Pandemic prompts accelerated digital investment

by Inside Logistics Online Staff

BANGALORE, India – The retail sector alone has invested in three years’ worth of digital transformation within a span of six months.

Retail categories such as grocery and medicine saw exponential demand at the height of the pandemic, while other segments such as fashion and apparel have seen in-store shopping dry up. However, for a large part, the shift in buying has moved online, with large retailers such as Tesco and Costco seeing their global online purchases nearly double in Q2 2020, as compared to the year before.

These are some of the findings of a study, “Digital Engineering in Retail”, by management consulting firm Zinnov. The study analyzed investment patterns of the top retail digital spenders.

The uncertainty brought on by Covid-19 has exposed retailers to a variety of obstacles and opportunities. They have responded by accelerating investments across key digital initiatives such as automated checkout and autonomous last-mile delivery.

Retailers across all operational formats are being disrupted by e-commerce start-ups in online grocery, social commerce, etc., but the greatest disruption comes from Amazon, Alibaba, and other platforms, who are forming retail tech oligopolies.

The study found that the retail sector’s spend on digital engineering grew steadily at 26 percent year-on-year in the pre-Covid era. However, the pandemic accelerated the spend to US$25 billion, a 100-percent-plus increase, signalling exponential future growth.

North America dominates

North America currently accounts for 57 percent of the overall digital engineering spend, with APAC steadily gaining ground.

Retailers are primarily investing in automated checkout, contactless payments, omnichannel inventory management, warehouse automation, stores as fulfillment centres, autonomous last-mile delivery, virtual trials, assisted shopping, and social commerce.

The study also provides a detailed breakdown of the Digital Engineering strategy of the top 25 technology spenders in the global Retail industry, across key technologies such as Artificial Intelligence (AI), Internet of Things (IoT), Cloud, Augmented Reality (AR)/Virtual Reality (VR), Big Data, Blockchain, and Cybersecurity. Cloud and Big Data make up 55 percent of overall digital engineering spend, but the next wave of investments is expected in AI (20 percent) and Internet of Things (16 percent).

Founded in 2002, Zinnov is a global management and strategy consulting firm, with presence in Santa Clara, Houston, Bangalore, Gurgaon, and Paris.