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What is Digital Transformation in Retail?

There’s no escaping the fact that modern consumers and businesses exist in a digital environment. At least 34% of people make online purchases at least once a week. The fact that someone can save time visiting the high street or shopping centre with a few clicks means retailers need to possess digital platforms to serve this new fast-paced, online consumer culture if they want to stay competitive. 

Digital transformation is the strategy by which organisations can innovate their online processes and customer experiences. It can modernise each aspect of the business’s operations, processes and tech stack. But it’s more than just adding new retail Application Programming Interfaces (APIs) to infrastructure. Digital transformation can revolutionise business operations and customer experiences. It gives retail brands more agility and scalability—bringing them fully into the 21st century.

Let’s explore the key retail digital transformation trends, and how they can revolutionise business operations and results.

What is digital transformation?

Digital transformation describes how digital technology is adopted and integrated into an organisation’s systems and operations. The main goal of digital transformation is to improve overall efficiency to deliver better results. For example, by digitising manual processes, digital transformation can support workers in completing their jobs—making it both easier and faster. 

In the retail sector, several key digital technologies are being used more frequently to upscale operations, helping to drive productivity and revenue. Let’s explore key digital transformation technologies in the retail industry and how they work:

Key technologies driving digital transformation in retail

Digital transformation encompasses a range of different digital tools, some of which most business professionals and consumers will have heard of, but others which may have gone under your radar. Here’s our pick of the digital solutions driving success across different industries: 

Artificial Intelligence (AI)

AI has caused quite a stir in the last year alone, and is one of the most hotly-discussed topics in society right now. AI is quickly making fundamental changes to the way businesses operate, in a sector that has already seen many companies migrate their business from brick-and-mortar stores to fully-online. Indeed, this is where AI can provides value for retailers:

Personalisation

In a world where customer assistants are no longer present in person, customer service still needs to be top-notch. Through the use of data analytics, AI can produce online customer profiles and provide personalised recommendations and marketing to online shoppers.

Chatbots

Not only does AI help to boost the likelihood of online conversions, it can also help retain that sense of brand loyalty which the physical shopping experience contributed to. Having a personalised chatbot as a substitute for a customer assistant also makes the experience much more seamless for the customer.

Internet of Things (IoT)

he Internet of Things (IoT) refers to when physical devices are embedded with smart technology—such as sensors or networking software—for exchanging information and connecting them to other devices or systems. This has been transformational for retail, for example:

Inventory management

Examples of IoT tools used in retail inventory are smart tags and RFID sensors. These track items in real-time, giving staff greater oversight on stock quantities, which helps optimise stocking and ordering.

Supply chain management

IoT sensors are able to trace the movement of goods throughout the supply chain: from manufacture and delivery, retailers can check product conditions and delivery schedules throughout the journey. This has helped to truly modernise supply chain management.

Big Data and Analytics

Put simply, big data is information from larger and more complex and varied sources. It often requires more sophisticated software to make sense of the data, but when it does, it can have great impact:

Personalisation

For example, retailers can capture their customers’ age, location, gender, favourite foods and restaurants, where they shop and what they read. 

This helps the businesses not just to personalise their product offering, but also forecast trends and adjust prices accordingly. They can also use data for product development, understanding what they can offer to customers that the competition cannot.

Predictive analytics

Another element in big data is predictive analytics. These are when complex statistical  algorithms can account for market trends, historical sales information, statistics, seasonality and other external factors that give businesses an idea about future demand levels. 

Amazon is a strong retail example here: they have pioneered the use of predictive analytics to adjust inventory in line with actual demand, using this insight to drive operational efficiency.

Cloud Computing

The ‘cloud’ is the name for when servers are distributed remotely and are accessible on-demand, without the direct management of the user. Many modern businesses use cloud computing in some shape or form, whether simply for storage or virtual workspaces.

Some retail applications of cloud computing include:

Automation

Though AI has rightfully caused a great deal of excitement, automated tools have been increasingly used in recent years. In retail, robotic process automation (RPA) tech can be an impactful way to streamline operations and drive productivity. 

