Emma Amparo Pérez Lladró - TFG

Digitalization and Disruptive Technologies in Retail industry: A Focus on the Spanish Market

1
Emma Amparo Pérez Lladró
Jordi Miró Albero
Márqueting
2015/2016
26/06/2016


2


3
University of Valencia
Faculty of Economics
Digitalization and Disruptive
Technologies in Retail Industry: A
Focus on the Spanish Market
By Emma Amparo Pérez Lladró
Degree in Business Management and Administration (GADE)
Group ARA
empella@alumni.uv.es
Directed by Jordi Miró Albero
Department of Marketing and Market Research
Jorge.miro@uv.es
June 2016


4
ABSTRACT
This thesis reports on the effects of the digital revolution on the retail sector
in Spain as applied to how retailers are coping with the new technological
changes that are coming mainly from customers, who are becoming smarter
and more empowered than ever. Through this thesis, new digital channels and
the evolution of traditional formats will be analysed in order to understand how
the process is developing. An analysis of the results from a panel of experts will
also be carried out to obtain a global overview of the effects of the digital
revolution on the future of the retail industry.
Key words: Digitization, Spain, Retail, Technologies, Consumers, Shopping


5
LIST OF ACRONYMS
B2C: Business – to – Consumer
BRICS: Brazil, Russia, India, China and South Africa
CIS: Centro de Investigaciones Sociológicas
CNMC: Comisión Nacional de los Mercados y la Competencia
CRM: Customer Relationship Management
ECB: European Central Bank
EIU: Economic Intelligence Unit
ERP: Enterprise Resource Planning
EU-5: European Union Five (France, Germany, Italy, Spain, United Kingdom)
EU-28: European Union Member Countries
GDP: Gross National Product
ICEMD: Instituto de la Economía Digital – ESIC
IoT: Internet of Things
INE: Instituto Nacional de Estadística
KPCB: Kleiner Perkins Caufield Byers
NFC: Near Field Communications
OECD: Organisation for Economic Co-Operation and Development
POS: Point of Sale
PwC: Price Waterhouse Coopers
SBU: Strategic Business Unit
SKU: Stock Keeping Unit
SME: Small and medium-sized enterprises


6
TABLE OF CONTENTS
ABSTRACT .........................................................................................................4
LIST OF ACRONYMS .........................................................................................5
EXECUTIVE SUMMARY.....................................................................................8
1. INTRODUCTION..........................................................................................9
1.1 Digitalization in context .........................................................................9
1.2 The retail sector: an overview .............................................................12
1.3 Disruptive technologies within retail business models ........................16
2. RETAILING IN SPAIN AND ITS DIGITIZATION PROCESS .....................22
2.1 Economic and retail trends .................................................................22
2.2 Digitalization in context – The evolution within the Spanish market ...26
2.3 Digital transformation of Spain’s largest retailers................................30
3. METHODOLOGY.......................................................................................33
3.1 Panel of experts and questionnaire development...............................34
3.2 Other research methods .....................................................................35
4. DIGITALIZATION AND ITS EVOLUTION: A PANEL STUDY....................36
4.1 Structure of the study..........................................................................36
4.2 Key findings and results......................................................................37
4.3 Classification criteria ...........................................................................50
5. CONCLUSIONS.........................................................................................52
6. BIBLIOGRAPHY ........................................................................................54
7. APPENDIX .................................................................................................72
7.1 Degree evaluation...............................................................................72
7.2 Online survey ......................................................................................73
7.3 Curriculum vitae ..................................................................................80


7
FIGURES
Figure 1: Evolution of content discovery from 1965 until 2015..........................11
Figure 2: Forecasts for global retail sales growth from 2008 to 2018 (in %) .....13
Figure 3: Patterns of online shopping................................................................15
Figure 4: Porter’s (1979) five forces applied to digitalization in retail ................17
Figure 5: Technological and digital trends in retailing .......................................19
Figure 6: Impact of digital technologies on retailing ..........................................27
Figure 7: Digitization of internal operations by Spanish enterprises .................29
Figure 8: Strategic diagnosis of Spain's largest retailers in E-Commerce and
Mobile markets ..................................................................................................31
Figure 9: Methodology used for the expert panel..............................................35
GRAPHS
Graph 1: 2.8 billion Internet users worldwide distributed by continents- 2014 ..10
Graph 2: Consumer Confidence, Present Situation and Expectations indexes in
Spain (January 2015 - April 2016).....................................................................23
Graph 3: Spanish Business Confidence index per quarters (2015 – 2016) ......24
Graph 4: Retail trade volume in current prices - general without service stations,
annual variation rate, seasonally adjusted (2010 = 100) 2008 – 2016.............25
Graph 5: E-Commerce and online shopping in Spain per quarters (2012 - 2015)
...........................................................................................................................28


8
EXECUTIVE SUMMARY
Technology is evolving at an increasingly faster rate, and the development of
new communication and technology information systems has enabled retailers
to use affordable and efficient communication with consumers. Globalisation
has been tagged as more of an economic phenomenon, and retailers all over
the world have had to adopt a more global approach in the development of
competitive advantages. The adoption of digital technologies in everyday life,
alongside the recent economic crisis, has had a profound impact on the way we
consume goods and services, and the rise of virtual consumption has also been
notable. When talking about trends in retail, executives in this industry are being
faced with a broad array of new digital opportunities, and they must be savvy at
using and targeting them appropriately. However, most find difficulties along the
way when devising the right cross-channel experiences. New digital
technologies such as smartphones and touchscreens, location-based
applications, radio frequency identification technologies, customized promotions
and information structure are all part of the process of the modernization of
retail formats.
When analysing the main trends in the retail industry, they can be broken
down into two components: external forces affecting operations from the
outside, and internal. The external forces are normally associated with changing
the demographic structure, while on the internal side there can be found
aspects of the likes of internationalisation, development of different store
concepts, vertical integration and technology development (Mesic, 2014).
The aim of this study is to analyse how the role of technology is taking over a
larger proportion of operations within the retail sector in Spain. The study
describes how retailers will have to overcome different threats and challenges
while serving as a guideline towards the integration of the consumer experience
in both virtual and physical environments.


9
1. INTRODUCTION
1.1Digitalization in context
Markets worldwide are becoming more connected and at the same time
increasingly competitive. Technology has provided new ways for companies to
cut down on costs and human efforts. With the same amount of resources, they
have become more productive thanks to new technological advancements, and
the proliferation of new devices such as tablets and smartphones that have
integrated into people’s day-to-day life has truly changed how business is
conducted. As a definition, digitalization1
refers to the use of new technologies
to change a business model and achieve higher revenues and value-producing
opportunities (Gartner, 2016). This concept has made many changes in today’s
contemporary society and poses a unique opportunity to shape the future for
most industries.
The Internet’s entry and the growth in the use of computers has resulted in
improved communication systems and, in a wide range of communities,
providing information of all kinds and entertainment, but also in new business
models and online companies that should be taken under consideration for
further analysis. The consumer theory of modern mainstream microeconomics
suggests that consumers have a set of preferences that define which goods
and services and in what quantities they desire to buy given their particular
budget constraints. These preferences exist prior to their potential satisfaction,
which are translated into “human needs”. According to Kotler (2003), “needs are
the basic human requirements. People need food, air, water, clothing and
shelter to survive”. When considering digitalization of consumption, the main
question mark is whether these new technologies are going to assist or hinder
the fulfilment of consumer choice.

1
Although digitalization refers to the adoption and integration of all types of new technologies, in this
dissertation this term will make reference to digital technologies applied to retail sector.


10
Graph 1: 2.8 billion Internet users worldwide distributed by continents-
20142
Source: Internet Trends 2015 – Code Conference by KPBC
E-commerce is strongly continuing its growth globally, and has also forced
businesses operating online to strengthen their distribution channels in order to
continue meeting the demands of consumers, although some argue that this
business side is only another extension of direct marketing. According to
Christensen and Tedlow (2000), the Internet only represented a fourth driver in
disruptive technologies in retail, but, throughout the last decade, it has actually
changed the way consumers shop and the way sellers do business with both
their suppliers and consumers by transcending boundaries in time and space.
What was once considered cutting-edge, is now imperative.
Due to obvious factors of convenience, consumers have shifted their
shopping habits to the far more easily accessible and efficient online market.
Recognizing the demand of customers, many companies realised that they
needed more data apart from what they were generating internally. They saw
the need for obtaining external data from their customers in order to better
understand fluctuations in sales and modify product offers more precisely. As

2
39% of world population penetration.


