Digital Transformation: Resource for Retailers this Year [Updated for 2023]
Introduction
The retail market is in the midst of a digital technology revolution. With the advent of methodologies and technologies like Service Design, AI/ML, and Data Strategy, Retailers must embrace change and expand vertically to transform in order to remain competitive. If you are a retailer this Digital Transformation Guide will offer some new insights into the new digital era.
By transforming their businesses to be more vertically integrated, retail companies can provide an improved customer experience, drive down costs and create new revenue streams. In this article, we will explore the importance of Retail vertical transformation and discuss how it can help your business succeed.
However, these challenges have also produced beneficial results: retailers have been forced to reconsider their long-standing systems and methods that have formed the industry for years.
The epidemic has allowed a long-overdue great retail reset that can help move many merchants into more stable—and potentially more lucrative— territories than ever before.
In order to obtain long-term and permanent benefits, merchants should continue down the path they started. In fact, 2023 continues to provide a chance to restructure outdated supply chains, slim down inventory management, rethink pricing, recalibrate promotional cycles, and reinvent the physical store. This will almost certainly necessitate significant paradigm-shifting.
While you reflect with a view toward the future, today marks the start of your future by addressing present-day real-life retail issues. Now is an excellent time to take stock of the market in order to discover what separates those who embrace the reset—the leaders—from the rest of the pack.
In the next 12 months, we expect to see several new trends in their industry. These include retention of talent and an increase in customer experience strategies from both suppliers as well as shoppers themselves—with supply chain resilience being crucial for all four factors listed above!
The pandemic has shown us that customers are willing to pay more for things they value, allowing retailers an opportunity to increase their margins while still providing high-quality services and products. In order to capture this market demand, companies will need to innovate faster than ever before.
Macro Economics
It may be useful to establish expectations for the economy, industry, and consumer before delving into retail’s strategic objectives. This can round out the subsequent strategic objectives with additional information.
The Congressional Budget Office (CBO) is a non-partisan agency that provides economic and budgetary analysis to Congress. According to their latest economic projections, published in February 2021, the CBO expects the US economy to grow at an average annual rate of 2.2% between 2022 and 2025.
Economic Outlook
Everything changed in 2022, and for the better. Enhanced vaccines and a more general understanding of COVID-19 increased consumer confidence, resulting in an increase in consumer spending, particularly in food services, transportation, and leisure activities.
The labor market also contributed significantly to the improvement.
All of this is encouraging for merchants in the near term. Many economists forecast GDP to rise by 3.1% in 2023, continuing the current pattern, according to my analysis.
We anticipate real personal consumer spending to grow in the future as a result of this development, lower health issues, and greater revenue through 2022-2024.
Digital Market Trends
Consumers are still in the dark about what lies ahead, and businesses are having a difficult time making sense of it. Businesses have developed a greater understanding of what’s next as a result of time and experience.
CEOs feel that consumer behavior is heading in their favor, despite an increase in bifurcation, because people are willing to spend more money.
For the next year, executives appear to be feeling good about revenue growth and margins. Some have even identified possible flaws as potential opportunities in their industry or company’s processes. Some believe inflation is a signal of higher prices and greater profit margin possibilities.
The news of this year has been full of changes for many people. One major shift, in particular, was the end-of-discounts at stores across America, which left shoppers questioning their own buying habits and what they should do with all those products once bought because there’s no more money being spent on them!
The downturn’s new possibilities are additional proof that the epidemic is encouraging a new trend. A retail reset. Despite other retail headwinds, such as supply chain and labor shortages, it appears that long-term optimism may be tenuous for now.
Some businesses appear to be looking for short-term stopgaps in 2023, while others seem to be striving to ensure they’re on a firmer footing for the future.
Business Priorities for 2023
When it comes to their strategic priorities, retailers have their eyes on three key objectives: workforce retention, supply chain resilience, the customer journey and the best way to enhance the customer experience
-Workforce Retention: The retail workforce is contracting, and businesses are struggling to fill positions. They’re turning to technology for assistance.
-Supply Chain Resilience: Retail organizations are making significant investments in their supply chains in order to become more resilient. They’re upgrading IT and analytics capabilities, as well as investing in automation and robotics to develop a more agile supply chain that is less susceptible to disruption.
