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On the malice of the day
10.05.2018

In the digital economy era the winners are those who experiment with technologies

Yuri told us about the prospects of online trade, personalization, chatbots, and other technologies that change the landscape of traditional retail.

— What is the current state of the e-commerce market in Russia and its potential? How will the volume of digital retail grow in future? What will be the main growth drivers: clothes, houseware, gadgets, or something else?

— The market is developing and has an impressive growth potential. Online and mobile trade is growing faster than brick-and-mortar shops, and in the near future, they will remain the key growth drivers. The leading conventional retailers no longer consider online trade yet another sales channel. This is obvious not only from the public speak of the top executives of leading retailers but also from the projects they implement and digital activities they launch. Consumer trends and changing consumer behavior really open new online channel development opportunities, which makes digital client experience a must for successful business.

The international market has impressive success stories: Tesco performs 15% of its sales in digital channels. This is a really good figure. If Russian retailers will follow the example of their Western colleagues and increase sales in digital channels, then, according to Digital Lab, the share of online trade might achieve 7% of Russian retail market. It is important to understand that not everyone will be able to succeed here. In 2017 one of the houseware market leaders achieved impressive results even when compared to international digital retail leaders — the average share of online sales in the year has exceeded 15% of company turnover.

We are witnessing peaks of activities in various market segments. Food retail in Russia has been cautious for a long time. While 17 years ago Utkonos, the oldest online hypermarket in Russia, had no direct competitors, now we are witnessing an avalanche effect, and more and more market players have to create and develop various e-commerce solutions. Only this year, several large food retail chains have launched online services for sales. Fashion retail shows the most significant growth figures: all large players have already created their online marketplaces — both such powerhouses as Lamoda and Wildberries and monobrands like Zara, H&M, etc. However, there are exceptions as well: Gloria Jeans, a company with multi-billion turnover, does not have an online sales channel. It is hard to predict when, but companies that do not follow the path of digital transformation are going to start losing their share in the market, their financial figures are going to fall, and in long-term perspective, the consequences might be very dire.

Of course, companies that have a digital retail vision, are ready to invest into perfect client experience and have advanced competences in creating digital services, are more likely to succeed. But this is a story of more than one project and more than one year.

— Which problems does the Russian e-commerce industry face at the current stage? What online trading solutions are the most promising now? Which technological growth drivers are most important and acting in Russia now: big data, cloud technologies, bots, etc.?

— Companies that have not yet started to prepare for digital transformation will have more difficulties in adapting to the modern environment: Despite the audience loyalty, the barrier for entering the online trade market is very high. The consumer needs are very diverse and expenses that are required to launch a successful project may be very high. It may be difficult for companies without large experience in e-commerce to catch up with the leaders and create something really relevant. Small players have the following benefit: they need to experiment and search for new niches. They need to invent ways to create higher value for clients. Large companies may face digital transformation issues: it is difficult for them to make prompt decisions, approve and implement them.

Changes are never an easy thing. Both the business leaders and line managers may turn out unprepared for them. There are no simple solutions for today’s pains of retailers — you need to experiment and be ready to adapt to the ever-changing market realities. In the age of digital economy, the winners are those who are ready to experiment with technologies from the entire value chain — and knows how to do it right.

Technologies used in online trade can be unique — or can be also used in other industries. Many things depend on the business model of a specific store. Today, to launch a competitive e-commerce business, creating a store with a broad product range and convenient interface is not enough. The trend towards personalization is becoming more persistent: decisions are powered by knowledge and technologies make the lives of clients and works of companies simpler. For example, one-third of Amazon sales today is generated by a recommendation service: an AI powered by big data and machine learning technologies.

Chatbots today are in the limelight, but to use them successfully, one does not only need to know the technology (which is not new at all), but also understand the client’s pain points and problems. Straightforward replacement of people with chatbots will cause only problems. Chatbots are useful to solve pinpointed tasks like transactional costs or optimizing the client experience.

— Can we assert that software that powers Russian online stores is on a par with foreign analogs? What benefits can cloud solutions bring to online trade?

— There is no unanimous opinion. Software is not the killer feature that determines the company’s success. Technologies are equally accessible for every online enterprise. Everyone stands on the same ground — but having competencies to use these technologies is another matter. The front-end practices for building a digital retail platform are creating invisible infrastructure, service-oriented architecture, and personalized client experience. Software is not the key aspect of solving these tasks, The experience of Digital Lab shows that the benefits of cloud solutions are obvious for the majority of companies: cloud capacities can be scaled without limits to process big data. Even if the entire internet will come knocking at your door, the cloud infrastructure will still be able to process all user queries.

— Your clients can be conventionally divided into three groups: large corporate clients, medium and small business, and governmental companies. Have you noticed the decline in software demand from one of these groups due to the current recession? Or growth, on the contrary? Have you achieved all goals for the current year, and what goals do you set for the next year?

— We do not observe an obvious decline or growth trend for the period of recession. The companies that realize the need of digital transformation strive to increase the investments in technologies, and so their expenses grow too.

In 2018, we want to scale the digital lab model because we witness the increasing number of requests in the market. Based on the work with our clients, we have realized that the market demand the competencies that we accumulate in our Digital Lab and the services that we offer are very popular on the market. All companies need digital transformation one way or another. At the dawn of the Digital Lab, we were setting very ambitious goals, and in some areas, we have fulfilled the plan by 200%. We have made very good progress towards the implementation of our business model, we plan to expand our capacities and keep moving forward.

The material has been published on www.rbc.ru

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