By slightly renouncing the reality dominated recently by the fear caused by the COVID-19 pandemic, I decided to discuss and review technological trends in the retail industry. I assume that from the crisis management phase of the sudden turn of events (I have described them in this post, among other things) and keep a close eye on the epidemiological, economic and political forecasts, we will move on to a new but stable status quo later this year.
My personal predictions indicate that the economy will start pulsating fairly regularly in the autumn. The question, then, is: what technology has to offer the retail segment in 2020? I have chosen some, in my opinion, most important trends and described them in alphabetical order, and today I want to share them with you. I encourage you to read it.
“A” like Automation
Automation or robotization is already affecting every area, including retail. Wherever there are repetitive processes, the robot’s work will be cheaper and more accurate than human work. In trade, robotization appears in at least three aspects: automatic cash registers, robots in goods logistics or process monitoring.
In Poland, automatic cash registers appeared at first in food hypermarkets (e.g. Auchan, Carrefour) and DIY (e.g. Leroy Merlin). Initially, they handled small customer flow. Near the cash registers, there always used to be an employee who was constantly supervising the integrity of the customers and served as an assistant in the event of service problems or the need to identify oneself when purchasing alcohol. The concept of automated cash registers was adopted quite quickly, and other networks, also in smaller formats, began to install automated cash registers en masse. I was curious how the coronavirus would influence this trend and I did not have to wait long for the effects – already in the first days of the pandemic Rossmann completely switched to automatic cash registers.
Automation in logistics seems to be a marriage of convenience. In few places of business we deal on the one hand with high standardisation (pallets, trucks, containers, wagons, warehouses; barcodes, labels, collectors) and on the other hand with the need to synchronise processes between different entities (loading/unloading, document circulation, customs procedures, audit). A good example is the establishment of one of the larger logistics companies, Rhenus Logistics, a company specializing in process robotization or success of Etisoft Smart Solutions, a Polish company implementing robotic AGVs for pallet transport. In an era of permanent staff shortages and rising labour costs, it can be expected that this trend will definitely increase in the coming years. This is evidenced by the fact that the cloud of driving robots is no longer just an everyday reality for Amazon but also for the Pabianice company Lumileds and Pepco opens a modern logistics centre.
The last area of automation, which is increasingly visible in the retail industry (as well as in its derivative areas – petrol stations, hotels) is the automation of monitoring. Two solutions in particular seem to be the market breakthrough: anti-fraud systems and monitoring of merchandising activities. Why these ones? As it turns out, fraud is a serious problem. According to the Sensormatic Global Shrink Index Report, the level of revenue lost due to fraudulent activity varies between 1 and 3% of turnover. Modern monitoring allows to identify and eliminate even half of such events. Modern solutions involve artificial intelligence, which by analyzing transaction data and CCTV camera recordings (for illustration purposes – on the scale of a chain of 500 stores we talk about 150 thousand transactions a day and an image from 2,500 cameras), allows to identify suspicious events and automatically send reports to persons responsible for fraud prevention. One of the best known implementations of this system was realized by March Networks company for Dunkin’ Donuts. Another application of automation takes place in the monitoring of shop shelves. The implementation of Boss Nova robots in the Walmart network got a lot publicity. This robot rides along the shelves and scans them with 15 cameras to check the compatibility with the planogram and verifies the deficiencies on the shelf to then notifies the warehouse of the need to complete the range. Another solution, provided by Euvic IT is a stationary shelf scanner designed to monitor merchandising activities. It is a combination of AI (comparing a shelf with a planogram and monitoring changes) with remote supervision (reviewing AI reports even several times a day, starting escalations and checking their effects).
“B” like Big Data
The retail sector generates and collects gigantic amounts of data. Each POS handles from a few to tens of thousands of transactions a day, each visit to the e-shop website is a dozen or so thousands of bytes of customer data, and each interaction with the customer in social media is a potential beginning or effect of the sales process. Countless warehousing and logistics operations, payments, CCTV camera records, ERP, CRM, mobile applications – this calls for associating these data with each other and using them to build a competitive advantage. This will enable e.g. better targeting of advertisements, improvement of service processes, effective involvement of customers in thoughtful sales scenarios or finally identification of places of cost optimization.
