Retail Digital Transformation in 2023: Benefits, Challenges, and Trends

Digital transformation in retail

Finding ways to connect to the consumer directly has never been more critical. The retail industry must accelerate digital transformation and tweak the customer journey to stay afloat and thrive.

The global digital transformation market in retail is expected to reach $710 billion in 2023 and grow to $1.72 trillion by 2028, at a CAGR of 19.30% over the forecast period (2023-2028).

These days, technology blurs industry boundaries and opens new possibilities in every aspect of retail — from marketing and procurement to sales, planning, and logistics. Interestingly, 50% of consumers say the way they use technology has changed for the better since the pandemic, and concurrently, 37% are now purchasing products online that they used to buy in physical stores.

In this article, we will not only explore the challenges and benefits of retail digital transformation but also take an in-depth look at emerging digital retail trends.

What is digital transformation in retail industry?

Retail digital transformation is the comprehensive integration of digital technologies and strategies to modernize and enhance various aspects of retail operations and customer interactions.

At its core, digital transformation in retail involves the utilization of technologies such as artificial intelligence, data analytics, cloud computing, and mobile apps to create a seamless and engaging shopping experience. This includes optimizing supply chain management, automating inventory processes, and offering personalized product recommendations based on customer data.

The goal is to provide customers with a consistent and convenient omnichannel experience, allowing them to interact with a brand across physical stores, online platforms, and mobile devices.

Need assistance with retail software development? We’re here to help

What are the challenges associated with digital transformation in retail?

Retailers are not new to disruption: they have faced the entry of online competitors, startups, and marketplaces for years. However, many have not been on the cutting edge and have responded to, rather than anticipated, these risks.

Whatever digital transformation entails for the retail industry requires a solid foundation. Whether the focus is customer data management, increased product availability or order visibility, ROI evaluation and risk assessment should be taken into account, alongside the following challenges:

  • Culture change. Those with traditional methods of doing things sometimes resist change, while changes in responsibilities often lead to problems accepting accountability, with delays in ROI. With that in mind, retailers often hesitate to adapt to new operating methods.
  • Lack of expertise and commitment. Management must be honest about their technical skills and whether they have the experience to transform retail. Determine what can be done in-house and where outsourcing can ease the burden.
  • Investment challenges. Liquidity issues are common for many businesses operating on low margins. This can lead to pushback from leadership, requiring sustained back-and-forth dialogue with stakeholders, partners, and customers.
  • Technology. Investing in the right technology that can add value is another significant challenge. It is critical to take calculated risks to understand which new infrastructure and technologies will suit an organization.

Why is digital transformation in the retail industry so important? Key benefits

The key benefits that explain why digital transformation in retail is a must include stronger trust and security, automation, enhanced customer experience, and the seamless integration of omnichannel strategies. Let’s find out more about each of these advantages.

Retail digital transformation benefits

Stronger trust and security

As the retail landscape increasingly shifts towards digital platforms, ensuring the protection of sensitive data and transactions has become a cornerstone of success. By embracing digital transformation, retailers can implement robust cybersecurity measures that safeguard customer information, payment details, and other confidential data.

Moreover, the establishment of a secure digital infrastructure cultivates a sense of confidence among consumers, encouraging them to engage in online transactions without apprehension. This newfound trust translates into higher customer retention rates, increased brand loyalty, and positive brand perception.


Retailers can harness automation to optimize various facets of their operations. This includes automating inventory management, order processing, and supply chain logistics. These automated processes lead to reduced human errors, minimized delays, and increased accuracy in inventory tracking, thereby ensuring that products are readily available when customers demand them.

Automation extends to customer interactions as well. Chatbots and AI-driven customer service solutions can handle routine inquiries, providing swift responses and freeing up human agents to focus on more complex matters.

Check out how we helped our client develop a comprehensive vision for a smart AI-powered warehouse automation system

Improved customer experience

Retailers can customize their offerings according to individual preferences, creating a more personalized shopping experience. Leveraging modern technologies, retailers can comprehend customer behavior and preferences, enabling them to provide pertinent product suggestions and recommendations. This level of personalization not only fosters a connection between customers and the brand but also boosts engagement and sales.

Furthermore, digital transformation facilitates seamless interactions across diverse channels, be it online, in-store, or via mobile apps. This integration guarantees that customers enjoy consistency and convenience, regardless of their chosen touchpoint.

