Why Digital Transformation in Retail is the Game Changer
Digital transformation in retail is probably the most disruptive, innovative factor poised to transform the current retail experience. Whether it is a start-up or a large corporation, businesses of all sizes (as well as the ecosystems that have supported them) are transitioning to digital retail. In fact, all retail stakeholders are similarly on the brink of an automation-driven revolution. The store of the future will be shaped by digital transformation, artificial intelligence (AI), and the Internet of Things (IoT).
Top executives are seeking diversification through the application of digitization to various aspects of their businesses, ranging from offering new products to generating more revenue channels. Many in the retail industry already have a digital transformation program or management initiative rolled out. Going digital is indeed high on the executives’ priority list, and it will only continue to increase in order to increase their market share, customer happiness, and profits.
Data-centric Needs in Retail
Thought leaders and industry stalwarts have come up with detailed guidelines to drive data-centric innovations in retail. Market leaders can thrive by understanding the major drivers behind digitization, such as changing customer preferences, shifting market trends, and needing to act upon data-generated insights and formulate better strategies.
Digital transformation offers opportunities for experiential retail:
- Personalized product curation and offers
- Omnichannel experiences
- Mobile optimization
Artificial Intelligence is the Key to Digital Transformation in Retail
Traditionally, the differentiators between good and great ways of doing business have been a mixture of tangibles and intangibles like superior customer service, superb operations, a standalone product, or brand appeal.
While these do remain important differentiators, digitization has raised the bar tremendously in all these sectors. The companies that have been early adopters of digital technology have bought themselves an advantage early in the game. IoT and AI are key technology drivers taking digital transformation to the next level and shaping the future of retail.
Despite this, AI is often not a spending priority for retailers, but those that do embrace it are set to gain advantages over their competitors.
Self-learning systems via AI and cognitive modeling enable retailers to use feedback from prior experiences to enhance customer shopping and brand experience, allowing them to increase customer satisfaction and foster brand loyalty.
Algorithmic Retailing: The Next Frontier
The term “algorithmic retailing” refers to the application of big data through AI and advanced analytics. Used in a complicated retail setting, it delivers a flexible, efficient, and unified customer experience.
Algorithmic retail helps organizations build a customer-centric operational platform that decimates silos, boosts conversion, increases selling and up-selling opportunities, and enhances customer satisfaction.
Algorithmic retailing provides a supporting framework for retailers to integrate key aspects of AI into their business operations. However, it is important to understand the difference between algorithmic retailing and conventional, rule-driven automation.
Algorithmic Retailing or Conventional Rule-Driven Automation?
The new wave of algorithmic retailing is powered by AI and machine learning (ML). These technologies give machines cognitive capabilities:
- Natural language processing
- Recognizing patterns
- Ability to hypothesize
- Ability to learn and build upon prior experiences
In conventional rule-driven automation, decisions are made based on independent variables. In contrast, algorithmic retailing leverages intelligent algorithms to take into account multiple variables and apply the right context. Not just that, but these algorithms filter out noise.
Altogether, their forte lies in processing inputs and responding intelligently by choosing the best possible course of action. Just as humans learn from experiences and apply their knowledge to future decisions, the algorithm refines its accuracy based on every activity it performs.
It then chooses and prioritizes its responses based on these inputs. This process is continual, and the algorithm continually gets smarter.
The algorithm can perform endless times without losing its precision, building knowledge for circumstances such as demands, buyer trends, emerging competition, disruption, and so on.
Advantages of Digital Transformation for Retailers
Digital transformation ushers in a world of benefits:
- Making the leap from insights to actionable steps faster
- Opening up new avenues of marketing and outreach
- Incorporating virtual reality and interactive shopping to transform the buyer experience
- Monetizing idle assets
- Bundling products or services to target specific consumer groups with better customer segmentation
- Transforming back end processes like logistics, shipping, and warehousing to optimize the supply chain
- Improving order fulfillment stats
- Creating better compliance
- Reducing the risk of overstocking or understocking
- Making the best use of available capital and keeping funds in play
- Reducing accounting errors
- Increasing customer engagement with reduced human effort
- Creating smart stores
- Optimizing workflows across the board to minimize operational costs
- Allowing access to cloud-based solutions for businesses
- Getting a better handle on social media presences and interactions with users
- Generating consumer data for better insights
- Establishing better customer support through chatbots
- Reducing the burden on human employees and reducing human error in processes
Challenges in Digital Transformation in Retail
For the uninitiated, taking on the digital transformation of a traditional business setup can seem extremely daunting, so take on the help of the right partner to avoid pitfalls and overcome challenges.
There may be some resistance among employees who are set and comfortable in their old ways of doing business and may feel threatened by new technology. They may feel uncomfortable with role changes or learning new technology.
Digital transformation can have several layers of complexity, for instance, in setting up systems to serve a diverse consumer base. Sometimes companies want half-measures, such as an experience-enhancing mobile app, which is great but does not help web users at all. Digital transformation is best when it is all-encompassing and cohesive.
Selecting the right technology not only serves current needs but also has the potential to grow as a retail business does.
However, it is well worth taking the plunge and making the necessary steps to usher in a new era of digital transformation for any retail organization that wants to remain relevant, competitive, and profitable.
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