What Is Digital Transformation? How To Create a Strategy (2024) – Shopify

For generations, brick-and-mortar stores shaped how we shop, from corner markets to massive malls. The digital shopping revolution kicked off in the late 1990s, allowing shoppers to browse and buy from home. Customers would never think about retail the same way again. More and more, these two worlds blend as traditional stores set up online shops, use social media to boost sales, and embrace digital innovation from mobile apps to in-store touchscreens to data analytics.

The digital era has led to plenty of fresh and impressive tech; machine learning, cloud computing, and artificial intelligence are just the latest additions to an ever-increasing list of innovations. Businesses like yours only stand to benefit from incorporating new technology to improve customer satisfaction.

This evolution, from old to new, is digital transformation in action. Stores that adopt ecommerce platforms, mobile apps, and data analytics tools can reach more customers, run their business more efficiently, and better understand what shoppers really want. Keep reading to learn how retail businesses are embracing digital transformation to surpass customer expectations and grow retail sales.

What is digital transformation?

Digital transformation is the process of integrating digital technologies into your business, changing how your company operates and delivers value to customers. In retail, it often involves reimagining the shopping experience—from browsing to buying to customer service—using digital tools and platforms.

Successful digital transformation strategies in retail might include adopting an ecommerce platform to sell online, using ecommerce analytics for deeper customer insights, and even expanding to social selling through platforms like Instagram and TikTok Shop.

This transformation can also touch some or all of a retail operation, including inventory management, warehouse operations, order fulfillment, and more. Digital transformation leaders help their companies stay competitive, improve operational efficiency, and meet the needs of consumers who increasingly value convenience.

Key areas of digital transformation

Digital transformation initiatives look different for each company. If you’re running a retail business and aiming to bring your physical store into the digital age, here are some key areas to focus on:

Customer buying experience

The traditional retail buying experience typically involves customers visiting a physical store, browsing products on shelves, and completing their purchase at a checkout counter. Introducing a digital transformation framework reshapes how customers buy.

Now, instead of relying solely on in-store visits, shoppers can purchase from your ecommerce site or mobile app, or through social media platforms like Pinterest and Facebook. This shift often leads to the adoption of omnichannel retail, which offers buyers a seamless customer experience across different touchpoints. For example, customers might order online and return in person, or browse in-store and have items shipped directly to their home.

Digital business transformation also extends to payment methods. While cash transactions were once the standard, retail environments that embrace digital transformation often accept digital wallets and, in some cases, even cryptocurrencies like Bitcoin. This evolution in payment options provides customers with more flexibility and convenience in how they complete their purchases.

Business operation

Business operations cover the behind-the-scenes work that keeps a retail company running, from employee hiring to financial management. Here’s how digital tools are changing key business processes for teams:

• Human resources. Hiring managers use applicant tracking systems to sort through résumés and schedule interviews more efficiently. HR teams can access employee records, manage benefits, and track performance reviews all in one place, making it easier to support staff across multiple store locations.

• Finance. Accountants and finance teams use cloud-based accounting software that connects sales data from all stores and online channels. This gives them a real-time view of the company’s financial health, helping them make quicker decisions about inventory investments or store expansions.

• Product design. Designers use 3D modeling software to create new product lines, like clothing or home goods. These digital designs can easily be shared with manufacturers, speeding up the time it takes to get new products on shelves.

• Procurement. Buyers use digital procurement platforms to manage relationships with suppliers for everything from store fixtures to products. These systems help buyers track orders, negotiate prices, and ensure stores are stocked with the right items at the right time.

Pricing models

Traditional retail pricing was straightforward: you’d see a price tag, pay at the counter, and take your item home. But digital technology is changing all of this. Many brands are now embracing subscription business models, thanks to tools like the Shopify Subscriptions feature. This lets customers sign up for regular deliveries of their favorite products.

Buy now, pay later services are also booming, with options like Shop Pay Installments, Affirm, Klarna, and Afterpay splitting big purchases into smaller payments. Dynamic pricing is another tech-enabled strategy, allowing retailers to adjust prices in real time based on demand and competitor pricing.

