A 100-year-old British retail giant’s thumb rule for Indian firms: Adapt to the digital world

Offering frictionless  shopping.
Offering frictionless shopping.
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The retail industry in India, and globally, has been in a state of flux. With the euphoria around e-commerce having tempered, online retailers understood the importance of selling through stores even as offline players realised how significant the internet is for future growth.

Yet, despite acknowledging the importance to co-exist through an “omnichannel model,” most Indian retailers have not managed to successfully crack the code of offering shoppers the best of both worlds. But there’s some inspiration they can take from Tesco, UK’s leading supermarket.

The 100-year old company operates in nine markets, including China, India, Malaysia, Poland, and Slovakia. With over 450,000 employees and 6,800 shops globally, Tesco is adept at navigating the offline and online world seamlessly. Tesco’s revenue in 2018 stood at £63.9 billion (Rs5.87 lakh crore).

“Technology has a big role to play in bridging the gap between online and offline world. We are focused on offering customers frictionless shopping experience using technology,” said Guus Dekkers, chief technology officer of Tesco, who was visiting India for a day last week.

The company is investing in new technologies like artificial intelligence (AI), machine learning (ML), and augmented reality (AR) to automate different processes to enhance shoppers’ buying experience.  “At our micro-fulfillment centres automation is enabling us to pick and process orders approximately ten times faster than the manual in-store method. Orders can also be transferred to other stores or delivered directly to the consumer,” he said.

In an interview with Quartz, Dekkers spoke about key emerging trends in the retail industry and leveraging new-age technologies to build a successful omnichannel strategy. Edited excerpts:

In what ways is Indian retail landscape similar or dissimilar to other international markets?

All the markets globally and in India are showing the same trend. Physical retail is now being led by smaller shop sizes. Convenience shopping is the way forward with more and more people shopping online. The only difference comes in the size of the markets and how mature each market is.

What are the key focus areas of your technology and retail operations centre in Bengaluru?

Tesco in Bengaluru is touching upon every area related to customer purchasing cycle starting from what is available at the supplier, induction of a product into existing products, ensuring product delivery from the supplier to the warehouse to the customer, and product placement in stores, among other things.

Who’s better placed to win in the long-run? Offline or online players?

We have been trading for 100 years and the industry has changed over these years. When we started, it was the classic market where retailers had to merely fulfill the demand. Now, the market is changing. Consumer is evolving. Personalisation is becoming important and it’s critical to know consumer preferences. Shopping channels are evolving, more people are shopping online. Physical stores are becoming smaller.

With all these changes, it’s extremely difficult to forecast who’s going to win in the long-run.

Based on the lessons we have learnt over the years, I can say players who are ready to adapt to digital are going to win the retail battle.

Omnichannel is touted to be the future, yet many companies struggle to integrate the online and offline worlds. What must companies focus on to get that right?

Guus Dekkers
Guus Dekkers

Online shopping opens up a lot of opportunities to understand consumer behaviour. I (as a retailer) know where a customer is, what is he/she shopping for, etc. All this also helps me in guessing consumers’ shopping behaviour offline. Similar, capabilities need to be brought to offline shopping as well and the question is how do we do it? The bigger thing to focus on is how do I bring convenience to buyers irrespective of the shopping channel.

For example, loyalty programmes help players understand how consumers behave and adapt their product portfolio to suit buyer preferences. It gives a more comprehensive view of consumers’ purchasing behaviour.

How is Tesco leveraging big data and analytics?

Retail is a very competitive business and the ability to crunch large volumes of data using emerging technologies such as AI, ML, and big data analytics is important. Tesco is looking to use big data and ML to help customers shop better.

For example, AR is the perfect tool to bridge the gap between online and offline shopping, bringing these two worlds together. When you are standing in a supermarket in front of certain items, and you are not sure, which one to take, we are looking to deploy technology to help you decide what to pick. With a phone camera pointed at a shelf, we use AR capabilities to superimpose information on what the camera is seeing to help a user look at the product more closely, and make a purchase decision by aiding her shopping process. This technology is available and we are already testing it.

How is Tesco using technology to run the supply chain efficiently?

We are seeing more people going online and shopping. So it’s important to drive more automation across functions, including the supply chain.

We are leveraging technology for demand forecasting and managing multiple stores in the UK and other markets. We undertake demand forecasts on a weekly basis to know what’s required at our individual stores. Multiple variables impact a forecast. Tesco uses various data-led algorithms and machine learning to assess happenings in its stores in the past 30 days. We do it for a couple of stores, which creates an unimaginable amount of data. Now, there are different weather zones and social events in the UK. In a single market, we create six billion records (data points) a week. All this takes a lot of computing power to process. On top of this data collected regularly, we bring in data techniques (big data and analytics) for forecasting the supply chain more accurately and reducing waste.

In a fast-changing technology landscape, how big a challenge is reskilling?

Technology is always changing, so reskilling is critical to move forward. And, therefore, continuous learning and improvement is a key focus area for us. For example, in India, we have partnered with Jobs for Her, an online portal that offers women information related to job opportunities and provides mentorship, to skill our employees. We are also focused on welcoming new mothers who are returning from a maternity break.