Digital Transformation in the Retail Sector

Digital Transformation in the Retail Sector

Digital Transformation in the Retail Sector

The digital transformation of the relationship between the seller and the buyer entails the simplification of trading procedures by switching to digital form, that is, the active use of electronic commerce. A prerequisite for comprehensive digitalization is to do business digitally.

For several years, the digital component has been an addition to traditional business. However, recently digitalization has become a fundamental component of any business. It has ceased to be part of the economy, becoming its new form.

The Internet has had a significant impact on retail, and today the Internet of Things is setting the trend for its further development. Consider the impact of the Internet as a whole and the Internet of things on the transformation of retail. In the broadest sense, the Internet of things covers everything that is connected to the Internet, but this term is increasingly used to define objects that communicate with each other.

What is Digital Transformation?

Digital transformation is the introduction of modern technologies into the business processes of an enterprise. Retailers can use such different approaches and technologies as big data, chat bots, voice assistants, artificial intelligence and more. But the basis for the effective operation of all these technologies will always be data and their effective management.

Digital Transformation
Digital Transformation

It includes not only the installation of modern software or hardware, but also fundamental changes in approaches to external communications, corporate culture and management. As a result, customer satisfaction and productivity increase, and the company gains a reputation as a modern and progressive organization.

Digitization of processes is relevant not only at the level of individual companies, entire industries choose this development path for themselves as a way to meet the rapidly changing conditions of the surrounding world. With this, the digital transformation of retail, the public sector, industry and other areas is already changing the lives of every person and every company.

Internet and retail

Almost two decades ago, the Internet began to fundamentally influence retail prospects. Retailers have the opportunity to sell goods in a fundamentally new way by which consumers can make purchases. The Internet has contributed to gradually blurring the line between traditional and digital retail. By acquiring the ability to obtain information about the availability of goods and services on the Internet, to make purchases with the possibility of delivery, the client is no longer limited by the cash supply of goods from the seller.

Today, Internet-enabled models are no longer a source of competitive advantage and are becoming a necessary but not sufficient condition for the acquisition of goods and services.

Usually, the retailer, in an effort to achieve the planned sales volume and profit mass, makes a choice between the effect of volume and the effect of price. That is, an increase in prices with a decrease in sales or, conversely, an increase in turnover due to lower prices. The decision is influenced by the specifics of a particular market, primarily the nature of price elasticity of demand for goods. But a significant role is played by the factor of physical availability of goods.

Before the introduction of the Internet in retail, customers made purchases by choosing from products available on store shelves and in warehouses. The only way for sellers to provide customers with the desired product was their physical availability. Ensuring the possibility of a wide choice meant an increase in the costs associated with the inventory, movement and storage of a large number of goods.

As a result, retailers who resorted to higher prices than those who offered fewer options provided themselves with higher profits. Alternatively, the seller could provide less choice at lower prices, while maintaining the desired profit margin.

The Internet has allowed sellers to offer a wide range of products at low prices. With Internet support, it has become possible to quickly respond to changing consumer demand. This allows you to provide a large selection while reducing costs and reducing the time during which goods are available to consumers. It is also important that the buyer, as a rule, wants to find the goods on the shelves before the end of the season. At the same time, in practice, some firms sometimes create a state where the goods are sold ahead of time, and therefore customer demand is not satisfied.

Internet and retail
Internet and retail

The Internet has expanded the space and increased the time during which a product remains viable. The multi-channel Internet support allows retailers to more often offer more products for an increasing number of people. Since companies have stocks of an almost complete assortment of their goods, the goods can be sent for sale to any geographic location and, moreover, are not tied to the season. For example, sellers of shorts in America, delivering this product to California throughout the year, during the winter months make them available to customers in Buffalo, near the Canadian border.

Nowadays, consumers are increasingly using digital technology at every stage of the purchase of goods, from the original idea that comes to mind to its gradual narrowing, purchase and care of the goods. This encourages sellers to combine digital and physical experiences.

