A categorical imperative

Interview with Peter Wippermann

The digital revolution is in full swing. The Internet is exerting more and more influence on how we communicate, work and conduct trade. We spoke to futurologist Peter Wippermann about the consequences of the digital transformation.

Question: Professor Wippermann, how is the Internet changing our lives?

Answer: The Internet is a major driver of social change. Over the last few decades it has radically changed two parts of our lives. First, it has changed our perception of analogue reality. And second, it has opened up a brand new, virtual reality in which we are not bound by the constraints of time – in other words, we are in control of a finite element of our lives. That’s what makes the Internet so attractive to us.

Question: What does that mean for retailers?

Answer: According to my observations, there are two directions of thought. One of these is still based on the product: merchandise is produced, presented and sold. The other mindset, however, is geared towards the situational requirements of the customer. Companies try to understand these requirements and use them as a basis to offer the right products. In my opinion, this approach is based on the opportunities provided by the Internet. Com-panies can observe the behaviour of the masses using the Internet, then analyse said behaviour and interact sep-arately with each individual.

Question: Is that the key element of customer orientation for you?

Answer: The key element is the fact that the relationship with the customer is becoming more important than the product. That is a paradigm shift compared with the past.

Question: Are companies even prepared for this?

Answer: At the present time, many companies see the Internet as simply another sales channel which they add to the others. To me, that seems to be a very risky strategy, as the costs involved in managing several channels probably increase at a greater rate than sales volumes. However, companies must be in a position to react to customer circumstances at any time. After all, it’s about processing large quantities of information, making connections to company product ranges, and providing products that retailers don’t even have in stock themselves. This is how companies such as Amazon see things.

Question: This must require a great deal of analysis, though.

Answer: That’s why statisticians should be seen as the pop stars of modern times. The question is: what can I do with data that will enable me to react immediately? The ability to forecast situations will become the most important tool in increasing efficiency throughout the supply chain. We only have to consider the length of time it took for retailers to be able to record sales in real time in order to make decisions on re-ordering. Sport apparel producer Nike is leading the field when it comes to combining consumers’ desires with the production process, by enabling its customers to design their own shoes. But developments such as these take years to occur.

Interview with Peter Wippermann

Question: How significant are social networks in this context?

Answer: Traditionally, retail has always been wherever the people are – and that’s now Facebook, Twitter, etc.. Again, many companies only see social networks as another media channel, and delegate responsibility for them to marketing or communications departments. But social networks also have a strategic value. Behaviour in virtual environments always leaves evidence behind. Many companies are finding it difficult to acknowledge this information, make decisions, structure product ranges based on it, and automate the entire process.

Question: Are there exceptions to this?

Answer: To an extent, yes. C&A’s idea in Brazil came as a surprise to me. The fashion retailer built “like” counters into its clothes hangers so that customers could see how many Facebook users like a certain piece of clothing in the store. The interesting part of this concept is that C&A organised a feedback process which can be accessed everywhere. It removed the artificial separation between the virtual world and the real world.

Question: Do you know of any other examples?

Answer: There are now hotels that search Twitter to find out if anyone is looking for hotel accommodation, and then make an offer to the respective user. Some insurance companies use social networks to find out more about the lifestyles of potential customers, such as whether they have become a parent and need a new insurance policy.

Question: That’s quite a frightening prospect for many …

Answer: Partnerships – and that’s all social networks are – create new moral principles. When an offer is pragmatic and the quality of life of the individual increases, opinions will change and so will the legal framework later on. This is a very long and drawn-out process. But we have already seen that young people tend to be relatively open when it comes to their own personal data and the companies that they trust.

Interview with Peter Wippermann

Question: Do you see a danger of a consumer being overwhelmed by information if many companies start making them tailor-made offers all of a sudden?

Answer: It is nothing less than a paradigm shift when our private lives become public. But we also use our social contacts as filters. If I have a preference for a certain product or a certain service, my community will tell me which retailers I could be interested in. This protects me from being flooded with information.

Question: So it’s a self-regulating system?

Answer: We simply blank things out.

Question: You said that customer relationships are more important that the product. Where are the opportunities for classic retailers?

Answer: Customers will ask themselves: “Who can help me make my life simpler?” So there will be a competition for trust. People in retail – in other words, retail employees – will therefore become more and more important. Someone must be present for the company, particularly in situations of conflict. Once I have put my trust in a company, other details don’t really matter. Apple, for example, maintains almost totalitarian customer relationships; in other words, anyone who has an iPhone must submit to Apple specifications. That means that iPhone users can only install selected programs and have to disclose a lot of personal information. But, for many, this is counterbalanced by the pleasure of owning and using an iPhone. Then there’s the increase in the user’s status thanks to the cult character that the Apple brand has.

Question: To what extent will retail change in the future?

Answer: In the past, retail has always been able to diversify itself. In other words, merchandise is distributed from the producer via wholesale through to retailers in individual residential areas. Today households are supplied directly. We must now ask ourselves whether we need all of the links in the supply chain. But there is also an unbelievable concentration of service providers taking place – and not just classic retailers.

Question: What does that mean?

Answer: Amazon has demonstrated how to enter the consumer electronics retail market with a completely different strategy from stationary retail. Now Amazon is planning to open its own stores. This means that stationary retailers will have a new competitor that already has outstanding customer relationships. Companies such as Google are also sure to become active in retail. Google also already has outstanding customer relationships and is theoretically in a position to reach every single person in the world. I think competition will be tough. Another exciting development will be the spread of electronic payment. Many internet-based companies are trying to move into this area because it allows them to obtain valuable statistical information on areas where they can increase business. American retailers have also recognised these opportunities and are joining forces to implement mobile payment solutions.

Interview with Peter Wippermann

Question: Are the challenges involved in wholesale the same as those faced by the retail industry?

Answer: A new direction will definitely need to be taken in wholesale too. Relationships with customers are a decisive success factor in wholesale, just like in retail.

Question: Will wholesalers have to position themselves more strongly through their services as a result?

Answer: That does seem to be a promising approach: identifying problems customers have and then recommending a solution, even though the customer does not expect one. There is also the possibility of integrating the customer as a marketing supporter and letting him share in the profits.

Question: How would that work?

Answer: There are already websites, such as dooyoo.com that pay users small amounts of money to evaluate products and services. Amazon has a very successful partner programme. I can link to products on the Amazon online store from my website, and if users click on these links and purchase something from Amazon, I take a small percentage of the sale. This is actually nothing less than a parlour game: I know something and you can benefit from it. I find it surprising that classic retail has not yet implemented such a system.

Prof. Wippermann, thank you very much for the interview.

Trend researcher Peter Wippermann is the founder of Trendbüro, a consulting firm for social change. He has also been Professor of Communication Design at Folkwang University of the Arts in Essen since 1993. In his work, Wippermann explores social and consumer trends, shifts in values in our society, and the global network economy.