11
stated by professor Walter Brenner from the University of St. Gallen in
Switzerland, “the aggressive use of data is transforming business models,
facilitating new products and services, creating new processes, generating
greater utility, and ushering in a new culture of management”. As a result, many
organisations have put in place different mechanisms to transform information
into digital values and other collection-development strategies but also to
provide greater accessibility to all this information. Still, there is a growing need
for knowledge about this process and its effects as most retailers are failing to
identify and categorise all-encompassing transformations of digitalization. The
growth of information technology together with new devices, contents and social
networks have enabled retailers to develop new forms of retailing, mainly in the
shape of online sales (Mesic, 2014).
Figure 1: Evolution of content discovery from 1965 until 2015
Source: Internet Trends 2015 – Code Conference by KPCB
3
Leaders in most industries the world over have recognised the growing
importance of the role of digital technology, from being a driver for costs and
marginal efficiency to enabling organisations to bring in innovation and
disruption to their processes (World Economic Forum, 2016), increasing
productivity levels by re-aligning existing technologies and integrating new

3
Graph extracted from: http://www.kpcb.com/internet-trends


12
ones, while improving end-to-end performance. However, some have started to
raise serious questions about the impact of digital technologies as a whole.
There are a number of issues that need to be addressed, such as rapidly
changing customer expectations, keeping up with cultural and technological
transformations and facing outdated regulations which impede unlocking the
benefits digitalization offers, mainly in terms of consumer privacy and data
concerns. For most traditional companies, these innovative processes do not
make sense for being burdened with inflexible legacies, and for the time being,
few early adopters have identified the opportunities arising from the latest
developments aimed to value creating and capture, without omitting the risks
these technologies come with.
1.2The retail sector: an overview
The concept of modern retailing had its start at the beginning of the twentieth
century, which comprised of small neighbourhood stores where grocery
shoppers knew their customers and engaged with them more affectively. The
model of these shops evolved throughout the last century, and between the
1950’s and 1960’s the first chain stores started to appear, mainly in the United
States with Walmart and K-mart. In Europe we see a similar pattern with the
appearance of hypermarkets and department stores such as Carrefour in
France, El Corte Inglés for Spain and Penneys (Primark) in Ireland. The
principal focus strategy of these big retailers was offering products at
competitive prices to achieve economies of scale, leaving aside strategies
towards creating personalised customer experiences. This retail trend stretched
out until the mid-1990’s with the surge of the Internet and e-commerce. In 1994,
Jeff Bezos founded Cadabra, changing its name to Amazon.com a year later.
Bezos’ idea was selling bulky items such as books but his vision was broader
and he wanted his website to become “an everything store” as he once stated.
At the moment, Amazon is one of the world’s most successful online retailers
with a market value of $79 billion and Bezos’ idea has indeed changed the way
consumers buy online. Following Ishak Mesic’s paper on Global Trends in
Retail Trade (2014), online retailing via the Internet is significantly more intense


13
in the US and Europe on a global level, knowing that the global share of online
stores is at 4%.
The retail industry at a global scale has become extremely competitive in
recent years and many retailers find themselves struggling to survive and to
catch up with rapidly changing consumer needs and shopping habits. The
recent recession, online retailing and the growth of big retailers pushing smaller
ones out of the market have also been factors that have put the whole industry
under pressure. The forecasts shown below indicate a slow recovering in sales
in the next two years and are expected to grow sustainably by 3.4% in 2018. In
2009, sales tumbled to the lowest levels in the last eight years, when
consumers worldwide reacted to the financial crisis. A year later, forecasts
showed a strong recovery in sales but slumped again between 2011 and 2012.
Figure 2: Forecasts for global retail sales growth from 2008 to 2018 (in %)
Source: Statistica. Own elaboration
The reality is that today consumers have unrestricted access to the Internet
and use PC’s, smartphones and tablets to search for information and buy
through these devices. They have become more discerning when buying and
are looking for something that goes beyond what they have already
experienced. Price still remains as the main factor in the determination of the


14
purchase, but the shopping process is evolving. The concept of omnichannel
retailing offers features and opportunities for retailers to continue growing and
offer different shopping experiences such as customised loyalty programs and
discounts, special promotions and engaging strategies. For those retailers who
operate both physically and online, they will have to converge both channels in
order to provide frictionless experiences together with a consistent brand
experience, and, at the same time, create compelling strategies to attract a
larger number of customers and encourage them to shop through their online
platforms. Following EIU’s global consumer survey, 47% of respondents stated
that using different mobile devices to interact with retailers increases their brand
loyalty with those stores.
Throughout the last decade, many traditional retailers have turned their
businesses into new digital enabled organisations to remain competitive by
adopting multichannel experiences, dividing the organisation into two sides; the
one that manages new trends and drives innovative processes forward, and the
other embracing traditional sales channels, delaying the multichannel transition
(PwC, 2013). This example shows the existing tendency in this industry to avoid
taking on the risk of implementing new technologies earlier, be it because of the
complexity of the business or for lack of both economic and human resources,
while facing customer concerns largely related with security and privacy issues.
Considering the retail sector as a whole, up to the present time the majority of
consumers do not differentiate between online and offline experiences, and
90%4
of retail transactions still occur in-store, but according to PwC’s latest
report “Total Retail Survey 2016”, 78% of global shoppers buy products based
on recommendations they find on social media platforms.

4
Data extracted from “The future of Retail; 4 Big Trends Bringing The Virtual Experience into Reality”.
http://www.visualistan.com/2015/01/the-future-of-retail-infographic.html


15
Figure 3: Patterns of online shopping
Source: Adapted from “A Dissertation Report on Consumer’s Perception on Online Shopping” by
Radhe Jha (2014). Own elaboration
If there is something that has prevailed in retail, it is change. Market leaders
are continuously pushing their teams forward to launch new designs, improved
services, and new layouts for their stores and brands and the majority has even
had to improve their supply chains in order to increase product availability and
automation. But what this industry really lacks is big innovations through new
technological developments, although it is true that the retail sector has been
one of the first industries to be impacted by new digital technologies
(Capgemini, 2011). Most retail businesses who have applied digital
transformations can be defined as early adopters of new technologies rather
than first movers. They adapt new technological processes when the
technology under consideration has been tested and approved for
implementation by others, although most retailers are notorious for being late
adopters of technology. Some scholars have emphasised the importance of
adapting the business to the new online era and have recognised the Internet to
not only be a great tool for cost-effectiveness, competitive pricing and effective
sales promotions but also for value creation and customer satisfaction.


16
1.3Disruptive technologies within retail business models
In recent years, many retailers have availed technology for internal purposes
as a means to gain time management and control over direct manufacturing,
transactions and logistics. But now the transformation comes from the customer
itself, armed with new digital technologies, who represents younger generations
that are growing up with digitalization and millennials who browse the net before
going to a store. IT infrastructure no longer has an exclusively internal corporate
role, but has transitioned to embedding IT services as additional extensions to
sellable products and services (Collin, 2015). Digitalization has enabled retailers
and manufacturers to sell directly to consumers thanks to having greater
visibility on the Internet, together with a generally available logistics force and
liberated flows of goods across borders. All these elements have translated into
greater efficiency levels and the elimination of intermediaries and costs along
the process, thus streamlining the value chain.
Retailers are starting to embrace new technologies and philosophies to
attract and retain loyal customers. While there are few truly successful online
stores and platforms, and few have started the transition towards applying
digital elements physically, certainly those who adopt their processes and offer
innovative solutions to both their suppliers and clients will move ahead of the
competition. This shift towards digitalization is not merely complementary, but
necessary to remain competitive. Along the process of adopting new digital
technologies in retail, some headwinds can be mentioned to explain why it is
developing at such a slow pace. Among the limitations are the coordination of
online and offline operations, failing to keep up with customers’ online and
offline activities as well as to optimize the use of in-store and online promotions,
and also privacy concerns. All these obstacles can be overcome by adopting a
multichannel strategy, well-designed systems adopted to the firms’ necessities
that allow managers to collect and analyse the information they need at the
right time, creating core strategies that embrace digitalization, shifting resources
(both economic and human) and developing digital capabilities and processes
to deliver new experiences.


17
Figure 4: Porter’s (1979) five forces applied to digitalization in retail
Source: Adapted from Raimo Maenpaa, Janne J. Korhonen, “Digitalization in Retail: The Impact on
Competition”
5
(2015). Own elaboration
Following Porter’s 5 Forces, since globalisation has become increasingly
prominent from the beginning of the 21st
century, competitiveness and price
warfare in retail has intensified. Suppliers can access final consumers directly
without including intermediaries along the selling process, thus bypassing the
value chain and reducing final costs. As prices are lower, customers can benefit
from a higher ability to bargain with retailers for better price or added value
products, having exceptional power and choice as a result. The travel industry
is a great example. Few people could afford to travel by train when they first
appeared for leisure, but now brick-and-mortar travel agencies have been
surpassed by customers who now browse online to book their holidays with the
best packages they can find, making reservations directly from hotels and
airlines at cheaper prices. With the proliferation of “do-it-yourself” online

5
For more information, visit:
https://aaltodoc.aalto.fi/bitstream/handle/123456789/16540/isbn9789526062433.pdf?sequence=1#page=9
2


18
platforms for small e-Commerce businesses, these platforms have gained
digital attention and are competing together with larger retailers. They have
been smart at identifying the new habits of digital consumers and are selling
unique, distinctive and in some cases customizable products and services.
Abiebrown6
has given another scope to the stationery industry. This Spanish
online company sells hand-made, highly personalised agendas, planners and
other stationary products with a modern and sophisticated touch. The client can
choose among a wide array of colours, fonts and hard covers and can include a
personal message on the first page. The company also sells other
complementary products like mugs, clips and pens. Through the use of different
social platforms of the likes of Facebook and Instagram, the company has been
able to gain a large customer base.
Replacement is closely linked to the term digitalization. Consumers’ rising
concerns over environmental issues and economic awareness have given way
to servitization7
. Examples of substitution in retail can be found in companies
like Netflix, Amazon’s Kindle Unlimited and Spotify, which have led to a new
streaming generation and the end of physical ownership. They provide instant
access, convenience and portability in one or even multiple devices, and
transactions occur directly between the client and the service provider. The
industry is continuing to make efforts in order to meet demands from mobile-
enabled consumers, but the fact is that some retailers are struggling to set up a
true omnichannel strategy.
All these elements mentioned above boil down to understanding digitalization
as an essential feature to attain efficiency and protect any organisation against
increasing competition and rivalry. The assortment planning is shortened with
the introduction of digital solutions that avoid the costs of dual systems and also
facilitates the flows of information into the organisation. The retail industry is
known for hosting a large number of retailers that offer very similar products and
services, meaning more choices for the customer to choose from. What most

6
For more information, visit http://www.abiebrown.com/
7
Servitization refers to the process of developing capabilities to provide services and solutions as an
added value, when providing products.


