Crisis: Driver of Digital Innovation or Really Just a Warning Signal for Retailers?
Article by Fanny Åberg and Marcus Honkanen
Photo from Mediamodifier via Pixabay
This spring, lockdowns all over Europe showed us how much businesses still relied on physical contact both within their organizations and towards their customers. Nordic Minds talked to two experts from the Nordics about digital innovation in times of crisis within retail. They shared their views on how physical stores and e-commerce together can create a healthy retail brand but also pointed out the major challenges.
While people were literally struggling to survive during the first hit of the pandemic, so did businesses. There were countless articles promoting the theory that the current crisis was driving innovation, especially digital transformation. But how sustainable really was the e-commerce infrastructure many companies created almost over night? There were ventures that didn’t make it through the pandemic after all. Some got through with life support in the form of government financial packages. And then there were retailers that seemed to steer across the stormy waters effortlessly. What did the successful ones do differently than the rest? .
Those who made it through the crisis didn’t play physical sales channels off against digital ones for starters. According to Carsten Dan Madsen, CEO of Danish children’s furniture company FLEXA, this is still a challenge within retail. Most companies that have been around longer started off with brick and mortar stores in order to sell their products. Hence convincing their physical franchise partners or own traditional retailers that e-commerce isn’t a threat but a chance takes time, the executive says. For FLEXA, according to Carsten, this journey started almost ten years ago. By now, his company is striving for consistent customer experience regardless of whether clients buy the products in a traditional shop owned by the brand itself, a franchise, or online. “One cohesive brand is what matters”, Carsten Dan Madsen says. But being present online and offline is essential in retail, he explains.
Not understanding the brand as one but thinking in categories as offline and online is a common problem, Esben Keller agrees. The executive with almost 20 years experience in retail, continues, “for customers the products are what matters first and foremost. It’s about a good and convenient user experience regardless of the sales channel.” This is why companies selling products should focus on a clear brand image and customer service. The importance of the brand perception in his opinion makes marketing a top priority in retail now and even more so in the future.
Many companies are still convinced that going digital is a way of making things easier and cheaper. For example through cutting costs for renting retail spaces, “We professionals in the retail industry are not good enough, yet, to listen to customers, through digital platforms or social media”, says Esben to Nordic Minds. Like it has always been, customers and their demands keep changing which makes it necessary to collect data and incorporate this into the business model, according to the executive.
It’s vital to understand that having digital channels - be it in order to sell products or just to communicate with customers - is delivering insights. These insights about the customer behavior only years ago were only accessible through expensive and laborious marketing research. On top of that, the data that consumer brands and retailers nowadays get through their digital platforms are much more reliable, says Esben. “We know from many years of research, if you ask people whether they - let’s say buy organic products, most of them tend to say yes. But when you look at the receipt you see that this is not the case. When you ask people they always tell you a better story, but if you look into the data, you learn how people really consume and can understand what they might be searching for but aren’t finding, yet.”.
So was the current crisis a driver of digital transformation? “People weren’t really prepared for the challenge, the digital sales platforms weren’t set up. If you look at supermarkets for example, the logistics that needed to be set up”, Esben answers. At least it wasn’t a sustainable transformation, he adds. But the situation during the pandemic was an eye-opener and made many companies realize they needed to push their development ahead, according to Esben. But really, driving innovation needs to be a permanent task within organizations.
“Those who made it through Corona were maybe more ready than they thought'' on their way towards digital sales channels, Carsten Dan Madsen agrees. A digital sales infrastructure can’t be built up just like that overnight, he says. It took his company years to create a community with their customers. “Even with all of our physical stores closed in China, we still had 40 to 50 percent of our turnover”, Carsten continues. But his company had done the work beforehand, be it through their own digital channels or through those of partners. “There are no quick fixes or shortcuts, sure, you could sell your products on Amazon starting tomorrow, but that wouldn’t be a real digital platform of your own”, he adds.
But in order to create strong online channels complementing physical stores, the demands towards their workforce in the retail industry are changing. The biggest challenge, especially in Scandinavia, is to recruit people with a solid background in logistics, digital marketing, and customer service in order to fit roles in e-commerce, according to Carsten. While there is a high demand for professionals with these kinds of backgrounds, he believes the training young people receive during their education is lagging years behind. At the same time, companies are really dependent on good talents to transform successfully into brands that have an on- and offline presence. Because great talent is scarce, says Carsten, “the companies often train their employees on the job.”
