IDC FutureScape

IDC FutureScape: Worldwide Retail 2020 Predictions

Andrea Sangalli Jon Duke Robert Eastman Leslie Hand
Giulio Raffaele Ornella Urso

IDC FUTURESCAPE FIGURE

FIGURE 1

IDC FutureScape: Worldwide Retail 2020 Top 10 Predictions

Note: Marker number refers only to the order the prediction appears in the document and does not indicate rank or importance,
unless otherwise noted in the Executive Summary.

Source: IDC, 2019

October 2019, IDC #US45588719

EXECUTIVE SUMMARY

This IDC FutureScape provides retail IT executives across the globe with actionable insights and
analysis for likely future technology and business scenarios. The intended readers of this IDC
FutureScape include but are not limited to members of the executive, business, and IT leadership of
retail organizations worldwide. The IDC FutureScape predictions suggest that the next five years will
continue to focus on the adoption of disruptive and innovative technologies, which will drive digital
transformation (DX) forward at a rapid pace through several key themes, including:

 Technology-driven transformation altering business and society

 Speed of change, delivery, and operations separating thrivers and survivors
 Data and intelligence representing a unique opportunity for creating entirely new value
 How the industry is learning to utilize artificial intelligence (AI)
 Protecting the security and privacy of digital assets and creating trusted transfers of value
 Consumers expecting more convenience, customization, and control
 How to retrofit old systems into the DX world
Our worldwide retail industry 2020 predictions are:

 Prediction 1: By 2022, 20% of retailers will embrace a complete cultural shift where leadership
champions disruptive innovation, driving investment that launches the next stage of growth,
while 80% see deceleration.
 Prediction 2: By 2025, 25% of the retail companies with an IDC Digital Index of less than 100
in 2020 will close all stores.
 Prediction 3: By 2024, 60% of retailers will implement AI-enabled software solutions; however,
only 20% of those will unlock true differentiation-focused use cases, broadening the gap in the
new intelligence divide.
 Prediction 4: By 2022, 35% of retailers will have announced partnerships or mash-ups that
cross shifting retail ecosystems to offer new services that converge the in-store and online
customer experiences.
 Prediction 5: By 2023, 65% of top global 250 retailers will have a digital workforce lifelong
learning strategy in place, enabling up to 20% increase in employee retention.
 Prediction 6: By 2024, empathy among brands and for customers will drive organizations to
adopt shared process intelligence across the ecosystem that drives 20% collective growth in
customer lifetime value.
 Prediction 7: By 2021, more than 50% of retailers, globally, will have launched at least one co-
innovation program, enabling 15% of retailers to sell their own Tech IP as an asset.
 Prediction 8: By 2021, 60% of major retailers will use consent-based approach to maximize
the value of contextualized customer journey personalization and automated conversations,
increasing loyalty up to four times.
 Prediction 9: By 2021, 80% of retailers will have implemented a retail commerce platform, with
35% of them achieving more than 10% improvement in customer experience metrics, such as
CSAT and NPS.

©2019 IDC #US45588719 2

  Prediction 10: By 2023, the 50% of retailers that have linked self-service technology strategy
to DX will see a 35% increase in net margin, 10% increase in customer loyalty, and 5%
decrease in staff turnover.
This IDC study explores how different drivers are collectively impacting technology in the retail industry
and offers guidance on actions to consider. Retail organizations are hard pressed in the new digital era
to respond to a wide range of political, economic, social, cultural, technological, legal, and experiential
forces. These forces alongside ever-expanding data assets, increasing market pressures, sweeping
regulations, and changes in the global populace and in consumer expectations for experiential retail
call for the industry to act in innovative ways that meet rising expectations, improve outcomes, and
deliver value.

"The 2020 worldwide retail industry predictions offer a glimpse into the future of the retail industry as it
is being transformed in the new digital era," says Leslie Hand, vice president, IDC Retail Insights. "The
future belongs to visionary leaders and forward-thinking organizations that are able to break the
shackles of legacy systems and accelerate mastering digital-first strategies. The thrivers will be those
that champion data-driven, experiential, and personalized approaches to experiential retail business
and IT. The strongest businesses will be truly customer driven, with big shifts in internal culture and in
collaborative/innovative partner relationships."

IDC FUTURESCAPE PREDICTIONS

Summary of External Drivers

IDC Retail Insights identified 10 drivers of retail IT investment:

 Accelerated disruption: Navigating business challenges as volatility intensifies

 The platform economy: Competing at hyperscale
 Sense, Compute, Act: Maximizing data value
 Crisis of digital trust: Escalating threats mandate strategic responses
 Rising customer expectations: More convenience, customization, and control
 The future of work: Agile, augmented, borderless, and reconfigurable
 Economies of intelligence: AI, human, and organizational "learning" fuels asymmetrical
advantage

Predictions: Impact on Technology Buyers

Prediction 1: By 2022, 20% of Retailers Will Embrace a Complete Cultural Shift
Where Leadership Champions Disruptive Innovation, Driving Investment That
Launches the Next Stage of Growth, While 80% See Deceleration
Retailers that dismiss and deny the changing landscape often find themselves questioning, debating,
and blaming others for their own decline, when they should be working on digital transformation in
response to changing consumers and new, innovative competitors. They realize too late in the game
that customers and competitors have shifted around them while they struggle to formulate a response.
Responses among many retailers often means chasing customer-facing capabilities focused primarily
on limited number of technology implementations that replace or integrate with legacy systems and
processes and solve for a narrow set of tactical problems. At the same time, innovation-skeptical
stakeholders within the organization are dismissive, attributing their own daily operations constraints to

©2019 IDC #US45588719 3

the allocation of resources toward innovation. While this approach may result in visible changes and
optimistic responses from consumers, one-off initiatives that still need to live within current processes
and ways of working limit retailers' ability to have truly effective responses against a growing pool of
competitors unconstrained by legacy culture, systems, and processes.

