Redefining Retail

What will remain after corona and how can we prepare for its aftermath? Five hypotheses for local businesses and their digital sustainability

 

by Carsten Szameitat, Chairman of the Board of the Location Based Marketing Association DACH e.V. (LBMA) and Director of the INTERNET WORLD EXPO trade fair. The LBMA is an international association that places the connection between the real world and the digital world at the heart of its activities. The INTERNET WORLD EXPO is the largest European e-commerce trade fair.

 

Out of concern for their very survival, many companies are currently ignoring the future viability of their own business after the end of the pandemic. This is understandable on the one hand; on the other hand, this can lead to an even more serious crisis in the longer term. This is because companies that hold back now and focus exclusively on their continued existence during this exceptional situation may well survive it. They will, however, not emerge stronger from it, but will prove to be badly damaged and weakened. This is why companies that see the current situation as an opportunity and take measures to guarantee success after and even during the crisis are set to benefit.

The focus here isn’t primarily on large corporations with their almost unlimited resources, but rather medium-sized companies with a clear market positioning. This also includes the specialized production and service companies, whose entire sales channel collapsed within a few days. Stores are no longer open and in mail order business, which is often seen as a way out, Amazon and similar enterprises have initially cleared out their storage space for goods for daily use. But precisely because such an industry giant like Amazon now has to set priorities, supply gaps are arising that others can fill with a bit of skill. Those who secure logistics capacities for themselves - at least storage space is currently more than plentiful - and who are not additionally affected by supply bottlenecks, may prove to be the winners during the crisis. After all, there is still a demand for certain goods that can only be satisfied to a limited extent by the usual game players.

And yet, a short-term adjustment of one's own business model is by no means sufficient, as the world is currently changing dramatically. And of course, every company is affected by this - whether it sells online, offline or across all channels. That's why it's imperative that companies everywhere take a close look at their own procedures and the forecasts that they have made so far. It is, of course, helpful if a clear, pursuable goal can be identified. To this effect, a few hypothetical assumptions can help to help adopt the right course.

Hypothesis 1: Physical stores will become increasingly automated

The fact that more and more processes in stationary stores will be automated in future is almost certain - only the extent is unknown. Even Amazon, which opened its first completely cashless supermarket in Seattle shortly before the beginning of the crisis, is continuing to rely on store personnel there - at least for the time being - to fill the shelves with products and answer customer questions. Weight sensors installed there enable fairly accurate monitoring of the stocks taken by customers, so that the shelves could actually be automatically filled from a central warehouse if the store is set up accordingly. Apart from the current logistical bottlenecks, customers would then no longer have to worry about empty shelves due to the store personnel not being able to keep up with the refilling process. How such systems work in practice can already be seen on a smaller scale in pharmacies, where medications can only be placed in the compartments provided for dispensing after they have been ordered.

And pure vending machines as well will certainly play an even more important role in future, especially since the modern versions of the machines allow an immense variety of goods to be sold and can remain "open" round the clock. In other countries it is already quite normal to purchase fruit and vegetables, eggs, fashion items, smartphones or fresh fast food from them. Germany is slowly catching up. ErnteBox, for example, brings fresh products produced by Bavarian farmers to Munich, where they can be purchased from a number of vending machines. The machines are likely, however, to develop their true potential in the countryside since they fill the gap, relatively inexpensively, left by the decline of mom-and-pop stores.

As a manufacturer, one should therefore urgently check whether the company’s own products and their packaging are suitable for automated delivery or presentation in a vending machine, and if in doubt, consider how they can be adapted accordingly. On the retail side, in addition to the measures described above, cleaning and inventory robots can now make life easier and free up employees from routine tasks. The workforce then has an increased amount of time much more often for various customer concerns, and thus ensure that consumers feel comfortable in the store. After all, stationary retail stands out from online business primarily through its inherent strengths: interpersonal contact (which will presumably be increasingly sought after again after the end of "social distancing"), personal advice and products that can be showcased directly. These are the “bonuses” with which it can and must score points.

In order to automate inventory via robots and thus also to considerably accelerate processes, the entire inventory should be quickly trackable by technical means. For this purpose, current solutions require that the products be equipped with RFID labelling. Using cameras, the robots can not only take over the standard inventory, but also detect gaps in the shelf. It is therefore hardly surprising, for example, that Adler fashion stores are already making intensive use of the Tory model developed in Ilmenau, Thuringia, and plan to install it in all stores by the end of 2021. Cleaning robots also increase cleanliness in the stores by declaring an ongoing war on dirt. Of course, those who want to use them during regular opening hours will have to consider their store layout and design: on the one hand, there should be hardly any corners inaccessible to robots; on the other hand, aisles should be designed so that customers and machines do not get in each other's way.

