E-commerce's share of total retail sales in Germany is growing and growing. Almost ten percent of all retail sales are now made online. This is the most visible consequence of the digital transformation in retail. And all experts agree that this trend will continue in the coming years.
Many retail companies have therefore become nervous, and owner-managed, bricks-and-mortar retailers in particular feel under a lot of pressure. But they are not at the mercy of the onslaught of e-commerce. There is a whole range of digital business models in retail. The most important of these will be presented here in a brief overview - as an inspiration for the first steps into the digital economy.
E-commerce is more than just a web store
The classic digital model is of course a web store, possibly combined with an app that also brings the store and other information to the smartphone. The model of the store or department store is transferred to the internet. However, the possibilities of digitalization are far from exhausted; there are many alternatives to pure e-commerce.
For example, subscription commerce, where consumer products are automatically delivered to your home. One of the trendsetters here is Dollar Shave Club in the USA. It sends inexpensive razor blades and other products by subscription and generates a turnover of 200 million dollars.
The principle: customers order their favorite product once, specify the quantity and time period and then don't have to do anything else. In principle, this works for many consumer products, which can also be delivered collectively in subscription boxes. One example of this is Glossybox, which delivers selected cosmetic products once a month. Other providers deliver food or children's toys.
Curated shopping, in which specific products selected by the shipper are ordered, also appeals to customers' convenience. Outfittery is a pioneer in Germany: it sends inspiring outfits on request, which are selected by stylists to precisely match a user profile.
Exploiting the platform economy
However, these business models have a small catch: the storage, packaging and shipping as well as the handling of returns and complaints mean a considerable amount of work. This is avoided with dropshipping. The retailer does not need to set up their own warehouse and logistics infrastructure. They send the orders to a special fulfillment service provider who carries out the shipping on behalf of the retailer. This can be a manufacturer, a special wholesaler or Amazon.
The retail giant recognized dropshipping as a need for its business customers early on. There are now even manufacturers who do most of their business via Amazon - for example, cell phone accessories specialist The Friendly Swede. Behind this is a small company that has its production in China and only generates a good eight million euros in annual sales via the Amazon platform.
But you don't have to become a millionaire right away, the platform economy also works on a small scale: Products are recorded using Amazon software, collected and sent to the nearest shipping center in any number of packages. Customers can then only order from Amazon, but in return the company takes care of the entire process, including collection and returns.
Digitization of the last mile
Nevertheless, having your own online store also has advantages, as retailers build a direct relationship with customers. This gives them an opportunity to lead them to their store, for example through Click & Collect. Customers select their purchases online and then pick them up at a time of their choosing. This concept is currently being tested by Edeka in the food retail sector. However, the retail chain is relying on an automated, refrigerated pick-up station developed by the startup Open Ideas under the name EmmasBox.
But it can be even more automated, namely with a robot as a supplier. Large retailers such as the Metro Group hope that this will enable them to establish same-day delivery. The considerable logistical and personnel costs are to be reduced, at least in large cities, by using semi-autonomous delivery robots. The device from London-based start-up Starship Technologies is currently being tested in Düsseldorf and Hamburg.
These complex technologies, which are intended to digitize the "last mile", also include concepts such as delivery drones that transport parcels through the air and the delivery of parcels into the trunk of a car. The latter is currently being tested by DHL, but requires a technical conversion of the trunk.
First steps into digital commerce
As interesting as such developments are, they are oversized, especially for smaller stores. But even an owner-managed specialist store can achieve a lot with little effort. However, the prerequisite is always the most consistent digitalization of business processes possible. This should not stop at merchandise management and checkout systems, but should also include customer relationship management (CRM) software.
This prepares a specialist store for the first steps towards digitalization, for example with a regular newsletter that draws the attention of regular customers to new products or discounts. A Facebook page or a dedicated marketing app for iOS and Android perform a similar task.
A mobile application like this does not necessarily require a great deal of development effort. There are a variety of app construction kits that can be used to build attractive apps for customer information. Although these options are not yet digital business models in their purest form, they are particularly recommended for companies that want to embark on the digital future without major investment.
