Digital Maturity in Retail Industry

Where Do You Belong in the Digital Transformation Quadrant & Maturity Index?

Digital transformation has become an industry buzzword. So much so that it is dominating retail industry conferences, panel discussions, business summits, etc. While some leaders are terming it as their biggest business enablers, some are admitting that it is one of their biggest challenges.

It is clear that digital transformation has indeed turned the retail industry dynamics head over heels. All the predetermined success parameters have been tossed out the window.

Lately, we have seen a lot of big-box retailers shut down, despite making the investments in digital solutions. On the other hand, we have seen smaller yet agile players disrupting the market with their solutions, processes, business models, and whatnot.

However, dividing the retailers into mere two categories of thriving and struggling brands would be too simple and we know that digital transformation is everything but simple. So how has digital transformation divided the retail industry? Let’s take a closer look.

Industry Divisions

We believe that retail industry can be divided into 4 major quadrants when it comes to digital transformation maturity.

  1. The Pioneers: This is the quadrant that boasts of the brands who are visionaries. These retailers set the tone for the industry. They are the ones who understand the true potential of digital and have realized how it can completely transform their business. These retailers would have already implemented game changing solutions long back and would have become extremely nimble due to agile operations irrespective of scale and size.
  2. The Explorers: These are the retailers who are aware of the potential of digital and see it as a strategic objective. But they are still evaluating different paths of transformation and are not there yet. They have witnessed what industry pioneers have done and are in the process of creating the roadmap of their own journey. They are making efforts to align their digital transformation to their own strategic goals.
  3. The Followers: These are the retailers who are struggling to grasp the concept of digital transformation. They are adopting digital solutions just to keep up with the competition. There is a lack of strategy and plan. We often see these retailers fail despite investing huge sums in technology. They end up accumulating technical debt which has a crushing effect on their business.
  4. Nay Sayers: These are the retailers who are in denial and have chosen to continue with the brick and mortar way of doing business. They do not make any digital commitments and don’t have much faith in transformation. They are the ones who believe that digital transformation is just a passing fad.
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To identify which quadrant a retailer belongs to we use a digital maturity model. This model is designed to give the retail leaders a way to move forward with obvious pragmatism and digital readiness.

Stage 1: Reactive Retailer

This is the stage where your decisions and actions are a reaction to events. The leadership is focused on crisis governance and does not invest in proactive approaches. The cost of operating such business is also high since operations and quality standards are influenced by partners immensely.

Stage 2: Organized Retailer

This is where the retailer will be focused on driving collaborative operation. The leadership would encourage connectivity and will look at specialists to introduce process changes. However, the collaboration and transparency will be limited to functional silos. Due to this, the cost of operating large and connected teams would be higher.

Stage 3: Digitized Retailer

This, we believe, in a true way is the start of a digitally transformed retailer. Here the leadership is focused on developing digital capabilities. The connectedness extends beyond functional silos and processes are designed to introduce trackability and accountability. At this stage the cost of operating the business is also less since automation has kicked in and division of work has optimized resource utilization.

Stage 4: Connected Retailer

This is where the retailer boasts of a connected business that links employees, vendors, partners, stakeholders, etc together. The approach of the leadership is proactive which ensures that the organization adapts to market changes seamlessly. They are further exploring digital solutions to self-disrupt and transform. The cost of operating such a business is less. Decisions are driven by data and automation becomes a norm rather than an exception.

Stage5: Intelligent Retailer

This is the highest digital maturity that a retailer can have. At this stage, it is not just automation but cognitive automation that matters. The leadership is investing heavily in artificial intelligence and machine learning for more accurate forecasting and stronger process evolution. Agile processes also become very critical at this stage as human intervention reduces. The business is able to engage customers far more effectively with least human involvement in the frontend. Data analytics builds a clear picture of the business and where it is headed.

Conclusion

A retailer needs to move from one stage of the digital maturity matrix to the next in a well thought out manner. The success of your initiatives at each stage will depend on how grounded you are with your digital transformation strategy.


To create your own digital evolution roadmap, you can talk to our digital retail consultants. We can help you understand where you currently sit in the maturity matrix and the market quadrant and help you move from one milestone to the next.

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