19
retailers are doing now is trying to understand the disruptions that are occurring
in the industry, and then preparing their responses as a headlong adoption.
Some barriers to entry and exit are starting to disappear, including for instance
physical assets and infrastructure. Consequently, human and consumer
behaviour should be at the centre of every strategy in order to progress with the
disruptive approach.
Figure 5: Technological and digital trends in retailing
Marketing &
Communications
Sales Operations
Augmented Reality Cryptocurrencies (Bitcoin) 3D Printers & Scanners
GeoMarketing E-Commerce
Collaborative Content
Management
iGaming Platforms Mobile payments Robotics
Monitorization Social Intranet
Social CRM Supply Chain Management
Internet of Things “On Me”
Sensors Bionics
Machine-to-People (M2P) Health Monitoring
Home Automation Mobile Internet
Machine-to-Machine (M2M) Smart Devices
Drones
Wearables
Social Infrastructure Data Analytics
Retail P2P Cybersecurity Big Data
Second Screen Cloud Computing Cognitive Computing
Social Platforms
Communications (iBeacons,
4G…)
Data Mining
Social Sign On Digital Privacy Machine Learning
Real Time Processing Natural Language Processing
Predictive Analysis
Prescriptive Analytics
Source: Adapted from “Transformación Digital: Reinventando Organizaciones ante la Nueva Revolución
Industrial” by Territorio Creativo (2016). Own elaboration


20
The main focus of the digital transformation process has been closely linked
to the so-called Industry 4.0 or “Fourth Industrial Revolution”. This has to be
understood as the application of automated systems (like robots) with a focus
on production processes and service transformation through the emergence of
cyber-physical systems and the interconnection of productive units to accelerate
production and allocate resources more efficiently. Retailers are currently
employing different technologies for blending physical and virtual experiences
into one as a way to increase revenue and decrease costs. The main
improvements by retailers in recent years have largely covered areas such as
logistics, supply chain management, inventory control, customer service and
loss prevention. However, some have identified the advantages of using data
and analytics to enable targeted marketing and effective pricing strategies and
promotions, commonly known as Big Data Analysis8
. Consumers are perceived
as valuable sources of data whom retailers can mine for information, such as
shopping habits, trends, sales forecasts, and so on. Mining data has become
one of the greatest tools for retailers to better manage relationships with
existing customers, find new pathways to engage with new ones and offer
customized promotions and experiences based on past shopping habits,
transactions and interactions. These measures are also used for gauging staff
engagement, wait time and in-store dwell time to adjust sales strategy, staffing
needs and merchandising layouts. The downsides of this technique, as some
experts in this topic have been warning, are related with breaching security and
privacy rights, which are still under analysis.
Retailers have also taken notice of the advantages of adopting mobile
strategies in their operations. Mobile technology is no longer cutting-edge, but
instead has become critical for retailers to embrace the smartphone’s influence
in the buying process beyond easing payment to the point of service. Mobile
interactions and transactions generate refreshed and specific data that
organisations can use to gain insights into better product and service offerings.
Consequently, mobile transactions must be enabled to receive real-time

8
The use of high-variety, high-volume data sets to uncover shopping trends, patterns and consumer
behaviour for more rigorous decision-making processes and effective targeting.


21
responses anytime, anywhere. Adopting a mobile IT infrastructure and
supportive practices can be key in achieving financial success and competitive
advantage. Another technology that many have put into practice is iBeacons.
These small, yet powerful, devices use transmitters equipped with Bluetooth
technology to send personalized messages and notifications to customers when
they are nearby the store. Some retailers like Tesco and Aloft Hotels are still
testing this technology with the aim of increasing store sales and traffic.
In recent years the banking sector has pioneered adapting their operations to
the new technologies after facing significant speed, convenience and cost
pressures. As an example, in the US, 62% of banking customers in 2011 stated
that they preferred to use online banking9
rather than going to a branch, and
some of the largest banks in the world are leveraging their operations with the
latest technologies to offer personalised banking experiences to their
customers, such as the use of P2P lenders10
. This is evident of how consumers’
demands are rapidly changing and at the same time becoming more
technologically savvy. The digitalization of banks once posed a threat in the
sector’s security, but now it has turned an essential survival strategy. Another
example, in this case for one of Spain’s largest banking groups, BBVA, the
company’s expansion strategy in the UK will be through setting up online
platforms instead of opening physical branches. Further, the company has also
agreed to invest around $67 million11
in Atom, an end payment services
provider, to launch its mobile-only services in the UK, becoming the first bank in
this country to offer such banking services.
What is true is that the Internet of Things (IoT) will more deeply impact a
wider variety of industries such as agriculture, healthcare, financial services and
even urban development in a not so far future as it has evidently started to have
an effect on the way consumers and businesses interact with each other. For

9
Extracted from “The future of bank branches: Coordinating physical with digital” Capgemini 2011.
10
The term P2P (Peer-to-Peer) refers to the practice of lending money to individuals or businesses
through online services without intermediaries, matching lenders directly with borrowers.
11
Data extracted from http://www.bizjournals.com/birmingham/news/2015/11/30/bbva-invests-in-mobile-
only-u-k-bank.html


22
years the Internet has been used as a social tool for connecting people, but
retailers are now dealing with a different level of abstraction. Changes in the IoT
will be translated into new business and innovation practices, regulations, and
everyday life and work, all of them coming from creating new relationships
between people and computers.
2. RETAILING IN SPAIN AND ITS DIGITIZATION PROCESS
2.1Economic and retail trends
Throughout the last five years, retailing in Spain has shown few signs of an
upturn but recovery continues apace. In 2015, sales in retail went up by 3.6%12
with respect to 2014 together with a growing in the affluence of 5.8% and
increased employment by 0.8%13
. With the recent crisis that has hit most
economies in Europe but especially those southern economies (Italy, Spain and
Greece), unemployment in Spain has skyrocketed since 2007, leading to social
disparities while the average consumer has seen its disposable income in
decline, which was one of many arguments that directly affected the retail
sector in Spain.
Economic activity in Spain has been robustly performing in 2015 and during
the first two quarters of 2016, although growth expectations for the short and
medium term continue to be modest and fragile. The country’s public debt is
worth more than the real value of the economy, representing 101% of Spain’s
annual GDP. Nonetheless, exchange rates and price differentials have showed
a gain in competitiveness in comparison with the EU-28, OECD countries and
BRICS economies due to still weakened internal demand and the decline of
Spanish prices14
, recording a current account surplus, although the country still
remains firmly stuck in a deflationary gap.

12
Data extracted from Instituto Nacional de Estadística (INE).
13
Data extracted from http://www.efeempresas.com/noticia/crecen-las-ventas-en-los-centros-y-parques-
comerciales/
14
For further information, visit
http://www.lamoncloa.gob.es/lang/en/gobierno/news/Paginas/2016/20160205-price-competitiv.aspx


23
Graph 2: Consumer Confidence, Present Situation and Expectations
indexes in Spain (January 2015 - April 2016)
Source: Centro de Investigaciones Sociológicas (CIS). Own elaboration
The Centro de Investigaciones Sociológicas (CIS) elaborates on the different
indicators showed in the graph above on a monthly basis to find insights into
consumers’ spending intentions, their perceptions about the current situation of
the economy overall and their sentiments towards the short-term future
economic environment. If the indexes peak above 100 points, this indicates
optimism among consumers, while values dipping below 100 indicate degrees
of pessimism. The evolution of both CCI and the Present Situation indexes
have been positive but fragile during 2015, while the Expectations index hasn’t
taken values that would be considered to be positive. Since the beginning of
2016, the three indicators have been falling as a consequence of the vacancy in
the Spanish government after the last elections held in December 2015 that
have generated continued political uncertainty. Due to low consumer
confidence and increasingly frenetic lifestyles, Spanish consumers have gained
more control over expenditure, particularly after the crisis years.
Confidence among Spanish businesses fell during the first quarter of 2016,
although it rose during the second quarter, taking at the same time positive but
declining values during 2015, while transportation and hostelry sectors were the


24
most optimistic about the short-term forecasts. The resilience of this indicator,
despite the political uncertainty and adverse economic conditions that have
been damaging growth prospects, suggests that Spain’s economic recovery will
continue over the next months. The post-crisis era has left a different consumer
type from that of 2008. Nielsen, a company dedicated to monitoring information
management and providing insights into consumption habits, describes Spanish
consumers for having a “bipolar” attitude during their purchase process. The
main factor behind this change in behaviour comes principally from disposable
income. Even with the economic situation continuing to improve, long-term
unemployment remains high and confidence levels are still a far cry from those
of 2007. In addition to this, economic and labour uncertainties are pushing
consumers to seek other channels to buy affordable products in all decision and
purchase processes.
Graph 3: Spanish Business Confidence index per quarters (2015 – 2016)
Source: INE. Own elaboration
Because of these reasons, traditional retailers have had to look for more
modernized sales forms in order to offer new shopping experiences and habits
to consumers, enabled by new technologies. What has happened in the
industry is trend dislocation, more commonly known as polarisation, splitting the
industry into two sides; those who have focused on offering low-cost products


25
and those selling high-end garment and items. However most have had to cope
with depressed demand by lowering margins and increasing promotional
activities and private label penetration both in grocery and non-grocery in order
to continue operating. Retailers selling discontinued products15
have performed
better than mid-price retailers while sales of luxury and branded retailers were
also robust. Following Nielsen ratings on shopping habits, Spanish consumers
spent around €71,000 millions in 2015 just in mass consumption products, an
increase of 1,7% over 2014. On an international scale, Spain led in growth
levels in comparison to other European countries. Excluding spending on fresh
food products, private consumption growth reached 2,7%, almost double of
those for France and Germany at 1,5%.
Graph 4: Retail trade volume in current prices - general without service
stations, annual variation rate, seasonally adjusted (2010 = 100) 2008 –
201616
Source: INE. Own elaboration

15
Product lines that are no longer available or produced.
16
The year-to-year change in retail trade index makes a comparison of the aggregated sales of retail
goods and services in a certain month over the same month a year ago. The information showed in the
graph is obtained from a sample of 12,500 companies spread across the country.


