Innovation at the Point of Sale - A journey around the world

By Björn Portillo, Managing Partner at hmmh and Nicolas Roemer, Chief Business Development Officer at Serviceplan US.

A few years ago expert predicted the end of stationary retail. The word was that it could not persist parallel to online retail in this new, digital world. However, due to the slow but steady establishment of connected-commerce concepts, this view changed again. Former online pure players like notebooksbilliger.de or mymuesli even established stationary concept stores and now find themselves in the selection of major retail chains. But what are the drivers that have given impetus to this change and what innovations have helped retail get back into the game?

In order to explore the "why" of the paradigm shift, we will go on a journey through business and culture in the US, visit China, and then return to Germany.

Pack your bags in Germany

Many companies and agencies have worked hard to drive technical progress forward and make our everyday lives easier through innovation. Concepts for interactive consulting solutions and mobile consulting via one's own smartphone, mobile payments, or augmented and virtual reality have become sophisticated enough to use them in stores. However, these possibilities still go mostly unused here. Why is that? Is this because of retailers who ignore this potential due to traditional reasons? Or is it skepticism of new things and distrust of technology itself? Are German retailers, their customers, or even both afraid of innovation?

The risk-averse, conventional German loves to research and compare online. Where he goes shopping then, depends on the product and context: sometimes online, sometimes offline. It is important to him that he feels well counseled and informed and that he can study the desired product at length.

Technical barriers and lack of acceptance

For classical retailers it is not only important to have a wide range of products available at all times, but also to display the brands and their products just right for each customer. However, often the implementation connected commerce concepts already fails at the internet access for customers. The use of different systems that are not easy to integrate also often creates large barriers for retailers. This makes it difficult for retailers to recognise their customers and impossible to collect relevant data, to offer integrated consulting or a quick and easy way to pay. With the exception of a few examples.

Another challenge: While it is important to German consumers to test their desired products, even to try it out in their private surroundings, and also expect comprehensive individual consulting, they are often not willing to share their personal information.

Off to the US

The land of opportunity – is this also the case in terms of retail innovation and which of these developments have already established themselves?
A clearly larger population on a land mass that is 25 times larger... this makes it difficult to find the average American citizen. However, we can state that he is open for new things, thinks practically, and always looking for a deal. When he buys ice cream he likes to pay by credit card and when he goes food shopping he always has his trusty coupon book with him. The possibly most important innovation drivers for Americans are thriftiness and comfort.

Ideas are tested and optimised

New concepts arise every day, giving US citizens the shopping experience they demand. For instance, at the end of 2016, the internet giant Amazon opened the doors of his Amazon Go food store in Seattle. Standing in line and the physical act of paying are redundant here. Everything is handled via a motion detection system installed in the store - the so-called "Just walk out technology". Payments are made via PayPal and the Amazon.com account. Due to technical issues in motion detection and tracking more than 20 customers at a time, the store had to close its doors temporarily.

This example shows that for innovative companies not everything has to work perfectly the first time. While it is a big no-no to make mistakes in Germany – which means that nobody even tries to establish new concepts - people in the US work with the successful principle of "trial and error". Courage is rewarded.

US retailers know what their customers need

Contrary to the reserved mentality of German offline retailers, the US market provides numerous examples for real-life digital transformation. The retail giant Walmart, for instance, purchases online shops and startups and thus has waded into e-commerce. The second stationary big player, Target, offers its customers a practical app with which consumers can manage their coupons simply per smartphone and also use an in-store navigation system. It shows them the shortest path to the product they are looking for. Additional concepts are already being tested. Unlimited data in mobile contracts makes it significantly easier to use such offers.

"Whether artificial intelligence in the form of multiple interfaces or in-store robots, speech assistants in the form of in-ear-consultants, or home delivery without having to be home: these are all trends on the US market, not all of which would be compatible with the German market due to the different mentality." warns Nicolas Roemer, Chief Business Development Officer Serviceplan US.

On to China

If you have ever travelled through China, you know about the great technology-affinity and the group-oriented, swarm-like thinking of the people there. You also have a picture of the typical city: millions of people on the streets, always with a smartphone in their hands, and unlimited data volumes. Driven by progress and development, new concepts find resonance in society much faster here.

A step ahead in innovation

Retailers who have also been successful in e-commerce were already looking for ways of combining the online and offline worlds years ago. Pioneers on the market, like Alibaba.com recognised the first signs of the "mobile boom" in China and developed concepts which corresponded to the mentality and the new shopping behavior of the Chinese. The results were futuristic stores with refined technology. For instance, China's Guangdong province saw the creation of a self-service store named "BingoBox". Not by any means as complex and comprehensive as the Amazon Go store, but adjusted to the need for mobile shopping. When the Amazon Go store was being tested in the US, Alibaba.com already opened a mature variant of the fully-automated store concept in China: the "Tao Cafe". Here, customers can login via their smartphone and pay cash-free in the check-out area via facial recognition.

The era of staff-free shopping

Staff-free stores and automated services are part of everyday life in Chinese malls. Fast payment per smartphone is still booming: in the meantime, 6 out of 10 customers pay for their shopping per smartphone. This offers great potential for Chinese retailers. Payment service providers know about the social interactions of Chinese and combine the popular payment method with social media functions. For instance users of WeChat Pay can follow the official WeChat accounts of the respective retailers and ask questions and get advice. The users can also exchange information and provide recommendations. What we feel is special about this: the retailers behave like private persons here. Because they know that customers identify much more strongly with the brand and thus connect clearly more emotion with it than people in Germany.

The hype about mobile payments in China has strongly driven the development towards connected commerce: for retailers, this payment method is not only a sales driver but also a new way to communicate and interact - online and offline. A great example of an optimal and integrated user journey.

Back to Germany with a full suitcase

The Americans and especially the Chinese show us how to implement connected commerce concepts. For this, Apple and Samsung pay are essential, just like large mobile data packets at affordable prices which permit 360°retailers to offer integrated services via the smartphone in the store. German retailers have a hard time taking this step. There are still very clear barriers to the seamless customer journey and customers have even helped create them. The cautiousness of Germans, privacy protection barriers, and inhibitions to using already existing technology must be decreased. "Many German retailers have the feeling their hands are tied and they have to do this huge split." Björn Portillo, Managing Partner at hmmh, tells us. This is exactly where it becomes so important to have the right partner on your side, with whom you can develop opportunities and methods together, who offer added value to consumers for which they will be glad to share their information.

While Germans are still afraid of making mistakes and thus often act too late, the US has a completely different attitude towards mistakes. "Test, optimise, test again is part of the innovation process and is firmly anchored in the minds of Americans.” so Nicolas Roemer, Chief Business Development Officer Serviceplan US. ”Even if a concept is not received that well and has to be trashed, this does not break the brand's neck right away. On the contrary. Courage is rewarded."

The drive for progress is the driver for the digitalisation of stationary retail in China. However, it does not make sense to simply copy innovations and to force them on us. "We first have to determine with our retailers what target group problems we would like to address. Only then should we check what innovations we could use for that and how, so that they are well received", encourage Björn Portillo.

We know the needs and fears of German customers, the technical challenges of retailers, and have already developed approaches for individual solutions. Experienced, internationally acting agencies are just waiting for the starter gun.

This article was published on e-commerce-magazin.de - Read more in the current print edition.

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