Digital Transformation in Retail Industry
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Digital Transformation in Retail

The retail industry has been and remains one of the most receptive to various innovations. In the past year, digitalization and informatization of retail have gained momentum, and now retailers need to solve new problems in order to use the new opportunities and prospects that are opening up before them. It is obvious that a correct and timely response to the situation in the modern retail market will give the company an edge over its competitors.

In the world  retail sector there is a constant increase in the pace of digitalization. This is due to the fact that more and more consumers are actively using digital technologies, and therefore, in order to be in tune with their preferences and successfully compete in the market, it is also required to introduce and apply modern technological solutions. With regard to the introduction of digital technologies, the world retail market is increasingly innovative. Key trends that have changed the global retail market, namely Big Data, artificial intelligence, augmented reality, blockchain, are already actively influencing present-day business realities.

Digital Transformation Trends in Retail

Today, the digitalization of the global retail  sector is largely determined by the change in the nature and behavior of the modern consumer. This is due, among other things, to a change in the environment – the rapid development of technologies, the emergence of digital ecosystems and innovative business models.

Thus, modern buyers’ values – convenience, environmental friendliness and more – require a personal approach. They actively use digital technologies and various channels to obtain information. In general, there is an increase in consumption, but the consumer's path to purchase is becoming multi-channel. This leads to the need for changes in retail.

Practice shows that the most effective is an integrated approach to the implementation of such changes. For example, in retail chains it is advisable not only to introduce systems for analyzing the behavior of visitors, but also to revise the requirements for personnel and increase labor productivity. With the help of digital technologies, it is possible to increase the efficiency of operating activities and, accordingly, reduce the cost of goods and make them more affordable in the market.

At the same time, many retailers note that the majority of consumers are enthusiastic about technical innovations and willingly use them in retail outlets. Thus, self-service cash desks, contactless payments, and mobile applications of retail chains are becoming more and more popular.

Thus, in the field of digitalization of the retail sector, two key trends can be distinguished: the active use of modern technologies and the desire for in-depth analysis of the audience. These trends are interrelated: technological shopping facilities attract modern consumers who are distinguished by their desire for development and based on the analysis of visitors, their areas of attention and preferences a targeted and more effective offer is formed. Digital systems allow a retailer to accumulate consumer information, track purchase history, analyze demand and be sought after customers.

Digital Transformation in Retail Examples

In the field of retail trade, today there are four fundamental directions of digitalization:

  • Work with consumers, including all stages from the emergence of interest in a trademark to the moment of making a purchase;
  • Ensuring operational efficiency, including the effectiveness of personnel, work with products, price tags, display of goods, etc.;
  • Logistics and control of product deliveries;
  • Control of the IT infrastructure and security systems.

Benefits of Digital Transformation in Retail

Every retailer, like any other business, strives to achieve two main goals – increasing profits and reducing costs. Therefore, most retailers pay maximum attention to primarily working with consumers, since it is the area that directly impacts on profit growth.

Today, outlets' owners understand how important it is to have the most complete information about their own audience. Analysis of visitors based on digital technologies will allow to form an accurate portrait of the target audience, and increase advertising efficiency. It gives a clear idea of the demographic characteristics of the audience of the retail facility and the degree of its involvement in the brand world. In addition, these technologies will allow us to timely track the results of marketing activities, accumulate online statistics and save the history of attendance at each point for a certain period of time. Therefore, modern software solutions (systems of face recognition, video surveillance systems, etc.) are becoming more and more popular.

The data obtained through the analysis of visitors is necessary in order to create personalized offers for shoppers, focused on their needs, and to target advertising at the point of sale. Facial recognition software solutions use video cameras to determine the demographic characteristics of visitors and launch the most relevant commercials on the screens in the sales area, for example, for a young man – an advertisement for sporting goods, for a girl – for perfumes and cosmetics. This helps to attract more buyers to retail properties and stimulate sales growth for certain product groups.

Digital systems make it possible to obtain and use objective data for generating analytical reports, and planning marketing strategies. With the help of analytics, you can evaluate the effectiveness of a new ad campaign or solution and identify areas where optimization is needed, as well as predict customer demand. All this will help to reduce costs, build the most effective marketing strategy, and improve the quality of customer service.

Digital transformation in retail store chains  makes it possible to optimize business processes and obtain more necessary information, which means that you can make more rational and informed decisions and successfully compete in the market.

Difficulties in Implementing New Digital Solutions

Organizational problems are among the most significant problems that companies face when implementing various new digital solutions. For some companies the difficulty lies in the lack of experience in creating and implementing such projects, for others –  in the incorrect assessment of the timing of the completion of work on the projects; some companies  highlight the lack of a sufficient number of qualified employees to implement such projects; a good few note ineffective interaction between different departments.

