The retail community across the globe is hinging it hopes on technology-fueled transformations that run into the hundreds of billions of dollars and entice customers to spend — even if executives at these organizations lack a nuanced understanding of what these digital innovations are really all about.
Retailers worldwide expect to spend $203.6 billion this year on technology, equivalent to an estimated 3.6% bump from their 2018 investments, based on research from Tech., a collaborative venture between U.K.-based Retail Week and World Retail Congress.
The Tech. report, “A World in Motion: Retail Digital Transformation Across the Globe, and the Technology Supporting It,” found that global retailers in the U.S., U.K. and Germany dub blockchain, artificial intelligence (AI) and robotics as “power technologies,” or the ones that rank highest on their list of investment priorities. Curiously, a large number of retail executives don’t quite grasp the technologies they’re deploying or putting up for consideration. Asked to rate visual search, blockchain, AI, voice search, augmented reality/virtual reality and robotics from 1 through 5, with 1 indicating the lowest familiarity and 5 the greatest, no technology received a higher average score than visual search’s 3.28.
“This finding alone perhaps illustrates the difficulty of digital transformation and emphasizes the lack of education about new technology and the options available,” the report said. Despite U.S. retailers’ familiarity with AI standing at a dismal average 2.92, many are charging ahead with deployments in this arena as noted below.
The digital imperative
One factor driving investments of poorly understand yet widely admired technologies: the urgency to transform digital operations has only increased over the past three years, according to three-quarters of retailers in the U.S., perhaps due to digital-first companies like Amazon and digitally native direct-to-consumer companies whose results and growth are giving enterprise-level retailers pause. All French retailers agree with American merchants that transformation has become an imperative, the report noted, while similar numbers of German retailers (90%) and their British peers (88%) harbor comparable sentiments.
“With retailers the world over going through a seismic shift from large store estates to more fleet of foot operations that are digitally enabled but not so heavily reliant on bricks and mortar, the need for digital transformation appears to be on the rise,” the report said.
Rather than spreading themselves thin, retailers prioritize the tech they believe can make a difference in their businesses and different countries are moving in disparate directions. While 40% of American merchants already have put AI to work in their businesses, their German counterparts are putting their investment focus on voice technology and its implications for commerce (60%). Meanwhile, robotics deployments can be found at 50% of French retailers, the study showed.
Transforming with speed and leaning on leadership
The Tech. report also indicates that retailers acknowledge the need to move quickly with digital projects, a far cry from the multiyear dragged-out approach commonly adopted in years past. More stateside retailers (80%) than those in the U.K. (75%) or France and Germany (70% apiece) said they’re working with an 18-month to three-year deployment timeframe, “perhaps indicating the U.S. retail industry is in more of a hurry to enact change and shift its business models,” the report added.
It’s often said that change and transformation begin at the top — and the study is proving this to be true. However, European retailers relative to Americans showed a more upbeat attitude when asked how effective their leadership is in moving the technology ball forward and supporting digital transformation initiatives in the coming 12 months to 18 months. A significant majority of French (80%) and U.K. respondents (79%) expressed faith in their C-suites, while the numbers drop off among the Germans (60%) with the U.S. barely cresting the halfway mark (57%).
That’s why it seems counterintuitive, the report added, that American retailers such as Target, Walmart and Wayfair “are viewed [as] among the global leaders in embracing retail technology innovation and driving sales using new tech deployment and e-commerce.”
Obstacles to innovation
Retailers cited varying challenges that hinder digital transformation, with responses again split according to geography. The Europeans blamed difficulties in effectively adopting technology from the stores to the supply chain, while Americans, on the other hand, expressed concerns that new systems would underperform on expectations — a common fear when plunking down big money and venturing into uncharted waters.
The U.S. may be a hotbed of innovation culture — what with the concentration of startups, tech talent and investment funding in Silicon Valley — but stateside retailers continue to lag their British peers when comparing deployment rates of capabilities like click-and-click (i.e. BOPIS) tap-and-go payments, or even accepting chip-and-PIN cards, the report said.
How Decathlon innovates in-store
Although many a retail earnings report points to a supercharged focus on digital transformation, French sporting goods chain Decathlon is one merchant putting its money where its mouth is. In April, the retailer opened its first full-size U.S. store in the California city of Emeryville, just across the bay from San Francisco where it had previously debuted a so-called “lab store” to take the pulse of Bay Area shoppers.
Vertically integrated Decathlon deployed NewStore’s omnichannel-as-a-service platform to go fully cashless and checkout-less at the Emeryville location, where associates roam the floor equipped with iPhones and ready to ring up customers at RFID-enabled stations located around the 47,000-square-foot store. Note that just a month prior San Francisco enacted a ban on stores that don’t accept cash, citing discrimination against people who may be unbanked or privacy-minded and rely on hard currency that doesn’t leave a digital trail for their brick-and-mortar transactions. On June 6, Decathlon announced that it accommodates cash-carrying customers with an in-store kiosk that converts cash to gift cards they can then use to pay for purchases.
Tech talent and budgets
Pressed to tackle tech projects in-house and struggling to fill new roles in often-unfamiliar territory, retailers increasingly cast their gaze outside of their industry to source top digital talent. U.S. merchants (15%) are slightly more likely than those in the U.K. (13%) and France and Germany (10% apiece) to acquire executive tech leaders from non-retail industries, the report found, and many businesses poach directly from software firms.
Just more than half (55%) of U.S. retailers tag their digital transformation budgets at £100,000 ($127,000) over an 18-month period, trailing the spend-happy French (80%) but 5% ahead of the Germans. As the focus on digital grows, retailers in general are looking to their third-party vendors to act as true partners walking alongside them in their transformation efforts rather than simply as suppliers, according to the study.
Though the French (60%), Brits (55%) and Germans (50%) indicate a desire for close collaboration with tech vendors, just 40% of U.S. retailers are interested in this kind of cozy relationship. The report noted that retail leaders in the U.S. “appear more reticent to hand over power and responsibility to technology companies as they navigate their way through digital transformation.”
However, high-profile partnerships like Walmart’s decision to partner with Microsoft on AI and cloud technologies could shift attitudes industrywide. As NBK Retail Consultancy founder Nathalie Berg said in the report, “The anti-Amazon alliances are coming thick and fast.”
Poppie Mickleburgh, director of the digital commerce-centric Tech. festival taking place in London in early October, noted how this new wave of technology and innovation is delivering opportunities that retailers couldn’t have fathomed even just one generation ago. “All regions agree that there is a need for digital transformation and that a change in leadership mind-set is required to do this,” she said in a statement. “However, how they go about tackling this, and which technologies they prioritize, differ — which is fascinating, and offers a chance for international peers to learn from each other.”
The Tech. festival launched two years ago to address “the vast disruption that technology continues to have on the retail industry,” Mickleburgh added. “This important annual event aims to ensure that those willing to seize these new opportunities will thrive in the fast-evolving digital era.”
Editor’s Note: This story was reported by FN’s sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.
Watch the highlights at the 2018 FNAAs.