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Report: Retailers lag in digital transformation

BY Deena M. Amato-McCoy

Nearly half of retailer leaders will be out of business if they don’t transform themselves digitally.

This is according to “Reinventing Retail: Cisco Reveals How Stores Can Surge Ahead on the Digital Transformation Journey,” a study based on data from 200 retail executives from North and South America and regions of Europe. Companies represent brick-and-mortar retailers, e-commerce, apparel manufacturers, food service and other segments of retail.

Retailers digital transformation is moving too slowly, and companies may not be investing in the right places. Currently, retailers’ digital investment priorities remain concentrated in the earliest “Enable” phase (49%), which is focused on more mature IT technologies that enable existing capabilities and processes, IT agility and operational efficiency.

Where retailers can gain the most value however, is to focus on employee engagement initiatives that increase associate efficiency, optimize checkout and improve worker collaboration. A mere 6% of retailers’ investment priorities are focused on employee productivity use cases. By not prioritizing investments in employee productivity, retailers are missing a $187 billion opportunity, according to the report.

Only 29% of retailers’ investment priorities are currently focused on the “Differentiate” phase and only 22% in the “Define” phase, the second and third phases of the roadmap, respectively. These more advanced phases rely on digital disruption to differentiate a brand or define new business models.

Retailers are over-prioritizing the majority of their digital technology investments in customer experience use cases (37%). While this can deliver an estimated $91 billion in opportunity, over-emphasizing these investments may limit retailers from getting the operational value they could from digitally transforming their business functions and workforce, the report said.

Some sub-segments are making strides in the disruption journey. New York-based apparel manufacturers and garment industry retailers have placed 58% of their digital investment priorities within the Differentiate and Define phases, compared with just 39% from the brick-and-mortar retailers, department stores and food service retailers.

South American retailers are investing in the Enable phase (67%) com-pared with their counterparts in North America (51%). This may be due to economic conditions in South America causing retailers to invest first in digitization of facilities, energy and other operational functions that help lower costs and free up capital.

“The shakeup caused by digital disruption is already underway with many major retailers announcing the closure of hundreds of their brick-and-mortar stores in recent months,” said Kathryn Howe, director, U.S. commercial digital transformation, retail and hospitality industries, Cisco.

“Yet, there remains a tremendous opportunity for retailers to generate more than $506 billion in value through digital transformation,” she said. “Retailers need to digitize their workforce and their core operations to execute on the innovative customer experiences they want to deliver, and to position themselves for success in the new retail landscape.”

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