Is Relevance The New Omni in Retail? WHU MBA guest lecture by Stefan Wenzel

So what I brought with me today are 3 brief chapters. So one will start by looking at what I would consider the problem of our omnichannel discussion within the industry and what's actually happening from a tectonical plates point of view. We'll then look at demand and supply side disruption. So what I think is going on in the background whilst some of the companies in our industry discuss other things. So we need to be conscious of what's going on out there. And then we'll wrap up and close with conclusions and food for thought. Warning up front, so some of the stuff is maybe non-obvious or maybe even contrarian to the things that you may have heard so far, you may have been discussing in your courses even, so bear with me, this is highly subjective, but I'm trying to synthesize and give you different perspectives, at least to foster a fruitful discussion in your companies and in the courses. So let's dive into the problem of omni and then look at some of the stuff that's going on in the landscape around us. So the problem with omnichannel from my point of view is the following. So the first thing is, you know, it tends to start with physical stores and their preservation as a kind of a prerequisite. So we're not discussing business models from a unit economic standpoint or from a capital efficiency standpoint to, you know, deploy growth. We tend to approach it from, okay, I run physical stores, brick-and-mortar stores, so what can I do to to somehow extend the lifespan of those stores. And that's, I think, fundamentally wrong as a starting point. And we'll come to that later. Secondly, the whole discussion of omnichannel has somehow morphed into a kind of a de facto standard for every retailer out there. And we're not discussing marginal benefits or marginal return of investment. We tend to say, we tend to think, we tend to state that omnichannel is what you have to do. When you look deeper into companies or at the companies that are very vocal around omnichannel, you may get the impression that some of those companies kind of misuse even, and it may not be intentional, but somehow it feels like a smoke candle to actually hide from other things. And other things are more substantial problems, very often around a kind of a rotten core proposition. So, companies have lost their mojo, have lost relevancy, don't have a proposition that's somewhat differentiating against competition. They don't have a strategy how to move on from there. But instead, they're kind of lighting up smoke candles around omni. Whilst at the same time, the problem is that the brick-and-mortar income line, at best case, is stagnating. In most companies, brick-and-mortar top line is declining. And at the same time, when you look at the P&L of any brick-and-mortar business, rental contracts, so rent, but also the amount of staff that you need to have in those stores, Those are fixed costs. So it doesn't matter how much top line you make, you have a certain level and a very high level of fixed cost within such a P&L. And that's the problem. So for the last couple of years, not just through COVID, I mean, the decrease in footfall in inner cities, on high streets, that declining top line that comes out of that deteriorating footfall, That's a trajectory, a negative trajectory we've been observing for years whilst fixed costs stayed high, even went up. That's a problem. But instead of reacting on a more fundamental level, we then try to find the solution in the omnichannel distribution discussion. So I think that's a very—

Mr. Wenzel, can I ask a question? Do you think that the footfall will grow again in some years from now on, or it will always decline or stagnate and not go up? What is your projection on that?

Well, I think the solution will be, or a potential fix could be, to make inner cities, high streets more attractive. So I think people like, people still enjoy, and we know this from research, people still enjoy going into the city center. Yeah, that's kind of what they've been doing for decades. And they seek, obviously, some form of entertainment. They like to go and grab some food, cafe, you know, some entertainment level, but then also go shopping. So if we were to succeed in providing rewarding experiences, I have all the, you know, the imaginational power in the world to see people going back into stores. I mean, in fact, there are stores that thrive despite the traffic challenge. So number one problem is the attractiveness of the retail destinations within the inner cities, and then coupled with the attractiveness of the inner city as such. So if those two were to be solved, I'm absolutely positive that we will continue to have a certain level of physical, let's say, experiences of a kind that are impossible to replicate online. So very niche, very different to what you typically find in digital formats. So yeah, I think it's possible, but I'm skeptical that companies will pull this off and inner cities will pull this off. I'm skeptical.

Yeah. Me too. Me too. I got to admit. Thank you.

