The Huge Impact of Digital Transformation in Retail

Digital Transformation | 0 comments | by Erin Quilliam

The retail industry is one which must adapt to changing consumer habits and expectations or face falling behind. Even in the time I’ve written this article, M&S has slipped from the FTSE100. (And although within the travel industry, the news of Thomas Cook’s collapse.) Not to mention, in the last month several brands have hit troubled water. Including high street staple Jack Wills, Karen Millen – and by extension – Coast. Even just this morning, it was announced Forever 21 had filed for bankruptcy. 

In recent years, many huge brands have collapsed. Many have named the rise of online shopping as the reason for their downfall. However, I’m sure many would argue that the availability of online shopping is not the sole reason for big brands going bust. I believe the inability to offer the customer experience now expected is what causes problems

For instance, we take to online shopping because of the ease and convenience. This is an experiential factor. Yet despite the competitive pricing, convenience and accessibility of online stores, we haven’t given up on the high street yet.

In fact, 90% of transactions still occur in a physical store. Plus, 2/3 of online customers use the physical store before or after their online purchase. Which stands by the fact that brick-and-mortar businesses are still the lifeblood of retail. 

Returning to customer experience, the huge majority of people have said they were willing to pay more for better customer experience. And Adobe even lists evolving customer expectations as the first reason to motivate change in retail businesses. This is not limited to only the retail industry but is becoming the expectation of all, including the medical industry

Ergo, businesses must evolve in order to address changing consumer habits and expectations. Additionally, as the business landscape shifts, so too must businesses, or they face falling behind.

Digital transformation is an opportunity to move away from manual work processes, and re-align businesses with these evolving expectations. It is an opportunity not just to take onboard the latest technology, methods and talent, but to provide the customer experience that people now expect.

big retailers and digitalWho Are the Biggest Businesses in Retail? And How do They Treat Digital?

The world’s largest retailer = Amazon 

It goes without saying that Amazon depends on digital.

Not content with simply being the world’s largest online retailer, in May this year, they became the world’s biggest retailer full stop. This means that Amazon is uniquely placed, in that it became a dominant retailer before ever even opening any sort of brick-and-mortar business. 

Their digital approach is not only in how they conduct business. Amazon is itself at the forefront of developing and delivering digital solutions for others. For example, their cloud computing service. This means that Amazon are not just keeping up with technical advances, they are spearheading them themselves. This position of innovation means they are not only preparing for the future, but forging it, and are likely to remain the top retailer for the foreseeable.

The world’s second-largest retailer = Walmart

This retail giant previously held the crown for the largest retailer in the world. And although Walmart remains the largest brick-and-mortar retailer, it’s prevailing and future success is being attributed to its expansive digital transformation.

Walmart is investing a lot in this transformation. It’s far more than just offering a great digital experience and eCommerce. They’ve changed the company structure in order to adopt technology at an increased pace. Returns standards with third-party sellers have been implemented. Black Friday brings booming business each year. Automation has been introduced. Services have been moved to the cloud, and machine learning has been implemented. They’re even using Blockchain. Which means that once again, we are seeing a retail giant not only adopting but innovating.

Cloud services and machine learning especially have brought the biggest improvements, according to their executive vice president and chief technology officer. This has provided many benefits to the business. Not only in strengthening their digital offering and providing engagement and sales through that channel, but it would have improved efficiency and reduced running costs for the business. 

Their transformation has been so successful as it has been a fundamental transformation, much like the one seen in McDonald’s. The understanding that this change in structure in order to best exploit new methods and technology is what defines a successful transformation project.

The world’s third-largest retailer = Alibaba

The third-largest retailer on the planet is Alibaba. Although often unheard of in the UK, it dominates the Chinese market. It began as an online platform to connect Chinese exporters with global customers, but now also offers services such as logistics management and cloud computing. (Another similarity to Amazon, as the company is also at the forefront of innovating and distributing these digital services.)

Alibaba also owns China’s largest shopping website, and Alipay, a payment platform similar to PayPal. In addition, it has huge stakes in a range of industries. From stakes in film businesses, social media like Sina Weibo, and even China’s most successful football team.

Its huge expansion is entirely down to their ability to leverage the power of internet commerce. Their early recognition of the power of the internet and smartphones has ensured their enduring relevance and success. This success has then led them to their delving in new markets, and their position of innovation. By understanding the power of digital and adopting it at the right time, they gave themselves such a headstart that they could innovate themselves and begin to implement the next wave of changes. (Arguably, like Amazon, then dictating the expectations of businesses thereafter.)

