Adjustments can be difficult, especially those that need to be implemented within a short period of time and are due to many variables. To prepare for them, it is worth acting as early as possible. COVID-19 has taught us to be ready for change, both in operational or sales processes and in the purchasing decisions of customers who have increasingly started to take advantage of on-line shopping opportunities.
How has COVID-19 changed retail?
The previous year made it even clearer how important the relationship with the customer is. COVID-19 affected the traditional sales model in big-box stores. Until now, the customer himself selected the goods from the shelf, put them in the trolley and made the payment at the checkout. Our role was to advise and support customers in the decision-making process. However, the pandemic situation forced far-reaching changes to the structure of the sales form. The lockdown and associated closure of our stores forced our customers to turn to the online sales channel in the Click & Collect model. Direct contact with the product and the associated experience no longer play a decisive role in the purchase decision. This is a new trend that will certainly stay with us for a long time and will require us to constantly develop and improve.
The changed purchase structure also forced changes in the area of competing the basket of products. Store employees, as part of our e-commerce sales regulations, have accepted a commitment to complete orders within two hours of placing them. This means that the shopping activities of our customers have been taken over by Castorama store employees. It was a huge challenge to keep our commitments to customers. Adapting to the sanitation requirements and health priorities of shop employees has resulted in the implementation of an additional Casto Drive pick-up service, whereby customers can collect their goods in the shop car park without leaving their cars.
Customer in focus
Customer satisfaction is our top priority. It is important to learn about their opinions, comments and experiences in order to improve our offer. To this end, we have launched the Back to the Floor programme for head office employees, which consists of a week-long internship in the store. This valuable experience and the collection of comments and observations from a week's work with colleagues in the store can translate into real improvements in operational sales processes. As a result, we know that decisions made centrally are tailored to the needs of both employees and customers and follow market requirements.
Based on conversations with clients and our research, it appears that our clients have the biggest problem with getting professionals to carry out their home improvement and construction plans. The problem with finding a reliable contractor to paint walls, lay tiles, lay parquet flooring, install doors and windows or repair things in the house, for example, discourages customers from carrying out these plans. Recently, there has been a significant increase in demand for these types of services, and finding reliable professionals has become a difficult challenge. The answer to this need is the introduction in the Kingfisher group of the NeedHelp portal, on which the customer searches for a reliable professional to carry out the contracted services.
E-commerce and convenience - speed and comfort of shopping
We observe that customers value convenience, quick, easy and trouble-free possibility to collect their purchases. Therefore, Castorama is adapting its infrastructure, e.g. by introducing self-service checkouts or its own parcel lockers. Such implementations meet with general approval of customers. Self-service checkouts allow customers to make quick payments for their purchases, and collection at any time from our parcel machines makes it even easier to complete purchases. We observe that this is a common trend implemented by most companies in the Retail segment.
Castorama is developing its convinience format in order to reach more customers. We are opening compact Castorama Smart stores, which are located in smaller towns. They offer a basic assortment available from stock and products available through the Order & Collect model. There are currently two stores in this format. Due to the very positive reception of it by our customers, we are planning to open further stores.
Sustainability high on the agenda of companies in the retail sector
Recently, ESG (Environment, Social, Governance) has become increasingly important. As a society we are more and more aware of the impact of our actions on the surrounding environment. For years, Castorama has been running a campaign called "Flowers for electro-waste," the aim of which is to help our customers get rid of used electronic and electrical equipment in exchange for free flower seedlings. In the autumn edition we managed to collect as much as 560 tonnes of electro-waste and Castorama gave away over 360,000 heather seedlings. Every year more and more people get involved in environmental protection campaigns. It is a very good sign that ecological education is necessary and effective.
The issues of assortment selection, sourcing and supplier verification are also gaining importance in the eyes of customers. The market is becoming more transparent in communicating where components are sourced and from where the goods come, or compliance with all sustainability procedures and policies.
Supporting local communities and people in need through the Castorama Foundation is in line with our values of providing good housing. Employees willingly participate as volunteers in the foundation's projects, thus fulfilling the need to help others.
Digitisation and automation - yes! But...
The upcoming integration of ERP or financial and accounting systems with the National System of E-invoices (KSeF)platform is a good solution, which in time will undoubtedly facilitate the issuance and receipt of electronic invoices and VAT settlements. However, the proposed regulation raises huge technical and organisational challenges in business processes. The organisations involved are at different levels of IT sophistication and use different ERP systems. Often, it is not one integrated IT system, but many different satellite modules that form a comprehensive IT architecture to support the organisation in its business processes.
Preparing for the change, integrating our own systems with the KSeF portal generates enormous costs, which our organisation must bear. An additional complication is that the invoice template on the KSeF portal does not contain all the necessary information that is needed in the process of reconciling purchase invoices with the delivery of goods. This means a return to manual work and therefore higher accounting service costs. What is the reason for this? In the invoice template proposal on the portal, the fields that are important to us are either optional or not included at all. From our perspective as a retailer, as well as from the supplier's perspective, it would be much more efficient and easier, for example, to be able to upload previously verified invoices to the KSeF portal, on behalf of the issuer, and have the invoices recognised as complete for VAT purposes after validation in our ERP system.
The issue of e-invoicing affects the entire retail sector. As Castorama, we receive an average of 120,000 invoices a month, and as we know, there are operators with much higher volumes on the market. This is a huge number of documents, and if even one item is missing from the invoice template, then the problem begins. At the moment, almost all processes are automated, only a small percentage requires manual processing. Integrating and maintaining the automation developed over the years in the system is a huge challenge, and change takes time and money.
Compliance with legal and legislative changes
Being ready to implement legal and tax changes by a certain date requires anticipatory action. Such rapid adaptation is difficult in terms of cost and human resources. In this particular case, it also requires many operational changes: updating cash register database, printing price labels and placing them on the shelves for each product affected by the change, or synchronisation with the online store. Such a challenge for the retail sector is the current change of VAT rates introduced within the Anti-Inflation Shield 2.0. Formally, it was approved only a few days before its introduction. From the very first information on this topic, we started systematic preparation and monitoring of the final list of categories covered by the VAT rate reduction. It includes the following product categories: fertilisers, plant protection products, horticultural soil, soil conditioners, growth promoters for growing media. We have also ensured appropriate communication with shops in this process. An additional challenge we face is the introduction of the Anti-Inflation Shield coinciding with price increases of fertilisers introduced by their manufacturers. These are due to the rise in the price of gas, which is a key raw material in their production.
Regardless of the headwinds we face as a result of the current macroeconomic situation, our top priority is to provide our customers with the best price offer and satisfaction while shopping in Castorama stores.
Monika Pietryszak
Head of Operational Finance
Castorama Poland
