Digitalization of retail. TAdviser 2023 review

At the end of 2022, retail trade turnover in Russia decreased by 6.7% to the level of 42.5 trillion rubles. Annual retail sales dropped to 2012 levels, 10-11% below the high recorded in 2014. According to experts, the 2022 crisis has become the strongest since 2015 and more destructive than the 2009 crisis in terms of the impact on retail turnover.

The main reasons for the fall in sales are associated with a decrease in the available range of goods due to sanctions, an increase in prices for certain groups of goods, which affected purchasing power, and a decrease in confidence in the economic outlook.

At the same time, at the end of 2022, an increase in the turnover of the online retail market was recorded. It reached 5.7 trillion rubles (+ 38%). According to Data Insight, the number of online orders in Russia has grown even more - by 65%, to 2.8 billion. However, if we compare these indicators with 2021, then you can see a decrease in dynamics. In 2021, the total turnover of e-commerce increased by 52% in money and by 104% in physical terms.

Analysts explain such indicators by the departure of a significant part of the players from the market, and the growth of online sales is primarily associated with the transition of consumers from regular retail to online. The latter trend, in particular, is associated with huge investments of market participants in the infrastructure for online trading (warehouses, logistics, etc.). In general, the share of online sales in 2022 amounted to 15% of the total retail volume in Russia and 30% of the non-food retail market.

Market participants call the past 2022 a turbulent period and a time of total revaluation. The key strategy 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.

In the past turbulent year, retail enterprises were focused on solving the most pressing tasks that ensure the operation of the business: restoring supply chains, managing changed demand and assortment matrix, "says Dmitry Kiselev, CEO of IT company Qlever Solutions.

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. On the other hand, the reduction in market volumes was mainly due to the departure of large Western vendors such as SAP, Microsoft, Oracle, etc.

The most critical were the problems with those IT solutions that automated the main business processes of retailers.

We saw this process in the sharply increased number of customers - large companies that need systems related to the processing of orders, their collection and delivery, purchase of goods, accounting for balances, warehouse processing and transportation. For example, for large companies that have already switched to WMS or TMS solutions, switching back to manual mode is possible, but will lead to serious losses in efficiency, a tremendous increase in the need for additional qualified employees, "said Vartan Gevorgov, partner at Reshape Analytics.

The second critical point for retail was cloud IT solutions with hosting not in Russia.

At the same time, retailers that have implemented and widely used the functionality of SAP ERP did not see a sharp transition to Russian software, although many voiced ideas about a gradual departure from SAP. But plans for such a transition have been worked out for more than one day. Companies that will begin to implement plans to replace foreign software earlier than others will benefit, according to Reshape Analytics.

At the same time, replacing with little-known foreign solutions, for example, from Asian developers, is also not a panacea - these are the risks of becoming dependent on other vendors, so Russian retailers prefer domestic solutions in all areas critical for them, says Vartan Gevorgov.

As Oleg Lexin, CIO Fix Price, said in an interview with TAdviser, recently there has been a significant leap in the development of Russian IT solutions.

Of the areas where Russian products are already highly developed, I can note, first of all, cash systems. It is dominated by Russian developers who offer cash software solutions that meet the requirements of legislation and taxation systems. Further - human resources management systems, which should also be localized under the requirements of Russian legislation, WMS systems for warehouse management, where there are also excellent Russian solutions, one of which we use. And, of course, the entire range of information protection systems: Russian companies offer a wide range of solutions, including antivirus software, network protection, monitoring and threat detection data. In terms of import substitution of application software, we also observe positive dynamics. Many Russian products are already approaching and are not even inferior in functionality and quality to their Western counterparts. One of the recent examples of the transition to Russian software in our company - in 2022, instead of the AutoCAD design and modeling system, in which our specialists draw store layouts for opening and renovation, we switched to the Russian analogue - NanoCAD. In terms of functionality, he completely suits us, and there were no difficulties with the transition, - said Oleg Lexin.

Those solutions that were previously closed by foreign vendors began to close Russian IT companies. This caused an increased demand for import substitution of software, as well as for services for the comprehensive modernization of the IT infrastructure.

A large resource was aimed at migration to domestic solutions, IT consulting and the search for local products with similar functionality. By the end of 2022, the first transitions and implementations started, - notes Yuri Vostrikov, General Director of Lanit Omni (part of the LANIT group)

At the same time, as Gennady Tarantasov, commercial director of KORUS Consulting Group of Companies, explains, it is not enough to replace one system with another pointwise.

