Digital transformation in retail management

With 20.8% of retail purchases taking place online, most brick-and-mortar stores have already adopted an online model. Some of these businesses have also adopted a hybrid approach that combines the efficiency of e-commerce with the functionality of physical stores.

However, they encounter difficulties while attempting to provide a seamless shopping experience regardless of where customers decide to purchase — on their devices, social media, or at physical stores.

Shopping is no longer a choice between physical or digital stores. Instead, current retail spaces offer consumers to embark on a dynamic shopping journey – starting their search in one place and purchasing in another.

Consequently, a hybrid approach isn't enough. It requires digital transformation to implement omnichannel retail strategies for the convenience of customers, efficient accounting, inventory management, and seamless order processing.

In this post, we explain retail digital transformation, how data shapes customer journeys, and list five technology trends you can implement to win the digital retail sector.

What Is Retail Digital Transformation?

Retail digital transformation is the process of integrating digital technologies and solutions to enhance in-store experience and streamline digitalized operations. 

It includes paving a pathway toward complete omnichannel retailing and supply chain optimization. In addition, retail digital transformation underscores the importance of utilizing emerging technologies like artificial intelligence (AI) and machine learning (ML) to make data-driven decisions.

Finally, retail digital transformation helps customers purchase seamlessly with mobile and digital payments across physical stores, e-commerce, and online marketplaces. Revving up your retail tech strategy allows you to become more sustainable and adopt ethical practices while improving customer relationship metrics. 

Let's dig deeper.

Until recently, digital transformation in the context of retail stores meant brick-and-mortar stores adopting e-commerce technologies to help customers make purchases online instead of having to visit physical stores. However, the retail industry has evolved and become more sophisticated. Now, the focus is to enhance customer experiences and ensure that historical data and customer interactions are updated in real-time. This helps customers to continue purchasing from where they left off.

Retail digital transformation is a future-oriented retail strategy that girdles you with cutting-edge technology to improve operational efficiency, enhance customer experience, and scale at speed. It requires a paradigm shift towards adopting evolving technologies to push your staff to perform their best. It also helps modernize your data management policies and IT infrastructure continuously. 

Critical technologies that highlight retail digital transformation include:

• AI-assisted product recommendation.
• Self-checkout options.
• Curbside pickup.
• Omnichannel support and sales.

What Does Digital Transformation Mean for Retailers?

For retailers, digital transformation opens up a world of promises and opportunities. To begin with, it enhances in-store experience and allows customers to shop online without friction as well.

Concurrently, it enables omnichannel inventory management and customer service while letting you manage all your backend operations from a single centralized interface. This enhances operational efficiency and generates data-driven insights.

Digital transformation also provides insight and tangible tools that help you scale up and set up new stores and implement market expansion. Last but not least, it enhances employee experience and ensures high retention and engagement rates. 

6 Key Factors Behind Retail Transformation

Customers increasingly expect personalized experiences and enhanced convenience. All this requires insights and business intelligence that is only possible with the help of predictive analysis, machine learning, and AI-enabled technologies. These emerging technologies also help enhance omnichannel shopping experience. Here are the six most significant factors that are driving the demand for retail digital transformation:

1. Changing Consumer Behaviors

The retail industry is transforming not only due to disruptive market and technological trends but also due to changing consumer behaviors. Customer expectations have increased dramatically, and most expect personalized and customized services by default. Hence, making sure that they gain access to tailored experiences across channels is crucial. Similarly, they expect fast and convenient delivery options, dynamic pricing, and an intuitive mobile-first approach. 

Customers are also increasingly politically and socially aware, making it essential for retailers to adopt a nuanced yet market-friendly stance in their digital marketing campaigns. Other recently changed behaviors include an increasing expectation of hygiene at retail stores, contactless shopping, and privacy concerns. All these evolving customer behaviors and expectations require retailers to adopt digital transformation. 

2. Business survival and competitive edge

Most successful retailers have already adopted omnichannel shopping strategies, making it critical for others to follow suit. In addition, customers who prefer shopping online not only use websites and mobile applications but paradoxically also visit physical stores more than those who do not shop online. Unless you are available on every channel your competitors already are, and unless you surpass the quality of your competitors, you stand to lose out. 

