Converged Development of Physical Retail and eCommerce

In June 2017, JD.com, an eCommerce giant in China, reported record high sales of CNY119.9 billion during the ‘6.18’ mid-year online shopping spree. Also in the same month, Amazon used USD $13.7 billion to purchase the USA’s largest organic food retailer, Whole Foods Market. Although eCommerce has been developing fast in recent years, the top 10 retailers in the world’s top 250 retailer list in 2016 were all brick-and-mortar retailers.

In the new market environment, converged development of physical retail and eCommerce is inevitable. The online and offline collaborative development model already exists in China.

Alibaba and Suning established an alliance by buying each other’s shares. JD.com buys shares of Yonghui Superstores and cooperates with Walmart. Alibaba buys shares of Bailian Group, San Jiang, and Lianhua. eCommerce players need to open up new markets through retail channels, obtain more customers’ background information, and develop their own products and brands. At the same time, retailers hope to improve online marketing and promotion and attract customers to retail stores with the help of eCommerce players. Retailers hope to use new ICT technologies to improve customers’ shopping experience, increase operational efficiency, build industrial competitiveness, and implement digital transformation of their enterprises.

Smart Retail Driven by New ICT

The retail industry has reached a consensus to use new ICT technologies, such as cloud computing, Big Data, the IoT, and Artificial Intelligence (AI), to create innovative operational models. New technical methods are accelerating digital transformation of the retail industry, helping it make breakthroughs in many areas, such as shopping efficiency and consumption experience. In other words, the retail industry is undergoing an intelligent revolution.

Whether it is online or physical, smart retail is a new business model that must not be taken for granted. The goal of smart retail is to center on multiple dimensions (for example, consumers, requirements, products, and services), maximize efficiency in specific actions (such as sensing lifeworld scenarios, pushing solutions, and implementing fast deliveries), across the entire process from commodity production to consumer experience.

Physical retail should implement intelligent customer, commodity, supply chain, and chain store management in a variety of ways:

• Check cashing and payment

• Automatic identification of devices

• Anti-theft commodity monitoring

• Marketing and customer service

Additionally, new business and profitability models should be developed to improve traditional retail’s operational efficiency and user consumption experience.

In the future, physical retail will integrate many technologies, such as computer vision, machine learning, natural language processing, sensors, robots, and Augmented Reality (AR)/Virtual Reality (VR). There will be pervasive use of sensors, cameras, signal-receiving devices, and customer service appliances (such as shopping guide robots and self-service terminals) in chain stores. These installations can monitor products that are taken or put back by customers, and track products in virtual shopping carts that operate like driverless cars. New technologies based on Big Data will help physical retail to efficiently and accurately develop user profiles, product and service positioning, and implement precise pushing along with intelligent replenishment, loss prevention, and customer services. Additionally, new technology will help physical retail to narrow gaps with eCommerce in terms of precision marketing and integrated interaction.

At present, smart retail is largely implemented in sales scenarios. For example, China, the USA, and Japan have started to use reception robots, shopping guide robots, intelligent dressing mirrors, goods shelf detection and management robots, and warehousing management and logistics robots.

Focusing on Western Europe and Constructing the New ICT Platform and Ecosystem of the Retail Industry

Most global retail giants are in Europe and North America. Almost half of top 50 retailers in the world are from Western Europe. Therefore, the digital transformation of retailers in Western Europe is significant for overall development of the global retail industry. Because new ICT technology is an important driving force of the retail industry’s digital transformation, enterprises represented by Western European retail giants continuously increase investment in ICT technology. A Gartner report shows that, the 2016 ICT investments of global retail and wholesale industry account for 1.6 percent of their revenue. Of these investments, 22 percent is injected in data centers and 9 percent in data networks. In the next two years, it is predicted that the retail industry will continue to increase investment in ICT.

Retail enterprises have different ways to implement digital transformation due to different operational models.