Yeah. So, and whilst this is the discussion or the status in a lot of corner offices, let's Let's go omni. Let's not look at the reality and reflect on our proposition and level of competitiveness. Let's do omni. While this happens, we still have to appreciate tectonic plates are continuously moving towards digital. So, and again, please ignore COVID, but you see development here during COVID pre- and post-COVID, and you see that we are now again back to the initial trajectory. And I agree, we all thought that the dynamic in digital through COVID, we all expected this to continue at least a bit more aggressive than we see today. But nevertheless, don't be fooled, it is still shifting, even though it lost some of the aggressive momentum that we had during COVID But when you see the normalized curve that we're on, It's a very clear trajectory and we're moving, you know, overall we're moving into the 20-point share direction. You see other countries being ahead of Germany. So you see that the US and the UK are already in 2024, they're already more towards the 30 percentage share mark. So Germany is 10 points-ish behind. But overall, this is again, 20-30% is already there. And so it's a question of time whether, you know, when will hit the 50% mark. And when you look at the growth rates, you see that the growth rates within digital commerce still outperform and will outperform those of physical retail. So it's a mathematical fact that those shares will continue to shift. And this is even more pronounced upper funnel. So when we talk about sales shares, we look at the till, if you will. So we look at the point of the transaction, which medium actually took the transaction. Was it a till in a physical retail store or was it an online shop? But there is a lot more going on before it actually hits the last point of the transaction. And everything above the transaction, so everything upper funnel, is basically 2 things: it's mobile and it's digital. And within digital and mobile, it's predominantly social. So there is a lot of data out there that the search has completely shifted away, or at least the lion's share of search has been taken over by digital platforms. And not only Google, but you see a lot of searches nowadays start on Amazon. More and more searches, product discovery starts on TikTok. So it's purely digital. You see that social media to discover products started to outperform other very popular media that we used to talk about in the past, including influencers. So social media overall is a key in the upper funnel media where people discover and prepare buying decisions. And then in terms of mobile, even Germany, and Germany is not overly tech savvy, but even the Germans spend more or less a third of their daytime on a mobile phone. And other countries, as you see, are a lot more active on mobile phones. So people literally spend their days on their mobile phone. And on that mobile phone, they tend to use social media and entertainment apps. At least that's the lion's share of what they do. And within that, they do everything. They entertain themselves, they discover products, they start to, you know, create an appetite for certain, you know, trends or themes or brands. So this is where everything is happening. And you don't see out-of-home there or, you know, terrestrial television. at all. And of course, you know, when you consider that phenomenon that basically beyond the transaction, so everything upper funnel is completely digital, then the question is, why would you still run physical retail stores? So what's the function of a physical retail store? And Benedict Evans, who is a former VC and now an analyst, industry analyst. By the way, someone you should check out if you yet haven't and subscribe to his newsletters. He does an annual big presentation on tech and commerce trends, really intriguing, good stuff. And he manipulates data himself. And he did an interesting calculation. It's back from 2020, so I'm curious, when he will update this. But back in 2020, and, you know, the general message will not have changed, he calculated what part of the US retail could actually be a parcel, which is an intriguing, you know, train of thought. So we have e-commerce, and that's, you know, that's a certain share. But then above and beyond what e-commerce is today, the question he answered, what of that remaining physical retail actually could be packaged up in a parcel and sent to consumers? Because that's the key question, isn't it? You know, if you run a store and people actually discover everything online, why do you break the medium? Why do you force people to then go off their mobile and, you know, hop on a bus drive into the city center and hopefully, and hope that they didn't forget about you and then still enter your store. So why would you do that? Why don't you try to stay within the medium, bring it home, get the transaction, and then ship it if they want? And that's what he calculated in this simulation, which is mind-blowing because there is, of course, one school of thought that says everything that can be a parcel ultimately will be a parcel. And that means that the remaining function of a physical retail store changes completely. Because when you look at the way that physical retail stores operate today, it's kind of a walk-in logistics concept, right? So I mean, the minority is a great experience. The majority are shelves with stuff on them, unfriendly personnel, worst case. You walk in and you help yourself. I mean, you know. not on the shelf isn't available. I mean, it's like, okay, and then you pay and you carry your stuff home. You do the last-mile logistics by carrying bags to the bus and then to your home, which is interesting, right? So you're outsourcing, as a retailer, you're outsourcing last-mile logistics and part of the warehousing, the pick and the pack, you're outsourcing it to the consumer. And you're not even making a big effort to masquerade this and make it feel friendly. I mean, some do, don't get me wrong. There are always outliers that are positive. But a large chunk of the industry doesn't do a good enough job when it comes to that retail experience. And therefore, every boring online shop wins. Online shops and apps are boring as well. And they're not— it's not a great experience either. But there's a high level of convenience. And therefore, people have little hesitation. to then shift away from physical into digital. And it only takes, and that's German data, it only takes the 50% online share, and that's transactional again, it only takes a 50% revenue share, online-offline revenue share, for another 30% of physical retail space to be obsolete. So by going into a 50-50 situation, which is not far out, Germany will have empty space in the realm of 30% of total retail space that we have at the moment, which is, I mean, really, that's a huge disruption, not