By akademiotoelektronik, 28/04/2022

How Migros tackles digitization | ICTjournal

Digitization poses new challenges to the retail trade. What are the main ones for you?

We have three major challenges. First of all, we need to digitize our business models - I'm thinking of the trend of online sales or marketplaces. Second, digitization also affects customer interfaces. We can already scan our purchases with our mobile phones, but the shopping experience will evolve further. The third major challenge concerns IT systems. Like most retailers, Migros still uses many old systems, in other words, legacy systems. They are a challenge because they slow us down and cost a lot of money.

You mentioned self-scanning. You could say that Migros is pushing the self-service trend to the extreme. What do you think of this development?

Technologically, I find the operation of these services exciting. In addition, this trend creates added value for customers. When I scan the products, for example, I can check for myself how much it will actually cost me if I want to buy several items during a given promotion campaign. Along with creating some gamification, it also gives me, as a customer, a sense of control and fairness.

What are your plans for Self-Checkout now?

We are in the deployment phase. We are mainly driven by the interest of our customers and we always see a strong demand for the classic checkout. However, I expect a change in the area of ​​self-scanning: the abandonment of scanners in favor of mobile applications. That's why we integrated the SubitoGo function into the Migros app six months ago. We are currently testing this feature in a few stores and plan to roll it out nationwide by the end of the year. The principle is simple: customers create a shopping list with the app, scan the items in the store, pay directly in the app and present a QR code at checkout. This makes shopping very easy and convenient.

What will happen to your staff if the profession of cashier disappears?

Our plans don't go that far because we don't see this important profession disappearing. Especially in small stores, customers have many questions: Where can I find this or that product? What's in it? There is therefore a real need for personalized advice, guidance and information. We are still a long way from a perfect digital world that provides customers with everything they want. Also, many people have a strong need for interpersonal contact when shopping. Chatting at the till isn't just something that happens in the countryside. Supermarkets are also important social meeting places in urban settings. In this regard, we can say that as a meeting place, retail businesses render a service to society.

Suppose that Self-Checkout one day replaces traditional checkouts. Do you have a plan to prepare employees for this eventuality?

We have very intensive training programs, but as I said, I don't expect the classic boxes to be replaced in the near future. The function of cashier is also a demanding job. And there are other jobs that are likely to disappear faster because of automation. I am thinking of tasks such as folding boxes or transporting empty containers with pallets. Serving people at the checkout is much more demanding. Our employees must have good interpersonal skills, be service oriented and know the products in detail. In this regard, our cashiers are doing very well, so I am not worried about their future.

With the “Voi Cube”, Migros is testing an unmanned convenience store concept. Why this test?

For us, the Voi Cube is above all a way of experimenting with these technologies. We want to know how they work in real life. The next step is to gain broader experience of this market and find out how customers are reacting to the concept. One store is not enough, it would take at least ten. But first we need to learn how this concept can work in Switzerland.

What are the difficulties posed by this concept in Switzerland?

The main difficulty lies in the interface between people and this technology. We need to make sure that customers behave in a way that everyone has a good shopping experience. Also, if everyone is not behaving responsibly, we have to raise prices, otherwise it's a mess from a business perspective. For example, if a cleaning team has to come into the store every half hour, that would be a problem. So the important questions are: what is the level of maintenance for these stores? And how to design them in such a way that customers feel comfortable on the one hand and are attentive to others on the other? In other words, it is behavioral economics. Any technological development these days should consider behavioral economics.

At the beginning of June, Migros interrupted the Amigos social shopping service for the second time. What is your track record?

We are very satisfied with Amigos. Initially, we wanted to develop an innovative solution that would benefit our customers. It was clear to us that the gig economy was also going to affect Switzerland. However, we later found that the project had some issues. We learned a lot from it.

That is to say?

We crossed out half of our list of theoretically feasible solutions because we realized that not everything imaginable is feasible - at least not to a reasonable extent. The most important lesson is to have understood that this service is not a good model for Switzerland. We are not a gig economy country, like the United States, where there is a culture of multi-employment. Digital innovation models from all over the world cannot simply be transferred to Switzerland.

With the coronavirus crisis, the Amigos project has had a second wind. How do you explain it?

When the pandemic hit, there was suddenly this desire for mutual aid. Pro Senectute approached us with the idea of ​​supporting people at increased risk of getting sick. We were able to reactivate Amigos in a short period of time and were pleased to see the number of users growing rapidly. However, as we now approach the end of the crisis, we have noticed that orders as well as the number of active delivery people have decreased. Matching has become more difficult. The few people who were still ordering or registering as deliverers were put in touch less and less quickly. It was therefore logical to discontinue the service again after more than a year. But the results remain positive. We were able to respond very quickly to an important need, both for people who wanted to help and for those who needed help. These are very human needs: to want to help and to be helped. In this regard, we were able to make an important contribution with Amigos, which personally pleases me a lot.