-Customer Experience: To remain competitive, and keep market share, retailers must innovate their business models, and enhance their customer experience through targeted marketing efforts, personalization strategies, and omnichannel technology investments.
The retail industry is making major investments in technology to increase customer experience, supply chain resilience, and workforce retention. These strategic priorities will be critical to success going forward.
Vertical Transformation
Retailers are also preparing themselves for a future in which they need to vertically transform their businesses. They’re doing this by expanding their product offerings, developing new customer experiences, and creating an agile supply chain. This is critical for two reasons.
First, the retail industry is evolving as consumer behavior changes. Second, there is a need for retailers to continue innovating and not rely on past successes because it will ensure their long-term viability as an industry.
The retail industry is investing in artificial intelligence and machine learning technologies. These investments will be focused on digital technologies like analytics and automation systems that improve customer service, inventory management, and cloud infrastructure.
This will give the retail industry seamless access across all aspects of business operations. Additionally, this will enable customers easier checkout experiences at the point of sale locations such as supermarkets.
It is clear that the retail industry has come to recognize technology’s role in its future. With these investments, retailers will be better equipped to compete with Amazon and other online retailers by offering new services such as same-day delivery options at low prices; better inventory management capabilities through artificial intelligence (AI) generated data analytics; as well as more robust eCommerce websites that integrate seamlessly into brick-and-mortar stores.
Organizations that want to stay ahead in the industry need a vertically-transformed business model. They must develop new services and experiences for customers as well as upgrade their supply chains, or they will be left behind by the ever-changing landscape of this constantly evolving marketplace
When it comes to the future of logistics, company officials are certainly aware that there will be many similarities this year. However, what stands out is how different leaders act on these issues depending upon their beliefs and actions related to digitization or incorporating environmental standards into decision-making processes.
Labor Shortages
The occurrence of The Great Resignation has placed workplace concerns on the front burner in business circles.
Even with the expanded economy where it is now, and given how widespread personnel cuts were back then, problems the sector faces today would have seemed improbable, especially because they were occurring at a time when unemployment was low.
When the pandemic hit, it seemed that no one would want to quit a position without first finding something else. However, this assumption has proven incorrect as employees are actually quitting even in these circumstances!
The fact that they’re doing so demonstrates how much stress individuals are under during this global crisis.
The lesson for employers is that they need to take a fresh look at their workplace policies and practices. This means rethinking how work is done, the expectations put on employees, and what type of support they offer. It also means being willing to change with the times.
In the short term, companies should try to make the working environment more bearable. That could mean reducing workloads and hours, instituting flexible work policies, or even providing some form of financial assistance. In the long term, businesses need to take a hard look at their cultures and identify ways in which they might be causing employees undue stress
In a time when retailers are in the midst of tough financial situations, many were forced to invest heavily in hiring new personnel and retaining them.
CEOs have noted that labor concerns rank among their top retail worries; companies should rethink how they perceive employees while preparing for future challenges because what we’re seeing now isn’t just about pay rates or employee benefits but rather priorities such as flexibility & culture – particularly around meaning when it comes down having something worth doing at work every day.
The Digital Talent Divide
CEOs are concerned that there won’t be enough competent staff for IT and analytics jobs, especially those requiring greater investment.
This will lead to less digitally enabled retail. The problem appears exacerbated by the fact that their companies need people with varied skillsets including data scientists as well as engineers who understand the business logic.
Hiring for technology-driven jobs will most likely necessitate far quicker adoption of cutting-edge technology in order to compete with more technologically advanced businesses.
The draw to retail for a young, agile brainiac wanting to do all these great things from a technology standpoint isn’t there—particularly when you’re a retailer still arm wrestling with on-premises technology installed in the dinosaur era.
Unfortunately, there is a lot of competition out there. Despite technological and automation advances, physical labor will be required in the future, despite the well-publicized changes in consumer behavior and retail trends. It may be difficult to accept now, but over half of CEOs believe that staff-free stores will become increasingly common in the future.
Talent Priorities
When companies try to take on the war for talent, they should realize how the epidemic has redefined priorities. The pandemic’s collective experience has prompted wage earners to evaluate themselves more deeply.
