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Retailers are increasingly aware of the dangers and opportunities of e-commerce. They turn to new technology to drive up sales in traditional stores – but to what end? by Beata Socha The e-commerce industry in Poland was worth some PLN 15.5 billion in 2010. In 2013, the market’s value stood at PLN 26 billion. This year, its total value will exceed PLN 35 billion, according to analysts from research firm Forester Research. While the pace of e-commerce growth seems to be decelerating in global terms, it seems to be picking up speed in Poland. With the cake getting bigger so quickly, no wonder there are so many contenders, both global and local, looking to make a play for it. Each of them comes with a different bag of tricks. Most hypermarket chains operating in Poland already have well-developed online shopping and delivery systems. The dispatch of goods usually takes no more than two days and the client can select the delivery time that is most convenient for him or her. Same-day deliveries seem to be the next logical step in the retail evolution, one that can be a game changer for the entire industry. Are same-day deliveries a viable option for Poland, though? “They are absolutely possible and we expect that some internet stores as well as brick-and-mortar retailers offering online sales will soon adapt this model. It will definitely be an important competitive advantage for them,” said Mariusz Czerwiak, associate director, Retail Agency at JLL. “It’s a matter of logistics. In order to have same-day deliveries, retailers need their own delivery systems because they cannot solely rely on courier companies. It also requires efficient order processing and expanding the order picking team,” he added. Point of no return However, online shopping and goods delivery is not without its problems. Return logistics seems to be the biggest issue. “A lot of online stores receive so many returns that they are no longer profitable,” said Eduard Zehetner, CEO of Immofinanz Group. “You want to go to a party, you order a new dress, wear it and then return it the next day,” he added. Naturally, making returns easy for the client can be extremely costly for the store. “It’s a major challenge, as not every company can afford to expand its logistics base and, at the same time, return to the client to collect individual items,” Czerwiak explained. But if a company somehow manages to work it into its business model, it can become a huge advantage. Take Zalando, for instance. The Berlin-based web fashion retailer may not have been the first one to adapt the “Free shipping! Free returns!” rule. In fact, it has been widely criticized as a rip-off of US retailer Zappos. In any case, Zalando is Europe’s definite market leader in online-only fashion retailing. It managed to pass the $1 billion mark in annual revenue just four years after its founding. Niche filling Even though internet shopping has been around for well over a decade (Poland’s biggest web auction site Allegro was established in 1999), it made its way into the FMCG market only a few years ago. Online sales is a way for most hypermarkets in Poland and elsewhere to make up for their ever declining sales results in traditional stores. Last year, hypermarkets’ food sales dropped by 5.7 percent, according to research firm Nielsen. Auchan, just like all other major hypermarket chains, already has an online shopping site with home delivery service. It is now trying to fill another niche. It is looking to implement its click-and-collect concept, dubbed Auchan Drive, in its Eastern European stores. In France, the concept is one of the giant’s flagship services, but in Central and Eastern Europe the click-and-collect model is still relatively fresh. “This is an intermediate solution between online purchases with home delivery and shopping in a brick-and-mortar store. You can order goods on the internet and then collect them already packaged and ready to go,” JLL’s Czerwiak explained. “This type of service is a significant change compared to traditional shopping and we believe it will find its place in Poland, particularly in large cities,” he added. [caption id="attachment_59533" align="alignleft" width="274"] Image : shutterstock [/caption] Digital gap Still, there are many retailers that have a lot to learn when it comes to operating in the digital world. Even though mobile devices generate some 38 percent of internet traffic in Poland, some major players, like discount retailer Biedronka, convenience store chain Żabka, and fashion giants LPP and 4F, have no mobile platforms, according to researchers from Boston Consulting Group quoted by daily Rzeczpospolita. Despite lagging a few years behind the west in retail habits, Poles are increasingly open to new forms of shopping: traditional, virtual and combinations of the two. Augmented shopping, as marketing wizards like to call it, is making its entrance. Augmented experience A Kraków-based start-up created a smart-tagging system, called Estimote Beacons, which is getting a lot of traction abroad. These beacons are small sensors that are located in various places around the store. They interact with mobile devices, like smartphones and tablets, thus providing a digital communication channel with the client. They can be used for in-store analytics, proximity marketing, indoor navigation as well as contactless payment. The company is now working on prolonging the beacon’s battery life, which is probably the biggest obstacle for this type of technology. Meanwhile, IT giant Apple and a myriad of start-ups are introducing their own beacon systems. Applications seem limitless. These sensors are great tools for gathering data about customers, which has been troublesome for brick-and-mortar stores thus far. More importantly, however, these systems are perfect sales tools. They can guide people to current special offers. If you need to clear more merchandise before a new shipment, just offer clients visiting the mall an exclusive 20 percent discount valid for the next 30 minutes. Sales aren’t going so well and you wonder if it’s the pricing policy, the marketing or the visibility of the product? Test different prices and ads when traffic levels in the store are comparable and you’ll have the answer immediately. Entertain and prosper If things go the way they are headed now, data gathering and store management will become one and the same. We will have algorithms running the store, analyzing swathes of data every second, controlling the beacons, the price tags, telling floor staff where to display things and when. And on top of it all, they will have to provide entertainment to the clients. Shopping center operators are well aware that entertainment will continue to become an increasingly important ingredient in the shopping experience. The term “retailtainment,” first coined about a decade ago, refers to using positive reinforcement stimuli to make shopping more enjoyable for the client, in order to increase the time shoppers linger in the mall and consequently the amounts of money they spend. Investors have thus far relied on making food courts and lounge areas bigger and more comfortable, and adding a variety of entertainment venues, like movie theaters, bowling alleys or even themed stores. Now, they are adding a digital component to the mix. It could be a funny short film about a product played either on a store display or on your mobile phone when you pass it by. It could also be more practical, for instance a virtual comments section about the product popping up on your phone while you examine it. Though a little scary, experts agree that the digital incursion into traditional shopping is all but inevitable. “We have to create a new environment where we integrate online and offline features and combine the advantages of both worlds,” Eduard Zehetner said.