Analysis of IT infrastructure, revision of IT strategy, development of target IT architecture and project program are required. Hence the additional demand for comprehensive solutions and consulting services, he adds.

At the same time, according to Mansur Kadimov, managing partner of Reshape Analytics, Russian retailers have experienced great stress. This was especially true for those who used cloud solutions located at vendor sites, because there was a risk of suspension of key business processes from cash registers to procurement planning. Nevertheless, according to the expert, in a short time the retail digitalization market in Russia was able to rebuild.

It turned out that you can find domestic solutions, and products on the open-source stack, and quickly build backup solutions literally from improvised means, there may be less automated, but still ensuring process continuity. It turned out that in some areas of business the choice of solutions is very large, "says Mansur Kadimov.

However, as [1] Lenta Chief information officer Sergei Sergeyev notes, Russian players often saw the development of their services differently compared to foreign counterparts. In particular, Russian clouds, SaaS, are not yet as developed as their foreign counterparts in the person of Azure and Amazon.

{{quote 'We have a case of migration to the Russian cloud, which we simply did not publicly promote, because it cannot be called 100% effective. We still have a lot to do in this project, - said Sergei Sergeyev in an interview with TAdviser. }}

The year has become a new starting point of its kind, says Set's Alexey Ankudinov product director. CSI The rules of the game changed rapidly and market participants learned to quickly respond to new challenges.

Despite the fact that there were fewer offers on the market, the experience gained by the industry made it possible to quickly find a replacement for everyone who needed it. At least, we successfully closed all the IT tasks and needs of CSI customers that arose last year, both in software and in hardware, and today most of them, except for those preparing for business sale, continue to systematically develop it, testing and implementing new IT tools. It can be assumed that the market grew in 2022 - due to import substitution projects, due to the exit of Russian retail chains to neighboring countries, the development of e-com, - notes Alexey Ankudinov.

In addition to import substitution, experts note a number of areas that have received priority development in retail. So, according to the reports of the largest retail chains, in the first half of last year alone, online sales showed an increase from 53% (O'key) to 159% (Lenta). This contributed to an increase in demand for omnichannel solutions, automation of logistics and warehouse processes and, in general, for e-commerce projects.

Last year, at KORUS Consulting, the number of orders in the direction of e-commerce increased by 20%, says Gennady Tarantasov.

Alexey Ankudinov, notes an increase in demand for security systems and anti-fraud. In addition, according to him, in addition to import substitution projects, projects to increase operational efficiency were relevant among retailers - for example, connecting new types of payments (the most popular option: shares), saving on acquiring with payment using QR codes, speeding up customer service, switching to electronic checks.

Among CSI customers, the percentage of electronic checks reaches 70%, he explains.

According to the CSI expert, retailers do not have time for dubious experiments and hypothesis testing - there is a demand for proven tools, with a payback period of six months or a year. The driver of market growth, according to Alexei Ankudinov, was also self-service, which is being introduced now in stores near home and in hard discounters.

Self-service checkouts successfully replace some of the classic cashier checkouts, he says.

Growing competition in retail, to trade as well as the desire of retailers to optimize business processes, increases the interest of companies in technologies based on. artificial intelligence Retail chains introduce AI for predictive analytics, personalization of services and services, automation of internal processes. According to experts, it is retail today that is one of the leaders in terms of AI use in Russia.

LANIT Omni also notes the great interest of retailers in bpm platforms, microservice architecture and low-code.

Large and medium-sized businesses strive for end-to-end process automation, so the focus is on orchestrating and managing distributed complex processes through a single center, "says Yuri Vostrikov, General Director of LANIT Omni (part of the LANIT group).

According to him, retail is one of the leaders in the field of digitalization and the main driver here is high competition. The company's position and stability directly depend on the responsiveness to external challenges, the speed of technology implementation and effective work with analytics. All these benefits are possible only with digital tools.

The trends of 2022 remained relevant in 2023. Russian retail optimizes business processes, replaces foreign software, develops online trading. IT companies, in turn, are increasing expertise and continue to form a new portfolio of domestic products that help retail chains achieve significant changes in business.