only on inner cities, but it's, I mean, the real estate business associated, the investors behind it, institutional investors, banks, insurances. I mean, this is This is indicating some stormy periods coming up. When you double down on the digital, so the digital component of that tectonical shift, what's interesting and I think doesn't get enough coverage in the discussion is within digital, there is one formula clearly winning, and that's marketplaces. So we tend to think of retailers, online retailers, but in fact, it's the online marketplaces. Most of them came out of online retailers. I mean, Amazon started as an online retailer, then became marketplace. Zalando, About You, I mean, you name it, they all kind of started in a similar way. eBay is different, but everybody else kind of started as a retailer and then expanded into marketplaces. But when you look at that development, and that's '23 data, you see that the entire growth within digital came from marketplaces, which means third-party sellers selling on a platform. First-party e-commerce, so, you know, direct-to-consumer owned operated online stores, in fact, in 2023 had a negative growth. So marketplaces clearly dominate growth within e-commerce. And when you look at the market share, 85% of total e-commerce is marketplaces. Yeah, so it differs by region. Asia is of course super amplified, so it's nearly the entire business is marketplaces. And you see in Europe it's more 70-30, 70 marketplaces, but globally it's 85-ish marketplaces. The rest is first-party ecommerce, direct-to-consumer ecommerce. So super important to understand whenever you do a strategy review, whenever you try to find where pockets of growth are. Well, clearly it's within marketplaces. When you look at the marketplaces landscape, so you double-click on marketplaces, it's also super interesting that amongst the top 10 global marketplaces, only 3 of Western nature. So this is the top 10 list. You see that, you know, you have Amazon, you have Walmart, and you have eBay. Those are the only 3 within the top 10 that are of Western origin. Everybody else is Asian. And you also see that within the top 10, you see there are basically 2 leagues, 2 classes. See the top 5, and then you see the bottom 5. And in terms of growth— sorry, in terms of size, you see that there is basically 2 very different levels even within the global top 10. And strikingly, at least that's last year's data, when you look at the top 5, which is on the left, only 2 of them grew at all. And one of the 2 obviously is Pinduoduo, which is the Chinese giant. All the other ones from the top 10 that did grow, or the other ones that did grow, are non-West. So they're all Asian. All the Asians grew. The only exceptions to the Asian success story, the only exception is Amazon. all the other Western companies, and of course some Asian as well, they didn't grow at all. So that's interesting, right? So there's a strong, let's say, shift of growth and dynamics away from the Western platforms to the ones from Asia. And then, I mean, everybody now is of course aware that this has also spilled over into Europe. So Asian competitors have entered Europe strongly. I mean, they've been here for quite some time, but over the last 2 years, it became very visible. And those are very tech-driven and fast companies. So by design, those companies will outperform any brick-and-mortar concept because they don't have that backpack full of bricks and mortar. They leverage data and they are very agile in responding not only to competition but also to regulation, which is of course something that Europe is now trying to throw in their way. But in terms of how did they arrive, are they successful in Europe? As you know, the Digital Services Act from the European Union, they force very large online platforms to public to publicate their monthly active user numbers. So this is publicly available official EU-reported data. And those are numbers that you see here from October '23 to March 2024. And these are the monthly averages in millions of users. And of course, we have Amazon as an outlier, And we have huge successes like our own Zalando with 75 million average actives per month. And you see within a couple of months being in Europe, you see that companies like Temu already achieved the same level. And by now, so that's obviously until March, by now I'm sure they will have outgrown Zalando. So they were then already on Zalando's level. you see that Shein within Europe already outperformed Zalando. And Zalando is obviously a success story that we are rightfully proud of, at least some are, and I would be, and I am. But you see that in terms of growth and reach, the Asian players already outperformed European platforms. And in terms of growth dynamic, you see here the absolute visits or users. And here the, you know, the relative development, you see again Shein and Trendyol within the fashion space, both in volume totals but also in growth rates, outperformed Western players like Zalando, like ASOS, like About You. So volume and growth dynamic, again, similar picture that we saw on the global ranking of the top platforms. See a similar picture here within the vertical of fashion. So they have arrived, and I think we need to take them really serious in terms of volume. So, um, people tend to say, yeah, but they're not making any, any money. Well, I'm not sure. At least for Shein, everything that we know— and it's not publicly, it's not official data, I mean, they are still in preparation to go public. It's taken quite some time now, but at some point, hopefully, we'll see official figures. But everything that's out there and available, they are on a similar profit margin than H&M. So they've outperformed top line already the primus of the brand, of the fashion industry, Inditex, with their subsidiary or their most popular brand, Zara. So they've outperformed top line already Inditex and H&M. And on a profitability level, despite this massive growth, they are not miles off H&M. I agree, and I appreciate H&M is not a success story at the moment, but nevertheless, this is not a loss maker. Temu is still a loss-making, uh, business. Um, but again, don't be fooled. Those parent companies behind, uh, or in Temu's case, the parent company Pinduoduo has huge cash reserves and will have could have and is able to have a long breath in acquiring market share before they try to, to improve profit. Now, why does it matter to us? Well, they're taking huge volumes in terms of revenue off the European table, and it's not just the $45 million in Shein's example that you, that, you know, European retailers or e-commerce players don't see in their books. It's not the $45 million. Actually, it is you need to multiply this by the level of discount they give. And this is an example from Ed Zander. He does a China briefing, which I would recommend you