The Meaning of Digital Transformation for Retail
Read this article to understand digital transformation, how its key concepts apply to retail, and where Ionic can help on the path to transforming your business digitally.
Intro to Digital Transformation in Retail
Since the emergence of the mobile-first mandate a few years ago, companies have been scrambling to keep up with a concept that has officially made its way into the mainstream: Digital Transformation.
Considering that technology and the market will continue to radically evolve, we’ve reached a point where no industry is safe from the need to digitally transform its products, processes, and services to ensure success for the future.
While the methods and implications for digital transformation look slightly different in each type of business, no industry has a trickier time deciphering the applications of digital transformation than retail. Why?
Because while other industries like entertainment, financial services, manufacturing, etc. are able to more logically apply technology to their business, one thing that hasn’t changed about retail is, at its core, it still requires the physical transfer of goods directly to the hands of a consumer. And, as a recent Forbes article put it, “You can’t yet digitize a sweater,” nor can you understand the touch-and-feel of fabric through a screen. For now, these facts will remain true for the foreseeable future.
The retail industry is also at an inflection point with young e-commerce brands going viral and seeking out space for pop-up shops while major retailers we’ve come to know over the years are going bankrupt or widely shutting down physical stores. In 2018 alone, over a dozen major retailers, like Sears, Mattress Firm, and David’s Bridal to name a few, filed for bankruptcy. However, it’s not all doom and gloom: There have also been retail stores, both new and old—like Target, IKEA, and Sephora to name a few—which have soared to heights by focusing on applying technology and agile practices to key areas of the business. So, let’s dive into the key elements of digital transformation and how they apply to the retail industry.
In this article, we’ll explore some of the digital transformation trends retailers need to know, highlight how successful retailers are making digital changes that deeply impact their business, and define a few areas where Ionic’s technology can help.
The Retail Landscape
To understand how digital transformation uniquely applies to retail, it’s first important to grasp its definition. We’ve written about this term before, sharing some of its pitfalls more generally, so feel free to take a read, but for our purposes today, let’s think of digital transformation in its simplest form before drilling down into how it impacts retailers.
At its highest level, digital transformation means using technology to create game-changing business innovations (whether through people or processes) that disrupt existing industries or create whole new ones.
Often, the most common examples that come to mind when thinking about this subject are Uber, Spotify, or Amazon. Each of these brands, among other big names, have played a major role in developing innovative products/services and shifting entire markets. But, when you try to apply these companies’ digital methods direct to, say, an apparel retailer, the application is a little more nuanced.
That’s because, as we mentioned, retail still has a traditional element to it: The final step of the shopper’s journey, which is the physical delivery of goods to the consumer. This part of the customer journey has not yet been digitized, while all other parts it (acquisition, engagement, conversion, and retention) have been. This lack of change is because of factors like how a product fits a consumer, what something looks in-store, or how something feels when you touch or wear a certain fabric, which aren’t yet elements of the shopping experience that translate well, digitally.
This, however, is just one part of the nuance of digital transformation in retail. The other part lies in the traditional methods of how retailers have garnered success in the past: A product-centric, buy-low/sell-high mindset. However, with the Amazons of the world quickly surpassing what used to be a lucrative strategy, the traditional mindset no longer works.
Most retail companies don’t have the volume of Walmart or the vastness of products or price reductions as Amazon. More than that, customer service looks completely different than it did even five or ten years ago. Because of these behemoth companies and their built-in digital practices, how are more traditional retail companies expected to keep up? The answer is two-fold: The right technology paired with a new, customer-centric approach to business.
For companies that are able to digitally optimize the entire customer journey across their business, the more likely they are to stay in business for years to come. Consumer priorities have drastically changed and customers don’t just want convenience in their shopping experience: They want their preferences to be deeply understood and catered to, automatically. And, the best way to do that today is with good data and the right technology.
Let’s take a look at some ideas and examples of how technology can enable customer-centricity and kick-start digital transformation efforts for retailers.
Digital Transformation Trends & Recommendations for Retailers
First, it’s important to understand that retailers need not fear that brick-and-mortar stores will become obsolete anytime soon. Instead, because of the radical shift in consumer technology and preferences, for retailers that want to succeed now and into the future, it’s about finding the right balance between e-commerce and in-store efforts—all through the lens of digitization.
