Tomasz Blicharski – EVP & Board Member at Żabka – Revolutionising retail with autonomous stores

We run almost 9000 stores but we like to call ourselves a convenience ecosystem because on top of the stores we also have a set of other businesses which are digital, which encircle the Polish consumers, and all together they serve different convenience related missions. The digital transformation is not a gimmick, it's not something that is 10 years away, it's actually creating results here and now. Any company at the moment that is not on top of the digital game will or have a high risk of being disrupted and being actively out of the market. I think the most important value that I actually use is hard work. Without hard work, talent will not get you anywhere. I know plenty of super talented people that failed or didn't achieve their potential because of lack of hard work.

Yeah indeed, I've changed my career at least once before. I graduated from finance and went to London, worked in finance, and then moved to the investment side of the equation and spent quite a bit of time there. Within that role I was responsible for, among other things, retail investments in the region. The fund I worked with, which is the leading fund in Central and Eastern Europe focused on private equity, acquired Zabka. So I became a board member of Zabka as part of the supervisory board and spent four years there while the company was growing and changing. At some point it became visible that additional changes would be required to make the company successful over the longer term, and that's when I came down to the managerial role at the management board level. I became part of the new team that started to make these changes, and that's how I changed my career for the first time. I was the CFO, responsible for the company's change as well as running finance and other areas. I liked it so much because at first it was an interim role, but I stayed. I was fascinated by the fact that a manager makes so many different decisions every single day, and these decisions altogether can lead the company to somewhere completely different from where it currently is. This is unlike the investor side where you make relatively fewer decisions but each has great financial value. I liked this way of operating more. That's how the journey started. We soon realized that on top of improving operationally, opening more stores, making them better, and changing the organization, we could also change the company using digital tools and digitally transform it. That started happening in 2016-2017, when we saw a lot of value to be created for shareholders and all stakeholders through using these tools.

Yes, it is. We run almost 9000 stores, but we like to call ourselves a convenience ecosystem because on top of the stores we also have a set of other businesses which are digital, which encircle the Polish consumers. All together they serve different convenience-related missions through that set of services.

Indeed, I'm in a store as you can see from my background, but it's not a traditional store. It's an autonomous store – there is no physical checkout process. You enter with a credit card or an app, pick up the goods, and leave. It's also partially robotized. Zabka Nano stores are famous for Zabka Cafe, and the hero product is a hot dog. In our pursuit of automation, we figured out how to serve these products in stores without personnel. We created a robot that prepares hot dogs. It's the only one so far, but we're exploring further. It's a huge success, doing almost 200 hot dogs per day and creating a lot of interest from the media and the public. There are queues of people watching the robot prepare hot dogs. This helped us promote the Zabka Nano chain and the new way of shopping.

That's a great question. Before we started our digital transformation, we as a senior team went to many places around the globe to inspire ourselves. We saw that in many places retail has been vastly disrupted – non-food retailers were affected by newcomers, startups, and new ways of providing services. That made us think about how to build our business for the long term. Even though we were not disrupted in Poland, we felt we had to disrupt ourselves to stay competitive. Digital transformation was key to that. I believe any company not on top of the digital game will have a high risk of being disrupted and being out of the market in the next 5 to 15 years. So we created a culture and strategic plan starting in 2017.

Let me take a step back. Digital transformation can either increase revenue or decrease costs – period. You can optimize internal operations to be more efficient, or create new businesses to increase top line. We started on the efficiency side first because we wanted quick results to get buy-in from the entire team. We focused on use cases close to the core with plenty of data, so even small changes had visible impact. We started with pricing, assortment selection, and new location search using data analytics and machine learning. When we introduced new pricing, we increased sales and margin simultaneously. We differentiated assortment between store types – again a big success. Finally, we used data to open better stores and doubled our expansion speed from 500 to 1000 stores per year. That built a foundation showing that digital transformation is not a gimmick but creates results here and now. Then we started creating businesses and products for consumers. The first product was the Zabka app – a digital engagement platform launched in 2018-2019. It included specialized offers and a loyalty program with a currency called 'jobs'. It became an immediate success with millions of downloads, over 3 million monthly active users, and 1 million daily active users. The app increased basket size by 15%. Once we launched that under the old structure, we realized we needed to change the structure to have one side focused on day-to-day business and the other on building digital businesses. That allowed us to become the leader in Europe in autonomous stores – we have 50 stores, more than Amazon in the US. We also became leaders in quick commerce and acquired direct-to-consumer companies in food. That's how we created the ecosystem.

