Dr. Robert Zores, CTO of REWE digital, and Christoph Günther, Director of Key Account Management at T-Systems, on voice commerce, the convenience of shopping in the future and how lateral thinking increases efficiency.
Dr. Robert Zores, CTO REWE digital (left) and Christoph Günther, Head of Retail T-Systems
Dr. Zores, to make REWE ready for digitization, the company founded REWE digital in 2014. Why was this job not simply given to the company’s IT department? Digitization isn’t just technology or IT. It’s about people, working environments, working differently, and perhaps also thinking differently. This is why the CEO decided on a greenfield approach and not a classic integration approach. At its core, it’s always about the questions: how do I digitize my team? How do I make them agile? How doI use that to change how they work and what technology do I use?
From smartphone apps through social media activities to digital marketing – how do you make sure you don’t digitize past the parent company and, instead, efficiently integrate your experiences and developments? When integration fails, it’s not because of the structures, it’s because of the people. One of the strengths of our team is certainly that we engage in integration and collaboration with colleagues right from the start, and that none of us have forgotten the founding idea behind REWE digital, forgotten where we came from, whom we need to take with us. We definitely have a certain corporate sophistication, if you will, but it’s not especially pronounced in anyone’s ego.
With 75 cities in which REWE already makes home deliveries to its online customers, you’re Germany’s #1 online supermarket for fresh products. What part does the first fully automated “Food Fulfillment Center 2.0”, which REWE digital just opened, play in further expansion? With our own fleet of vehicles, we deliver around 20,000 products within a radius of 90 minutes by car from the facility in Northern Cologne. We’re also working on a hub-and-spoke system with logistics partners who will take over additional routes. We are looking at using the new central warehouse as a distribution center, where we’re picking orders today to deliver to online customers, to allow us to gradually eliminate some of the normal stores. Even in our so-called ‘dark stores’, where there are no customers, a picker can walk up to 9 miles in a shift. This walking is completely eliminated in the new center, since the goods come to the picker automatically. More efficiency, more convenience for the customers, and less cost – this is the experience we’re getting with the food fulfillment center.
To what extent is it feasible to expand this assortment and the sales channel of food and non-food items into a proper REWE marketplace? What options does REWE digital see here? The way we currently curate our ‘Shop in Shops’ in REWE shops is how we will do it in the online marketplace. Every baker, every butcher, even regional employees who occasionally go from store to store need to meet dedicated product and service quality criteria that our customers simply expect. This is a big difference from operators of other online marketplaces who aren’t concerned with acting as curators. We, on the other hand, incorporate it and use it to continue online what the standard is in the real world.
Facts & Figures
The commerce start-up REWE digital bundles all strategic and operative online activities of the REWE Group, one of the leading commercial an tourism companies in Europe with 345,000 employees. In addition to digitizing the grocery business, REWE digital works with its business units to develop omnichannel solutions, handles investments in digital ventures, and manages the parent company’s holdings in digital ventures. The REWE Group owns the brands REWE, PENNY, toom, ITS, DER, Meiers Weltreisen, and Jahn Reisen as well as the Austrian chains Billa, Merkur, and BIPA. The REWE Group’s revenue in 2017 was € 54.7 billion.
What do you see as the future of voice commerce and what options/potential does REWE see in this area? Voice commerce will be the biggest thing to simplify the customer’s purchase process, not least because of the major changes we’re experiencing in the mobile world. For us, with a view to the technology needed in the background, it will be anything but trivial. You’ll have to, for example, add artificial intelligence to the processes needed to interact with customers who buy via voice. This means your domain knowledge – about the variety of cold cuts at your counter, the option of the customer getting ham sliced thick or shaved, etc. – you have to instill that in a digital assistant interacting with the customer. Siri, Alexa, Bixby and Co. don’t have the intelligence for this, only we do, because only we know what the customer wants, what their preferences are, their purchase history, and we don’t have to ask the same questions every time. Of course, this means every voice commerce customer has to identify themselves. If anonymized, “voice” would remain rather dumb. It’s the same as in a real store where our sales people in many cases know their customers or immediately recognize them: the potential for improving their service lies in knowing who they’re dealing with.