RPA bots can imitate human-computer interactions. This lets them perform data-entry tasks, reducing human error and limiting the need for workers to carry out labour-intensive jobs, such as:

Benefits of Digital Transformation in Retail

Enhanced customer experience

When done right, digital transformation can create an enhanced experience that leaves customers satisfied and helps build brand loyalty. In an age of omnichannel retail, if a business upscales its website for omnichannel use (e.g. web device, mobile and social media presence) it can make the user journey feel seamless. Statistics show omnichannel brands also see better conversion rates than their single channel counterparts.

Chatbots also add significant value, as they go beyond the valuable assistance of in-store personnel and provide 24/7 customer service. On top of this, personalised product recommendations for regular customers can give retailers an edge over the competition by providing online shoppers with a more memorable brand experience tailored to their tastes.

Operational efficiency

Finding the right digital technology, whether it’s process automation or predictive analytics, can be instrumental in reducing efficiencies scattered throughout a business. 

For example, store operations which are laborious, such as taking inventory and data-entry, can be carried out by RPA. This not only reduces the risk of human error, but also cuts labour costs by giving those team members time and space to focus on more complicated decision-making and other productivity gains.

Advanced forecasting through analysing rich, complex data sets can provide real-time insights into accuracy of inventory orders, predict consumer demand and get greater insights into warehouse capacity. All of these can help improve resource allocation and increase ROI.

Competitive advantage

Digital transformation can also encourage a company-wide culture of experimentation, learning and collaboration. Adopting cloud solutions, new APIs and IoT devices can help business teams test new ideas at speed, helping to provide an edge over their competitors. 

It also allows the business to get more out of its employees’ skills and creativity, another advantage while Plus, automating tasks that rival retailers are still carrying out manually will naturally make any organisation more competitive in a crowded sector.

Digital transformation challenges in retail

Digital transformation is a serious undertaking. Without doing background research and consulting with the right provider, it’s easy to create unnecessary hurdles during the process.

Integration with legacy systems

It’s a fact that many retailers will still have older systems for primary business processes, and replacing these with new digital infrastructures can involve a lot of dedicated time and valuable resources. To work around this, businesses can ask the supplier of new digital systems to give them the full range of solutions on offer. This will help in assessing which ones will integrate the easiest. 

It’s important to ensure that the new digital platforms are scalable, meaning that they can be adjusted if data requirements grow; for example, if the company expands its network of IoT devices or hires a significant number of new employees. 

Brands looking at digital transformation tools are also wise to find out what technical support systems will be in place for lifecycle management and device updates.

Data privacy and cybersecurity

Unfortunately, with new technologies also comes new risks. Digital transformation strategies always involve the need for hyper-awareness of threats to data security and other cyber-threats, especially as existing information is migrated to new digital infrastructure. 

Retail companies must exercise caution not only around their own sensitive data but customer information too. Ensuring safeguards for consumer and business data is vital. A breach to the new system can have a severe impact on the business: loss of reputation, financial damage and potential legal action.

However, cloud computing systems are strong in terms of cybersecurity. Cloud providers understand the degree of trust involved and the fundamental importance of data security.

Xpedition’s solutions for retail digital transformation

At Xpedition, we take a unique and thoughtful approach to every digital transformation. This involves our deliberate step-by-step process. 

In order to properly understand your pain points and business strengths, we’ll take a deep dive into your current processes and existing infrastructure, tech and company culture,and collaborate with you to define your transformation objectives and maintain the agility of your operations.

This assessment will help us create a clear, costed project timeline before we embark on your journey. Throughout the transformation process, there’ll be a dedicated experienced guide to help with any tactical changes needed.

Our Microsoft Dynamics 365 Business Central ERP can integrate into your processes and provides end-to-end view of business data, and use it to enhance customer experiences, build organisational resilience and drive value across the retail value chain.

Contact one of our team today to find out more about our approach or to book a consultation.