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11. 03. 2022
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Physical retail is becoming the exact analog of online retail regarding measurement and available data. Data that used to be obtained by estimation or one-off measurements is now continuously and automated. As a result, decision-making is no longer driven by experience or feelings.
"We have the opportunity to collect data on actual customer behavior that has never been available before. This gives us the basis for real decisions in real-time," says Petr Blabla, who leads teams and projects dedicated to digital retail at Adastra in the podcast.
Ivana Karhanová: Retailers and brands can finally have the same data as their online colleagues. How many people have passed by the display or shelf? How many bought the product? And what were their gender and age? Which display sells more? Data that used to be collected by estimation or one-off measurement is now available continuously. How does it work? That's what we'll discuss in today's podcast with Peter Blabla, Director of Digital Retail at Adastra. Hi, welcome to the studio.
Petr Blabla: Hi.
Ivana Karhanová: Peter, is there a tipping point for physical retail?
Petr Blabla: I don't know if I would quite call it a turning point. There are a lot of big words flying around lately. There's definitely a big opportunity there because we can get data around actual customer behavior that was never available before. It allows us to really get the basis for real decisions in real-time.
Ivana Karhanová: What all can you measure in physical retail at the moment?
Petr Blabla: It depends if we want to look at just physical retail because there's a whole product journey where we're dealing with our own supply chain - from raw materials through logistics, warehouses, manufacturing, etc. But if it's purely retail, then we can, for example, deal with how many customers walk into a shopping center in total or look at the first conversion when they walk into a particular store. Then within the business unit, we find out which way they move. That means the trajectory of their movement and the places where they congregate. Those are the most interesting investment opportunities.
Ivana Karhanová: Does this mean some kind of analogy to the heat map that we all know from online?
Petr Blabla: Exactly, and of course, you can find out where the places are that are worth investing in, that are the most visible and allow, whether brands or chains, to highlight a product or a campaign. Then, of course, we're able to track sales from specific locations. At the same time, we can occupy these places with smart camera technology or count how many people have passed through, where they came from, and how long they stood by a given product. We're already looking at the actual conversion of awareness of the product and of the brand, and also the subsequent conversion to purchase, whether it took place or not. At the same time, we are also able to look at how long it takes for queues to start forming after an increase in the number of people in the store and how to respond to that in terms of process efficiency in general. I think the range is relatively wide.
Ivana Karhanová: So basically, a completely accurate analogy of what we know online.
Petr Blabla: Exactly. And at the same time, the more complex solutions also allow us to tell who the target audience is that we've reached and that has responded. Of course, we try to respect all GDPR rules, so we only track gender, age estimation, height or mood, and whether the person was satisfied with the purchase or not. But we don't go into much detail.
Ivana Karhanová: Who are these solutions ideal for? Who will use them the most on the market?
Petr Blabla: I think it's definitely a wider range. We can't say it's just one entity. It's definitely brands or suppliers that are competing for customers in that relatively saturated market and need to both draw attention to the brand or product and, of course, convert. At the same time, it's definitely business units or chains as such. They are margin pressured and are trying to attract customers in a competitive online environment. It can certainly be agencies that produce solutions for chains and for brands.
Ivana Karhanová: If we take it specifically from the brands' point of view, does that mean that they get an answer at this point to the question of which exposure is more profitable for them?
Petr Blabla: Absolutely.
Ivana Karhanová: And retailers will be interested in what? How do place the goods around the store?
Petr Blabla: If it's a third party or a retailer, they usually have a primary display for brands where they stand next to others and have to communicate to stand out. But often, brands pay for secondary exposure within stores, which can be just zones that are exposed to more passing customers. So understanding where it's really worth investing in secondary exposure and also understanding what type of people are shopping so that I can adjust my marketing campaign, product mix, or pricing strategy accordingly is valuable information.
Ivana Karhanová: If we look at it from the perspective of individual chains, which ones are the solutions suited for which use cases?
Petr Blabla: It's definitely optimizing the people who are moving around merchandising or replenishment. There can be two use times. One is specifically notifying the person who is responsible for replenishment so that a customer doesn't come in and buy because the product is not on the shelf or on display. The other is long-term trends, which allows them to see specific peaks when the most people go there when to replenish the goods, and also the efficiency of the optimization processes.
Ivana Karhanová: You said that physical retail and selling to the end customer is just the end of all that can be measured and tracked. Earlier, you mentioned the whole supply chain. What are you able to do for brands in that?
Petr Blabla: Now, we've talked a lot about the customer journey and what happens the moment a customer starts to interact with a product in a business unit. But if we want to look at the product journey, all the way down to the raw material, for example, we can address transparency, which is something that the younger generation, in particular, is craving right now. They want to see how the product was made and what its carbon footprint is along the route it took to get to the store, etc. At the same time, we need to engage with the authenticity of the brand and the values it stands for. That's all traceable. We're able to track the whole journey of a product through production and storage to the customer and then look at how that cycle can be closed.
Ivana Karhanová: If we say that in the store, we can measure how many people bought a product or from which display. I guess the first question from the client is how does it actually work, etc.
Petr Blabla: The systems can be different. We have smart scale solutions that primarily measure product weight or shelf occupancy and recalculate the specific pieces that are sold or link them to a planogram in the cloud. This allows us to see what has sold and when. I think the power is in that connection with all the background data that are available at that moment, whether it's the weather, the time the event happened, the pricing strategy that people responded to, and then the comparisons across different locations in the store. At the same time, different store formats and different cities can be compared to each other, regions, countries, etc. We have sales data from the checkouts and anything we want to build on that is possible at this point. We can then integrate the data into reports that give us sophisticated answers and insights.