There’s a give and take of information behind that. How ready is a REWE customer for that and have you found national differences in your markets? Absolutely. If we take Austria, for example, customers are very interested in that kind of exchange. We have a very promotion-driven market there, subsequently, for example, our national benefits club card has a penetration rate of over 80 percent. For better prices and making their shopping plans easier, customers in Austria are very open to giving us information about themselves, which puts them a bit ahead of our customers in Germany. But even our payback card is going very well here, both with customers who shop online and customers in real stores. That is: customers understand this “give and take” and want it more and more.
With almost 30 million people going to REWE every week, how quickly can you update your information on each one of your customers? If we’re talking about “real-time”, we still need some time. Then we’ll be equipped to immediately add new information provided by the customer. Ultimately, the whole thing naturally needs to make sense to the customer. Not least with this meaning, we also consider the European General Data Protection Regulation in effect since May as corrective not throughout, but in a series of aspects.
“Corrective” is a good word – how much do start-ups, for example, help you adjust some of the courses REWE is on?
We’re also following several courses there. One regular tool is our “REWE Hackdays,” where we try out and develop new services as well as entirely new business ideas. One of these is our recipe mapper. In principle, it’s an AI solution customers can use to automatically have a shopping cart put together following a recipe they found online. A great solution, widespread acceptance, developed during the Hackdays within 48 hours. It’s where we invite outsiders in to help us think laterally, out in left field and just differently. Of course, we also work with venture capital and our own start-ups.
„WiFi in the supermarket is as essential as light, water, and power.“
Dr. Robert Zores, CTO REWE Digital
Can you give an example?
“Commercetools” is such a young company that has been around for three years under the umbrella of REWE digital, not only advancing the digital activities of the entire REWE Group with new webshop technologies, but also acting as an independent company in the e-commerce applications market. As a background partner, we’re promoting the continued development of this young company and are further expanding our third-party business. In the Magic Quadrant, they’re one of the four leading software developers in the e-commerce sector, and they were called a contender in the Forrester Wave B2C Commerce Suites in September after scoring the most points possible. At its core is a cloud-based API-first concept that allows retailers to quickly display shopping experiences across the entire spectrum of channels, devices, and touchpoints. This goes far beyond the possibilities of a traditional webshop.
You’ve put customer WiFi by T-Systems in nearly every REWE store. How does that help you address customer wishes with even greater precision? These days, WiFi in the supermarket is as essential as light, water, and power. If you want to play omnichannel or purposefully guide your customers through the store, WiFi is a basic requirement. Or let’s take just our REWE To Go stores at train stations – their customers need a hotspot to check the arrival time of their train. And paying with your smartphone wouldn’t work at all without WiFi. In this context, we’re also gradually putting WiFi in all PENNY stores and toom home improvement stores. But if we’re talking about customer wishes, like feedback, then a salesforce service that’s also hosted in a T-Systems cloud helps us, as well.
What cloud architecture seems to be the best for REWE’s needs in your opinion? Technologically, we’re moving toward a multi-cloud setup consisting of our own data centers and various clouds. For this purpose, we’re testing private cloud services as well as the Open Telekom Cloud, with its sites in Germany, for REWE, REWE digital, and subsidiaries such as Commercetools. This is particularly important for our European customers. However, at the end of the day, we consider the orchestration of virtualization infrastructures in the style of Docker to be of even greater relevance. That would raise many, many questions for companies that work with microservices like we do.
Which, for example? How do I orchestrate my high volume of services? What kind of independence of services can I guarantee and how? How can I simultaneously set up the distribution of my data with regard to latency times between various data centers/sources to be sophisticated enough so the customer doesn’t experience any wait time? At the same time, I have to keep an eye on security and always be able to answer the question: where actually is everything? All these things, it has to be clearly stated, have not yet been worked out that much so far. This means I – especially in the interest of all subsidiaries with their different needs – first need to develop standards I can set for all providers, such as the Open Telekom Cloud.
What will be the next big thing for classic food retailing? I believe that in the medium and long term, the payment options will have to be geared even more towards customer convenience so customers can shop much more easily and conveniently than today. This means computer vision, sensors, and IoT are at the very top of the agenda. That’s exactly where I think our work with technologies and the integration of services should lead. You’re right: there’s always the next big thing. But exactly in this sense, digitization is a continuum: It’ll always go on.