Physical stores and online business: is German retail making a shift?

The retail sector has changed drastically in the last couple of years. Trends evolve and – quite often – mix. Everyone seems to be talking about future commerce such as the implementation of voice assistants or the integration of intelligent chatbots into the customer journey, but at the same time, there is a recognizable shift back to brick and mortar. Is Germany adopting to the digital trends in retail or rather still looking back? And if the latter, what is the next smart move to consider?

All focus on customer experience

New approaches affect business models and the ways in which retailers and manufacturers work together. However, the ones that face the greatest change are the customers and their existing options for making purchases. In the process of digital transformation customer expectations towards shopping are evolving as well. Making purchases is not just about buying products anymore, it’s about experiencing different brands and sharing their values. With the rise of unique shopping experiences, customers are beginning to expect the same standard and variety of experiences from all brands.

In our digital age, customer experience is key to turn your customers into loyal regulars. This can only be achieved with seamless, consistent and personalized services in mind – along the whole customer journey and across all channels.

Omnichannel and the German market

The retail market is perceived as two different sectors: online and offline. However, customers don’t really see it this way. They want their products and services where they wish, when they wish and how they wish, always in best quality and preferably personalized. Consumers don’t distinguish between on- and offline. Whether shopping in a physical store, via mobile, web or even using a voice assistant, the customer interacts with the same company or brand. The Omnichannel approach can help connect these different channels of customer interaction and introduce a more holistic experience of a company or a brand. To some, this topic might seem already covered, but a short look at the German market is an eye-opener: omnichannel is still no standard in retail. The 2017 Global Omnichannel Retail Index by PWC clearly proves this point, analyzing the German trends between 2015 and 2017. The level of digitalization in Germany is low and behind other EU countries in terms of the digital infrastructure. The German retail market has some catching up to do.

Misunderstanding of omnichannel

Just one visit to the K5 Future Retail Conference this year makes one realize there is a widespread misunderstanding of the concept of omnichannel. It does not just come down to offering different distribution channels to customers, but also providing a connected customer journey at disparate points of interaction. If the customer feels a gap between different channels, it does not correspond to an omnichannel experience. Why? It’s a matter of proper integration and developing a thought-out content strategy. To put it more simply: it’s all about consistency across the different communication channels.

The revival of brick-and-mortar

As mentioned before, physical stores still present a very strong channel, one that should not be underestimated. Traditional retail is not dead; it’s changing. In Germany, focusing on offline business usually translates to significant growth in online retail as well. It is important to understand that the main reason for customers to shop online is convenience. So why not make the offline shopping experience as convenient as possible, and connect it to the online world? Pure Players are investing in physical stores to give customers an opportunity to see, touch and test products. Creating a consistent brand experience, using in-store market research to collect in-store data, is now much easier. Data-driven intelligence helps in understanding customer needs, and new solutions offer customers convenient options, like ‘click & collect.’ The idea behind all this is to connect every physical store to the online world to create a seamless experience; one that blurs the lines between off- and online.

It’s good to keep in mind that customers prefer to buy some product groups online, like Fast Moving Consumer Goods (FMCG) and food, whereas fashion and consumer electronics are more likely bought online according to data from Statista.

Retail giants already do it

One of the largest e-tail players, Amazon, acquired an American supermarket chain Whole Foods in 2017. It seemed a strange decision, considering that business appears to be shifting in the opposite direction. While every retailer is focusing on e-commerce and new online business opportunities, Amazon – a pure online player – goes, somewhat, offline. So, what was it all about? Amazon is connecting Whole Foods to its online ecosystem, e.g., by implementing prime as a customer rewards program, offering special prices and providing Amazon lockers in selected stores to enable pick up options for online orders, and convenient returns. This way the customers gain easy access to multiple services and can finalize most of their shopping (on- and offline) at a local store. Another good example of how a retail giant goes offline, is Amazon’s largest competitor, Alibaba. The world’s largest retailer now builds tech-enabled Brick-and-Mortar stores from scratch, and furthermore, it is acquiring and investing in retailer chains like grocery retailer Sanjian Shopping Club Co, Chinese grocery chain Lianhua Supermarket, and in hypermarket operator Sun Art Retail Group. And these are only a couple of ways in which Alibaba grows offline. “Physical stores serve an indispensable role during the consumer journey and should be enhanced through data-driven technology and personalized services in the digital economy.”, says Daniel Zhang, CEO at Alibaba Group.

Creating interfaces between the on- and offline world

Connecting on- and offline requires interfaces for the customers. It can be a voice assistant to order from home and pick up at a local store or a smartphone. Smartphones have a huge impact on the shopper experience. A study of Google Shopper Marketing Agency Council in 2013 has found that „84% of smartphone shoppers use their phones while in a physical store“ and it is to be assumed this number has increased over the last years.

To ensure a better customer experience in physical stores smartphone can be used for:

  • mobile payment

  • loyalty programs

  • self-scanning

  • product information

  • indoor navigation

  • AR experiences.

Of course, there are many other possible interfaces like magic mirrors, robots or HoloLenses to connect on- and offline. However, whatever you go for, keep in mind that not everything in the digital age requires cutting-edge-technology. In retail, companies that stop investing in simple mobile apps will miss the boat.

Added value for retailers and customers

Connecting on- and offline can help retailers in convincing their customers to engage more and make larger on- and offline purchases. If some products are not in stock offline, a seamless connection increases revenue anyway, because the customer has an opportunity to buy the desired products online, during the very same visit. Smartphones can be used to track customers and gain customer insights about their shopping behavior, which lead to more data, and data is the fuel of the future. Furthermore, implementing a cross-channel business model makes it easier to interact with customers in a personalized way. Customers are able to find exactly what they are looking for by using intelligent solutions.

The future of seamless shopping

We are not living in an exclusively off- or online world anymore; we are living in a Connected World. While interacting with brands and companies, customers expect an easy and convenient experience. Doing an online search and later buying offline, or the other way around is a standard customer behavior nowadays. Of course, retailers are facing some challenges in implementing a seamless shopping experience. PWC states that „it requires coordination and integration across the entire retail ecosystem, and if even one aspect does not go as planned — particularly the sales associates who are the “face” of the organization to customers in stores — the entire experience falls apart.“

The bottom line

A seamless shopping experience should be the major goal for today’s and future retailers not because it’s a hot trend, but because it’s natural and convenient for consumers. Using engaging interfaces that express – and add up to – the brand spirit (smartphones, magic mirrors, voice assistants, robots, HoloLenses…) makes the customer journey complete and crosses out the distinction between on- and offline. An integration of services and branding across all channels is the way to go for all: small and big scale businesses. Large global players are already adopting the channel fusion approach. At the same time, countries like Germany still have a long way to go to fully understand the very concept itself and to reach the omnichannel standards.

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