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Retailers face digital boot

News, 20 January 2016
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NEW YORK: Retail is one of three industries most vulnerable to digital disruption, according to a new study which says that four of the current top ten retail firms will be displaced or disappear over the next five years.

That's the stark conclusion of a report published by the Global Center for Digital Transformation, a joint initiative of IT firm Cisco and the Institute for Management Development.

It undertook a survey of 941 business leaders around the world in 12 industries and found that among retail leaders almost half (47%) thought digital disruption "somewhat" or "significantly" increased their risk of going out of business.

A similar proportion (46%) admitted their own organisations had not paid enough attention to this issue, even though they were well aware of the consequences of failing to act.

"Most of the leaders we spoke to predicted that four of the top ten retailers would no longer be around within as little as three years or at least displaced from the top ten," said Shaun Kirby, CTO of Cisco.

Despite that, only one quarter (24%) had a plan and were willing to disrupt themselves in order to compete.

Almost one third (30%) preferred to take a wait-and-see approach, an attitude that may partly be attributed to the widespread view that newcomers, or start-ups, will likely be the biggest source of digital disruption.

A separate Cisco study suggested that there was $2.8 trillion up for grabs for retailers over the next decade – that being the figure it arrived at for Digital Value at Stake (VaS).

This is a measure of financial gain or loss based on two components, the first being entirely new sources of revenue or savings derived from digital investments and innovations; the second is value shifting among players within industries based on how their respective digital capabilities equip them to steal value from rivals.

In 2015, retailers realised only 15% of their potential VaS, according to Cisco, which highlighted those areas that offered the greatest potential in this respect.

Connected ads and marketing, for example, could drive $112bn in VaS, it said.

Kirby recommended three steps to retailers, starting with understanding where their business is currently, before identifying the use cases that provide most value to the business, and identifying gaps in existing capabilities.

"We see an impending disruption here, which is a threat for those who are not going to be early adopters, but also a huge opportunity for those who do adopt early," he said.

Data sourced from DBT Center, CMO.com; additional content by Warc staff

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