Digital transformation isn’t a luxury for retailers anymore. It’s a ticket to staying competitive, relevant, and top of mind for customers.
Spending is accelerating, and companies are allocating as much as $17.7 billion toward digital transformation—about 7.5% of total revenue. Total spend is anticipated to hit $3.9 trillion by 2027.
Think of digital transformation as giving your retail organization a tech makeover from top to bottom. Done well, it’s a tactic that can boost your brand reputation and increase sales. This guide shares how to implement it in your business.
What is retail digital transformation?
Digital transformation in retail means using modern technology to improve every part of your business. It's about making shopping easier for customers while making your operations smarter and more efficient.
Some examples of digital transformation include:
- Creating an ecommerce store
- Developing a mobile shopping app
- Using customer data to personalize experiences
- Providing seamless integration between online and offline channels
- Implementing systems for real-time inventory management
A retail digital transformation means reimagining your whole business model from a digital perspective. You can also use tech to streamline your operations and focus on what really matters, keeping your customers happy and your business thriving.
What’s influencing the move to digital transformation?
Digital transformation in the retail industry is not really a trend; it’s a necessity to compete in today’s market. Global ecommerce sales are expected to total $6.86 trillion in 2025, with mobile ecommerce sales accounting for over $2.5 trillion. This number is expected to continue growing over the next few years.
Retailers are increasingly turning to big data, AI, and the Internet of Things (IoT) to gain insights and enhance customer experiences. According to one Gartner survey, more than 8 in 10 CIOs plan to invest in cybersecurity, GenAI, business intelligence and data analytics, and integration technologies like APIs this year. Retail industry AI spending is forecasted to grow from $5 billion in 2022 to more than $31 billion by 2028, according to The World Economic Forum.
Challenges of digital transformation
Retailers have a lot to gain from digital transformation, but it doesn’t come without its hurdles.
Change is hard
Organizations tend to struggle with successful digital transformation due to deeply ingrained traditional practices. Many retailers have operated using the same business models for decades, which makes it hard to pivot to a digital-first strategy.
In fact, 53% of professionals believe that digital transformation is difficult because of insufficient change enablement capabilities. Integrating new technologies with legacy systems, retraining staff, and changing organizational culture is often met with resistance.
Budget constraints
A complete digital transformation requires a lot of money to cover new technology, staff training, and disruptions to regular operations, so small to medium-sized businesses often struggle.
Large companies spend an average of $17.7 billion on a complete digital transformation, according to a report from Deloitte. The same report found that as many as 57% of professionals cite "insufficient funding for digital/technology investments” to be a major hurdle.
Adoption challenges
Many factors can make digital transformation difficult, including employee resistance, lack of digital literacy, and the complexity of a new system. More than half of organizations feel they lack the internal expertise required for a successful digital transformation. It can be tough for retailers to get staff to adopt new technologies and processes, from mobile POS systems to retail business intelligence dashboards.
Benefits of digital transformation
The digital transformation certainly has its challenges, but retailers who navigate it successfully can reap the rewards.
Better customer experiences
Digital transformation helps you provide unique experiences across in-person and online channels. For example, you can recommend products based on a shopper’s browsing history and past purchases, while also allowing them to virtually try on shoes using augmented reality (AR).
Belstaff’s shift to a unified commerce approach with Shopify shows how digital transformation can enhance customer experience in retail. By unifying its online and in-store systems, Belstaff achieved a consistent omnichannel experience for both new and loyal customers, while gaining a single view of customer data that enables more targeted and effective marketing strategies.
Since moving to Shopify, Belstaff has seen:
- A drastic improvement in speed to market
- A drastic decrease in total cost of ownership (TCO)
- An increase in conversion
“IT transformation is really about data centralisation and gaining a one platform view,” explains Belstaff’s director of technology Navid Jilow. “Whether we have a customer shopping in-store or purchasing online, we now have that single view. We’re closing gaps in our data—enabling us to keep improving the customer experience.”
Improved operational efficiency
Through digital transformation, you can automate processes, streamline workflows, and get real-time data insights to make better decisions. For example, with a digital supply chain, retailers can track inventory in real-time, anticipate demand better, and optimize stock levels across multiple locations.
