Many retail executives are struggling to imagine where the future is leading them and their organizations, not to mention the role digital technologies should play along the way. Our research shows a significant number of retailers continuing to make decisions and form strategies based on outdated attitudes, fears and misunderstandings.
To better understand the strategies and technologies that digital transformation requires, Cognizant’s Center for the Future of Work surveyed 2,000 senior-level executives from around the world, including 500 executives from the retail industry. Here are the key trends that retailers need to embrace in the work ahead:
Digital commerce is only getting bigger. Already a significant retail driver, digital commerce is predicted to increase in importance by 68% for surveyed retailers between now and 2020. Retailers are increasingly dependent on digital commerce growth as sales soften through traditional channels. In fact, 22% of retailers in our study said they generate 30% or more of their sales from digital channels. By 2020, that percentage will increase to 79%, a massive 259% increase.
Digital leaders outperform digital laggards. Retailers with exceptionally strong (11%-plus) revenue growth already derive a higher percentage of their sales from digital channels, according to our research. These retailers also forecast a more bullish future than lower performing retailers.
We also found a correlation between the percentage of revenues from digital channels and digital maturity. As an example, one-third of digital leaders currently receive 30% or more of their sales through digital channels compared with just 4% of digital laggards. That gap will continue through 2020, our research suggests. (For more on how we defined and identified digital leaders and laggards, see our full study.)
Digital leaders also have a head start on their digital transformation, better attitudes about the value of digital technologies, greater revenue growth and, generally, more organizational awareness about how to win in the highly competitive retail environment. These characteristics are all proving to be key market advantages.
Given this analysis, it should come as no surprise that 75% of companies with very strong revenue growth said they had increased their investments in digital technologies in 2015–2016; in contrast, 50% of companies with negative to flat revenue growth made no changes or reduced their investments in digital technologies.
Digital leaders think differently about the role and value of digital technologies. Overall, digital leaders see digital transformation as a positive, while digital laggards express far more fears and concerns. In fact, almost 72% of digital laggards are concerned they are wasting money by investing in digital technologies, compared with only 25% of digital leaders. These concerns may stem from leadership’s unwillingness to adopt a digital mindset or invest in the required upgrades, technologies, doctrines, strategies, skills and business processes to elevate their organization’s digital wherewithal.
A retailer’s attitude about the potential of digital technologies to positively impact business performance is an important predictor of digital success. Digitally mature retailers are significantly more enthusiastic about how digital impacts their work, in terms of helping them become more efficient, manage people better, work faster, be more creative and innovative, make better decisions, provide more freedom and flexibility, and make more money. As a result, leaders are developing more aggressive technology plans and strategies than digital laggards.
Digital leaders believe digital technologies will have a big impact on work by 2020. Far more so than laggards, digital leaders believe work will be significantly impacted by technologies such as business analytics and artificial intelligence. They are simultaneously concerned about data security and privacy, bots, new regulations on digital businesses and hyperconnectivity of people and things.
Retailers with very strong revenue growth have different opinions than moderate growth retailers as to which skills will be needed by 2020. The biggest differences in opinion are in the areas of fabrication, verbal and written communications, language and design skills.
We attribute the need for improved design, language and communication skills to the increasing shift from brick-and-mortar and face-to-face interactions to digital ones, where the design of digital interfaces becomes critical and the medium of communication moves to online chat, AI-supported chat bots, audio and video.
Technology investments will come in waves: Retailers are prioritizing their timing of digital initiatives, based on business impact. At least 25% of digital leaders in our study identified five digital technologies as having already had a large business impact: cybersecurity, big data/business analytics, mobile technology, social media and cloud.
Between now and 2020, at least 25% of digital leaders named nine additional digital technologies to join the list: collaboration technologies, telepresence devices, artificial intelligence, digital currency, sensors/IoT, software bots (for process automation), sharing economy platforms, hardware robots and telematics.
Between 2020 and 2025, at least 25% of retail digital leaders predicted all 23 digital technologies included in our survey will have a large to very large impact on their businesses. This expansive list of technologies includes nine additional digital technologies: nanotechnology, geospatial information systems, drones, wearables, blockchain, virtual reality, biotechnology, 3-D printing and autonomous self-driving cars.
The pace of change across the industry landscape is accelerating like never before. Some retailers will choose to deny, ignore and retrench, while others will embrace, adopt and lead. The race to digital transformation is on, and there is no time for delay.
For the full report, please read "The Work Ahead: How Digital Thinking Separates Retail’s Leaders from Laggards," or visit us at our Work Ahead website.