In addition to these difficulties associated with organizing the implementation of digital solutions, companies often mention two more common problems related to users: certain companies believe that users are not technologically competent enough, and still others indicate lack of interest and lack of involvement.

In addition, an indicator of the insufficient level of organization of the digital transformation process is the absence of certain strategies related to digitalization. This situation is typical for many companies:  they do not have a clear plan for the coming years related to the implementation of digital solutions.

So, the further development and active use of digital technologies in companies is slowing down due to a number of obstacles, and among them there are more external factors than internal ones. The external factors are economic instability in the world as a whole, insufficiently developed information and communication infrastructure, ill-preparedness for the widespread use of digital systems. Internal factors are primarily associated with financing: we are talking about the considerable cost of digital projects, a low budget, serious costs for the implementation and further development of solutions.

It is worth noting that many business owners still consider the use of digital solutions to be a purely technological task, which must be carried out by designated IT specialists. However, digital transformation is not only the development and implementation of new technologies, but also a change in business processes, a new level of interaction with partners and customers, a new system of business management and functioning. We are talking about complex changes that affect all areas of the company and all personnel, not just the IT department. Understanding this clearly will give retailers a competitive edge.
Today, more and more retailers are switching to a new business model that is focused on working with data about visitors in real time.

Digital Transformation in B2B Sales

Technology is completely transforming the rules of the game in all market areas. And in 2021, this trend will become even more pronounced. That is why, following the successful experience of retail sales, B2B is also going digital. Moreover, this is true even for the largest corporations, whose sales services are already achieving great success through the use of digital.

A McKinsey study of the B2B area revealed that representatives of the industry, whose vector is directed towards the digitalization of business processes, can boast of higher financial results. The CAGR (annual growth rate) of the aggregate income of such enterprises for 5 years is almost 2 times higher than the similar indicator of other firms.

The top B2B players using web tools have 3.5% higher revenues and 15% higher profitability than the rest of the b2b players. However, only 10% of b2b corporations who participated in the study confirmed that web transformation is their top investment priority. The rest give preference to the development of other areas, even though they are limited, irrelevant and less profitable.

Meanwhile, the impact of digital leverage on B2B marketing and sales is only increasing every year.

Digitalization of B2B sales is the next stage of business development associated with the transition of companies to B2B e-commerce platforms. Moreover, this includes not only the redirection of personnel tasks to computers and other technological solutions (automation). Digitalization affects the global transformation of work processes, up to updating the business model, taking into account the needs of the digital economy of the new era.

Advantages of introducing digitalization tools for B2B business:

  • Sales  growth due to optimization of time and operational costs.
  • Personalization of work, as well as the ability to use flexible settings in various areas (for example, unique configurations for different user groups). However, this includes personalized display for different customer groups, personalized prices, promotions, marketing messages and special offers. At the same time, personalization in the B2B sector can often be expressed in the revision of pricing, assortment and other units. And also in providing discounts on unpopular assortment groups and in sales of “frozen” goods (stock balances).
  • Freeing up the time of managers, which directly and positively affects the speed of work, and also reduces the time for receiving and processing orders, complaints and other important incoming business flows.
  • EDI (electronic document management), which can be conducted directly through the platform: financial transactions, invoicing and reporting.
  • Reducing the influence of the human factor, minimizing the likelihood of errors caused by personnel.
  • The ability to integrate with the supplier's accounting programs, which allows you to monitor warehouse balances and other important information in real time.
  • Automation of collection and processing of statistical information, which allows you to generate detailed and relevant analytical reports. 

The Pace of Digital Transformation in Retail Industry

If we talk about the pace of digitalization, then the undisputed leader in the world market is still the industry of Internet commerce, which is now actively developing and increasing volumes. 

At the same time, most retailers today are more than serious about the impact of digital technologies on business processes. Business owners, and management specialists understand that without the introduction of modern digital solutions it is no longer possible to maintain their position in the market in an increasingly competitive environment. At the same time, many organizations strive to implement the most necessary solutions, the absence of which is already beginning to negatively affect business, but are in no hurry to develop new directions.

Despite this, we are witnessing the process of accelerating digital transformation: retailers gradually come to understand the inevitability of the ongoing changes and their systemic nature. Analyzing the situation in world retail, it can be noted that not only innovative digital solutions are being used, but traditional business models are being revised, relationships with partners and consumers are changing. Digitalization affects various areas, and in the near future its pace will increase.



Viktor Ihnatiuk

Founder at Boosty Labs, SNO Growth Lead at Storj Labs

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