Pandemic as a catalyst for future retail processes

2020 in the world was a turning point, the pandemic of a new type of coronavirus forced to review almost everything: from the lifestyle of people to the priorities of the development of large corporations. The issues of security, modernization of processes and the rapid development of those areas that were previously discussed in a very distant future came to the fore. In the field of trade, the networks where previously developed their selling points in offline mode began to break into the space where marketplaces are firmly established. In a changing world, they have strengthened online ordering systems and contactless home delivery. The situation around two areas of trade - retail tech and e-commerce, as well as their prospects and the possibility of using innovative solutions for the development of each of them were discussed during the “Start-up cafe:Future Retail »Moscow Innovation Agency and Moscow Department of Entrepreneurship and Innovative Development. The meeting was held on May 22 as part of the Startup Village Livestream'20.

The panel discussion was delivered by representatives of industry leading companies, including the X5 Retail Group, Lamoda and Samokat. At the beginning of the meeting, the Director General of the Innovation Agency of Moscow Alexei Parabuchev presented a review of the retail tech market, prepared by the Agency's Analytical Center and dedicated to the dynamics of profile investments in comparison with the e-commerce sector.

According to the conclusions of leading world analysts, the volume of venture investments in technological solutions for retail has been increasing over the past years, the average annual growth rate is about 8% with a decrease in the number of transactions. According to Alexei Parabuchev, this indicates that the startup investment market in this area has moved to a more mature stage, when most of the venture money is received not by teams starting with a new product, but by established and dynamically growing companies. At the same time, the metropolitan venture capital market retail tech is at the initial stage and significantly lags behind the growth dynamics of foreign markets. In addition, it is important to note that until recently, the volume of investments in e-commerce was 8 times larger. “In 2019, 25% of all investments were in the e-commerce sector.It was the most dynamically growing venture investment market in the city, ”explained Alexey Parabuchev. However, according to Agency analysts, already in the short term, the balance will shift towards more attention of venture investors to the high-tech sector for retail.

In the global retail tech, they invested the most in payment systems (34%) and analytics (28%) - this area refers to technologies that process big data and provide productive information on users' completed purchases and further orders. 13% of investments were aimed at establishing interaction with the buyer - and, according to experts, it is this sector of the global market that is starting to grow quite quickly. This dynamics is highly likely to be characteristic of Moscow retail. “The largest venture deals in the last three months confirm this. The most dynamically growing niches: solutions in the field of customer involvement and personalized interaction with them, collecting feedback, as well as creating analytical platforms based on big data to optimize marketing,pricing and work with staff, ”said Alexei Parabuchev.

The head of the Agency emphasized that all retail markets were shocked by the global epidemic and are actively transforming. One of the aspects of the new reality is the forced migration of consumers to online. “Many of those who have not used the Internet before have gone online to make daily purchases. At the same time, not everyone will remain on the Internet after the restrictions are lifted and the opportunity to visit stores reappears. Nevertheless, 17% of the total number of respondents will continue to buy products online after quarantine, ”said Alexei Parabuchev.

Secondly, another area of ​​market transformation is related to the fact that consumers have new demands in connection with the pandemic: demand for contactless services is growing, sanitary safety requirements are being introduced, slow service and queues are perceived more negatively than before. The valuation of companies now depends, inter alia, on their compliance with these requests.

Thirdly, retailers are currently forced to solve new problems, faced with blurring the boundaries between online and offline, flexible and quick decision-making, rethinking personnel policies, the need to personalize offers for customers, the need for reorientation to local manufacturers and to customized production of goods. “Many players seeking to remain effective in a changing market are turning to high technology - primarily to five promising areas. This is big data and analytics (this area is in the focus of attention of venture funds); artificial intelligence, allowing the development of recommendation services; recognition of images and images; robotics; versatile manufacturing innovations, ”concluded Alexei Parabuchev.

Director of Innovation X5 Retail Group Ivan Melnik confirmed that the current situation with coronavirus has become a catalyst for the development of technology. “In Europe, the current statistics on working with self-service systems has given a very sharp jump four to five times. E-commerce, of course, really jumped up, but 98% of people will continue to buy in ordinary stores. At least food. So far, grocery e-commerce is only 2%. And 98% of people will continue to go to ordinary shops, and security will be important to them: the scan & go system and self-service cash desks. Buyers try to stand in lines as little as possible and distance themselves from each other as much as possible. They pay great attention to cleanliness and disinfection. My opinion is that a serious leap will occur in this area.For the coming year, this will determine the development vector in the trading floors. And it is there that we meet with our customers, ”said Ivan Melnik.