guys to check out as well. So he does a lot of in-depth research around China and e-commerce. So he went off and he tried to find the same bag on different platforms. So he found a camera bag cable carrier You found it on the parent of Temu in China. So that's a Chinese local website servicing the Chinese market. So that retails on the Chinese market for around €1. And that means there is already a margin within that. So people, sellers make a living off the €1. And the very same bag you see now on different platforms. So you see it at What is it? $5 and then $8, $5.08 on Shein and $15-ish on Amazon. So it's the very same bag. Maybe it's slightly, maybe, you know, this is a slightly cheaper version, you know, thinner fabric, who knows. But broad brush, this is a very similar, if not the identical bag. And you see that we are looking at a markup of anywhere between, you know, 4 to factor 12. in comparison to a Western brand. So if you go to Peak Design and you find, all right, not the same bag but also a cable bag, then a Western brand is, is at the moment, you know, would, would be asking €70 for a very similar product, arguably. So, and this is the impact that it has. So look at the price that you're asking, because if someone now bought the camera bag on Temu or Shein That camera bag purchase is done. They won't buy a second one because they find Peak Design is a great Western brand. So that need for a bag is satisfied, and that's it. So the damage is not the €5 revenue that Shein made. It is the purchase of €70 that didn't happen because of the €5. So that gap is actually the risk. that we need to appreciate in terms of volume. And that's substantial. In terms of what's going on out there and why do these companies succeed, well, there is, you know, I mentioned it, it's digital playbooks. And one of the things that they successfully do is they think very differently along the you know, playbook of marketing, uh, customer acquisition and retention. So not only will you find, you know, Shein and Temu in basically nearly every region on every, you know, ranking when it comes to app downloads and usage, so they dominate all ranks, um, you know, all the charts that show top-performing downloads and activity across regions and platforms. So that's one thing. And of course, they are investing heavily in this. I mean, they're the biggest spender within the Meta advertising, for example. They're heavily spending on Google, of course. $3 billion and more is what they invested last year into visibility on those platforms. But the playbook is very different. So what What they're doing is they spend all that money in getting a first-time download, a first-time login or registration. So it is the, let's say, the, the highest possible spend on making you get hooked up once. And that's the biggest difference to the Western playbook. Once you're hooked up, everything they try is to make you come back organically. So, they're trying to not spend any further media marketing on making you come back. So, the concept within those apps and on those websites is to make you feel rewarded, to make you, you know, to trigger dopamine, in fact, that makes you come back and want more. And that doesn't need to be a purchase. It can also be sweepstakes, small you know, some gamification elements. So the way they try to hook you up into, you know, the Temu or Shein world is very different. And some may say or will say it's irritating and it looks unprofessional, but it does work. So people come back, and that means that they don't need to pay another penny to Meta or Google for this to happen, whilst Western shops do the opposite. they continuously buy their own traffic again and again. So, you know, look at the traffic share of Western players. Most of them have, I don't know, 30 to 40% organic traffic, some even less, and the rest of the traffic is what they acquire. So paid traffic. And because we only optimize for conversion, so we're trying to make you buy once you hit our digital store, it's all about making you buy on that very moment. That's our entire focus. It's conversion optimization for decades. Whilst those Asian players, they optimize for customer engagement, user engagement, and they make sure that you are engaged and you start to appreciate the experience and then come back because you appreciate it and you did find it rewarding. So that's a very, very different playbook. And people who criticize $3 billion in ad spend and call this a fad, I think they're they're just jumping short because there is a completely different playbook behind this. And guess what? The argument that those companies are not able to achieve a sufficient level of customer retention seems to be wrong as well. So there is credit card data from the US, so real purchasing data, not research, not people asking, you know, companies asking consumers about behavior. No, no, it's genuine transactional data from credit card companies. And that data shows that the retention level of Temu is not as good as Amazon, but is second best of the cohort that they reviewed in the US. And they're miles better even than a Walmart or a Target. So retention levels, customer retention, Super high, not just as good as Amazon, but better than Walmart and Target, and miles ahead, miles ahead of Wish, which is a company they always get compared with, which obviously is more or less out of business because they did not get customer retention right. And that's, of course, crucial. Without customer retention, a Temu or a Shein playbook, no e-commerce playbook in the world would ever work. But anyway, so what I was trying to explain is another challenge. We have a generation, new generations coming up, our new cohorts to deal with in terms of revenue and business. It's Generation Z is important, and of course, Generation Alpha is the next to come. And those demographics have a very different expectation when it comes to entertainment experience, experience in shopping, So they do, it's a very different behavior altogether using media. And here's the problem for traditional e-commerce. So you see that last year, this is media consumption by minutes, you see winners and losers over an entire year, mobile app usage, and you see that e-commerce and shopping was the second biggest loser of the entire year 2023. And the biggest winners is everything around entertainment, short-form videos, social media, social networks. So this is where younger demographics spend their time, and younger demographics get more important also for commerce, obviously. So that's a problem because, you know, people have a certain amount of hours per day awake, and if you lose out on a share of that time awake, you lose out entirely. And then you see other companies coming along, and, you know, this is time spent per app. And Amazon, and I would argue they are already a very successful retailer, Amazon