Exploring Asian and European Retail Trends

Automation, technology and economic sentiment are driving innovation and trends in the Asian and European convenience retail markets.

June 08, 2018

LONDON – Filippo Battaini, research analyst at Coresight Research, shared how the vast array of technology trends in Asia, from mobile payments to artificial intelligence (AI) and unmanned stores, are revolutionizing how convenience retailers interact with consumers and optimize business processes.

Battiani kicked off the “2018 Retail Technology Trends” session at the NACS Convenience Summit Europe on June 6 by highlighting the four “CORE” AI technology applications for convenience retail:

  • Communication: Mobile solutions can enhance the customer experience through personalization (i.e. chatbots, voice) by acting as a personal assistant through the shopping journey.
  • Optimize pricing: AI can enhance a retailer’s ability to forecast and set optimal prices based on market conditions and data such as sales, promotions, weather and calendar events. Amazon, for example, deploys AI-powered dynamic pricing to change prices rapidly in response to competition and demand.
  • Rationalize inventory: AI can help retailers manage inventory by using historical transactions and variables such as weather, calendar events and website searches to predict future purchases, as well as predict demand and allocate inventory effectively, in turn reducing markdowns and returns.
  • Experiential retail: AI offers new ways for shoppers to engage, discover and purchase through services such as virtual assistance and recommendations, in-store robot advisors and facial recognition.

Battiani said that in China, companies such as Alibaba, JD.com, Xiaomi, Wahaha and BingoBox operate automated, unstaffed convenience stores, and Tencent is using facial recognition to enable purchases through its WeChat app.

While U.S.-based Amazon Go in Seattle is using a more advanced technology inside its cashier-less convenience store, BingoBox is relying on a RFID technology to power its an unmanned c-store concept in China. The difference, he said, is that Amazon Go’s concept may not be as scalable. BingoBox relies on an established technology that is much easier to implement and operate, and with 300 sites in China, the concept is scalable. BingoBox customers also have more than one mobile choice to pay for their purchases, using WeChat Pay or Alipay by scanning items at the self-checkout.

Battiani explained that unmanned concepts encourage new entrants into the retail space, and also serve as an entry point for new companies to invest in convenience retail. Although human interaction is still an important aspect of the shopping experience, technology such as mobile and AI can enhance this experience by freeing staff of mundane tasks that can be automated, thus allowing employees to focus on the customer.

Shifting the retail perspective from Asia to Europe, Boris Planer, chief economist at Planet Retail, highlighted key drivers of change in Europe that will define the future of retail. To prepare for change, he noted the importance of first understanding the root causes of retail disruption, or “STEIP”:

  • Society: Planer noted that the ageing population in Europe is driving the need for proximity and convenience, while urbanization is lending to more fast-faced and modern lifestyles. Throughout Europe, labor participation rates are up, and more women are entering the workforce. Both changes are good news for convenience stores, which are well-positioned to cater to on-the-go shoppers who are looking for quick shopping experience, such as meal solutions and healthy snacking and beverage options.
  • Technology: Mobile devices are driving digital transformation and changing consumer expectations, said Planer, adding that internet and mobile usage are both up. “This tells us that digital integration in retail will work around the smartphone, and mobile payments will be an expectation in convenience,” he said.
  • Economy: Middle-class erosion in Europe, said Planer, will split the retail market into two types of offers: the no frills/replenishment offer of convenience stores, and the experiential retail offer that focuses on fresh food to go and the overall shopping experience.
  • Industry: Planer noted that the rise of ecommerce reflects consumer needs. Retailers such as Asda and Sainsbury’s are partnering to create an omnichannel experience, he said, while retailers such as OXXO are creating in-store spaces for consumers to shop online.
  • Policy: Curating international products is becoming more difficult for retailers in Europe because of trade restrictions and protectionism measures. Planer also said that the fight on sugar, however, is forcing companies to diversify their ranges. Fortunately, many large manufacturers already have responded to consumer demand for health and wellness, while start-ups are able to enter the market more easily with new food and beverage innovations.

Mike Watkins, head of retailer and business insight at Nielsen, gave a macro overview of the retail landscape in Western Europe with a focus on how shopper behavior is changing—through the lens that everything in retail has changed.

Focusing on how shopper sentiment is influencing spending on fast-moving consumer goods (FMCG), Watkins noted that although the recession crisis in countries such as Greece, Spain and Portugal has subsided, economic sentiment in Europe is improving, but consumers are not as confident as consumers in the rest of the world. “Europeans are still on fence” and need some type of enticement to spend, he suggested, noting when it comes to price, shoppers are more worried about total spend than shopping for a specific brand. “Shoppers want to economize, but not compromise,” he said.

The good news for retail is that Europe is experiencing its strongest economic growth in more than a decade, said Watkins, with growth in FMCG brands improving heading into 2018. However, many retailers still are activating promotional strategies “just to stand still,” he said, adding that 22% of FMCG sales is given away as a promotional benefit to shoppers. This could become problematic for the convenience channel, which is reliant on promotions and brands.

Watkins cited several trends in the European convenience channel echoed throughout various presentations during the five-day Summit: consumers are shopping more often and making more trips into stores; beverages, snacks and fresh foods are fast-growing categories; discount retailers are the fastest-growing channel and placing the most competition and pressure on retail in general; technology is driving change in shopping behavior and expectations.

The NACS Convenience Summit Europe kicked off in Warsaw on June 3, and on June 5 headed to London, where it wraps up today. For more event coverage, stay tuned to NACS Daily and upcoming issues of NACS Magazine. To register for next year’s event, taking place June 2-7 in Amsterdam and London, go to conveniencesummit.com.