In the last few years, traditional retailers have been learning to adapt—at varying levels of success—to the digital world of e-commerce. While some retail brands have achieved record sales in recent years, most traditional retailers have struggled to effectively adjust to the world of e-commerce. During the COVID-19 pandemic, as many faced a further existential challenge, there has been no turning back. A recent study by Cognizant’s Center for the Future of Work found that the world’s largest retailers show a renewed focus on combining the best of physical and online shopping to reignite sustained growth in the decades to come.
Balancing the physical and virtual worlds
Even as some retail stores cautiously re-open for business, others have shuttered for good. Some stores are now used as local warehouses, known as dark stores, to improve retailers’ delivery to consumers; others have left gaping holes in their wake; their absence now raises big questions about how to redefine what is left behind.
Meanwhile, over the past year and a half, more consumers have turned to online shopping for reasons such as their health (groceries and necessities) and their sanity (shopping for the not-so-necessary items). However, as we look to the future, the balance of physical and virtual still has some way to go before a new equilibrium is found.
Innovating to meet customer demands
Cognizant’s Center for the Future of Work research found that respondents are still reeling from the pandemic-induced “retail apocalypse,” even amid consistent online and overall retail industry growth. Now, however, retailers appear ready to turn the corner with renewed focus on meeting customer needs through innovation and the use of digital technology.
Key themes that emerged from the research include:
•Boosting technology budgets equates to better digital leadership: Retail executives plan to hike their investment in technology by 50% between now and 2023 (from 6% to 9% of revenues). To close the gap with the digital elite, traditional retailers will need to make the funding of technology initiatives a sustained priority over the next few years.
•Technology implementations mirror the convergence of virtual-physical retail: At least 40% of retailers have gone beyond the pilot stage of implementing analytics, artificial intelligence (AI) and Internet of Things (IoT) technologies to create experiences that bring the best of the physical world to the virtual, and vice-versa. New models of retail will result that seamlessly blend the two worlds.
•Digital ambitions are high: The percentage of revenues retailers expect from digital channels is above the cross-industry average but still far below the segment of respondents deemed “digital-first,” based on their percentage of online sales and growth rate. Retailers need to keep aiming high to meet their stated digital ambitions and those set by the pandemic.
•The shift from commuting to “cocooning” will continue to reshape retail: The widespread movement towards finding new purpose for our homes, including working remotely, isn’t just a COVID-19 fad—it’s here to stay. As consumers continue to set up their spaces with equipment for work, exercise and entertainment, and engage in online shopping behaviours, retailers will need to respond. More than half of retail leaders said they will rely more on digital channels for customer interactions, as well as digital working practices for themselves.
•Digitisation presents new dangers: The increased reliance on digital tools and ever-growing sophistication of hackers put businesses at ever greater risk of operational disruption. Retailers have taken note, with 63% of executives listing digital terrorism as a concern.
•Retail must reskill for the future of work: An overwhelming 86% of retailers anticipate a global talent shortage for workers. While automation and robotics will fill a portion of that gap, the race is on for organisations to cultivate deep talent pools for the work ahead.
Robert Hoyle Brown, VP for Cognizant’s Center for the Future of Work, says: “In the aftermath of the rush to online shopping, it seems the onus is on retailers to find new ways, physically and virtually, of providing a communal space that fulfils consumers’ desire for engagement, discovery and aspiration for something ‘more.’
“Retailers tend to approach the future with much trepidation and only after proven success from others. The work ahead calls for active experimentation and long-term focus to meet customers where they will be in five-, seven- or even 10-year time horizons.”