manages to attract 11 minutes of average time per day within the US. So 11 minutes per day on average, that's a lot. And I would argue German retailers, e-commerce players are miles behind. And then Temu comes along and already doubles this. So that's 22 minutes per day on average in the US. And then you have someone like TikTok, pure entertainment, short-form video, and that's nearly an hour. So again, you know, this is, you know, time of a day, awake time that people spend on TikTok. That's time they do not spend on your service. They do not spend on your app, in your app, on your website. So this is, of course, to me, that's a major, major call-out. We seem to be losing access to an entire demographic, and that's a problem. Yeah. So that's what's going on out there. And then on top of that, we have a disruption from 2 angles, from the demand and from the supply side. And I'll speed up in the interest of time, but I just want to share what I see coming up on both sides of the equation. Which is on top of the tectonic changes and challenges that we just ran through. So what's going on on the demand side? I see 4 major things. I mean, there's a lot more going on, but I find 4 very interesting. And again, this is just teasing. So when you find it interesting, go off and do your own research and go deeper. And maybe you find other things that are even more relevant for your industry. But Those 4, I think, are hugely, hugely relevant. So first is consumer-to-manufacturer. So consumer-to-manufacturer is something that you have to have in mind, especially when you talk about companies like Shein. And the business model as such is new. We already, I mean, we know forever what B2C is. So that's manufacturer, so business-to-consumer. You start with a manufacturer and through some middle layer, the manufacturer ends up with the consumer. And you have a distributor and a retailer or more in between. That's the traditional B2C model. And then, the first disruption came through what's called D2C, so direct-to-consumer, which meant cutting out distributors and retailers. And manufacturers, aka brands, started to go directly to consumers. That was the first wave of disruption, if you will, because all of a sudden, retailers and distributors, they felt threatened because all of a sudden, they didn't play a role. And of course, that's not 100% of the business. But it did obviously eat into a large chunk of the former business-to-consumer. Now comes consumer-to-manufacturer, which is again a disruption even to direct-to-consumer, because what now happens is that consumers get a direct interface into the manufacturers. So in Shein's example, or in Shein's case, you have a couple of thousand manufacturers, factories, factories that we as Western brands used for our own production. So it's our factories, not our in a legal sense, but it's the factories that we used. Then we moved away and we went to Bangladesh because it was even cheaper. So now there are all those factories in China and they have overcapacity. So what happened is that Shein leveraged this overcapacity and built a technology that allowed those factories to interface directly with Shein's ERP system. So those factories are hooked up, interfaced with the ERP system of Shein. And what now happens is that Shein uses artificial intelligence to understand demand. So they try to understand what's hot on social, what signals can I find on social networks like Pinterest or TikTok or Instagram. But also in their own website, on their own app. So, you know, what level of data do I get to understand demand? And once I understand what demand at the moment is, what's in demand, they translate this into a product briefing, and within 5 working days, a product is ready to be shipped to a consumer. So the turnaround time between this is a data signal of something that's hot, a color, a print, a style, whatever it may be, between that signal and the ready-to-be-shipped product, it can be a couple of working days, a week only for that to happen. Small batches are produced in the first step to be asked to be that quickly. You can only run for small batches. Those batches are used to test the water, and if the assumption was right that this is a hot product, You will obviously sell out rather quickly, and that triggers the replenishment. And replenishment will be large volumes, maybe even with different suppliers, different factories in the background. But this is how this 3-step process in consumer-to-manufacturer works. Understand signals for demand, translate this into a product very quickly, test waters with small batches, and then do replenishment large scale. For those products that you know has or have demand. And of course, that's an absolute disruption of the entire value chain. There is no purchasing department. They reduce overstocks because they don't produce based on guesswork. They produce on the level of data. They know really what's moving and what's not, at least to a larger extent than anybody else. So that consumer-to-manufacturer model is highly disruptive and hugely intriguing. And people need to overcome the whole criticism around labor conditions and all that. It's rightfully to be criticized. Don't get me wrong. There's a lot of stuff fundamentally wrong in some of those companies. Don't get me wrong. But I can only advocate to look at the positives within, the innovation that they bring, and focus on the innovation and not copy blindly, but try to take and then translate it into your case, into our cultural context or industry context. So the adoption, the transformation of that level of information, I think that's a huge opportunity.

Mr. Wenzel, I think that's a very important point which was raised by Jun. I think very important, don't play Because sometimes in Germany, I have the image or my perception is that many people like to blame those companies such as Shein, Temu. A lot is wrong with them, no doubt about this. But the business has become more complex. Look what they're doing quite positively in terms of being consumer customer-centric. And they are not stupid what they're doing in certain areas, especially when it comes to the topic of customer consumer centricity. They're changing also the game. So look at the pros and cons and be open-minded. That's very, very important from my perspective.

Absolutely. I mean, to complain doesn't help. I mean, let some folks complain and ask lawyers and do all this lobby work and regulation. Great. But the rest of the gang should focus on innovation and see how can you positively differentiate against a Shein. There's a lot of stuff you can do. But you need to get going. You need to do things and not sit, be complacent, and complain, which is at least to some extent, I agree, the tendency that at least over here in Germany, I think we have. Yeah.

Don't spend too much of your time to complain.

