At a glance: Explore what retail digital transformation really means and how to improve your operations and worker and customer experiences. Reflect on why it matters and see practical tips on how and where to focus your efforts. The insights in this guide come from our experiences supporting some of the world’s biggest retail brands.
The retail industry has seen radical changes over the past decade. With the widespread adoption of new technologies, significant changes in customer habits and new ideas about reducing inefficiencies, all accelerated by the covid-19 pandemic.
The combination of these events has sparked the need for digital transformation in the retail sector. But what does ‘digital transformation’ mean? What are the key areas of change to be aware of? And how does it apply to retail operations?
In this guide, we explore those questions and get to the bottom of retail digital transformation.
What does retail digital transformation mean?
What is retail digital transformation?
Retail digital transformation is the process of integrating technology into a retailer’s operations, systems, and processes to improve the customer experience, enhance operational efficiency and drive growth.
The goal is to digitize manual processes to help workers perform their jobs better and faster. And to provide a seamless omnichannel shopping experience across physical and digital touchpoints. With consistent pricing, product selection, and information available both in store and online.
Why does retail digital transformation matter?
It allows retailers to stay relevant in an ever-changing and increasingly competitive marketplace. At the basic level, retailers are looking to sell their products and services. Traditional challenges will need to be overcome to enable this – like margin, efficiency, staffing and customer satisfaction.
The use of technology allows a new way to tackle those challenges. Providing the flexibility to adapt quickly to changes in the market and a platform for data-driven decision-making. Those who embrace it will be better positioned to succeed in the long run.
Key elements of retail digital transformation
Digital transformation is a broad topic that can be all-encompassing for retailers. Focusing on where people and systems interact can ensure that any transformation benefits your workers, customers and your business. Let’s explore those areas.
Omnichannel shopping involves retailers integrating their physical and digital channels to provide a seamless shopping experience across all touchpoints. Why do it? Because today’s shoppers use an average of 6 touchpoints when considering a purchase. Researching and comparing products before making an informed decision.
US retailer Target discovered that multi-channel customers spend 4 times as much as in-store customers and 10 times more than digital-only ones.
Data underpins decision-making. And the best users of data tend to win in retail. Not only from a retail operational point of view but also regarding customers searching for the right product.
Retailers must use data analytics to gain insight into consumer behaviors and preferences. This will drive operational decisions on what to sell, how and to who. As well as providing the means to personalize the experience for shoppers along the way.
Data must also be accessible to those who need it most. Information is at the fingertips of consumers all day. But sometimes this stops when they enter a store.
For workers, a way for them to access inventory and customer data in real time can improve daily tasks and customer assistance.
The use of technology to automate manual processes and tasks can lead to big efficiency gains. It can also free up workers to focus where it matters most – like better-serving customers.
Automation is best used on processes that are repetitive, prone to error and time-consuming. Streamlining tasks like inventory management and order fulfillment and reducing costly inaccuracies.
When it comes to technology, the options for retailers are seemingly endless. From a simple shift to mobile technology and smart devices, right through to autonomous robots and the use of AI and machine learning.
Having the right technology in place not only accelerates transformation but provides a critical link between all the elements. Capturing data, analyzing and disseminating it, and giving workers the most up-to-date and appropriate tools will enable them to perform at their best.
Benefits of digitization in retail
Digital transformation can be a costly exercise, both in time and money. Benefits must be far-reaching and have a positive impact on customers and employees for any investment to be worthwhile. Here are 6 benefits of retail digital transformation.
Improved customer loyalty
With digitization comes data. and with data, retailers can provide a more personalized service, at scale, to their customers.
Basic customer satisfaction doesn’t drive loyalty. But providing a seamless, personalized and differentiated experience does.
Here, retailers can combine customer data to provide offers and rewards based on demographics and prior shopping habits. Retailers can also offer a faster and more convenient experience by providing new ways to shop such as mobile self-scanning and click-and-collect.
An omnichannel strategy and digital transformation initiatives can be closely tied. Omnichannel customers have been proven to spend more than those who shop using a single channel.
of retailers reported that average order size increased when using clienteling apps. Source: Scandit Future of Fashion In-Store Engagement 2022 Report
Combining the right technology with process automation can reduce operational inefficiencies. Cutting waste, cost and optimizing resources can lead to efficiency gains.
Several store operations tasks are time-consuming and prone to error – perfectly ripe for improving with the right tools. Reducing inaccuracies for tasks such as receiving goods or replenishment prevents the need for tasks to be redone. And performing tasks faster with minimal downtime using automation can improve store efficiency.
Better support retail workers
The connectivity of today’s frontline retail workers is imperative not only from a worker satisfaction and retention perspective but also from a customer service perspective.
Using smart devices and employee-focused apps, workers can be better connected to management, each other and their stores. With the ability to access stock and product information and communicate with other workers at their fingertips, their store experience is improved.
Driving up worker satisfaction and allowing them to provide superior customer service that will benefit the business.
of retail decision-makers say digital transformation initiatives have not yet reached the frontline.
Improve stock availability
Retailers can leverage digital technologies to optimize their supply chain processes, including sourcing, inventory management and delivery. This can lead to faster turnaround times, reduced inventory carrying costs, and improved product availability.
Retailers can gain real-time visibility into their inventory levels, location, and movement. This allows retailers to reduce out-of-stock situations, and avoid overstocking.
Use data to make business predictions
Digital transformation causes an influx of data to retailers. With the right systems in place, data can be used for analytics and predictive modeling to make decisions in several areas:
- Trend analysis – identify trends and patterns in consumer behavior to help inform product offerings and marketing strategies.