26
Year-on-year estimates of the evolution of the retail trade index for Spain has
shown a divergent evolution for the past eight years. After the 2008 decline that
lasted until the end of 2013, the evolution of the real volume of retail trade
throughout this period suggests a decrease in the general level of retail prices,
although the index has continued to show growth for the past 17 months, the
longest sustained year-on-year growth since 2008. During 2015 as a whole,
retail sales at current prices increased by 4.3%, sustaining the growing trend
through the first months of 2016.
2.2Digitalization in context – The evolution within the Spanish market
Retailers in Spain have started to give more importance to M-commerce and
Social Selling17
, as Spain is one of the market leaders in Europe in terms of
Smartphone penetration, just behind Denmark, Finland and Norway. Following
Fundación Telefónica’s La Sociedad de la Información en España 201518
report, 83% of Internet users in Spain use their mobiles to go online while 4G
coverage has expanded from 48% to 76%, positioning Spain as one of the
countries with the highest technological readiness level and leading Europe in
terms of deployment of optical fibre infrastructure. On the other hand, Ditendria,
in their study “Mobile en España y el Mundo”, reveal that 87% of adult
population own a smartphone device. For all these reasons, mobile connectivity
is having a pivotal role in supporting marketers’ strategic decision-making and
long-term investment planning. Apart from that, this digital transformation
should be viewed as an opportunity to reposition the country in the global
economy and also for companies to have a greater positive impact on society.

17
Social selling refers to the process of using social media as a way to develop relationships with target
clients along the sales process.
18
For more information, visit http://www.fundaciontelefonica.com/arte_cultura/publicaciones-
listado/pagina-item-publicaciones/itempubli/483/


27
Figure 6: Impact of digital technologies on retailing
Source: Adapted from “The Impact of Digital Technologies on Innovations in Retail Business Models”
by David Prepletany (2013). Own elaboration
With shifting consumer attitudes towards online shopping and increased
connectivity, the effect of the Internet has been translated into increased
competition with small search costs, low geographical differentiation and a
significant reduction of barriers to entry for new players, while spawning new
forms of product differentiation and brand reputation. This has resulted in a
combination of both physical and digital presence, enabling consumers to shop
at their own convenience. As a result, traditional retailers will be forced to
defend themselves from these disruptive technologies. Sooner or later, small
businesses will face digitalisation of their business models and, given this
scenario, an open minded approach to the new innovations can become a
potential lever for growth.
Considering consumer adoption of e-commerce, online spending rose by
29.2% inter-annual growth rate during the third quarter of 2015 in comparison to
the same period of 2014. As e-commerce is still in growth phase as opposed to
other European economies, purchases made through this channel have a
complementary role within the shopping process. Unfavourable economic
conditions and the retailers’ lack of follow-through to identify the residents’
growing appetite for online shopping are just a sample of the reasons explaining
why e-commerce has developed as such a slow pace. Following CNMC’s latest
report on online shopping habits in Spain, domestic purchasing in e-commerce
sites accounted for 41.2%, while 39.7% of online spending came from digital
sellers outside Spain.


28
Graph 5: E-Commerce and online shopping in Spain per quarters (2012 -
2015)
Source: Comisión Nacional de los Mercados y la Competencia (CNMC). Own elaboration
On the other hand, considering the internal processes adopted by retailers,
according to ICEMD’s19
latest study in collaboration with MillwardBrown on the
implementation of digital technologies and devices by Spanish retailers, 81% of
respondents admitted to setting up an online shop through different channels
such as websites like Facebook. In terms of the professional use of different
digital tools they used, there is a rather modest degree of penetration of new
digital tools of the likes of instant chats, video chat conferences and cloud
computing, while electronic mail still prevails as the most widely used digital tool
in business communication. In contrast with Roland Berger’s report in
collaboration with Siemens Spain on a study about the digitalization process of
Spanish enterprises20
, there exists a “digital gap” across businesses as the
analysis reveals that Spanish companies have a strong domain of basic digital

19
“Competencias Digitales en la Empresa Española” by MillwardBrown for Instituto de la Economía Digital
– ESIC. For this survey, a total of 442 interviews were conducted to firms whose main activity was related
with tourism, services, industry, retail and transportation.
20
“España 4.0: El Reto de la Transformación Digital de la Economía”. For more information, visit
http://w5.siemens.com/spain/web/es/estudiodigitalizacion/Documents/Estudio_Digitalizacion_Espana40_Si
emens.pdf


29
tools, but not of the more advanced tools. This gap is strongly evident in sectors
such as health and transportation, followed by the energy industry. The results
also show that only 38% of surveyed companies21
have set up a digital strategy,
being resistance to change as the main internal factor to adopt new operative
and digital processes. Among other estimations, if new digital technologies
were implemented and developed in order to reduce production costs, the
amount of savings for the economy would reach over €120,000 million in
two years’ time while increasing productivity levels. The process would also
lead to quantitative and qualitative benefits in the medium-term going from
improving revenues, cost optimization (lowering them by almost 20%) and
employee welfare.
Figure 7: Digitization of internal operations by Spanish enterprises
Source: Adapted from Roland Berger; Agenda Digital para Europa; Siemens España; Fundación
Orange. Own elaboration
While most Spanish firms are equipped with simple Internet applications
such as email and E-business solutions for the development of their activities, a
large number of SME’s haven’t bridged the digital divide in contrast with larger
enterprises. As shown in the figure above, only a minority of companies use
advanced digital processes for business management (35% use ERP systems

21
Companies listed on IBEX 35 and selected small enterprises (Total 900 firms).


30
while 27% use CMR to manage relationships with customers) and they also
make far less transactions through online channels in comparison to larger
sized firms. Knowing that the configuration of the Spanish industry is made by
more than 99% SME’s and that the vast majority are still facing strict credit
restrictions for funding22
, it necessitates the advancement of managerial and
innovation efforts towards the development of funding programs with the aim of
achieving greater capacity and competitiveness levels.
2.3Digital transformation of Spain’s largest retailers
Rapidly changing consumer habits have pushed the whole industry to a new
consumption paradigm where the shopping experience is almost as important
as the product itself. Big retailers in Spain are beginning to meet consumer
needs more accurately while traditional retailers are facing considerable
changes due to the development of new technologies, the expansion of social
networks and the increasing digitalization of consumers. Similarly, many
companies are becoming more curious about how people live, what they look
for when they go shopping and what they really need in order to connect better
with them, the community and the society as a whole. All this is possible thanks
to the digital transformation that is allowing companies to address all these
groups more quickly and accurately, but the truth is that top retailers in Spain
are adapting disproportionately to the new digital era. In order to carry out the
matrix shown below, information on R&D investment in relation to the size of the
companies depicted has been analysed together with some qualitative
variables: the quality of the digital services offered, degree of penetration and
speed of the implementation process.

22
Since the beginning of the housing bubble back in 2009, according to the ECB bank credit to the private
sector in Spain has contracted by €172 billions (17% of GDP).


