Strategies & Opportunities for Digital Transformation in Retail

Smiling woman in looking at phone in mall, holding shopping bags

Despite the retail apocalypse we saw in the late 2010s, which rapidly accelerated due to mandatory closures during the COVID-19 pandemic, in-store shopping is far from dead. However, customers have vastly different expectations for their retail experience than they did just a few years ago.

Retailers can deliver compelling customer experiences that drive engagement, loyalty, and sales by leveraging digital transformation.

By harnessing the power of digital transformation, retailers can revolutionize the customer journey, igniting engagement, bolstering unwavering loyalty, and turbocharging sales.

What is Digital Transformation?

Digital transformation is the process of leveraging digital technologies to transform business processes, services, or operations. It can involve the creation of a new digital process, the maturation of an existing process, or the conversion of an analog process to a digital one.

5 Digital Transformation Opportunities in Retail

Some of the most significant digital transformation applications to delight customers, increase engagement, and drive sales in the retail industry are:

  1. Omnichannel experiences
  2. Personalized experiences
  3. AI and machine learning
  4. Augmented reality (AR)
  5. Gamification

Omnichannel experiences

The way customers shop has drastically changed over the past decade. Customers engage with brands across multiple platforms in a variety of ways, such as using mobile apps to research products, buying products online and picking them up in-store, signing up for promotional emails, and engaging with the brand’s accounts on social media.

Omnichannel is far from a new concept, but many retailers still struggle in this area. Yet omnichannel has become table stakes – customers expect an easy, compelling, and seamless experience with each brand touchpoint.

Meeting customers where they are – whether it’s an online marketplace, their email inbox, a social media platform, their mobile device, or in person – and delivering a consistently delightful experience drives customer satisfaction, loyalty, and sales.

Brands should prioritize digital transformation by synchronizing their physical and digital worlds to provide their customers with a seamless, enjoyable, multi-channel experience.

Personalized experiences

Tailored experiences can be a game-changing lever of revenue and customer allegiance: a staggering 70% of consumers pledged to frequent businesses that deliver a personally curated journey, turning shopping into a unique adventure tailored just for them.

AR, discussed below, is a powerful way to deliver a customized experience.

Another means of leveraging digital transformation to deliver personalized experiences is developing a recommendation engine that uses customer data and predictive modeling to cross-sell and upsell. This engine can make more effective and customized product recommendations that drive more conversions.

For example, if you know a customer purchased a product, such as a skincare product or vitamins, a few months ago that they have likely run out of, you can recommend it as a product to easily and quickly purchase again. Or if you know a customer recently bought an espresso machine from your site, your data-driven recommendation engine can recommend espresso pods and mugs to accompany the product.

Yet another personalization opportunity is leveraging customer data to identify trends and patterns in preferences, browsing, and buying behavior. This enables brands to deliver the kind of personalized discounts, messaging, and recommendations that customers want.

AI and machine learning

Artificial intelligence (AI) and machine learning (ML) have become significant catalysts for digital transformation in the retail industry. Retailers are increasingly leveraging these technologies to gain a competitive edge and offer a superior customer experience. These tools can help retailers with customer segmentation, personalized recommendations, demand forecasting, inventory management, and detecting patterns and insights that would be challenging for humans to identify.

One prominent use of AI in retail is for personalized marketing. For example, Amazon uses AI to analyze individual customer data and past purchase history to offer personalized product recommendations. This increases the likelihood of additional purchases and enhances the customer experience by making the shopping process easier and more personalized.

Additionally, chatbots, powered by AI, provide 24/7 customer service, handle inquiries, and even aid in purchase decisions, offering a level of customer service that would be difficult to maintain manually.

In terms of machine learning, retailers use these technologies for demand forecasting and inventory management. For instance, Walmart uses ML algorithms to analyze historical sales data and other factors like weather, holidays, or local events to predict product demand and optimize inventory in each store. This reduces the chances of overstocking or understocking, leading to cost savings and improved customer satisfaction.

The use of AI and ML in digital transformation not only optimizes business operations but also delivers an enhanced shopping experience tailored to individual customer needs.

Augmented reality (AR)

Another significant opportunity to leverage digital transformation in the retail space is through augmented reality (AR). AR can be used to enable customers to “try” a product before purchasing it.

This increases confidence in purchasing decisions and reduces returns, since customers know exactly what to expect and how the furniture item will fit and look in their space.

Footwear: The global footwear brand, Nike, uses AR for customer engagement and sales. Their app, Nike Fit, uses AR technology and machine learning to scan and measure the full shape of a user’s feet, recommending the best fit for each Nike shoe style. This innovative use of AR technology aims to solve a common problem in online shoe shopping – finding the right size – and thus reduce returns.

Jewelry: The jewelry retailer, Blue Nile, has introduced an AR feature in their shopping app that allows customers to “try on” rings virtually. Customers can see the rings from different angles and in various lighting conditions on their own hands. This helps the customers visualize the product and boosts their confidence to make a purchase, a significant advantage for high-value items like jewelry.

A recent study of more than 160,000 customers conducted in partnership with a large international cosmetics and beauty retailer revealed that AR usage in online settings dramatically affects customer engagement, behavior, and sales.

The beauty retailer leveraged AR to let customers virtually try on make-up products (such as lipsticks), both on their mobile app and in their brick-and-mortar stores. The study found that:

  • Shoppers who sampled lipsticks on the AR interface sampled 7.5 more products on average than the average shopper.
  • Among the 16 featured lipsticks, most manual, in-person product sampling was concentrated on two lipsticks. In comparison, sampling activity was more evenly distributed across the 16 lipsticks when shoppers tried the products using AR.
  • Customers who used AR spent 20.7% more time on the retailer’s app and viewed 1.28 times more products, on average, than the average customer
  • Customers who used AR were 19.8% more likely to make a purchase than customers who did not use AR.

These results indicate that when using AR to try products, customers are more likely to consider a greater range of (less mainstream) products from your portfolio, are more likely to make a purchase, and will spend more time engaging with your brand.

AR can provide an excellent opportunity to digitally transform your business, provide customers with a memorable and informative experience, increase conversions, distribute sales more widely across your product portfolio, and reduce returns.


Retail gamification is an exciting way to set yourself apart from the competition, keep your business relevant and exciting, and delight your customers.

A popular means of gamification is loyalty rewards programs. Customers can accumulate points when making purchases and eventually redeem these for free items, discounts, and other rewards. They can view and use these points by accessing their account online or in a mobile app.

A popular example of gamification in retail is Starbucks’ rewards program. The Starbucks app uses a points system where customers earn “stars” for each purchase, which can be tracked through a visual representation in the app. As customers earn more stars, they “level up” to access more significant rewards, such as free drinks and food items. This gamified rewards program not only encourages repeat purchases but also enhances customer engagement with the Starbucks brand.

Another innovative example is Nike’s use of gamification in their Nike Run Club app. Users are encouraged to run more by tracking their runs, offering personalized coaching plans, challenging friends, and earning achievements. This gamification strategy not only promotes the use of Nike’s app but also aligns with its brand image of inspiring athletic achievement.

These examples demonstrate how gamification can be an effective tool in the digital transformation of the retail industry, enhancing customer engagement and loyalty.

Optimize Your Customer Experience with Digital Transformation

A successful digital transformation enables your retail brand to create a noticeable increase in customer satisfaction, loyalty, and revenue.

At AIM Consulting, we offer expert guidance to chart your path forward by identifying the processes, tools, and technology solutions needed to embrace digital transformation.

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