Hypothesis 2: Information will become digital on site

Nowadays, when consumers search for information on products, they often first consult the Internet, even if they actually shop as usual afterwards. This thirst for knowledge can no longer escape the attention of stationary retailers, which is why product descriptions, in addition to prices, are becoming an additional digital on site feature. For example, touchscreen monitors enable consumers to learn all that is relevant about the respective goods directly in the store or receive basic advice. As retailers generally do not compile the displayed information themselves and can therefore only add a personal touch, they are dependent on the cooperation of manufacturers. For this reason, all product data and descriptions should be carefully scrutinized. Companies should determine whether they still meet the increased requirements; if not, the quality of the texts and images must be significantly improved.

In addition, the separation of online and offline business is being further eroded, as it is becoming increasingly apparent that both channels can only enfold their full potential when they are used together. Ideally, customers on the Internet site of a retailer can have the goods which are offered there, and which are excellently described, delivered to their home, to a parcel station or to a nearby branch of the company. At the same time, they can discover in real time which and how many items are available in the store itself - in other words, whether a shopping trip there is worthwhile. This detailed product display also feeds the search engines, so that users receive local hits when they look for a particular item. All the options listed are also available to consumers directly in the store.

By using physical space, e-commerce is provided with the opportunity to demonstrate its products to customers up close and personal in order to further boost sales. Currently, primarily showrooms are used for this purpose, although buyers can only order the displayed goods via online shipping. Internet giants like Zalando are now also making inroads into the stationary market trade with regular branches. Even Amazon has long since recognized this potential and now owns, in addition to numerous stores operating under the Amazon logo, the organic supermarket chain Whole Foods in the US, which boasts around 500 locations. And as the Chinese e-commerce companies, which are increasingly investing in their own convenience stores, are demonstrating, a physical presence on site can also make it easier to fill online orders.

The nearly seamless linking of online and offline business is now one of the basic principles for almost every company when it comes to preparing for the future. Especially these days, it would be extremely helpful for countless individuals if they had at least one online shop that they could count on which continues to offer their products. Instead, it is part of German reality today that a Rewe supermarket cooperating with a local auxiliary delivery service prefers to accept orders via fax. But even during normal times: When customers experience ‘live’ what is actually possible with modern technology and a correspondingly optimized supply chain, they will also demand the same from other retailers - and put them under a great deal of pressure. That's why everything should be done today to be at the vanguard of digital transformation.

 

Hypothesis 3: Virtual product presentations on the rise

Even though it will still take a few years before the technology is fully mature, augmented reality (AR) and virtual reality (VR) are already changing the retail terrain. Augmented reality is currently benefiting somewhat from the fact that it only requires a smartphone, even though future plans for the technology are more likely to include a solution involving glasses. Since the camera image on the mobile phone display is mixed with digital content, products can be presented via AR in an environment familiar to the user or even on his or her own body. In applications from various companies, it is now possible, among other things, to see in advance how furniture will look in one's own home or how a particular cosmetic product changes one’s face. The online fashion market in particular, which is confronted with frequent returns, is set to benefit from augmented reality in the long term, as better technology can also be used to simulate the wearing of clothing on one's own body. In the meantime, mirrors are deployed in shops that are rarely used to reflect reality, as users can change their appearance at the push of a button and thus try out various make-up utensils, for example. Compared to the rather small smartphone screens, these systems score points above all with their much more realistic proportions.

Via virtual reality, product experiences can be created, especially in stationary retail, which otherwise would have been much more difficult or even impossible to realize. The often criticized isolation from the normal environment helps here in favor of a digital environment that feels real. In practical tests as part of a master's thesis, for example, the scent of a certain perfume was combined with a simulated VR helicopter flight over Mount Everest, which inspired almost three times as many test persons to buy as in the control group. Product presentations through the Internet, where everyone feels as if they are ‘live’ on site, are also conceivable in future, should virtual reality become widely accepted thanks to the better form factor of the necessary glasses and increased display quality. Especially in times of isolation, this would be extremely helpful, as concerts, sports events and other events could still be "visited" without fearing possible threats.

On the retail side, thought should therefore already now be given as to how both AR and VR could be integrated into one's own concepts, whereby creative ideas are definitely required. Once again, manufacturers must also become active by preparing their articles for presentation in digital worlds. This includes, above all, high-quality 3D models of all available products.

Hypothesis 4: Physical payment on site will be minimized

At least before the crisis, Germany was still considered a cash nation, even though the importance of notes and coins continues to decline there. In view of Covid-19, however, there has been an increasing call for card-based or contactless payment - in some stores cash is even completely taboo. This should significantly accelerate the change in payment methods. At present, mobile payment, i.e. paying the bill with a smartphone, is probably the best protection against infection, as the PIN entry or fingerprint scan is usually done on the user's own device. With advanced cashless systems, such as the Amazon Go Grocery store in Seattle, the mobile phone plays an even more important role. In this case, when entering the store, customers are securely identified via their Amazon account and a QR code generated via an app and can then simply add items to their shopping cart as usual. However, there is no longer a checkout zone, so they simply walk out of the store with all of their purchases. Billing is done automatically via Amazon.