The retail environment today is determined by the ability of companies to effectively use the innovations that the Internet provides. Companies that have not mastered online retailing will inevitably lose out in competition.

The role of IoT in retail

The Internet has spread everywhere, penetrating all spheres of the economy. Having occupied a certain place in the retail trade, it allowed many companies to adapt to the conditions of sale in retail, using a multi-channel strategy for selling goods with their wide assortment and lower prices when selling in online stores and on mobile platforms. Internet of Things technology, in turn, is changing the competitive environment.

The Internet itself has helped bring together sellers and buyers, optimize costs and increase sales. However, it does not give a complete picture of which customers are demanding certain goods at a given time. This situation, in particular, is the result of the fact that online and offline life of people to one degree or another differs from each other.

The Internet provides the customer with the opportunity to present their preferences to the seller, but often it takes some time and effort. Due to this information gap, some retailers always prefer to offer customers the maximum choice at a low price, although this does not always meet the wishes of customers.

E-commerce has a wide selection, an ever-increasing number of available types of goods, but this situation may lead to a lesser degree of satisfaction of the needs of customers who are faced with the paradox of choice. Experts note that under certain conditions, expanding choices can stop people in the final decision process and leave their needs less satisfied.

It should be noted that retailers can provide custom-made goods, which enriches the experience of working with customers through a personalized approach, but this is only possible with the sale of expensive goods. Possessing sufficient information about the consumer, they are able to provide the consumer with the exact product they are interested in. However, a customer orientation strategy avoids, but does not eliminate, the paradox of choice.

With the advent of the Internet of things, Internet-connected objects can transmit information about their condition and, since this information is linked to other data sources, companies can achieve a more accurate understanding of their supply chains and their customers.

Using IoT technology, data that used to be extremely expensive to obtain, or which were completely inaccessible, can now be generated, collected, analyzed and run autonomously. For retailers, the collection of data, in particular regarding specific customers, their habits and preferences, is provided by IoT technology. In combination with new information requirements, such as the location of a user with advanced analytics and artificial intelligence, sellers can direct consumers through many options to purchase specific goods, thereby solving the problem of the paradox of choice.

For large retailers, IoT technology also creates opportunities for better customer service. Buyers often do research online before they go to the store. Providing the stores with such data, along with information about how often the customer visits the store, which he purchased for the last time and his typical expenses, sellers can build more stable and effective relationships with him.

The role of IoT in retail
The role of IoT in retail

Instead of a personalized message from the customer’s application, a store employee who can personally submit personalized offers, leads the customer through the store and offers options based on previous purchases and data viewed, greets him by name.

The Internet of things has a big impact on the transformation of trade. IoT technology enables companies to create, collect and process new types of data. This eliminates the limitation of information, reduces the client’s waiting time, optimizes inventory, increases delivery speed and more.

Obtaining information about the value creation cycle allows the organization to create the necessary value. The value of the generated value will depend on the specific drivers. The value of information is largely determined by its flow, from creation to recommendations for more effective solutions. More information generated with less risk and over a shorter period of time will increase the value of the information flow.

For example, data collected about shoppers moving around the store, transmitted over the network, aggregated, and analyzed may allow the retailer to create value in the form of improved store layouts. Even more valuable are the data on the number of customers processed with increased security and collected by season, and not as a whole for the year.


Today, almost all major brands have embarked on a digital transformation of customer service. Some focused on the integrated implementation of AI and machine learning in business processes. Others are targeted solutions that will allow them to recognize their customers on any communication channel, learn about all his calls to the company, improve the quality of customer service, and optimize the cost of additional staff and inefficient services.

AI will continue to evolve, new developments in the field of cognitive computing will appear. Also, in the near future, representatives of the IT industry will still have to work on improving payment technologies without cards and expanding the capabilities for exchanging data with customers’ mobile devices in offline stores.