According to McKinsey & Company, by 2020 more than 80 percent of U.S. retail sales will still happen within the walls of a store. However, for in-store experiences to thrive they will have to be reimagined and redefined for the digital age.
This is just one example of the importance for traditional retailers to rethink how they leverage and implement technology—not just on their website, but in-store as well. It’s also worth noting from the same McKinsey study that more than 60 percent of Americans have a smartphone and about 80 percent of these consumers use their smartphone to shop, both when they’re in a store or elsewhere.
Additionally, according to Statista, online e-commerce sales are projected to grow from about $360 billion in 2016 to over $638 billion by 2022. While Business Insider found that m-commerce (mobile) will reach $285 billion, or 45 percent of the total U.S. e-commerce market by 2020.
One more critical study, from Capegemini, showed how important customer preferences are for retail success, sharing: "Consumers wish to use technology to help them engage with the store at every step of the shopping journey." However concerns arise for some with the feedback that "...Many retailers are not implementing the digital initiatives that consumers want, achieving significant scale, or delivering a return." The study goes on to note that "a minority of digital leaders that have implemented relevant digital initiatives in the majority of their stores have realized significant benefits."
With 2020 just around the corner and the predictions mentioned above, digitally transforming products, processes, and the customer experience is no longer an option but a mandate for retail companies that want to succeed. And, luckily there are plenty of examples out there of companies large and small that are finding niches in the market through the right mix of technologies and dedication to transformational shifts in the business.
A few examples of trends and technologies retail companies should consider as part of their digital transformation efforts include the following:
- Mobile apps: Whether a native app or a new-comer technology like progressive web apps, mobile apps and mobile accessibility still reign supreme. Shoppers use retail apps to look for localized deals, order products/services online, create wishlists, schedule in-store pickup, and so much more.
- Interactive kiosks or screens, in-store: This allows shoppers to quickly search inventory and find what they’re looking for or discover new products and areas of a store. Additionally, kiosks are being used in all sorts of creative ways like scanning barcodes for product information or placing orders.
- Mobile POS (point-of-sale) devices: Think accessibility to Google or Apple pay at in-store checkout. Stores that prepare for the proliferation of digital payments will be setting themselves up for future success.
- Augmented and virtual reality options: Especially for clothing or beauty retailers, AR/VR tools for consumers can be a game changer. An example that comes to mind here is NYX Cosmetics, which has AR built into kiosks in-store which allow consumers to try on different shades of makeup products based on their hair, eye, and skin color—helping customers engage with a wider variety of products and make more informed purchases.
- Better workforce and inventory management systems: Applying technology to your business doesn’t just impact consumers, but should also help your employees do their jobs better and more easily. Whether it’s smart-shelf technology that digitally tracks inventory or other automated solutions that free up employee time to help customers, consider the implications of digitizing employee processes for a more seamless in-store experience.
The above include just a few of the many ways in which technology can impact retailers for the better. With openness to testing and learning new ways to digitize processes and experiences, digital transformation, as it applies to retail, becomes a little easier to grasp and implement.
Let’s take a look at some recent real-life examples of how some retailers are tackling the mandate for digital transformation.
Digital Transformation Examples: Tech & Retail Come Together
There are a number of retail companies out there that have been making big strides in their digital efforts, but instead of looking at brands that nailed digital transformation from the get-go because of inherent timing and technology (the usual culprits: Spotify, Amazon, etc.), let’s look at traditional retailers that have been progressing with technology and have set themselves up to thrive in a rapidly-changing landscape. When thinking about this topic, three companies come to mind: Dick’s Sporting Goods, Home Depot, and Walmart.
Dick’s Sporting Goods
This year, Dick’s was featured in the Wall Street Journal for its controversial decision to move all of its software building in-house instead of relying on third-party vendors. This transition to in-house software development allowed Dick’s to build out better e-commerce platforms and a brand new system for inventory tracking. On top of that, with this new team and in-house control, Dick’s also plans to overhaul its website, how products are showcased online, as well as update the website’s search, checkout, and shipping estimate functionality.
According to the CTO, Paul Gaffney, it’s not about just shipping features—He wants his team to get excited and be motivated by when the features they’re shipping turn into revenue and profit. And, the company is already seeing results: Dick’s president is quoted saying, “Transforming the technology group has improved productivity and the customer experience… it’s become an enormous strategic weapon for us.”