The market feels cheerful. Total reassessment leveled the chances for players old and new, large and small. At the same time, time has shrunk, for a long time harnessing retailers who go to procurement procedures set very tight deadlines for the implementation of projects, the results of which they needed "yesterday." At the same time, many decisions are made as a result of belief in the best result, because out of the box they rarely fully meet the requirements of customers. This is how 2023 will fly with finishing on the go, "says Vartan Gevorgov, partner at Reshape Analytics.

This company is waiting for a significant growth in the retail digitalization market. According to Mansur Kadimov, managing partner of Reshape Analytics, this is due to the fact that retailers have already developed a position and formulated requirements for import substitution projects and have developed an appetite for innovations. In addition, companies that postponed digitalization projects "until better times" are returning to the market.

The best time is now, - emphasizes Mansur Kadimov.

In this regard, market participants predict a renewed interest in corporate analytics, since the main criterion for efficiency will be the ability of the business to extract maximum from limited resources.

In the era of hard discounters and thrifty buyers, tools will be in demand that will help you navigate the situation confidently: monitoring competitors' prices, profit analytics not only in general, but by product groups for long-term assortment management, controlling and minimizing losses, personalizing marketing actions, managing the accuracy of product balances and reducing the cost of sold goods (COGS), "says Dmitry Kiselev, CEO of IT company Qlev Solutions.

Alexey Ankudinov, CSI Set Product Director, believes that the changes taking place in this area have accelerated. And on the example of the largest retailers, the transition from evolutionary changes to revolutionary ones is noticeable. As an example, he cites the transition to electronic checks and the introduction of modern means of payment at cash desks, which speed up service, provide new purchasing experience and savings for the retailer on acquiring.

We ourselves do not notice this, but in a number of technologies in the field of retail, we have become world leaders, - notes the CSI expert.

In addition, an increasing penetration into the work of offline stores of online practices that change the purchasing experience is predicted. As a result, according to Alexei Ankudinov, visiting stores for customers will gradually turn from a utilitarian process into a process that brings pleasant emotions.

50 companies took part in the new TAdviser rating, prepared on the basis of revenue from the implementation of IT projects in retail. Their total income in this area in 2022 exceeded 46 billion rubles.

The leader of the rating was CSI (4.55 billion rubles), the second place was taken by Atol (3.93 billion rubles), the third was taken by Evotor (3.37 billion rubles).

It is worth noting that 17 companies in the rating showed negative revenue dynamics (5 of them are in the top 10). The 27 participants finished the year in the black. In general, the total revenue of companies for which the data for the last two years are known decreased by 1.4%.

In addition to the development and improvement of technologies that have been in an active stage of development for several years, for example, the transfer of enterprise infrastructure to the cloud, as well as the expansion of the level of personalization of offers, there are more progressive solutions that retail companies are introducing.

Reshape Analytics, in particular, mentions the replacement of routine work with automated systems and robots, for example, in the form of chatbots, automated warehouses, self-service stores and hiring bots.

Speaking of chat bots, it should be noted that it is retail that is the leader in the application of such solutions. According to a study by Naumen, 35% of retailers have chatbots, which is significantly higher than, for example, in the highly civilized financial sector. For comparison: chatbots are implemented only in 23% of banks and 15% of insurance companies. Such an intelligent assistant is capable of processing up to 150,000 requests monthly, while for an employee the limit is about 500-1000 requests, experts say.^[1]

Marketplaces remained the leaders in the use of chatbots: assistants were introduced in 75% of companies from this segment. Pharmacies were in second place with a share of 54%, and Cosmetics and Drogery and FMCG were in third with 38%.

Among other promising trends that are discussed in Reshape Analytics is the complication of existing processes, when retailers use data on the regional information background to improve the sales forecast, analyzing news, activity on social networks and changes in legislation. Innovation can also include the creation of a new level of purchasing experience and the transition to active recommendations for consumers, based on predicting preferences and tracking changes in real time.

Retail chains today are extremely interested in reducing costs and maintaining profitability. And new technologies can bring significant savings. For example, the Retail Soft solution called Supermag Vision allows you to automatically recognize goods without bar codes (unbarcoded): weight goods, baked goods, metalware, etc. Thanks to this solution, buyers get rid of the need to search for barcodes, remember product names - the system recognizes them automatically.

