Digital transformation in retail: industry vs. technology, who follows whom?

Today’s consumers became the driving force for an in-depth integration of techno-solutions into the retail routine, since they demand total personalization, tailored offers and seamless interactions across any possible channels. More often now 2017’s customers are being called “digital” or “omni-shoppers” because their buying habits are not limited by going to a mall or a brick-and-mortar store. Retail is literally in their pockets now — when has it ever been more convenient to manage your shopping routines with the help of a smartphone or some other device?

Digital shoppers cheer all the experiments and innovations that can provide them with a smart customer-first omni-experience. Not only aware of cutting-edge technologies and innovations but actively using them, such customers become a headache for traditional retailers. These changes lead to the importance of digital transformation in retail to win the market; according to Greg Verdino’s definition, “Digital transformation closes the gap between what digital customers already expect and what analog businesses actually deliver.”

There is no one-size-fits-all strategy of how a company can undergo digital transformation; it will always look different for every business but will have a similar aim — to deliver new and advanced value to customers.

Integrating digital transformation into the retail industry: disrupt or be disrupted!

Undoubtedly, the ubiquity of digital everything dictates further trends and makes retailers invest more in tech solutions to achieve customers’ loyalty. Retailers turn to Artificial Intelligence, Big Data, the Internet of Things, and Virtual or Augmented Reality to find solutions for business improvements.

Looking for some creative ideas and promising retail technology use cases? Check out this whitepaper.

Implementation of these trailblazing technologies requires a total shift not only in your retail strategy but also in the general structure of your organization. Such core reestablishment is exactly what digital transformation presumes — it is a new way of thinking and turning your business into a full-fledged, digitally tuned retail machine.

Previously, the needs of retail triggered the development of new technologies. Today, the IT industry is growing so rapidly that retail has to keep up with the emerging trends — to offer flexible services, business itself has to be flexible. As a result, we observe the consistent increase in investments in R&D and technology, and 30% of retailers indicate that their IT budget increased by more than 5%. The brightest example is Amazon, which claims to have spent around $14.2 billion on “technology and content.”

The outcome of such spending is more than successful. Being technology-oriented and aiming at providing convenience, Amazon gained a loyal audience of omni-shoppers and increased its market value up to 1,910% since 2006. This number impresses even more in comparison to Macy’s or JCPenney decrease in market value — 46% and 83% accordingly.

Another remarkable change occurred with S&P 500 Index: U.S. corporations used to remain on it for approximately 60 years since 1958, and now this period reduced to two weeks. Obviously, retailers have to reconsider the impact of technology on their usual business strategy and aim at implementing digital transformation; otherwise, chances to succeed are miserable. But how can retail run digital transformation smoothly?

Undergoing digital transformation: you’re not alone!

Retailers with innovative ideas and revolutionary concepts have usually been at a crossroads: to work with the in-house IT teams or hire a tech-oriented outsourcing company. With such a rapid development of the IT industry, more and more retailers decide to turn to outsourcing, though wish to keep it secret. The ISG Research Company discovered that outsourcing became a tendency among retailers during last 5–7 years. Approximately 80% of 104 retail firms indexed in a Global 2,000 list of companies rely on cooperation with third parties when it comes to software development, project realization, and digital management consulting.

Why? In-house teams may not handle the overwhelming stream of emerging technologies and introduce them as working solutions. Obviously, not so many retailers can boast having strong enough teams to offer customize and print clothing directly in a store, or to give shoppers a chance to visualize how certain furniture would look like in their houses. By pursuing new digital capabilities and forming a digital transformation strategy, retailers now prefer to engage industry professionals — it is more recouping and less costly, than struggling to triumph using internal resources.

Levi’s, for example, cut its IT staff for the outsourcing company Wipro Limited and didn’t lose out: while many brands continue experiencing challenging times, Levi’s announces an increase in revenue. Knorr cooperates with IBM on a mutual “Flavor Profiler” that helps target Millennials and, ultimately, has already gained 1.2 million clicks. Argos also didn’t explore digital transformation in isolation and remained an influential player on the market as a result. Wal-Mart sees a future in technological migration and lays off not only personnel of closed stores but IT workers as well — many of these jobs are to be outsourced now.

However, when it comes to choosing a technology provider, how can retailers avoid pitfalls?

Robust technological companies that specialize only in software development are not enough. Consider IT vendors who understand the nuances of the retail industry. For correct transformation consulting, a chosen solution partner has to be aware of the unique challenges retailers face and realize how to deal with them and deliver value through new technologies.

That is why we at ELEKS have created a separate dedicated division to work as a technical department for retailers and specialize in retail IT solutions — the ELEKS Retail Centre of Excellence, through which we strive to implement the forefront of approaches and advanced technologies based on the analysis of the current needs of the retail sector. Understanding the importance of both high-quality software and its relevance to the retail industry is a must for an appropriate technological associate.

You, as a retailer, have to understand that digital transformation is a process of business evolution, a fundamental change of existing operational models; however, you should not risk missing out on the moment to implement it. If you aim at keeping competitive positions on the market, digital transformation is an inevitable process anyway — technology will become at times more significant. Don’t just follow these changes, lead them with the right partner. Get in touch with us today!



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