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Digital Transformation in Retail – Remodelling Retail Industry

The continued spread of the Coronavirus has impacted the whole world. If the pandemic is not controlled quickly, the world economy is likely to face the risk of a global recession. It has eventually stopped the growth of the retail industry and affected offline retailers profoundly.

The COVID-19 outbreak has reduced customer volumes in the retail industry of various countries over the last few months and dived many businesses into operational complexities. The pandemic has forced the retail industry to transform and rethink their models digitally. Retailers are thinking about how they should respond to this immediate change. They want to understand how they can use technologies to find innovative ways to build up new business models and drive more revenue.

Therefore, looking at all the aspects of digital transformation in the retail industry is essential.

Before we explain how retail businesses can digitize their operations for better customer experience and more revenue generation, let’s understand what is digital transformation and what does it mean to transform the retail industry.

We have highlighted the following topics in the article:

What is Digital Transformation in Retail Industry?

Digital transformation is entering into every field and industry that we know today, starting with mass media, education, healthcare, finance, banking and more. Organizations go digital to improve their services and facilities to bring up the satisfaction level of their customers. The idea behind digital transformation in retail is based on the needs and requirements of customers.

While deciding about going digital, retailers think about how they can use emerging technologies to find new ways to drive revenue and create innovative business models. As digital tools and technologies emerge, they are going to have a considerable impact not only on the services offered by the company but also its organization of the workflow.

Digital transformation for retailers is about thinking beyond marginal improvements. It is about creating a connected engagement facilitated by the use of technology. It is not only about data intelligence, agility, customer centricity, new value propositions and innovative, but also about reducing costs, enhancing efficiencies and streamlining processes.

When thinking about the digital transformation in retail, retailers have to re-consider every aspect of their business, from sourcing to inventory management, employee management and training and customer experience management.

Digital transformation in retail can navigate customer retention and satisfaction by offering customers the services and products they need. Big data analytics, location-based services and mobile apps have brought a significant transformation in the way retailers conduct business. However, the path to digital transformation may have to face various challenges.

What are the challenges in the transformation of retail industry?

  • Change Management
    Many departments behave on their own accord, describing and handling their touch-points differently and adhering to different standards and metrics. Transformation menaces the traditional ways of doing things, arousing a self-defense mechanism that holds change.Moreover, changes in roles create challenges in proving ROI and taking ownership. Therefore, retailers usually have doubts and unwillingness to implement new ways of working.
  • Commitment
    In many cases, though initiatives are in progress, they are not transformational enough. Those initiatives just end up being a mobile app or a new website that partially enhances customer experience. Moreover, the commitment to introduce digital transformation in an enterprise goes beyond ideation. It needs leadership level emphasis, an assurance of resources and budget and an ability to follow the initiative with certainty.
  • Complexity
    Digital transformation is too complicated for retailers that they cannot handle everything themselves. Though outsourcing can ease the burden, retailers need to choose partners carefully. It requires a partnership of a different kind to co-establish digital journeys for all customers, stakeholders and enterprise entities. The need is to find those digital moments in a retailer’s operational journey and customer experience to establish a transformational impact.
  • Technology
    For a complete digital transformation to be successful, the foundation needs to be strong – be it a single view of orders, products, inventory, customers or a scalable architecture to support dynamic changes in the business. Moreover, selecting the right technologies that can bring value is also one of the significant challenges. At the same time, it is essential to take evaluated risks to understand what new infrastructure and technologies would be suitable for an organization.

Despite the above challenges, retailers must embark on their journey after a good understanding of how different technologies can help in digitizing retail businesses and driving growth. Taking a self-assessment can also help identify areas where retailers must focus on becoming digital masters of the future.

Because transformation brings about considerable changes, retailers should have a change management strategy in place. They must build collaborations so that they can leverage the strength of their partners to facilitate transformation and build through leadership.

  1. Increased number of social media and internet users
    Provided the deep correlation between economic affluence and internet inclusion, connecting billions and trillions of users to the world wide web is one of the significant and most prominent opportunities for the retail industry. Expanding the trend of using the internet through wireless devices equipped by technologies, including 3G, 4G and public Wi-Fi, has placed mobility at the center of the next big revolution for retail businesses.
  2. The increasing number of smartphone users and the growing use of m-commerce
    Smartphone usage statistics reveal that an average person spends more than 2 hours and 51 minutes per day on their mobile phones. 51% of users check their mobile devices a few times per hour and 22% of users look at phones every few minutes. More than 2.71 billion people in the world have smartphones and it is expected that mobile owners worldwide will increase to 7.33 billion by 2023.With the increased usage of smartphones, it is expected to drive the growth of mobile commerce in the retail industry.
  3. Digital Infrastructure
    The fourth industrial revolution or Industry 4.0, is defined by emerging technologies that blur lines between the digital and physical worlds. Combined with powerful analytics tools, including scenario analysis, predictive learning algorithms and visualization, access to data is transforming how companies perform.Companies can now collect vast data sets from physical facilities and assets in real-time, execute advanced analytics to generate new insights and make more effective decisions. The digital revolution is transforming the way products are designed, developed and delivered to customers. It offers tremendous implications for the retail value chain.

