Retail today Connecta 21 recap – How is the world of retail changing?
With Connecta TV and the Connecta blog, Switzerland’s most important digitization event once again provided plenty of food for thought. What did the experts have to say about developments in the world of retail? We report on the key findings.
Due to the pandemic, Connecta was once again held as a digital event this year. But as in previous years, it provided plenty of revealing insights and analysis from experts on all things related to digitization. One of the major topics was the continued development of retail in Switzerland.
Online retail continues to grow
The pandemic and the lockdown restrictions imposed gave online retail in Switzerland a tremendous boost. More is being purchased online than ever before. This fact was pointed out by Tiziana Gaito, Research Assistant and Lecturer, University of Applied Sciences in Business Administration Zurich (HWZ) and Ricarda Raemy, Customer Insights Specialist, Post CH Ltd. They presented the Swiss e-commerce trend indicator, which has explored the habits and preferences of more than 11,000 Swiss consumers.
The over-55 age group, in particular, buys significantly more online. 19 percent of them shopped online on a weekly basis. Customers cite home delivery and not having to worry about opening hours as their main reasons for shopping online. In the Connecta Talk, both experts emphasized that they did not see any change in this trend. The shift towards online retail therefore appears to be permanent.
During their discussion, both experts highlighted the fact that the change in behaviour in the Swiss population poses specific challenges for retail companies. This is because there is no longer a single communication and shopping channel. Customers might find information on Instagram and ask a question about a product there before buying it in a shop, while a complaint or request might be made via Twitter. This means that keeping track of a customer’s history is no easy task.
High street retail has to reinvent itself
This is how Prof. Dr. Gerrit Heinemann, Head of the eWeb Research Center at the University of Niederrhein in Mönchengladbach, sees it. In his opinion, customers are increasingly voting with their feet (and “with their thumbs”). He does not, however, think that high street retail can be completely written off. But in order to remain relevant in the future, it will have to reinvent itself. His answer to this challenge is “intelligent retail”. For this to succeed, retail companies must first create the right foundation: it’s all about collecting as much customer data as possible. Retailers need to know their customers and their needs. Customer Relationship Management (CRM) is not a new development, and yet there is a lack of the basics in some areas – especially in high street retail.
This data-based mode of operation is the basis for the use of other technologies, such as artificial intelligence which enables real one-to-one marketing. But it can only succeed if properly qualified employees can be recruited. The “war for talent” is becoming increasingly important for high street retail. This is because retail needs to be where its customers are these days. And that’s online. “Online” doesn't necessarily mean running your own shop. Heinemann, for example, points to the possibilities arising from maintaining an Instagram presence and using online advertising.
Thomas Zuberbühler, owner of zubischuhe.ch, agrees with this and reports on his own experience of combining bricks-and-mortar branches and online sales. With a share of turnover of 30 percent, his company’s online channel is now its most important branch. He is keen to emphasize that retailers should not evaluate their online shop solely in terms of full cost accounting. Because an online presence also has a positive impact on branch business, even if this is difficult to measure. Presenting yourself online with the latest information, trends and products is the basis for success. In his opinion, advertising that is seen online should also be displayed in the branches and, for example, on social media.
Artificial intelligence using the example of returns processing
Prof. Dr. Patrick Cichy, who works as a Senior Data Scientist at Westphalia DataLab, describes the practical benefits of artificial intelligence. Especially in industries with particularly high return rates, such as fashion or accessories, AI can be applied to optimize processes and make workflows and the use of resources more efficient. AI methods, such as machine learning, will not solve the problem of returns on their own. After all, customers will always find reasons not to keep an item. But through forecasts and analyses, AI can help with the optimal application of human resources in order to improve the processing of returns, while also enhancing the customer experience. By analysing returns and the reasons for them, AI also enables preventive action to be taken, for example by rectifying incorrect or inappropriate information about textile sizes.
E-food is growing, but has its own challenges
As the e-commerce trend indicator shows, online groceries shopping was one of the winners of the pandemic. This is also confirmed by Katrin Tschannen, Head of Migros Online. Online purchasing of groceries grew by 40 percent during the first phase of the pandemic lockdown. So far, Migros has not seen any signs that this trend will be reversed. But she also points out that “e-food” still has a modest share of less than 4 percent of the overall market. This is significantly different to other product categories, where e-commerce already accounts for 30 or 40 percent.
In general, online food retail is developing very dynamically. “Quick commerce”, in particular, is definitely a surprise in this segment. Customers apparently want to get their hands on products from the “petrol station range” as quickly as possible. Because providers in the e-food sector are still battling for market share, Tschannen believes that it is important to meet customer expectations. These include punctual delivery windows and a desire for greater sustainability (e.g. packaging). Efficient processes are a key factor for success in the e-food sector.
Dr. Matthias Schu, a leading e-food expert, agrees. Since there are high fixed structural costs for picking, packing and delivery, retail companies can only address process costs when seeking to operate their business model profitably and scalably. This is also one of the reasons that the e-food sector is currently focusing on metropolitan areas. Another challenge lies in the expectations of customers, who expect at least same-day delivery, which cannot be provided in rural areas.
The triumph of the marketplaces
Digital retail around the world is increasingly controlled by marketplaces and platforms. Switzerland is no exception, as Philippe Mettler, Head of Digital Commerce at Post CH, emphasizes. He presented the results of a study on this topic at Connecta. For many retailers, marketplaces are an important component in their overall strategy. They are growing at an above-average rate, and Switzerland has a greater diversity of platforms than other countries. The dominance of Amazon is not evident in Switzerland. It is also not seeing the same developments as in Asia, where the market is heavily influenced by Alibaba, for example. However, Mettler explains that, in his opinion, marketplaces will continue to gain market share. The level of convenience from the customer’s perspective is simply too great. This means that even more retail companies will join marketplaces, even if that also involves a few obstacles.
This includes, for example, absolute price transparency. For many retailers, however, actively using a marketplace does not mean giving up their own channels. The expert points out that despite all the advantages of a platform, there are also limitations. From the retailer’s perspective, this means that a marketplace provides few opportunities to deliver a brand experience.
Sustainability is becoming increasingly important
Sustainability is an increasingly important issue for many customers. More and more retail companies are meeting this desire, which is already evident in the trend indicator, as confirmed by Thomas Wozniak and Michael Nussbaumer from HSLU when presenting the results of a survey. But the topic is not at the top of the agenda for retail companies. Companies are currently focusing on becoming more sustainable in the areas of packaging and shipping. Four out of 10 retailers now avoid using plastics in their packaging.
Carbon-neutral shipping is also growing in importance. 26 percent of retailers now offer this. The two experts believe that retail companies are also missing opportunities here, for example, by failing to indicate sustainable alternatives or particularly eco-friendly products in their online shops.
Due to the current situation, Connecta Bern was held as a digital event once again in 2021. Connecta is renowned for shining a light on the diverse nature of digitization and this year was no different with content presented across the three formats of Connecta Blog, Connecta TV and Connecta Talk. Find out more here: www.swisspost.ch/connecta