The biggest requirement of retail enterprises using the small-scale chain store model, such as Germany’s ALDI, is unified management and maintenance of different types of devices and terminals. They hope to use a single device to centrally manage all systems and terminals, such as POS terminals, check cashing systems, telephone systems, computer networks, and advertisement push systems. They hope to use Electronic Shelf Labels (ESLs), so that after headquarters adjusts prices, branch stores can automatically synchronize the prices, reducing manual operations. Small-scale chain stores strictly control overall costs, and they are pursuing faster rollout of new services and easier device O&M.

Integrated operations are the biggest requirement of retail enterprises using the large-scale shopping mall and supermarket model, such as Germany’s METRO, and France’s E.Leclerc and Auchan. These enterprises hope to have seamless, wireless coverage of an entire store, including customer and industrial terminals, in order to improve each store’s quality of service. They also wish to provide more customer-centric services, such as precision location, in-store navigation, and reverse vehicle lookup, to improve customers’ shopping experience. They expect to improve sales through many services, such as customer shopping, Big Data analytics, and targeted wireless marketing. The IoT-based innovative solution can intelligently adjust lighting and air conditioning, sense commodities’ expiration dates, and support timely scheduling to replace commodities or sell them at a discount. Retail enterprises can use ESLs to implement price adjustments, thus improving operational efficiency and reducing costs.

Huawei Solutions

Huawei uses state-of-the-art ICT technology and cooperates with industry-leading partners to develop different smart retail solutions for different retail features and business scenarios.

The Huawei Chain Store Unified Access Solution provides chain stores with integrated access gateways that implement unified access of many services and devices, such as POS terminals, Office Automation (OA), wireless coverage, voice, surveillance, advertisement screens, and ESLs in physical stores. This can speed chain store openings and simplify network management.

The Huawei Wireless Shopping Mall Solution provides secure, reliable wireless coverage for shopping malls and supermarkets, as well as many value-added services, such as store navigation, reverse vehicle lookup, and precision marketing. This can improve shopping experiences and operational efficiency.

The Huawei Micro Data Center (MicroDC) Solution provides MicroDCs for shopping centers and chain stores to integrate a variety of capabilities, such as routing, switching, security, computing, and storage. The solution pre-integrates many systems and software, such as Enterprise Resource Planning (ERP) and OA software, to ensure rapid rollout of retail services. System U, a famous supermarket company in France, uses the Huawei MicroDC Solution to implement remote management of physical stores, reducing costs and improving operational efficiency.

Retail enterprises’ ERP performance bottlenecks lead to delays in business data entry and output of data reports. An ERP core database platform, the Huawei KunLun HANA Appliance Solution, helps stores enter business data in real time. This can improve the efficiency of generating general warehouse data reports by more than 10 times and implement refined management of the supply chain.

At present, cloud computing is blooming in all industries, and retail is no exception. A Gartner report shows that the compound annual growth rate of the cloud service market in the retail industry is 10 percent. Huawei cloud solutions, such as the Huawei Retail Hybrid Cloud Solution, eCommerce Cloud Solution, Retail Store Unified Management Cloud Solution, Online Experience Cloud Solution, and Collaborative Office Cloud Solution, help retailers seize new opportunities and stimulate business innovation.

In the retail industry, Huawei’s Enterprise Business Group will continue to focus on ‘platform and ecosystem’ as its two key strategies. Huawei will center on the Western European retail industry to conduct ecosystem construction when providing a one-stop basic infrastructure platform featuring cloud-pipe-device synergy. Huawei has established collaborative relationships with enterprise resale players, such as DT and KPN, and organized The Consumer Goods Forum (TCGF). The ESL solution is streamlined through integration with products from other third-party suppliers, such as Hanshow and Findbox. Additionally, Huawei has established an OpenLab in Munich for the retail industry. Huawei, through its OpenLab system, participates in joint innovations with many companies, such as T-Systems and NTT DATA.

Benefits

Don E. Schultz, the father of integrated marketing, predicted that one retail success model is to make customer loyalty a major core competency and to develop a loyalty plan by understanding customers and creating good customer relationships.

Another model is to accelerate consumption-oriented digital transformation. Smart retail should be developed because of customer demand, and not just because we have access to intelligent technology. The retail industry should use the new ICT technology, such as cloud computing, the IoT, VR, and Big Data, to build new, consumer-centric retail models and deepen communication and interaction between retailers and consumers.