I can cite as an example the projects of three federal networks. Thanks to the use of our Supermag Vision solutions, they have a proven effect of reducing losses at the ratio of 2% to 0.1% at self-service checkouts and from 6% to 2% at self-service scales. As a result, for only one store in the "fruit-vegetables" zone, the network's savings are 100-200 thousand rubles per month. Thus, on the scale of each network, the savings are many millions of rubles, [2] "Alexander Belyakov, CEO of Retail Soft, told TAdviser.

The Honest Sign product labeling system will not surprise anyone. It has been developing in Russia for several years. But in the fall of 2023, it is planned to launch a new important functionality - a mechanism for blocking the sale of goods, if they are in illegal circulation or expiration date. Sales of expired products will be blocked by cash registers with the appropriate software. This will reduce the risks for stores when, due to the human factor, expired goods do not have time to be removed from the shelves and they fall into the baskets of customers.

An interesting technology based on artificial intelligence is being introduced by the Magnit Cosmetic network. BeautyScan is designed to tailor facial skin care cosmetics. For analysis, customers need to point their smartphone camera at the QR code in the store, upload a photo of their face and answer a few questions. AI processes the shot and selects an individual care program for the ingredients in the makeup. BeautyScan technology has been tested by the retail chain since 2022, and in the summer of 2023 Magnit announced its implementation in more than 200 stores.

In addition to developing new technologies to improve the purchasing experience, companies are striving to improve the efficiency of their business. Russian retailers, in particular, invest in logistics innovations. For example, Wildberries began using cargo unmanned electric vehicles. Transportation by cars without drivers was launched at the marktetplay distribution center in Elektrostal near Moscow. The machine independently moves goods loaded into it in advance between various units of the company's log center, where they are further processed and sorted. The project is being implemented jointly with a large Russian company Evocargo, which provides logistics service based on autonomous trucks of its own production.

Retailer X5 in the summer of 2023 was the first of the grocery retail to launch regular commercial transportation with trucks without drivers behind the wheel for real deliveries to retail chains. Earlier, the owner of the Pyaterochka and Perekrestok supermarket chains took part in the development of unmanned logistics corridors, regulatory requirements for a pilot launch, as well as testing trucks with KamAZ. During the preparation for the launch, the parties identified the route and potential volumes for transportation. At the first stage, one car will be sent in the direction from Moscow and from St. Petersburg per day. The route will connect the company's distribution centers in the Moscow and Leningrad regions.

Yandex.Market has developed and implemented Spectro inventory robots. Three systems are installed in the logistics center of the company in Sofyina near Moscow. Robots inventory pallets and all large goods. This reduces marketplace costs for storing goods in warehouses, improves logistics and frees people from monotonous tasks - they will be able to engage in more complex and interesting tasks.

The most popular classes of IT systems in retail

According to the TAdviser database, among the different classes of IT solutions in retail companies, enterprise resource planning (ERP) systems are most in demand. Such solutions account for the largest number of completed projects. Data on other classes of systems are shown in the diagram below.

Vendors of IT systems, most often implemented in retail

For each class of IT systems implemented in certain industries, the TAdviser database allows you to identify the most popular solutions and vendors of such products. See the chart below for which companies are developing the systems most commonly implemented by retailers.

Despite all the difficulties of recent years, Russian retailers continue to follow the path of development. Digitalization is one of the key drivers for this industry. On the one hand, it helps to ensure the continuity of the main processes of a modern retailer, on the other, it implements competitive advantages. It is safe to say that in partnership with domestic IT companies, Russian retail will be able to overcome all challenges. There are opportunities for this.

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• Information security in retail
• Information Security in E-Commerce
• Information Technology at Wildberries
• Information technologies in Megapolis Group of Companies
• Information Technology in M.Video - Eldorado
• Information Technology in Magnit
• Information technology in the Crossroads network
• Online business chain of stores Perekrestok
• Digital at X5 Retail Group
• Digitalization and Robots in Tape
• Artificial intelligence in retail
• Artificial intelligence in logistics
• Retail Information Technology Market Map: 390 suppliers of IT products and services
• Marketplaces in Russia
• TAdviser review: What cash solutions Russian retail uses
• Cloud services in retail
• Fiscal Data Operators (Russian Market)
• Retail (Global)
• Retail in Russia
• How the Russian retail digitalization market has changed under the influence of a pandemic

Notes