The main benefits of using Big Data by retail chains include:
- collecting and processing data about customers, their behaviour, purchasing preferences and segmenting this information in order to prepare effective marketing strategies,
- price optimization based on current and forecast trends in popularity of brands and product groups in connection with customer data, their location, purchasing preferences and data on prices offered by competitors,
- ensuring an adequate level of inventory through dynamic supply chain management based on the expected volume of sales of particular groups of goods or SKU products over a specific time period,
- improving the quality of service by collecting and analysing customer feedback in traditional channels and social media,
- optimization of the distribution of goods on the shelves by collecting information from cameras and motion sensors and modeling them in the form of templates of customer behavior in the store.
“C” like Cybersecurity
There is no doubt that a lot will happen in the field of security. However, I would like to draw particular attention to two aspects:
- cybersecurity related to the expansion of retail on the Internet and the regulation of the GDPR and fraud prevention,
- sanitary safety, the importance of which has increased dramatically as a result of the COVID-19 pandemic.
Many online retailers have already seen that insufficient data security on the Internet can pose a serious threat to the whole company. Moreover, with the implementation of the GDPR Directive within the European Union, the loss of control over data has ceased to be a mere image problem and now, in addition, it also carries high financial penalties. Morele.net experienced its severe consequences when it was punished with PLN 2.8 million for disclosing data of 2 million customers. Where is the problem? As usual in security expenses, which the punished company explained.
Solutions in the area of fraud prevention automate the detection of crimes which, as I mentioned above, are responsible for a loss of 1 to 3 points of gross margin. According to Sensomatric Shrink Index thefts (34%), dishonest suppliers (24%), shopkeepers (23%) and administrative errors (nearly 19%) are the source of losses. Traditional physical protection based on RFID or direct CCTV surveillance proves to be insufficient today, and shop or hotel owners are more and more willing to use advanced BI solutions (based on transactional data) or automated camera image analysis to detect sources of losses. Such solutions are based on a simple return on investment – if a small convenience store has a monthly turnover of PLN 100 thousand, the statistical fraud in this period of time reaches PLN 1-3 thousand. Detecting the sources of theft and implementing point-based security measures will reduce the scale of fraud by 50%, which is a sufficient argument for investing in such systems.
Sanitary safety in shops, service points and hotels is an absolute novelty, but you can expect a boom for this type of solution. Especially now, when the presence of Coronavirus in an employee may lead to the closure of the premises, warehouse or shutting down the hotel room for many days. The emphasis on employee safety is also becoming increasingly strong. Non-contact systems scanning body temperature of people entering a given place, alarming about the detection of people with elevated body temperature and the need to take appropriate steps in this connection (e.g. not to allow the employee to work or disinfect the hotel room with special care).
“D” like Digital Strategy
As we all know, all sales are gradually but inexorably migrating to virtual space. The more people regularly use their smartphones, the faster it happens. Physical stores still have a strong market position (due to time and cost of delivery or the possibility of physical contact with the product, e.g. to assess its quality), but the trend is clear. In some areas (music, books, computer games), virtual sales have almost completely displaced physical sales. What is more, every year, whether due to social media, popularization of mobile applications or monopolization of market fragments by specific platforms (such as Amazon, Allegro or Google Maps), the burden of consumer decisions is increasingly shifting towards virtual space. So you can safely risk the thesis that large trade, without a proper digital strategy, simply cannot survive. So where can technology find its place? At least in several areas: omnichannel, mobile applications, BigData, proximity marketing or SEO. I will mention omnichannel, BigData and SEO in more detail below, describing the e-commerce trend, but at this point I would like to focus on mobile applications.
It was a big surprise for the market to see Żappka whose success in mid-2019 was reported in the media. Rossmann Club and my Carrefour turned out to be popular loyalty applications have also proved to be. The survey conducted by Spicy mobile clearly shows that there is no turning back from mobile today. We do not yet know in which direction this area will develop (loyalty programs, mobile stores, integration into wider shopping platforms), but it seems that the money invested in it already has a high rate of return, and in a moment it will become for companies in the retail sector “to be or not to be”.