Broader retail business model innovation is a complete overhaul that begins when leadership
establishes a culture intent on disruption. Innovation as culture is tied to a single, executive-sponsored
innovation strategy that drives companywide engagement in innovation for long-term profitable growth.
This type of innovation is business model focused and is collectively supported by people, processes,
and technology. Moreover, leadership is focused on ensuring that every functional area of the internal
value chain is actively involved in the innovation of the business model.

IDC expects that over the next two years, 20% of retailers will embrace the complete cultural shift
required for a true innovation culture. Companies that do so will set in motion the virtuous dynamics of
retail innovation excellence, where incremental innovation drives operational efficiencies that unlock
investment capacity for long-term innovation and accelerated, profitable growth. Not only does this
success reinforce the innovation culture, it creates the conditions for companies to find and launch
their next stage of growth, while those companies with a narrower innovation mindset will face
deceleration and decline.

Associated Drivers
 The future of work: Agile, augmented, borderless, and reconfigurable
 Accelerated disruption: Navigating business challenges as volatility intensifies
IT Impact
 IT will need to increase partnership with teams across the organization, working together to
codevelop and own the technology road map to improve agility and operational results.
 CIOs will be required to lead the shift in innovation efforts away from a tactical use case–driven
model and toward an ecosystem-driven approach to create a platform for innovation.
Guidance
 Focus a portion of early innovation efforts on building awareness and buy-in from executives
on the importance of an innovation-as-culture mindset.
 Engage stakeholders in all areas of the organization early in the innovation process. Work to
create a sense of ownership as you understand the practical hurdles from different
departments that innovation projects will need to clear.
 Plan beyond technology-driven and tactical use case–oriented innovation. Instead, consider
incentives that reward innovation centered around building concepts for potential new
business models.
Prediction 2: By 2025, 25% of the Retail Companies with an IDC Digital Index
of Less than 100 in 2020 Will Close All Stores
Research that IDC completed in 2019 illustrates that retailers that have progressed to the most
advanced stages of digital transformation outperform nondigital and less mature (DX) companies by a
wide margin on our Retail Revenue and Profitability Indexes. In addition, companies at the first stage
of DX with just a few ad hoc projects, and no real strategy or road map for digital transformation,
underperform the baseline. Those that are dabbling with digital versus developing enterprise strategies

©2019 IDC #US45588719 4

at this stage are essentially making last ditch efforts to improve customer traffic, loyalty, or patching
processes where costs are not well contained.

The new formula for retail success starts with digitally transformed business and new foundational
capabilities that enable them to keep pace with the variable nature of customer needs. Advanced DX
maturity enables the retailer to execute against customer expectations flawlessly at every step along
the way — from inspiration, discovery, purchase, and fulfillment to service. A strong cloud-based
foundation enables responsive customer data–driven processes (bespoke customer engagement at
scale) that create optimal assortments, pricing, discovery, and fulfillment strategies that drive repeat
business!

Retail is here to stay, but the battle for share of customer wallet is becoming more intense. The
heavyweights, Walmart, Amazon, Target, Alibaba and JD.com, are investing with intent, and frankly,
everyone else should look to partner or mirror the best practices of these giants. The problem, of
course, is what is the cost of standing alone? The truly differentiated brands can survive, but can the
others?

Associated Drivers
 Economies of intelligence: AI, human, and organizational "learning" fuels asymmetrical
advantage
 Rising customer expectations: More convenience, customization, and control
 Accelerated disruption: Navigating business challenges as volatility intensifies
IT Impact
 The mandate for DX has accelerated. Investment strategies and plans will be longer term, but
agile.
 Current IT architecture needs to be evaluated and likely upgraded to meet current and future
needs.
 Relationships with third-party implementation partners may change but keep the IT/PMO team
engaged to ensure that the business continues to influence with each agile development cycle.
Guidance
 Get the business to make the tough economic/business model decisions that need to be made
by your business leaders, in order to fund the five-year road map — not just projects.
 Invest with intent — develop a road map for digital transformation and work toward objectives.
 Identify the fundamental building blocks that will drive operational agility and bespoke
customer engagement at scale.
 Be authentic, transparent, and link everything you do to what the customer wants — not only to
what they did last year.
Prediction 3: By 2024, 60% of Retailers Will Implement AI-Enabled Software
Solutions; However, Only 20% of Those Will Unlock True Differentiation-
Focused Use Cases, Broadening the Gap in the New Intelligence Divide
The scale, speed, complexity, and consumer orientation of modern experiential retail creates
conditions ripe for artificial intelligence solutions. At a high level, there are two complementary types of
AI solutions in retail: process automation that streamlines and automates simple tasks and process
augmentation that extends human capabilities to do things that people can't. The latter category
comprises differentiation-focused use cases that are complex, challenging analytical problems that,

©2019 IDC #US45588719 5

while humans could theoretically solve, would be difficult for a human to solve at the speed, scale, and
accuracy necessary to deliver value. While automation solutions are internally focused, helping retail
associates do their jobs better, differentiation-focused use cases are those that will ultimately improve
the customer experience directly, helping retailers buy better, assort better, and price better.

AI solutions in retail are on the rise and are expected to expand rapidly across the industry over the
next five years. Today, AI solutions in use among retailers tend to be aimed at automation rather than
capability extension. However, given the rapidly shifting preferences of consumers who have
seemingly endless choice in a competitive market filled with a conveyor belt of new digital-native
entrants, forward-thinking retailers can seize the opportunity to leverage the power of AI solutions
strategically to drive unique competitive advantage with differentiation-focused use cases.