Omnichannel, the way forward

Organizations that can quickly reinvent their omnichannel approach to provide a unique customer experience recover faster from unexpected challenges and stand better positioned to navigate uncertain times with resilience and success.

Omnichannel retail digital transformation has created tools to remove doubt and confusion during purchase decisions. Currently, augmented reality is one of the most common technologies that shops utilize to help customers visualize products with cameras on mobile devices.

Moreover, new delivery models are already gaining popularity among the general public, with BOPIS (buy online, pick up in-store) expected to stay in demand for years to come.

Retail digital transformation trends

The main trends propelling digital transformation in retail encompass harnessing the potential of data analytics, machine learning, artificial intelligence, the Internet of Things, unified commerce strategies, augmented and virtual reality, along with comprehensive content management systems.

Let’s delve deeper into these transformative technologies that are currently reshaping the retail landscape.

Data analytics

With the growing amount of data generated by organizations, performing analysis and uncovering insights has become a necessity.

Data analytics is now used at every level of the retail industry, from tracking new products to projecting sales and predicting future demand, thus increasing revenue and business performance.

ML and AI

Customers expect quick, high-quality customer service available 24/7. Machine learning and artificial intelligence developments offer a significant step toward providing this attentive level of service, and chatbots are retailers’ ‘go-to solution’.

Chatbots allow for the same level of service quality regardless of circumstances. Marketing activities are easier since the chatbot can engage with the consumer and provide suggestions powered by greater analytical capabilities. Moreover, chatbots can upsell or cross-sell products, pointing the customer toward merchandise that might interest them. The right method can significantly lower costs and increase revenue.

Find out more about how machine learning is applied in eCommerce and how it transforms the industry


IoT is expected to boost sales, increase customer loyalty, create a personalized experience and enhance inventory management.

It’s hardly surprising therefore that the EY Reimagining Industry Futures 2022 report confirms how external factors have accelerated the pace of digital transformation in retail. According to the report, 71% of retailers say their organization is more interested than ever in 5G and IoT use cases that can improve supply chain visibility and management.

Beacons, for example, have been a growing trend since their introduction by Apple in 2014. Beacon technology has revolutionized various industry verticals, particularly retail and eCommerce, to send customers location awareness alerts and promotional notifications.

Unified commerce

Reconciling data pulled from multiple systems is time-consuming and resource-intensive. To effectively maintain data integrity intact and secure, data silos must be broken down, and data from disparate sources integrated into a single unified commerce system.

In addition, as discussed above, consumers use multiple channels and expect businesses to be available across all channels. According to a Harvard Business Review study, consumers who use 4+ channels spend 9% percent more than those who use only one.

Omnichannel retailing improves customer retention and experience by delivering a consistent experience across multiple channels, allowing users to continue their queries across these channels while leveraging data from all channels to construct a unified perspective of the consumer.

AR and VR

AR and VR technology have extended beyond the gaming world, and the retail industry has found ways to leverage these technologies to create a one-of-a-kind shopping experience.

Since today’s shopping experiences are happening in many different contexts — at home, on the go, and in store — AR shopping is enabling customers to engage with brands and products via digital experiences that allow them to try on, try out, interact, or personalize their product virtually. VR, for its part, creates a fully rendered digital environment that replaces the user’s real-world environment, featuring body and motion-tracking capabilities.


Publishing accurate and relevant product and marketing content is challenging even before factoring in the growing number of consumer touchpoints.

Instead of implementing multiple, parallel content management system instances, for example, to support web and mobile channels, a single headless content management system, or CMS, can serve an unlimited number of digital channels.

The headless CMS is an essential piece of technology for organizations that are aiming toward an omnichannel world. In particular, in the retail industry, headless CMS allows online retailers to form 1:1 relationships with customers by connecting marketing and product content to purchase history and other data to provide a completely personalized shopping experience at scale.

Take a look at our recent article on how to achieve digital transformation in supply chain and find useful insights

Closing thoughts

To enable retail digital transformation, companies should understand that emerging technologies cannot be considered in isolation. They require the right infrastructure and integration to run smoothly and consistently.

Having a sound digital transformation plan is also paramount, as is having the right advisory board to delve into your specific circumstances and bring R&D-based product concepts, safety, marketing strategies, practical roadmaps, whitepapers, and manuals to the table.

There’s no chance you’ll be left on your own, as PixelPlex custom software developers are natural at providing tech that supports full business cycles — from manufacture to transportation to omnichannel sales.

Reach out to us to start your retail digital transformation journey.


Darya Yatchenko

Lead Technical Writer

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