Disruptions in retail through digital transformation

Executive summary

Digital provides opportunities for retailers to acquire new customers, engage better with existing customers, reduce the cost of operations, and improve employee motivation along with various other benefits that have a positive influence from a revenue and margin perspective.

For the purpose of this report, digital has been defined as a technology enabled combination of resources (can include instruments, devices, bots, tools, teams, protocols, processes, networks, methodologies) which enables the availability of content (can be data, information, expert/social reviews, reports, analysis, games) for the user (employee or customer) to make more productive (can impact cost, time or service level) decisions and satisfying choices.

The ability to collect, process and share large quantities of data has led to some fundamental disruptions in the design of business models. The key factors impacting this change include:

• Convergence: The traditional boundaries between sectors is collapsing. Innovation at the boundaries of sectors such as payment systems (Financial Services & Telecom), e-commerce (Retail & Telecom), Industry 4.0 (ICT and Manufacturing) etc. is fundamentally disrupting businesses. Any disruptive approach in digital transformation for retail hence, needs to factor in a multidisciplinary view of implementation with a mix of analytical and creative capabilities.
• Customer centricity: Functional boundaries within organizations are also being dismantled to align structures to customer needs. The process has been further accelerated through digital as big data is now making it possible to analyze shopper behavior in great detail and customize the delivery format to individual consumer requirements through personalization.
• Co-opetition: This is a revolutionary mindset that combines competition with collaboration. Suppliers and retailers are no longer competing for limited resources but are working together to profit from enhanced customer value being delivered. There have been several instances of collaboration between retailers even from an India context (e.g.: Future Group and Flipkart).
• Co-ownership: From a retail context digital has helped monitor and control quality in franchising agreements to achieve greater alignment of the business model to shopper requirements presenting an enhanced opportunity for retailers to drive scale at a fast clip without compromising on the brand promise and sharing the investment burden with their partners.
• Co-creation: The new digital shopper is highly interconnected with his social peers and is more willing than ever before to share experiences and let others profit from his/her interactions with products/services. Consumers help co-create the value proposition basis their willingness to provide feedback which helps refine delivery models on an ongoing real time basis.
• Continuous learning: Self learning systems through AI and cognitive modelling has enabled feedback from past experiences to optimize the shopping experience for consumers and hence impacting satisfaction and loyalty to be enhanced.