According to current statistics, there is a greater emphasis on self-reflection and well-being, as well as a difference between money and a cause. There’s also a growing desire to work from home more often.
The present model of workplace organization appears to be incompatible with evolving employee expectations.
Retailers should follow the playbook of industry leaders both inside and outside the sector in order to enhance their employee experiences.
They should consider how to inject culture, adaptability, and meaning into their hiring and retention strategies to improve the implementation of their digital transformation strategy and ultimately all their digital channels and retail sales
Furthermore, as priorities change, retailers will undoubtedly be forced to address how they represent themselves in the marketplace, from a diversity of suppliers to career advancement for previously underprivileged people.
The way a firm depicts its brand may be an important element of the retail reset and gaining competitive advantage. Adapting to shifting market conditions and evolving the narrative around the brand might be a contributing factor to the development of new talent.
Retail employers are looking to retain their workforce, while also preparing for potential disruptions in the supply chain. They are also focused on delivering excellent customer experiences. Each of these objectives requires a different set of strategies and capabilities.
By understanding the challenges and opportunities that lie ahead, employers can begin to plan for the future and make the necessary changes needed to be successful. Are you doing everything possible to retain your employees? What steps are you taking to ensure a resilient supply chain? And how are you delighting your customers?
Resilience in the Supply Chain
During the pandemic, supply-chain failures up and down the line have revealed persistent concerns with product manufacturing and transportation across the world. Despite its inevitable nature, the abrupt and simultaneous closures demonstrated in real-time that the current situation would no longer do.
When it comes to taking action, understanding that just as the changing focus on the pandemic has altered employee expectations, so too have consumer expectations.
These days, when and where customers make their purchases is considerably less predictable. Consumers have evolved into merchants in their own right, purchasing from a variety of retail channels and creating and promoting their own line of items.
Many current supply chain capabilities, such as demand planning, inventory management, and fulfillment forecasting, aren’t designed to address these situations. Businesses require more verified information and technological improvements to create agile systems that can meet the new consumer demands.
Automation
The most anticipated sector for financial investment in 2023 is fulfillment and inventory management, as it has been previously. Robotics and automated material handling are only considered by 57% of CEOs now, compared with 78% in 2021. (National Retail Federation)
The same study found that 54% of retailers are looking to adopt or expand the use of artificial intelligence (AI) in the next five years.
Services, such as in-store product demonstrations or digital customer service channels, are being offered by 31% of retailers and this is expected to grow to 45% over the next three years. (National Retail Federation)
Customer experience is the top priority for retailers in order to stay ahead of the competition. This ranges from offering a seamless shopping experience, whether in-store or online, to providing engaging content and personalized recommendations.
(Retail Dive) In order to keep up with the latest trends, many retailers are turning to innovative technologies such as augmented reality, virtual reality, and beacons.
Data Transparency
When it becomes apparent that a supply bottleneck may take years to resolve, merchants should prepare for the future not just by investing in new technologies and automation.
Transparency and communication across the end-to-end process are frequently needed components to help optimize technology investments in the future.
There’s a lot of evidence suggesting that without accurate knowledge, it’s hard for businesses to plan ahead or make informed decisions. When you buy directly from the manufacturer, you have much better information than when you purchase through a third-party marketplace like Amazon.
Companies with little insight into what those firms expect to sell or could discount in the future are an order of magnitude more likely to experience financial distress.
Transparency is key for retailers looking to plan for the future.
-When it becomes apparent that a supply bottleneck may take years to resolve, merchants should prepare for the future not just by investing in new technologies and automation.
-Transparency and communication across the end-to-end process are frequently needed components to help optimize technology investments in the future.
-There’s a lot of evidence suggesting that without accurate knowledge, it’s hard for businesses to plan ahead or make informed decisions.
-When you buy directly from the manufacturer, you have much better information than when you purchase through a third-party marketplace like Amazon.
-Retail businesses with little insight into what those firms expect to sell or could discount in the future are an order of magnitude more likely to experience financial distress.
-Transparency is key for retailers looking to plan for the future and improve their digital transformation efforts.
What other factors should retailers consider when preparing for the future?
Collaborating with new Partners and Suppliers.
It’s a fact that every business, no matter how big or small it is, may benefit from data-driven supply chain optimization and specific experiences.
