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Otto Group
Decisions Under Uncertainty and Highest Competitiveness - Can Retailers Still Set Themselves Apart?
Dr. Sebastian Walter
Dr. Sebastian Walter is the VP for Digital Products and Consulting at the Otto Group, a global multichannel Retail, Financial Services, and Logistics group. The Otto Group holds about 30 companies such as Crate & Barrel, About You, or Hermes Logistics. Sebastian leads the group-wide digital solutions product suite as well as the in-house consulting. Prior to his current position he was a partner at Bain & Company and a manager at Unilever. He has successfully supported many clients in their transformations and in driving digital solutions.
Could you shed light on the recent challenges in the retail industry?
The key challenge these days is deciding under uncertainty. This is driven by three forces:
COVID-19 lockdowns across the globe have reinforced many retail businesses to go online. Now, assuming no other dangerous mutations, the post-pandemic time is approaching. It remains unclear, to what extent customers will stay online, to what extent they will switch back into brick-and-mortar stores. Multichannel retail businesses have to balance investments between online and brick-and-mortar now – to meet an unclear customer behavior in the future.
The recent Russian invasion in the Ukraine causes high (economic) uncertainty for the western hemisphere, with severe consequences for retail businesses. The breakdown in the consumption climate in Europe is substantial: Customers withhold planned purchases and spend less. Moreover, the supply chain for some products is hit even stronger than in the COVID-19 crises, causing ever-increasing delivery times.
Lastly, continuing inflation is fueling uncertainty in markets. With higher prices, consumers sentiment and consumption behavior further decrease, causing increasing costs for retailers, forcing a reassessment of revenue and cost management.
All three forces cause a highly challenging environment to make investment decisions and plan ahead.
Could you walk us through the contemporary trends of eCommerce?
Nowadays, for multi-category offerings, some big players such as Amazon and OTTO set the market standard as gatekeepers. Early platform providers such as eBay or Rakuten have difficulties to evolve their business model along with the changing customer needs, while providers with both a platform and an own retailing business meet customer demands best and grow well.
For gatekeepers, I consider it essential to treat platform partners, i.e., brands and retailers, fairly by the platform provider. Only then, they will provide a full offer and best
service on the platform. Also, customers expect a sustainable corporate behavior, meaning the platform provider should have strict and transparent sustainability requirements for their partners covering the entire value chain from production to servicing.
On a more general note, a customer-centric approach remains key and is still not lived by many. The end-to-end journey needs continuous improvement from a customer perspective and not from an internal, organizational perspective.
Personalization is a driver of differentiation: Presenting only relevant products, ads and services allows to create a unique customer experience.
Other CX trends include the seamless integration of new technologies like Augmented Reality (AR) to create and enriched shopping experience, an easy payment processing, and fast delivery times. Same or next day delivery even in somewhat remote areas will become a standard.
Data and algorithms help improving the customer experience as well as internal processes. Demand forecasting algorithms have become much more reliable in the past years which enable category management to better predict ordering sizes, reduce overstock and improve the offer attractiveness for consumers. Chatbots and voicebots – anything “beyond touch” of an employee – improve efficiency and accuracy in solving customers’ problems and experience shows such technologies yield high customer satisfaction. Data driven business intelligence allows fast decision-making. These tools can save cost and fund customer centricity investments.
How are tech solutions in the Martech space benefiting eCommerce organizations?
The field of Martech solutions is broad; it includes email marketing platforms, customer relationship management solutions, customer data platforms, and others. All these should help to scale personalization and efficiently manage marketing activities. The tool selection depends on the characteristics of each business model. A headquarter role can help guiding group companies in selecting an implementing the appropriate solutions or build and run a group-wide offering: Typically, this is a field to seek synergies.
Could you elaborate on some of your recent projects?
As a group professional services function many recent projects were aimed at customer experience, conceptually, operationally, and technologically. For example, we build and provide apps to group retailers that we are constantly evolving to country-specific needs. We have collaborated with Apple to develop a state-of-the art AR plug-in and established highly successful automated customer response technologies for e-com retailers and for Hermes Logistics.
Personalization Is A Driver Of Differentiation: Presenting Only Relevant Products, Ads And Services Allows To Create A Unique Customer Experience
Another focus area is developing solutions for user-based marketing in a cookie-less future. We simulate the impact of Google’s privacy sandbox and prototype solutions, which still allow onsite personalization or retargeting while maintaining highest privacy standards in the future.
Ongoing is a project with the German government and other industry partners to enhance state-provided digital identity. We aim simplifying the user experience and enriching the state ID card with digital functions for usage in daily life, such as easy online registry and fraud prevention.
How do you envision the future of Martech space?
Consumer online behavior will continue to evolve, and along with this I expect further gatekeepers to emerge, potentially causing tectonic shifts in the landscape. Once Google shopping or fintechs like Klarna will launch more advanced search functions and will be further integrated into the checkout with retailers, these players may take significant share of traffic from established gatekeepers and price comparison sites, as they can serve the same purpose with an even more frictionless experience. Again, differentiation for existing retailers will be possible via a unique customer experience – which can be significantly driven by Martech. Its relevance will rise and accelerate.
What will be your advice to peers in the eCommerce space?
Amidst the highly competitive market of eCommerce gatekeepers and retailers, the principle of winner-takes-it-all (well, a lot at least) will prevail and relative market will remain key. To grow the business, tech investments for state-of-the-art innovations are needed.
Synergies, with partners or through headquarter functions can help.
Also, for those who made profits in the past years, I’d re-invest. Do not alter growth plans rather use this year be courageous and set your own company apart from reluctant competition.