Solutions focused on process augmentation use cases can not only accelerate differentiation for
companies that employ them but also transform markets and change the dynamics of competition in
the industry. IDC expects that by 2024, the use of AI solutions will be the norm in retail, but only a
fraction of those that have implemented AI will have unlocked differentiation-focused use cases. This
divide between retailers that have implemented differentiation-focused use cases and those that have
not will further segregate retailers, creating an intelligence divide in much the same way we see a
digital divide. Like what we see relative to digital transformation, those that are out in front of the curve
in intelligence will thrive and be better positioned to find their next stage of growth, while being on the
wrong side of the divide will challenge a retailer's long-term viability.

Associated Drivers
 Economies of intelligence: AI, human, and organizational "learning" fuels asymmetrical
advantage
 Accelerated disruption: Navigating business challenges as volatility intensifies
IT Impact
 CIOs will spearhead the shift among their C-level peers, where executive leadership will
strongly emphasize an AI-first culture, mandating and incentivizing the use of AI.
 IT leaders will need to seamlessly engage partners across the organization to not only
implement automation-focused AI solutions but also those that drive differentiation-focused
use cases, taking accountability for leading organizations across the intelligence divide.
Guidance
 Don't dismiss AI solutions as something that can wait until the future. Retailers can drive value
from practical use cases today, regardless of the stage of digital transformation and analytical
maturity the organization is in today.
 Be deliberate when you determine the intent of the use case your AI system will help you
solve. Understand how the potential strategic benefits vary depending on your stage of digital
transformation and the intent of the solution.
 Be aware of the coming intelligence divide: at a minimum, place small bets and begin
experimenting now, while AI solutions are still in early in their adoption cycle, so you can
launch solutions while a majority of peers are still on the sidelines.

©2019 IDC #US45588719 6

Prediction 4: By 2022, 35% of Retailers Will Have Announced Partnerships or
Mash-Ups That Cross Shifting Retail Ecosystems to Offer New Services That
Converge the In-Store and Online Customer Experiences
The future of retail is the continually improving response to consumer expectations for a fuller, richer,
more frictionless customer experience. To respond, retailers are having to offer a broader menu of
services that converge the offline and online domains of the customer journey while reducing or
eliminating friction points in the customer experience. The customer experience must be enhanced
within the offline and online experiences and nurtured and refined across these domains. Increasingly,
this requires that retailers' partner and mash-up offerings from a larger ecosystem of retailers and
industry participants to offer customers a broader and richer customer experience.

Early examples of these partnerships hint at the potential opportunities to leverage the retail
ecosystem to expand services and offerings. Kroger and Walgreens have evolved a growing
partnership over the past year that combines Kroger's expertise and offerings in grocery with
Walgreens' offerings in pharmacy and health and beauty to create a new customer experience. The
partnership enables them to cross-offer products and services. Amazon and Kohl's are partnering to
enable Amazon customers to be able to return products purchased from Amazon to Kohl's. Alibaba's
Hema cashless supermarkets is serving as a fulfillment center for Hema Apps online orders.

These alliances have risks. One ongoing challenge is how to capitalize on such combinations while not
letting front of store and back-office costs grow out of control. Needed remedies go beyond identifying
and minimizing redundancies to relentless pursuit of new inefficiencies that crop up from new
processes that effect the partnership or alliance. Still, such partnerships showcase the potential of
creative mash-ups to transcend the online and in-store experience silos with new omni-channel
services.

Associated Drivers
 Rising customer expectations: More convenience, customization, and control
 Accelerated disruption: Navigating business challenges as volatility intensifies
IT Impact
 IT needs to be a strategic internal partner and stakeholder in defining the desired customer
experience and in enabling the necessary innovation with essential technologies and
infrastructure.
 IT culture needs to adopt a perspective that is both internally digital transformation focused
and also readies the organization for possible collaborations with other ecosystem partners.
 Ensuring data and IP security when partnering with the ecosystem requires providing
necessary data to facilitate meaningful alliances while respecting best-in-class security
protocols.
Guidance
 Embed in the management culture a situational awareness around ecosystem opportunities,
focusing on specific business outcomes based on the retail segment and format.
 Enlarge the organization's concept of agility to encompass collaboration-ready and
ecosystem-friendly IT architecture; opportunities that cannot be taken due to legacy IT will
handicap a retailer.

©2019 IDC #US45588719 7

  Recognize that the success or failure of such alliances will be significantly impacted by the
ability of the mash-up to offer new services with a tight scrutiny of redundancies, inefficiencies,
and associated costs.
Prediction 5: By 2023, 65% of Top Global 250 Retailers Will Have a Digital
Workforce Lifelong Learning Strategy in Place, Enabling up to 20% Increase in
Employee Retention
Today, more than half of the activities performed by retail workers could potentially be automated.
Therefore, the workforce must be supported in their journey to master new technological, analytical,
and interpersonal skills while simultaneously embracing new ways of working with their digital
counterparts in the new retail reality. For example, Walmart adopted VR headsets to support and
constantly train its employees to boost store associate retention and confidence. By doing so, Walmart
has seen "that VR training boosts confidence and retention while improving test scores 10–15% — even
those associates who simply watched others experience the training saw the same retention boosts,"
said Andy Trainor, senior director for Walmart's U.S. Academies.