Yes, more than a thousand now, and only in Poland for the moment. Regarding store location optimization: we have almost 9000 existing stores with about 3000 parameters per store – wealth of people around, foot traffic, points of interest. Using cloud computing and machine learning, we checked the performance of a Zabka store for every address point in Poland – 8.7 million addresses – and overlaid potential cannibalization. That created heat maps where it makes sense to open stores. The expansion team focuses on those locations, and when we open, the forecast matches reality within a few percentage points. This system enabled us to optimize the opening machine, eliminate cognitive biases, and achieve higher quality, fewer errors, and better speed.

Yeah, exactly. We look for the location ourselves, sign the lease, and look for franchisees separately. The franchisee has to accept a location, but once we show them data on expected performance and profit, it's much easier for them to accept.

That's quite a challenge. The loyalty app is successful because first, you don't collect points, you collect 'jobs' – our own currency – which creates buzz, especially among younger consumers. Second, you can exchange jobs for hero products of Zabka – there's always something for you, both smaller and bigger rewards. Third, you can send points to someone else or exchange them for special causes. For example, during COVID we enabled donating points to hospitals, creating a huge wave of donations. During the Ukraine conflict, we enabled support for Ukrainians. It's one of the few loyalty schemes where you can do something for yourself and for society, which aligns with our business philosophy.

You always have to develop the app. Initially it was just loyalty and non-individualized offers. Over time we added services like parcel pickup management and the ability to collect products close to expiry at a discount. The autonomous store can be accessed via the app. Gradually this app is becoming the central piece of the ecosystem. With 9 million users, it helps us acquire new customers for younger businesses much faster and cheaper. For example, if we launch a quick commerce service, we push notifications to people in range. The direction is to add more features and make the app the central app for the ecosystem.

It's a combination of factors. We are innovative and spotted the trend early. We started in 2018 and invested in a Silicon Valley startup that uses deep learning and computer vision for checkout-free technology. We selected them because they understood the problem best. We helped develop the technology emphasizing that it must be cheap – camera-only, not sensor fusion like Amazon. We opened pilot stores in 2019, polished the technology, and launched to consumers in mid-2021. The NPS is around 80, the highest in Polish retail. Consumers love the freedom and speed. Now we have 50 stores and understand consumer needs and issues. In the long term, this technology will be embedded in many retail stores.

It's for everybody with a credit card or the app. But usage skews younger – 20 to 30 something. Over time, it will equalize.

At the moment, the autonomous format complements the core business. These smaller stores have a lower break-even point, so we can open them in areas where regular stores wouldn't work – in high streets, inside other stores, offices, hospitals, schools, campuses. We focus there for now. Over the longer term, as technology matures and adoption increases, I see this becoming widespread. Stores could operate in a hybrid model – for instance, high-traffic stores might use the system for part of the checkout. Eventually this will be mainstream, but that's ahead of us.

Yes, we acquired two businesses last year: Maczfit, the direct-to-consumer market leader and producer of food, and Dietly.pl, a SaaS software provider and marketplace. We are now the definite market leader in that space. The idea is: consumers who want a healthy lifestyle and don't have time to shop can subscribe to full meal diets delivered every morning. They just heat up or consume cold. Maczfit has over 6000 active recipes, so no repetition. You select meals the day before and it's delivered. This has become very popular in Poland, especially during the pandemic. At any moment, there are several hundred thousand users.

Poland who live this way and use this service. We actually love that, right? We love it. It's very much in the spirit of convenience. You make people's lives easier because of this. It's also under the trend of healthy nutrition and sustainable lifestyle, which we loved as well. That's why we decided to go for it and make these acquisitions, for these two businesses to become an integral part of our ecosystem. Wow, so it's everyday healthy food on your doorstep. Yeah, and then all the meals and snacks during the day. It's different from the HelloFresh model where you have to get it every week and cook it yourself. It's a daily healthy food delivery. People love it because of the choice they have. There is no big need to prepare it. You just heat it up in the oven or microwave depending on preferences. That's it, voila. You have this choice and you know everything is freshly prepared with balanced ingredients. In our busy lifestyles, there are only so many things you can worry about, and that eliminates one of them. That's why younger white-collar people across Poland, not only in big cities but also small cities, are users of these services.