Exactly. The second thing that's important is entertainment goes e-commerce. So remember, TikTok, nearly an hour a day, you know, it's the magnet of attention, especially for younger demographics who are those demographics that we all want to appeal to. So that demographic spends an hour a day at the moment on TikTok. And now all of a sudden TikTok comes along and says, well, how about integrating e-commerce? And now they vertically integrate e-commerce. And the idea is to be as seeming as— how do you call this? Seemingly, yeah, as possible. So it's different to attempts that Meta and other companies did before, where at some point you were thrown out of the platform, you had to go into a normal Shopify shop or something. So without any break in the experience, they're trying to integrate e-commerce as deep as possible, including own infrastructure, logistics, fulfillment, and so forth. So there's different ways that they test at the moment. And of course, there's, again, there's already criticism that the trial, the pilot that they did in the US wasn't as successful as they had hoped for. And that's true. They were gunning for $17.5 billion in their first year, which is, again, I mean, think about it, yeah, nearly $20 billion in their first year as a pilot in one country. And they kind of failed, but they failed nearly achieving $6 billion, which is, in German terms, that's Germany's number 3, the Otto.de company. So I mean, it's 2 ways of looking at it. Yeah, right. It's not what they wanted, but at the same time, it's nearly $6 billion in terms of first-year annual revenue. So definitely something we need to be aware of. And it doesn't need to be TikTok. It can be someone else. I mean, TikTok won't be the last playbook to test waters like this. But the idea that commerce will be available where content is consumed. That idea, I think, needs to— or that concept needs to settle in because if you try to sell products and you're not part of that entertainment playbook, you may be out of the equation because on TikTok, which is a It's a small detail, but it has major impact. TikTok is one of the few, or I think Instagram is copying by now, but they used to be the only network of that size where the number of followers is irrelevant to the reach you can build. So it's not a social graph, it's an interest graph that TikTok is built upon. So the algorithm doesn't care about the number of followers you have. The only thing that the algorithm cares about is the attractiveness, the attraction of your content. So if you know how to produce a great TikTok short video, if you know how to do this and grab attention within the first couple of milliseconds and so forth, if you're good at that, you can have millions and millions and millions of views And no followers even. So it's, I mean, that means it's a complete, you know, it democratizes the access to reach on a level that we haven't seen it. No advertising money in the world can buy you the trick to or the ability to have great content. I mean, you know, you can buy followers, but you can't buy the creative edge either. You understand this. I mean, you can buy help, but ultimately, Ultimately, you need to be able to produce organic content that resonates with audiences. And that's a form of art. And size doesn't matter to master this art, which is mind-blowing. It's super intriguing, at the same time scary, especially for well-established brands, because that's the first time that their size and their heritage actually doesn't matter a thing. Thing or nearly doesn't matter anything at all when it comes to building up reach on this very network. Another example, you know, how entertainment and reach then finds its way into commerce and again is a competition with companies like yourselves is MrBeast. If you don't know who he is, that's the world's largest YouTuber. And he has built a reach that outpaces the most successful shows on Netflix. So, I mean, he's highly professional. It's a company. He has a huge team. He spends millions on every video that he produces. So, that's not a mobile phone on a tripod. It's professional production. And he spends a lot of money on his content. But on the back of that unbelievable reach and audience that he has, On the back of that, obviously, he started to branch out and started to do all kinds of revenue streams. You may have seen when he opened the burger restaurants, people, you know, complete craziness in shopping malls. People were queuing up for days to get hold of a hamburger produced by the license of MrBeast. He now went on from there and he does some form of, you know, Nutrition bars and so on. I mean, all kind of things, merchandising on Shopify shops and so forth. So it's a huge enterprise based upon a guy who started to do his YouTube channel. And of course, that's not easy to replicate, but it just shows that he eats into awake time. So he captures hours and hours of our audience. And again, whilst they're watching MrBeast, they're not in your app and shopping for your socks or t-shirts or whatever you're selling. So they spend time with him and then on the back of that relationship, that deep content relationship, that community feel that they even have, on the back of that, he starts to also monetize that relationship by going into hardcore straight-on commerce. And of course, Amazon looks at this and says, Jesus, am I just the company that provides products? So where am I? And they don't have any community. They don't have I mean, of course, Prime and they produce content, so they are the farthest ahead. And they are alert enough to take action. And they started to partner with Facebook and Instagram and Pinterest and Snapchat. So they try very aggressively to be, at least for some of those platforms, to be the supplier in the background. So whenever product needs to be made available, whenever something should be made available, then Here is Amazon with their unlimited product offering, at least providing the pipeline to supply, which is at least one attempt to not completely be missed out on this entertainment goes e-commerce playbook. E-com goes entertainment very quickly. So e-shops are boring. As I said, as I showed you, people don't appreciate the experience. They move away. They go to TikTok. And of course, you know, companies, e-commerce players, platforms, they all think, you know, how can we improve our entertainment playbook? How can we be more sticky? And there are a couple of things that are going on with, you know, different shades of success. Live shopping being one, short-form video and shoppable content, definitely something that's on the horizon. User-generated content and micro-influencers, definitely, you know, worth having on your radar. Shein works, and Temu as well, they work with thousands and thousands of micro-influencers. Those are people that have a couple of hundred, maybe a few thousand followers on Insta, on YouTube, on TikTok, wherever. And they work with them because those micro-influencers have a huge relevance for that smaller audience. So, the level of influence that they have in decision-making is a lot higher than the high-profile you know, superstars of Insta who tend to make a different advertising deal every other day, so people don't take them serious because they know it's paid. Micro-influencers have, at least for the time being, a lot more credibility. Gamification of shopping. So how can we learn from Shein and Temu to make sure that the Dopamine Playbook starts to unfold? How can we, you know, make that shopping experience