Digital reckoning in retail – how to be a leader, not a latecomer

The European retail sector has entered a phase of digital reckoning. According to the Retail Economics and Zühlke report “Adapt now or disappear: why digital maturity is the new survival strategy in European retail”, retail companies that invested in digital solutions early on are now earning twice as much as those that did not. The latter are losing customers and revenue, and the gap between them and the leaders is becoming harder to bridge with every passing day.

A new paradigm for growth and profitability

An analysis of market data reveals a deep polarisation within the retail sector: digital leaders are growing at a CAGR of 8.6%, almost twice that of digital latecomers (4.6% CAGR). An even greater disparity is evident in profits – between 2019 and 2024, the profitability of leaders increased by 47.2%, whilst businesses that failed to invest in the development of modern technologies recorded a decline of 12.8%.

According to a report by Retail Economics and Zühlke, the foundation of the best retailers’ success in the market is the MACH architecture (Microservices, API-first, Cloud-native, Headless), which – as the standard for e-commerce systems – ensures maximum flexibility, scalability and speed of implementation thanks to its modular design based on independent services.

A well-developed omnichannel strategy is also crucial for gaining a competitive edge. Integrated business models that seamlessly combine physical stores with digital channels achieve an average margin of around 5%, outperforming other models in terms of profitability and resilience to changing conditions. What is even more worth highlighting is that many online-only retailers are reporting negative margins.

Why is digital maturity a survival strategy?

Over the past five years, the retail market has undergone a fundamental transformation. Analysis shows that retailers who have fully operationalised digital tools not only weathered the pandemic better than their competitors, but have also increased their lead over them in the years since.

According to data from the report “Adapt now or disappear: why digital maturity is the new survival strategy in European retail”, for a company with a turnover of £1 billion, technological backwardness relative to market leaders can translate into around £135 million in lost sales value annually.

Retailers who fail to undertake a thorough digital transformation within their organisations over the next 12 months risk disappearing from the market altogether. Substantial investment in modern technologies is no longer merely an opportunity to optimise business operations, but a means of countering a real threat to the company’s survival, particularly in the face of rising operating costs. However, digital transformation must be carried out with great sensitivity.

– Our experience in delivering complex projects shows that the key to success lies not only in possessing the technology itself, but in skilfully and deeply embedding it within the company’s culture and business processes. Digital leaders are organisations that can combine strategic imperatives with operational discipline and employee talent – comments Marek Nowakowski, Business Development Manager at Exorigo-Upos

How do digital leaders differ from the rest of the retail sector?

First and foremost, through effective execution and modern technological infrastructure. Whilst 77% of companies state they wish to have modular systems, only 33% have actually managed to implement them. Leaders opt for MACH architecture, which allows for the rapid replacement of individual system components without paralysing the whole system. Other distinguishing features of digital leaders in retail include:

• Deep in-house expertise: among leaders, as many as 18% of roles at head office are in technology and digital, whilst the market average is 10%.
• Omnichannel strategy: ensuring, among other things, consistency and visibility of prices, services and stock across all channels.
• Scalability through the cloud: companies such as Lidl are building their own cloud solutions to ensure infrastructure resilience and independence.

What barriers are blocking the transformation of retail?

The main barriers to digital transformation in the retail sector include:

• Staff and skills shortages: 63% of companies cite a shortage of talent and digital skills.
• Difficulties with scaling: 60% of retailers struggle to move from the pilot phase to the full-scale implementation of innovations.
• Organisational silos: disconnected systems and teams hinder the flow of information in 51% of organisations.

A major obstacle is also the tech stack – over half (52%) of respondents admit that their current tech stack (a collection of various technologies, tools and frameworks used to create, implement and manage applications and systems) limits their ability to scale innovation.

The use of AI beyond the pilot phase

Market leaders are implementing artificial intelligence on a massive scale – from supply chain optimisation to real-time personalisation of offers. One example is Sainsbury’s Nectar360, which has launched the Pollen platform. It uses AI to combine data from online and offline channels, enabling precise campaign planning based on a single, consistent customer identity.

Meanwhile, British giant Next has demonstrated how technology can become a new source of revenue. Thanks to its “Total Platform”, the company is commercialising its modular infrastructure, offering partners logistics, e-commerce and customer service as a service. The result? Profit from this activity has almost doubled in a year – to £76.6 million.

IKEA and Lidl also demonstrate that digitalisation is an ongoing process and one worth investing in. For these companies, technology is not an “add-on” but an operating system which, through better inventory management and task automation, allows them to defend their margins in an era of inflation.

– Having worked with leaders in the retail sector, we know that the key challenge is no longer simply implementing artificial intelligence, but scaling it whilst maintaining data security. Our experience shows that building a solid data foundation and transitioning to a modular architecture is the best way to ensure that AI tools genuinely support sales rather than generating additional technical debt – comments Marek Nowakowski.

How can digital resilience be effectively built?

Digital resilience refers to the ability to adapt quickly to market evolution and regulatory changes. To join the ranks of leaders in 2026 and beyond, retailers must focus on eight key areas, the most important of which are building modular foundations and treating data as a strategic asset.

Summary

In today’s retail sector, digital maturity has become the only effective strategy for survival and growth. An analysis of data from the Retail Economics and Zühlke report “Adapt now or disappear: why digital maturity is the new survival strategy in European retail” clearly shows that technology leaders are not only growing twice as fast, but above all are building a huge advantage in profitability that cannot be offset by simple price cuts. Investment in MACH architecture, data unification and AI scaling are now the foundations without which a retailer will be unable to meet the expectations of today’s consumer.

The Retail Economics and Zühlke report “Adapt now or disappear: why digital maturity is the new survival strategy in European retail” is available to download here.

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