Payment methods formerly reserved for the Internet are generally gaining in importance as they can also be used for physical services. For example, there is little reason why customers in stationary trade should not be offered PayPal and other previously unsupported payment methods. As in e-commerce, customers value a wide variety of payment options. Foreign tourists, who will hopefully return to Europe in large numbers after the crisis, are particularly pleased if they can continue to pay for their purchases using the payment method they are used to at home. A shop that relies solely on cash and card payments will presumably miss out on a lot of sales in the future. Cash register systems, which will most likely not become obsolete for some time due to the high acquisition costs for alternative technology, should therefore be enabled to quickly integrate even seemingly exotic payment systems. Given the complexity of the issue, cooperation with a company specializing in payment is advisable.

Hypothesis 5: Sustainability will gain in importance

Even though the media are of course currently focusing on something else, environmental protection and sustainability remain on the agenda - precisely because the current crisis shows us how fragile a stable society can quickly become. Retailers and manufacturers alike should therefore ask themselves what adjustments they can make to offer more sustainably produced products, reduce the enormous amount of packaging waste and put a stop to the throwaway mentality. Apart from radical measures to attract a very specific target group, this will certainly not have an immediate impact on sales success. In the long term, however, at least the image among younger people is likely to suffer if companies simply continue to operate as before without including the problems of the planet in their strategy.

NEXT:

LBMA's “Redefine Retail” Tour

In order to actively face the current challenges and to provide companies with plenty of additional helpful information and tips for their further orientation, the Location Based Marketing Association is organizing for the first time a conference on this topic to be held on September 3. The "Redefine Retail" can be attended both physically in Zurich and digitally.

 

INTERNET WORLD EXPO

The next INTERNET WORLD EXPO on October 13-14 in Munich offers a range of new insights for all those who are involved in online and digital commerce. Many partners and exhibitors are looking forward to the trade fair, which has now been postponed until fall. A particular focus will be on assistance for stationary retail chains, which are currently under enormous pressure. You will find a wealth of information on this topic on the news channel of INTERNET WORLD Business.

 

Contact:

 

Location Based Marketing Association

Jacqueline Gebhard

E-Mail: office@theLBMA.org

Internet: www.theLBMA.org

 

About the author:

Carsten Szameitat is one of the pioneers in the mobile market and stationary digital commerce. With a passion for innovation and technology, he has been linking up market players with customers and media over the past 10 years. In addition, he organizes various focus events that give him a broad insight into the digital value chain. Currently, he is dedicating himself to the topic of location-based services at the POS/POI with technological possibilities. The focus is on "location" in connection with service and technology as well as the marketing-oriented interaction and networking in the online world. In addition to professional positions at Red Bull, Dr. Oetker, Gallo Winery, SZ Services Payment and the publishing house Computech Media, Carsten Szameitat founded the agency 11 Prozent Communication together with his wife. There, he developed GFM Nachrichten - Digital for retail and marketing as well as numerous communication, customer loyalty and service products for the European digital industry. In 2013 Carsten Szameitat took over the German-speaking agencies of the global association Location Based Marketing Association (LBMA) e.V. In 2017, he founded the RetailTour Initiative within the association, which brings together local retail experts leading to the most interesting installations of new technologies in stationary retail worldwide. Since March 2019, he has been the director of, in addition to LBMA e.V., the INTERNET WORLD EXPO, the leading trade fair for e-commerce.

 

Location Based Marketing Association (LBMA e.V.):

International trade association for location-based technology solutions and marketing. With 1,400 members from 20 countries, the LBMA promotes the exchange among the digital stationary retail world. The focus is on the networking online, mobile and local. With Carsten Szameitat as Chairman of the Board of Management, the association launched its activities in the DACH region in 2014 as LBMA e.V. and attracted well-known companies including PAYBACK, Media-Saturn, KARSTADT and Wirecard. The newest members include CCV Deutschland, Brunée Marketing, hystreet.com, Pyramid Computer, synaigy, the Search Experience Cloud company Yext, Wanzl, the world's largest manufacturer of shopping trolleys, and Munich Airport with Eurotrade. The association supports its members with information, networking, knowledge and various projects. A German-language information and knowledge magazine is also published regularly. The latest issue "Reaching customers: stationary and online" can be found at https://www.thelbma.org/kompendium/.

Member quotes:

"MediaMarktSaturn is involved in the association as multichannel retailing reflects the reality of our customers' lives. They no longer distinguish between online and offline, so we don't either."

"KARSTADT is active in the association because it gives us an overview of current information, new technologies and use cases when digitizing our business.”