Ivana Karhanová: Let's stay with the technical solution. What does a smart shelf or scale look like? My point is how to incorporate it into the ecosystem of the store.
Petr Blabla: We are trying to build the solution in a way that is non-invasive in terms of installation and doesn't have to make a big investment in existing infrastructure. That means putting a shelf on a shelf or putting a scale under a specific rack. So really, it's just an investment in the measuring equipment. That measuring equipment can then be supplemented with a simple counter of people or things, or a more sophisticated camera that allows you to, for example, look at demographics and understand what type of customers are responding and buying.
Ivana Karhanová: If it's non-invasive, I'm supposed to imagine that there are basically no wires running anywhere that customers could trip over?
Petr Blabla: The basic solution, yes. If we're talking about the cameras, they need them. But simple devices to track people's movements can be integrated into the batteries powering the devices.
Ivana Karhanová: When we mentioned motion tracking and demographics, we came to the issue of GDPR and data protection. How do you work with that data?
Petr Blabla: We're able to talk to the client about the fact that the data is processed directly within the business unit, and only the ones and zeros go to the cloud. But in most cases, we're not really tracking a specific person, just an approximation of age or gender to know if it's a child or an adult. It depends on what technology we choose and how much detail we want to go into. It's all absolutely in accordance with all the rules.
Ivana Karhanová: So does that mean that just like online, I have cookies, and based on my history, the algorithms can guess what kind of customer I am? In physical retail, we only measure approximate age, and we know that so many women walked past the shelf, so many men walked past the shelf, and they had roughly the same age composition?
Petr Blabla: Yes. Then, of course, we're able to link that with other background sales information to see what each target group is responding to.
Ivana Karhanová: You and your team are already implementing such solutions in the market. What do brands appreciate most about it, and what are their expectations?
Petr Blabla: I think that often decisions within a pricing strategy or marketing campaign are based on some long-term experiences and feelings. At the moment, hard data that underpins decisions in real-time is definitely one of the big benefits. At the same time, of course, everyone wants to increase sales and gain more market share. They want to better target any campaign because there's a relatively large investment involved. And recently, from what I've seen, there's also been an increase in investment in secondary exposure just to pull customers within the market. So it's definitely, in the end, increasing sales, brand awareness, and communication in the marketplace.
Ivana Karhanová: So verifying that result on the data.
Petr Blabla: Exactly, because they are able to measure that outcome. Of course, optimally, they should make some decisions based on that to help sales or better market reach. The basis is definitely the measurement data.
Ivana Karhanová: When a brand decides that they want to try to measure how it works in physical retail and they want to have real data, then what does the collaboration with Adastra look like or what follows?
Petr Blabla: It depends if they want to focus on just specific types of stores or maybe a country within Europe. The range somehow determines the options that we have. We're very aware of the processes that already exist, and we're trying to run those things in parallel and validate them relatively quickly. We're able to have separate connectivity and separate reporting, but then we're also able to quickly integrate that into existing processes or reporting because nobody wants to see another login, another website, another report, etc. The primary thing for us is to remove any possible doubt and be able to get it up and running relatively quickly with minimal interference to the existing process.
Ivana Karhanová: Does that mean that you do proof of concept by default outside of existing systems? So you're collecting the customer's data on the side and showing them only what they can have and what they can do with it next?
Petr Blabla: The way I see it so far, that's the preferred option.
Ivana Karhanová: This phase usually takes how long?
Petr Blabla: It can be in the order of months, but it can also be years. Of course, it's much more interesting financially if you sign a contract for a year or two. It's easier to spread the fixed costs that are needed to start an activity.
Ivana Karhanová: When the customer decides that the solution gives them the insight they need, then they deal with you to implement it into their real processes and systems?
Petr Blabla: Ideally, that's the case. In some places, we've incorporated this right from the start because the expectations were high, and they wanted to work with the data right away. But there are both possibilities.
Ivana Karhanová: And where do you think physical retail is moving at the moment? Do you see changes in customer behavior and in the approach of brands?
Petr Blabla: There is definitely a lot of pressure from online. The last few years have shown that there are a lot of people who didn't use online before but now have at least tried it, which of course, increases the pressure. There are undeniable benefits, whether it's the breadth of the range, the personalized service, or the connection between the local community and local suppliers. Of course, that wasn't there before in that online retail. At the same time, growing online stores are getting more competitive. On the other hand, it turns out that people need interaction. We see that physical retail is able to appeal to multiple senses at once, there are emotions involved, and I don't think that will change completely anytime soon. The two will coexist and influence each other. Online, on the other hand, that personalized experience and convenience of service are pushing the business units. It can't be that a person doesn't find what they wanted in a physical store and leaves unsatisfied. For example, during the pandemic, we're seeing that customers didn't quite have the classic trajectory of going through the store that we were used to. For this reason, it is also important to understand new behavioral trends, measure them and have them backed up by data. It's definitely a big competitive advantage.
Ivana Karhanová: So physical retail is also starting to inflect the word customer experience more and more, as we are used to from online?
Petr Blabla: It's always been there. Now the two solutions are more or less competing side by side. Each has its particular advantage, and it's interesting to see how their advantages intersect and how both sides try to respond to the other's advantages, whether it's emotion, sensory, convenience, etc.
Ivana Karhanová: That was Peter Blabla, director of digital retail from Adastra. Peter, thanks for coming into the studio.