The fourth annual JDA survey of more than 350 global retailers finds that a digital transformation strategy is their No. 1 priority in 2017; 69% of executives say they plan to increase their investment in digital transformation over the next year
The next wave of change is sweeping across retail as the industry looks to leverage digital technologies to reach the modern shopper. The Internet of Things (IoT), big data, robotics and augmented reality are some of the ways CEOs reveal they are choosing to invest their capital in the coming year to better compete. The fourth annual JDA survey of more than 350 global retailers finds that a digital transformation strategy is their No. 1 priority in 2017; 69% of executives say they plan to increase their investment in digital transformation over the next year.
This and other key findings are highlighted in the “CEO Viewpoint 2017: The Transformation of Retail,” a new report prepared for JDA Software Group by PwC.
“The investment in technologies underscoring digital transformation was a major undercurrent within this year’s survey results, which is no surprise, since retail CEOs understand just how important it is to invest in the technology that will improve the customer experience,” said Lee Gill, Group Vice President, Global Retail Strategy, JDA. “The next wave of results also reveal the continued balancing act retailers are struggling to maintain with delivering superior omni-channel execution and profitability, all while meeting the demands of the modern shopper, and keeping pace with the digital transformation underway across the supply chain.”
Digital Transformation Driving Technology Investments
Retailers are leveraging digital technologies to better understand and connect with their consumers, giving customers the reason to engage with them across retail channels. Despite the obvious importance of having a digital transformation strategy in place, surprisingly, more than half of respondents – 52% – have not defined or started implementing a digital transformation strategy yet. Globally, Chinese retailers are more likely to be implementing their defined digital transformation strategy (58%) than the US (40%) with 19% of US retailers struggling to or choosing not to define this strategy at all.
Mobile-enabled applications (85%), big data (86%) and use of social media data (85%) are the top technologies survey respondents are investing in or plan to over the next 12 months while automation and IoT are lower on the list for investment but gaining momentum as they are perceived as true game changers. The use of social media and big data is highly valuable in giving retailers deep insights into rich sources of customer information, allowing them to create credible customer segments while gaining insight into shopper preferences.
Omni-channel Execution Issues Continue
As omni-channel retailing continues to mature and retailers have blurred the lines between online and store, their attention has shifted to execution and profitability. Omni-channel execution amongst global retailers continues to lag in areas of order fulfillment, and profitability is still a challenge, with only 10% of those surveyed able to make a profit while fulfilling omni-channel demand. Only 12% of CEOs surveyed, down from 19% in 2014, provide a seamless shopping experience across channels. These retailers are finding their omni-channel offerings to be too complex or expensive and are choosing to scale back.
Omni-channel Fulfillment and Returns Spending Priorities
74% of respondents believe that the cost of customer returns is impacting profits to at least some extent. Retailers in the US are less likely to experience profit erosion from customer returns than other markets. As CEOs look to regain profitability, their chosen areas for order fulfillment investment are prioritized by those that are the most important and net the most financial return.
The survey found that retail CEOs are increasing their investment in buy online, pick up in-store (BOPIS), with 51% of survey respondents saying they offer or plan to offer BOPIS in the next 12 months – up from 47% in 2016. Buy online, ship to store, has picked up steam in the past year with 48% of retail CEOs investing in this service or planning to in the next 12 months. Conversely, fulfillment options that are becoming costlier and less profitable are areas where CEOs are decreasing investments in 2017. These include same day delivery (reduced to 33%, down from 43% in 2016), and providing specific delivery time slots (down to 27% vs. 48% in 2016).
The rising costs of order fulfillment are also pushing executives to rethink their strategy overall. 2017 will see increased charges for online orders (57% plan to or will make this change in the next 12 months), a rise in minimum order thresholds for free standard home delivery (62% plan to or will make this change in the next 12 months), and raising the minimum order value for BOPIS (55% plan to or will make this change in the next 12 months).