What is Retail Digital Transformation? Examples and Best Practices

The retail industry has seen radical changes over the past decade.

• Widespread adoption of new technologies
• The introduction and growth of AI
• Significant changes in customer habits
• New ideas about reducing inefficiencies
• A pandemic that changed everything

The combination of these events has sparked the need for digital transformation in the retail sector. But what does ‘digital transformation’ mean? What are the key areas of change to be aware of? And how does it apply to retail operations?

In this guide, we explore those questions and get to the bottom of retail digital transformation.

Retail digital transformation is the process of integrating technology into a retailer’s operations, systems, and processes to improve the customer experience, enhance operational efficiency, and drive growth.

Goals of retail digital transformation:

• Digitize manual processes to help workers perform their jobs better and faster.
• Provide a seamless omnichannel shopping experience across physical and digital touchpoints.
• Ensure consistent pricing, product selection, and information available both in store and online.
• Enable data-driven decision-making by collecting data from multiple sources and providing people with the tools to analyze it for insights.

Why does retail digital transformation matter?

Digital transformation enables retailers to remain relevant in an ever-changing and increasingly competitive marketplace, with its influence continuing to grow.

At the basic level, retailers are looking to sell their products and services. Traditional challenges will need to be overcome to enable this, like margin, efficiency, staffing, and customer satisfaction.

The use of technology allows a new way to tackle those challenges.

Providing the flexibility to adapt quickly to changes in the market and a platform for data-driven decision-making. Those who embrace it will be better positioned to succeed in the long run.

Digital transformation is a broad topic that can be all-encompassing for retailers. Focusing on where people and systems interact can ensure that any transformation benefits your workers, customers and your business. Let’s explore those areas and how AI is accelerating digital transformation as a whole.

Omnichannel shopping

Omnichannel shopping involves retailers integrating their physical and digital channels to provide a seamless shopping experience across all touchpoints.

Why do it? Because today’s shoppers use an average of 6 touchpoints when considering a purchase. Researching and comparing products before making an informed decision.

US retailer, Target, discovered that multi-channel customers spend 4 times as much as in-store customers and 10 times more than digital-only ones.

Data analytics

Data underpins decision-making. And the best users of data tend to win in retail. Not only from a retail operational point of view but also regarding customers searching for the right product.

Retailers must use data analytics to gain insight into consumer behaviors and preferences. This will drive operational decisions on what to sell, how and to who. As well as providing the means to personalize the experience for shoppers along the way.

Data must also be accessible to those who need it most. Information is at the fingertips of consumers all day. But sometimes this stops when they enter a store.

For workers, a way for them to access inventory and customer data in real time can improve daily tasks and customer assistance.

Automation

The use of technology to automate manual processes and tasks can lead to big efficiency gains. It can also free up workers to focus where it matters most – like better-serving customers.

Automation is best used on processes that are repetitive, prone to error and time-consuming. Streamlining tasks like inventory management and order fulfillment and reducing costly inaccuracies.

Staples Canada automated the price checking process with smart data capture. Saving associates thousands of hours across 20,000 weekly pricing audits.

Modernizing technology

When it comes to technology, the options for retailers are seemingly endless. From a simple shift to mobile technology and smart devices, right through to autonomous robots and the use of AI and machine learning.

Having the right technology in place not only accelerates transformation but also provides a critical link between all the elements. Capturing data, analyzing and disseminating it, and giving workers the most up-to-date and appropriate tools will enable them to perform at their best.

How is artificial intelligence accelerating retail digital transformation?

AI, encompassing predictive machine-learning models and generative assistants, automates decisions, personalizes shopper touchpoints, and streamlines tasks. It's even changing the way we scan barcodes and is the fastest-growing driver of competitiveness in retail.

Some core use cases and recent results include:

• Personalized promotions and dynamic pricing: Real-time recommendation engines and price optimization lifted Black Friday conversion rates by 15% in 2024.
• Demand forecasting and inventory optimization: Walmart’s upgraded platform cut stock-outs by 30% and trimmed excess inventory by 20%, freeing working capital while protecting sales.
• Shelf intelligence and on-shelf availability: Advanced computer vision and machine learning transformed shelf images into insights to boost on-shelf availability to 95% and store revenue by 2%.

  

Here are six benefits of retail digital transformation.