Higher revenue and international market share
Digital transformation can help retailers expand their reach globally and make more money. With Shopify’s Managed Markets, for example, retailers can easily enter international markets by handling currency conversion, language translation, and local payment methods automatically.
WOLFpak, an athletic backpack company, expanded internationally using Shopify Plus and Managed Markets, resulting in a 433% increase in cross-border revenue and a 30% rise in global conversions.
Through this digital transformation, WOLFpak overcame challenges like operational complexity and unexpected fees for international customers, which helped improve buyer experiences, boost checkout conversion rates, and grow international sales.
Pillars of retail digital transformation
Unified data infrastructure
While many retailers have achieved omnichannel capabilities by connecting their various systems, modern retail demands more. A unified commerce approach goes beyond just connecting channels—it provides a single, native platform where all retail operations naturally work together.
According to research from a leading independent consulting firm, while omnichannel unifies front-end customer experiences, back-end infrastructure often remains fragmented. True unified commerce, as exemplified by Shopify's architecture, eliminates this fragmentation by providing:
- Natively unified ecommerce and POS solutions
- A single source of truth for all retail data
- Seamless operations across all channels without middleware
- Reduced technical complexity and maintenance costs
This architectural advantage translates to significant business benefits, with retailers seeing up to 22% lower total cost of ownership compared to traditional retail solutions.
Omnichannel customer experience
Digital transformation requires a shift in how retailers operate across various touchpoints. Order fulfillment, pricing and promos, returns, and customer data all become interconnected through an ecommerce platform, instead of siloed across different tools.
Shopify natively builds POS and ecommerce on the same platform with one shared data model—unlike competitors that often rely on middleware or integrations between these separate platforms
The platform provides a unified back office where you can manage all your order, inventory, and customer data across multiple sales channels in one place. And if you sell both to other businesses and directly to consumers, Shopify Plus helps you manage both B2B and DTC sales.
Supply chain and fulfillment
Today’s consumers expect fast, flexible, and transparent fulfillment options. A digital-first supply chain strategy ensures efficiency and agility by unifying inventory and order management across all channels.
- Universal inventory visibility allows retailers to track stock levels across warehouses, physical stores, and distribution centers in real time.
- Cross-channel fulfillment options like ship-from-store, BOPIS, and curbside pickup create seamless customer experiences.
- Integrated returns management simplifies the return process by enabling customers to return items across different sales channels.
- Real-time order tracking improves transparency, keeping customers informed about order status at every stage.
Digital payments
The evolution of digital payments is transforming how customers shop and pay. A modern payment infrastructure enables secure, frictionless transactions while accommodating new consumer preferences.
Retailers can also create a positive shopping experience by accepting multiple payment methods, including mobile wallets and buy now, pay later (BNPL) options through Shop Pay Installments, to give customers more flexibility at checkout.
Secure transaction processing with encryption and fraud detection can also help build trust and facilitate compliance with global payment regulations.
Customer loyalty programs and digital rewards tied to payment data also help increase customer retention by offering personalized incentives. This can reduce cart abandonment, increase conversion rates, and build stronger customer relationships.
Organizational change
Successful digital transformation isn’t just about technology—it requires a cultural shift within the organization. Retailers must invest in digital capabilities to support their teams and equip employees with the tools and skills they need to navigate the new retail landscape.
Building digital capabilities involves upskilling teams in data analytics, automation, and AI-driven decision-making. Employee training programs help frontline staff adapt to new tools and technologies, improving customer service, and operational efficiency.
Retail digital transformation examples
POS systems
A POS system bridges the gap between offline and online retail operations. It helps retailers manage in-person sales and connect them with online operations. For example, you can:
- Manage inventory across multiple locations from one dashboard
- Set low stock alerts
- Create reorder recommendations
- Automatically adjust stock after each sale.
Shopify POS is a complete retail solution that lets you sell products in person—whether in stores, markets, or pop-up shops. Because it's built on the same platform as your online store, you get accurate inventory and complete customer information everywhere you sell.
And because POS is natively built on the same platform that powers ecommerce, you get one centralized business “brain” possible of syncing retail hardware to support both physical and online sales operations.
Oz Hair & Beauty, an Australian beauty retailer, saw explosive growth after adopting Shopify POS. Revenue increased 484% year over year, and the company rapidly expanded to seven physical retail stores. The switch enabled seamless omnichannel operations, driving in-store sales from 5% to 20% of total sales and allowing for faster, more efficient business management.
