Marketing

What retailers should value – eCommerce Magazin

In some cases, a lot has already happened with the implementation of new technologies and there are a number of some, already successful pilot projects. Nevertheless, especially in German-speaking countries, it is still a lot of “pilot” and too little “standard”, which primarily affects certain basic consumer requirements. Who said that? The consumers themselves. It is precisely these who provide an interesting insight into the current state of digitization in retail in the new study “Accelerating Digital Retail in DACH: A Consumer Perspective” by IBM. It examined what retailers should really pay attention to.

Digitization of the retail trade – the essential findings

The study, for which over 2,000 consumers in Germany, Austria and Switzerland were asked about their personal needs and preferences in retail both offline and online last year, focused on the areas of food, pharmaceuticals, fashion, household goods and electronics. The central results paint a nice picture of the current consumer attitudes in the German-speaking area, which certainly differs slightly in an international comparison, but also brings “local needs” into focus. So it is – if you know the German mentality – not too surprising that the price and the range are still the most important Decision criteria for purchasing are with a specific provider.

This is clearly reflected in the food retail sector in particular, as both are still the main distinguishing features of the numerous providers. Every week a new brochure, every week a new price war with combination and XXL offers, where every single cent is haggled. The creativity knows no limits here, just like the current flood of offers and Pricing around the VAT reduction shows. Nevertheless, the consumer can be more closely bound with additional digital offers. The example of Amazon shows how well this works and why it can outperform the price: the range is huge, but the price is not always the smallest. Nevertheless, many Amazon customers still access it, as handling via the website or app is very easy and the delivery speed – especially as a Prime customer – is unbeatable.

This is very difficult to imagine in the food retail sector, where the consumer is already happy when there is a reasonably clear online presence with a reasonable range. Here, more or less everything is defined by the price. That may be due in part to consumer expectations, as the study showed. While more than half of the respondents – across generations – expect an omnichannel offer in the electronics, fashion and household sectors, it is in the grocery sector, in which there is also much more emphasis on purchasing locally or at least “simply” ordering Groceries placed online with home delivery are far less.

Digital and innovative services are not a question of generation

In general, the generation differences in many categories are much smaller than is often assumed, also with regard to digital and innovative services. For example, not even 40 percent of respondents strive for this. Much more important to them is an existing and neatly set up basis with a few basic offers that should be standard for them, but are far from being established. “Simple” purchase and information offers such as online coupons for discounts in the store or bar or QR codes for more information on products in the store are mentioned here, although product reviews on the website would also be desirable.

As well as the ability to check online how full the store is before making a physical purchase. The “basis” also includes offers for the increasingly important last mile, in which returns handling in the shop and click-and-collect offers are mentioned. This clearly shows that consumers have long known what a functional basic offer should look like for them.

Digitization of Retail: New Technologies Less Important

However, according to the study, special, technologically advanced digital services such as augmented reality (AR) applications in stores or payment by facial scan are considered less important. The use of smartphones before and during physical shopping alone is much lower in German-speaking countries than in many international studies. “There you have it!”, Some retailers could say. “They don’t even want that.” However, this may be a fallacy. If we look at the general technological development and the state of digitization of private life and not just at the pure study results, it can certainly be better classified.

Why are smartphones hardly used for shopping? The answer could simply be: where there is no offer, there no incentive (not to mention the “reception possibilities” in certain shops). While Carrefour in France, for example, makes the entire supply chain of certain products accessible via a simple QR code scan in the store, there are few incentives in this country to use the mobile device, neither for in-store price comparisons, nor for little discount campaigns or also just a simple additional information offer. According to the study, it is precisely the digital services that can increase the relevance of a retailer. Only the basic offer should be right. No consumer will go to a retail store because of a fancy AR application or any other technological “gimmick” if he is already disappointed with its basic offer.

Effects of the corona crisis on the digitization of retail

The corona pandemic, which also took its course in Germany at the beginning of 2020, has once again made the whole topic even more explosive. While the study results relate to the pre-Corona period, the results with regard to the lack of digitization in retail and the lack of numerous “standard” offers in the online area are likely to have increased again. Corona suddenly held up a mirror in front of the entire retail industry in terms of flexibility and ability to act. Clearly, a distinction must be made here according to relevance. Fashion and electronics were suddenly less of a focus for consumers; most companies were already reasonably well positioned with their online business and were able to generate at least some of their sales from them. However, the basic supply of food and medicines was the most important. The failures of the last few years quickly became apparent here.

In the past, there were supposedly only a few reasons to implement an omnichannel presence on the basis of a scalable platform. This was often justified by the fact that the associated investments and running costs were too high, so that the next weekly offer prospectus was further refined. Anyone who was not very mobile or belonged to a risk group, especially in times of lockdown, was dependent on flexible delivery offers, for example. However, these were hardly available, so thanks go to the many voluntary helpers from the family or the neighborhood who took care of others, as the food retailers in particular could not afford it.

At least some providers of daily needs were able to react relatively quickly, as the example of dm showed, who were able to roll out a click-and-collect offer very quickly. However, this only works with an existing online presence and in conjunction with a functional merchandise management system and other crucial back office systems. Other technological possibilities, which at first might have been dismissed as “gimmicks” or “distant utopia”, would suddenly have been desirable, for example fully automatic goods registration and functioning mobile payment methods, which further reduce the formation of small groups at the checkouts and thus the physical contact points of people would have. At least self-checkout stations are becoming more and more established. Above all, it is time to rethink this in order to be prepared for similar crises. According to estimates by virologists and ecologists, such crises can be expected at regular intervals in the future.