Those that are unable to grow should consider other alternatives such as openness, access to underutilized assets, and cooperation with new partners.
Retail real estate owners and merchants, for example, might collaborate on pop-up shops, short-term rentals, or other new retail concepts.
By taking the necessary steps toward resilience in the supply chain, creating transparency, and collaborating with new partners and suppliers, businesses can ensure their longevity and success.
As technology advances, the retail industry is changing faster than ever.
-To keep up, retailers need to invest in new technologies and automation.
-Transparency and communication across the end-to-end process are frequently needed components to help optimize technology investments in the future.
-Collaborating with new partners and suppliers is also important for retailers looking to plan for the future.
The Digital Experience
We anticipate that the integration of digital and physical experiences will grow in importance in 2023. When it comes to online shopping, merchants should make significant investments in order to satisfy the requirements of both now and future consumers.
According to an article from the New York Times, consumers’ trust in technology and digital platforms. Virtual work, school, and leisure have replaced real-world interactions with more gadgets and edge add-ons.
Consumers also tried out new and inventive ways to shop as a result of the pandemic. Even with recent industry studies on back-to-school and the holidays, we found that new technologies will play a more important role in how customers purchase items.
As we move further into the digital age, retailers need to adapt quickly to focus on increasing sales activity and the integration of digital and physical experiences in order to satisfy the needs of consumers.
– Customers are increasingly trusting technology, mobile apps, the internet of things, and social media digital platforms when it comes to their shopping habits.
– Virtual work, school, and leisure have replaced real-world interactions for many people, which has led to a change in how they shop.
– New technologies will play a more important role in purchasing decisions during the back-to-school season and the holidays. Retailers who don’t adapt may lose profit.
Digital Marketing
It’s the lifeblood of any organization, whether it be a profit-driven company or a non-profit trying to make the world a little bit better. The decisions made in marketing can mean the difference between an organization that thrives and one that fails.
This is especially true in the digital age. In a world where people can buy anything they want with just a few clicks, businesses need to be on top of their marketing game if they want to survive. And this isn’t limited to online-only businesses.
Brick and mortar retail stores and discount stores need to embrace new business models and be just as digitally savvy as ever if they want to remain competitive, stay afloat and stay connected to the end-user. This includes avoiding the status quo and killing off outdated processes.
These businesses must embrace digital change.
In today’s business world, profit is king. Companies that can’t generate profit are quickly pushed to the sidelines. This has always been the case, but it’s even more true in today’s digital age. With so many businesses vying for attention online, those that can’t generate profit are quickly forgotten.
This is why it’s more important than ever for businesses to focus on profit in their marketing. If you can’t make money, you won’t be able to stay in business for long.
So, what does this all mean for retailers? It means that they need to be prepared for the future. They need to focus on profit and on being digitally savvy. They need to make sure that they’re always ahead of the curve because if they fall behind, it could mean the end of their business.
The Metaverse
Given the considerable investments in internet marketing, businesses should consider using the metaverse. In the next five years, over half of CEOs anticipate retailers interacting with customers about digital goods. The profit potential is too large to ignore.
The metaverse refers to new tech and implies a shared, virtual space where people can meet and interact. It’s a place where businesses can have a physical presence and offer digital products, digital tools, and services. Retailers should start planning their metaverse strategy now to be ready for the future.
Some of the benefits of using the metaverse include:
– Increased profit potential. The metaverse offers a new way to sell products and services, increasing profits.
– Greater customer engagement. Customers are more engaged when they can interact with businesses in a virtual space.
– Improved brand awareness. The metaverse provides an opportunity for retailers.
As the hype cycle for NFTs has gone nuclear in recent months, many are predicting that this new technology will be at our disposal soon.
Early use cases were unclear but the retail sector seems to figure it out depending on which brand you support–with different players chasing after their respective needs or desires as well!
For instance: Gucci partnered with Superplastic which creates animated celebrities using digital avatars – creating a limited series of collectible items available only through characters created by users within its virtual world; Nike acquired RTFKT founded largely upon sneakers designed exclusively for virtual worlds.
The metaverse promises to be a new way for shoppers and brands to interact with each other in an immersive environment. It’s like going into a store without setting foot inside one!