1. Improved customer loyalty

With digitization comes data. and with data, retailers can provide a more personalized service, at scale, to their customers.

Basic customer satisfaction doesn’t drive loyalty. But providing a seamless, personalized, and differentiated experience does.

Here, retailers can combine customer data to provide offers and rewards based on demographics and prior shopping habits. Retailers can also offer a faster and more convenient experience by providing new ways to shop, such as mobile self-scanning and click-and-collect.

2. Increased sales

An omnichannel strategy and digital transformation initiatives can be closely tied. Omnichannel customers have been proven to spend more than those who shop using a single channel.

In-store services like clienteling, mPOS and mobile self-checkout have caused an increase in retail sales and prevented walkouts as customers can skip the line and shop quickly and conveniently.

3. Reduced Inefficiencies

Combining the right technology with process automation can reduce operational inefficiencies. Cutting waste, reducing retail costs and optimizing resources can lead to efficiency gains.

Several store operations tasks are time-consuming and prone to error – perfectly ripe for improving with the right tools. Reducing inaccuracies for tasks such as receiving goods or replenishment prevents the need for tasks to be redone. And performing tasks faster with minimal downtime using automation can improve store efficiency.

4. Retail worker support

The connectivity of today’s frontline retail workers is imperative not only from a worker satisfaction and retention perspective but also from a customer service perspective.

Using smart devices and employee-focused apps, workers can be better connected to management, each other and their stores. With the ability to access stock and product information and communicate with other workers at their fingertips, their store experience is improved.

Driving up worker satisfaction and allowing them to provide superior customer service that will benefit the business.

5. Improved stock availability

Retailers can leverage digital technologies to optimize their supply chain processes, including sourcing, inventory management, and delivery. This can lead to faster turnaround times, reduced inventory carrying costs, and improved product availability.

Retailers can gain real-time visibility into their inventory levels, location, and movement. This allows retailers to reduce out-of-stock situations and avoid overstocking.

6. Better business predictions

Digital transformation causes an influx of data to retailers. With the right systems in place, data can be used for analytics and predictive modeling to make decisions in several areas:

• Trend analysis – identify trends and patterns in consumer behavior to help inform product offerings and marketing strategies.
• Personalization at scale – Use data to make personalized product recommendations to customers and also provide them with offers and rewards that drive loyalty.

• Pricing optimization – consider more data points to ensure correct pricing and promotions to maximize sales.
• Sales forecasting – using historical sales and current industry data, retailers can better forecast sales which allows them to optimize their supply chain, resources and inventory management.

Digital transformation can be a costly exercise, both in time and money. Benefits must be far-reaching and have a positive impact on customers and employees for any retail technology investment to be worthwhile.

How can retailers fund transformation without blowing the budget?

Technology costs money. Knowing whether to build or buy and investing in the right areas requires careful consideration. Implementation costs, downtime, and training costs also need to be factored into the overall transformation project.

Mitigation points:

• Shift capex to opex with SaaS or managed services contracts.
• Phase investments by piloting in one store or region to prove ROI before chain-wide roll-out.
• Bundle quick‑win use cases (e.g., scanning optimization) that self‑fund longer projects such as shelf intelligence.

How to break the legacy systems bottleneck?

Decades‑old POS, WMS, and ERP platforms create data silos, brittle integrations, and high maintenance costs that strangle innovation.

Mitigation points:

• Maximize existing retail technology investments. Audit workflows and leverage existing infrastructure as much as possible.
• Retire modules gradually. Replace the clunkiest legacy function with a new service, then move on to the next.
• Unify data into a central platform that can be accessed by all departments for a single source of truth and eliminate siloes.

How to overcome resistance to change?

Workers and customers are often at the end of transformation projects and are likely to be the most resistant. Workers fear job losses or extra work, while customers dislike unexpected changes.

Mitigation points:

• Involve workers in the design, testing, and rollout of new tools.
• Adopt fail-fast and agile methodologies to quickly test and iterate before scaling.
• Clearly communicate proposed changes to affected users and provide sufficient training.

How to bridge the tech-talent gap?

Retail digital transformation projects may require new talent with the skills and knowledge to implement and manage new technology.

Mitigation points:

• Perform a skills gap analysis to assess digital competency levels and identify critical gaps.
• Determine where to upskill, hire, or outsource to properly fill gaps.
• Adopt no-code and low-code solutions that are user-friendly and simple to integrate to reduce technical complexity.

