Żabka Polska Brings Autonomous Convenience to Europe | Pawel Grabowski

Today we’re kicking off another episode of the Retail Rundown podcast with guest Pawel Grabowski.

Pawel is the Head of unmanned solutions at Żabka Polska, which is the largest, formatted, and centralized chain of convenience stores in Central and Eastern Europe. On today’s episode, we discuss the store’s recent roll out of 25 autonomous stores, powered by AiFi.

In his career, he has worked with global clients on the transition to a technology platform-based economy, data-driven strategy development, and an omnichannel approach to customer service. Pawel is also a lecturer at the Warsaw University of Technology.

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Hosted by Julia Raymond Hare
Written and produced by Gabriella Bock
Edited by Trenton Waller

TRANSCRIPTION

Julia Raymond Hare:
Hi everyone. Today, we’re kicking off another episode of the Retail Rundown podcast with my guest, Pawel Grabowski. Pawel is the Head of Unmanned Solutions at Zabka Polska, which is the largest formatted and centralized chain of convenience stores in Central and Eastern Europe.

Julia Raymond Hare:
In his career, he’s worked with global clients on the transition to a technology platform-based economy, data-driven strategy development, and an omnichannel approach to customer service. Pawel is also a lecturer at the Warsaw University of Technology.

Julia Raymond Hare:
Thank you so much for joining the show today, Pawel. I’m excited to talk with you.

Pawel Grabowski:
Thank you, Julia, for the invitation. It’s a pleasure to meet you.

Julia Raymond Hare:
It’s a pleasure to meet you, and I know I don’t have the Polish accent down, so I apologize if I’m saying the American version of Zabka, but could you give our listeners an overview of the company?

Pawel Grabowski:
Of course. Julia, have you ever been in Poland?

Julia Raymond Hare:
I have not, but it’s on my list of places to visit.

Pawel Grabowski:
Okay, once you’re going to visit, you’re going to understand the phenomenon behind Zabka, because we are the largest chain of modern convenience stores in Central and Eastern Europe, based in Poland, and we have been growing here in Poland for the last 20 years. Right now, we have more than 7,900 stores, visited by two and a half million of customers every day, and almost half of the population, 15 millions of Poles, lives in less than five minute walk from the nearest Zabka store, so we are really convenient in the sense, and in our digital environment, we have 8 million users of our Żappka app.

Pawel Grabowski:
So we are the biggest here in Poland when it comes to the convenience, and we’re also the largest chain of autonomous shops in Europe. We have just finished opening the 25th store in Poland, so we’re growing really rapidly, and we very much focus on creating convenience solutions for the customers here in Central Europe.

Julia Raymond Hare:
Amazing, and can you talk a little bit about what it means? A lot of our listeners will understand autonomous shops in the concept, but just for those who are a little less familiar, you said you opened your 25th store. It sounds like you guys are planning to open a lot more. What does that look like?

Pawel Grabowski:
Yeah, definitely. We’re going to continue this journey.

Pawel Grabowski:
Right now, we consider those 25th as a first wave, which gives us a lot of information about how the customers are perceiving the new experience, and let me pass here on what we believe the autonomous experience is. So in our opinion, autonomous experience is when you walk into the store and you walk out, without any cashier, without any other interactions, beside of picking up the goods and just leaving the store. So all the payments, all the authentication, and all the customer purchase recognition should be happening in the background, so without involving the customers in those boring activities, and this is fully autonomous, in our perspective.

Julia Raymond Hare:
It sounds futuristic, but it’s here now, and Zabka has those stores. Yeah, very cool.

Julia Raymond Hare:
And so with these computer vision, AI-powered stores, what would the shopper journey, as we like to talk about in retail, look like?

Pawel Grabowski:
So basically when we are these designing the customer or shopper journey, we took three main assumptions. So first of all, we needed to make it as easy as possible. We need to avoid any interactions within the store, if the customer doesn’t want them. And the third thing, it should be seamless as possible, at the beginning, and at the end.

Pawel Grabowski:
We have designed different customer journeys. Right now, we have implemented two. First one is when you just tap your bankcard and you add the phone number, and you can enter the store, and later on communication, and the bill goes to your smartphone, and you can have access through it through the links which you get in a SMSs.