One way to outperform your rivals is to focus on the cost of your goods and ensure that labor efficiency is part of your organizational culture. This not only helps bring down the cost of end products but also your own business expenses, helping offset additional expenses you may incur while trying to remain competitive. Adopting a future-oriented retail management tool built around an omnichannel paradigm not only ensures business survival, but also helps cut costs. 

3. Self-service technologies

Customers increasingly prefer adding products to the cart independently and completing purchases without difficulties. This is expected online, of course. However, customers also like being able to shop independently at physical stores. This is when in-store smart devices, like self-service kiosks, help customers seamlessly checkout without human contact. This means, customers neither desire to wait at the counter endlessly, nor do they solely rely on self-service. Rather, they expect enhanced human-assisted shopping experience while in the store. 

To enable this, retailers may install in-store devices that allow an “endless aisle” facility. In this approach, customers can browse more related products, pay, and have products delivered to their homes. Employees can focus on attending to customers' quirks and preferences, which enhances their satisfaction. Store owners, on the other hand, can benefit from reduced employee needs, increased sales, and higher business growth.

4. Proximity marketing

Studies show that people are open to push notifications from brands they like, especially when they are likely to purchase – for example while walking around in a commercial space. Omnichannel marketing uses data from previous interactions and purchase history to detect customers in a physical area who may be primed to purchase certain products. Sensors can correctly identify customers and send personalized alerts to help them make relevant purchases.

5. Phigital experiences

It's important to note that most customers utilize multiple channels before making their final purchase. Some customers may prefer to browse online and visit the store to purchase the product, while others may first see the store, compare prices, and then opt to have the products delivered to their homes – something that the industry insiders call a “phygital experience”. Phygital is a neologism that combines the words “physical” and “digital.” Therefore, it's crucial to map out the customer's journey and record all previous interactions to ensure that they can easily browse through the product catalog, add products to their cart, and have them delivered to their preferred location.

6. Personalized marketing

Today, retail digital transformation is driven by the need to factor in various consumer touchpoints while publishing marketing content. This is necessitated by an increasing demand for personalized marketing content. For instance, content that is not personalized and contextualized enough runs the risk of sounding like ChatGPT – this may result in loss of brand value via your content. 

A headless content management system (CMS) helps retailers create a content marketing strategy that considers multiple marketing channels and uses real-time data to create content that aligns with customer journeys. AI and predictive analytics can help organizations implement omnichannel marketing more efficiently.

The Role of Data in Shaping Customer Journeys

It is crucial to record, map, and analyze data from customer interactions, support tickets, and purchase journeys to ensure the success of omnichannel shopping. Big Data and predictive analytics can be helpful, but prescriptive analytics are even more valuable as they provide actionable insights to help retailers improve customer experiences and increase sales growth. By leveraging data, retailers can shape customer journeys in several ways.

• Transform your marketing and sales processes to align with customer needs.
• Enhance behind-the-scenes operations such as merchandising, inventory management, and procurement for better customer experience.
• Process orders and deliver them on time.

To make this happen, retailers can prioritize omnichannel sales and retail strategy and ensure that they choose a data-oriented retail ERP tool.

5 Key Technologies for Retail Digital Transformation

Certain key technologies enabling retail digital transformation are responsible for your business' success. Here are five important technology trends that are currently influencing the digital sector.

1. Integration of AI and Machine Learning

Tools that integrate artificial intelligence and machine learning can detect trends that are often ignored, make accurate predictions, and generate prescriptive insight to implement omnichannel business strategies. These technologies are crucial for you to gain insight and develop customized strategies that keep your customers hooked to your brand. For instance, several studies show that retail businesses grow by using machine learning to enhance inventory management, warehouse management, shipping, and delivery, and even add or remove product features. 

2. Omni-channel retailing

Omnichannel retailing requires a paradigm shift and the adoption of evolving technologies such as predictive and prescriptive analytics. Using an all-in-one retail ERP, which is a centralized management software, helps retailers to a large extent. It integrates the synchronization of transactional data, management of stores, lanes, items, promotions, customers, and employees, and the delivery of analytics to enhance performance, helps business owners implement omnichannel retailing, which results in enhanced customer experience and improved sales.