31
Figure 8: Strategic diagnosis of Spain's largest retailers in e-Commerce
and Mobile markets
Source: Annual reports and press releases. Own elaboration
First, the food retail industry seems to be falling behind other retailers
although it is true that some of them have been closing the “e-commerce gap”
by leveraging digital solutions internally. For example, Mercadona, one of the
largest family-owned discount food retailers in Spain, began its digitalization
process back in 2012 by installing a data processing centre23
where it receives
real-time data that directly links stock availability. In this centre, the scope of
change is applied as horizontal as the company has also installed tactile scales,
in-store mobile devices and fish reception ports in order to obtain instant and
unique information available for all operators within Mercadona. Apart from this
example, most supermarket chains in Spain are still following strategies pointed
to customer and physical proximity, as investments in new store openings far
exceed those made towards store digitization and e-Commerce.
On the other hand, retailers within the apparel and fashion industry are
continuing to increase the scale of their e-Commerce operations both nationally
and internationally. This can be observed in the case of Inditex with its SBUs,
Mango and El Corte Inglés, in particular due to savings on fixed and logistics

23
Centro de Proceso de Datos (CPD) located in Albalat dels Sorells (Valencia).


32
costs and a steady decline in mall traffic. Price comparisons, customer reviews,
new and more secure payment methods, the rise of social media platforms and
innovative visualization tools have also been other factors for those retailers to
continue developing their online platforms. Therefore this group of enterprises
could be defined as one of the fastest groups in carrying out e-Commerce
operations directed to customers. Within the telecommunications sector,
Telefónica has fully committed to transforming the whole organisation as a
digital one, dividing its strategic plan into three pillars: excellent connectivity,
comprehensive offer and values and customer experience (Alierta, 2015).
It is worth stressing that the banking and financial sectors have taken a step
closer towards digitization than any other sector in Spain, and the change has
taken a more radical and intense approach. After having been provided with up
to €100,000 millions of rescue loans for restructuration, the Spanish banking
sector has been asked by different European Authorities for significant changes
such as limiting the distortion of competition with the final aim of reducing their
installed capacity (branches and employees). In order to increase efficiency and
reduce costs in an environment where low profitability levels prevail—mainly
due to low or even zero interest rates—the vast majority of Spanish banks have
opted for technology-related disruption and automation of their operations, at
the same time forcing them to abandon the traditional business model they
have relied on throughout the last 20 years. While it is certainly obvious that
disruptive technologies will bring new opportunities, there are also risks evident
in the long term. One key challenge will be capturing the next generation of
clients (millennials), who are more prone to by-pass traditional banking
procedures as new alternative lending channels are on the rise such as P2P
lending, DLT24
and “FinTech”25
companies. Banks will no longer compete on the
basis of proximity as relationships with clients will adapt a more distant nature.
The main pillar to achieve sustainable competition will rely largely on investing
in resilient technologies and simplifying processes (Accenture, 2016). To
illustrate, Banco Santander recently announced its intentions to close 13% of its

24
Distributed Ledger Technologies.
25
FinTech companies are mainly start-ups founded with the aim of disrupting financial systems and
sectors such as money transfers, loans, mobile payments and asset management.


33
total 3,467 branches in Spain as a way to boost profitability and cut down costs,
but also to adopt a more digital focus. Another example of a bank that realised
the advent of new technologies much earlier was LaCaixa, who pioneered the
introduction of automated ATM’s and now it’s taken the lead, together with
BBVA, towards the development of mobile and bill-management platforms such
as Recibox and NFC26
transactions that allow users to have access to basic
banking functions from their computers, mobile devices and tablets.
Even though the worst of the slump after the crisis might already be over, it is
evident that technology advancements and innovations are pushing
organizations to change the way they respond to strategic, organizational and
technological actions as the biggest challenges for all retailers will be based on
growing in a market with fewer buyers, less space and greater competitive
pressure. According to Gartner’s strategic predictions, one out of three jobs will
no longer exist by 2025, indicating an imminent shift towards mass digitization
of sectors such as banking, education, communication, health services and
infrastructure, and Spanish retailers will be not be exempt from these changes.
3. METHODOLOGY
The subject under investigation is undergoing constant and rapid changes as
this sector is one of the most affected due to greater user acceptance of
information technology. As a result, those technologies that were once cutting-
edge just few years ago could be already outdated or omitted by consumers.
For these reasons, the methodology chosen for this study was to create a panel
of experts following the Delphi technique27
where the participants could submit
their views and opinions about the evolution of the subject under study,
although due to time and cost constraints it was decided to perform just one
consultative round, substituting the second round for the discussion of results

26
Near Field Communications (NFC) consist of a wireless data transfer feature that enable two electronic
devices to connect without the need for an Internet connection.
27
The Delphi technique is a structured and systematic communication method based on collecting
opinions from a group of experts about the future of a specific subject. This technique typically involves at
least two rounds of experts answering questions and expressing their opinions individually.


34
and the degree of convergence achieved to check if there were points of
disagreement. The role of the experts is an essential tool for the success of the
study and to analyse the uncertainties associated with future developments,
from which the experts contributed by reflecting their thoughts on possible
scenarios. A previous research on existing information from different studies in
Spain and other countries of the European periphery was carried out too in
order to gather data and information that could be subject to consultation.
3.1Panel of experts and questionnaire development
To carry out this prospective study, a panel of ten experts were selected,
made up by professionals with extensive knowledge about the evolution of retail
sector in Spain. The main objective of this panel was to analyse and select
different future scenarios that would form the basis of the questionnaire (see
appendix). These hypotheses established what would be the direction of the
development of new technologies within retailing, changes in consumer habits,
the evolution of e-commerce and the impacts that could have a significant stake
on the advancement of the sector. The names of the participants will remain
anonymous as one of the intentions of this panel was to ensure anonymity in
order to avoid major disagreements, domination by quantity or strength of
personalities and subjective judgements.
Most participants were reached through LinkedIn, although some of them
were contacted personally due to proximity. The participants were first given an
explanation about the aim and steps of the panel and then they were asked
whether they wanted to participate or not. If so, they were sent an email with the
survey link and were also told that their identities would be kept anonymous.
Their responses were collected through an online questionnaire set up with the
Qualtrics28
platform to which they had access between the months of March
and April. The process ended in April after all participants had submitted their
answers and opinions. Later, individual reports were sent including feedback

28
For more information, visit https://www.qualtrics.com/


35
about the overall and individual results for them to make comparisons, still
maintaining anonymity throughout the process.
The questionnaire was designed to provide a snapshot of the development of
the subject but also to give initial information on a number of areas of special
interest, including predictions on consumer spending, internal investment plans,
the evolution of new technologies and their impact on SMEs. The questionnaire
included a total of twenty questions that were reviewed a number of times for
clarity, completeness and the use of appropriate language and terminology.
Subsequently the survey was submitted to the tutor for approval and was finally
sent to the experts.
Figure 9: Methodology used for the expert panel
3.2Other research methods
For the development of this report, several case studies, mainly found in
online sources and academic journals, that had been published and discussed
by experts and academia were consulted. Other sources of information that
have been key for this thesis are publicly available market research reports
published by global consulting firms (Accenture, PwC, Capgemini, Salesforce,
Gartner, Territorio Creativo, Roland Berger…). Furthermore, some articles
written by recognised journalists, bloggers and contributors were also
considered in order to improve richness and the quality of the examples
provided in this thesis, but also to give updated information. Also, it is important
to stress that although some theses and books have been consulted, there


36
were found few, limited and, in some cases, outdated academic papers when
they referred to change in consumer behaviour and technology innovations.
Consequently, the results analysed from various market research studies have
facilitated the theoretical framework for this report.
4. DIGITALIZATION AND ITS EVOLUTION: A PANEL STUDY
4.1Structure of the study
Considering the current retail trends in Europe and in the United States, a
study was carried out based on individual surveys where a total of ten retail
industry experts – including university researchers and consultants – shared
their opinions and views to examine how digitization is changing the scope of
retail in Spain but also to understand the course of action retailers will have to
take in the new e-commerce environment, identifying at the same time the key
opportunities coming ahead but also the challenges. For this purpose, a
framework was created for this study based on the three following observations:
• The move from physical retailing to online and mobile commerce:
As technology continues to change the way retailers interact with their
customers, it is therefore imperative to analyse how the adoption will be carried
out in order to be successful as these technologies are creating new
possibilities for retailers to offer innovative experiences. The successful
adoption of online sales will clearly depend on the product or service offered.
• Onmichannel and the growing importance of e-commerce: These
two concepts must be included to define the concept of the new store. For
many retailers, physical stores are expensive assets that are no longer meeting
the needs of consumers or even creating profits, and the challenge at hand will
be to drive customers to their shops. The other challenge is to overcome the
complexity of adopting internal and in-store processes to increase demand and
traffic.


37
• Understanding whether retailers in Spain are adapting to the new
digital processes in line with other developed markets or lagging behind,
in order to assess productivity, competitiveness and success-oriented
management in retail practices.
Following the points outlined above, the purpose of this study was to
understand whether retailers in Spain are benefiting from increased online
turnover or whether these are missing significant opportunities for growth
potential, while understanding retail growth strategies that are being adopted.
For this panel, the participants were asked about major developments shaping
the retail sector in Spain as a whole and, additionally, about the factors that will
separate the winners from the losers.
4.2 Key findings and results
The final aim of this panel was to provide a window into the participants’
opinions about the retailers’ intentions in the medium and long term in Spain.
From that, core conclusions were agreed upon regarding the state of both
physical and online retailing in Spain as well as the future of the sector.
One of the first findings was that e-commerce and “brick and click” initiatives
are still in a nascent stage. When asked about how the process of digitization is
being implemented, over half responded that the process is either being done
with an overcautious delay or not carried out at all. What is actually happening
is that big corporations are disrupting the market through rapid delivery of digital
products with an all-in-one user experience while traditional organisations are
failing to meet these expectations. Analysing the panel as a whole:


38
Question 1. How would you evaluate the current state of the economy?
(Single response)
Base: 10 responses
Question 2. About trading expectations… (Single response)
Base: 10 responses
Though more than half of respondents said that the economy is recovering,
some had doubts about the evolution of the trading expectations, saying that it


39
would continue at the same pace. Spain’s average predicted growth rate stood
at 0.8% during the first quarter of 2016, while household consumption increased
by 0.9%. Although the services sector showed a robust evolution during 2015
and 2016, the country’s manufacturing industry slipped into stagnation during
the last seven months, due largely to a slower increase in production and an
increase in the price of raw materials, particularly steel. Spain’s difficulties in
forming a government have also been another factor affecting growth
expectations.
3. In which sectors do you think consumer spending will increase more
in the next years in Spain? (Multiple - maximum 4)
Base: 10 responses
As optimism is growing, so is consumer spending in Spain. According to a
Cetelem29
report released in May 2016, the percentage of Internet users
planning to buy products – either offline or online – has increased steadily
during the past year in comparison to other EU-5 countries. The majority of
respondents predicted consumer spending will increase more in technology and
consumer electronics goods along with beauty and communications, all

29
Cetelen España. Grupo BNP Paribas. For more information, visit: http://www.elobservatoriocetelem.es/


40
belonging to leisure and culture goods. Perhaps this is an indication that
consumers consume more as wages and salaries start to recover.
Question 4. In the medium term, what investment plans do you think
will be most important for retailers in Spain? (Multiple - maximum 6)
Base: 10 responses
Although the process of digitization is gaining momentum in Spain, most
retailers still believe in brick-and-mortar stores as a way to reach customers
more effectively. As retailers are rethinking their online strategies, many are
beginning to question their success and profitability in the future as the sector
moves towards an omnichannel environment. Web development and mobile
platforms, strengthening omnichannel strategies, logistics and IT systems were
the most popular areas of investment the experts pointed to, coinciding with
online sales growth in Spain. Logistics took third place due to growing
consumer expectations for speed of delivery and return factors, consequently it
will be imperative for retailers to develop a robust warehousing and distribution
infrastructure to have a successful business model.