Devise a holistic and adaptive digital enablement strategy, a continuous digital training, and upskilling
module that delivers digital education, monitors adoption, tracks progress levels of employees, and
adapts and realigns specific trainings meant for specific requirements. For example, in-store digital
customer engagement gets automatically directed to the store staff, while automated warehouse
monitoring leveraging mobile POS can be routed to back-end staff. According to IDC's 2019 Global
Retail Innovation Survey, connected workforce is a top use case priority digital transformation
programs for more than 40% of retailers. For instance, Ulta Beauty has implemented a mobile
clienteling system so that retail sales associates have real-time access to customer behavior and
product information. This enables omni-experience customer engagement and commerce everywhere
through inventory transparency across supply chain.

Cloud-based training helps companies achieve cost-reductions over conventional F2F trainings. Cisco
reported a 40-60% training cost reduction after switching to a web-based training module for its 28,000
employees. An EU-based company reported that the cost of employee non-productivity + situational
training costs can easily be €500 per day. Reducing time spent for training by 50%, say from one day
to half a day, freed up €50,000 for a staff of 200 employees (in retail, this may be the number of
employees in one large store). And €50,000 buys you extensive VR training courses with unlimited (re-
)use. Incremental productivity will ensue when the in-store staff gets digitally native. Key use cases for
this improvement in productivity include inventory management, mobile dashboarding/reporting,
task/order management and fulfillment, and effective and frictionless workforce management.

Associated Drivers
 The future of work: Agile, augmented, borderless, and reconfigurable
 Economies of intelligence: AI, human, and organizational "learning" fuels asymmetrical
advantage
 The platform economy: Competing at hyperscale
IT Impact
 IT needs to equip store associates with retail-specific, consumer-grade mobile devices and
infrastructure to complete consumer and employee-facing processes. CIOs need to reallocate
funds spent on conventional mediums of training to these revolutionary and high-impact future
carriers of workforce training and development.

©2019 IDC #US45588719 8

  Build competencies in enterprise mobile management (EMM) and mobile application
development (MADP) to enable faster development cycles and more secure utilization of
mobile processes.
 Ensure security with clearly defined usage standards and protocols connecting cross-
functional best practices and usage guidelines.
Guidance
 Identify digitally aware workforce and plan hiring based on the skill gaps that are required to be
filled across functions and roles.
 Shift focus of retailers and treatment of employees as internal customers will bring in values of
client delight (internally), thereby raising levels of employee loyalty and awareness of their
roles within the company.
 Measure employee productivity using AI, machine learning (ML), and mobile device
task/workforce management principles will help in objective, data-backed, and meritorious
performance bonuses and promotions while increasing retention.
Prediction 6: By 2024, Empathy Among Brands and for Customers Will Drive
Organizations to Adopt Shared Process Intelligence Across the Ecosystem That
Drives 20% Collective Growth in Customer Lifetime Value
By 2024, some well-known brands will be gone, and those that remain and that want to continue to
grow will have started to work together in new ways that truly benefits the whole ecosystem. Leading
partners will be rewarded for successfully serving their joint customers better with 20% collective
growth in customer lifetime value, just as the laggards struggle to maintain customer loyalty.

Whether you call it marketplace participation or not, the ultimate objective of retail collaboration with
partners is driving joint sales lift, growth, and profitability. With all the new last mile services that are
being offered to customers, profit margins are being squeezed. But what if retailers could truly act as
one with their ecosystem partners operating toward common objectives, including delivering customer
choice convenience, value, and satisfaction at every touch point? What if the ecosystem naturally
rewarded the most efficient and customer service–oriented execution systems — a natural selection,
enabled by AI, of the processes that get the job at hand done at the optimum cost, coupled with a high
regard for garnering the highest customer satisfaction scores possible?

Essentially, this is a meritocracy for retail customer services. Access to intelligent processes that
connect to catalogs, inventory, reviews, order creation, fulfillment, and delivery options would be
available to each ecosystem partner, and the partners that execute against objectives best would
ultimately be rewarded with more traffic, more revenue, and more profitability.

Associated Drivers
 Accelerated disruption: Navigating business challenges as volatility intensifies
 Crisis of digital trust: Escalating threats mandate strategic responses
IT Impact
 IT and line-of-business teams need to move into the realm of AI-driven decision processes
that link to external services based on the likelihood of each decision meeting business
objectives.
 IT must measure success against objectives regularly to ensure the robotic process
automation (RPA) hasn't led the company astray.

©2019 IDC #US45588719 9

  Modernization is not possible without solid cloud-based foundations, so the road map will need
to reflect that this is what is possible at a late stage of digital transformation.
Guidance
 Get your own house in order — execute against a plan and invest with intent to extend your
capabilities into commercial ecosystems.
 Start evolving relationships to the obvious services offerings that the customer selects,
including delivery. Why offer one option, when the best performing option would be best.
 Reach further into the areas where decisions improve outcomes — fulfilling from store A or B
versus vendor 1 or 2; completing the sale via payment process X, Y, or Z.
Prediction 7: By 2021, More than 50% of Retailers, Globally, Will Have
Launched at Least One Co-Innovation Program, Enabling 15% of Retailers to
Sell Their Own Tech IP as an Asset
Retailers have developed the awareness that efficient and effective innovation also relies on the
continued and data-driven collaboration with the external stakeholders of the extended value chain.
Importantly, retail commerce platforms (for more details on retail commerce platforms, refer to
Prediction 9), retail-specific AI capabilities, and industry collaborative clouds provide retailers with
increasing opportunities for integrating their applications and databases to the ones of suppliers and
partners and even to IT vendors, consulting firms, and systems integrators. Indeed, by leveraging
shared sets of data sourced from customers, products, and assets, retailers and their stakeholders will
be able to develop new offerings for their customers.

