Low app ranking can bankrupt a retail chain

Adi Nov Photo: Carmi Dror

A report by Euler-Hermes links US retail chain bankruptcies to dissatisfaction with their apps.

European company Euler-Hermes, the world's largest credit insurance company, which is part of the Allianz group, has published a study linking bankruptcies of veteran retail chains in the US market to dissatisfaction with their apps. Figures cited by the company show that smartphones were used in over 25% of Black Friday sales in 2018. Of the 13 main retailers in the US that became insolvent in 2018, only six currently have mobile purchasing apps, and six prominent retailers that went bankrupt in 2018 had a high rate of dissatisfaction among their customers.

The analysis shows that the apps of the five leading retail sellers in 2017 had an average rating of 4.5 stars and an 8% average customer dissatisfaction rate (customers who gave a rating of one or two stars). In contrast, the US retailers who went bankrupt had an average rating of 3 stars and a 42% average customer dissatisfaction rate.

For example, the app of veteran US retailer Sears, which went bankrupt after being one of the leading US retail chains for 125 years, had only a 3-star rating, with a $17 billion sales volume during the year. Walmart, whose sales volume was $486 billion, had a 4.5-star rating, and Kruger, with a $115 billion sales volume, had a 4.7-star rating. Amazon's app had a 3.5-star rating, while Wallgreens's app had a 4.4-star rating.

Adi Nov, VP marketing and business development at Israel Credit Insurance Company (ICIC), jointly owned by Euler-Hermes and Harel Insurance Investments and Financial Services Ltd. (TASE: HARL), told "Globes," "The question of online sales has been disturbing the sector for several years already. This is the first time that it has been proven that chains that are unprepared to make digital sales to their customers are less successful in competing in the market. There is a correlation in the US between bankruptcy and the rating."

Nov adds that a similar trend is anticipated in Israel: players who do not make the necessary investments in online sales, such as building logistics centers and large-scale investments in consolidating these activities, which do not show an immediate profit, will find competing in the market difficult in the coming years. "Seriously staying out of the online game will not be an option. Not all of the food and fashion chains are aware of how critical this is to their continued viability.

"Most of the major chains in the US that collapsed did not offer sales through online apps. In our opinion, this is also a good indicator of the positioning of companies in Israel," Nov remarked. She went on to say, "Players in the fashion industry, such as Fox and Golf, realize where the market is headed, and have made adjustments, but there are chains and supermarkets in Israel that are not active online and will have trouble keeping up with their competitors. This is a good indicator of who will have great difficult in competing in the market, and who is more likely to collapse, or who has a poorer chance to survive. This does not necessarily happen when digital activity is profitable.

"One example of a chain that was unable to adapt itself is Honigman. They were unable to find the right branding and marketing methods. Anyone who can't fit into this will have a hard time coping."

In an effort to make the necessary adjustments for itself, ICIC recently launched an app that displays to customers the information that it provides in the credit insurance market about the changing risks levels. ICIC enables customers to view a rating of companies' risk.

Published by Globes, Israel business news - en.globes.co.il - on January 10, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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Adi Nov Photo: Carmi Dror
Adi Nov Photo: Carmi Dror
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