing them to physical stores in the offline realm. Some would argue, this is nothing new and many websites have been targeting people online to bring them in offline, but the element of online payment is what really makes O2O powerful. Why? Because businesses can measure the impact of online sales since a payment was actually made.

The group-buying or tuango model has been the most hyped and recently successful example of how O2O can work. However, many of yesterday’s speakers slammed the group-buying model because many players enter the market due to low barriers to entry, compete heavily on price and sell to un-loyal price sensitive customers that will switch from merchant to merchant, looking for the best deal, ultimately hurting the merchants. Now that many group-buying sites are quickly dying from simply a marketing channel disguised as something else, the next trend of O2O with a focus on service and value will emerge.

Since 2011 was the year of tuango or daily deals, 2012 is expected to be the year of O2O where people realize price is not enough to sustain a business. Other facets such as quality, value, service and experience will become more important differentiators. An example of an O2O business that delivers such a package is Zipcar, a business that allows customers to find and pay for a rental car online and drive it offline.

For more Western companies it will be easier to transpose a business online to offline because the tradition of service and quality are more developed. However, as one speaker yesterday mentioned, this could be difficult in China, where service is usually not a high priority. In my view, the best service I’ve gotten was from the hot pot chain, Haidilao but it is not reflective of most other businesses in China.

Another observation that emerged was the need for niche plays in the O2O market. Since most of the value generated will mainly occur offline, it will be important for such O2O businesses to have strong systems, processes, staff training, customer service, post-purchase service to really succeed. Niche markets could be health spas, gyms, rental cars, food delivery.

What are some of the best existing O2O examples you can think of?