Lessons from Leaders: Retail Digital Transformation in Germany
Germany, a Powerful Force in Retail
In 2020, retail revenue in Germany was estimated to be $820 billion. According to Deloitte’s Global Powers of Retailing 2020 study, four of the top 20 largest retailers in the world are German companies: Schwarz Group (Lidl), Aldi, Edeka, and Rewe. And among the 250 largest retailers, 20 are German.
Even Top Retailers Are Not Immune to the Effects of the Pandemic
The coronavirus outbreak has been cataclysmic for the retail sector in Western Europe with an estimated decline of 10%. In Germany, however, the retail industry appears to have suffered a less dramatic, albeit still serious, decline of 8%. Although German consumers are feeling less optimistic about a quick recovery in 2021, they are indeed more optimistic than their European peers.
Prior to the pandemic, online grocery sales in Germany had very low penetration, in the low single-digit range, compared to the UK with a high single-digit penetration. Germans also typically preferred cash transactions. However, the coronavirus lockdown led to a dramatic and rapid switch to ecommerce with significant increases in online purchasing, mobile commerce, and digital payments.
German Retailers Leverage Technology at Lightning Speed
With stores closed and a spike in digital commerce, German retailers have seen a blurring of the line between physical and online shopping. As a result, retailers have felt the pressure to eliminate friction and increase personalization. At the same time, product availability, efficient inventory management, and convenient fulfillment options have become more crucial than ever. German retailers across the board have raced to ramp up digital capabilities, integrate omnichannel capabilities, reduce cost structures, and use data more effectively to drive decision making.
Breuninger and HSE24
For instance, German retailers with big store networks dramatically accelerated investments in ecommerce operations. Such is the case with upscale fashion and home goods retailer Breuninger, based in Stuttgart, Germany. The company retired its monolithic online shop and replaced it with a self-built solution deployed on AWS that allows its IT team to rapidly deploy new features that enhance the customer experience. This is also the case with HSE24, a home shopping company that sells products on TV and finds itself facing significant competitive threats. HSE24 used a microservice-based architecture and a cloud-based deployment process to scale its digital capabilities to grow its ecommerce business.
Other well-established multichannel retailers have invested heavily to integrate different sales channels to offer mobile commerce capabilities. adidas, the global sports apparel brand based in Herzogenaurach, Germany, uses AWS Data Lakes to run its big data platform, and the company migrated its ecommerce store from a proprietary solution to AWS. Now, adidas can offer scalable mobile applications at speed and can integrate and analyze consumer information much more quickly to make data-driven decisions.
Many other German retailers have leveraged cloud infrastructure technologies to optimize costs. For example, Chronext, a global marketplace for buying and selling luxury watches based in Cologne, Germany, automated its contact center using Amazon Connect, a cloud-based, artificial intelligence and machine learning (AI/ML) solution that offers serverless operations that provide real-time metrics without a telephone system.
Zalando and Delivery Hero
We also see sophisticated digital-native retailers, like Zalando, a Berlin-based fashion and lifestyle ecommerce company, continue to gain scale and speed with cloud technologies and data integration. Zalando is now using AI/ML to personalize its ecommerce offerings to 28 million users resulting in superior customer experiences. At the same time, the company has automated its warehouse, with hundreds of thousands of SKUs, to ensure seamless, speedy fulfillment. Digital native Delivery Hero, another Berlin-based global ecommerce retailer that offers food delivery in more than 40 countries, migrated its 18 SAP systems to AWS to fuel its impressive 50%+ growth. After the company’s transition to AWS, Delivery Hero’s finance team can close the books each month in 90 minutes instead of 20 hours—an 87% increase in productivity.
A Few Lessons for Other Markets
German retailers are embracing digital transformation as a way to combat and cope with market challenges—from the pandemic to competition to cost reductions.
Where retailers start on their digital transformation journey depends on the point of departure. Retailers should:
- Start from the customer and work backwards.
- Ask “Who is my customer and what are their biggest pain-points?” Example issues could be a cumbersome website experience, products that don’t arrive on time, stockouts at store shelves, or long cue lines at checkout with no options for contactless payment.
- Look for a strong partner, like AWS, to help you develop technology strategies to address these different challenges and improve customer experiences.
Ask how AWS can support you in the process. Contact your AWS account team today to get started.