Top 10 Digital Transformation Challenges In Retail

We are living in an era where people from all walks of life keep scrolling down their smartphones, irrespective of what generation they belong to. The COVID-19 on one side, pulled the curtains down on the high streets bustling with the excitement of shopping sprees, as restrictions still prevail in many countries, but on the other side has brought clutter to our screens!

According to eMarketer, 2020 witnessed +27.6% growth in global online retail e-commerce, despite the overall retail industry’s 3% shrink. So, what does it mean to the retailers? Surely, it’s time to gear up to digital transformation.

Digital transformation in retail is not just about e-commerce apps or websites. It’s about infusing technology into all aspects of the business. Digital transformation in the retail sector is pioneered by the adoption of technological advancements in the likes of IoT, facial recognition, warehouse & delivery robots, virtual store assistants, chatbots, cashier-less stores, e-wallets, augmented shopping, voice commerce, automated checkouts, smart shelves, etc. In this article, let’s look at the challenges retailers face during their digital transformation journey.

With an increasing number of shoppers looking for a wider range of buying options, there is a need for retailers to rethink their existing models to stay in the game. Moreover, globally the Covid-19 outbreak is accelerating the adoption of digital services and opening new opportunities for retailers to step up their games.

However, starting on the digital transformation for retailers is not straight-forward and as a business, you would need to go through several challenges listed below.

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1. Top 10 digital transformation challenges in retail
1.1. Efficient supply chain management

As online buying soars with retailers adopting digital transformation, capacity handling becomes a challenge. Supply chains should be designed in a way that they can accommodate both temporary influxes as well as sustained growth.

Increasing customer expectations mean a reduction in the delivery time too. If these demands are consistently met by the supply chain setup there is a risk of getting left behind the competition. Few countries are encountering the long-lasting effects of the pandemic supply chain disruptions, in the form of delays, product shortages, and challenges on warehouse maintenance.

The retailers featuring omnichannel experience in their services have to integrate e-commerce fulfillment with the traditional distribution and that’s when things start to get complicated. So, unifying multiple inputs should be a priority when managing the supply chains.

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1.2. A good start on e-commerce

Digitalization is the go-to solution that many turn towards, to catch up with the speeding market. In most cases, the first step is to move the commerce online, building online platforms and apps. The strike of the pandemic has propelled the need for this, even further.

With e-commerce, retailers must get it right, in terms of creating positive interactions with customers. Getting an interactive platform that is fast & secure with functional features, search options, optimized across several devices including mobile phones. There are several e-commerce platforms available in the market to reduce efforts on the technical front, and there are no excuses for a bad website or a platform.

However, smaller retailers not yet ready for investing in building platforms could get onto social selling or local e-commerce platforms.

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1.3. Building insightful customer data

Customers from all channels expect a great personalized experience when shopping, and it’s critical for businesses that they manage the database correctly, to extract valuable insights from their customers and deliver them the best experiences.

Capturing a large amount of information is important, but the more challenging part comes when it is time to define how to monitor, analyze and structure the acquired data from every single interaction. This way, retailers would end up having a meaningful database enabling them to effectively track trends and get deeper insights. Also, it helps both sellers and customers to conveniently manage their information. On the other hand, incorrect data will mislead the customers and negatively affect their experiences.

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1.4. Meeting customer expectations

As e-commerce spikes and retailers focus on the omnichannel shopping experience, customers’ expectations are also growing higher. Gravy Analytics estimated that 90% of today’s consumers expect seamless interactions across all shopping channels, from in-store to websites to apps. This is when the omnichannel strategy has to thrive as consistency in customers’ shopping experiences is vital in the age of digitalization.

Consequently, retailers need to create positive interactions with customers to better understand their demands and experiences, and from there, effectively optimize the platforms to meet customers’ expectations.

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1.5. Change management

Digital transformation could also mean resistance to change from the people and departments who are used in certain ways to handle their touchpoints.

Concerns over the change of roles & KPIs and the doubts on the transformation programs might run into problems, as digital transformation cuts into the traditional approaches. Defining the ownership and discovering ways to measure the ROIs become new tasks. Leaders must address these challenges and break the status quo.

