Digital transformation in the retail sector

(Image credit: Image Credit: Zapp2Photo / Shutterstock)

Recent advances in technology such as cloud, artificial intelligence and data management have had a massive effect on the majority of sectors. Businesses today have the opportunity to streamline processes and become faster, more efficient and ultimately better than ever before. The challenge this presents retailers is how to keep pace with this rapid change and avoid being left behind.

Last year was a turbulent year for retailers, and the industry appeared in the headlines regularly. Household names went bust and disappeared from the British high street and others were forced to close hundreds of stores. This continues to be the case, and according to British Retail Consortium, the worst December sales performance in 10 years means a challenging start to 2019, a warning amplified by the recent news of HMV going into administration again.

There are obviously a number of reasons for this, and one of the main drivers is changing consumer habits and the rise of digital technology. To meet to these changes, retailers must digitally transform their business – however, this can be a huge challenge.

What is digital transformation?

When it comes to the retail sector, digital transformation takes on a very wide meaning and can be a very unhelpful phrase. ‘Business Transformation’ better represents the process as it requires more than just replacing old technology to guarantee success. It embodies the necessity to change how retail operates to accommodate the continuing shift in how consumers shop. This transformation includes how stores are using digital technology to revolutionise the in-store experience, as well as reshaping everything from finding a local store to paying for goods without queuing up.

Digital transformation also defines how retailers are engaging with their customers. It was previously the case that this was known as marketing, but now engagement has developed past this. It has now come to cover how retailers engage with their customers and prospects to acquire and retain them, service and sell to them, while also taking on board their views and experiences to reshape both the business and the marketing.

The strategy needs to define how retailers are engaging with their customers and the digital transformation helps them achieve that. Businesses need to understand exactly why they are undergoing this process, and what they hope to attain. Too often we see retailers attempt digital transformation just for the sake of it, without properly understanding its purpose. This is not the way to go about it.

The need for quick digital transformation has put retail and brand marketers in the eye of a unique storm: having to balance an increasingly complex front-end customer-facing set of activities against the back-end capabilities of retail technology.

The front-end of a retail business needs to be keenly focused on customer acquisition, retention, SEO, driving channel engagement, driving cross channel engagement and driving visitors – to all channels. This has traditionally been the marketing department, or an external agency’s role.

Meanwhile, the back-end – the engine room of technology – is focused on efficient running and integration of the ecommerce platform, the ERP, CRM, mobile, apps and POS – not to mention working with evolving machine learning and AI tools that aim to help refine marketing activity of the front-end.

How to lead digital transformation?

Many companies don’t have large IT teams and don’t want to have them, therefore third parties often hold the key to digital transformation. Digital transformation relies heavily on changes to the front and back-end processes and technologies that a business uses and how to bring those changes together. This requires a lot of re-wiring of existing systems and the integration of business functions, staff and cultures, and most importantly the technology itself.

It is possible to rip out and replace what already exists in one go, but third-party technology companies can help to integrate what you already have to make things run more smoothly. These third-party partners don't hold all the answers, but will be able to assist the process of bringing about the staff, leadership and technology changes to make the digital transformation work.

Often these third parties become part of a business and are then key to all future evolution. We recently carried out some research of the Top500 retailers which found that many retailers and brands already recognise this with 32 per cent working with five or more third parties both in the front and back-end of their marketing communications.

Why does digital transformation matter?

It is clear that digital transformation is vital to the future of retailers as it ensures they remain competitive in an ever-changing landscape. 

Our research shows that retailers are taking digital transformation very seriously, with 66 per cent of respondents rating digital transformation as "crucial". The research also found that retailers are making progress with their digital transformation strategy, with 46 per cent of respondents being "well on their way" to digital transformation. 

Digital transformation is mainly about improving customer service, and delivering a competitive advantage in the attraction and retention of customers. Our research found that consumers are driving the need for digital transformation, with 51 per cent of respondents stating the customer is their primary driver for change. This central position means that digital transformation has to be customer-centric across both the front-end and back-end functions to meet the growing needs of an ever more complex and demanding consumer.

Think about the long-term

The speed that consumers are moving means that retailers have to think long-term and appreciate that digital transformation is an ongoing project. Instead of implementing multi-year IT projects designed to stay in place for a prolonged period of time, it is better to stay flexible and agile.

Retailers should build a culture where they embrace constant change and are willing to try, win and fail in quick succession - only those that are able to transform quickly and realise immediate benefits will be here in years to come.

Kevin Murray, Managing Director, Greenlight Commerce
Image Credit: Zapp2Photo / Shutterstock