Russian IT market in retail

2023-2022: Digitalization of retail. TAdviser Overview

Participants in the Russian retail digitalization market call 2022 a turbulent period and a time of total revaluation. The key strategy for companies was survival and reorientation to new sources of income and areas of competence. Foreign vendors left the market, work on existing contracts stopped, and promising contracts lost any chance to be implemented in the original format.

Russian retail has already reached a high level of digital maturity, adapting to the tasks that have arisen against the backdrop of the pandemic. However, as one of the most digitalized industries, it found itself in a vulnerable position due to the departure of foreign vendors in 2022. Participants in this market surveyed by TAdviser note that in the first six months of 2022, retailers reduced their IT costs and frozen a significant number of digital projects.

The trends of 2022 remained relevant in 2023. Russian retail continued to optimize business processes, replace foreign software, and develop online trading. IT companies, in turn, continued to increase expertise and form a new portfolio of domestic products that should help retail chains achieve significant changes in business.

Read about the development of the Russian retail digitalization market in the TAdviser review.

2021

How the Russian retail digitalization market has changed under the influence of a pandemic

TAdviser spoke with experts from domestic IT companies and learned how the tasks of digitalizing retail were transformed under the influence of restrictions caused by the coronavirus pandemic, and which IT projects became priorities for this industry.

Adapting to the new reality - moving online

The pandemic has seriously affected retailers and their customers. Retail chains have done a fantastic job of adapting to the new reality, each of them has implemented not a single IT project.

Indeed, the pandemic has become a real challenge for business and retail chains are no exception. The introduction of restrictive measures, and a change in consumer behavior pushed large retail chains to actively develop online sales channels, as well as warehouse and logistics services, - said Alexander Niznik, CEO of Novardis.

Gennady Tarantasov, Commercial Director of KORUS Consulting Group of Companies, says that retailers have implemented and adapted order management systems, WMS solutions in warehouses and distribution centers, automated the "last mile" and courier delivery. Client analytics helped to better understand the expectations and behavior of buyers, to look for what to offer them.

According to him, such market leaders as X5 Retail Group significantly increased sales, promptly launched several RCs and darksters and provided high-quality delivery. And if at the beginning of the pandemic it was possible to get an order only in two or three days, then by the end of summer retailers were able to rebuild and learned how to deliver the next day or even day to day. This required automation or modernization of the processes of receiving, processing, routing, assembly and picking orders.

Sergey Osipov, vice president of GMCS, adds that the pandemic has accelerated e-commerce to incredible speeds in just a few weeks. Lockdown has become a real "test of strength" both for retailers who have already established online sales to one degree or another, and for those who began to hastily bring sales online through marketplaces, their own delivery, etc.

Those retailers who had a "door to door" delivery cycle before the pandemic were in a more advantageous situation. The rest felt an increase in demand in the online channel, but faced a number of restrictions, primarily in the field of expansion and scaling of logistics, which forced them to move to an active correction of the situation, including using IT tools:

• Online shopping, mobile apps, and other means of digitally interacting with customers needed to be quickly refined, both in terms of scalability and integration capabilities.
• Increased demand for IT solutions in supply chain management, logistics optimization. Companies where these systems were already at least partially implemented before the pandemic were able to take full advantage of such solutions. In rapidly changing conditions and with great uncertainty, such solutions helped retailers make constant changes at all stages of the logistics cycle, while balancing performance indicators.
• Customer engagement tools needed to be upgraded to cope with the increased workload. For example, before the pandemic, there was a chat bot on the website of the online store, which was more often "bored" than communicated with customers. In the context of the avalanche-like growth of online orders, the number of calls to the chatbot increased by a multiple. It was necessary to quickly make improvements, in particular, to add similar functionality to the mobile application. All this helped to reduce the load on the call center, to maintain the quality of service.

According to Denis Seleznev, CEO of First Form, the transition of buyers online required the rapid development of delivery services. Many large retail chains already had (or intended) their own delivery service, but they had to develop it by "assault" methods. Instead of ordinary stores, dark stores began to open - this means that they had to abandon the lease of retail space that had become unnecessary and find new premises, quickly re-equip them, rebuild supply and logistics. We also had to cut staff in retail stores and hire collectors and couriers instead, or look for suppliers of courier services and build relationships with them. Many retailers were forced to expand their range and look for new suppliers, as earlier customers could go to different stores out of habit for different groups of goods, but when shopping online, they began to prefer a universal range in order to order all goods in one place.

Those retailers who have flexible and transparent management systems of the BPM or Project Management class successfully rebuilt key, highly loaded business processes "on the go." If there were no such systems, they had to be quickly implemented and configured. The same applies to your own mobile applications - they had to be created or finalized in a matter of weeks. Perhaps the main lesson of 2020 is a reminder to business and all of us that we need to prepare for the crisis in peacetime, without postponing important and promising projects for "someday later," explains Denis Seleznev.

