5 min read

Revolutionizing retail: Exploring the dynamics of digital transformation in retail industry

E-commerce

Fashion

Logistics

Summarize article with AI

Digital transformation in retail has made online and brick-and-mortar stores as convenient as ever. Thanks to advanced technology, shoppers can easily access thousands of products to browse through, choose custom options, place orders, and pay with zero friction.

On the other hand, the sellers get the tools to manage their stocks conveniently, communicate with suppliers, keep track of their customers’ orders, and even collect and analyze data to improve the shopping experience further.

But it doesn’t end just there. There are many things that data insights and sophisticated hardware can improve retail. Let’s discuss how digital transformation in retail reinvents experience for all actors involved – from suppliers to end customers.

The demand for retail digital transformation

The streamlined user experience and convenient service facilitated by modern technology are the things that keep customers coming back. Studies show that 73% of retail consumers prefer using self-service technology like self-checkout kiosks. On top of that, a good chunk of people indulge in online shopping: 50% of smartphone users use their devices to buy things over the internet, amounting to global online sales of over $4,9 trillion in 2021 alone.Responding to the surging demand for improved shopping experience, retailers are looking into ways to implement technology into their everyday operations:

Digital enterprise transformation solutions include a plethora of modern tech that optimizes each step of retail operations. From managing inventory to getting the product right into the customers’ hands, companies can benefit from an expanded pool of data and insights provided by intelligent hardware and software solutions. Let’s explore how retail companies can improve their work through eCommerce software development and adjacent hardware solutions.

Supply chain enhancement

The demand for various products is often unstable, making it difficult for retailers to balance their supply volumes. They have to consider a lot of things to keep the stocks sufficient, like anticipated demand for certain goods, current stock levels, costs, supplier production capacity, and so on.

Digital transformation in the retail industry offers access to advanced inventory management technology that makes stocking up on goods more efficient with informed and automated decision-making. With the hardware collecting relevant data, the software offers ways to optimize supply chain management.

Artificial intelligence forecasts demand

AI development services allow retailers to benefit from historical sales data, customer trends, and news agenda analysis. AI can use the info to forecast the demand for certain goods. Companies like Walmart already rely on the data to adjust order information, getting more of the goods that the system considers to be in high demand and less of those that customers don’t like as much.

Data analysis optimizes stock volume

Supported by inventory management hardware and software, data analytics services track stock levels and help avoid understocking and overstocking situations. Overstocking can lead to inventory obsolescence, which means the product becomes irrelevant when it eventually hits the store shelves. On the other hand, understocking results in lost sales opportunities because of the retailer’s inability to keep up with demand.

Data insights augment delivery

Digital transformation for retail empowers logistics with AI studying data on traffic, weather, and fuel costs in certain areas to offer the most efficient delivery routes. Amazon offers their Location Service to enable retailers to fulfill deliveries quicker, reducing overall fuel consumption and time on the road, which means they can fulfill more orders and sell off their inventory quickly.

Inventory management

Managing inventory is no easy feat. It is necessary to balance the stocks so that retailers’ shelves are never empty and the goods do not spend too much time in the warehouse. Keeping track of inventory and storage becomes increasingly difficult as the company and production rates grow, and it is a matter of time before the whole system becomes incomprehensible.

That is where digital transformation for retail sets things in order. There are many tools available to assist retailers in maintaining adequate stock levels to satisfy customer needs.

Embedded devices and AI track in-store demand

AI allows retailers to analyze the data collected from various sources and use it to make decisions regarding stocking up on goods. It can analyze the data from cameras and sensors installed in the store and determine how much of a particular product customers buy. Then, the retailer can use that data to adjust the order volume from the supplier.

Embedded devices powered by computer vision tech scan the area and detect the objects within. They recognize different goods on the shelves, assess the stock volume, and make ordering decisions. This way, the retailers can optimize their operational costs by not overstocking the products and increasing the volume of those in high demand.

RFID tags and barcodes optimize warehousing and inventory

RFID tags improve inventory management with convenient scanning and better object tracking across the inventory management system. Because the RFID scanners do not require a clear line of sight to scan RFID tags, the inventory management system will have a much easier time keeping track of the goods in the warehouse.

The RFID scanners located in the warehouse allow the system to get more frequent updates on the goods’ availability or their exact location. The staff uses mobile RFID scanners during delivery to facilitate inventory check-in and shipment verification.