41
Question 5. Considering internal operations, what technologies or
aspects do you believe should be strengthen in the future to meet
demands? (Multiple - maximum 6)
Base: 10 responses
Most retailers have had to review their internal operations to eliminate
obstacles and improve efficiency along the shopping process – mainly
organisational changes – for the adoption of the Internet in their day-to-day
operations, like price monitoring and consumer tracking, as well as for
simplifying flows of information. Based on the experts’ opinions, retailers will
have to centre their attention on their internal investments towards effective
intelligent software, multichannel replacement and cybersecurity. Many retail
consortiums and organisations have been warning about fraud and cyber-
attacks and how devastating the consequences could be for both sellers and
consumers (specially consumer confidence). To understand the dimension of
the issue, there is an average of 4,00030
cyberattacks on a daily basis in Spain,
meaning $500,000 millions in potential losses for the economy. For this reason,
retailers must protect their operations to prevent security breaches and attacks.

30
“Ciberseguridad: tecnología del futuro para una amenaza del presente” by Universidad Pontificia
Comillas ICAI-ICADE.


42
Question 6. How do you think the digitization process is being carried
out in Spain in comparison to other markets? (Single response)
Base: 10 responses
Question 7. In general, do you think the main Spanish retailers are
undervaluing the growth and expansion opportunities new technologies
can offer to their processes? (Single response)
Base: 10 responses


43
Despite the efforts made by many Spanish retailers in adapting their
operations to Internet-based applications, these have encountered many
difficulties both internally and externally when applying new technologies to
achieve their strategic objectives. Some resistance points might be primarily the
lack of demand by consumers, lack of necessary capabilities, hesitancy to
change, uncertainties in the market, policies and standards and even the
intended technology itself because it could be a poor fit or does not lead to
innovation. Also, half of respondents affirmed that, overall, retailers are failing to
harness emerging opportunities from these technologies for increased
productivity, profitability and flexibility.
Question 8. What aspects do you think new technologies can improve
in terms of consumer buying process?
Base: 10 responses


44
Question 9. On a scale ranging from 1 to 5, to what extent do you
believe that new technologies will have a major impact in the medium
term following the next statements? (1 being "no impact" and 5 "greater
impact")
Greater
rivalry
between
formats
Changing
customer
behavior
during the
buying
process
Entry of new
competitors
Greater SKU
proliferation
Changing
competitive
environment
Minimum value 1 4 3.0 3 3
Maximum value 5 5 5.0 4 5
Average 3.3 4.7 4.3 4 4
Variance 1.12 0.23 0.68 0.28 0.9
Standard deviation 1.06 0.48 0.82 0.53 0.95
Total responses 10 10 10 10 10
As purchase behavior changes rapidly, retailers need to be consistent with
their customer service strategies in order to provide reliable and trustworthy
shopping experiences across different channels, especially those online. During
the last decades, many firms have been implementing mass marketing
strategies that gave way to segmentation, but what it is occurring now is a shift
towards one-to-one or “momentary” marketing (Vellmure, 2014), which can be
defined as the process of aligning offers to very specific contexts based on
networks, behaviors, locations and activities. In this panel, most participants
suggested that new technologies will have a focal role on improving customized
communications and promotions but also on delivering a faster service. This
indicates that digitization is leading to an increased number of non-traditional
customers. From these assumptions, the participants concluded there will be a
greater number of competitors in the marketplace, SKU proliferation and a more
clustered competitive environment when surveyed about external
consequences, all these elements as a result of new consumer habits.


45
Question 10. Do you think online shopping and the use of new
technologies and devices for user-level transactions will cease to be
"complementary" with respect to physical formats?
Base: 10 responses
Question 10_B. If so, on what time horizon do you think this will
happen?
%
Before 2020 0%
2021 - 2025 75%
2026 - 2030 25%
Beyond 2030 0%
TOTAL 100%
Base: 4 responses
Most respondents believe that online shopping won’t take over physical
formats in the medium, therefore some of the measures retailers will have to put
in place in order to drive ongoing foot traffic will be based on lock-in
strategies.31
This would include targeted shopping lists and promotions,
differentiated storefronts, “showrooming”, introducing technology inside the

31
Customer lock-in strategies are based on making the customer dependent on a vendor for products or
services, without involving substantial switching costs.


46
stores, convenience and loyalty programs. For those who responded “yes” in
question 10, most believe this process will take place between 2021 – 2025, not
in the too far off future. As Nicolas Crespin (Michael Kors’ COO) once said: “In
the future, e-commerce and brick-and-mortar will have to work together: e-
commerce is for commodity purchases that are standards, brick-and-mortar is
for experience and individualised advice”. Companies that are using digital tools
more ubiquitously across the purchase decision journey are gaining significant
lead over other competitors.
Question 11. To what extent do you think new technologies can help in
terms of improving the following elements?
Base: 10 responses


47
Question 12. To what extent do you think the following sectors will be
affected by the new digital technologies? (0 being "not affected" and 100
"very affected")
Base: 10 responses
In recent decades, large retailers have made massive investments towards
POS software, logistics, consolidation of master data, e-commerce and stock
control structures, leading to the optimization of silos that retain valuable
operational data (Accenture & Salesforce, 2016)32
. New automated systems
have allowed for greater efficiency of supply chains, more accurate demand
forecasts and exchange of sales information, despite the deployment of these
technologies is still in an early stage. The responses of the participants clearly
concurred with all these facts, which leads one to understand that digital
technology will keep on disrupting traditional operations to help retailers
develop new synergies, boost loyalty and quickly build new offers. Additionally,
most agreed that the sectors that show a higher degree of technology
convergence or digital disruption will be those related with communications,
banking and financial services, transport and tourism, belonging mainly to B2C
sectors.

32
Retrieved from “Retailing, Reimagined: Embracing personalization to drive customer engagement and
loyalty” (2016).


48
Question 13. Do you think that new technologies within retailing will
help SMEs to be more competitive? (Single response)
Base: 10 responses
Question 14. What obstacles do you think SMEs will face when
adapting their processes to the new technologies?
%
Lack of economic and financial resources 40%
Inadequate business structure to adapt new technologies 40%
Lack of knowledge about their use/existence 10%
Other (Specify) 10%
Obsolete regulations 0%
TOTAL 100%
Base: 10 responses
Others (Specify) %
Lack of demand by consumers (referring to digital processes) 10%
Base: 1 response
Many academics have raised concerns on whether SMEs are actually
embracing new technologies or if they are failing to foresee the benefits of
virtual tools and online presence – largely because these are seen as an
inexpensive and accessible opportunity to improve competitiveness and
internationalization of SMEs. Although practically all respondents agreed that


49
new technologies will be beneficial for SMEs, they are confronted with evident
difficulties such as attitudinal barriers, lack of awareness or understanding and
financial constraints that are hindering their process towards digitization. Among
other reasons, these barriers can also be associated with the aftermath of the
economic crisis plus a lack of innovative entrepreneurship culture in Spain. For
all these reasons, the respondents were more inclined to mention barriers
related with financial resources and the business model structure itself.
Question 15. Please indicate which technologies/tools you think will
help retailers improve customer relations (Multiple - maximum 6)
%
Mobile E-Commerce 80%
Big Data analysis 70%
Social Media tools 70%
Mobile payments 50%
Digital Signage 40%
Small Data analysis 30%
Augmented reality 30%
"Beacon" technologies 20%
"Wearable" technologies 20%
"Peer-to-Peer" retail
(P2P)
20%
Customized sampling 20%
Others (Specify) 10%
Base: 10 responses
Others (Specify) %
Omnichannel tools 10%
Base: 1 response
The top four technologies chosen by respondents in this question show a
strong tendency towards the use of mobile platforms and systems, as there is a
higher degree of user acceptance of mobile Internet in Spain. As e-commerce is
going more mobile, it is becoming a core part of consumers’ shopping
experiences and processes, therefore retailers should pay special attention to
this side of technology. Big data analytics have been helping retailers in