be not only transactional. There are different attempts and concepts being kicked around as we speak. And of course, interactive and immersive experiences will come. You've seen the latest artificial— sorry, augmented reality glasses from Meta piloting the first AR lens basically that's different to Apple Vision Pro and other concepts, which is really something you can wear as you participate in normal life. And, just imagine, like in your car, the head-up display, just imagine that in a few years, it will be completely normal and standard that you have a lens that can feed information around objects that you see. So, it can identify a product. It can show you know, information that it finds, or it can show similar items with a blink of an eye or a kind of a gesture, this will be shoppable. So, I mean, no doubt about this, even if it's not the metaverse, but who knows? Let's see. You know, I wouldn't write this off entirely. But, you know, augmented reality, immersive experiences in different shapes and forms are very likely to play a role. Moving forward, and of course, you know, big companies around the globe in Europe, you know, tested waters. You know, even those that may not have the the image of being super innovative all the time, but I mean, live shopping, for example, has arrived pretty much in all major companies. Started during the pandemic, has now continued to evolve, and with TikTok, you know, pushing hard. In combining video live or on tape. But I mean, the production of short-form videos or live streams with a commerce layer, that combination I think is definitely something we'll continue to see, especially around expectations from younger demographics like Gen Z. And then last but not least, make yourself— please make yourself aware and familiarize yourself with the concept of local agents on your mobile phone. I mean, Apple Intelligence, I'm sure you've heard about this, or Gemini on Android phones. I mean, this is most likely— it hasn't settled in with the mainstream, But what this ultimately could mean, or in my opinion will mean, is that the most personal device, which is the mobile phone, will have a personal assistant, an agent, which is an artificial intelligence that sits on your phone. And it will have a local application, so running intelligence on your local device, but it will also have access to, let's say, other devices. chatbots and models through the web. But what it ultimately means is that this, let's say, technology will be a new gatekeeper between yourself and everything that it knows through your most personal device. And imagine what your device knows. I mean, it knows literally everything, right? It has direct data from your last purchases. It can read your emails, what you returned, why you returned it, Did you do ratings and reviews? What did you like? Did you refer? Did you— I mean, your addresses, your payments, your locations. It knows when you went on holidays. It even knows when you're going on holidays next time. It knows everything. Likes, dislikes from your photo library, from your maps. It knows everything. And of course, there is a data privacy challenge. But I'm sure Apple will find a way. to make it feel very, very secure and will most likely motivate a lot of people into giving a lot of access to a lot of data. And an intelligence that sits on a wealth of data on that scale is mind-blowing. And you will be talking to your iPhone agent and they will be able to process projects for you. So you're going on a trip I don't know, to a wedding in Italy next spring, and that agent will be able to solve all related problems for you, from buying the right dress to booking your flights, hotels, to booking rental cars, everything. And of course, the question is, if you're a supplier of such a service or a product that you want to be considered, the question is, how do you make sure that you will be considered? So how do you make sure from a supplier manufacturer point of view, what do you need to make sure, how do you make sure that the AI treats you as an input source and makes sure that you're in the mix? I mean, this is, again, I don't think we've discussed it yet on the level that we should, but I, and maybe I'm, I don't know, I see this too dramatically, I don't know, but I find this I find this has huge potential to become a very critical new gatekeeper situation that we haven't seen despite Google and Meta already being, and Amazon being some form of gatekeeper. Quickly on the supply side, which is the last piece of that, the other side of the coin. So demand side we looked at. Now let's look quickly at the supply side. And again, you know, 4 things, but, you know, we'll package it up, that I think we need to be aware of when we discuss omnichannel. And that's why I think the omnichannel discussion needs to be changed and we need to look at things of that nature. One being the flip side for consumer to manufacturer, which we discussed on the demand piece. Now we're flipping the perspective and the backbone to consumer to manufacturer is factory to consumer. And that means that factories will have access to global buyers, consumers, through technology that's been provided as a service. So, um, and it will not be limited to Asia. So every production region that we have chosen in the past, every single one, I guarantee you sooner or later will have access to platforms that themselves interface with consumers around the world. And that's not a small change. And the Chinese government, I mean, there is an initiative called the eCommerce Silk Road Initiative, and they are supporting, they're subsidizing the development of infrastructure. And that's more than 20 countries already joined that initiative. And the mission that they're on is to build e-commerce, including factory-to-consumer infrastructure, to basically give those production facilities all the access in the world and all the support that they need to prosper and leverage and participate in global e-commerce. And that's analytics, it's logistics, it's technology. So all things needed for those factories that had no idea how to do this, that wouldn't be able to find those solutions themselves. That initiative supports this. It's a heavy investment and it's a serious investment. And if you consider or if you imagine that any factory in the world could theoretically now access global consumers, then you have to ask yourself, so what's my reason for being? So if any product in the world could theoretically find its direct way to a consumer in this world, then you have to reflect on your own contribution in that value chain. Is there something left for you? And again, it's black and white, and it may not be as extreme as it sounds, but it's definitely a large part that's moving away into this factory-to-consumer space. And then last but not least, production used to be an exclusive initiative. So you had to be a company to do a tender, to find a vendor, to write a product, to write product specifications, to a point that, you know, a supplier could actually produce something for you. You had to negotiate terms and conditions, logistics. So it was an exclusive, let's say, you know, phenomenon exclusive to professionals. And this is changing as well. When you look at what already Alibaba is offering as we speak, so that's that's live, it's up and running. They leverage artificial intelligence for you as basically even a private person to say, well, I want to start buying or building products. So the platform, the B2B platform of Alibaba helps you to find vendors