Digital Transformation in the Retail Industry marketinsight

The retail sector is one of the sectors that is most heavily impacted by digitization. The way that consumers interact with retailers, together with the level of service that consumers expect, is evolving at a dramatic pace. Major changes in lifestyle, demographics and technology are forcing retail businesses to provide a more convenient and flexible service, through an increasingly diverse range of outlets and interfaces. However, digitization has not only forced retailers to restructure customer interaction, service and sales channels, but has also made it necessary for retailers to fundamentally adapt their market positioning, internal organization and operations, as well as their overall business model to the digital age. The disruptive impact of digitization is felt in all retail sub-segments, whether this be food or non-food retail, specialized distribution, hard discount, e-commerce or mail order. Indeed, digital transformation has become mandatory for retailers to survive in a difficult economic context.

Retailers therefore have to maintain significant IT investments so that they can differentiate themselves from competitors through innovation and address a variety of challenges:
•    Implementation of omni-channel strategies that go beyond simple multi- and cross-channel approaches. This involves, in particular, sustaining the point of sales digitization and aligning stores with the omni-channel strategy.
•    Implementation of advanced analytics solutions to provide a personalized customer experience and optimize operational decision-making and processes.
•    Development of innovative value propositions and progressive involvement of customers in innovation activities (co-innovation).
•    Improvement of operational processes and agility. The supply-chain is especially impacted and its optimization becomes a key differentiator.

Retailers’ approaches towards digital transformation are heavily influencing their IT spending and relationships with software and IT service providers.

Traditional technology consultants and SIs are increasingly competing with digital agencies and digital strategy specialists. The latter are working particularly with decision makers in marketing and sales rather than IT departments. IT service providers who want to position themselves as their retail customers’ digital transformation partners therefore have to address LOBs beyond IT and have to provide a very broad range of expertise, including customer experience design, business model innovation and customer analytics, as well as complex technology implementation and integration. Innovativeness, alongside short development cycles and fast solution delivery, is becoming a key prerequisite for service providers to the retail sector.