While people were literally struggling to survive during the first hit of the pandemic, so did businesses. There were countless articles promoting the theory that the current crisis was driving innovation, especially digital transformation. But how sustainable really was the e-commerce infrastructure many companies created almost over night? There were ventures that didn’t make it through the pandemic after all. Some got through with life support in the form of government financial packages. And then there were retailers that seemed to steer across the stormy waters effortlessly. What did the successful ones do differently than the rest? .
Traditional companies still perceive e-commerce as a threat
Those who made it through the crisis didn’t play physical sales channels off against digital ones for starters. According to Carsten Dan Madsen, CEO of Danish children’s furniture company FLEXA, this is still a challenge within retail. Most companies that have been around longer started off with brick and mortar stores in order to sell their products. Hence convincing their physical franchise partners or own traditional retailers that e-commerce isn’t a threat but a chance takes time, the executive says. For FLEXA, according to Carsten, this journey started almost ten years ago. By now, his company is striving for consistent customer experience regardless of whether clients buy the products in a traditional shop owned by the brand itself, a franchise, or online. “One cohesive brand is what matters”, Carsten Dan Madsen says. But being present online and offline is essential in retail, he explains.
Not understanding the brand as one but thinking in categories as offline and online is a common problem, Esben Keller agrees. The executive with almost 20 years experience in retail, continues, “for customers the products are what matters first and foremost. It’s about a good and convenient user experience regardless of the sales channel.” This is why companies selling products should focus on a clear brand image and customer service. The importance of the brand perception in his opinion makes marketing a top priority in retail now and even more so in the future.
Digital sales channels are an opportunity to find out how customers are behaving now and what they might desire in the future
Many companies are still convinced that going digital is a way of making things easier and cheaper. For example through cutting costs for renting retail spaces, “We professionals in the retail industry are not good enough, yet, to listen to customers, through digital platforms or social media”, says Esben to Nordic Minds. Like it has always been, customers and their demands keep changing which makes it necessary to collect data and incorporate this into the business model, according to the executive.
It’s vital to understand that having digital channels - be it in order to sell products or just to communicate with customers - is delivering insights. These insights about the customer behavior only years ago were only accessible through expensive and laborious marketing research. On top of that, the data that consumer brands and retailers nowadays get through their digital platforms are much more reliable, says Esben. “We know from many years of research, if you ask people whether they - let’s say buy organic products, most of them tend to say yes. But when you look at the receipt you see that this is not the case. When you ask people they always tell you a better story, but if you look into the data, you learn how people really consume and can understand what they might be searching for but aren’t finding, yet.”.
"There are no quick fixes or shortcuts, sure, you can start selling on Amazon, but that isn’t a real digital platform of your own"
So was the current crisis a driver of digital transformation? “People weren’t really prepared for the challenge, the digital sales platforms weren’t set up. If you look at supermarkets for example, the logistics that needed to be set up”, Esben answers. At least it wasn’t a sustainable transformation, he adds. But the situation during the pandemic was an eye-opener and made many companies realize they needed to push their development ahead, according to Esben. But really, driving innovation needs to be a permanent task within organizations.
“Those who made it through Corona were maybe more ready than they thought'' on their way towards digital sales channels, Carsten Dan Madsen agrees. A digital sales infrastructure can’t be built up just like that overnight, he says. It took his company years to create a community with their customers. “Even with all of our physical stores closed in China, we still had 40 to 50 percent of our turnover”, Carsten continues. But his company had done the work beforehand, be it through their own digital channels or through those of partners. “There are no quick fixes or shortcuts, sure, you could sell your products on Amazon starting tomorrow, but that wouldn’t be a real digital platform of your own”, he adds.
"The biggest challenge, especially in Scandinavia, is to recruit people with a solid background ... to fit roles in e-commerce"
But in order to create strong online channels complementing physical stores, the demands towards their workforce in the retail industry are changing. The biggest challenge, especially in Scandinavia, is to recruit people with a solid background in logistics, digital marketing, and customer service in order to fit roles in e-commerce, according to Carsten. While there is a high demand for professionals with these kinds of backgrounds, he believes the training young people receive during their education is lagging years behind. At the same time, companies are really dependent on good talents to transform successfully into brands that have an on- and offline presence. Because great talent is scarce, says Carsten, “the companies often train their employees on the job.”