Retail is currently undergoing radical transformation: smartphones have turned purchasing habits upside down and many customers are migrating from shops and stores to online retailers. Yet there are effective countermeasures – we spoke with digital retail expert Alexander Hahn about digital price tags, smart shopping carts, AI-based customer consultation and other exciting developments.
Note: This article is part of our #DigitalRetail series - click here for an overview
Alexander, what current trends are you seeing at the Point of Sale (POS)?
POS business is currently undergoing a radical transformation. Although individual decision-makers in retail still have some inhibitions about being the first movers, retailers active out on the shop floor are all aware that massive change is inevitable. A retail revolution is underway.
The primary cause of this is that digital technology is changing customer purchasing habits to an extreme degree. To give but one example: the omnipresent smartphone is with people all the time, no matter where they go, and that includes when they’re shopping. It is a matter of course today that customers wanting to buy a new TV from an electronics store will first use their cellphones to check how much other suppliers are charging for that particular model.
So how can retailers respond to this?
To give a concrete example, every Media Markt and Saturn branch – and they are the European market leaders in consumer electronics – has introduced electronic price tagging by SES-Imagotag, the French electronic shelf-labelling supplier. Among other advantages, this offers the benefit of dynamic pricing, so that not only customers, but retailers themselves can keep a watchful eye on the prices charged by online suppliers, enabling them to react accordingly. In other words: If a retail giant like Amazon drops a price by 50 euros, Media Markt can react instantly and perhaps even undercut the price somewhat and remain an attractive option to consumers.
In my opinion – and this is the critical point – physical retailers must not give way to e-commerce in the hope that perhaps customers might be unaware of the prices charged by other suppliers. The issue here is to understand customers and their buying habits very precisely and to react accordingly, making use of the available smart, digital technologies, such as the electronic price tags that can do so much more than merely indicate prices.
What else can electronic price tags do?
A very important additional function just recently introduced is that Wirecard has integrated a payment processing function in cooperation with SES-Imagotag. This means that customers can avoid one of the biggest headaches of retail shopping: queuing at the till for ages. Instead, they can pay for their purchases directly at the shelf via NFC or QR code by simply holding their smartphone in front of a digital price tag and this can also give them further product information before they use their cellphone to pay with their preferred payment method. Then they can just walk out of the shop. It couldn’t be faster or simpler.
This is just one example of how retailers can make a huge step forward in digitization with a relatively small investment, making their company more attractive to customers at the same time as generating considerable savings in operational costs. The costs involved in manually changing prices printed on paper price tags is exorbitant.
What else can retailers do to stay competitive in the face of e-commerce?
Firstly, physical retailers must more often play to their strengths: the immediate availability of goods and face-to-face contact. Retailing has to become more interesting on the shop floor and provide a positive customer experience. This can be achieved, for instance, by a well-arranged store, well-informed and easily available staff and seamless integration of the various sales channels. Customers must be able to choose between ordering online and then making use of a click & collect service from the store on the same day or visiting the store, seeking advice, testing out the products in person before making a purchase with delivery arranged to their home.
Secondly, retail must look to e-commerce for a few key secrets to success. Of course, an online shop can identify the customer buying there and consequently use AI technology to make the best offers and recommend just the right products. This is something that brick and mortar retailers should also be doing. AI can be used to provide helpful advice in-store, for example, if a customer going into a clothes store is automatically recognized by biometric technology on entering the store and is then offered clothes that are exactly the right size in his or her favorite colors, which suit his or her style and are well coordinated. Customers can then choose to either leave the store with their purchases or have them delivered back home.
What many customers value in e-commerce is that they don’t have to cope with the hustle and bustle of shopping, but can sit in comfort at home and buy whatever they want in a single click. What can retail stores do to counter this?
In general, the maxim “POS: exactly where the customer is” will apply even more in the future: In brief, retailers will have to go to the consumer and not the other way around.
This was well illustrated in a number of different concepts that were recently on show at the CES in Las Vegas. For instance, autonomous cars taking products directly where they were needed, be it shoes, fruit or vegetables.
Turning for a moment to classic supermarkets, are there any innovations there?
Quite a few. As I have already mentioned, stores are increasingly looking to adapt online recipes for success for their own needs, in addition to which, better use is being made of the strengths of shop floor trading. This can easily be seen in the innovations advanced in digital retailing introduced by T-Systems in cooperation with partners such as Wirecard. The blog has already published a report on Connected Commerce with the Smart Shelf.
An entirely new function that has been added is the T-System digital shopping cart. Wirecard also works on this development and, in fact, we are responsible for the payment, proximity marketing, data analytics areas as well as for the development of the app.
The customer journey takes the following form: at home, or wherever a customer is at the time, he or she will plan a shopping trip via a smartphone app. At the supermarket, this is then transferred onto a digital shopping list on a device on the handle of the shopping cart. On the left-hand side of the display, customers can see the goods to be bought, automatically arranged in the sequence in which they can be found as the cart passes along the aisles of the store. Any unwanted items in the shopping cart can be deleted with a click and finally, customers can use the app to pay and then simply leave the store. Hanging around to pay at the till is therefore a thing of the past.