An example is the collaboration announced by Nike and Foot Locker. The two companies agreed to
use Nike Plus mobile application in Foot Locker's Washington Heights store, in order to leverage
"member data or member insights and customize and provide offers, activations, and experiences that
will be unique and specifically targeted at an individual or group of individuals," said Frank Bracken,
vice president of Foot Locker, Kids Foot Locker, and Lady Foot Locker. In cases such as the latter, co-
innovation will be focused on generating added value within the existing downstream portion of the
business model. Even more interestingly, co-innovation will be fundamental for retailers to develop
technology intellectual property that will have twofold benefits. On one side, the bespoke technology
will enable the co-innovators to improve the outcomes of specific domains of their shared value chains.
On the other side, the co-innovators will have the opportunity to transform technology intellectual
property into an asset for innovating the business model itself. This means that the collaborating
parties could become technology providers able to generate revenue by selling their platform
capabilities to other retailers, executing a coopetition business model. This may seem like an unusual
or even risky attempt to develop very strong ties with competitors, but some would argue that joining
forces against even tougher adversaries is warranted.

Associated Drivers
 The platform economy: Competing at hyperscale
 Economies of intelligence: AI, human, and organizational "learning" fuels asymmetrical
advantage
IT Impact
 The efficient and effective execution at scale of a co-innovation strategy implies that the
enterprise has already started the implementation of a retail commerce platform.

©2019 IDC #US45588719 10

  Executing a co-innovation strategy requires open APIs and packaged SDKs that can be
leveraged by innovation partners.
 Reselling Tech IP implies that the IT department needs to develop the capabilities of an
external services provider or find a partner that can bring the platform to market as a
commercial offering (such as major consultancies and systems integrators).
Guidance
 Work with lines of business in designing co-innovation as a program that is an integral part to
the same road map.
 Prioritize the selection of an appropriate IT supplier of integration and development services
that can commit in supporting your company and your partners in the resource-demanding
execution of the co-innovation strategy.
 Establish a solid IT sales and services outsourcing partnership. At the same time, consider the
opportunity to acquire a start-up/scale-up IT services provider.
Prediction 8: By 2021, 60% of Major Retailers Will Use Consent-Based
Approach to Maximize the Value of Contextualized Customer Journey
Personalization and Automated Conversations, Increasing Loyalty up to
Four Times
Based on recent IDC's ConsumerScape 360 Survey, 70% of U.S. consumers state that organizations
are collecting too much data about them online, with some difference across age groups. At the same
time, personalization of ads, websites, and apps is ranked lower than the negative sentiment around
the data collection, especially among older consumers. Retailers are aware that customer experience
is a key differentiator, and the sense of urgency is evident in the percentage of retailers whose
customer journey models are moving beyond the "segment of one" while aiming to achieve the highest
level of maturity through a real-time contextual customer journey model. Retail organizations focusing
on a real-time contextual model increased from 5% in 2018 to 20% in 2019. But the key points are
related to what type of data retailers are collecting and how they are generating actionable insights
from them. Based on IDC's 2019 Global Retail Innovation Survey, one-third of retail organizations
stated that managing consent and selecting useful data and integrating data silos are the top
challenges for delivering customer experience. Retailers unable to address these challenges through a
consent-based customer engagement can only leverage anonymous and aggregated data. They will
be unable to deliver contextualized customer journeys and speed up product innovation.

Associated Drivers
 Rising customer expectations: More convenience, customization, and control
 Sense, compute, act: Maximizing data value
 Economies of intelligence: AI, human, and organizational "learning" fuels asymmetrical
advantage
IT Impact
 A fundamental shift in managing data privacy and security is required, from a mere regulation
approach to building customer engagement on a foundation of trust and transparency
continually adapt parameters depending on the nature of the interactions and customer
disclosures. IT department will be required to establish appropriate enterprise governance
policies, consent management infrastructure, and data schema.

©2019 IDC #US45588719 11

  Consent-based security and privacy approaches require the infusion of principles, such as
fairness, transparency, purpose limitation, data minimization, and the right to information, into
analytics best practices.
Guidance
 Eliminate divisions between IT and LOB to share a common vision in designing customer
experience strategy.
 Define processes and implement solutions to make data more accessible at all levels of the
organization and to customers. The latter should be able to access its data and review the
proposed usage.
 Select AI platforms that enable organizations to build transparent models applying the
principles of privacy by design and privacy by default.
Prediction 9: By 2021, 80% of Retailers Will Have Implemented a Retail
Commerce Platform, with 35% of Them Achieving More than 10% Improvement
in Customer Experience Metrics, Such as CSAT and NPS
Enabling a digital commerce platform is an essential step for companies to drive commerce throughout
both old and new business models. According to IDC's 2019 Global Retail Innovation Survey, 60% of
retailers will have implemented such a platform in next 12 months. Retailers need to better harness
innovation to make the necessary pivot from digitally distraught to digitally determined. This implies the
implementation of a set of essential capabilities to deliver business logic and retail commerce services.
As a core component of the retail commerce platform, AI is foundational to optimize daily operations
and gather insights for innovation. As of today, two-thirds of retailers are moving toward the adoption
of AI foundations.

These, in turn, are key enablers of ecosystems, digital supply chain, and customer experience. As an
example, Walmart is constantly building its own platform for ecosystem integration that is addressed to
so-called "buyers" and "sellers." Buyers include Walmart affiliates and partners for which the retailer
has developed a set of tools that they can leverage to place relevant links inside their products,
whether it is a website, mobile app, or a physical home device. Walmart allows its buyer audience to
earn money by showing Walmart ads on the affiliate site, link affiliate users directly to products on
Walmart.com, manage affiliate revenue and traffic online, and extend affiliate brand leveraging the
Walmart.com experience. Sellers are Walmart's active partners, such as warehouse suppliers,
dropship vendors, marketplace sellers, or content service providers, that have already collaborated
with Walmart.com to provide support for the site with specific services. By doing so, retailers can
effectively increase customer experience metrics, improving customer's overall satisfaction. Therefore,
IDC expects a considerable increase in the number of retailers achieving more than 10% improvement
in customer experience metrics, such as CSAT and NPS.

