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Blog-Hero-Retail Digital Transformation Staying Two Steps Ahead of a Dynamic Marketplace

To state the obvious, things have been turbulent in retail over the last few years. A global pandemic, mandatory quarantines, a tidal wave of e-commerce colliding with an already stretched supply chain that, for some, lead to inventory oversupply, short-term margin pressure, and a mad dash to liquidate inventory – we could go on, but you get the idea. It's been bananas on a historic scale, leading to many sleepless nights and migraines for leadership.

And while it's true that history has a way of repeating itself, that doesn't mean the retail industry is helpless against further stresses and strains, even historic ones. That's precisely why digital transformation plays such a critical role in separating market leaders from everyone else – it provides the flexibility and foresight organizations need to steer a profitable course, even in the choppiest of waters. So let's take a closer look at what digital transformation in retail means, as well as a few examples and trends to boot.

The Business Intelligence Revolution: The Road to Data-Driven Decision Making

What Is Digital Transformation?

We understand that digital transformation is one of the buzziest terms in today's business world. After all, in retail alone, the concept has gone from virtually non-existent a decade ago to an essential component of technology strategies for nearly 71% of today’s retailers.

To that point, we also understand that when a particular term or concept becomes so pervasive, even one as critical as digital transformation, it can start losing its meaning. So, on that note, what exactly is a digital transformation?

To paraphrase ourselves, digital transformation is an organization revisiting how it utilizes its people, processes, and technology, typically propelled by digital solutions and a broader embrace of a data-driven culture. For the retail sector, nowhere is this concept better represented by the push and pull between brick-and-mortar and digital operations.

Ultimately, an effective transformation initiative creates a more satisfying experience for everyone involved in retail, from customers and supply chain partners to employees and stakeholders. And while e-commerce and an omnichannel experience for customers aren't new or novel concepts for the retail business, the coronavirus pandemic has accelerated their adoption, really highlighting the difference between the digital haves and have-nots.

Post-pandemic, one of the more obvious ways this dynamic rears its ugly head is in the often challenging shift from just-in-time (JIT) to safety stock models to account for longer lead times. However, there’s a fine line between “safety” stock and idle inventory that sits on a balance sheet like a lump of coal. Likewise, in an industry not necessarily known for the cleanest, most streamlined data ecosystems, digital transformation can effectively address all of these issues and countless more. That is, assuming they choose and implement the most suitable solutions for their needs.

Why Digital Transformation is Important in Retail

We'll get to more examples and trends in a minute, but we’ve probably already proved our point – a digital transformation strategy can be a new lease on life for retail stores, both physical and online. However, it's also one of those concepts that seems fantastic on paper – because it is – yet still runs into significant and stubborn industry barriers.

Unfortunately, despite steady growth in e-commerce across the sector, antiquated systems and outdated thinking remain pervasive in much of traditional retail, impeding a company's ability to capture, analyze, and report on critical operational data.

Granted, with physical, in-store sales still accounting for roughly 80% of total core retail sales, there's obviously still an overwhelming need to provide customers with the tactile shopping experience only physical retail stores can provide. However, while that classic customer experience might look the same as it did a decade or two ago – at least from a distance – the underlying customer behavior and expectations are wildly different.

Today, 80% of customers are more likely to spend their hard-earned money on brands that provide them with personalized experiences. However, with 80% of companies saying they struggle to incorporate the customer-based data analytics needed to effectively drive personalization, that obviously doesn't bode well for companies still using the same systems and data repositories as – once again – a decade or two ago.

The point is, without the back office efficiencies and capacities to drive those front office essentials, a retailer can't meet modern consumer needs or drive customer engagement levels. Put another way, failing to create a sound digital framework is essentially pushing customers to competitors that have such a framework in place. And that's not good.


Examples and Trends in Retail Digital Transformation

Enough of the depressing stuff, though. Let's look at a handful of real-world examples where transformed people, processes, and new technologies drive exceptional value for retail organizations.

Personalized Marketing

To flesh out an already recurring theme, personalization is now essential to customer satisfaction and engagement. But given all of the different ways you can engage the modern consumer – email, social media, push notifications, and the many other avenues big data provides – how do you choose which direction to go? And how do you take full advantage of each and every touchpoint with a diverse, often fickle customer base?

Digital marketing campaigns take the guesswork out of the equation, using pertinent data points – including everything from social media likes to checkout scans – to provide personalized product recommendations across the most impactful channels.

Technology automates the heavy lifting throughout this process, helping your sales and marketing teams become more efficient and effective, all while providing a more satisfying customer journey through this automated, omnichannel approach. While this might seem outside the purview of a business advisory firm – like Embark, for instance – our transformation specialists help organizations make sense of customer data through automation tools and quantifying marketing campaign results. This critical data provides a sales and marketing team with a continuous, in-depth gauge on campaign performance and customer engagement.

