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Cisco, Microsoft Reveal Important Retail Dynamics

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Lynn HaberNATIONAL RETAIL FEDERATION BIG SHOW — New research from Cisco – Reinventing Retail: Cisco Reveals How Stores Can Surge Ahead of the Digital Transformation Journey – finds that retailers worldwide aren’t keeping up with digital-transformation investments that multi-channel shoppers are demanding, potentially driving some of them out of business.

The networking giant revealed the results of the research at this week’s National Retail Federation (NRF) Big Show in New York City,

The Cisco report takes a look at where retailers are on their digital transformation journey, where they’re prioritizing investments, and where they’re striking out in their digitization strategies. The report results are based on a series of in-depth sessions conducted over a course of 12 months, with more than 200 retail executives who represented more than 120 retailers globally.

Not surprising are the findings that both innovation and disruption in the retail sector come from startups and non-store retail channels. More traditional retailers don’t seem to be as savvy about whom they’ll be competing against or what novel digital consumer-behavior trends will become the new norm, according to Cisco.{ad}

Some key findings from the report:

  • Retailers are stuck in the early phase of the digital road map. Nearly half (49 percent) of retailers’ digital-investment priorities remain focused in the more mature IT technologies that enable existing capabilities and processes, IT agility and operational efficiency.  
  • Retailers are missing a $187 billion opportunity by not prioritizing investments in employee productivity. These technologies and use cases deliver the greatest value from digitization by increasing associate efficiency, optimizing the checkout and improving worker collaboration. Prioritizing investments in these areas not only improves operational productivity and associate effectiveness, but also contribute to improved shopper experiences and increased loyalty. Yet, according to the report, only 6 percent of retailers’ investment priorities are focused on employee productivity use cases. For example, Cisco pointed out, the highest value investment is in employee productivity such as BYOD; labor optimization via digitizing low-value tasks and leveraging specialized resources through digital presence across multiple stores; and virtual training.
  • Retailers are not investing enough in the areas that create competitive differentiation and new revenue streams. Only 29 percent of retailers’ investment priorities are currently focused on “differentiation” or highlighting their unique digital capabilities and services; and only 22 percent on defining new business models and revenue streams through digital disruption. However, digging a bit deeper into some sub-segments of the retail industry, it seems that 58 percent of New York-based apparel manufacturers and garment-industry retailers are more focused on differentiation and defining new business models compared to 39 percent of brick-and-mortar retailers, department stores and food-service retailers.
  • Retailers are investing too much in customer experience. The report noted that 37 percent of retailers are prioritizing the majority of their digital technology investments in customer experience use cases that aim to improve personal engagement with consumers. While these use cases can deliver an estimated $91 billion in opportunity, overemphasizing their digital investments in these use cases may limit retailers from getting the operational value they could from digital transformation of their business functions and workforce.

“The shake-up caused by digital disruption is already underway with many major retailers announcing the closure of …

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… hundreds of their brick-and-mortar stores in recent months, in order to better compete in a landscape where physical and digital channels are increasingly converging,” said Kathryn Howe, director, U.S. Commercial Digital Transformation, Retail and Hospitality Industries, Cisco. “Yet, there remains a tremendous opportunity, with the potential for retailers to generate more than $506 billion in value that can be achieved through digital transformation. Retailers need to make more progress in digitizing their workforce and their core operations in order to execute on the innovative customer experiences they want to deliver, and to position themselves for success in the new retail landscape.”  

Cisco offers a Digital Transformation Roadmap or framework defined by three phases: enable, differentiate and define.

Microsoft Highlights Partner Expertise in Retail

Microsoft and partners, also in attendance at NRF Big Show, are busy showcasing how they’re helping retail customers with digital transformation with Azure, Power BI and Dynamics 365.

For example, working with Hitachi Consulting for support, Giant Eagle, a regional supermarket chain, is using Powershelf to digitize inventory management — the solution runs on Microsoft Azure. Powershelf uses sensors on shelves and Power BI dashboards to give employees up-to-date insight into what to order. The technology can also change pricing electronically, measure inventory life and send shoppers product information on their mobile phones. According to Microsoft, this solution has helped Giant Eagle reduce its out-of-stock replenishment time by two-thirds and cut its out-of-stock SKUs in half on any given day.

In a recent blog, Gavriella Schuster, Microsoft’s corporate vice president, worldwide partner group,  pointed to an IDC Worldwide Vertical Markets IT Spending 2014-2019 forecast that estimated global IT spending in retail at $86 billion in 2016.

Vertical-market expertise is vital to partner success in 2017 and beyond as specialization and differentiation will drive partner-business longevity.


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