Now, let’s discuss technologies that can help in retail digital transformation.

What are technologies that help in digital transformation of retail industry?

1. Data Analytics

As the retail market is becoming more and more competitive with each passing day, nothing has been more crucial than the ability to optimize business processes when satisfying customer expectations.

Data analytics is nowadays implemented at all stages of the retail process, keeping track of all emerging products, forecasting sales and predicting future demand.

Data analytics can also be used to optimize placements of offers and products via the heat-mapping of customers. Using analytics, customers who are interested in specific products based on their past purchases can be identified quickly and effectively. It helps in finding the appropriate way to handle such customers via targeted marketing campaigns. This is what data analytics deals with.

Following are some of the strategic areas where retail players identify how data analytics can help them drive more revenue and growth to their business

  • Predict future performance
    It is also one of the significant areas when looking into data analytics in retail businesses, as every customer interaction has a significant impact on both existing and potential relationships. Executing the idea without knowing about it entirely can be risky because a wrong decision could lead to a prolonged or quick loss.Retail players can predict the future performance of different products based on the customers’ existing interests and likes.
  • Price Optimization
    Data analytics plays a crucial role in the optimization of prices. Using different analytics algorithms, you can perform several functions, including monitoring inventory levels, tracking demands, responding to market challenges in real-time automatically and monitoring activities of competitors.With price optimization, it becomes possible for retailers to determine when to drop or raise prices. Before analytics was introduced, retailers would drop prices after a buying season ends for a specific product.At the same time, analytics represents that a gradual price drop from when demand starts vanishing would result in increased revenue. The US Retail Stage Stores used a predictive approach and performed some experiments to determine the fall and rise of demand for a specific product.Walmarts, one of the biggest retail giants, spend millions on investing in real-time systems to develop the world’s largest private cloud to track and monitor millions of transactions and optimize pricing for all products.
  • Demand Prediction
    When retailers get an understanding of customers buying trends, they focus on areas that would have high demand. It involves collecting demographics, occasion-based and economic parameters to create a good image of buying behavior across the target market. It helps in effectively managing inventory.
  • Trends Forecasting
    With data analytics tools, retailers can have a better understanding of the current trends of their businesses. Data analytics algorithms can be used to forecast future trends based on buying data. Forecasted trends tell us what needs to be promoted to increase the revenue and what does not need to be promoted.
  • Picking out the highest return on investment opportunities
    Using data-driven intelligence and predictive risk filters, retailers can gain an understanding of their existing and potential customer base. It can help them model expected responses for marketing activities based on how they are evaluated by a tendency to likely buy or buy.
  • Customer Identification
    Identifying customers is also essential in data analytics because it helps in selecting which customers would tend to like a specific product. Due to this, most of the retailers depend on recommendation engine technology, data fetched via transactional records and online and offline loyalty programs.

Data analytics is a proactive approach whereby retail players can use past data to forecast expected sales growth by looking at customer behavior trends. It helps retailers stay on the competitive edge and gain significant market share.

2. Artificial Intelligence (AI)

Artificial Intelligence is being implemented in retail in new ways across the entire service and product cycle – from construction to post-sale customer service interactions. But as a retail player, you will require answers to the following essential questions:

  • How are retail companies using AI technologies to stay ahead of competitors?
  • Which AI applications can automate and augment the retail process?
  • What innovations are considered as potential game-changers over the next ten years?

IBM surveyed 1900 retail and consumer product companies across 23 countries, out of which 85% of retail firms are planning to implement intelligent automation in the supply chain by 2021. Retailers believe that implementing AI can lead to a 10% annual growth.

Let’s understand how AI contributed to digital transformation in retail industry.

