Deloitte: Chinese retailers still have a long way to go in terms of digital maturity

Published: 3 November 2017

In recent years, digitalization has been a pervasive presence in China's retail sector, which is an industry driven by technological advancement and consumption upgrade. However, according to the latest survey on Digital Maturity of China Retail Industry jointly conducted by Deloitte China and the China Chain Store & Franchise Association (CCFA), Chinese retail companies achieved a score of 2.9 out of 5 in terms of digital maturity, which implies that there is still a long way to go before they can build a complete business ecosystem backed by digital technology.

The survey report sets out to analyze the digital maturity of Chinese retail companies. Based on Deloitte's digital maturity model, the assessment focuses on three major aspects: the degree of digitalization, the management of digital transformation, and the capability to drive digital transformation. The report includes a survey of 34 retail companies in China.     

During his speech at the China National Retail Congress 2017 held by CCFA in Chongqing, Deloitte China Risk Advisory Partner Jian Zhao said, "From our assessment, it appears that Chinese retail companies have passed the early stage of digitalization, but are yet to reach the stage of execution. While companies may have started building their digital capabilities, they may not have clear objectives, a roadmap and a timetable for achieving digital transformation."

Deloitte China Consumer Products and Retail Sectors Leader Tianbing Zhang pointed out, "Chinese retail companies are marked by different degrees of digital maturity, with 36 percent and 30 percent at the stage of 'Optimization' or 'Intelligence' when it comes to building core processes and touch points for digitalization. This reflects that Chinese retail companies have focused on building IT infrastructure and elevating their online and offline sales capabilities. "

In terms of liaising and forging digital synergy with external parties, Chinese retail companies seem to remain at the early stage of development. Only 9 percent have reached the stage of "Optimization" or "Intelligence" with regard to their supply chain capabilities. Given the general absence of a talent developing mechanism, talent shortage appears to be a prominent problem in the industry, where 48 percent of companies are at the early stage of developing the digital DNA of their employees.  

The report also looks into the digital maturityof different retail store types, and reflects that convenient stores have fared better than their counterparts in all assessment criteria, with specialty stories performing to the contrary. Department stores fare relatively close to the overall industry average, while supermarkets show a stronger edge in offering digitalized products and services, as well as in building digital touch points and content.

Overall, Chinese retail companies understand that technology and digitalization are no longer supporting tools for their business, but are instead basic essentials for their future development. With regard to meeting digitalization target, 64 percent of companies believe that they should reach the stage of "Optimization", meaning that there is still ample room for improvement between the current "beginning" stage and the eventual "execution" stage.

"China has a unique digital environment, which poses a deep impact on retail companies as they embark on their own digital journeys. Digitalization will determine the business success of retail companies against the increase in mobile data traffic, the rapid growth in the logistics industry and the heightened penetration of third party mobile payment. To seize market opportunities, it is necessary for retail companies to invest their effort into three major areas, which include improving customer experience in different digital channels, strengthening the digitalized supply chain network and leveraging digital technology for retail market analysis," said Zhang Tianbing.