“Digital leaders” in retail are growing revenues at 6% per year and have a price-to-earnings ratio almost twice that of “digital explorers.” This is according to a recent study: Retail Industry Digital Adoption Survey 2018.
The study, commissioned by Software AG and conducted by NSU Technologies in conjunction with Cathy Hotka and Associates, illustrates the financial benefits of committing to digital transformation.
But this should not be a surprise - despite much talk of the so called “retail apocalypse” we have recently seen Walgreens Boots Alliance become part of the Dow Jones Industrial Average. This is an organization that - about three years ago - made a firm commitment to digitally transform in order to optimize its current business, but also able exploit future revenue-generating opportunities. This is more than a coincidence.
The report divides retailers into two distinct groups – “digital explorers” and “digital leaders” - each with its own specific characteristics.
Digital leaders are actively applying digital technologies to business problems and the CEO and board have given formal endorsement of digital transformation as a business strategy. This has resulted in cultural change in order to aid transformation. These retailers are benefiting with a compound annual growth rate in revenue of around 6% and a price-to-earnings ratio of 22.32.
Digital explorers by contrast are exploring digital but not yet fully committed. They have had “relatively flat” three-year revenue growth and a price-to-earnings ratio of 12.22.
In addition to benefiting from senior support, digital leaders are twice as likely to view their IT organization as a trusted provider and are attempting to utilize digital platforms to enable them to address changing trends and customer patterns. They understand how technology can help them keep pace with changing demands.
In terms of focus and investment, it should not be a surprise that digital leaders are not only investing in AI and Big Data but the report also calls out that they are investing in third party integration platforms in order to “insulate digital platforms from change” – a further endorsement of the “headless commerce” architecture approach.
All transformation starts at the top and digital transformation is no exception. The value that technology-literate board members and a trusted IT organization provide cannot be overstated. The path ahead is littered with obstacles, but the digital leaders are showing the way forward. Explorer or leader – it’s time to pick a side.
Read the full report by clicking below.