  • Better Customer Service
    AI can revolutionize the retail industry by enabling webshops that help retail companies in promoting their products or services based on the customer’s behavior and buying history. It is essential to realize that seamless customer service can help run a business successfully.AI can help make customer service effective and better by analyzing customers’ data and behavior. Offline stores can also leverage the potential of AI in a number of ways. What if you visit a store and you come across a friendly robot instead of a salesman. Customers can ask as many questions as they want from the robot, instead of talking to a salesman. It ensures the least contact with a human being, ensuring no risk of spread of the infection post-COVID-19 outbreak.Also, AI-enabled robots will feed the data and analyze it to identify customer likes or dislikes and predict future sales. For example, if a customer is looking for a moisturizer, they can ask your robot for product recommendations based on the skin type. Therefore, the overall experience gets interactive for customers.
  • Better Data Accumulation
    AI can help retail firms accumulate a massive amount of customer data. With collected data, AI can help create a personalized shopping experience for the customers by drawing conclusions. If you have the customer data, you can understand what do they like the most.It helps create an engaging experience for users based on their likes and interests. Moreover, retailers can forecast how well a product is likely to perform in the market by learning from past experiences.
  • Virtual Trial Rooms
    When shopping to buy an outfit, trying out different apparels can be time-consuming and quite frustrating. Using virtual rooms equipped with digital mirrors, consumers can try dresses without requiring to change again and again.With a touch-based and gesture interface, a customer can mix and match different outfits, shoes and accessories to select the final look and decide what to buy. It reduces the time that people spend on making buying decisions.
  • Behavioral Analytics using AI-enabled Surveillance
    With modern surveillance equipment powered by CV and AI technologies, retailers can capture and examine customer behavior inside stores. It will help them gain an understanding of customer engagement levels with store layout and optimize operations for higher revenues.Video analytics can also enhance in-store security and lessen the chances of theft. Using AI, surveillance data can be controlled in real-time and notification can be sent to store owners and administrators for quick action.
  • Chatbots for Customer Support
    AI-enabled chatbots enable retail players to engage consumers. Using chatbots, retail companies can manage thousands of queries simultaneously without needing a large workforce.Chatbots are designed to answer queries, offer instant support and provide shopping recommendations. With a combination of AI chatbots and human beings, retail brands can handle customers effectively and provide customers with a proper resolution of their problem.When customers get quick and personalized attention, they get engaged with the brand deeply, enabling improved customer loyalty.

The above use cases are not fantasy, but many retailers have started experimenting with these technologies. AI will be ruling the retail sector by helping brands become more customer-centric in retail operations.

3. IoT

The retail industry is witnessing a rapid transformation with the implementation of the Internet of Things. It is poised to boost sales, increase customer loyalty, provide a personalized experience and enhance inventory management. For the last 20 years, the traditional retail has dramatically transformed, providing companies with opportunities to gather and analyze data and target various channels.

Here’s how IoT can help in digital transformation in retail industry

  • Robots
    Robots can significantly transform the retail sector by delivering items without the need for the workforce. Recently, many countries, including China and the USA, deployed robots to provide unmanned goods delivery amid COVID-19. People appreciated their efforts to reduce the risk of infection.Though it can be quite terrifying to trust a robot to be your customer service representative, it’s a great opportunity to cut down on forcing your workforce.OSHbot, Lowe’s newest robot employee, helps customers detect certain products and provides information on inventory and promotions. Also, OSHbot answers in two languages, including English and Spanish. 

    By handling simple inventory tasks, robots free up the human workforce to emphasize on offering top-notch customer support.

  • Smart Shelves
    Retail employees’ energy and time are usually focused on tracking items to make sure that items are not out of stock and checking items if they are at their right place. Using IoT, the concept of smart shelves can be introduced to automate both of these tasks while identifying thefts simultaneously.Smart shelves are equipped with RFID tags, weight sensors and readers to scan products on both stock and display shelves. Using smart shelves, you can get to know when you have fewer items on the shelves or when items are not placed correctly on a shelf.Since each RFID tag is connected to the reader, smart shelves can monitor in-store thefts, saving you money on cameras and security personnel.
  • Automated Checkouts
    You must have noticed many times how long queues prevent your customer from buying products. Using IoT, it is possible to set up a system that can read tags on each item when a customer leaves the store. An IoT-enabled checkout system would tally the items up and deduct money from the customer’s digital payment app automatically.Developing an automated checkout system with IoT devices would make your consumers happier and they will be willing again and again to enter your store. According to McKinsey, automated checkout systems can reduce the need for cashier staff by up to 75%.
  • In-store layout optimization
    You can be surprised to know that your retail store is not optimized for your customer’s behavior. Your store might have the least popular products in the front or your customers may need more space around couches in the back.By implementing analytics software with infrared sensors, you can utilize IoT technology to enhance your retail layout. Therefore, IoT can help you optimize the in-store layout effectively.


Digital transformation in retail industry may sound great and existing after reading about the above technologies and its use cases within the retail sector. But, the question is how to get started.

As a retailer, you will have to put an effective digital transformation strategy into place that meets the changing demands of consumers and the marketplace.

The easiest and fastest way to initiate and conclude digital transformation in retail industry is to find the right partner. A partner with the technical understanding and the industry know-how can assist you in transforming your business inside and out.

Our team has deep experience in business analytics, IoT enablement, data-driven insights and user collaboration. If you have any project ideas in your mind but looking for technology expertise, contact our team of experts and we will guide you throughout your journey of digital transformation in the retail business.  

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Author’s Bio

Akash Takyar
Akash Takyar
CEO LeewayHertz
Akash Takyar is the founder and CEO at LeewayHertz. The experience of building over 100+ platforms for startups and enterprises allows Akash to rapidly architect and design solutions that are scalable and beautiful.
Akash's ability to build enterprise-grade technology solutions has attracted over 30 Fortune 500 companies, including Siemens, 3M, P&G and Hershey’s. Akash is an early adopter of new technology, a passionate technology enthusiast, and an investor in AI and IoT startups.

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