Driven by changing consumer behaviors and expectations, disruptive technologies, and macroeconomic influences, the retail industry is currently undergoing a phenomenal renaissance. Much has been written about the struggles that traditional brick-and-mortar retailers have faced, imposed largely by the advent and uprise of e-commerce. Consumers’ preference for shopping online only grows with each new generation: G2 Crowd reports that while 51 percent of overall Americans prefer to shop online, 67 percent of Millennials prefer to do their shopping online. While it’s true that some retailers have been unable to compete in a newly-global marketplace where the customer is more in control than ever, others have risen to the occasion, embracing the challenge and finding ways to innovate and transform their business to meet the needs and expectations of today’s shoppers.
Digital transformation and innovation involve more than just technology. Retailers who have been operating for more than a few years are likely to have deep-rooted organizational silos that can hinder the progress that is needed in order to survive and thrive in today’s economy. People, processes, and technology all need to play a part in facilitating innovation, and transformation initiatives need to be embraced from the top down in order to succeed. For example, small-scale pilot projects are often doomed to fail in retail, because they involve too narrow a scope, too small a team, and aren’t given the resources needed to fully penetrate the business to make a measurable impact.
Digital transformation does not just provide a strong competitive advantage – it has become essential to retail survival. While it may be difficult to predict what the “next big thing” will be in retail – from voice-driven shopping to fulfillment by drone or driverless cars, retailers need to keep a close watch on emerging trends and technologies and be ready to embrace them before their competition does.
The Cost of Doing Nothing is Greater Than Ever
A refusal to modernize systems or improve customer experience is one of the top 4 commonalities between retailers who are closing stores or going out of business. (IHL)
“Many retailers have fallen behind — or closed their doors entirely — because they failed to adapt their businesses for the digital curve. On the flip side, those that have stayed ahead of the proverbial curve have enjoyed improved profits, happier customers and better business outcomes.” (TotalRetail)
“To survive in the digital era, retailers need to become disruptors, rebasing their businesses around innovation, making technology a revenue-driver rather than an overhead, and putting data-driven personalization at the heart of their customer strategy.“ (Accenture)
Retailers are Taking Notice and Taking Action
Worldwide spending on digital transformation technologies is estimated to reach $1.3 trillion in 2018, up 16.8 percent from the $1.1 trillion spent last year. (International Data Corporation)
68 percent of global business leaders list digital transformation as a top priority for their business. (Forrester)
83 percent of large retailers say that digital transformation is a core business goal. (Oxford Economics)
30% of retailers in a recent survey said that their IT budget has increased by more than 5 percent. (Gartner)
The CIO is the executive most often tasked (28 percent) with leading digital transformation efforts. (Altimeter Group)
Innovation Drives Increased Revenues
Superior digital strategies can boost revenues by more than 15 percent. (McKinsey)
59 percent of small and midsize retailers believe that digital transformation is important or critically important to the survival of their company (Oxford Economics)
Amazon, the world’s third-largest retailer, reportedly spent more than $22 billion on research and development last year alone. (Recode)
“Innovation can provide an edge in any of five major categories of retail shopper need—convenience, choice or assortment, shopability and price value, as well as in what retailers can do beyond the store to drive brand equity.” (Nielsen)
As Important as it is, Digital Transformation Doesn’t Come Easy
A mere 3 percent of retailers have actually completed a digital transformation project. (Oxford Economics)
The top five obstacles to innovation for retailers are optimizing digital commerce growth, consolidating channel silos, retiring legacy systems, integration, and data security. (Gartner)
Only 2 in 5 companies operate with an executive-mandated steering committee responsible for organizational transformation. (Altimeter Group)
“We identify five barriers to innovation of particular significance to the retail sector: a lack of awareness, costs, availability of human resources, risks, and regulatory constraints.” (European Commission)
Consumers Are in Control
“Consumers are now demanding innovation—technological innovation in particular—as they insist on a seamless, integrated omnichannel experience that enables them to shop from anywhere via their mobile phone, tablet, PC or wearable device, in addition to traditional brick-and-mortar stores.” (PwC)
The top five digital transformation initiatives over the next 18 months for retailers are in the areas of expanding unified commerce, social media, customer engagement, personalization, and analytics. (Gartner)
The key drivers of digital transformation are evolving customer and employee behaviors and preferences, increased competitive pressure, and growth opportunities in new markets. (Altimeter Group)
Fashion and luxury retailers tend to have above-average IT budgets (median of 2.1 percent of revenue) compared to other verticals (median of 1.2 percent of revenue) because of the increased need to invest in customer experience and engagement. (Boston Consulting Group)