Pawel Grabowski:
Our second journey was designed to accelerate the use in our Żappka application users group. So we added a key into our Żappka application, and you can use also our Zabka Pay, which is a wallet building into the application, as a payment method. So we have designed these two journeys as the prime journeys, but obviously there will be more coming, especially if we want to merge the transitional store with the fully autonomous store.

Julia Raymond Hare:
Excellent. So it sounds like the first journey, I am shopping there, I take my bankcard, I enter my phone number, and then the receipt will come to me via text message once I exit the store with my basket?

Pawel Grabowski:
Yes, correct.

Julia Raymond Hare:
Okay. And then the second journey, if you’re someone who already has the Żappka app on your phone, or maybe you need to download it for the first time, you open that, you can use the built-in wallet in the app, and then you’ll see the receipt in the app?

Pawel Grabowski:
Yes, and you have all the customer care as well, built-in in the app.

Julia Raymond Hare:
So I’ll ask you here, Pawel, I know that an increased demand for convenience has been a trend we’ve seen, and pretty much global consumers over the past, I would say, five years. So what would you say is some of the shopping habits you’re seeing among European consumers?

Pawel Grabowski:
That’s a good question, because first of all, we did some research here in Poland, and 82% of Polish consumers, they agree with the statement that, “I’m always looking for the things and experience which makes my life easier.” The funny thing about the COVID, even though we stay longer at homes, we have less time, so for us, it’s a guiding sign in a sense, that all of what we do should save customers’ time and make their lives easier. And I can say that when we think about our consumers and we see the changing reality of their lives, especially with the generation changes, they don’t want spend too much time at the store. I remember one of the feedback I got from one of the consumers, an autonomous woman, and she replied in the interview, “That’s a fantastic story, because I don’t need to switch my music off, and I can do my shopping, listening still to my music.”

Julia Raymond Hare:
Interesting.

Pawel Grabowski:
And you know, switching the music is like five seconds, right? And we’re talking here about-

Julia Raymond Hare:
So inconvenient, though.

Pawel Grabowski:
Really convenient, yes. And my observation is that … because you asked about Europe and I started with Poland … is that Europe is very different, but there are some trends common to the whole continent. So first of all, this change in the e-commerce adaptation, and the big boom for the Q-commerce, and expectation for 15 minutes delivery, which we responded. I don’t know if you are aware, but last year we launched a service called Jush, which means in Polish, Now … Now by Zabka … which is Jush by Zabka. And the second thing is that people have a stronger tendency to experiment.

Pawel Grabowski:
I think that COVID situation has pushed us out of the comfort zone. So instead of doing the shopping in the old way, I’m trying the new things, and I can illustrate it with examples. So my brother was quarantined because of the COVID and he never tried a 15 minute shopping, so I ordered Jush for him, not even for me, but using his address, just notifying him that he going to get the grocery in 15 minutes, and he was, “Oh, you’re joking.” And through the whole quarantine, he was using our service.

Pawel Grabowski:
So I think this whole COVID experience is obviously very tough for the community, and for the way the city lives, but it’s also very enriching from new experience and how we are being pushed out of the comfort zone.

Julia Raymond Hare:
And you said people have a tendency, a stronger tendency, to experiment probably that comes from the pandemic, and then also, perhaps they have a little bit more openness when it comes to the retailers’ experimenting, and things might not always work perfectly at first, but consumers are okay with that. Whereas maybe in the past, they wouldn’t have been as open.

Julia Raymond Hare:
And I wanted to ask, what technology powers the store, because we didn’t get into that too much. I know I’ve talked a little bit about a few other autonomous stores, so can you talk a little bit to what that looks like. Is it camera-based?

Pawel Grabowski:
Yeah, actually it’s only camera-based. Everything started two years ago, when we started a strategy partnership with Aifi. So the Aifi is based in Silicon Valley, and we have a long history of working on this concept. And at certain point, we have decided that for speed of the deployment of the store, actual return of the investment from store deployment, we should use only cameras. On the other side, Aifi made their platform robust and resilient, to that level that we made a conscious decision that that’s the way, and this is the future.