Headless ecommerce
Headless ecommerce is one of the fastest rising trends in retail. It can give brands the creative freedom to build bespoke customer experiences with the technologies they prefer.
Shopify offers headless commerce capabilities through its Storefront API, which allows developers to create custom front-end experiences while maintaining the power of Shopify's backend. This approach helps to:
- Create highly customized shopping experiences on any device
- Design unique digital storefronts with complete creative freedom
- Achieve faster load times and better performance
- Build specialized features for your unique business needs
PittaRosso, an Italian footwear retailer, saw significant online growth after migrating to Shopify Plus and implementing a headless commerce architecture. The company saw:
- A 27% increase in Black Friday Cyber Monday revenue
- An 11% year-over-year increase in ecommerce conversion rate
- A 37% year-over-year growth in online net profit
PittaRosso overcame previous constraints in website customization and performance, allowing it to run faster, improve SEO, and improve its multichannel retail strategy.
AR/VR
The augmented reality (AR) and virtual reality (VR) market is projected to reach $12.6 billion in 2025. AR apps help retailers engage customers with immersive experiences like viewing products in 3D and visualizing items in their own spaces before buying.
Polish furniture maker Oakywood saw big growth after implementing AR technology. Within just a few months, the company saw 250% growth in sales, and a big increase in average order value across multiple countries (458% in Germany, 232% in Switzerland, and 84% in the UK).
Using Shopify AR and Precismo’s 3D scanning technology, Oakywood transformed its custom order process, letting customers visualize products in their homes and doubling custom orders from almost none to up to 300 a month.
Mobile apps
Mobile apps are another way retailers are tapping into digital transformation. A big part of ecommerce growth worldwide comes from mobile shopping.
One Statista report found that, by 2028, mobile ecommerce sales are expected to account for 63% of total commerce sales. That’s why retailers like Fashion Nova have already made the move. The Fashion Nova mobile app lets customers order and pay for items, and shop exclusive deals, while giving the retailer a direct line of contact with its customers through push notifications.
Omnichannel integration
Digital transformation is changing how retailers serve customers across all touchpoints. Modern retail demands more than just connected systems—it requires a foundation where order fulfillment, pricing, promotions, returns, and customer data naturally work together.
Shopify provides this foundation, giving you one place to manage your entire retail business. This means you can focus on serving customers better instead of managing multiple systems.
Geofencing
Geofencing technology allows retailers to set up virtual perimeters around specific locations, triggering real-time interactions with customers when they enter or leave these areas. This strategy is a powerful way to drive foot traffic, enhance in-store engagement, and create seamless omnichannel experiences.
For example, retailers can use geofencing to:
- Send targeted promotions to nearby customers via push notifications
- Deliver personalized experiences based on location and customer history
- Offer location-based loyalty rewards to encourage repeat visits
- Optimize local inventory based on regional customer behavior
Cost optimization
Retail digital transformation isn’t just about improving the customer experience—it’s also about making operations more efficient and cost-effective. Modern retail platforms combine AI-driven analytics, efficient inventory management, and cloud-based POS capabilities to help retailers optimize costs across their business. This unified approach eliminates the complexity and expense of managing multiple systems.
Key ways retailers can reduce costs through digital transformation include:
- Automated inventory management to prevent overstocking or stockouts
- AI-powered demand forecasting to make more accurate purchasing decisions
- Optimized staffing solutions to schedule employees based on sales trends
- Cloud-based infrastructure to reduce IT and maintenance costs
With Shopify’s data-driven automation, retailers can optimize costs while scaling efficiently. Merchants using Shopify POS, for example, can automatically track stock levels across multiple locations and automate reorders, so they never tie up cash in excess inventory.
Personalized shopping experiences
Personalization is at the core of modern retail. Customers expect tailored experiences that align with their shopping habits, preferences, and past interactions. Digital transformation enables retailers to collect and leverage data across online and offline channels to deliver hyper-personalized shopping experiences.