50
developing more consumer insights and stronger platforms to better manage
existing relations and start new ones. In turn, they have also transformed mobile
payments as a way to add value through the shopping process by providing
customers with more cashless convenience and the ability to track spending
patterns.
4.3Classification criteria
The next section describes the classification criteria that has been selected to
assess the overall view of the participants on the topics suggested in order to
detect if there was some degree of discrepancy depending on the professional
sector each participant belonged to, although no difference was observed
regarding the variables and topics mentioned in this questionnaire, as most
participants work at consulting firms (90%). The geographical origins of the
experts have been moderately diverse although the Valencian Community was
the most predominant. Experts were asked to assess the degree of knowledge
they had about the digitization process of retailing in Spain. The results show
that the participants have a knowledge ranged from medium – high to high. It
should be noted that the two participants that responded “medium – low” and
“low” assigned a lower level of knowledge that corresponds to their knowledge
on the matter.
Classification A: Professional background
%
Administration 0%
Research institutes 0%
Universities 10%
Consulting 90%
TOTAL 100%
Base: 10 responses


51
Classification B. Please indicate your degree of knowledge about the
process of digitization of retailing in Spain
Classification C: Location


52
5. CONCLUSIONS

Although e-commerce is still in its embryonic stage in Spain, as confirmed
from the panel of experts and other sources mentioned, its growth potential can
be seen through emerging online initiatives. As a result, retailers will have to be
extremely flexible with consumer demands if they want to emerge stronger from
the consumer and economic crisis that Spain is unfortunately still submerged in.
Throughout recent years, retailing in Spain has shown a dynamic evolution
while it has undergone drastic transformations that have really changed how the
sector operates in general. Although many studies suggest that e-commerce
will have a higher proportion over physical retail in the foreseeable future, it is
difficult to know how to best prepare for the technological change that is about
to come, but if we consider what has been learnt from the past plus current
economic and retail conditions, these two factors will provide a clearer route.
Now the central question will be based on creating compelling strategies that
stand out from the rest as a way to meet consumer needs more accurately, as
consumers are relying more and more on new digital technologies. In order to
capture the attention of these shoppers, retailers will have to increase their
investments towards effective mobile apps, in-store experiences, degree of
personalisation, convenience and contextual brand experiences across all
channels.
Additionally, it has been observed through this study that Spain has had
some delay in its business digitization process. Although the use of mobile
devices is widespread among users, Spanish firms have not completely
transformed their processes that could lead them to be more efficient in terms of
cost savings and work practices, while reaching customers more effectively.
Considering the Networked Readiness Index, Spain occupies the 34th
position,
which implies that the digitization of internal processes has taken a slower pace,
the lack of innovation being the root of this problem. This lack of follow-through
in monitoring new technologies and consumer trends indicates that most
retailers are not anticipating about how customers are using technology when
they shop. New innovative and technological advancements are challenging
retailers by posing them with new business models, and in some cases it will


53
require radical business model innovations such as in the case of the banking
sector in Spain, a clear example of securing a lasting competitive edge in the
future. Also, retailers will have to put more efforts towards digital literacy and
skills in the workplace to keep up with societal changes that are occurring in
Spain. In conclusion, retailers should pay special attention to the following
points:
• Customer expectations when it comes to shopping experiences, in order
to increase both online and physical traffic. Customer experience strategies
must remain in the forefront to achieve sustainable competitive advantage over
other retailers.
• Omnichannel and omnipresence across channels: To this point, retailers
will have to carefully analyse the strategic moves from non-traditional retailers
(e.g., Amazon, Alibaba, others) as increasing pricing competition is likely to
occur. Although customers will continue using online tools for customer reviews,
tips and broader selections, they will keep looking for personal service and the
possibility to see and test the products themselves.
• Tracking and analysing consumer habits to measure consumer
engagement and understand consumers’ sentiments on social networking and
review sites (Miles, 2012).
• Increase M-Commerce presence, since it has been observed that most
retailers in Spain have a high Internet presence but not on mobile devices.
Personal PC’s will be substituted for mobile and wearable devices, which
means that retailers will have to improve their promotional efforts and mobile-
based solutions on these type of devices.
• Development of new capabilities towards technology, marketing,
communications and merchandising


54
6. BIBLIOGRAPHY

Accenture. (2015). Being Digital: Digital Strategy Execution Drives a New Eras
of Banking. Retrieved 2016, from Accenture:
https://www.accenture.com/t00010101T000000__w__/it-
it/_acnmedia/Accenture/Conversion-
Assets/DotCom/Documents/Global/PDF/Dualpub_18/Accenture-New-Era-
Banking-Strategy.pdf

Accenture. (2016). Digital Disruption in the UK Banking Industry. Retrieved
2016, from Accenture: https://www.accenture.com/us-en/insight-digital-
disruption-uk-banking-industry

All Africa. (2016, January 12). Zambia: New Technology Changes Marketing
Strategies. Retrieved 2016, from All Africa: Zambia: New Technology
Changes Marketing Strategies

Arendt, L. (2008). Barriers to ICT Adoption in SMEs: How to Bridge the Digital
Divide? Retrieved 2016, from Emerald Insight:
http://www.emeraldinsight.com/doi/pdfplus/10.1108/13287260810897738

AT Kearney. (2013). Banking in a Digital World. Retrieved 2016, from AT
Kearney:
https://www.atkearney.es/documents/10192/3054333/Banking+in+a+Digital+
World.pdf/91231b20-788e-41a1-a429-3f926834c2b0

Barron, I. (2016, April 1). El Banco Santander Cerrará 425 Oficinas y Reducirá
Plantilla. Retrieved 2016, from El País:
http://economia.elpais.com/economia/2016/03/31/actualidad/1459455211_3
30122.html

Bhatia, S. (2015, April 30). Digitization is Crucial for SMEs. Retrieved 2016,
from Samir Bhatia: http://samirbhatia.in/digitization-is-crucial-for-smes/


55
BMG Research & Durham University. (2015, September). Digital Capabilities in
SMEs: Evidence Review and Re-survey of 2014 Small Business Survey
respondents. Retrieved 2016, from UK Government:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/fi
le/457750/BIS-15-509-digital-capabilities-in-SMEs-evidence-review-and-re-
survey-of-2014-small-business-survey-respondents.pdf

Boden, R. (2015, June 15). Tesco Puts Beacons in 270 London Stores.
Retrieved from NFC World:
http://www.nfcworld.com/2015/06/15/335978/tesco-puts-beacons-in-270-
london-stores/

Bonderud, D. (2014, July 15). Cyber Security Challenges: How Do Retailers
Protect the Bottom Line? Retrieved 2016, from Security Intelligence IBM:
https://securityintelligence.com/cyber-security-challenges-how-do-retailers-
protect-the-bottom-line/

Bowman, R. J. (2013, October 28). SKU Proliferation: Is There a Cure for the
Disease? Retrieved 2016, from Supply Chain Brain:
http://www.supplychainbrain.com/content/blogs/think-tank/blog/article/sku-
proliferation-is-there-a-cure-for-the-disease/

Box, J. (2014, June 20). The Mobile Store: Brands Facilitating Engagement
Through Existing In-Store Behaviours. Retrieved 2016, from LinkedIn:
https://www.linkedin.com/pulse/20140620005923-238907205-the-mobile-
store-brands-facilitating-engagement-through-existing-in-store-
behaviours?trkSplashRedir=true&forceNoSplash=true

Brick Meets Click. (2012, January 2). What will it take for retailers to adopt new
technology faster? Retrieved 2016, from Brick Meets Click:
http://www.brickmeetsclick.com/what-will-it-take-for-retailers-to-adopt-new-
technology-faster-

Brines , J. (2016, February 29). Así Opera el Cerebro Tecnológico de
Mercadona. Retrieved 2016, from Expansión:


56
http://www.expansion.com/economia-
digital/companias/2016/02/29/56d49fcf268e3e521f8b463b.html

Bughin, J. (2015, February). Brand Success in an Era of Digital Darwinism.
Retrieved 2016, from McKinsey: http://www.mckinsey.com/industries/high-
tech/our-insights/brand-success-in-an-era-of-digital-darwinism

Camplone, G., Köstring, J.-C., Hahn, D., & Kerschbaumer, L. (2013, August).
Racing ahead: How digital is changing and enhancing the car buying
experience. Retrieved 2016, from McKinsey:
http://www.mckinseyonmarketingandsales.com/racing-ahead-how-digital-is-
changing-and-enhancing-the-car-buying-experience

Capgemini . (n.d.). The Future of Bank Branches: Coordinating Physical with
Digital. Retrieved 2016, from Capgemini : http://ebooks.capgemini-
consulting.com/The-Future-of-Bank-Branches/files/assets/basic-
html/page1.html

Capgemini. (2011). Digital Transformation of Supply Chains: Creating Value –
When Digital Meets Physical. Retrieved 2010, from Capgemini:
https://www.capgemini-consulting.com/resource-file-
access/resource/pdf/Digital_Transformation_of_Supply_Chains.pdf

Capgemini. (n.d.). The Digital Advantage: How Digital Leaders Outperform their
Peers in Every Industry. Retrieved 2016, from Capgemini:
https://www.capgemini.com/resource-file-
access/resource/pdf/The_Digital_Advantage__How_Digital_Leaders_Outperfor
m_their_Peers_in_Every_Industry.pdf

Centro de Innovación BBVA. (2016). Project Big Data. Retrieved 2016, from
Centro de Innovación BBVA:
http://www.centrodeinnovacionbbva.com/en/projects/big-data

Cibersur.com. (2016, March 29). El Sector de la Moda a la Cola de la
Digitalización Empresarial en España. Retrieved 2016, from


57
Cibersur.com:
http://www.cibersur.com/cibersur/impe/internet/018299/sector/moda/cola/d
igitalizacion/empresarial/espana

Colorofchange.com. (2013, November). Consumers, Big Data, and Online
Tracking in the Retail Industry. Retrieved 2016, from The Center for
Media Justice: http://centerformediajustice.org/wp-
content/uploads/2014/06/WALMART_PRIVACY_.pdf

Coto Consulting S.L. (2016). Retail Revolution 2016. Valencia, Valencia, Spain.