One great example of how digital transformation is directly impacting customers and the business is in Dick’s latest ability to list sports products online within 30 minutes of a major event like a championship win or player trade. Previously, according to Mr. Gaffney, this effort would have taken three to five days and now it’s happening almost instantaneously.
Additionally, the team also created a new merchandise search application for employees that tracks employee usage by store location in order to collect data and find patterns to guarantee the right stock in-store as well as improve the employee experience overall.
Since implementing the new team and investing in technology to improve processes, Dick’s has seen a 17 percent increase in e-commerce sales this quarter with its stores generating 80 percent of its revenue.
Just a few ways in digital transformation can be realized in a traditional retailer.
Home Depot is another retail company tackling digital transformation head-on and seeing remarkable results.
According to a Stores.org article, Matt Jones, Home Depot’s senior director of digital strategy and mobile applications, said, “It was very apparent to us a number of years ago that customer shopping habits were changing. They were looking for convenience, and they were looking for frictionless shopping experiences.”
And, clearly, Jones was right in that assumption. The need for technology to create frictionless shopping experiences is here, and Home Depot has already implemented technology to help its business thrive now and in a future landscape.
Here are a few ways that Home Depot has tackled digital transformation:
- Targeting smartphone users: The Home Depot app has a lot of functionality which allows users to compare products and prices, search by barcode/image/text, order for in-store pickup, communicate directly with the retailer, and more.
- Attracting the pros: For professionals that use Home Depot, the store has made order loading and checkout easier than ever—Allowing pros to reserve parking to pick up their order quickly and even offering special project pricing and volume discounts.
- Adding augmented reality to their app: With dedication to improving functionality across its digital experiences and app, Home Depot added an app feature that allows customers to use AR to view how certain products will look in a specific space (home, office, etc.).
- Leveraging location: Customers using their Home Depot app in-store are now able to search for a product and have the in-store location pointed out to them. The app doesn’t just show which aisle a product is in, but will also uncover any coupons or deals related to the item and offer them to the customer instantaneously via the app.
According to Jones, the functionality and features of their in-store and digital experiences don’t just help improve the customer experience, but also assists the business in gleaning key insights that impact how the company and stores are run. For example, because of Home Depot’s rich well of data, the company learned that nearly half of online orders are picked up in-store, which lets executives know that their digital strategy is headed in the right direction and that there is value in betting on a healthy balance between both physical and digital experiences.
This type of dedication to the customer experience, augmented with the right technology, is just one of the many ways Home Depot is applying its digital transformation efforts to the business and seeing results.
Walmart has been quietly acquiring a number of different technologies and companies to tackle digital transformation and ensure its future success. From ModCloth to Art.com and Jet.com, Walmart is stacking its already massive inventory with a wider variety of products and prices to compete with Amazon and Target.
But it’s not just the retail acquisitions that are important, it’s Walmart’s dedication to improving its in-store and e-commerce experience with new technology. According to another Forbes article, one part of that plan has been to add thousands of robots to 5000 of its 11,348 stores.
Perhaps robots sound like an extreme application of digital transformation, but they’re also a great example of the strides technology has made in recent years and how new types of tech are already in a place to be applied directly to retail businesses today.
While some robots will be used to replace janitorial functions within stores, another area where they will be applied is for lower-level inventory tasks to manage rising costs in stores. According to feedback from 100 retail executives from companies with more than $500 million, as reported in the article, about 99 percent of them reported an inventory problem. The survey also found the following:
- 87 percent of respondents stated inaccurate inventories are to blame for more lost revenue than stealing
- 92 percent said their stores spend more time identifying inventory issues than they do implementing solutions
- 81 percent said they feel their stores are only keeping pace or actually falling behind technologically, despite the availability of new technologies
- 76% said the introduction of robots in stores would improve employee productivity
The above highlights only one area of a traditional retail business that is struggling without the help of technology—Just think of other areas at the forefront and behind the scenes of a business that can be impacted or improved by adding the right technology to your stack.
Whether retail companies or their employees like it or not, automation is one major key to whether a business will succeed or fail in the future.
Home Depot, Dick’s, and Walmart are just a few great examples of retailers that are embracing and prioritizing digital transformation as a means to further their business. Hopefully, some of these examples and the reasoning behind them can inspire your company to see how digital transformation can be a means to ensure future success.
While Ionic isn’t (yet) building robots for you to add to your store, we do specialize in technology that can impact one major area of digital transformation: Mobile and web application development.
