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IXR: Innovation Expanding Retail
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Offline vs Online: How Retail Technologies Fight for the Consumer

The rise of online shopping and the COVID-19 pandemic have changed shopping habits. Natalya Usmanova, Commercial Director of IXR, a developer, integrator, manufacturer and supplier of complex digital solutions for retail, shares what requirements modern consumers of offline retail impose and how modern technologies adapt to them.


Under the new rules

Buying fast, safe and only what is necessary are the three main patterns that can be traced in consumer behavior today. The acquired online experience and the rapid development of e-commerce forced to revise the previous habits of buyers. This trend is now observed all over the world. According to the annual Data Insight report, in 2020 the volume of the e-commerce market in our country amounted to 2.7 trillion rubles.

The main customer request today - security - is dictated by the pandemic. Online stores successfully cope with it.

The grocery basket has also changed. People are increasingly abandoning goods that they do not have an urgent need, and generally from spontaneous purchases. They willingly began to purchase products from local manufacturers, considering it more useful. In addition, shoppers expect personalized pricing from offline stores based on the history of their previous purchases.

In short, in order to successfully compete with online, retain old customers and attract new ones, retail needs to change and adapt to new requirements. Moreover, these trends, according to experts, are not fleeting, and will continue to develop after the end of the pandemic. This is where modern technologies come to the rescue of business. Let's figure out which of them will be the most relevant in the near future.

Clean and safe

Roughly 70% of Russians say they miss live shopping and would like to return to them - provided that offline shopping is as safe as on the Internet. Almost 80% of the country's residents, when choosing which cafe or store to visit, pay special attention to their cleanliness. This means not only clean windows and floors, but also contacts with sellers and other buyers. Customers did not like queues at the checkout, crowds of people near counters before. The pandemic has added to this fear of contracting the coronavirus, which is why in-store visitors are looking to reduce the number of in-store contacts. This is not always possible, especially in the checkout area, which is considered one of the most crowded and therefore potentially most dangerous points. This is a compelling argument in favor of introducing self-service checkouts in shopping centers, which keep customer contacts between themselves and the cashier to a minimum.

As statistics show, in 2020 retailers were actively working in this direction. Thus, the global market share of self-service checkouts increased by 25%, more than 175 thousand deliveries were made. CSR is increasingly using not only grocery retail, but also DIY (home and repair goods), as well as electronics stores and discounters.

In Central and Eastern Europe, the market share of self-checkouts more than doubled in 2020 - by 107%. In total, 21 thousand CSR were established.

Self-service systems were actively introduced in Russia as well. Last year their share increased by 230%. A record number of CSR was set - 7300. For comparison: in 2019, 2200 self-service checkouts were installed in Russia. Perekrestok has the most CSR: Self-Checkout is implemented in 850 supermarkets of this retail chain.

Thousands of self-service checkouts were installed in 2020 in Pyaterochka stores. CSR is used by Magnit, which includes more than 15 thousand supermarkets and 5500 pharmacies, and Auchan (280 supermarkets). Analysts predict that by 2026 more than 53 thousand self-service checkouts will be installed in Russia. In five years, the number of CSR in the world may reach 1.6 million.

Some of the country's major shopping malls are testing biometric payment systems. Today, this method of paying for purchases is considered the most "anti-covid". It is good because it saves customers from using banknotes, plastic cards, which can be a source of infection, as well as from contacts with cashiers.

The technology is as follows: a special scanner equipped with a camera is installed at the self-service checkout. It reads the image of the customer's face and compares it with the biometric data associated with the customer's bank card. If these information match, the system allows you to pay for the purchase.

X5 Group was the first among Russian retailers to test this technology. In the spring of 2021, payment systems using biometrics appeared in 150 Perekrestok supermarkets. It has also been introduced in Papa John’s pizzerias and Cofix coffee shops. Magnit plans to introduce the same technology.

Another new trend that is now observed in grocery retail and which also allows to reduce the number of contacts is micromarkets, retail chains install them in offices and entrances of residential buildings. This technology gives shoppers the ability to purchase goods on their own. To do this, you need to scan the barcode and pay for the purchase with a card. Azbuka Vkusa and VkusVill were among the first to install vending machines with products.

Some companies go further - they open "smart" stores without salespeople and cashiers. In Russia, the largest Russian grocery retailer X5 Group decided on this experiment back in 2019, having begun testing a fully automated store at its facility in Dolgoprudny. A year ago, a similar store was opened by Azbuka Vkusa.


Individual approach

The second trend - personalization - has become even more relevant with the emergence of a competitor online. Research shows that personal appeal is important for 84% of shoppers. This is especially appreciated by young buyers. 75% of millennials and Gen Z are ready to share personal information about themselves. Personal offers are so important to them that they are even ready to provide brands with additional information about themselves.

In order to make the customer an individual offer that will cause him a wow effect, the retailer needs to know his customer as best as possible and the path he goes from the moment the need for a product or service arises to the last interaction with the company. This information helps the business to see its strengths and weaknesses, and also gives an understanding of how to improve them.

There are various technologies that allow companies to get to know their customers better and better interact with them. You can get feedback from the buyer using traditional "live" surveys and questionnaires. As online becomes an increasingly important part of the customer journey, retailers are looking to actively engage with their users there as well. Communication with them in social networks, instant messengers, as well as email newsletters work well.

Often such research is carried out using digital technology. The video cameras installed in the sales area measure the flow of customers and indicate the routes of their movement around the store. Wi-Fi tracking, which picks up the radio signals of buyers' smartphones, allows them to locate them indoors. Thus, the retailer receives information about which departments and products are in high demand among consumers, and which products are of lesser interest to them.

One of the successful cases of using innovative technologies belongs to the American company Walmart. In 2019, the retailer opened a unique retail facility in Levittown, New York, the Walmart Intelligent Retail Lab (IRL). Numerous sensors, cameras and processors are set up to gather information about what is happening inside the store. First of all, the system monitors the availability of goods on the shelves, their quality and freshness.

Self-checkout counters are also one of the tools that allows you to find out the preferences of a particular customer. They enable retailers to “see” what their customers are most likely to buy, and based on the analysis of this data, make them individual offers - for example, personal prices that take into account the purchase history of a particular customer - as well as predict demand.


Consumer concerns

There is a downside to ubiquitous personalization: some consumers reject this obsession. Buyers are concerned about how well their personal data is protected. Such concerns are expressed by 62% of consumers, and 59% of respondents believe that their personal information is vulnerable to hacking. This means that retailers need to pay increased attention to protecting confidential customer information. Experts believe that biometric and fingerprint recognition can provide additional security for customers when making financial transactions.

Not everything is clear with self-service systems. Some companies believe that using CSR, the business interacts worse with customers, loses the emotional, human connection with them, which makes the shopping experience unique. For this reason, a number of foreign retailers - for example, the largest consumer cooperative in the United States PCC Community Markets - refused self-checkouts.

It should be borne in mind that the company made this decision before the pandemic. It is possible that in the future she will revise it, taking into account new trends in consumer behavior, as other large American retailers have already done - Albertsons and Costco. Previously, they reduced the number of CSR, but then decided to return to this technology.

Conclusions

For retail, the world will no longer be the same: automated trading will become an indispensable element of our life. The winners will be those retailers who can create ideal user-friendly technologies both online and offline. If you ignore new buying patterns, you risk losing your loyal audience. As statistics show, more than half of disappointed customers go to competitors in search of better service. The winner will be the one who quickly adapts technologically to the new reality.



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