Smart-store technologies: the retail situation in Germany

The digital transformation of retail is in full swing: IoT, artificial intelligence and others are opening up completely new opportunities. But even if bits and bytes are rewriting the rules, physical (yet smart) shops still have a pivotal part to play. Omnichannel solutions are the name of the game. They are blurring the boundaries between in-store and online.

Against this background, Panasonic Business Europe teamed up with the Cologne-based EHI Retail Institute to produce a white paper for our In-store Insights series.  The document, based on multiple EHI surveys/studies, takes a long, hard look at the digitisation of retail in Germany.

The situation in 2018

First, let’s start with the figures posted by the German Retail Federation (HDE). From 2017 to 2018, retail as a whole expanded by around 2 per cent. On one hand, this growth was primarily driven by online sales (9.7 per cent compared to physical stores’ 1.2 per cent). On the other, the lion’s share of sales turnover still belongs firmly to bricks-and-mortar, at nearly 90 per cent (469.7 billion euros of the total 523.1 billion euros). That said, the role of online sales varies widely from market to market within Germany – it has had a big impact on books and consumer electronics, but far less on food and furniture.

Bricks-and-mortar embrace digital

But it is not just about buying over the Internet. German retailers are also looking to add the digital dimension to their physical stores, but are still in the early stages. The big players, at least, have made a start. EHI found, for example, that many chains already have some new technologies in place, such as location-based services, robotics and IoT (38, 32 and 28 per cent of respondents respectively). Around a third also have plans to introduce artificial intelligence or chatbots in the near future, while blockchain and voice technologies are of only very limited concrete interest.  

The role of physical shops in omnichannel retail

There is a growing focus on omnichannel solutions, i.e. combining both in-store and online. Online shops are looking to incorporate the physical experience, in particular, click-and-collect, in-store return and in-store order – although only click-and-collect is well established at this point.  At the same time, bricks-and-mortar shops want to deploy new technologies to strengthen the physical brand experience at the PoS.

72 per cent are looking for ways to provide customers with additional information on products or ranges. They also want to respond to evolving shopper behaviour and expectations (58 per cent) – and bolster their image as companies that keep pace with the times (54 per cent).

Digital sales strategies

What types of digital sales solutions are gaining traction in physical stores? Screens and video walls have a firm foothold: around two thirds have these installed. Free-standing terminals are also popular (40 per cent). They serve primarily as guidance systems or interactive service points – providing a way to link online and in-store business. A further, increasingly visible trend is the use of tablets as digital assistance systems, particularly for sales staff (40 per cent). Employees enjoy fingertip access to product information, cross-channel data, and can, for instance, place digital orders in-store on behalf of customers. Moreover, electronic shelf labels have seen improvements in recent years in terms of readability and power consumption; however, they are only really widespread in the food sector (80 per cent).

Inventory management in omnichannel strategies

Inventory also has to be aligned and transparent across all channels. For example, if click-and-reserve is triggered online, in-store staff need to be made aware of the change in stock levels, ideally in real time. And it also needs to work in the opposite direction. So how prepared are German retailers? 59 per cent of respondents stated that information from digital channels is automatically updated in physical store inventory management; a further 23 per cent will soon acquire this capability. In contrast, tracking stock in physical shops in real time is still in its infancy: currently, only 5 per cent have the corresponding technology, e.g. shelf sensors, RFID, HD cameras, etc.

Looking forward: investing in a better experience

All in all, it is fair to say that German retailers with physical stores are in the midst of a rethink. Back in 2015, most were uncertain how to respond to the seemingly inevitable forward march of the new e-commerce disruptors. Now, they are fighting back and upping their investment – and budgets are not just being funnelled into online activities. Quite the opposite, the emphasis is on upgrading bricks-and-mortar environments to create a better consumer experience, and to make them an integral part of an omnichannel strategy.

For more detailed information, we have translated the EHI white paper into English. And anyone who is interested in learning more in-store insights can find other Panasonic white papers here.

I’d also like to know: what are your thoughts? What retail digitisation trends have you noticed – in the UK, in Europe, and elsewhere?