May 3, 2012

Supermarket in a smart phone

Tesco Korea, scannable posters (photo: Tesco)
Shopping while you wait: Commuters in Seoul order products with their smartphones
You have to hand it to Tesco; they are one of the few big international retailers who understand that consumers want to shop anywhere, any time.

When the rumour hit the internet last summer that the UK's largest grocery multiple by sales had created a virtual shop in a metro station in the South Korean capital Seoul, few were prepared to believe it.

The idea that shoppers would order products online while waiting for the train or bus on their way to work seemed implausible to say the least.

That they would use their smart phone to scan quick response (QR) codes off product placards in order to pick their orders up from local Tesco stores on their way back from work, or have them delivered home the same evening sounded, more like science fiction than real-life retailing.

Tesco didn't exactly help by narrating an Abyssinian shaggy dog story that it was all a mistake and just a clever marketing gag fabulated by an overambitious advertising agency determined to win the Cannes Advertising Festival prize.

We now know differently.

Web shop 3.0

Tesco has increased online revenues in South Korea by 130 per cent since the company launched its "web shop 3.0". Also, its smart phone app enabling customers to scan QR product codes has already been downloaded more than 900,000 times.

Since Tesco has come clean with the press, further virtual mini-stores have been opened in South Korea this spring. For instance, more than 20 bus stops have been transformed into extended shelving space for the retailer.

Tesco's indubitable success in pioneering this new technology has quickly been copied. For instance, Belgian retailer Delhaize has now created a virtual supermarket at Brussels main station where customers can order around 300 lines and collect them at selected Delhaize outlets the next day.

Coop Suisse, Budnikowsky,
At the end of 2011, Coop Suisse placed big placards on the exterior walls of its station bridge outlet in Zurich in order to capture passers-by who might not normally have shopped at the store. "Since we introduced our new shopping wall, the number of orders placed via mobile phones has almost doubled," says a company spokesman.

German retailers have also been experimenting with mobile online shopping ideas. For instance, German drugstore multiple Budnikowsky started using QR-coded placards in October, and media retailer Weltbild 140 "Book shops to go" brought out its first online placards in August.

These initiatives were quickly followed by Tengelmann subsidiary which put up more than 40 QR-coded placards in the greater Mulheim area between mid-February and mid-April. Initial results, however, have been disappointing. Only ten orders were received via smart phone. refuses to be daunted though and intends to create more placards in Hamburg, Berlin and Munich during the second half of this year.

Only a cool marketing gag?
Meanwhile Hans-Ulrich Sachenbacher, CEO of Jochen Schweizer Gruppe, has paused for thought. The company put up 70 QR placard shops in the small Bavarian town of Ingolstadt, but only gained five mobile phone orders. This represents quite a large negative return on investment when one remembers that the QR pilot project cost the company around €14,000.

However, it is not hard to understand why retailers are so interested in virtual supermarkets. At first blush, there would seem to be many pros (no store staff wages, no planning permission to obtain or zoning regulations to observe, and no store maintenance) with very few cons (did some bored adolescent scratch or graffiti the QR code?).

A certain note of realism, however, was sounded by Dirk Morschett, e-commerce expert and a professor at Fribourg University in Switzerland, during a recent interview with LZ-colleague Silvia Flier:

"QR code placards are a cool marketing gag, create a lot of attention, and give a retailer a modern image, but they most certainly don't generate a lot of direct revenues. Why should a consumer push past other pedestrians in order to photograph QR codes in such a bothersome way?"

Related article in German: Lebensmittel Zeitung, no. 15, 13.04.2012, by Silvia Flier

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