Marketing and advertising

In the past, a jewelry brand might have relied on flashy billboards along busy highways, glossy magazine spreads in fashion publications, or catchy radio jingles to catch a potential customer’s ear. These traditional advertising methods cast a wide net, hoping to snag the attention of anyone in the market for a new jade necklace or pair of gold earrings.

Brands that embark on a digital transformation journey open up new marketing channels and unlock great precision in measuring their advertising efforts. Now, that same jewelry brand can use pay-per-click (PPC) ads to show up when someone searches for “anniversary gifts” online.

They can create Instagram ads displaying their latest collection to users who’ve recently visited their website and tailor email campaigns to customer preferences. This data-driven approach allows for more targeted and personalized marketing, often leading to a clearer return on investment (ROI).

Order fulfillment

Order fulfillment used to mean a lot of manual work—from counting stock by hand to shuffling papers for shipping. Digital transformations streamline this process, helping retailers reach more customers with fewer staff members. Here’s how digital solutions are changing order fulfillment:

• Inventory. Staff can use inventory management systems to track stock levels in real time across all locations. Customers see accurate availability when shopping online, reducing frustration from out-of-stock items.

• Picking and packing. Your team can use RFID scanners and wearable devices to locate and verify items in the warehouse quickly. This helps new employees work as efficiently as veterans, getting orders out faster.

• Tracking. Both customer service reps and shoppers can follow a package’s journey online and get status updates through email and SMS notifications. This cuts down on “where’s my order” emails and calls and keeps customers informed.

• Returns. Stores use return management platforms to streamline the reverse logistics process. Customers can initiate returns through an online portal, often getting faster refunds, while returned items get back into stock quicker.

Customer service

Digital transformation means companies are moving away from regular 9 a.m. to 6 p.m. hours and Sunday closures to being open 24/7 online, thanks to ecommerce checkout capabilities. In response, customer service has been digitized, expanding beyond traditional in-person and phone support.

Today’s shoppers can get help through various channels: live chat on websites, AI chatbots for quick answers, and self-service FAQ pages and video tutorials. Social media platforms have also become important for customer support, with many people now expecting quick responses to their Instagram or Facebook messages. This shift to always-on, multichannel support helps retailers meet expectations, turning customer interactions into opportunities for increased brand loyalty and online sales.

Example of a successful digital transformation

Belstaff, a century-old fashion brand, recently underwent a digital transformation to modernize its operations and improve customer experience. The company, facing financial challenges and legacy systems with technical debt in 2021, embarked on an overhaul dubbed “Mission Phoenix.” This initiative involved replatforming their entire tech stack. That included moving their ecommerce platform and point-of-sale (POS) system to Shopify.

“IT transformation starts with data centralization and we really found the proposition where you can combine your point of sale and your ecommerce platform under a single platform very appealing,” explains Navid Jilow, director of technology at Belstaff, in an episode of the Shopify Masters podcast.

Belstaff’s digital transformation initiative is an example of how legacy brands can adapt to the digital age and prepare for future growth. The transformation has resulted in a more agile, cost-effective, and user-friendly system for customers and employees.

How to create a digital transformation strategy

Digital transformation efforts can solve the problems your business is facing. Maybe you’ve noticed falling sales, or you’re struggling to keep up with tech-savvy competitors. Perhaps you’re just frustrated by a lack of visibility into your own operations. Whatever the trigger, creating a solid digital transformation strategy may be the key to moving forward. Here’s how:

• Seek out pain points. Walk through your store and website as if you were a customer. Are products hard to find? Is checkout a hassle? These frustrations are your first targets for change. Identify the problem first, then explore the tech to solve it second.

• Set specific goals. Want to cut checkout time by 30 seconds? Boost online sales by 15%? Set clear key performance indicators to keep you focused and show your progress.

• Explore technological solutions. Research tools that address your specific issues. For faster checkouts, maybe it’s a new POS system. To boost online sales, consider AI tools that make personalized product recommendations.

• Experiment and document. Try out new tech in small doses. Test a chatbot on one product page or self-checkout in one store. Keep detailed documentation on what works and what doesn’t.

• Measure and reassess. Compare your results to those initial goals. Did that chatbot actually increase sales? Be ready to pivot if something’s not working as planned.