With Shopify’s unified customer profiles, retailers can:
- Offer product recommendations based on purchase history
- Create dynamic pricing and promotions for specific customer segments
- Provide seamless shopping experiences across devices and channels
- Engage customers with personalized email, SMS, and push notifications
Home goods brand Parachute, for example, leveraged digital technology to unify the checkout process and create customer profiles so it could personalize interactions and offers for those customers. Using Shopify to unify its commerce channels, it grew retail AOV by 12%. Parachute also saw its buy online, pickup in-store (BOPIS) revenue increase 5x in four years.
“The data we have access to by having everything in a unified place through Shopify has allowed us to truly understand our customers and tailor our communications to meet their needs," says founder Ariel Kaye. "This level of personalization is what sets us apart in a crowded market."
Key technologies reshaping digital transformation in retail
Big data
Data is the foundation of modern retail, driving personalized experiences, operational efficiency, and strategic decision-making. “Big data” specifically refers to large, complex datasets you can’t analyze with traditional methods like spreadsheets and graphs. That’s where digital transformation comes in.
With a unified commerce approach, retailers can consolidate customer interactions, sales, and inventory data across all channels. Advanced analytics uncover valuable insights—such as shopping patterns, demand forecasts, and customer lifetime value—helping businesses optimize pricing, promotions, and inventory management.
True, effective unified commerce is only possible when ecommerce and POS exist on the same platform. Shopify is the only technology solution that does this, empowering retailers of all sizes with big data tools to support growth.
Internet of Things
The Internet of Things (IoT) is a network of electronics connected to each other and apps through the internet or an intranet.
In retail, smart sensors and connected devices enable real-time inventory tracking, automated restocking, and in-store analytics. RFID tags improve supply chain transparency, while IoT-powered beacons enhance in-store navigation and personalized promotions. Retailers can also use IoT to streamline operations, from smart shelves that detect low stock levels to AI-powered checkout systems that reduce friction.
Artificial intelligence
AI is impacting virtually every industry—more than many realize. In fact, McKinsey found that three times more employees use AI than employers think. More than 9 in 10 companies plan to invest in AI in the coming years, yet only 1% believe their investments have reached maturity. Regardless, AI is a major technology trend in digital transformation.
AI in retail can automate processes and deliver personalized shopping experiences. For example:
- Machine learning algorithms analyze huge amounts of data to predict customer preferences, optimize pricing strategies, and generate product recommendations.
- AI-powered chatbots and virtual assistants provide instant customer support, while other tools support fraud detection and loss prevention.
- In fulfillment, AI-driven demand forecasting helps retailers allocate inventory efficiently, reducing stockouts and excess inventory.
Start your digital transformation today with Shopify
Digital transformation starts with choosing the right foundation for your retail business. Leading brands are building their future on platforms where everything naturally works together—serving customers seamlessly, accessing complete data instantly, and adding new capabilities as they grow.
See how Shopify helps retailers deliver better shopping experiences while reducing complexity.
Retail Digital Transformation FAQ
What are the 4 main areas of digital transformation?
The four main areas of digital transformation in retail are:
- Customer experience: Enhancing the shopping journey through personalization, omnichannel experiences, and seamless interactions across digital and physical touchpoints.
- Operations and processes: Streamlining workflows, automating tasks, and improving efficiency through AI, data analytics, and cloud-based tools.
- Business models: Adapting to new revenue streams, such as direct-to-consumer (DTC) models, subscriptions, and marketplace integrations.
- Technology and innovation: Implementing advanced technologies like AI-driven recommendations, IoT-enabled inventory tracking, and AR/VR shopping experiences to stay competitive.
What is the digital transformation of the retail industry?
Digital transformation in the retail industry means reimagining business operations and customer engagement using digital technology. It involves adopting new tech, reshaping the customer journey from discovery to support, and evolving company culture and business models to thrive in the digital economy.
What are the digital technologies in retail?
Digital technologies in retail include ecommerce websites, mobile apps, AI for product recommendations and chatbots, AR for virtual try-ons, IoT devices for inventory tracking, blockchain for supply chain transparency, and big data analytics for deeper insights into customer behavior.
How does digitalization affect retail?
Digitalization in retail blurs the line between online and offline shopping, creating "phygital" experiences. It enables features like BOPIS (Buy Online, Pick Up In-Store), real-time inventory visibility, and personalized shopping based on customer data—resulting in higher expectations for seamless, tailored customer journeys.