Alexey Ankudinov, the sales director of Set products of the company, CSI adds that thanks to the development of e-commerce and delivery technologies, the buyer can now not only order almost any goods at home, but also apply the same conditions to orders loyalty programs as offline - today retailers are striving to ensure this.

For example, we have the Set Omni service, which supports uniform terms of loyalty programs in any retailer's channels, in conjunction with the Set Kit service, they provide work with Internet orders, taking into account individual prices and labeling rules, - he explains.

Despite the fact that online trading grew by 59% in 2020 (Data Insight data), most non-chain retail stores, as sold offline, are sold. According to a survey conducted by Evotor in 2020, only 6% had a full-fledged online store. For them, e-commerce is too difficult a process: they do not understand how to attract traffic on the Internet, how to fill out product cards, and they cannot compete with big business. Nevertheless, the most progressive sellers amid the pandemic set up online communication with the client, began online sales and delivery. This year, this trend will intensify, says Olga Kukushkina, commercial director of Evotor.

Minimize staff and customer contact

The priority is projects and solutions that reduce purchase time and dilute customer flows, minimizing contact between staff and buyers. In the pandemic year, Click & Collect pickup services were developed. They allow you to check into the store and pick up a pre-formed order.

In the Globus network, for example, an order can be taken out and put right in the trunk, and you can pay for it at a special terminal in the parking lot - a completely contactless option, - explains Alexey Ankudinov.

Novardis CEO Alexander Niznik adds that a similar project of ordering and pickup service was implemented at Lenta. At the same time, it was launched in record time.

In just two months, in a remote format, we launched the Click & collect service in several stores and scaled the solution to the entire network. This is the only project from the SAP Customer Experience portfolio implemented in such a time frame, the expert notes.

Alexander Dyachkov, CEO of iCsEl Retail Services, cites several examples of projects implemented by retailers that are aimed at transforming purchasing experience and contactless service:

• Lancôme launched an online makeup matching service
• SberMarket launched an electronic tip service
• Puma suggests testing shoes and clothing on a virtual football field
• ABC of Vkusa opened a fully automated store without cashiers
• M.video launched a service that allows customers to evaluate goods on the Internet
• VkusVill installed vending machines in the entrances of apartment buildings

Retail has become more active in exploring new sales formats - self-service kiosks, which are installed in residential entrances and offices, express delivery of products from the nearest chain store, warehouse or point of delivery directly to the doorstep of the apartment. Accordingly, there are requests for automation of new processes and integration with external services, - explains Denis Seleznev, general director of First Form.

Customer Centricity

The behavior of buyers has changed a lot during the pandemic, the success of the retailer now depends less on the location of stores than it was before the pandemic, and the competition becomes even more acute. Retail chains have to adapt and adapt, offer the "right" assortment, build communication in various channels and create new unique value propositions.

In fact, this is very similar to the transition to a partner model: retailers become a friend to the buyer, do not try to impose on him a low quality thing or one that he does not need. It seems to me that the previous paradigm is breaking down and retail chains are trying to better understand who their customers are. Companies promote a healthy lifestyle, support eco-initiatives. This is an urgent agenda that will ensure the very long-term partnership between business and consumer, "says Gennady Tarantasov, Commercial Director of KORUS Consulting Group of Companies.

Back Office Remote

Many companies, including large retail, were forced to transfer their back offices to a remote location. And after a small adaptation, they found that the efficiency of work did not fall or even increase, but on one condition - the presence of a normal communication system within the company.

Denis Seleznev explains that communications are not only an opportunity to hold remote meetings in Zoom. First of all, this is electronic document management, an internal corporate portal with all the news, orders and regulations, convenient and transparent online analytics, and as the basis of all this, the most basic function is a task tracker (setting instructions and monitoring their implementation).

All this should be accessible from anywhere and from any device, should be easily administered and protected even outside a closed corporate loop. It is now clear that remote work is not a temporary solution, but a long-term and powerful trend, he says.

Natalia Leshchinets, Deputy Technical Director of Docrobot, adds that in 2020, many companies that transferred employees to remote work realized the need to switch to EDO with suppliers, customers and their own employees.

We see this by a significant increase in requests and the implementation of such projects by us, "she notes.

Sergey Osipov, Vice President of GMCS, adds that in addition to the rapid deployment of systems and services to form a digital space for collaboration, retailers closed tasks in the field of information security, monitoring, video surveillance. The rapid transfer of employees to the remote also contributed to the active development of projects in the field of organizing online training (LMS), robotization of routine processes (RPA), etc.

Elsa Egorova, CEO of the HCM platform of the HRtech solutions developer TalentTech, recalls that with a remote work format, it is important not to lose contact with employees, connect their goals with global business goals and organize development within the company.