Inventory and Supply Chain

Once again, digital technologies – from internet-of-things (IoT) sensors in warehouses to systems that track and report in real-time – allow retailers to find that comfy middle ground between just-in-time efficiency and save-for-a-rainy-day inventory counts. So let's look at something new and hugely impactful – vendor selection.

During the pandemic, many retailers learned the hard way that a lack of diversification in a vendor portfolio can spell serious trouble. To put a finer point on the issue, according to a recent survey, 73% of companies experienced pandemic-related issues in their supplier base. Even worse, that figure rises to 91% in the consumer goods and food industries.

As you probably guessed, this is yet another area where digital transformation can help retailers right the procurement ship and galvanize their vendor portfolios. With digital technologies, you can expand your procurement model to something far more strategic, accounting for materials sourcing and shifting price points, even in the highly dynamic backdrops retailers have been fighting through lately.

This way, you can take full advantage of economies of scale without painting yourself into a corner by relying too heavily on a single vendor. Remember that old saying about having too many eggs in one basket? A diversified procurement model by way of digital solutions helps you dodge that particular bullet.


Your 4-5-4 retail calendar never rests. It’s unrelenting and unsympathetic. And rudely, it doesn’t care if its never-ending parade of deadlines makes your mountainous pile of manual processes comparable to scaling Everest every accounting period. Which doesn’t do much good for your team of battle-worn accountants.

In practice, that means sweating every cut-off date and set of actuals, along with the management reports that rely on accurate, timely data. And when there’s a broken link in that chain, decision-makers don’t have the information they need to strategize and guide the ship. And that’s when really bad stuff can happen.

But what if those processes and cut-off dates weren’t so scary? What if your accounting team wasn’t rustling through dozens, sometimes hundreds of spreadsheets for data to feed those reports? Digital tools can automate those processes for even the highest-volume retail organizations, quickly and efficiently collecting and organizing transactional data using essentially any detail and perspective you choose.

Mind you, all of this is true no matter how many stores you have, how big your footprint extends, or transactions you record every day. Automation keeps accountants, CFOs, stakeholders, and investors happy by streamlining the entire record-to-report process. And that’s a noble cause if there ever was one.

Store De-Densification

Store de-sensification is an unfortunate but inevitable part of the retail industry when sales figures stagnate or fall backward. However, that doesn’t mean there aren’t benefits to it as well, particularly the opportunity in capital management to reallocate resources, invest in high-performing existing stores, or  simply stretch every dollar as far as possible. But how, exactly, can you optimize your decision-making process when, for example, you have a dozen locations in a single region but no obvious outliers to quickly hone in on?

Specific digital technologies can not only help you gain a full understanding of essential lease information for each location – there are many robust, ASC 842-compliant lease accounting platforms available – but also inform your store transference models. With accurate, timely foot traffic data and other key KPIs, digital solutions can tell leadership which existing stores can absorb the de-selected store business, minimizing the impact on total sales.

Analytics and Reporting

Remember those antiquated systems, messy data environments, and disconnected systems we mentioned? Well, digital transformation can address all of those issues, from the automation of cumbersome but essential processes like the month-end close, to business intelligence-driving analytics, technologies can refine – often redefine – critical functions across the finance organization.

For example, by freeing the business information that’s been sitting under your nose the entire time, advanced analytics allow your FP&A team to provide decision-makers with a clearer, more detailed view of operations, using predictive analytics to peer into the future.

And as if advanced analytics slicing and dicing every nuanced inch of your POS data wasn't enough, thanks to a more efficient data management architecture and toolset, data visualization solutions like self-service dashboards can put all of that information into the palm of leadership's collective hand. Literally. From a smartphone or virtually any other internet-connected mobile device, your decision makers can burrow into all of that data to get the most relevant and timely information possible for strategizing.

Similarly, automated store reporting is a treasure trove of operational insights just waiting for managers to discover them. For instance, an automated process can collect POS data after the close of business on Saturday, validate that data, and generate an operating report before managers even walk through the door on the next business day.


The Bigger Transformational Picture

We could go on for days with different examples and use cases that would only further crystallize the importance of digital technologies in retail's future. But even without mentioning what machine learning-based inventory algorithms, artificial intelligence-powered chatbots, or augmented reality (AR) in mobile apps bring to the fold, we know you get our drift. Like it or not, digital technologies will be critical for your future success, if they aren't already.

But as overwhelming as all of this might sound, the stew of technologies and terminologies we've used today aren't nearly as complicated as you might think. In fact, these technologies are just as appropriate for a mom-and-pop donut shop's business strategy as they are for massive brick-and-mortar stores or the biggest online retailers in the world. As is often the case, though, the trick is finding the right set of experts to show you the way.

That's why a team of specialists like Embark can be such an asset to your business, no matter how tech-savvy or averse you might be. So stay tuned to this channel because we'll be taking a far deeper dive into retail transformations over the next few weeks, discussing where to start, the specifics involved, and, most importantly, what it means for your people, processes, and technologies. We promise it's going to be a fun, informative, eye-opening ride. And hopefully a profitable one for you as well.

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