- Sales forecasting – using historical sales and current industry data, retailers can better forecast sales which allows them to optimize their supply chain, resources and inventory management.
- Pricing optimization – consider more data points to ensure correct pricing and promotions to maximize sales.
- Personalization at scale – Use data to make personalized product recommendations to customers and also provide them with offers and rewards that drive loyalty.
The challenges of digitalization in retail
Technology is essential for digitalization. And technology costs money. Investing in the right areas requires careful consideration and a clear plan of how different technologies integrate and how the overall changes will impact the business. Costs go beyond the purchase of new tools and systems. Implementation costs, downtime, and training costs need to be factored into the overall transformation project.
Many retailers still rely on outdated systems for their core operations. Some systems will have been in place for more than 20 years with market needs driving further capabilities to be added on top. This complexity makes having a lean architecture and compatibility with new technology a challenge. Replacing these systems or finding ways to integrate the old and new will take time and resources.
Resistance to change
Changes will affect all stakeholders associated with a retailer. Workers and customers are often at the end of transformation projects and are likely to be the most resistant. To achieve desired results and to make sure new tools are adopted, clear communication and a plan that involves them in the testing and rollout of new systems are required for transformation to take place. Agile and fail-fast methodologies allow retailers to test new things and gather feedback to reduce any resistance.
Retail digital transformation projects may require new talent with the skills and knowledge to implement and manage new technology. For existing workers, training them on new processes and tools requires time, money and effort and should not be underestimated.
Examples of digital transformation in retail
Artificial Intelligence (AI) for smarter substitutions
Giant US retailer, Walmart, is now making use of AI to help their store associates make better choices when substituting products for online orders.
At times, popular grocery items can sell out. Substitutions of out-of-stock items for other products are required. The decision used to be a manual one made by the picker. Nearly 100 different factors can go into that decision, so Walmart now uses deep learning AI to consider the variables such as size, brand, type and price in real time to determine the next best item.
Data capture is the process of collecting information from the physical world and converting it into a form a computer or a human can read and use. In retail, this often means scanning barcodes or manually recording the details of an item for upload into a central system for tasks like inventory management.
The barcode is 50 years old and remains the primary way to represent data in a machine-readable form. But both barcode symbologies and how you capture and use data from them are evolving. Automation is more commonplace and other capture techniques like optical character recognition (OCR) and object recognition can now be used alongside barcodes for an enriched picture. Here are 6 examples of ways to capture data that drive digital transformation.
Augmented reality (AR)
UK convenience retailer, Nisa, implemented an AR ‘Scan & Save’ project that allows customers to save money on branded items by scanning barcodes with a Scandit-powered Jisp app. Displayed using AR on the customer’s smartphone, offers are revealed and redeemed at the checkout.
150 stores across the UK have implemented the technology which has resulted in hundreds of thousands of scans and redemptions. A voucher-issued-to-redemption rate of 86% has helped shoppers save an average of £4.72 per store visit, fueling loyalty and repeat visits to Nisa stores.
Cosmetic and beauty retailer, Sephora, has built a large base of loyal customers through a digital customer experience strategy. Its mobile retail app is the gateway to product recommendations, reviews and pricing to give customers an unbiased service from experts so they feel confident about making a purchase.
The app also includes an AI feature called Virtual Artist which uses augmented reality and facial recognition to give shoppers a ‘try before you buy’ experience. Customers can see how different makeup colors will suit them and compare them before adding them to their shopping baskets.
River Island, a prominent UK fashion retailer, wanted to modernize their store operations and improve both customer and employee experience. They decided to replace their dedicated scanning devices and equip each of their store associates with a rugged smart device.
It allows them to instantly access information to answer queries, retrieve product information, check stock availability and proactively retrieve click-and-collect packages as customers enter the store. Improving the lives of their store associates and creating higher job satisfaction.
Where to start with retail digital transformation?
Transformation initiatives will be dependent on the circumstances of each retailer and its objectives. Most initiatives fall into three areas: lowering costs, improving customer experience and increasing operational efficiency.
Often the most successful transformations look at where people and systems interact and find ways to improve those processes. For example, how a customer shops in store using their smartphone, or how a worker manages inventory.
In all cases, an iterative and agile approach is recommended. Starting with a minimal viable product (MVP) that adds value to or streamlines a process and captures user feedback before moving to the next stage. Using this approach, customers and workers feel included in the project. Their guidance will help ensure that the final outcome is well adopted and fit for purpose.
Overall, having a clear strategy, involving different stakeholders from the outset and taking a staged approach will yield the best results. Being agile will help embrace new discoveries along the way.
“People, people, people. In the end, people make the difference. Without the buy-in from your workforce, you will never be successful.”
Christian Bader, CTO of Fenix Outdoor – Transaction to Experience: Lessons from Fenix Outdoor on Decrypting Digital Transformation
How Scandit can help
Scandit is the leader in smart data capture technology. We enable users to digitally interact with physical items by capturing data from barcodes, text, IDs and objects to automate end-to-end processes and provide actionable insights.
Top retailers are now using the Scandit Smart Data Capture Platform in their digital transformation efforts. Improving their operations and the customer experience in one go. Including 4 of the top 5 European retailers, 8 of the top 10 US Grocers and 6 of the top 10 luxury and premium brand retailers.
Our capabilities provide unmatched scanning performance that unburdens workers from repetitive tasks. And useful insights at the point of data capture help employees and customers make better decisions as they work and shop.
We offer no-code and low-code integration options and our Enterprise Support Team will partner with you all the way from evaluation to day-to-day operations – with trials, solution design, integration and customer success support included.