Digitally-Inclined_Businesses_Dominate-minDigitally-Inclined Businesses Dominate 

As you can see, digital-based businesses have raced to the top. Yet many of the world’s largest retailers are huge brands we have known and loved for decades. But with a little investigation, it becomes clear that all have invested significantly in their digital strategy and approach in order to maintain their relevancy.

For example, the fifth-largest retailer, Kroger. Kroger stands out as more than a transformer, but an early-adopter. A significant part of their own transformation has involved developing new technologies for themselves, and with the hopes to then sell these on. The company partnered with Microsoft to develop “smart shelves” in a bid to compete with Amazon, in one example of their desire to innovate. 

These shelves offer enhanced experiences for customers by displaying coupons, showing ads, and interacting with their smartphones. Whereas the shelves also aid in the employee experience, as sensors track stock, and prices can be changed quickly on the digital monitors.

They also plan to sell the shelving on to other retailers if it proves a hit. This would then translate to several hundred dollars of profit.

Therefore this single example of change already has benefits for the employee, the customer, and the business itself. As employees will become more efficient and costs will lower, whilst customers will be more engaged and inclined to purchase due to the interactivity and ease of accessing product information and deals.

A_Phoenix_Rises_How_Best_Buy_was_Revived_by_Digital_Transformation-minA Phoenix Rises: How Best Buy was Revived by Digital Transformation

Best Buy is ranked number 74 on the Fortune 500 list. Not bad for a retailer thought to be at death’s door a few years ago. They even hailed their doom as a consequence of the rise of Amazon. Again, alluding to how digitally-focused companies dominate, while older and less nimble traditional retailers fell behind.

The turning point for America’s foremost electricals retailer came in 2012, as they hired a new CEO and began adopting a new digital mindset. They developed a turnaround strategy to revive the business, which was named “Renew Blue”. 

The changes implemented touched every aspect of the business. From restructuring, to cost reduction, to strengthening vendor relationships. However, the driving force came from a changed mindset. It was from their desire to become not just a retailer, but a business who enriched people’s technological lives. This same ambition is fueling their latest strategy regarding the future trajectory of the company.

As then-CEO Hubert Joly said, “Our purpose is to enrich lives with the help of technology. Not to sell products to you.”

This mindset meant changing the entire business model. It involved developing new offerings, expanding and revamping their online presence, and integrating a digital-first approach to their business.

One of the biggest changes was how they connected with customers. This included revamping their online store, and adopting a strategy to expand it. One aspect of this was to adopt a digital-first marketing strategy. Although the idea of digital marketing seems a no-brainer for many of us, it’s worth pointing out that in 2012, 80% of Best Buy’s media spend was on traditional mail.

Fast forward to today, and 90% of their sales are now digital. It represents a dramatic shift for the company and aligning itself with the expectations of today’s consumers. And for being an electricals company, you would anticipate they were using new technology themselves.

Another important factor in their increased revenue and improved customer relationships is the adoption of customer IDs. This means keeping track of every individual customer, from their purchases to their preferences. Customers can also schedule for a Best Buy employee to visit their home and make suggestions as to what devices would work best in the space that they have. This personalised service harks to their new ethos, to enrich lives and not just to simply sell.

In addition, it correlates with the expectations of the digital-savvy consumer, to be able to access personalised services when and where they need them. The marriage of traditional and digital services in this manner has provided a unique selling point, whilst enabling the company to organise and grow the data they have in order to better understand their individual customers and in turn, improve their ability to sell to them. The data gathered as part of the customer IDs also enables the business to make more informed, data-driven decisions.


There are dozens of stories about how digital transformation has bolstered big brands, and buoyed up floundering companies. Huge success stories include not only Walmart, but McDonald’s and Starbucks

Digital transformation offers huge benefits to businesses, particularly those within the retail industry. It helps align the business with evolving customer expectations and gives the opportunity to compete in an evolving business landscape. Furthermore, it provides the methods to gather and use data in a way to better inform all decisions in the hopes to improve efficiency and services and customer experience.

The transformation itself also offers the chance to reduce running costs, improve logistics and connect the supply chain, and to digitise and improve work processes. Saving money and maximising efficiency.

Are you ready to start your digital transformation journey? Contact us for a free consultation. 

Call us on +44 207 127 4304 or book your meeting online today.


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