Pawel Grabowski:
So we use a lot of cameras. Then we have two steps of processing, because we have actual processing in the store. This is already Aifi-orchestrated Autonomous Store Infrastructure & Services, they call it OASIS, as a platform. So it goes to the platform. Then it goes to the cloud, where we are doing additional processing, and we are getting the information back from Aifi. What type of the products, by whom has it been picked up and purchased? And on site, we have the whole ecosystem, because we have the things, IOT, to control the store. This is called Frontless eCommerce, which is about pricing, which is about discounts, which is about marketing automation, and it’s about basket processing. So those are the things we have built up on our side. Then we have all the processing of the payments, and obviously we have our application.

Pawel Grabowski:
So that’s a little bit complicated view, but if you have it on the picture, it’s much easier to be understood, but everything starts with the fact that we were able, as Zabka, to build whatever was needed to create a whole store, and we had a fantastic partner in Aifi, who are specialized in processing the whole journey in the store.

Julia Raymond Hare:
And that’s really incredible, right? To have only cameras, and not have to worry about the weighted shelves and some of the other actual hardware that’s required by other types of solutions for autonomous stores.

Pawel Grabowski:
It is, and economically-wise, it’s fantastic, but also it’s really interesting from the technology itself, right? I know that you are a big fan of the big data. I’m the engineer as well. So when you’re see a advanced model of the store, where every product, every person who moves, is reflected in the 3D model, and this model is maintained over the time, so you have the things being changed in the store. You have something’s being purchased, something’s being misreplaced, so then you are having like a living organism who controls its state, and this is extra really interesting.

Pawel Grabowski:
One day, Julia, I should show you how it looks from vectors and numbers, because probably it’s more important than just even seeing a video.

Julia Raymond Hare:
Super-cool. Yeah, that’s really exciting stuff. And the fact that you said, it’s IOT to control the store, and it’s near real time, because the camera’s capturing all this information, and you said the Edge processing is in the store, and then when they walk out, everything is sent to the cloud and they get a receipt, right? The receipt comes through on their phone, I’m assuming?

Pawel Grabowski:
Yes, or it goes via SMS. Interesting fact is that we do control some things in real time, like door-opening recognition, the people payments, and we have some things which almost happen in the real time, so the store itself is also learning over the time. So once we have a very well-learned, very mature model of the store, then the receipt processing is happening really fast. If we have, I would call it, like a young or just-deployed store, then this receipt-processing time is a little bit longer, but we’re promising to the customers that those should be just a single minutes, basically, the time when you’re walking out, you should just shortly get the receipt.

Julia Raymond Hare:
Exceptional, exceptional. That would probably not have been possible just five or so years ago. It’s really impressive in how far technology has come.

Julia Raymond Hare:
Do you think that the concept of smart stores, because you mentioned the store is learning, just like a machine model learns in a way, is that something that you see expanding outside of grocery and convenience stores?

Pawel Grabowski:
Yes and no.

Pawel Grabowski:
Yes, because I see a lot of points of interest or places where you don’t really go out there for an experience, but looking at the fashion industry, I believe that you’re visiting the stores for certain type of experience. So I would say that I see autonomous stores everywhere, but they’re going to have a different character. They will be more focused on the transaction, or more focused on the experience, and I think that the future can be very interesting from this perspective, because right now there is a lot of talk about how the cities and how the future will look after pandemics, right? And I believe that autonomous solutions can provide this on-the-street experience a little bit different from today, which is very positive, because you have asked about how we attract the people. So we have a lot of brand ambassadors, always somewhere around the store, just checking everything is fine, and asking the people if they need some help. So this way we can put more effort on the customer, not on charging the customer or swiping the card. Those are boring things, right? We can spend more time human-to-human.

Julia Raymond Hare:
Sure, and if I have a question about a product, the associate is right there, ready to help me, versus checking people out manually. So that’s an amazing shift that we haven’t seen as much. It’s increasing now, but it’s really exciting. We all could use a little bit more human interaction after the past few years, so it’s amazing that this enables the associates to be more at the beck and call of the shopper.

Julia Raymond Hare:
And if we zoom away from the consumer for a quick second, there was a pressing question I’ve been meaning to ask, because you mentioned you have over 7,000 stores. That’s a lot, and you’re rolling out these autonomous stores. How do you select the location of those autonomous stores? Is it existing stores that you re-outfit to have that technology, or is it brand new stores? How do you approach that?