3. Queue busting checkout systems

There is undoubtedly a need to install in-store devices that help customers to checkout faster with fewer hassles. Introducing Queue Busting checkout, whether it is self-service or not (such as kiosks, points of sale on a mobile device or tablet), can significantly reduce customer wait time for billing by up to 80%, thus allowing customers to spend more time shopping. As the name suggests, a queue busting checkout system ensures that your customers don't have to wait in line ever. This enhances the customer experience and provides a competitive edge over online retailers.

4. Internet of Things (IoT)

Although the Internet of Things (IoT) has been around for quite some time now, it is becoming apparent that businesses simply can't do without it anymore. From allowing retailers to track their inventory in real-time to avoid overstocking or failed orders to ensuring personalized shopping experiences, IoT does quite a lot. It also helps retailers to comply with energy regulations and ensures safety and security of both tangible and intangible assets. IoT also helps retailers provide a better in-store experience as long as they use smart sensors along the aisles.

5. Mobile Technology

Mobile technology is ubiquitous, and no business can survive today without going mobile-first. However, digital transformation is not just about letting customers shop from mobile phones or apps. It is also about recognizing the importance of non-intrusive push notifications and collecting user data legally. At the same time, they use their mobile devices and provide mobile PoS and checkout solutions at stores so that in-store sales processes are not hindered. Most importantly, a mobile-first approach helps employees remain productive and efficient as they will no longer be bound to their desktops. In short, mobile technology is not just the present, but also the future. 

Challenges of Digital Transformation for Retailers

While digital transformation offers immense opportunities for retailers, it also presents numerous challenges, from centralizing their data to modernizing their existing strategies. Here are the three biggest challenges currently faced by retailers.

Lack of tech scalability

Retail businesses are often not prepared for the rapid changes that are associated with digital transformation. They may not be used to complex technologies or know how to use them correctly. To successfully adopt new tools and processes, it is essential to ensure that vendors offer training to staff and business leaders. Otherwise, even the best tech may not help retailers to scale. In addition, there should be ample scope for change management. 

Lack of insight and business intelligence

Technological investment can be expensive, and businesses must be careful when making large-scale changes to existing retail processes. Even the best software program cannot help retailers with insight unless they know what to do with it. Data analytics will have no meaning unless they are aligned with recommendations for next best actions. Insights must also take operational expenses and other budgetary constraints into account. 

Lack of data visibility

Customers are spoiled for choice today, forcing retailers to always be on the edge. Although stressful, this can be an opportunity for retailers to understand their customers better with the help of data insights generated by retail management systems. However, this requires real-time data visibility which is not possible unless retailers have access to a centralized tool that also incorporates an omnichannel strategy. A centralized tool also solves the problem which many retailers face – unifying existing data to a single source of truth. 

Unifying The Data To A Single Source Of Truth

As discussed previously, retailers find it very difficult to unify data into a single source of truth. This is mostly due to the dynamic nature of data generation in a retail atmosphere. Not only do retailers have to deal with real-time and concurrent data from the same and multiple users across channels, but they also need to streamline and update emerging data in the backend. Digitization in the retail industry squarely depends on choosing a single retail ERP solution that unifies data to a single source of truth. As a result, customer profiles and product information are error-free, always updated, and uniform across channels. 

Centralizing The Data

Many retailers have multiple locations and online stores from where they operate their businesses. This causes data to remain in siloes, which results in delays, customer dissatisfaction, and inaccurate insights. Centralizing the data is necessary for retailers, but can often be a challenge if they don't use an advanced ERP that is available on all devices and channels. Moreover, finding the right tool that meets all the technological criteria can be hard, just as it is difficult to find the right vendor. 

The Future of The Digital Transformation in Retail

Continuous digital transformation is the future of retail. Everything depends on how quickly and tactfully you adopt an omnichannel strategy that works in your favor. Here are the most critical factors you must bear in mind for successful implementation of digital transformation in the future:

• Choose a tool that helps manage multiple stores and channels from a single interface. This is essential to consolidate online and in-store retail operations.
• Ensure your ERP has mobile capabilities for both POS and back-office operations.
• It is not always possible to assume that we will have access to the internet at all times. To ensure that customers truly have an omnichannel shopping experience, your omnichannel retail ERP must sync data without an internet connection (for example, via cellular networks)
• Invest in a scalable retail ERP that enhances customer loyalty, bridges online and offline touchpoints, and ensures customer retention.

Contact us today to learn more about how Priority's Retail ERP helps you prepare for the digital future.