The Retail Industry Digital Adoption Survey,
Sponsored by Software AG, Shows that Retail Digital Leaders Are
Well Positioned for Growth While Retail Digital Explorers Remain
Vulnerable to Amazon and Other Disruptors
A new independent survey from NSU Technologies, LLC and
sponsored by Software AG (Frankfurt TecDAX: SOW) found that
retailers that have readily adopted digital technologies have
experienced a six percent CAGR revenue growth over a three-year
period, while other retailers that have explored digital without a
full commitment to broad implementation experienced flat growth
over the same period. The retail early adopters, known as Digital
Leaders, also had a higher average price-to-earnings ratio of 22.32
versus 12.22 for Digital Explorers. In addition to outperforming
their peers, the Digital Leaders are already reaping the benefits
from improved customer engagement and operational efficiencies born
from digital adoption while capitalizing early on changing trends
and customer buying patterns. Full text of the survey can be found
here.
The 2018 Retail Industry Digital Adoption Survey queried 100
major retailers with 80 percent of those organizations having
annual revenues in excess of $1B (USD). 69 percent of those
surveyed operate only in the U.S. 38 percent of those surveyed
operate over 1,000 stores, while 56 percent operate less than 200
stores. 63 percent of respondents are publicly traded retailers,
while 37 percent are privately held. Nine different retail sectors
are represented in this survey: fashion, sports & leisure, home
& DIY, health & beauty, general merchandise, food,
electronics, auto & auto parts and specialty merchandise.
While the retail industry is still in the early stages of
digital transformation adoption, there is evidence that the speed
of adoption is increasing. 75 percent of respondents expect digital
technologies to increase their annual IT budget for 2019, and
retail IT organizations adopt new tools and techniques to increase
throughput and improve customer responsiveness. Still, many
retailers are not moving their digital transformation strategies
quickly enough to keep pace with Amazon and other disruptors. In
fact, 38 percent of respondents reported that they have not yet
started on a broader scale of implementing digital
technologies.
Delays and cost overruns have also stalled digital adoption for
retailers with 75 percent of respondents citing issues with both.
50 percent stated the delays were a result of a lack of complete or
well-understood requirements, while an additional 19 percent
indicated that a lack of digital expertise was the root cause of
delays. Regarding in-house digital talent, only 25 percent of
respondents noted they had the majority of skills needed to deploy
digital technologies already on board. Of those without the
required skills, the majority of respondents planned to augment via
external labor while others will leverage managed services or
outsourcing to complete digital efforts.
The survey also further revealed more distinct differences
between the Digital Leaders and the Digital Explorers regarding the
rate of digital transformation in the retail sector. The Digital
Leaders benefitted from CEO endorsement of a strong enterprise
digital strategy, a corporate culture supportive of digital
adoption and Boards of Directors with technical expertise, while
the Digital Explorers suffered from limited involvement at the
executive level as well as an incomplete or poorly defined
strategy. This had a direct impact on overall revenues, market
share growth and competitiveness in an increasingly uncertain
retail climate for both parties.
“Retail Digital Leaders are already investing in key enabling
technologies such as artificial intelligence (AI), Big Data, Agile
and DevOps as well as the Internet of Things (IoT) to meet the
changing demands of today’s discriminating, empowered shoppers,“
said Oliver Guy, Global Industry Director, Retail, Software AG. “At
Software AG, we work with the world’s most respected retail brands
such as Adeo, Staples, 7-Eleven, Lidl and Kiabi, among others. We
found that the retailers that are thriving in a challenging
environment have a number of things in common: they have adopted
service-oriented architectures and an independent integration
platform in order to insulate themselves from change and to
increase agility to try new things. They realized, early on, the
need to increase technology throughput to keep pace with rapidly
changing business demands and are thus realizing greater
profitability than the Digital Explorers.“
Guy also noted, “The Digital Leaders investing in specific
digital deployments such as IoT, big data and advanced analytics
are optimistic about the business benefits they will yield. 87
percent of respondents with physical stores are deploying or
planning to deploy a variant of IoT technology. What was also
interesting is that Digital Leaders were more than twice as likely
to view their IT organization as a trusted provider.”
Big data and advanced analytics continue to be extremely
important to retailers, more so than blockchain investments, which
received the least amount of attention than any of the digital
technologies in the survey. 81 percent of those queried were either
active with, or preparing for, Big Data deployments with 94 percent
doing the same for advanced analytics. In fact, 44 percent of
respondents found advanced analytics deployment to be the most
challenging digital technology to deploy across the enterprise.
Lastly, only six percent of respondents indicated that they were
actively deploying blockchain while another 19 percent had plans to
start a blockchain project.
Not surprisingly, 100 percent of respondents already have
efforts underway to improve customer experience (CX), with 94
percent expecting to increase CX efforts in 2019. These efforts
will focus on the gamut of e-commerce, mobile and stores. Retailers
continue to invest heavily in e-commerce, with 75 percent of
respondents stating their e-commerce CX is on-par or ahead of their
competitors, versus 62 percent for mobile CX and 67 percent for
in-store CX. CX was the area of digital adoption that provided the
best results to retailers thus far with 57 percent of respondents
stating that their CX initiatives were already delivering tangible
business benefits.
Survey results also show that respondents are very optimistic
about potential benefits from deploying digital technologies in
specific retail business areas. 100 percent of respondents expect
to receive benefits in Marketing/Customer Engagement and
E-Commerce/Omni-Channel, while 94 percent expect to receive
benefits in Store Operations/Labor Management and
Merchandising/Assortment Planning. However, only 44 percent expect
to see digital create benefits for Real Estate and Store
Construction.
The survey also offers a detailed look at the digital strategy
and digital governance approaches from the respondents, as well as
how new digital talent, techniques, tools and practices are
empowering retailers.
For more information, the complete survey can be found at
https://www.softwareag.com/info/retail/digital_adoption/default.html.
About Software AG
Software AG (Frankfurt TecDAX: SOW) helps companies with their
digital transformation. With Software AG’s Digital Business
Platform, companies can better interact with their customers and
bring them on new ‘digital’ journeys, promote unique value
propositions, and create new business opportunities. In the
Internet of Things (IoT) market, Software AG enables enterprises to
integrate, connect and manage IoT components as well as analyze
data and predict future events based on Artificial Intelligence
(AI). The Digital Business Platform is built on decades of
uncompromising software development, IT experience and
technological leadership. Software AG has more than 4,500
employees, is active in 70 countries and had revenues of €879
million in 2017.
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version on businesswire.com: https://www.businesswire.com/news/home/20180919005113/en/
Software AGLisa Coulouris,
617-413-7062Lisa.Coulouris@softwareag.comorfama PRCait Mattingly,
617-986-5033sag@famapr.com