Pawel Grabowski:
No, no, those are completely brand new locations. Actually, we did a very deep analysis on potential spaces and where we can capture new customers. So we are addressing new spaces, especially the spaces where we have very small brick and mortar locations. We are addressing the spaces where we were not previously a Zabka, because in December we have opened a store in Decathlon. So we opened a store inside the store.

Pawel Grabowski:
We have opened the stores within the office buildings, just available for office people, and our concept is not replacing traditional stores. Autonomous format is part of our mission to be more convenient for the customers. Sometimes we’re joking that we want to be not in a five minutes walk. We want to in a three minutes walk.

Julia Raymond Hare:
Can I just get out of bed and be in the store … yeah, exactly.

Pawel Grabowski:
Actually, that’s my dream. Julia, I don’t know if you’re aware of that, but there are some places, especially in Scandinavia, where you have one common laundry room, and in this laundry room, you have a huge washing machine which can fit, I don’t know, 12, 15 kilos, and a huge dryer, right? So basically you can just do a laundry once a week or whatever, and I was thinking about our autonomous concept, and it can be used as a big fridge. So if we can find the right spots and we’re going to implement it right, it can be treated as a fridge, open 24/7, with all the benefits. So you don’t have to waste the space in your apartment. You’re not have to pay for the electricity bills. You don’t have all this food waste, which obviously occurs in your fridge, every everyone wastes food, right? And here in this store, you can have a completely different experience.

Pawel Grabowski:
And if we are going to go into customization, and we’re going to respond to customer needs in a smart way, we can provide meals, snacks based on your particular needs. So I can imagine that we can achieve more popcorn on Friday evenings than-

Julia Raymond Hare:
Sure.

Pawel Grabowski:
… on any other day, right?

Julia Raymond Hare:
Yeah, that’s an interesting idea. It’s a unique concept, and you said you have opened stores inside of stores and within office buildings, but why not within apartment building that are really densely populated or even hotels?

Pawel Grabowski:
And definitely it’s part of the catchments we have selected to experiment with.

Julia Raymond Hare:
Okay.

Pawel Grabowski:
And yeah, hopefully within a few months, I will be able to share some insights about how it works.

Julia Raymond Hare:
Oh, very exciting. Okay, we look forward to that, for sure.

Julia Raymond Hare:
You hinted out a few things earlier in our chat, but is there anything else you can share with our listeners about your plans with Zabka rolling forward, whether that’s more autonomous stores or something else?

Pawel Grabowski:
Yeah, sure. We already have, even our numbers, because our CEO, Tomasz Suchański, mentioned last year that we want to close the Q1 with 50 stores, so we already have a target.

Julia Raymond Hare:
Okay. That’s amazing.

Pawel Grabowski:
But we are not going to stop at 50. What is really interesting with this autonomous format, is that we know that customer perceptions is really good. We have the NPS of 82 right now, so this is world class, right?

Julia Raymond Hare:
That’s very high. That’s great.

Pawel Grabowski:
Yes, so we’re looking for ways to share this experience with the traditional network. So probably this year, we are going to do a premier of the hybrid solution. We also want to expand the network here in Poland because we strongly believe that right now we are in seven cities, but we strongly believe that there are some formats which can work extremely well in the smaller cities. So the store-in-the-store is one of those formats, but we also believe that in the smaller villages or small towns where you cannot get the service 24/7, that can be a great solution for the customers to do the shopping, and obviously we want to expand the network to the size in which we can verify commercial and operating model.

Julia Raymond Hare:
Well, that is exciting. You have a lot on your roadmap. 50 stores sounds like an enterprising number to achieve, but you said it won’t stop there, so I’m excited to see what you guys roll out over the next six months even, and we will be following you guys in the news for sure.

Julia Raymond Hare:
So I wanted to go ahead and thank you again, Pawel Grabowski. You are the Head of Unmanned Solutions at Zabka Polska. Again, that’s one of the largest formatted and centralized chain convenience stores in Central and Eastern Europe, so we were super-happy to have you on the show today, and we hope to have you on again soon.

Pawel Grabowski:
Julia, looking forward to speak again. Please keep fingers crossed for at least a hundred or maybe 200 stores.

Julia Raymond Hare:
Yes, I would love that. 200, let’s go.

Pawel Grabowski:
Okay, deal done. Thank you very much for inviting me here. It was a real pleasure.

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