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Stationary retailing is not dead

Expert interview with Melanie Tschugmall

An expert interview between Florin Janine Krapp, Partner at KPMG, and Melanie Tschugmall, Head of Retail and Consumer Goods at Zühlke.

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Melanie Tschugmall and Florin Janine Krapp

Melanie Tschugmall and Florin Janine Krapp

With pressure on margins in the retail sector steadily increasing, conventional ways of adjusting product ranges and cutting costs aren’t enough anymore to make retail companies viable in the long term. The question is: What can businesses do in today’s world to carve out a competitive advantage? Which major trends do you see in the sector?

While it’s true that the retail sector is under pressure, it should be mentioned that changes were already taking place before COVID-19. Sustainability, direct-to-consumer, and customers’ need for immediate, 24/7 product availability are a few examples that come to mind. The sector is undergoing a perpetual transformation that’s giving rise to numerous innovations.

The usual customer journeys and even entire sales channels were eliminated overnight when the first COVID precautions were taken. Look at the partial closure of non-food retail outlets, for example, or even the disappearance of the usual throngs of commuters. Customer interactions definitely shifted to the digital realm. That not only holds true with respect to the purchase transaction itself, but also in terms of how information was generated and how customers looked for new products and services. That the coronavirus crisis intensified and accelerated these trends is crystal clear.

Given these more intense, accelerated trends, what does the retail sector need to pay particular attention to now to stay on the ball?

To remain relevant in this changed environment, retailers should define a clear goal – set a North Star that establishes a basis for the customer experience, in particular, and from which they derive their entire arsenal of strategic initiatives and tactical decisions. That will help them stay focused and work quickly to remain relevant and keep their bearings, especially in these extremely fast-moving times. For that, having an agile mindset and a more intense digital engagement are critical success factors.

It also means having the courage to try, test, learn and adapt. It goes to follow that retailers have to be innovative at all times and keep an eye on the system as a whole. If IT changes processes on the customer front, for example, those changes will impact the IT systems, as well. Outdated IT systems, on the other hand, could be standing in the way of urgently needed innovations.

How much innovation is actually happening in the retail sector? Is there a gap between what’s needed and reality?

I’m thrilled to say that I’m noticing more and more that both our clients as well as companies in Switzerland, in general, are taking a proactive approach toward innovation-related issues. You could even say that COVID-19 helped fuel this pioneering spirit, in keeping with the old adage: “necessity is the mother of invention”.

Another thing also holds true: Our thinking is still overly incremental. The radical changes I mentioned also call for entirely new answers and approaches. To achieve these quickly, we need to rely more on data-driven innovations. That means taking hypotheses and experimenting with them, measuring and understanding them so that we can make better decisions in the future.

How does this pioneering spirit manifest itself? How do you, as a provider of innovation services, address the topic of innovation with your clients?

One key question that arises over and over again is: How can we take good ideas and arrive at the effective, marketable innovations that customers are seeking? To find an answer, we worked together with HSG last year to conduct a large consumer survey focused on the topic of contactless shopping. The take-home message of this survey was interesting, namely that end consumers consider the “self-service store” format extremely appealing. That means stationary retailing isn’t dead. But it can’t just sit on its laurels, either.

Right now, it’s more important than ever that we don’t simply optimize existing formats and services, but instead take a critical look at them because we’ve seen that newly tested formats are becoming more and more accepted. Both data analytics and artificial intelligence can offer valuable insights on the matter and help develop new solutions.

You phrased it nicely: In-person visits aren’t actually becoming less important in the retail sector, they’re only changing. What did you mean?

As the study conducted together with HSG revealed, stationary retailing isn’t anywhere close to dead. We’re all yearning to go do some in-person shopping and have those experiences. What I think will happen, though, is that we’ll discover the retail sector has changed. In the future, the new possibilities opened up by data-driven interactions will allow companies to analyze customer needs in an even more targeted way. Where should I open my new store? Which products will let me reach my desired target group? How should the shelf look? The potential is enormous.

And what do you think the future will look like?

With respect to the blending of online and offline channels, I’m curious to see which innovative formats arise. Personally, though, I always like taking a look at what’s happening in Asia. Right now, the big trend there is live streaming. I wonder when we’ll start seeing this trend in Switzerland.

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