How Walmart uses Artificial Intelligence for smarter substitutions

Giant US retailer Walmart is now using AI to help its store associates make better choices when substituting products for online orders.

At times, popular grocery items can sell out. Substitutions of out-of-stock items for other products are required. The decision used to be a manual one made by the picker. Nearly 100 different factors can go into that decision, so Walmart now uses deep learning AI to consider the variables such as size, brand, type, and price in real time to determine the next best item.

How Nisa’s Scan & Save AR app lifted voucher redemptions to 86%

UK convenience retailer Nisa implemented an AR ‘Scan & Save’ project, enabling customers to save money on branded items by scanning barcodes with a Scandit-powered Jisp app. Displayed using AR on the customer’s smartphone, offers are revealed and redeemed at checkout.

150 stores across the UK have implemented the technology, which has resulted in hundreds of thousands of scans and redemptions. A voucher-issued-to-redemption rate of 86% has helped shoppers save an average of £4.72 per store visit, fueling loyalty and repeat visits to Nisa stores.

How data capture drives digital transformation

Data capture is the process of collecting information from the physical world and converting it into a form that a computer or a human can read and use. In retail, this often means scanning barcodes or manually recording the details of an item for upload into a central system for tasks like inventory management.

The barcode is 50 years old and remains the primary way to represent data in a machine-readable form. But both barcode symbologies and how you capture and use data from them are evolving.

Automation is more commonplace and other capture techniques like optical character recognition (OCR) and object recognition can now be used alongside barcodes for an enriched picture. Here are 6 examples of ways to capture data that drive digital transformation.

How Sephora uses AR to personalise beauty consultations

Cosmetic and beauty retailer Sephora has built a large base of loyal customers through a digital customer experience strategy. Its mobile retail app serves as the gateway to product recommendations, reviews, and pricing, providing customers with an unbiased service from experts, so they feel confident about making a purchase.

The app also includes an AI feature called Virtual Artist, which uses augmented reality and facial recognition to give shoppers a ‘try before you buy’ experience. Customers can see how different makeup colors will suit them and compare them before adding them to their shopping baskets.

How River Island deployed smart devices to improve service and cut costs

River Island, a prominent UK fashion retailer, wanted to modernize its store operations and improve both customer and employee experience. They decided to replace their dedicated scanning devices and equip each of their store associates with a rugged smart device.

It enables them to instantly access information, answering queries, retrieving product details, checking stock availability, and proactively retrieving click-and-collect packages as customers enter the store.

Improving the lives of their store associates and creating higher job satisfaction.

Often, the most successful transformations look at where people and systems interact and find ways to improve those processes. For example, how a customer shops in a store using their smartphone, or how a worker manages inventory.

Transformation initiatives will be dependent on the circumstances of each retailer and its objectives. Most initiatives fall into three areas:

• Lowering costs
• Improving customer experience
• Increasing operational efficiency

In all cases, an iterative and agile approach is recommended.

Starting with a minimal viable product (MVP) that adds value to or streamlines a process and captures user feedback before moving to the next stage.

Using this approach, customers and workers feel included in the project. Their guidance will help ensure that the final outcome is well adopted and fit for purpose.

Overall, having a clear strategy, involving different stakeholders from the outset, and taking a staged approach will yield the best results. Being agile will help embrace new discoveries along the way.

People, people, people. In the end, people make the difference. Without the buy-in from your workforce, you will never be successful.

Christian Bader, CTO of Fenix Outdoor

Scandit is the leader in smart data capture technology. We enable users to digitally interact with physical items by capturing data from barcodes, text, IDs, and objects to automate end-to-end processes and provide actionable insights.

Top retailers are now using the Scandit Smart Data Capture Platform in their digital transformation efforts. Improving their operations and the customer experience in one go. Including 5 of the top 10 European retailers, 8 of the top 10 US Grocers, and 6 of the top 10 luxury and premium brand retailers.

Our capabilities provide unmatched scanning performance that unburdens workers from repetitive tasks. And useful insights at the point of data capture help employees and customers make better decisions as they work and shop.

We offer no-code and low-code integration options, and our Enterprise Support Team will partner with you all the way from evaluation to day-to-day operations, with trials, solution design, integration, and customer success support included.