Innovation management

Innovation strategy planning process

Innovation strategy planning process (graphic)

As a retail company, METRO GROUP does not make its own products and therefore does not conduct research and development in the strict sense of the term. When it comes to innovation management, we concentrate more on pursuing the objective of fuelling our transformation within a world that is constantly reinventing itself.

Both our sector and our customers currently find themselves in a profound transformation process which is being driven in particular by megatrends such as digitalisation and social change. These trends have a great impact on the way our customers live, work and consume. Our aim is to support our customers in this change process and become a relevant partner for them. We are thereby faced with the challenge of having to change ourselves, because as retailers, we can no longer be satisfied with simply providing access to products for our customers – regardless of whether online or offline. In order to successfully shape the retail of the future, we have to offer our customers added value and involve them more closely. To achieve this, we need new business models that enable us to generate content and offer it to our customers. To that end, METRO GROUP’s Business Innovation organisational unit is working together with the sales lines on a customer-centred process that is designed to optimally support everyone involved and that can be appropriately adjusted with an eye to the customer groups of the various sales lines (see graphic).

In the course of this process, digitalisation, social change, urbanisation and sustainability were identified as the most important trends that will most strongly influence and change people’s value systems, lives, work and consumption patterns. On the basis of these analyses, we ask the following questions: How can we involve our customers more closely in future? How can we become the defining player in the retail sector? Which role does store-based retail play in digital business models? At the same time, our aim is to increase the customer benefit as best we can, and thus ensure that price is no longer the only decisive argument. Instead of merely facilitating access to products, we wish to involve customers, further personalise our offers, network with our customers and, in the best case, collaborate with them. Only when the framework conditions and benefits have been decided on will detailed business models be defined and pilot projects implemented. In the process, innovation management concentrates on a number of clearly defined focal topics (see graphic). In the course of financial year 2014/15, the new focal area of “Horeca Services” was added to the existing innovation fields. The new field relates to the introduction of digital services and solutions for hotel and restaurant owners as well as catering firms. Of the two million businesses that are active in the hospitality sector in Western Europe alone, 1.4 million are METRO Cash & Carry Horeca customers. However, the digital services market for this group of customers is still unoccupied. At the same time, there are many young entrepreneurs who offer digital solutions but are unable to implement them in their own business models or at a larger scale without support. We see considerable potential in this area and therefore created a new focal area at the end of financial year 2014/15: Digital Horeca. METRO GROUP’s goal is to provide Horeca customers with digital tools that enable them to grow more quickly and more easily manage their processes.

METRO GROUP is actively seeking businesses across Europe, the USA, Asia and Africa that fit in with its innovation strategy. When making investments, METRO GROUP’s focus is on significantly supporting start-up businesses in achieving growth. In December 2014, we acquired a 15 per cent share in “Emmas Enkel”, a company that combines traditional local supply with modern online retail. Since April 2015, METRO GROUP has held an 18.33 per cent share in Culinary Agents, an American online job network that specialises in the placement of qualified personnel in the hospitality sector.

Another aspect of our innovation management is positioning METRO GROUP as an interesting and reliable partner for start-up businesses and making active use of METRO GROUP’s strengths for this purpose. Our aim is to foster collaboration with business founders and young entrepreneurs as well as to strengthen and support start-up structures in general. With a view to these objectives, METRO GROUP has provided financial and content-related backing for several events on this topic in the course of 2015. One example of this is a series of events entitled “Innovation in Retail Meetup”, through which we have created a platform for exchange between innovative business start-ups in the retail and food service sectors and METRO GROUP and its sales lines. At the gatherings in Düsseldorf, business founders present their ideas and business models and then network with other founders, experts and representatives of METRO GROUP. Here, valuable contacts are established, which have already resulted in start-up businesses having been able to implement pilot projects within the METRO GROUP sales lines. Examples of this are the listing of craft beer of the Berlin-based company BRLO at Emmas Enkel as well as initial test activities with Instagram printing stations and terminals at METRO Cash & Carry. The service offered by Dinnery will be presented at a pop-up store at the Weserpark shopping mall in Bremen from 24 September to 23 December 2015: this start-up supplies gourmet boxes with freshly pre-cooked components that contain all the ingredients customers need to create a menu in high-end professional quality. POSpulse, a start-up that deploys private citizens as scouts for the purpose of analysing retail at the point of sale, was given the opportunity to conduct a pilot project with Media-Saturn. This solution is meanwhile being used as a market research instrument by the sales line.

However, innovation management also has an impact on the process of cultural change within the company. The emphasis in this case is on fostering the understanding that the company must constantly and ever more quickly reinvent itself in order to cope with the digital age. The aim is to remove the fear of change and create an understanding that everyone can and must play a role in shaping change. As a first step towards this, a series of workshops has been created that is designed to familiarise employees with innovative topics in an easily understood way. With the internal social network UNITED, METRO GROUP has also created a new communication and interaction platform in the reporting year that enables employees to network efficiently with one another and work together across national boundaries on the development of ideas. In this way, METRO GROUP also actively supports the change process in its everyday work.

The six areas of innovation at METRO GROUP

The six areas of innovation at METRO GROUP (graphic)

Working in close collaboration, the sales lines are already testing and successfully implementing numerous innovations in the six fields indicated. Selected examples are outlined below.

METRO Cash & Carry is intensively working on serving customers as an ideal partner in their everyday working lives. One of the goals is to provide Horeca customers with increased support regarding digitalisation processes. To this end, in financial year 2014/15, METRO GROUP entered into a strategic partnership with the online job network Culinary Agents. The American start-up works with a self-developed, dynamic technology that directly connects talents with businesses. The network also offers tools for the selection and management of applicants and communication with them. With its participation in Culinary Agents, METRO Cash & Carry offers its important customer groups of restaurateurs, hoteliers and caterers an added service for their day-to-day business success. Culinary Agents, which already operates in more than 30 cities in the United States, was launched in Europe in October 2015, initially in Italy and France, with other countries scheduled to follow in 2016.

