The new world of shopping, made in Central and Eastern Europe

In recent years retailers have been challenged to keep up with an increasingly digital world, where customers expect to be able to make purchases when, where and through any channel they want. The effects of social distancing and lockdown measures this year have accelerated this trend and have also created new expectations from customers around the ways in which, and from whom, they make their purchases.

For example, many customers have increasingly turned to online shopping to manage the new rhythm of their lives, others have chosen to buy more from local stores in their communities – and many are changing the products they choose, in order to reflect evolving priorities and convenience in the current environment.

For retailers these changing behaviors represent both necessity and opportunities to rethink and reinvent their business; embedding resilience, integrating new products and business models and, perhaps most importantly, getting to know their customers better.

Why Europe needs innovation and skills to reinvent itself

For many, the path to making these evolutions will be paved with using technologies such as cloud computing and artificial intelligence (AI). Recent research from Microsoft showed that the majority of companies in Central and Eastern Europe (CEE) see technology as an important enabler for recovery and reinvention, saying they intended to maintain or even increase their IT investments after the peak of the pandemic.

Take, for example, Polish retailer, Zabka. With almost 6,700 stores, it is the biggest grocery chain in CEE, serving millions of customers daily – many of whom use its AI-enabled app for better and more-personalized services. When the first lockdown was implemented, Zabka was able to use its existing platform to accelerate the development of two new digital solutions; effectively combining customers’ need and desire to shop online as well as to shop locally.

The first was a click and collect facility, allowing customers to shop online and collect in store; the second, a home delivery service, matching customers with their nearest Żabka outlet and giving them access to the most updated product stock, based on what was in that store. Building on what it had already put in place, Żabka was able to roll out further innovation that allowed people to shop safely during the pandemic; as well as have a whole new way of shopping in the future.

Creating preference through personalization

Understanding customer needs and expectations is at the heart of a successful retail strategy. Our research showed that for many retailers in CEE, their top priority for investing into technology would be exactly this.  By making sense of their unique preferences, retailers can offer their customers a more personalized – and ultimately more rewarding – shopping experience.

Polish software company Synerise, uses data and AI to help retail companies better respond to the needs of their customers through automation, business intelligence, communication and personalization tools, and pricing policy management. Its digital ecosystem helps retailers to gather data from customer interactions, analyze that data, and use the conclusions to offer better services, such as optimizing prices in real time.

In the company’s flagship partnership project with Zabka, Synerise has helped the retailer use data from its app to recreate and understand the shopping paths of each customer; then respond to their specific needs by showing them personalized offers, using artificial intelligence. Synerise technology acts as the base for managing data, communicating with customers and personalizing their experience. The app is designed to change its appearance and content depending on the time of day, customer location and their shopping history, meaning that no user ever has exactly the same app content. All of which is helping the retailer build a closer bond with each of its customers, at scale.

Offer what’s of interest

For many shoppers, a pain point of opting into apps or sharing information with retailers is the risk of being overwhelmed with irrelevant offers or marketing content. It’s a common experience to make a purchase and then find yourself bombarded with advertisements for the same product, despite having already bought it.

To help reduce the number of irrelevant experiences customers were subjected to, Magnit, one of Russia’s largest food retailers, operating 22 000 thousands stores across 5 formats, created a solution that would allow themselves – and even other retailers – to enhance how they tailor the marketing of their products to customers. Using big data and advanced analytics, Magnit established a dedicated department which helps them better forecast demand for different products, optimize the selection of products available and create appropriate promotion for what’s on offer.

The retailer partnered with Aggregion to launch a system that would help its partners, primarily FMCG producers and others, using anonymized customer data to increase the relevance of what they offered. Rather than showing customers ads for what they had already bought – for example, cat food – it offered them what they had not yet purchased but may need – for example, a carpet cleaning agent designed for pet owners. One of their customers, a leading global consumer goods company, found that, using the system, 22 percent more people clicked on ads that had been tailored to them and they experienced an 18 percent rise in sales.

Dealing with deadstock

A major headache for any retailer is when there is high demand for one product in a region but not enough supply. Our research showed that, even before the impetus of the pandemic, a quarter of CEE retailers were looking to use technology to improve their supply chains, ensuring faster delivery timelines and more efficient inventory management.

Cloud platform, Ydistri, helps retailers by analyzing sales and inventory data to re-route products from stores where they aren’t selling – also known as deadstock – to the stores that need them most, where they can be re-shelved and sold at full price. Deadstock is a huge issue in Europe, with Ydistri estimating that some €25 billion is lost to inventory waste each year. By using AI to move products away from areas of low demand, customers get more of what they like best in their local store, while retailers can minimize waste and increase sales. With Ydistri, deadstock is converted into cash for the full price instead of sold at high discounts or being written off.

Delivering for customers

As more goods are shipped directly to consumers, we’re also seeing a re-imagination of delivery, storage and collection. In many cases, businesses with experience outside of retail are contributing new ideas and solutions.

Founder of Czech startup Zasilkovna, Simona Kijonková, was originally an entrepreneur working in the media industry – however, she spotted a niche in the retail market. Leveraging a network of small local outlets, she was able to build on her web development training to innovate how goods reach customers. This ambition formed the basis of Zasilkovna, a network of dispensing points at shops and workshops, across the country where customers buying goods online can choose to have packages delivered to their nearest most convenient store. As well as creating opportunities for local retailers by sending potential buyers their way, the service also reduces frustration for customers who have missed deliveries made when they weren’t home. Ten years since its inception, Zasilkovna now operates in 33 European countries and in almost 30,000 e-shops.

“We work with small retailers and small businesses worldwide. The pandemic – and resulting government restrictions – changed everything. With shops having to close, 50% of our pickup points were also closed. And of course, at the same time, demand for ecommerce went up,” explains Simona Kijonková “Because we are a data-led company, we were able to react very quickly. What might have taken months, took days. And, while we’ve been able to quickly pivot during the pandemic, we’ve also been able to keep innovating.”

Today Zasilkovna is using technology to fully optimize its dispensing points through the world’s fastest robotic parcel dispenser, the fully automated Z-Bot. Z-Bot works like real-life Tetris, storing items optimally and dispensing them almost as soon as a customer has finished inputting their parcel’s unique identification code. The team also runs 70 solar powered Z-boxes, accessible via mobile phone, that can also be used to send packages – creating better access to postal services in rural areas, while minimizing the need for physical contact throughout the process.

Managing the ‘last mile’ for home deliveries is also often an expensive and inefficient step in the process for logistics providers, swallowing up to two-fifths of the total cost of transport. Czech startup DoDo has developed its own logistics platform that aims to ease this pressure for its customers, including KFC, Košík, Tesco and other key e-commerce players, by identifying peak traffic times, predicting the optimal time for deliveries based on traffic flows and combining deliveries for multiple retailers headed to the same area. These efficiency measures save costs, get products to consumers faster and reduce the number of vans on the road, benefitting the environment as well.

The retail environment has always been fast-paced and a source of great creativity and innovation. Across CEE we’re seeing examples of large retailers, as well as ambitious startups and SMBs, that are delivering truly world-class innovation to reinvent how they serve customers.

“Every company now has access to technology like AI. To use technology to drive one piece of innovation is not enough,” said Ramon Baeza, head of Boston Consulting Group’s innovation globally, speaking at a recent Microsoft event, “We’ve seen the most successful companies become serial innovators, where they are driving new innovations year after year.”

With a strong talent pool, and increasing investment in digital infrastructure across the region, we can expect to see even more exciting innovation come out of CEE’s retail industry in the future, to the benefit of both, retailers as well as their customers.

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