Barcodes, on the other hand, have to be visible to be scanned. At the same time, they share a significant part of RFID functionality tags at a lower cost and may be preferable in some situations. For instance, RFID tags can have trouble transmitting data through materials like metal or liquids. Also, RFID tags require dedicated scanners, while barcodes can be scanned with a smartphone camera through a dedicated application. In case the scanner fails, employees can use smartphones issued by the employer.

Inventory management software structures warehouse operations

An inventory management system offers tracking features that allow retailers and suppliers to gather, structure, and access inventory information conveniently. Supported by RFID tags, barcodes, computer vision tech, and AI-powered data analytics, inventory management software offers up-to-date information on stock volume, shipping status, and specific goods availability. It makes finding certain goods and managing shipments much easier and helps avoid inventory obsolescence due to them staying in the warehouse for too long.

Advanced digital transformation for the retail industry may add even more features to the inventory management system, tying all of them together into a powerful ERP ecosystem that offers retailers a way to not only manage inventory but also set up dynamic pricing rules, enable compliance with tax regulations, and generate financial reports.

Customer journey optimization

Digital transformation in the retail sector can improve the customer experience and remove friction from shopping. Let’s take a look at what tools are at play here.

Smart shelves control in-store stock levels

Smart shelves help stores keep the most desired goods on the shelves at all times. Equipped with Computer Vision sensors, the shelves can track the availability of certain goods and report the dwindling stock to the warehouse managers. From there, the warehouse management system uses the data to arrange additional deliveries and adjust order volumes, increasing or decreasing the amount of goods accordingly.

The digital transformation for retail also enables stores to offer the freshest goods. The stores that sell the food they make themselves can adjust the volume of things they prepare based on demand. For example, smart shelves track how much in-store baked bread people buy and notify the bakers if the stock runs too low.

Self-checkout kiosks and contactless payments remove shopping friction

Self-checkout kiosks and contactless payments significantly reduce customers’ time in lines, allowing retailers to benefit from increased foot traffic and sales volume. Since customers prefer to shop at stores where they can quickly get in, pay, and get out, self-service is a must for retailers to stay competitive for customers’ preferences.

Using a self-checkout kiosk, customers scan the barcodes of the goods they buy, get the amount they owe, and pay with a contactless payment terminal attached to the kiosk.

They are pretty compact compared to regular checkout, which means by installing several kiosks in the store, the retailer further reduces purchase processing time.

Interactive kiosks provide shoppers with relevant information

Interactive kiosks provide the customers with relevant information, helping them along their journey. For instance, kiosks installed in shopping malls feature interactive maps to help customers find their way to a particular store or entertainment spot. They also list all locations present at the mall and other information like parking and working hours.

Retailers can install custom kiosks in their stores to further enhance the customers’ shopping experience. For example, customers can use such devices in clothing stores and get a 3D scan of their body measurements. Later, they can use the measurements to buy clothes from the same vendor, knowing they will always get the right size. The technology helps retailers reduce processing costs caused by bracketing: a practice of ordering several sizes of the same item, choosing the one that fits and then returning the others.

Since many clothing retailers do not charge for returning items, they must cover the shipping costs. Many retailers do not consider the items new once they have been unboxed, so they often have to sell them at a discount as “used”, “open box,” or “refurbished”.

Using a 3D fitting system allows to reduce the number of items that end up being returned, streamline the shopping experience for customers, and optimize operational costs for retailers.

Another good example of digital transformation in fashion retail is virtual fashion showrooms, which make shopping for clothes even more immersive. Shoppers get to browse through the entire collection in a virtual space and select the desired outfits, mixing and matching items.

Smart sensors track customer behavior

An array of smart sensors tracking customer behavior helps retailers tweak their offerings and customize experiences to attract more clientele.

Customer behavior details the way customers act along their purchase journey, including the time they come into the store, the section they spend the most time in, the products they look at and purchase, and any other things that help retailers find ways to improve the shoppers’ experience.

For instance, Wi-Fi fingerprinting, LED lighting frequency tracking, and smartphone microelectromechanical systems track customers’ location as they wander around the store. This way, the retailers can see what sections customers spend more time in and change the layout to optimize the shoppers’ journey and push the favored products.

Tracking the exact time of day the customers come to the store is another strong benefit of digital transformation in retail – having that information, the store managers may open more checkout points and deploy additional sales floor attendants to handle the fluctuating traffic.

In addition, Bluetooth tech can be used to send loyalty programs or discount offers to nearby shoppers. A person passing by the store can get an ad that may catch their interest at the right moment.

