Retailers That Readily Adopt Digital Technologies Outperform Competitors and Capitalize on Changing Trends and Consumer Patterns According to New Independent Survey
RESTON, Va.--(BUSINESS WIRE)--Sep 19, 2018--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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CONTACT: Software AG
Lisa Coulouris, 617-413-7062
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SOURCE: Software AG
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