Yeah, exactly. You're completely right in your assessment. It was a story of change. We started, we always as a company were a little bit ahead of some others with our IT, but obviously the key KPI was it has to be cheap and it has to work. Using simple language, many traditional organizations run IT that way: it has to function, systems have high availability, and the budget has to be under control. That was our organization as well. Over time, we went through a process where we separately created a new digital organization that reported to me. To accelerate change management, we created a position of Chief Digital Officer, Chief Data Officer, and separate teams of translators between technology and business. That worked for about two years. Then we decided to collapse the two and create product teams composed of digital-minded business people and technology people, working in an agile product way. Their key focus is to deliver business value.

We do not have a typical IT department. In our company, there is no IT department officially, only a technology department because we wanted to be broader. Within the technology department, teams are organized around products and platforms. Their key KPIs are the business impact of what they create and deliver. For example, we introduced an app for franchisees to run their stores. We thought about how to make franchisees' lives easier. They had different systems, so we created an app where they could run the store from the app. We created a product team, invited franchisees with a design thinking process, launched an MVP, fine-tuned it, and that became the core product. We develop the front end ourselves, but on the back end we use Salesforce as a platform to manage operational processes. We create apps on platforms and expand platforms to eliminate technological debt and speed up future development.

Yeah, look. One example is the product groups within areas of the business. We have a store team that deals with all technology in the store, including POS, WMS, and everything that happens with a store. We have a core processes team for HQ processes, typically around ERP. We have a communications team for tools used for communication between groups. We have an apps-related team for all applications on platforms. We also have security, cloud infrastructure, and network infrastructure teams that run across all product teams, providing services to all. This way of thinking enabled us to shorten time to market, gave better coordination and ownership, and decreased cost. We have internal teams but also outsource part of the resources. We have around 200 people in the core team inside the company and several hundred additional ones outside.

Yeah, you know, I wasn't a very typical CFO because as an investor you have to be an optimist. Your job is to take risk and get rewarded. You have to be an optimist to take risk. Some CFOs are pessimists. I always had an element of building for the future, not only focusing on cost. In the first period, we had to clean the house first. That was my job to facilitate and lead that. Over time, I added a development role, leading digital and data teams. Starting from 2021, as MD of Żabka Future, I am solely focused on building a second leg of growth for the group. I focus on building businesses beyond our core convenience business in Poland. I first focused on building a digital ecosystem that complemented the physical part. Now I'm thinking about what to do next, such as international expansion. Can we replicate some of our success outside of Poland? I've been spending time figuring out how to grow the business with new services, acquisitions, and international rollout.

Look, I think my formula is relatively simple. There are three constituents key to success. First, create a vision and attract the best talent to that vision. Second, remove boundaries, any showstoppers or blockers from their road. Third, align interests so that when we are successful, they are successful. These are the three necessary ingredients. In each case, the setup is different, but the principle is the same.

Yeah, look. For example, for autonomous stores. When we started working on this in 2018, it was such a novelty that nobody understood the concept. It was difficult to inspire someone because it was unknown. So we went to the US, saw the first Amazon Go store, and I told them: look, feel the freedom of the consumer when you enter such a store. We should look into this because I believe this freedom, plus other benefits for the consumer and retailer, can be great over the long term. That's how it started. For quick commerce, we decided to bring in a team of managers from Asia, mostly Polish people who came to create this business with us. Asia is a pioneer of quick commerce, so we brought in people who understood the business better than anyone in Poland. We created incentives for others to join.

Yeah, look. In no organization does everything work perfectly. There are always wrinkles and intra-interest groups. If my people convince me that there is a need for something from any part of the organization and they can't get it, that's my role to enable that for them. I'm the door opener. I go to someone who has access to that asset or convince someone at different levels to enable that access.

Well, we create short-term and long-term incentives for people. Our business philosophy is to reward people for successfully doing their job. Our cash compensation is heavily skewed toward short-term incentive schemes. Annual bonuses are probably among the biggest in the industry in Poland. For special levels of people, we also have longer-term incentives. All of this is created so that we share the success with them.

