‘Digital Transformation’ Will Reshape Retail World, Analyst Says

Posted by Ian McCue on Mar 14, 2017 10:05:44 AM

IDC Retail Insights

Omnichannel is no longer a trendy industry buzzword for retailers – it’s now the reality in which they operate. Some retailers have dived headfirst into this environment; others have been slower to adapt. But every large retailer is selling online and through retail stores, with other potential channels like drop shipping and buy online, pickup in store.

The goal – and fundamental challenge – retailers face today is to provide the same experience for customers regardless of where they interact with the brand.

To accomplish that goal, retailers are investing more time and dollars into what IDC Retail Insights senior analyst Victoria Brown called “digital transformation” at a presentation Monday at HighJump Elevate 2017. The goal of that transformation is to blend the physical and digital experiences into one. Processes like automated supply (a new way to handle replenishment) and augmented living (clients interact with technology in the store) are two examples of this transformation.

As an example, Brown told a hypothetical story involving two retail stores that offer the same product but leave the consumer with much different experiences. In the first store, the shopper pulls up an image of a bathing suit they found online on their phone and shows it to an associate. The associate searches the system and it shows the bathing suit is in stock, but after much digging around, it can’t be located. The frustrated customer eventually leaves without buying anything and posts a negative review online on her way out.

That same customer then heads to the “retailer of tomorrow,” where an associate has the right tools to find the bathing suit quickly. Before the shopper tries it on, the associate gives her a few other items she may be interested in based on that customer’s profile. She leaves with the desired item in hand – and perhaps another piece of clothing or two – with a smile on her face and time to spare.

By 2019, Brown predicts investments in digital transformation will triple. The biggest forces driving that investment are competition, internal growth and new technology, according to surveys conducted by IDC. The top priority of those retailers, unsurprisingly, is to reduce costs. But there was a tie for the No. 2 priority: becoming more “customer-centric” and modernizing the IT infrastructure. Those two goals work hand-in-hand because selecting the right solutions will lead to more positive customer experiences.

Delivering on these goals will eventually require more than the classic supply chain solutions available today, Brown said. She identified robotics and the “internet of things” as the two accelerators that will have the biggest impact on retailers over the next few years. The internet of things refers to all the connected devices and items that surround us, storing information on everyone and everything. Robotics could include drone deliveries or a robot handling basic warehouse tasks. IDC predicts use of those two resources will triple over the next two years.

Retail store

Brown offered guidelines to businesses who are attempting to make this leap. Her suggestions included:

  • Set metrics to benchmark the effects of your IT investment
  • Simulate the production when possible
  • Incorporate the frontlines (i.e. those directly affected by changes) into your decisions
  • Know your infrastructure constraints

The analyst noted that most retailers have not yet made this digital transformation. So those that are trying to catch up should not feel behind because most of their competitors are on the same page. The key is to start the process now so that you have an actionable plan for the future.

Brown’s presentation drove home the point that retailers need to start preparing for the future now. These trends are not some faraway vision but are already taking hold.

Topics: Omni-Channel