The mindset of not changing or questioning the change unless there is a crisis can be dangerous in the context of effective digital transformation. People tend to realize the fast-changing market environment, once it gets too late. So again, it all comes down to how the leaders communicate with good reasoning and paint the transformation as the future vision.

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1.6. Budget constraints

As Retailers set themselves to modernize with the digital transformation, it puts a strain on the budgets. Moreover, this will be an ongoing process, and costs always recur.

To roll out the plans effectively, the initiatives from the management must be transformational enough. Not just in terms of ideas but also with budgets. For many retail companies, digital transformation will just end with a mobile app or website. To create uncompromised customer experiences and to reap the benefits of digital transformation, retailers should look for a comprehensive implementation that features AI-powered bots, AR/VR options, headless commerce, mobile POS, interactive kiosks, etc. Hence proper planning and allocation of budgets become vital.

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1.7. Technology & expertise matters

Technologies play a key role in a successful transformation and the foundation needs to be robust.  Combining the right set of technologies with a proper understanding and risk evaluation is the biggest challenge. Analyzing available options and picking the right infrastructure and technologies that bring value, will remain the key.

However, in today’s market where numerous development teams and companies are competing to stand out. Yet, it could be a struggle for retailers to find themselves the right partner who can co-establish decent digital experiences for customers, as well as ensure smooth operations for business.

Therefore, it is of the utmost importance that retailers team up with compatible, expert developers to take on the chosen technologies for getting benefit in the long run.

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1.8. Complexity

A majority of people are familiar with simple technology and digital platforms such as social media and mobile shopping apps, but that doesn’t mean they are capable of digitizing all aspects of their businesses with ease. Digital transformation requires a mixed skill set that those with little to no expertise can’t properly handle.

The complexity lies in the overwhelming number of details, steps, and processes when going full digital, as well as keeping things unified across various channels while constantly updating the resources as technologies are ever-changing.

Oftentimes, retailers rely on outsourcing to develop efficient digital systems in a short amount of time while still being professional.

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1.9. Security management

The need to quickly upgrade and expand digital infrastructures comes with great concerns on cybersecurity. Particularly for the retail industry which essentially involves selling and buying and every single transaction, will expose the platform to risks of information getting stolen. This would be a huge setback for retailers who are putting efforts into creating a safe and secured service for customers to facilitate easy management for the business.

A study by Fortinet  revealed that 30% of retailers lost critical data due to cyberattacks. Cybercriminals and security gaps should therefore be prevented and tackled effectively by excelling at risk management and instant response when it comes to digital transformation on a large scale.

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1.10. Unclear strategy

For achieving proper digital transformation, you need a well-defined strategy with clear objectives, goals, and vision. It has a lot to do with proper planning by the organizational management. The inputs have to be taken from everyone for a unified understanding from several touchpoints.

Business leaders should understand that digital transformation is not just about technologies. It’s constituent of business processes, self-awareness, competitor threats, new roles, organizational changes, and business models. So, an unclear digital strategy can be the fast-approaching pitfall when embarking on a digital transformation journey.

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2. Conclusion

The Bloomberg intelligence report states that “digital’’ is expected to engulf 35% of the total retail sales in the United States, and the South East Asian markets are catching up fast thanks to smartphones (m-commerce) and COVID-19 restrictions.

Businesses need to be aware of the constantly evolving trends to successfully implement, and prepare themselves to efficiently drive the transformation tasks. Many retail brands around the globe have reached newer heights, by shifting focus to technology and agile practices across key areas of the business.

Digital technologies are influencing customers’ expectations as well, while the ever-chaining new normals are disrupting the retail industry. To remain relevant and become successful, retailers must embrace and swiftly respond to change by creating new experiences for customers that add value.

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Kyanon Digital is a Vietnam-based technology power-house with specialist expertise in helping retail clients to digitize their customer experiences and to stay on top of the trend. Check out our capabilities by browsing through our website and drop us a message to discuss how to effectively plan and kickstart the digital transformation for your retail business.