Digital-First Retail Firms Lead the Charge
The retail industry is a melting pot of digital innovation. This is due to the high prevalence of enterprise-level digital transformation, where market competition is driving continuous innovation across retail product-service portfolios. Private equity and venture capital firms are supporting new disruptors to rapidly develop and deploy their products and services in the cloud, with data-driven processes that augment and improve the customer experience (CX).
Incumbents can no longer rely on reputation and brand image, with a loss of product momentum resulting in a feedback loop of lost sales and widespread customer exodus. Retail industry players must be aware and remain sensitive to the changing status quo, leveraging technology and data-driven business models to remain competitive.
Only 7% of Companies Are Delivering on Their Transformational Initiatives
Our research has shown that 30% of companies will fail to survive this decade due to an inability to evolve digitally. To address this negative trend, we have developed the Digital Enterprise Evolution Model™ (DEEM).
Digital Enterprise Evolution Model™
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DEEM allows our clients to recognize digital evolution patterns, implement benchmarking and prioritization strategies, and initiate application management protocols to satisfy stakeholder and market requirements.
Reimagining the Retail Customer Value Proposition
The retail industry is in the midst of a reimagining of the customer value proposition. This necessitates comprehensive analysis of customer sentiment for retail firms to be able to make the right business decisions. As product-service lifecycles grow shorter due to rapid innovation, e-commerce disruptors are well-positioned to absorb heightened demand among consumers. Additionally, retail firms are losing their place in the value chain as manufacturers adopt direct-to-consumer (D2C) sales models. This necessitates action from incumbents, delivering new value to preserve their place in the retail chain.
Digital-first retail companies use technologies like the cloud, artificial intelligence (AI) and machine learning (ML), as well as automation with flair to outcompete incumbents. Venture capital support also enables net-loss operations in the short-to-midterm, growing the customer base at the expense of profitability. This allows for disruptors to shift and add new product-service portfolio items, as well as adjust prices to leverage this new customer base.
Great risk comes with the potential for great rewards, and incumbents are hesitant to take these risks. These legacy firms must invest in digitalizing their operations to remain competitive and retain industry leadership. Interconnected product experiences and a complete transformation of the value chain will be essential.
Vision-Driven Retail Strategies Leave Little Room for Error
For retail firms that reside outside the vision-driven quadrant, there is a lack of urgency around digital transformation. These firms may digitalize certain aspects of their operations in a fragmented manner, but even then, sub-optimal execution is undermining the value of these initiatives. This highlights the need for end-to-end digital transformation strategies that encompass all areas of the business for retail players.
Around half of retail companies are planning significant investments in cloud technologies, creating a digital foundation equipped to support new technologies and approaches across their wider operations. Retail firms also report investments in advanced analytics functionality and robotic process automation (RPA), driving greater efficiency and cost-reduction to compete in the digital era. For retail incumbents, digital transformation is fast becoming a mandatory process to remain relevant in the face of digital disruption.
Research and Development Is Raising the Retail Bar
The retail industry is aligning more closely with the high-tech industry in terms of research and development. Research and development is a significant area for retail companies, with digitalization in the context of process digitalization and robotic process automation (RPA) being the focus. Advanced analytics will also play a huge part in generating insights to guide retail business decisions, with significant investment across the industry already taking place.
For retail incumbents, this increases the urgency for vision-driven digitalization of the product-service portfolio and underlying business operations. For retail firms who fail to digitalize and consequently sit outside the vision-driven quadrant, there is a significant risk of being forgotten in favor of new digital disruptors.