Technology

Why ‘tech anxiety’ is keeping retailers up at night

‘Tech anxiety’ is growing, and with the rapid pace of advancements in technology, retailers are going to have to change how they operate.

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December 12, 2023 by Nate Ley — Senior Director and Retail Portfolio Lead, Kin + Carta

It is a huge understatement to say the pace of change in technology is moving fast. It's actually traveling at breakneck speed — and so, perhaps unsurprisingly, a lot of senior business leaders are concerned that it's going to be them and their teams on the line.

That concern is fair and justified. When considered differently though, it also represents an opportunity. This 'tech anxiety' is growing, and with the rapid pace of advancements in technology, businesses, especially those in retail, are going to have to change how they operate.

Kin + Carta recently examined these tech concerns and opportunities in a research study titled "2024 Leadership Priorities in Tech: Leading through tech anxiety in retail and distribution." It was part of our industry-spanning 2024 Leadership Priorities in Tech report, which showcased priorities and concerns from 800 senior business leaders in the U.S. and U.K.

The sample was made up of c-suite executives and senior decision makers in £800m+ turnove /$1bn+ revenue organizations — and it found that, overall, 94% of leaders reported some level of tech anxiety among senior leadership in their organizations.

It also highlighted that certain areas of technology were particularly worrying for retailers — the disruptive developments that will fundamentally change how they operate.

Not yet Skynet?

According to the research, a third (32%) of retail leaders admitted to having tech anxiety over the impact AI and machine learning are having on the sector. Of this number, almost half (48%) attributed their anxiety to the technology moving too fast.

This is not surprising, given the amount of column inches devoted to AI of late and the fact that 22 percent of employees say they are regularly using generative AI in their own work.

While developments in AI and machine learning pose a range of opportunities for retail businesses by way of automating services, predicting demand and enhancing customer experience, they can also pose a significant threat.

Generative AI projects are one key element of the anxiety. Leaders cited concerns around job displacement, data privacy and algorithm bias, as well as the potential introduction of errors in decision-making.

And yet at the same time, this is where the money is going. The study also revealed AI and machine learning is the biggest investment priority for retail and distribution: 17% of retail businesses are investing more in this than anything else. So despite it creating a great fear, acceptance of this direction will also create great capability.

Understanding digital transformation and data

More than three-quarters (78%) of the retail leaders who were surveyed identified investment in digital transformation as either critical or necessary for business success. Of these, 89% believed that investment in digital transformation is necessary within the next 12 months.

As for what that means in practice:

• 61% of leaders in retail used digital transformation to describe customer experience improvements — suggesting that many consider the customer to be at the heart of retail businesses' digital transformation strategies. The key areas of focus for many of those surveyed were tailored marketing, personalized experiences, and the use of data for customer retention.
• Nearly half of retail leaders (42%) identified data foundations and analytics as key to digital transformation, identifying the value of leveraging data insights and analytics to inform decision-making in everything from streamlining supply chains to optimizing sales.
• Those surveyed identified cloud computing as a major focus area, with 48% of retail and distribution leaders relating digital transformation to cloud modernization. Retail opportunities are increasingly shifting online, which means leaders are investing in migrating systems and applications to the cloud while ensuring seamless integration, data integrity, and minimizing disruption.
• 43% of retail businesses said digital transformation involves the automation, upgrading and streamlining of internal processes.

It all highlights the need for investment in the right areas if retailers are going to adapt to the new realities of the digital age. Data is going to be core to this effort, as only 30% of leaders surveyed currently fully trust their data, and a significant 19% trust it either 'somewhat' or 'little.'

Retail leaders raised concerns around disparities in definition and methodologies, multiple siloed systems, and the difficulties in connecting data across different channels — and yet data will invariably underpin any investment in AI, CRM systems or other digital transformation strategies.

After all, there is more to data architecture than offering an accurate picture of the organization. Enhancing data foundations also prepares a business for the future, addresses key sources of anxiety, and helps to realize the potential of emergent technologies.

Put your money where your worry is

The fact that many retailers are directing investment towards the areas that are causing them the most tech anxiety is a positive sign. They recognize the growth mindset required for existing comfortably in these new changes.

There is no doubt that anxiety represents an opportunity for this learning and growth — even if, as noted in the research, economic uncertainty has impacted most retail and distribution businesses' short-term (74%) and long-term (75%) plans.

In fact, nearly two-thirds of retail businesses (64%) plan to spend more on digital transformation initiatives this year than in previous years.

That matters because tech is an enabler, not just for better processes but for a better customer experience both in-store and online. If retailers can approach new technology with a focus on their customers and a willingness to learn through experiments and mistakes, then they will always be more successful than those that just play it safe.

About Nate Ley

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