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Risks and Rewards of Digital Transformation in the Retail Sector

The widespread disruption driven by economic, consumer and competitor forces, left no choice to the businesses but to adopt digital technologies to transform how they conduct business. Retail is no exception. Both physical and electronic retail formats need consistent systematic future planning to withstand. However, an otherwise smart move towards modernization can unintentionally expose organizations to a range of unforeseen threats that must be addressed. In this article, we will discuss some ground-breaking retail digital transformation initiatives by global retail giants, and their respective results. I promise to present digital transformation examples that are not only from Amazon, Netflix, or Uber while I do so.

The definitive aspect of Retailing is: It starts with making a product, getting customers to notice it, making them buy it, transferring the actual physical possession of the goods to the buyer, collecting their feedback and using it for the next time you make new products and repeat the cycle from step one all over again. The race started when the Digital Natives started digitizing some steps, so the cycle became smaller and the pace faster. The traditional players have struggled almost a decade to cope-up, but gladly most of them have dipped their toes in the digital pond with time. Else, it would have been difficult for them to accommodate the range of transactions, goods, and vendor management tasks.

As soon as the internet was commercialized, the retailers started adopting various operational methods. Started with basic billing systems, manufacturing, and enterprising resource planning systems; the evolution of technology in Retail space has seen online listing, digital spending, database management, supply chain management, artificial intelligence, Internet of Things, automation, cloud computing, virtual reality, and the list goes on. Digital Leadership is trying to blur the lines between physical and digital retailing.


Let us take a closer look at them, one by one and see how some retailers reaped benefits through Digital Transformation in the Retail Sector.


Honestly, customer-centric does not even cut it to what creates brand loyalty in the competitive world we live in today. A brand should be customer-obsessed to earn some brownie points. The stats say brands that offer superior customer experience are more likely to bring in 5.7 times more revenue than their immediate competitors. World’s renowned make-up chain Sephora knows a thing or two about customer experience. As online shopping is giving physical stores a run for their money, Sephora not only created an immersive e-Shopping experience but also brought in simple yet effective strategies to keep in-store customers engaged. They have placed color-coded shopping baskets in a few stores across Europe that indicates whether the customer would like to be assisted or rather shop alone. The initiative came alive from their recent customer insights has dramatically improved their average UPT (Units Per Transaction) by 30%. As the recent CoronaVirus Pandemic is affecting global retailers, Sephora shut the stores until the end of March 2020 and declared waive-off on shipping charges for online shoppers and extending its return policy to 60 days to be more online-friendly.

A few characteristics observed in retailers that are obsessed with their customers and its working wonders for them.

  • They always ensure their customer has an easy and quick gateway to customer service with real people.
  • They insist on instilling customer-experience in their internal communications.
  • They align and periodically re-align their marketing and customer service teams based on their ROI metrics.
  • They value customer quality over quantity.
  • They are proactive.
  • They factor in customer satisfaction scores as part of employee recognition and compensation bonuses.

Shifting innovation focus

Modernization is often misapprehended as complexity. Amusing the customers is good but there are other aspects to keep in mind before turning ideas into products or services. They are – ease of use, cost, customer readiness, time to market, competing counterparts, social conditions, etc. Businesses that balanced all these aspects always find themselves in the front row.

Recently, a luxury retail giant’s new leadership went one step ahead in implementing it. They looked at Digital presence as ‘Digital store’ than a ‘Door to store’. Their strategy for seamless digital customer experience is any/any/any – any device, any channel, or any touchpoint. In extension to that, they have shelved their extravagant tech innovation center and routed those investments to creating and enhancing tech-enabled customer experience in their stores. Though the decision raised a few eyebrows, it worked well for them. The retail mammoth has witnessed an increasingly visible growth in their store walk-ins compared to any of their competitive counterparts in luxury retail.

Simplifying the innovation and personalization on the run does wonders. The world’s second-largest Auto-manufacturer is also known for its creative product promotions. As part of their Digital Transformation evolution, they have introduced interactive digital dealerships and product exploring applications. Due to various reasons ranging from app performance to lack of user-engagement elements, they have faced a decline from their users during 2012. But they came back twice as strong with their new AR-driven campaign. They took advantage of their new AI ventures and created an ultra-simplified immersive AR experience that allows its users to explore all the features of their automobile features up and close. With a hint of Mixed Reality technologies, they have even created virtual vehicles that let the customer smell and get a tactile feel of the new car before even stepping into it. Ladies and gentlemen, that is customer-centric innovation!

Customer insights for prescriptive accuracy

Across sectors, satisfied customers spend more, exhibit brand loyalty and enable conditions that encourage organizations to step into new ventures. It is true that modern buyers are stoked by digital-first attackers and a powerful weapon in traditional players’ quiver to fight back is piles of seasoned data. With the help of data-turned-analytics and artificial intelligence, we can detect patterns – patterns of customer behavior, market fluctuations, demand variations, etc.

Data modeling has evolved as a crucial part of the next-generation business operating model. The digital forerunners are already employing dedicated teams (home-grown or outsourced) to capture first-hand data, customer journey and turn that into a framework that can offer an actionable perspective.

An enormous hypermarket chain that has thousands of stores across the globe is partnered with various advertising and marketing firms to handle promotions and customer experience programs. According to their recent numbers, over 160 million shoppers visit their online and physical stores every week, just in the USA. Out of which 90% of the shopping is done in-store. Lately, their digital transformation steering team made sure all the initiatives are data-driven. They started hiring young fresh-out-of-college people to serve in stores, evolving their omnichannel strategies gradually, stepped up their in-store digitization game and most importantly their tailored gift suggestion app ShopyCat, delivery app Goodies – they are all data-led decisions which are working great for the company right now.

As much as they are proving that ‘although the digital marketplaces like Amazon gained popularity, people still prefer physical shopping spaces if they meet their digital experience expectations’. Talking at a recent event, company’s CEO said that they are currently processing 40 petabytes of data every day and their largest private cloud solution is enabling them to process 2.5 petabytes of data per hour. Having infrastructure and talent that can enable data integration into organizational strategy is not an option anymore.

Some of the best practices across retail verticals that can improve the efficiency of data:

  • Conducting redesign workshops
  • Shortening feedback loops and enabling quick response
  • Taking post-launch testing practices religiously
  • Finding ways for seamless integration between new and existing channels (including non-digital channels)
  • Rendering the customer journey as a clickable prototype for better simulation
  • Creating data fetching mechanisms in every media/marketing activity including SEO and SEA

Retail as a business is no longer just about the products but is about customers. They no longer can make money by optimizing their product-driven processes.

If retailers are determined to transform themselves from product-centric to customer-centric, they must succeed in moving from efficiency to flexibility, from optimization to inspiration. The volumes of customer insights (not just data) a company can generate and their pace of acting upon those insights are more crucial in growth than how fast they can create and bring a product out. Digital experience decides the business’s lifespan. Do you think having an efficient and process-aware team by your side can speed up your digital transformation? Write to us: