Online and Offline Shopping – A Marriage Made in Heaven?

Retail is changing; I guess that is not new. Change is the only constant[1]. If we accept that Retail is not what it was, and it won’t be what it is … then what will it be?

We have to look East to see one future of Retail.

In China, Freshippo and Seven Fresh have married in-store and online shopping. It started in 2015; Alibaba opened the first Hema[2], a high-tech supermarket designed around your smartphone, which is used to put items in your digital cart while you shop, getting additional information, and paying for your goods. Alibaba’s New Retail integrates online, offline, logistics, and data along a single value chain.

The marriage presents itself in how they do their fulfilment because each store is also a fulfilment centre for customers ordering online. Store employees have the usual customer-facing responsibilities, but they also fulfil online orders[3]. Within a 3km radius, the groceries are then delivered for free within 30 minutes.

Whilst the fulfilment is very competitive, I find one thing even more noteworthy about their approach: that is that it’s mobile-first. They have effectively designed the store and the processes around the app, not the other way round.

How can established businesses reinvent themselves to mirror, let alone compete with, Alibaba’s approach?

Years ago, Ralph Hamers, CEO of ING Group, said, “If you don’t disrupt your business, someone else will”[4]. So, whilst Amazon Go might only have one store in London, and Hema (Freshippo, not the Dutch retail chain) might just operate in China, this train is moving, and you better get ready to jump on it or get left behind.

I am not suggesting you immediately start redesigning your operating model! However, it is worth looking at your labour model.

It is essential for the enablement of an integrated value chain to have a holistic labour model. The bringing together of different parts of the business which are often separated not just physically, but in everything but the name on the door.

The challenge in many environments is that there is no visibility of supply, capacity and demand.  Without visibility, there is no control. For example, most High Street brands I have worked with use their POS data to derive demand rather than measuring actual footfall, but that is just the tip of the iceberg. In fulfilment, the situation is typically worse, but there is a strong status quo bias for the lack of visibility which helps hide the majority of problems.

True change comes from understanding what happens and why. The catalyst for understanding is visibility. So that is where to start, visibility of the execution across the entire value chain.

By: Michiel Lely

Director, Professional Services

[1] Heraclitus of Ephesus, Greek philosopher 535-475BC

[2] Hema’s English name is Freshippo

[3] It is not unique in itself. Have personally seen employees at Morrisons, an UK supermarket, do online fulfilment, but the targets at Hema are.

[4] The statement is not uniquely his, but that is where I heard it first.