There are also some unobvious elements of a digital strategy in the mobile area, in particular third-party applications that are worth integrating with their own solutions. Which applications are these? First of all payment systems (PayPal, Revolut, Blik), independent loyalty programs (Payback), credit and payment services (Bluemedia, PayU), specialized solutions (Books) or proximity marketing tools based on beacons or Google location services. However, this is a huge area, which would certainly be worth a separate article.
Inventing and developing a digital strategy for many entrepreneurs can be a really tough nut to crack. However, it should be remembered that today’s strategy does not have to be invented by itself. It is worth choosing your partner who, thanks to its know-how and knowledge of best practices relevant to the sector, will help to successfully complete the digital transition.
“E” like E-commerce
E-commerce solutions are nothing new in retail. What is more, as the leading independent analytical and research company Gartner admits, Magento has been the market leader in e-commerce platforms for several years now.
Although different juxtapositions also indicate the existence of other successful players, Magento is always high. The most changes in e-commerce software include SEO support, omnichannel and integration with the external environment, i.e. sales platforms (Allegro), payment systems (PayU), courier companies (DHL), or omnichannel platforms. Although, since Amazon patented 1-click experience, 11 years have passed (and 3 years after the patent expires…), the one-step shopping basket for many online retailers is still just a dream. Customers, on the other hand, strongly appreciate automatic notifications about the statuses: availability of goods, payment, shipping or complaints, and their implementation requires complex integration of own software with external software.
A separate issue in e-commerce is omnichannel, understood not only as unifying shopping experience in different channels, but above all as multichannel communication. A modern customer expects the seller to ensure consistency within all available communication scenarios (e-mail, telephone, chat, mobile application, social media, traditional mail, etc.).
This approach, however, requires the implementation and integration of the software in order to combine the different communication channels into one scenario and a ticket available to all consultants and customers. However, as it turns out, it happens that even the biggest players do not deal with this issue, which I described briefly in my post devoted to trying to buy a desk from one of the world’s leading furniture retailers.
It is difficult to go past the innovative solutions that stormed the e-commerce market in 2019 indifferently. A great example is eobuwie.com brank which completely reversed the paradigm of traditional sales, making e-commerce a central axis of operation, and the real space (expensive shopping malls) started to serve only as a place to pick up orders, measure the rate or make online purchases thanks to special kiosks. Interestingly, the concept assumes that without clicking through the online system, the customer is not even able to try on any shoes on site. The year 2020 will certainly be crucial for this sales model and will verify whether it is likely to be adopted on a larger scale. The best indicator here will surely be the boom for leasing space in shopping malls among brands such as Zalando or Moliera2.
“F” like Facilities
It has long been known that a physical shop is not only a counter, cash register, warehouse, goods and seller. Taking advantage of the fact that the customer has made an effort and has found himself in the shop space with his wallet, retailers are more and more willing to equip this space with devices that increase its attractiveness and, as a result, allow the customer to spend money easier and faster.
For many years, lottery machines, vending machines or terminals for scratch cards and loyalty programs have been present in the shops, but already in 2019, completely new devices began to appear, such as car loaders, machines for receiving and transmitting parcels or even stands of city bike rental companies. All this increases the attractiveness of the shop, and in the case of chargers for electric cars, it also causes an additional influx of wealthy customers. No wonder – the possibility of charging an electric car while shopping or staying in a hotel is a really attractive scenario. This opportunity was noticed by Auchan shopping centre (or more precisely by the Ceetrus company which manages it), which in 2019 launched the first chargers at shopping malls. The same principle also applies to the automatic sending and to collection of the packages. They allow you to collect/send a package when shopping. Biedronka and Poczta Polska, which in 2019 began installing the first 200 automatic vending machines. are an interesting combination of two giants deserves special attention in this area.
Summary
Personally, I see the enormous potential of all the trends I have mentioned and I am convinced that they can and certainly will have a huge impact on the entire retail industry.
I firmly believe that both this year and the coming years will be a period of transformation on an unprecedented scale for the retail industry. The speed with which companies from the industry will adapt new trends will translate directly into their image and future development. However, it is necessary to understand how technology supports the work of physical sales outlets, how it affects their performance, the work of their salespeople and, most importantly, the customer experience.
The author of the article is Bartłomiej Łatka, an expert on retail and logistics.