I hope only good things, but I'm joking. There are good and bad parts of anyone. On the strong side, I'm sure they would say that I inspired them and helped them achieve what they wanted, sometimes against the odds. On the negative side, sometimes I'm impatient and push people too much, which creates unpleasant discussions. I have to control myself not to do it too much.

Look, I think it's about self-control. Detaching yourself from the moment, taking a deep breath and counting down so you don't act on emotion. Try to take more time to digest the situation with your slow thinking system. My fast thinking system is very dominant and gets me where I want most of the time, so I tend to over-rely on it. In problematic situations, I stop relying on my fast thinking system and take a deep breath to think. Otherwise, I can act too fast in a bad way and create an unpleasant situation.

Look, I tend to read a lot on that. I always loved reading in all aspects. I used to have a coach but it didn't work out for me. I didn't like it; it was too slow. Maybe I should come back to it one day. So I tend to self-reflect. I think about past moments and analyze them to see what I could do differently. That's how I concluded that acting too fast is not great. I also talk to people with more life experience, which teaches me quite a bit.

Yeah, look. There's nobody internationally recognized that I could quote directly. But I generally look at people who have been successful in certain areas, not only in business but also scientists, people who achieved something against adversity or in difficult conditions. I try to understand why they were successful. One book I really like is 'Endurance', about a 100-year-old history of a trip to the South Pole. It's about how leaders were able to save everyone despite all adversity. It's a testament that strong leaders who maintain positivity despite the facts can create a miracle.

Yeah, to me, the most important value that I use is hard work. Without hard work, talent will not get you anywhere. I know plenty of super talented people who failed or didn't achieve their potential because of lack of hard work. I try to pass that to my kids. It's difficult with the younger generation who want to see results very fast. The second value is integrity. I am a person who doesn't hold back what I think, and I die by the sword. In a fast-changing business environment, people need to act quickly, and communication has to be straightforward. I try to pass that on to my kids to communicate well and in a straight way.

I like to connect with nature, and my way of doing that is cycling. I cycle at least 10 hours per week. I've done that for the last five years. I always loved cycling, but now it also cleans my head. I love nature, and from a bike you can connect with nature more than from a car. You can go to the mountains or wherever you want.

I do not. When I have a difficult situation or decision, I focus on my values. When I'm unsure what to do, I look at my deep values and try to get the answer from there.

Yeah, that's a good question. Worst thing that happened in my life? I tend to learn from it and then forget about it because life is full of disappointments. If you spend too much time focusing on them, your baggage will grow too heavy. For example, when I was working on some investments, it wasn't always success. We had difficult situations not really our fault, but from the business environment, that forced us to do heavy restructurings, change strategy, and prioritize short term over long term for survival. With Żabka also, when I came in, the situation wasn't ideal. We were investors, and suddenly the company faced distress, creating tension and need for immediate change. These failures constitute me now, not only the successes.

My family, my wife and my two kids. That's very easy to answer. I really think we together create a fantastic family. We try to develop our boys, make them discover the world and be successful, but also have fun. My wife is also my best friend.

What I fear most? That's a good one. I don't fear anything really badly. I feel a little bit for many different things. I worry about all the things I'm doing. This weekend I had to spend at work because of a problem with one of the businesses. I always worry about what's going to happen, but it's not paralyzing. I worry and try to fix things. I try not to let worry consume me or prevent me from making decisions. That's my modus operandi. What I love? I love for my business to succeed, I love to see my boys grow and be successful, I love to travel, spend time on the bike. I love many different things. I try to remain a positive person despite my personality factors.

Look, I always thought about myself that I don't have one single gift. I'm good in a lot of things but not great in anything. I think that's the best gift: I received a little bit of gifts in different areas. I'm good at analyzing things, good at centralizing things, decent in communication especially if I focus. But I'm not great in anything. The one thing I was great at but lost is a super memory. I had incredible memory as a teenager; I could remember 200 rolls of dice in a row. But as I grew older, I lost it because my mind developed differently.

Two words: growth mindset. To have and exhibit a growth-minded attitude. That is the only thing you need. Once you have a growth mindset, you are able not only to rely on what's currently in your head and your skills, but also rely on others, get advice from others, and change the way you approach things. The only certainty in life other than death is change. Situations change, businesses change, environment changes. We have to be on top of it, and the only way is through a growth mindset.