So, let’s talk about a few ways our technology can help tackle a major part of your digital transformation strategy.
How Ionic Can Help Retailers with Digital Transformation
Early on at Ionic, we bet on the web as a powerful platform for building stunning mobile applications. Since the advent of hybrid app development, along with the proliferation of the web, we’ve seen this approach become an even more viable, cost-effective, and performant option for companies looking to tackle digital transformation and their growing app backlog today.
According to a recent Gartner report, mobile accounts for an increasing share of digital commerce transactions (~32 percent of online retail sales up from 28 percent in 2017), but mobile web doesn’t always provide a great user experience. Additionally, developing native apps with lack of developer talent and funds can be time consuming and costly. Thankfully, with the right development skills and recent technology strides, there are a growing number of solutions that can help companies bridge the gap between their mobile and web experience. That’s why, for companies today, it’s important to consider the best way to reach customers and the strategy behind development efforts to decide whether or not to develop a native app, a progressive web app, or both.
Luckily, we’ve written in depth about the benefits and challenges of PWAs before, which you can read about here. And, we have also shared a more technical blog on how to decide what kind of app your business needs: Native or PWA? As Gartner shares in its report, investing in building out a PWA is great for a few reasons:
- PWAs align better with SEO and personalization practices. Because it’s a web app, content on the app and the PWA itself is searchable by consumers, and indexed by browsers, to make it more easily discoverable and convenient for customers while also being beneficial for a brand’s SEO.
- PWAs also are also easy to install, have a native look-and-feel, and are lightweight, which offers better support for offline and low-bandwidth environments.
- PWAs offer a faster time to market and less maintenance with simple app distribution and the ability to develop once and deploy across a number of platforms.
Lastly, while native apps are still an important part of the shopper’s journey today, consumers are already experiencing app fatigue and don’t always like being required to download an app to experience the benefits or discounts of a brand. With a PWA, a customer can access the same functionality and experience via the web without being required to download an app from the store—helping remove friction on the buyer’s journey.
It’s also important to recognize that mobile apps don’t just benefit the customer through offering convenience and connectivity with a brand, but apps are can also be beneficial in streamlining processes for a business and its employees. For example, inventory tracking was listed as an issue for many large retail companies today. Using the web to build an app for better inventory tracking that employees can use when replenishing the stock room or to search while helping customers in-store, is just one way apps can be used to improve the employee experience and improve company processes.
As we’ve seen with a number of Ionic clients, when you arm your development team with the right technology to build applications at a higher speed and lower cost, you free up time for those employees to focus on new features, product ideas, and innovation in general. Check out a few of our case studies for examples of how we helped companies speed up their development, tackle their backlog, and innovate more frequently.
So, let’s get to the two big ways Ionic can help retail companies with digital transformation:
- Mobile/Desktop Apps & PWAs: Enabling a wider talent pool (web developers) to create high-performing mobile/desktop applications or progressive web apps with speed and native functionality. Our technology also helps companies leverage existing employee skill sets to build and ship apps to market faster without the added cost and time spent for developing native apps.
- Design Systems: According to Kinesis Inc., 94 percent of a user’s first impressions of a company are design-related. Don’t let bad design or inconsistent UI ruin the customer experience or impact your bottom line. Thanks to the latest version of our framework built with web components, Ionic 4, paired with Stencil, our reusable web component compiler, companies can now easily create a custom UI library that dynamically functions across teams and projects to ensure consistent UX and brand experiences (a.k.a. A design system).
You can read about this year’s release of Ionic 4, our latest version of the open source UI framework, which pairs with any front-end technology of choice to help web developers build mobile and desktop apps using their existing skills and one, shared codebase. Plus, we also shared a recent article on Why Every Company Needs a Design System and how a system like this can help a business reduce costs and errors, improve time to market, and achieve better UX across projects and apps.
It’s clear that digital transformation is here to stay and requires all retail companies to refocus their efforts to ensure technology is transforming their business, processes, and customer experiences, or fear being left behind.
While Ionic might not be able to build a robot that performs a store's janitorial duties, we have been a key strategic partner for large, global companies tackling their app development projects—Helping these organizations leverage their in-house development skills and funds to efficiently create performant mobile and desktop apps that streamline their business processes and improve experiences for consumers.
Want more information on how to take on digital transformation through development? Book a strategy session with one of our Solutions Architects to discuss digital transformation and learn how Ionic can kickstart your dev projects.