Ken Morris: “Consumers expect a seamless experience – making real-time retail the new industry imperative.”
The constant change and adaption of the business models is how one keeps the business in the competition race and fights the time vortex that is constantly bringing challenges to be overcome. As the example of the uprising path in the moment when the digital transformation became a must-be, we can think about the German brand having a tradition of over 60 years.
Let us go back to 1949 when the OTTO was founded using the paper catalog to communicate with the customers – 14 years later, OTTO becomes one of the first to take phone calls orders! For years, this company was settled in an analog world with the leading position when it comes to the consumer’s operating retail.
September 1995: the scratching sound of a modem and in a few seconds, Otto’s website is on the screen. One of the first German shopping platforms on the Internet, far away from the glue and paper pages, non-touchable and not tearing.
September 1995: and Otto made the first step towards the transformation from analog to digital.
September 1995: and Otto was back in the game with the contemporary business model in its first phases.
On the other hand, Otto Group came to face another challenge: the existence of the competition that had its digital trait from the day 1, Zalando and Amazon, and had the basis built on the technologies that Otto was just about to get to know.
Digital technologies have changed company’s way of thinking; approach to the data has to be adapted to the amount of the information gathered. To always be one-step further, the predictive analysis says what will be bought tomorrow, what will be sold tomorrow and what kind of customers will be coming to demand the services. Having the value of this information in mind, Otto invested three-digit million amounts in IT, logistics and in establishing important new business models for the future, as it is stated in their report from 2015.
In order to reach the best quality of the data processed, Otto started cooperating with one of the leading providers of cloud-based predictive applications: Blue Yonder. Blue Yonder Company was established in 2008 in Karlsruhe, Germany, by former CERN scientist Michael Feindt. The collaboration between two companies had a goal to exceed the dares that were set: the attractive offers and fast deliveries were upgraded based on the predictive trade, as the data processing was automatized. The stock’s refilling and the prices optimization now had a support from the machine learning algorithms, which influenced user’s experience and raised sales opportunities. Not only that machine learning is a part of a digital transformation process, but it also represents one of the most contemporary ways to get more than 5 million of the sales prognoses, as Otto states to produce them every year. Furthermore, Blue Yonder develops the algorithms that are trained with the huge amounts of the input variables, so they can learn from the previously gathered data, which leads to the self-evaluation of the prediction quality.
Despite the fact that losses were happening, Otto was not giving up on the vision of being a successful part of a digital world, so in a year from 2015/16 to 2016/16, the increase of the revenue from 12.1 billion to 12.5 billion euros was announced, and with the eCommerce revenue increase for a half of the billion, Otto could state that the end of the year was set in a positive range.
The question remains – will the digital age let everyone survive? Is it possible for the old-fashioned systems to be transformed fast enough without losing their identity and essence? Moreover, the most important one: even if they succeed, how far can they go in comparison with their digital-native competitors?
Otto will say, let us listen carefully.