Associated Drivers
 The platform economy: Competing at hyperscale
 Economies of intelligence: AI, human, and organizational "learning" fuels asymmetrical
advantage
 Rising customer expectations: More convenience, customization, and control
IT Impact
 Lines of business will increasingly demand fast implementation of AI/ML analytics capabilities
specific for customer experience and other core domains.

©2019 IDC #US45588719 12

  Build a partner ecosystem to effectively implement all the retail commerce platform services
and execute the innovation strategy with external stakeholders.
Guidance
 Leverage advanced analytics to process and analyze conversational data and deliver
customer experience personalization at scale.
 LOB and IT must work together to develop an innovation strategy that would support digital
determination.
 Allocate a dedicated effort to ecosystem innovation in the short term and long term to deliver
services that are relevant to external stakeholders.
Prediction 10: By 2023, the 50% of Retailers That Have Linked Self-Service
Technology Strategy to DX Will See a 35% Increase in Net Margin, 10% Increase
in Customer Loyalty, and 5% Decrease in Staff Turnover
In the quest to deliver the best and most convenient customer experience — and employee experience
— in the most efficient way, self-service strategies and technologies are rising in importance. The
spectrum of self-service technologies runs from consumer-held devices, such as the scan-and-go
devices in grocery stores, to kiosks, to self-checkout lanes, and to cashierless retail stores. The retail
industry is finding that, sometimes, the most frictionless retail experience can be a self-service
experience. At a time when customers and retailers alike are in relentless pursuit of a more convenient
and frictionless retail experience, self-service strategies enable a retailer to offer the customer an
alternative to direct engagement with an associate while availing the retailer of a customer touch point
at a lower cost.

Self-service appeals to a customer base that has grown accustomed to the ease and convenience of
online shopping. For store management, providing store employees with self-service tools and
technology means it is easier for associates to update and maintain their employee information,
manage their schedules, swap shifts, and self-submit their vacation and sick time. This empowers the
employee to be more productive and to feel that they have more control over their work and work
administration, while freeing up managers for more nonadministrative work. The result is better
employee engagement and fewer missed shifts.

Self-service is not without its risks. Predictably, where there is self-service, there are opportunities for
errors, abuse, and, even worse, fraud. Self-service checkout is notorious for errors and fraud; and
while self-service is just as vulnerable as other devices to cyberattacks, security is often an
afterthought. Still, self-service strategy, well executed, means that the retailer can offer a range of
engagement styles to the customer, freeing up associates for more value-add interactions with
customers who need an associate. On the employee side, self-service can empower employees,
streamline the onboarding and administrative management of the employee, and positively impact
employee morale and retention. While self-service is not appropriate everywhere, the retail's focus on
frictionless commerce, and retail's historical underinvestment in associate training and development,
means that self-service will become a considered strategic element for an increasing number of
retailers.

Associated Drivers
 Economies of intelligence: AI, human, and organizational "learning" fuels asymmetrical
advantage
 Rising customer expectations: More convenience, customization, and control

©2019 IDC #US45588719 13

  The future of work: Agile, augmented, borderless, and reconfigurable
 Accelerated disruption: Navigating business challenges as volatility intensifies
IT Impact
 CIOs should anticipate that the attachment of self-service is a critical component of digital
transformation strategy.
 IT needs to assess what the strategic elevation of self-service means for adjacent systems in
the enterprise.
 The IT function needs to adapt their assessment for technologies that are going to be used by
non-IT people looking at the human factors of such technology, how intuitive the technology is
to use and how the technology contributes to the customer or associate experience.
Guidance
 Scan the enterprise for scenarios where low value-add customer interactions or significant
friction points indicate opportunities for self-service.
 Involve associates and employees and store managers to assess where their ability to
manage their employee information, manage and swap schedules, and submit vacation and
sick time requests will have positive impacts on performance and morale.
 Recognize self-service as a service option that is appropriate for some scenarios and
opportunities and will likely mean added hardware, software, and support costs.

ADVICE FOR TECHNOLOGY BUYERS

The IT transformation required to enable experiential retail requires renovation from the inside out (IT
and cultural/organizational) and outside in (modernized business models with customer experience
awareness-driven KPIs). Retail organizations need to seek to understand customer desires, not just
historical purchase behaviors, so that they may set a course to digitally transform business. Seamless,
frictionless, and individualized customer experiences that can adapt over time will enable brands to
remain relevant as customer behavior changes in the future. Executing profitably against a vision for
experiential retail is nearly impossible without first aggressively modernizing the digital data core for
product and customer, followed by the ingestion of new data sources and the application of AI to make
data more actionable and outcomes driven. All retail IT initiatives and new investments must align to
one or more of the following goals:

 Enabling leadership teams to more quickly identify opportunities, assess risks, and guide
organizational change in response to new technologies and market developments
 Ensuring that workforces have all the skills, tools, data, and insight they need to deliver the
optimal customer experience without degradations due to application or data latency
 Guarding security and privacy in consistent seamless, frictionless, and individualized
engagements with customers across all touch points
 Accelerating transformation of operations by reducing the complexity and risks associated with
prevalent sourcing and distribution patterns
 Driving outcomes-based data ingestion and utilization to create greater relevancy and loyalty
among the consumer base while driving operational expenses down due to automation and AI-
driven learning
CIOs must make clear to LOB partners that they need to work together to define and deliver digital
transformation of retail business, before their joint goals shall be achieved. The key to delivering on the

©2019 IDC #US45588719 14

promise of digital transformation is to build cross-functional teams that can deliver the resources
required. Making this a reality depends on your ability to:

 Make your IT teams' jobs about the delivery of outcomes, not projects.
 Educate business leaders to achieve more progress against the vision for experiential retail
through a step-by-step prioritization of use cases that build the platforms and data core that
subsequent initiatives will build on.
 Incorporate a vision for cloud and edge management of the IT portfolio, to enable faster more
agile delivery of new capabilities.