The right-hand side of the display may show greetings, product offers and coupons that are individually matched to consumer buying habits and the particular POS location. These proximity marketing tools create a new shopping experience and help to increase customer loyalty and raise the volume of sales per shop. It also offers the advantage of addressing customers personally. For example, customers buying cucumbers and goat cheese may also be offered locally-sourced, organic tomatoes, since it is highly likely that they are making a salad. Customers and retailers alike both benefit from anonymized data collection.
And how exactly?
Once again, this is quite comparable with online shops: today, even physical retailers can use the data to find out how and where customers are going and obtain meaningful insights into routes taken, speed and length of stay. They can also obtain information on footfall, that is, how many customers shop at what times, and on till receipts, such as sales per time period, product group, shopping basket analyses and correlation with flow of customers analyses.
This enables retailers to arrange their stores far more appropriately to suit their customers – starting with the presentation of goods, that is, where customers can find particular products, what combination of items are often bought together as well as what should ideally be placed close by and and how to avoid hotspots and overcrowding in certain areas of the store. However, retailers can also plan for how many staff they might require on certain days and during specific times of the week, as well as so much more. Last but not least, once their preferences are known, retailers can address customers directly with appropriate offers even when they are not in the store and they can also specifically prevent customers migrating away. The watchword here is loyalty, an aspect which is still very much underused in retail on the shop floor.
Examples for data-driven analyses: walking routes, heatmaps and usage analysis (Source and copyright: T-Systems)
What is the remaining potential for loyalty measures in retail?
Unfortunately, this important subject has been criminally neglected by many retailers. However, it is always better to discuss those that get it right: I am always taking Breuninger as an example. This company based in south Germany operates several department stores at the top end of the market. The firm was the first to introduce customer store cards in 1959, and is still doing it very successfully to this day, with over one million customers targeted via the card and happily receiving tailored offers.
Ikea has also been very successful for many years with its Ikea card and its Family Card. Similarly, Lufthansa’s Miles&More has also been a great success. Other than that, loyalty cards are not in extensive use, although we know that customers really like gaining points, obtaining individual discounts and receiving suitable offers.
However, these days, we can skip the physical card completely and instead use apps which offer a far greater range of functions. Aside from this, while consumers may forget to bring their store cards along, they are practically never without their smartphones. Plus, a loyalty app can easily be equipped with a payment function and a great many other features.
Does this mean that we are moving towards integrated solutions, such as Alipay and WeChat Pay that are already heavily in use in China?
I believe that it is unlikely to come to apps with the vast scope of functionality offered by Alipay and WeChat in western countries because of the issue of data protection alone. In principle, I can say that today’s younger consumers have a far more liberal attitude to their personal data than older generations, when it comes to providing their location or uploading credit card details via an app, for example. Experience has shown quite clearly that if something gives them concrete advantages, people will do it!
Certainly as far as more convenient payments are concerned, many consumers really appreciate the fact that they are no longer have to carry loose change for parking meters or to buy a packet of chewing gum at a kiosk. Cashless payment methods are making significant progress for reasons of convenience alone.
On that subject, in concrete terms, what role does the selection of accepted payment methods play in retailing?
Well, of course there are fewer instances of people abandoning purchases in stores than online, and full supermarket trolleys are seldom left abandoned. Nevertheless, it is often the case that consumers find it very irritating when a shop only takes cash or doesn’t accept any credit cards. Consequently, they are most unlikely to shop there again. Retailers have only themselves to blame if they more or less exclude certain customer groups – tourists from abroad who don’t want to change up their money into euros spring to mind here. Many shops in Europe already accept Chinese payment methods, and for good reason, since this is the only way affluent Chinese tourists will even consider buying from them.
The EHI has recently once again discovered that cashless payment is becoming increasingly well-established in German retailing. The fees charged for card payments have already been largely capped by PSD2 and any retailer not willing to give up a very minor proportion of their earnings to facilitate more convenient payment experiences for their customers is truly behind the times.
Instead – and most surprisingly – many retailers have not yet realized just how much it costs them to deal in cash. This relates to the huge reserves of change needed on a daily basis and the securely moving cash takings. If they did, they would surely be far more interested in promoting cashless payment in their own business.
Last but not least, cashless payments are absolutely essential for curtailing or eliminating the irritation of having to stand in line at the till, as well as for all the data-driven features mentioned above, which once again serve to ensure retail shopping is an altogether more positive experience.
I agree with the growing technology, smartphone took over the shopping world. As a customer, I also like it as it is more convenient. In the event that I get to put up my shopping business, I will have physical and electronic shops. In the physical shop, I'll make sure that it's also inclined with the latest technology like being equipped with CCTV, electronic business counter, theft detector, and many others. This is to match the growing trend in it's a mobile or electronic counterpart.