In October, Migros entered into a cloud partnership with Microsoft. Where are you in your migration to the cloud?

We are proud to operate four data centers that are owned by us. But like most companies, we realized that this model was not the right long-term solution. Of course, we will retain some local IT infrastructure where proximity is important for risk management issues – for example, for large production and logistics operations. But for everything else, we plan a gradual and functional migration to the cloud, over a period of five years. We decided to do a refactoring. Namely that we adapt the code of our applications to future cloud environments. We have two strategic platforms: Microsoft Azure and Google Cloud Platform.

What is currently the biggest construction site of this cloud transition project?

Our ERP systems are the biggest challenge. We have always worked with SAP, and about a year ago we launched the biggest transformation program in the history of Migros. We are renewing the entire digital base of the company. And we do this through a clean, business-oriented transformation that brings us as close as possible to an off-the-shelf solution. It's a complicated mission because we have a very important Long-Tail. By that I mean thousands of small applications and dozens of SAP systems. Taking all this into account in a systematic way is a considerable task in itself. Consolidation and refactoring for the cloud are even more complex projects, even for a large team like ours. We have nearly 3,000 employees in the core technologies division. We consider the redesign of our core base as a major technological redesign. As things stand, it will keep us busy at least until 2028. The objective is clear: our company must be able to respond more effectively to customer expectations.

How satisfied are you with SAP?

Let me rephrase it like this: From a certain company size, there is hardly any way around SAP in the German-speaking world. There are many great vendors out there, but from the perspective of a large, highly integrated enterprise, the alternatives are very limited. And once you've made the leap into the SAP world, it's very hard to go back. The key question for us is: how can we use SAP most effectively? In the past, we would have relied on a huge monolith. Today, it is more about building a highly efficient base and assembling the surrounding systems according to the best-of-breed principle.

It would seem that SAP is a necessary evil.

I wouldn't say that. SAP definitely offers added value. Take the many integration possibilities: from goods procurement to customs processing, from inventory management in the warehouse to the downstream finance module - you can take everything into account with SAP. We can also manage the very complicated processes related to the management of the different VAT rates. The procedure would be extremely tedious to set up in a home-made system. A modern company could of course do it differently, for example by creating a data lake, adding many Java programs to it which can also handle all the processes, and designing everything with cool user interfaces in order to offer excellent user experience. But one can wonder if the integration in a complex environment will then be smooth. Furthermore, it is also possible to create an attractive front-end with SAP.

Despite everything, SAP constantly comes up against criticism from its customers. Why?

I think the problem is general. On the one hand, small businesses often feel that they don't have enough support when working with large suppliers. SAP's situation is probably similar to that of other large IT companies. On the other hand, there is this perception of dependence, this feeling of not having a say. But this type of problem does not only concern the field of tech.

What is the technology trend that fascinates you the most?

My favorite concept is the digital twin. In the future, I want customers to be able to know, in the store, where a banana comes from, who planted and harvested it, how it arrived in Switzerland and what the ecological footprint of logistics and transportation. I would like to make this type of information available to customers. We are working on such a project. The objective would be to be able to communicate information on the products as well as on the subject of sustainability in a way that is both concrete and credible.

The issue of digitization is everywhere today and is the subject of many discussions. In this context, what makes you happy or irritates you?

Ten years ago, technology was still considered a secondary phenomenon in many circles. Today, everyone is talking about it. On the one hand, I'm very happy that public interest in the technology has increased so much. On the other hand, it never ceases to amaze me that some discussions are clearly not aimed at better understanding the subject matter. Instead, technical terms are used as buzzwords to tell success stories. Sometimes it bothers me. I sometimes call myself a nerd, in other words, I am a really convinced tech specialist. With my employees, I like to immerse myself in projects to understand things. I would therefore like to see more depth in the public discussions around technology and digitization.

About Rainer Baumann

Rainer Baumann is Head of Operations and Member of the Executive Board of the Federation of Migros Cooperatives. He is responsible for the functional areas of IT, Logistics, Transportation, Engineering, Digital Business and Analytics. He joined the company in 2019. Previously, Rainer Baumann held various positions at Swiss Re, the last of which was Head of Group Digital and Information. Rainer Baumann holds a doctorate in science from ETH Zurich.