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German retail chains are lagging behind - A “self-scan” could solve the problem

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Imagine going to a supermarket where you scan your products through a smartphone application and leave the store without any POS or queueing. In Germany that might sound like science fiction, but in some countries like China, this is a reality.

At Euro CIS 2019, the retail technology trade fair held in Düsseldorf, available digital innovations that improve convenience in the checkout process were amongst the most emphasized. This comes along with digitalisation as highlighted in Michelle Evans' article Five Trends That Will Redefine Commerce in 2019, and the increasing consumer demands regarding convenience.

Still, there is no significant indication that leading grocery retailers in Germany such as Rewe and Edeka intend to modernise the point of sale on a wider scope. In the coming years that passive behaviour could lead to strategic disadvantages as avoiding innovation often threatens a company’s long-term profitability, opening the doors to the market for foreign competitors and new entrants.

Status quo drives Germany’s supermarkets and their consumers

Not only because of Apple Pay and Google Pay but definitely influenced by them, e-payment in Germany is on the rise.  Still, Germany remains a “cash-loving” nation. Controversially, most German supermarkets already have the necessary technological infrastructure (e.g. NFC) to make the POS cashless but neither consumers nor retailers are taking advantage of it.

Still, industry experts argue that traditional POS will still be available 30 years from now. Germans, especially older generations can be rather suspicious and binary and either like or dislike innovation. On the other hand, all German generations like convenience and efficiency. Especially younger generations like millennials and generation Z, whose stereotypical characteristics - as impatience and need for instant gratification (“I want it now” attitude) – had a substantial impact on the rise of Amazon and on demand-services as Netflix.

The near future outlook for supermarkets

Recent developments in e-payment open opportunities to look ahead towards self-scanning applications in supermarkets. It is important to distinguish between self-scanning and self-checkout applications. The newest self-scan applications work on smartphones, making the traditional point of sale obsolete as you can pay your scanned products through the app via credit card or other e-payment options right away. They avoid queueing at check out and scan race with the check-out staff, while simultaneously saving time for the consumer. Further, they provide a better overview of prices and shopping cart.

For retailers, a self-scan integration would not only reduce costs in the long-run as processes would become more efficient, but the relevant app would also help to get to know the consumer better over time.

However, the self-scan approach is also coming along with potential - mostly short-term - pitfalls. The main disadvantage is that self-scan could jeopardize jobs, which in a country with strong regulations protecting employee rights, could raise debates over the impact of digitalisation and automation processes on future workforces. Another even statistically proven flaw are security issues. In countries where self-checkout processes are more advanced, the rate of “shoplifting” is relatively high.

A hybrid strategy as a mid-term solution

As most disruptive innovations such as mobile banking, mobility 2.0 and platform economy, self-scan approaches offer big opportunities for retailers and consumers but also require some short-term sacrifices. If, however, German retailers are not willing to adapt and maintain the status quo, foreign competitors like Amazon Go might soon enter the market offering better service, state-of-the-art technology and cheaper prices. Ever more price comparing and convenience-seeking consumers surely won’t be loyal to existing retail chains but will choose the best deal for themselves.

The demographic development in Germany points towards an increasing share of older consumers who might be overwhelmed by rapid changes and new systems. A mid-term hybrid solution appears most logical. In other words, German retail chains could consider complementing their traditional POS with self-scan options to enhance the consumer experience of all generations while being prepared for potential future disruption.

To learn more about Grocery Retailers in Germany, click here.

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