EXTERNAL DRIVERS: DETAIL

Accelerated Disruption: Navigating Business Challenges as

Volatility Intensifies
 Description: Today, survival of the fittest is linked not to size or strength but to the ability to
change — to move quickly, react, adapt, seize opportunities, and be agile. With the increasing
uncertainty in economic rules, political stability, climate effects, and disruptive innovations in
the marketplace, a sense of urgency pervades companies concerned about their
competitiveness and longevity. Beyond that, organizations' ability to navigate the increasingly
complex and uncertain business environment has become essential. The new imperative is to
keep pace with business change by increasing the speed of business operations, the speed at
which changes are delivered, and the speed and scale of innovation. Survival means
understanding and adopting these new approaches quickly, throughout the organization.
 Context: The best performing companies are pulling away from the rest, creating a bifurcated
and unequal landscape where a few firms exhibit high productivity and profits. The global
superstar companies and the unicorn start-ups leverage innovation cultures, agile
organizations, and disruptive approaches to everything from machine learning to talent
acquisition in order to adapt to complex uncertainty; adjust their products, services, and
operations; and seize opportunities.

The Platform Economy: Competing at Hyperscale

 Description: Understanding and provisioning the platforms that will sustain, advance, and
scale business and operations are essential for every business. The platform is where the
future of software, infrastructure, and connectivity will evolve and where edge will be
accessed, integrated, and optimized. Megaplatforms compete to own infrastructure, artificial
intelligence, and development environments. Application-centric platforms look for the network
effect to expand their reach. Industry-specific platforms harness multiplied innovation to build
niche ecosystems. Capturing profits will be highly dependent on controlling or participating in
the right platform. Every business must incorporate these new realities into its platform
strategy.
 Context: Today, we are in a platform economy — one in which tools, capabilities, and
frameworks based upon the power of information, cognitive computing, and ubiquitous access
will frame and channel our economic, business, and social lives. Leading organizations are
shifting to platform thinking to evolve their business models and manage their technology
architecture. Platform thinking is a fundamental shift in business strategy, moving beyond
product differentiation and pricing toward ecosystem-based value creation. It is also a long-
term, sustainable response to new realities in the DX economy, one in which organizations
digitally transform themselves into digital-native enterprises.

©2019 IDC #US45588719 15

Sense, Compute, Act: Maximizing Data Value
 Description: Today, data and intelligence represent a unique opportunity for creating
unimaginable value. Real–time data from IoT, mobile devices, and other devices at the edge —
combined with historical data, enterprise systems, and global information — continually sense
an environment and put it into new contexts. By combining data with AI and machine learning,
organizations are spreading intelligence from the core to the edge to turn data into action and
action into value. Automation literally extends beyond decision making and optimization into
life-and-death dependencies. Competitiveness is determined by how data is transformed into
insight and knowledge to create high-value differentiators for products, customers, and
markets and deliver meaningful, value-added learning, predictions, and actions that improve
experiential engagement, industrial processes, enterprise decision making, and much more.
 Context: In this "data driving action" world, ensuring the veracity of the data and transforming
data into insights become a strategic imperative. Sometimes called "decision-centric
computing," the need to understand and utilize data goes beyond data integration and
governance. What becomes essential is: first, to put data into context to provide meaning; next
to understand it in relationship to other data and events to gain knowledge; and finally, to add
judgement and action to achieve the full potential of value realization.

Crisis of Digital Trust: Escalating Threats Mandate Strategic Responses

 Description: The new digital environment has significantly changed organizations' exposure to
adversarial risk. Organized threat actors leverage AI to find and exploit new vulnerabilities.
Ransomware, cybercrime, and nation-state attacks are increasingly common events that
cause significant business disruptions, high costs, and reputational damage. The first global
cyberwar may be just over the horizon, bringing unknown havoc with it. In the face of daily
incidents, many consumers, citizens, and partners have lost faith in technology, business, and
government, creating a crisis of trust. Regulations, publicity, and fines increase risk aversion,
while the positive correlation showing that higher levels of trust yield higher levels of GDP
demand action. Protecting the security and privacy of digital assets and cultivating the ability
to anticipate, identify, contain, measure, and address risks are critical to mitigating the crisis.
 Context: Bad decisions, poor leadership, complexity, and cybercrime result in breaches that
have a significant impact on businesses and customers. New approaches such as zero trust
and distributed integrity are proving themselves and blockchain shows promise to provide the
"glue" for some digital trust issues. At the same time, quantum computing has the potential to
redefine current security assumptions and practices. But, the crisis of trust goes beyond just
security concerns. Social and other media are deepening trust inequities between informed
and uninformed citizens, fueling discord within societies, while lack of trust between
governments grows across them. AI shows promise in curating information, but there is little
trust in whomever is managing the AI or the information.

