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Digitalization in traditional consumer markets

By Antonio Sola – Chairman, Storecheck


Those of us who have smartphones know that these devices have changed our lives in many ways, from the way we work and communicate, to the way we have fun, relate to one another and research.

This disruptive technology is here to stay, and has created and destroyed categories of products and age-old services in record time.

Although Mexico has a low penetration of smartphones among its population (33% in 2013), it is estimated that by 2015 two out of three phones will be smartphones, due to the fact that every day the density of the Internet grows and the costs of mobile devices and services decrease.

Society as a whole has great challenges ahead in order to learn how to responsibly use this ecosystem of devices, applications, and interconnected users; however, the benefits are clear, and they can be capitalized on by those companies that have the ability to transform the physical world into a digital one... including in traditional markets.

Modern distribution channels differ from traditional ones because they have developed processes, systems and methodologies, many of them supported by "digital" technologies, that have allowed them to grow in terms of profitability, square meters of sales floor and shopping experience.

Sharing transactional information from their stores, these large retailers of the modern channels have developed collaboration systems with their suppliers in order to align marketing and distribution efforts in favor of an efficient supply chain.

Supported in digitalization, they have been present in e-commerce for sometime, as well as in online advertising and social networks, and in the world of promotions through loyalty programs targeted at their consumers, which is why they are surpassing the traditional channel by far, and this can be seen in productivity levels.

The new challenge for the modern channel lies in taking advantage of the ecosystem of technological consumers in order to carry out smartmarketing activities and business process optimization at the point of sale, based on knowledge of a customer who generates and shares information on their buying habits through their smartphone.

Despite the current and future competitive advantages of these large retail chains, the traditional channel is still the biggest and most profitable channel for most manufacturers of consumer products, since with more than 700,000 stores, every day it serves the vast majority of Mexicans with its offer of proximity and warm service.

Manufacturers, wholesalers, storekeepers, governments and consumers agree that the survival and modernization of the traditional channel is a window of opportunity for the country's transformation.

The digitalization of stores is undoubtedly one of the steps that must be taken to increase the competitiveness of this sector, and although the challenge of introducing technology into this channel on a massive scale seems ambitious, we are seeing that the ecosystem will very soon be ready to support this transformation, because unlike in the past, in which companies who embraced technology pushed for changes in habits in society, now it is the technologically savvy society that will trigger change in companies.

There are several initiatives attempting to partially meet this opportunity with offers of technology for “top-up” sales and service charges, management of POS through systems controlled by bar code readers, and terminals for payment by bank cards; indeed, they are beginning to generate incremental traffic in stores that embrace them early.

These technification efforts are aimed primarily at generating traffic to bring additional revenue for the storekeeper and the company offering the service, but they still aren’t causing efficiencies in the supply chain or opening communication channels between stores and manufacturers. These issues must be resolved through digitalization in order to make the channel sustainable in the long term.

The massive implementation of a POS terminal with 360° vision which can solve comprehensively the channel digitalization will surely be the answer to the lack of competitiveness of microretailers. The execution of a project of such magnitude requires an effort coordinated between producers, governments and storekeepers; however, it is an effort that will pay off, since the benefits are highly valuable to all parties. After digitalization, product manufacturers may be more assertive in marketing strategies and supply channel, shopkeepers will keep their places of self-employment and the government will be setting foot in the path of banking and formalization of these businesses. The question still stands: when?

Note: ConMéxico, Storecheck and the Federal Government, through inadem, are running a pilot program for the digitalization of the traditional channel in the state of Querétaro.




By Antonio Sola

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