Cuhls, K. (n.d.). Delphi Method. Retrieved 2016, from United Nations Industrial
Development Organisation:
http://www.unido.org/fileadmin/import/16959_DelphiMethod.pdf

Davara, A. (2016, June 1). Álex López. “El Social Selling No Va de Grandes o
Pequeños, Sino de Rápidos o Lentos”. Retrieved 2016, from Distribución
Actualidad Retail: http://www.distribucionactualidad.com/103032-
2/?platform=hootsuite

Desai, P., Potia, A., & Salsberg, B. (n.d.). Retail 4.0: The Future of Retail
Grocery in a Digital World. Retrieved from McKinsey on Marketing and
Sales:
https://www.mckinseyonmarketingandsales.com/sites/default/files/pdf/Future
_of_grocery_in_digital_world.pdf

Dickey, T. (2014, March 2). Search Results for: Technologies Retail 2014.06 |
Internet of Things for Retail . Retrieved 2016, from Retail Technology
Trends: https://retailtechnologytrends.com/?s=technologies+retail

Distribución Actualidad Retail. (2016, March 30). Retail Moda. A la Cabeza de
ECommerce, a la Cola en Digitalización. Retrieved 2016, from
Distribución Actualidad Retail:
http://www.distribucionactualidad.com/retail-moda-la-cabeza-
ecommerce-la-cola-digitalizacion/


58
Divante. (2014, March 3). E-Commerce in Fashion Industry. Retrieved 2016,
from SlideShare: http://www.slideshare.net/divanteltd/e-commerce-in-
fashion-industry

D'Onfro, J. (2014, May 10). 14 Quirky Things You Didn't Know About Amazon.
Retrieved from Business Insider: http://www.businessinsider.com/amazon-
jeff-bezos-facts-story-history-2014-5

EFE Empresas. (2016, February 28). Crecen las Ventas en los Centros y
Parques Comerciales. Retrieved 2016, from EFE Empresas:
http://www.efeempresas.com/noticia/crecen-las-ventas-en-los-centros-y-
parques-comerciales/

EKN Research. (2016). 2nd Annual Stores Benchmark. Retrieved 2016, from
EKN Research: http://eknresearch.com/2014/10/28/2nd-annual-stores-
benchmark/

El Economista. (2016). Ranking Nacional de Empresas por Facturación.
Retrieved 2016, from El Economista: http://ranking-
empresas.eleconomista.es/ranking_empresas_nacional.html?qNombreNorm=C
AIXA-EINES

El País. (2016, April 1). El Comercio Electrónico Crece en España a su Mayor
Ritmo en Casi Seis Años. Retrieved 2016, from El País:
http://economia.elpais.com/economia/2016/04/01/actualidad/1459500053_4
49714.html

eMarketer. (2016, June 7). Seniors in Spain Are Warming to Digital Culture.
Retrieved 2016, from eMarketer:
http://www.emarketer.com/Article/Seniors-Spain-Warming-Digital-
Culture/1014043

eMarketer. (2016, April 11). Spain's Ecommerce Sales Leap as Economy
Rebounds. Retrieved 2016, from eMarketer:


59
http://www.emarketer.com/Article/Spains-Ecommerce-Sales-Leap-Economy-
Rebounds/1013807

Ernest&Young. (2014, March). Informe de Valoración Sectorial Retail &
Consumer Products. Retrieved 2016, from Thinktur: Plataforma
Tecnológica del Turismo: http://www.thinktur.org/media/EY-Informe-
sectorial-retail-comsumer-products.pdf

Euromonitor International. (2016, January). Retailing in Spain. Retrieved 2016,
from Euromonitor International: http://www.euromonitor.com/retailing-in-
spain/report

F., S. (2016, January 30). España, Territorio Smartphone. Retrieved 2016, from
Xataka Móvil: http://www.xatakamovil.com/movil-y-sociedad/espana-
territorio-smartphone

Faulkner, C. (2015, November 17). What is NFC? Everything You Need to
Know. Retrieved 2016, from Techradar:
http://www.techradar.com/news/phone-and-communications/what-is-nfc-
and-why-is-it-in-your-phone-948410

Fernandez, J. G. (2015, December 14). La Digitalización Llega al Mundo de las
Pymes. Retrieved 2016, from Expansión:
http://www.expansion.com/empresas/tecnologia/2015/12/09/5667ef9d22601
d1d2f8b462f.html

Fujitsu. (2015, September 29). Leveraging Business Opportunities in the Era of
Rapid Digital Evolution. Retrieved 2016, from Fujitsu:
http://journal.jp.fujitsu.com/en/2015/09/29/01/

Fundación Telefónica. (2016, February 29). La Sociedad de la Información en
España 2015. Retrieved 2016, from Fudación Telefónica:
http://www.fundaciontelefonica.com/arte_cultura/publicaciones-
listado/pagina-item-publicaciones/itempubli/483/


60
Garcia Delgado, J. L., & Myro, R. (2014). The Spanish Economy: An
Introduction (1st Edition). Pamplona, Navarre, Spain: Thomson Reuters.

Garcia, K. (2015, October 5). ¿Cómo Innova el Retail ante la Digitalización?
Retrieved 2016, from America Retail: http://www.america-
retail.com/estudios-consumidores/como-innova-el-retail-ante-la-digitalizacion/

Gonzalo Alconada, A. (2016, June 3). El Nuevo Ajuste en Banca Dejará la Red
a Nivel de Hace 36 Años. Retrieved 2016, from Cinco Días:
http://cincodias.com/cincodias/2016/04/05/mercados/1459881779_497894.ht
ml

Grewal, D., & Levy, M. (2009). Emerging Issues in Retailing Research.
Retrieved 2016, from Dr. Dhruv Grewal: http://www.dhruvgrewal.com/wp-
content/uploads/2014/09/2009-JR-Emerging-Issues.pdf

Grossman, R. (2016, March 21). The Industries That Are Being Disrupted the
Most by Digital. Retrieved 2016, from Harvard Business Review:
https://hbr.org/2016/03/the-industries-that-are-being-disrupted-the-most-by-
digital

GSMA. (n.d.). GSMA: The Impact of the Internet of Things. Retrieved 2016,
from GMSA: http://www.gsma.com/newsroom/wp-content/uploads/15625-
Connected-Living-Report.pdf

Hagberg, J., Sundström, M., & Egels-Zandén, N. (n.d.). Digitalization of
Retailing: Beyond E-Commerce. Gothenburg, Sweden.

Hannon, P. (2016, March 30). European Confidence Firms Despite Political
Uncertainty. Retrieved 2016, from The Wall Street Journal:
http://www.wsj.com/articles/european-confidence-firms-despite-political-
uncertainty-1464598802

Harshak, A., Schmaus, B., & Dimitrova, D. (2013). Building a Digital Culture:
How to Meet the Challenge of Multichannel Digitization. Retrieved 2016,


61
from PwC: http://www.strategyand.pwc.com/reports/building-a-digital-
culture

Hosteltur. (2016, March 8). Nielsen: "Los Españoles Son Consumidores
Bipolares tras la Crisis". Retrieved 2016, from Hosteltur:
http://www.hosteltur.com/115382_nielsen-espanoles-son-consumidores-
bipolares-crisis.html

IBM. (2013, June). Putting Mobile First: Best Practices of Mobile Technology
Leaders. Retrieved 2016, from IBM:
http://hosteddocs.ittoolbox.com/ENW03013USEN.PDF

Iglesias Fraga, A. (2016, May 31). Así Innovan las Grandes Empresas
Españolas. Retrieved 2016, from El Mundo:
http://www.elmundo.es/economia/2016/05/31/574d67d3ca474160288b45dc.
html

Indra. (n.d.). Retos Estratégicos del FMCG y del Retail. Retrieved 2016, from
Indra: http://businessconsulting.indracompany.com/sites/default/files/retos-
estrategicos_AF_final.pdf

Innovative Retail Technologies. (2014, October 29). Make The Shopping
Experience Personal, Relevant, And Profitable. Retrieved 2016, from
Innovative Retail Technologies:
http://www.innovativeretailtechnologies.com/doc/make-the-shopping-
experience-personal-relevant-and-profitable-0001

Instituto de Estudios Bursátiles. (n.d.). La Transformación Digital de la Banca
Española: Estudio Banca Digital Española. Retrieved 2016, from Instituto
de Estudios Bursátiles: http://www.ieb.es/wp-
content/uploads/2015/11/estudio_banca_2015.pdf

Instituto Nacional de Estadística. (2016). Instituto Nacional de Estadística.
Retrieved 2016, from Instituto Nacional de Estadística: http://www.ine.es/

Emma Amparo Pérez Lladró - TFG

Emma Amparo Pérez Lladró - TFG

Recommended

Recommended

More Related Content

What's hot

What's hot (6)

Similar to Emma Amparo Pérez Lladró - TFG

Similar to Emma Amparo Pérez Lladró - TFG (20)

Emma Amparo Pérez Lladró - TFG