that offer the products that you want, but it also helps you to find a factory that builds a bespoke product to your likings. And your liking might be articulated through an image, a photo that you've taken, or a verbal description that AI helps you to put on virtual paper. And then the process, you know, the bidding, the finding of a vendor, the whole administrational piece, it's all supported through AI, through the platform. So everybody gets access to basically a global base of suppliers and factories. To either buy goods from or get bespoke goods produced. And this is again absolutely game-changing because it removes the barrier basically to zero to enter the product game. So if you are a micro influencer and you want to run your own collections because you have huge reach or you have significant reach, and you want to leverage this, but you don't want to partner with an existing brand, well, here you go. So, you know, no minimum order quantities anymore, no professional infrastructure needed. This is more or less a turnkey solution into, you know, everybody being able to source products from over the world for their own commercial activities. So again, could become a huge threat or at least a meaningful threat to some parts of the industry. Let me start to close off and look at some of the conclusions and finish off with a little food for thought. So I think the main takeaway, one of the main takeaways for me is that price will entirely replace what I would call undifferentiated mediocrity. So everything in the middle, everything that's neither norm, everything that's undifferentiated, replaceable product supply, that will completely be dominated by price. So people want to buy I don't know, a light, want to buy a cup, then the majority just want a cup. The minority will want a certain brand. I mean, some will, and that's still available, but the majority want a cup. And maybe they want a few specs that the cup complies with, a certain color, a certain quality. So that's a product decision. And this will be made available. Factory-to-consumer will make that available, and it will become the cheapest possible because there are no parties in between. So everything that's replaceable, everything that's product, everything that's kind of in the middle will be completely eaten by this supply model and ultimately by price. So that's one takeaway. And when you critically look at what we, a lot of Western companies, bring to people's life in terms of product and experience, I think it's fair to say, self-critically, it's fair to say a lot of stuff is really mediocre and it's not great in any dimension. It's not differentiating. It's not It's not better than anybody else. It's just somewhere in the middle. And that's a problem. The second is, and again, I come from a background where this happens all the time, right? So we tend to get carried away by technology. And I think a main takeaway would be, by all means, please, please, please avoid the tech feature or channel trap. I mean, to use AI, as you see on the picture, is one thing. But to use it in a meaningful sense, to use it in a way that it's not just technology for the sake of using technology, I think that's an important thing. And this is a visual that I created on ChatGPT, which tries to symbolize what I observe, at least in a lot of companies that I talk to, We suffer from a core, from a rotten core proposition. And what we tend to do is, you know, like put some candy on top of that rotten core. And, you know, the candy could be a lot of projects, very, very different things. So, you know, again, we're talking about omnichannel. You know, we're trying to replace, or we think that adding more distribution touchpoints and combining distribution touchpoints through technology will actually make a difference to the fact that the actual proposition is non-differentiating or not adding value. So we're just doing more distribution or adding technology like AI or introducing a chatbot or a new loyalty card or, I don't know, retail media. Well, nobody cares what we do, but we add retail media because it monetizes our decline slightly longer. So we're extending the P&L lifespan because we're generating additional revenue. But at the end of the day, it doesn't help the problem, which is your core proposition sucks. And retail media, in most cases, makes it even worse because the user experience caused by retail media tends to get worse from what it was before, and it wasn't great before either. So, that's a trap, not being really self-critical around core proposition, which means where do I play and how do I want to win? How do I positively differentiate against competition? What is it that I'm better at than everybody else? So, where am I adding value to people's lives? This is the core question. If that answer is difficult, none of the stuff on the right will help. It just dilutes, it distracts, it makes people busy, it makes people feel engaged in interesting projects, but it doesn't help the company. So instead, my key takeaway from this is we need to focus on our core. So we need to deliver those differentiating omni-customer value propositions. We need to develop customer value propositions that we can actually sustain and defend. So we need to bring something to the party that isn't there already 50 times. So relevance is easily said but difficult to explain, difficult to achieve. But relevance is what matters. If you are not relevant, there is no business to be had. And if you're relevant but nobody is aware of you, if you're relevant, nobody sees you, it's not much worth either. So that's why companies that say, yeah, but I'm brick and mortar. Well, attention isn't in the high street, is it? So if you're not killing it on social mobile, you most likely don't get the attention that you need. So relevance in combination with attention That's what's needed. And that's why the discussion around channels to me doesn't make any sense. A channel is a means to an end. It has a function. And if we find most relevance and most attention in a different format, then we should be in that other format. So we shouldn't select a format because of our preferences. No. we should select a format, you know, a medium. We should select it because it helps to drive relevance and attention. And then the last thing that is needed and sometimes tends to get forgotten is we need a business model. So if over time we're not generating positive— I mean, we're not generating income, not making any profits, that over time this won't fly regardless of how we explain it to ourselves and We're acquiring market share. I agree. Growth, investing into growth is important. And yes, there may be a period where you're not making any profits. But over time, you need a business model. And without a business model developing in parallel to relevance and increasing attention, without a business model, relevance and attention over time isn't worth much either. So, those 3 things I think is what every company, what you as executives, As, you know, C-level executives to come or already in charge, I think those are the 3 things that you should worry about. And that means ultimately, I don't think you should discuss omnichannel. I think you should discuss omnivalue because that's the only thing that matters as far as I'm concerned. And with that, I'd like to thank you. If you want to continue the discussions afterwards, feel free to reach out on LinkedIn. And then I'll hand now back over to Mr. Fassnacht for some questions if there are. Thank you very much.