In her opinion, working with data about a person - People analytics - about productivity and effectiveness, involvement and adaptation becomes especially relevant. Companies that know how to collect and analyze such data (or quickly learned to do so) have gained a noticeable advantage, because management decisions in them are made on the basis of objective facts and figures. And the main focus of HR specialists in retail was the automation of work with personnel.

In the new realities, Elsa Egorova notes, it is not enough to conduct research once a year or six months: you need to continuously analyze the situation inside the business in order to quickly recognize the threat or see new opportunities. The data flow should arrive regularly and quickly (ideally in real time). This will allow you to look at the correlation between different factors, such as performance, training, adaptation and employee engagement.

We see how the need for HR solutions has become more urgent to help collect, accumulate and analyze data on a single platform. The response to the request from the market and industry was the solution that our company TalentTech recently presented. This is an HCM platform that combines analytics from different modules - TalentTech solutions - into a single digital profile. It displays an individual's education and work experience, knowledge and skills, survey results, goal progress, career plans and other information. Based on this data, the digital profile will tell HR which talents of employees should be developed in order to increase the efficiency of the team, explains the TalentTech expert.

Shorten IT Project Timelines

Retailers, who continued to work in a pandemic, learned to quickly update applications, introduce new functionality, reducing the time for bringing products to market.

Novardis CEO Alexander Niznik notes that customers expected the maximum speed of projects.

We are well acquainted with retail business processes and the team working with this segment has accumulated vast experience over the years of work, therefore, despite the tight deadlines, we coped with the tasks of our customers, he explains.

Alexey Ankudinov from CSI, adds that projects can no longer go on for a year or two: preferably six months, and small projects - several months.

Among our examples is the large-scale project of the Globus network, when the cash system was replaced in less than a year and the retailer received new business tools. In the summer of 2020, Lenta launched a pickup service in just 2 months. The record holder for a quick project is the RealKommersant network in St. Petersburg, which accelerated the work of cash registers by 40% in just 2 weeks, says Ankudinov.

Reduce IT investment

In general, 2020 can be considered a really difficult year for the retail industry, which could not but affect the development strategy. In addition, the purchasing power of the population fell and the structure of demand changed - retailers focused on reducing costs and offering a new range at the "right" price to the client.

Many companies were forced, if not completely stopped, to at least postpone most of the business development projects, leaving only support projects, "says the director Victor Frolov of business development. Usetech

Sergey Kosetsky, Commercial Director of X-Com, also speaks about the reduction in investment in IT. According to him, global informatization projects were completely or partially frozen, and smaller ones were limited to the development of technologies already used: solutions for automating transport and warehouse logistics, cash management, and video analytics.

Surge in interest in data

Shift of focus towards online, increased use of mobile applications and digital sales channels, unprecedented growth in purchases with "door to door" delivery - these and other factors influenced the surge in interest in data.

GMCS Vice President Sergei Osipov cites several examples of such tasks, based on his own practice: the ability to carry out a more targeted approach to forecasting and planning promotions taking into account seasonality, demand trends, store location and other parameters, the development of recommendation systems, work with "abandoned" baskets, the ability to analyze and select the most suitable points for issuing orders from your own and partner points.

Yuri Vostrikov, operating director of Norbit (part of the Lanit group), adds that the largest retailers, using Big Data technologies, are fighting customer outflows, personalizing supplies and predicting demand.

Labeling Implementation

For sellers of tobacco, shoes, medicines, light industry and a number of other goods, 2020 was held under the auspices of the introduction of labeling. The introduction of labeling leads to dramatic changes in small retail. Business not only gradually leaves the gray zone, but also automates processes.

More than 80% of small footwear and tobacco sellers began to use EDO thanks to labeling. The most valuable thing is that the business begins to use EDO for unmarked goods, - notes Olga Kukushkina, commercial director of Evotor.

Alexey Ankudinov recalls that in the near future work will be launched with labeled dairy products - and this will add some additional work to retailers, because all buyers at self-service checkouts and selfscan will have to learn how to handle the marking. Now this habit is not, but it will have to appear.

The largest IT suppliers in Russian retail

At the end of 2020, Softline became the largest Russian IT supplier in retail. Its revenue from IT projects in this industry exceeded 29 billion rubles. (growth 34%). With a significant lag behind the leader, the companies Evotor, ATOL, CROC and I-Teco entered the top five.

See also

• IT in retail 2021. TAdviser overview.
• IT in Retail 2019. TAdviser Overview
• Information technology in retail: 390 suppliers of IT products and services (market map)
• IT in Trade and Logistics 2017. TAdviser Overview
• E-commerce
• Information Security in E-Commerce
• Retail (Global)
• Retail in Russia