Digitization of retail: It starts at the base

But the corona crisis is by no means the only reason why retailers should start thinking about their future now, especially the food retailers. Of course, this especially has to struggle with extremely low margins, which can often only be achieved by purchasing enormous quantities. It will stay that way if everything continues in the previous price-dumping cycle and the pork schnitzel is available here and there next week for a small kilo price.

The electronics and fashion industries have already passed an extreme turning point. Amazon and Zalando have become indispensable in both areas and now form a strong pillar in these segments, while all competitors are wondering how they should position themselves against them. The question is: When will the digitization of retail in the food sector happen? The supposed lack of digital “need” of customers does not have to mean that it does not become a need or desire at some point when certain offers suddenly appear.

When it came to delivery times, a few days ago there were no problems at all. Then came Amazon with its Prime offering. From now on, delivery is expected the next day or, at most, the day after that. The same-day delivery trend will exacerbate this. Everything above that already leads to many a break in the purchasing process. So what if suddenly there is a supplier like Amazon in the food sector, be it an existing supplier that is positioning itself accordingly or a completely new company that is pushing into the market? And what happens at the latest in a new crisis, when this provider is able overnight to pull out all the stops across all channels and to supply its customers optimally and in every situation?

It is therefore essential for the retail sector to implement four key conclusions from the IBM study:

  1. Get the basics right: The fundamentals of the digitization of retail must be laid correctly. However, it will by no means be sufficient to try to simply add certain services and offers to the existing organizational and technological structures. On the one hand, it is time to clean up the old systems that still exist in many places and to think about a functioning basic setup that enables cross-channel networking and interlocking services. One that also opens up the opportunity to retain customers with additional services and to constantly surprise them positively – not only in times of a corona pandemic.
  2. The omnichannel customer experience must be designed more actively, to be closer to the customer; all actions must always be viewed and evaluated from the customer’s perspective. This includes first of all clarifying the questions: Who will buy from me when, where and what? What process is he going through and how can I support him at the individual stages of his journey, offline as well as online? In its “Connect” branches, Decathlon not only enables its customers to experience the products of their choice via an AR application, but also to use a variety of services with the mobile app as a central element. This includes a product finder for items selected online, in-store navigation for quick and precise localization of your product, more information on products by scanning (RFID) labels and payment via app. All steps that make the customer’s shopping experience easier and more effective. In addition, customers can join sports communities via the app, which has a community effect. In a set with a range of delivery options for the last mile, this binds customers permanently.
  3. For the identification of customer requirements modern analytics tools are used. What customers say is one thing, what they really want is the other – read between the lines and identify and try out new services. It is also important to have more courage for test pilots, even if they may not always bring the desired result because customers do not accept certain offers. No development is better than shared experience with the customer. The findings from each of these projects can have a positive influence on all subsequent projects.
  4. The customer relationship is a shared journey into the future, that never ends. The more people are involved in their design via learning and test phases, the better the digital offers will be accepted on this. In our fast-paced world, it is utopian to strive for a very specific omnichannel setup, even if it works excellently at first, and then to assume that this model will work the same over a longer period of time. The constant evaluation and reassessment of the measures is now an integral part of the management.

Nobody is alone – the Fressnapf Group is leading the way

Of course, it is easy to say to ask for detailed business and customer analysis. In addition, by means of analysis processes and tools that may not have been used before. Especially in segments in which the distinguishing features are initially considered to be rather minor. But nobody is alone. For this important first step, the “self-discovery” and the definition of strategy and potential measures, which are still far ahead of the technology procurement (if it is the other way around, it goes fundamentally wrong), there are partners and models who can provide support.

For example, the Fressnapf Group faced a similar challenge. In 2025, the company aims to be number one for all pet-related topics – offline and online. The basis is to provide data-driven professional and personal customer advice that is geared towards customer needs and the life cycle of the pet. Whether information on certain pet diets, questions about dog schools, tips for caring for animals at home or looking for the nearest veterinarian or a good boarding house – pet owners should find all of this at Fressnapf in the future, regardless of which contact point.

In order to achieve these goals and to promote the development of a digital platform in addition to the development of an agile organization, Fressnapf worked with IBM iX, the global digital agency under the umbrella of IBM. The decisive factor for this cooperation was the approach that goes beyond the mere development of certain digital solutions, since a successful digital transformation is much more than the stringing together of a web shop and digital sales assistant. For the Fressnapf Group, too, it was a matter of rethinking the business model and actively shaping change processes. For this, both entrepreneurial and creative skills had to be brought together. With the credo “Business by Design” and the method set of the IBM Garage, the IBM iX teams work worldwide according to a consistently user-oriented and collaborative model that involves the customer in the process from the very beginning.

One of the results of this method for the Fressnapf Group is the expansion of digital tools for employees and customers, the implementation of which is now up to both partners. These are implemented with the help of microservices and thus enable reusability in other digital projects. One example is the digital employee assistant MIA, which can be used on mobile devices in the shop as well as in the back office. Thanks to MIA, the staff can provide information on customer inquiries quickly and competently at any time.

Digitization of retail: implementing consumer wishes

While customers have long known what to expect from their retailers, the reverse is still far too little the case. The results of the study have shown that in this country it is primarily about a functioning basis of digital offers, such as online bookable options for the last mile, which the consumer would like to see as “standard”, but which are often still available for retailers Future lie. Or just the option of ordering groceries entirely online.

However, customer loyalty will hardly work like this, especially not in times of a corona pandemic, which has made many retailers aware of what they have done or failed to do in recent years. Mind you: in the “standard area”. More unusual technological applications, on the other hand, are still in little demand anyway, but that is not surprising – from a contextual perspective. After all, the customer wants to say: “First show me that you can do the duty before we get to the freestyle.”

About the author: Michael Fischer is Executive Partner at IBM Consumer Products & Retail Industry Leader DE & AT.

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