Rising Customer Expectations: More Convenience, Customization,

and Control
 Description: Customers accustomed to the personalization and ease of dealing with digital-
native companies such as Google and Amazon now expect the same kind of service from
every business in every industry. The changing expectations are most evident in the newest
generations of customers, but all customers are demanding more convenience and
personalization. At the same time, they want more control of what data is collected and how it
is used. Intelligent customer agents will start to intermediate the relationship on the customer's
behalf, taking more control from the vendor. Companies that systematically collect, measure,

©2019 IDC #US45588719 16

 and analyze data to create exceptional, personal, relevant, and compelling experiences can
set themselves apart from their competitors.
 Context: With new customer expectations being set by thriving companies that disrupt
markets, the previous levels of customer service are no longer good enough. New business,
operational, and organizational models are required to meet continually growing consumer
expectations. 38% of companies that are digital natives report that they are "almost constantly
online" through their device of choice, the mobile phone, providing unparalleled access to
behaviors and preferences, that they expect to be turned into customized engagement and
experience. While there is also backlash, customers seem willing to relinquish some control
over their data in exchange for a sufficiently engaging personalized experience.

The Future of Work: Agile, Augmented, Borderless, and Reconfigurable

 Description: Technologies are rapidly changing who, or what — and where, or how — work is
being done. A new generation of workers have new expectations for work, culture, and space.
The future workspace will be a mix of physical and virtual. Work culture will be more
collaborative, while the workforce will be a combination of people and machines working
together. Organizations are using new contracting models to create an agile, borderless, and
reconfigurable workforce. However, the new skills required to thrive in this new era are still in
short supply. To bridge the digital talent gap, organizations need to retrain and reskill existing
staff, develop access to new talent pools, and attract new resources. Society must equip and
educate up-and-coming generations for the future while bringing existing workers up to speed
to address current needs. Employees must become lifelong learners.
 Context: The demographic shifts led by millennials entering the workforce and technology
advances are driving fundamental changes in the workplace. Good pay, positive cultures,
diversity, flexibility, and access to leading-edge technology are all important keys to keeping
workers happy at work. The short supply of digital talent, particularly in data science, security,
and CX design, is forcing organizations to adopt new approaches to work. IDC predicts that by
2021, 60% of G2000 companies will have adopted a future workspace model — a flexible,
intelligent, and collaborative virtual/physical work environment — to attract new talent and
improve employee experience and productivity.

Economies of Intelligence: AI, Human, and Organizational "Learning" Fuels

Asymmetrical Advantage
 Description: Enterprise economies and the nature of competition have changed. While still
important, economy of scale has been augmented with economies of scope and economies of
learning. Now, leading companies are pursuing "economies of intelligence," the continual
improvement, innovation, and variation based on leveraging data and AI technologies to
identify and fulfill changing needs to enhance scale, scope, and customer engagement. This is
changing the nature of intellectual property, whose value has shifted to where it's created
rather than where it's realized and contributing to an asymmetrical accumulation of capital and
innovation where an organization's capacity to learn has a distinct competitive advantage.
 Context: As enterprises scale their use of modern technologies for complete instrumentation,
integration, and insight, they can expand their scope by offering a wider variety of experiences
that demonstrate increasing value as the organization learns what is most desirable and
efficient. This enables the learning organization to capture more knowledge and increase its
asymmetrical accumulation of capital and innovation.

©2019 IDC #US45588719 17

LEARN MORE

Related Research
 Critical External Drivers Shaping Global IT and Business Planning, 2020 (IDC #US45540519,
October 2019)
 IDC's Worldwide Digital Transformation Use Case Taxonomy, 2019: Experiential Hospitality,
Dining, and Travel (IDC #US44787719, August 2019)
 IDC's Worldwide Semiannual Digital Transformation Spending Guide, 1H18, April 2019
 IDC's Worldwide Semiannual Digital Transformation Spending Guide Taxonomy, 2019:
Release Version 1H18 (IDC #US44958519, April 2019)
 Retail Renaissance: Takeaways from the NRF "Big Show" 2019 (IDC #US44627819, February
2019)
 IDC FutureScape: Worldwide Retail 2019 Predictions (IDC #US44567318, December 2018)
 IDC Market Glance: Experiential Retail Technologies, 4Q18 (IDC #US44420518, November
2018)
 IDC's Worldwide Digital Transformation Use Case Taxonomy, 2018: Experiential Retail (IDC
#US44092118, July 2018)

©2019 IDC #US45588719 18

About IDC
International Data Corporation (IDC) is the premier global provider of market intelligence, advisory
services, and events for the information technology, telecommunications and consumer technology
markets. IDC helps IT professionals, business executives, and the investment community make fact-
based decisions on technology purchases and business strategy. More than 1,100 IDC analysts
provide global, regional, and local expertise on technology and industry opportunities and trends in
over 110 countries worldwide. For 50 years, IDC has provided strategic insights to help our clients
achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology
media, research, and events company.

Global Headquarters

5 Speen Street
Framingham, MA 01701
USA
508.872.8200
Twitter: @IDC
idc-community.com
www.idc.com

Copyright and Trademark Notice

This IDC research document was published as part of an IDC continuous intelligence service, providing written
research, analyst interactions, telebriefings, and conferences. Visit www.idc.com to learn more about IDC
subscription and consulting services. To view a list of IDC offices worldwide, visit www.idc.com/offices. Please
contact the IDC Hotline at 800.343.4952, ext. 7988 (or +1.508.988.7988) or sales@idc.com for information on
applying the price of this document toward the purchase of an IDC service or for information on additional copies
or web rights. IDC and IDC FutureScape are trademarks of International Data Group, Inc. IDC FutureScape is a
registered trademark of International Data Corporation, Ltd. in Japan.

Copyright 2019 IDC. Reproduction is forbidden unless authorized. All rights reserved.