There is no doubt that this will not only change the retail experience but also how consumers make purchases online or offline.
As you plan your metaverse venture, consider utilizing fan missions to extend the lifecycle of your in-world goods, increase revenue streams, and boost brand awareness.
Working to convert real-world products into digital ones may help you establish marketing windows for virtual product releases, events, and other unique—and value-added—metaverse experiences that shoppers can enjoy.
Infrastructure, Multichannel, Omnichannel
For years, bandwidth, connectivity, and security have stymied merchants in their efforts to implement retail store technology.
The introduction of minimal and zero infrastructure flips the script by allowing businesses to invest while also encouraging them to connect technologies that improve operations, experience, and efficiency.
A cloud-first, zero-infrastructure mentality allows for improved cost, service quality, security, and application control across geographies. In an ideal world, plug-and-play connectivity should be feasible between devices and solutions that enable organizations to easily deploy new applications, as well as the capacity to deploy them when and when needed.
In addition, in the future, retailers will be able to utilize this technology to build an omnichannel presence through virtual and physical stores.
Customers should expect a seamless experience when they switch between devices or channels that are enabled by cloud-based infrastructure connecting all of these points together seamlessly.
Retailers have been talking about omnichannel for years, but the pandemic has forced them to finally invest in the technology and processes required to make it a reality.
Omnichannel is no longer a “nice to have” for retailers—it’s a necessity. In order to survive and thrive in the new retail landscape, retailers must provide their customers with a seamless shopping experience across
Data Security and Privacy
It’s possible that participating in the retail reset will force companies to properly prepare for the physical world’s digitization.
The ultimate objective is to provide a seamless omnichannel shopping experience. But it also necessitates measures beyond the internet, including data privacy and security technologies for the real world as well as the digital one.
In order to keep pace with technological developments and remain competitive, retailers must use their data more effectively. However, businesses that are not following up on this opportunity may lose out in a post-pandemic economy where customers expect personalized services from companies they do business with, whether online or in-person!
We have seen how technology has transformed our lives in many different ways, and now it is time for retailers to take advantage of these changes as well.
Consequently, the retail reset will benefit from technologies that are integrated with data privacy and protection protocols such as blockchain, encryption, or artificial intelligence (AI).
It’s expected that this industry-wide reset will help create an environment where retailers are able to use data in a more effective way for their business and customers alike.
We see a future where retailers and consumers are inextricably linked by technology. The retail reset will force companies to take advantage of the technological changes that have been happening around us for years now if they want to remain competitive in an increasingly digital world.
We’ve seen how it’s transformed our lives in many different ways; Analytics investments may help businesses better prepare to meet rapidly changing consumer priorities than their competition—while also ensuring that security and data privacy policies are in place to keep customers believing in them.
Conclusion
It’s likely that many retailers will continue to find themselves in a “reboot” situation this year. The CIO role is more important than ever. By leveraging new technologies and processes to meet customer needs, we can hopefully reduce friction and increase sales for businesses as well.
The coming era of retail will be dominated by new technologies, artificial intelligence, and the rise of DTC / e-commerce.
To compete in this changing landscape retailers must first figure out how they can reset as employers meet consumer demands while acting as better corporate citizens–and then embrace what’s happening with innovative ideas like warehouse stores that are now accessible on-demand through mobile devices.
We expect that the retail reset will open up new opportunities for innovation in how we deliver products and services to our customers in ways never seen before.
The next couple of years may offer some very exciting developments from a technological standpoint as companies invest heavily in transforming their business models while simultaneously dealing with shifting customer expectations resulting from changing demographics around age, gender, race-ethnicity, etc.
Retailers need to be proactive in resetting their business processes and models by investing heavily into technologies like artificial intelligence (AI), automation tools such as chatbots that automate customer service interactions; Blockchain technology for security purposes, or even self-driving cars so they can move products from store shelves directly into customers’ hands. This is an important factor.
Workforce retention, supply chain resilience, customer experience, and vertical transformation are essential for business success in the modern era. Each of these topics is complex and deserves its own article for further exploration.
However, at a high level, each area represents an important consideration for businesses looking to stay ahead of the curve. If you’re interested in learning more about how your business can take advantage of these trends, get in touch with today. I would be happy to share my insights and help you chart a course for success.