To be able to offer the customers of METRO Cash & Carry new services and technologies in the future, METRO GROUP launched its Techstars METRO Accelerator in the course of financial year 2014/15. This new support and development programme is being undertaken jointly with the American company Techstars, one of the most internationally renowned start-up networks, as well as the digital agency R/GA. Techstars METRO Accelerator is targeted at business founders with innovative technological applications for use in the food service, hospitality and catering sectors. The programme provides for experienced mentors and experts to support selected start-up enterprises in successfully developing their business during a period of three months. During the programme phase, the business founders also work closely with representatives of the METRO Cash & Carry national subsidiaries for an initial pilot project. On so-called Demo Day in January 2016, the teams will present their business concepts to an audience of international investors, leading industry representatives and the general public. The Techstars METRO Accelerator is the first support programme worldwide to focus on technology applications for the hospitality sector.

In order to guarantee the customers a unique shopping and freshness experience, METRO Cash & Carry is also working on a pilot project with the Berlin start-up Infarm. The objective is to introduce “indoor farming” to the METRO Cash & Carry wholesale stores. Infarm specialises in the sustainable cultivation of shoots and sprouts, herbs and even lettuce varieties in enclosed spaces. With the aid of technical installations, the plants are grown directly in store and sold directly to the customers.

At Media-Saturn, various innovations have proved themselves in the field of goods delivery. Express delivery and delivery at a time of the customer’s choice have now become a firm feature among the range of services offered to customers. In order to optimally fulfil their expectations and wishes, Media-Saturn is also working with the Business Innovation unit on new market formats.

Additionally, in autumn 2014, Media-Saturn launched a project with Shopkick, a mobile shopping service provider. With the aid of the Shopkick app, the attention of customers is drawn to products and offers in shops in their vicinity. On entering a shop, the customer is rewarded with “kicks”, which can then be exchanged for vouchers through Shopkick. To make this and other services possible, Shopkick uses beacons. These are tiny transmitters that emit signals which can be received by correspondingly configured smartphones. Media-Saturn wanted to try out the new technology and therefore entered into the partnership with Shopkick. Media-Saturn also uses Shopkick to engage in targeted, personalised marketing with the app. As a result, in the period from January to August 2015, more than half a million customers collected “kicks” at a Media Markt or Saturn consumer electronics store. In the process, these customers viewed products over ten million times via the app. The project with Shopkick is initially planned until spring 2016.

With the relaunch of the Real app for iOS and Android operating systems in April 2015, Real has significantly increased the added value for its customers. Since its launch in 2010, more than 870,000 customers have installed the application on an iOS or Android device. In regard to the customised marketing activities which are planned for the future, the Real app has also been more strongly personalised and can now be adjusted by the users according to their individual preferences. After logging in, the customer is already offered customised services and information on the homepage. A new recipe section has also been incorporated into the app. To ease the use of the new technical functions, Wi-Fi is already available to users of the Real app in over 100 Real hypermarkets – free of charge and with no restrictions on access or data volume.

In the context of its 15 per cent stake in Emmas Enkel, METRO GROUP has been testing new multichannel concepts in small-format food retail in Germany. Real is acting as an operating partner, supplying Emmas Enkel with high-quality food products, fresh regional produce, household and drugstore articles as well as own-brand products. Through the city-centre Emmas Enkel stores and the online shop, the sales line is reaching new customer groups, thus creating a new sales channel for itself.

But other new technologies are also being introduced to the stores of our sales line. For example, Real is offering its customers new payment systems. These include self-checkouts and cash registers equipped with wireless near field communication (NFC) transmission technology. With NFC, contactless purchases can be made using compatible cards or mobile phones. In connection with the launch of this technology, Real is participating in the mobile payment initiative NFC City Berlin. The biggest nationwide project of its kind, for which the company GS1 Germany created the platform, started in April 2015 and will run for one year. NFC City Berlin is a cooperation between all German mobile network operators and leading retail and wholesale companies. The aim is to familiarise customers with the possibilities of mobile payment technology and win them over for it.

Working in cooperation with Ebay and Paypal, METRO GROUP tested a new omnichannel concept in the course of a three-month, multiple-sales-line project. From October 2014 to January 2015, customers and traders were able to test and experience this form of shopping in the “Inspiration Store”. On a sales area of around 200 square metres in the Weserpark shopping mall in Bremen, various technologies from a number of producers and service providers in the field of online and offline shopping were used in new combinations. One focus, among others, was on QR code shopping as well as payment methods such as payment using the Paypal app. The goods could be bought in store and taken home, delivered to the customer’s home, or directly ordered online. The goal of the project was to gather experience in the field of omnichannel retail. Altogether, more than 40,000 customers visited the Inspiration Store. They were especially interested in the omnichannel functions such as “ship from store” and payment via smartphone. 10 per cent of sales were made using Paypal.

Following the previous projects with cooperation partners, METRO GROUP has gone one step further and is currently testing the Cross-Border E-Commerce concept. Here, the Business Innovation unit is working closely with METRO Cash & Carry China, with the aim of being able to offer German products on the Asian e-commerce platform Tmall. Tmall is a subsidiary of the Alibaba Group and is China’s third-largest e-commerce platform for brands and retailers. Within the scope of this test project, the Real sales line is delivering own-brand products, among other things, to China. The huge market and the strong demand for German products in China offer a major potential that METRO GROUP seeks to use.