Sensors powered by computer vision tech also track queues to find the bottlenecks in the customer journey. 1 of every 3 customers will likely leave the store if they have to wait more than 5 minutes to pay for their purchase – retailers can minimize lost sales opportunities by using the queue data to adjust the location’s operational capacity to match the traffic volume.

Unmanned stores make quick shopping accessible everywhere

Digital transformation for retail allows commerce companies to do without the manpower to handle inventory management and checkout in certain situations. Those situations include providing people with goods in areas with scarce workforce or hard-to-reach locations.In that case, unmanned stores are the best way to go. Several types allow customers to come in and get what they need without ever interacting with a clerk.

Just-walk-out. Amazon GO is a well-known example of a just-walk-out store. It is packed with cameras and sensors that track the shoppers as they stroll through the sections and select the products, and the mobile app handles the billing.
Stores with vending machines. Convenient in remote and hard-to-reach locations, they essentially act as large vending machines. The users can use their personal code or mobile app to get into the store, get the items, and pay using the same application. Alternatively, they can place orders remotely and then pick up their goods at the location.

The stores are supported by advanced inventory management systems that track stock levels on the shelves and in the back rooms and place orders to replenish the inventory accordingly.

Smart shopping carts spare shoppers from waiting in queues

Retailers like Albertsons rely on smart shopping carts as an alternative to self-checkout devices, allowing shoppers to quickly get in, buy everything they need, and be on their way.

Smart shopping carts have a couple of advantages over the self-checkout kiosks. One of those is a further streamlined user experience: sometimes, as the store gets crowded, self-checkout kiosks meant to eliminate lines get lines of their own. With smart carts, the shoppers can scan their items as they put them into said carts and pay with their smartphones.

The other advantage is reduced adoption costs compared to other smart store options: for example, stores with just-walk-out tech require an array of cameras and sensors to track customers and the items they put into the baskets. Alternatively, deploying smart carts is just about purchasing the carts and educating the staff and the shoppers on how to use them.

In addition, retailers benefit from displays built into the smart shopping carts. For instance, as a customer picks and scans his items, the display takes that information and offers adjacent goods: if it sees a person picking up some ships, it may suggest some dips.

Bottom line

In today’s competitive retail environment, it is more important than ever for commerce companies to embrace retail digital transformation. By implementing advanced tools, retailers can set themselves up for success in the years to come.

A combination of hardware and software solutions can streamline the entire experience for suppliers, retailers, and shoppers. Suppliers can use embedded hardware and data analytics to predict demand, manage inventory, and augment deliveries effectively.

Retailers can track customer behavior to determine the most desired goods and adjust their order information accordingly. With the information from smart shelves and various sensors, they can ensure their stores always offer a sufficient volume of products.

On the other end, the customers benefit from quick deliveries, sufficient stock of goods, and personalized experiences.

FAQ

Why is digital transformation important for retailers?

Digital transformation is crucial for retailers because it enables them to adapt to rapidly changing consumer behaviors and market trends. By integrating advanced technologies, retailers can improve customer experiences, streamline operations, and enhance decision-making through data analytics. This transformation also allows for greater online presence and e-commerce capabilities, meeting the growing preference for online shopping. Additionally, digital tools help retailers optimize inventory management, personalize marketing efforts, and improve overall efficiency, leading to increased competitiveness and profitability in a digital-first economy.

What are the key components of retail digital transformation?

Key components of retail digital transformation involve integrating e-commerce platforms for online sales, utilizing data analytics for consumer insights, employing digital marketing for personalized experiences, and adopting mobile technologies for convenience. It also includes implementing omnichannel strategies to unify online and offline interactions, optimizing supply chains with digital tools, leveraging cloud computing for IT flexibility, and ensuring robust cybersecurity to safeguard data and digital assets.

How does digital transformation impact customer experience?

Digital transformation enriches customer experience through personalized product selection and recommendations, streamlined payment and delivery options, efficient support, convenient online shopping, and improved logistics.

How can small retailers begin their digital transformation journey?

Start with assessing the daily operations and identifying challenges. Then, create a clear plan of what technology you need to implement to solve your challenges, like building a website, a mobile app, or adopting software to handle your inventory or customers’ data.

What future trends should retailers be aware of in digital transformation?

Future digital transformation trends for retailers include artificial intelligence for personalized experiences, augmented and virtual reality in shopping, sustainability in e-commerce, the internet of things for operational efficiency, advanced data analytics, voice commerce, integrated omnichannel strategies, and blockchain for secure transactions.

Dmitry Nazarevich CTO

Date: Nov 20, 2023

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