According to him, the main problems that needed to be corrected at the very beginning of the pandemic were logistic issues: replenishment of shelves with food products, more people were needed to service more traffic of goods and the influx of customers. Then - the provision of disinfectants.

“In parallel, we have developed express delivery services. Here it was necessary to rapidly and rapidly scale in a large number of stores. Now we are covering all of Moscow. Pyaterochka-Express delivers orders from 167 stores to customers. But personally, from the point of view of innovation, my head hurts not for online, but for offline points. We decided to scale up VR technology and quickly train employees. Intensive self-service systems are being introduced. Last year, 80 thousand self-service systems were installed, X5 Retail Group plans to install another 12 thousand this year, ”Ivan Melnik explained.

He also confirmed that buyers want to touch surfaces as little as possible. And we are talking not only about the most contactless payment, but also about biometric recognition.

“Payment by the person will develop and will do it with confidence. Last year we saw the first pilots. With innovations, the question is how quickly they will scale and how difficult it is to implement. Because it is one thing to create a pilot with 1 thousand customers, with 10 customers in 2-3 stores, and in another - to make it available to the whole country and to millions of customers. In this case, contactless payment will develop much faster than the biometrics loyalty system. Big retail has a lot of opportunities for the guys involved in development: transport and traffic control, video analytics from the trading floor and loss analysis, security systems, VR development. Anything that cuts costs at retailers is endlessly in demand, and we will be very happy to see startups. Our bot is already calling customers, there is robotization in warehouses.There is a huge list of possible solutions, ”added Ivan Melnik.

Vyacheslav Bocharov, co-founder of Samokat express delivery service, voiced a more optimistic story of the return after the pandemic, but at the same time emphasized the relevance of contactless payment systems.

“If you close all offline cash desks, you will see an incredible penetration into contactless self-service terminals. The question is when do their people choose? When there is a queue at the checkout. Indeed, before there were a lot of difficulties just with breaking this experience. If today's habits enter a person’s permanent scenario, then people will realize that it’s easy. Just a year ago, we had four points in St. Petersburg. Today there are 200 of them in Moscow and in St. Petersburg. We have grown at times during the pandemic. Just a year ago, it was very difficult for us to tell people why making online purchases is as simple and safe as offline. And the biggest effort we spent precisely on changing habits. At some point, people felt the need to use it. And we see a very large conversion:more than 60% of people switch to the second or third month of using our service. But the pandemic only supported it. We just increased the funnel. In March, we covered 90% of St. Petersburg and 50% of Moscow. By the end of April, we are already covering all of Moscow, several regional cities and the whole of St. Petersburg, ”commented Vyacheslav Bocharov.

According to him, after the restoration of the situation, a certain number of people will return to their usual trips to the store. He also recalled that tobacco and alcohol products can only be bought there, it is impossible to do this online.

“All the money of the world is offline. We have points that sell, if not more, then on a par with offline stores. People are willing to spend money there. After all, we - a new layer of urban infrastructure - deliver orders in 15 minutes. We have built infrastructure, the operation of which is limited by regions: couriers run within a radius of 500 meters and an application that orders what is needed, ”said Vyacheslav Bocharov.

In June, the company launches a new catalog, it aims to introduce technological solutions in the field of logistics for both suppliers and couriers.

“The market cannot yet give what we need. Today we are forced to do all of these systems ourselves, ”explained the co-founder of the express delivery service.

In addition, Vyacheslav Bocharov shared the recipe "How to" like "large companies": "You can’t just come to an investor with MVP, hardly anyone will listen to you. You need to come with a finished product, tested hypotheses. In our case, it was personal savings and money from people in the notebook. Then, when there is already a finished product, confirmation of hypotheses is found and the economy is clear, you can go to investors, then you can definitely like it! ”

Lamoda Managing Commercial Director Alexandra Artyushkina also emphasized that the influx of new customers is now a record.

“People are trying, they understand that there is a future for online, they are ready for experiments. The main barrier that exists before a person to go online is that he does not understand how it works. The task of all online players to overcome these barriers. The online share is still small, even in our segment in 2019, it was only about 15%. We definitely have room to grow, and we will do it. When it's over, many will remain online. But at the same time, offline will need to change, because the client cares about speed, security, convenience and a certain pleasure - gamification. Online is now actively developing in all these areas, ”said Alexandra Artyushkina.

Among the promising areas, she noted the technology of personalization, big data analysis and recommendations, which will speed up the selection process.

“The future is with the virtual fitting room, they already exist. We work with our partners in virtual shoe fitting. Clothing is the next stage and the most sought-after category for virtual fitting. We are open to offers from startups. The current situation has shown that diversification is the key to success, you must definitely try to use not only your own omnichannel solutions, but also partnership ones, ”summed up Alexander Artyushkina.