The Internet of Things (IoT), big data, robotics, and augmented reality are some of the ways CEOs reveal they are choosing to invest their capital in the coming year to better compete, according to a new study.

The “CEO Viewpoint 2017: The Transformation of Retail,” prepared for  JDA Software Group, Inc. by PwC, found that 350 global retailers finds that a digital transformation strategy is their number one priority in 2017; 69% of executives say they plan to increase their investment in digital transformation over the next year.

“The results reveal the continued balancing act retailers are struggling to maintain with delivering superior omni-channel execution and profitability, all while meeting the demands of the modern shopper, and keeping pace with the digital transformation underway across the supply chain.” said Lee Gill, group vice president, global retail strategy, JDA.

The goal of the variety of technologies is to better understand and connect with their consumers, giving customers reason to engage with sellers across retail channels. Despite the obvious importance of having a digital transformation strategy in place, more than half of respondents – 52% – have not defined or started implementing a digital transformation strategy yet.

Looking at the use of specific technology, the report showed the mobile-enabled applications (85%), big data (86%) and use of social media data (85%) are the top technologies survey respondents are investing in or plan to over the next year.

Automation and IoT are lower on the list for investment but gaining momentum as they are perceived as true game changers.

Omni-channel Execution Issues Continue

As omni-channel retailing continues to mature and retailers have blurred the lines between online and store, their attention has shifted to execution and profitability, the report says. Omni-channel execution amongst global retailers continues to lag in areas of order fulfillment, and profitability is still a challenge, with only 10% of those surveyed able to make a profit while fulfilling omni-channel demand.

Only 12% of CEOs surveyed, down from 19% in 2014, provide a seamless shopping experience across channels. These retailers are finding their omni-channel offerings to be too complex or expensive and are choosing to scale back.

Omni-channel Fulfillment and Returns Spending Priorities

Seventy-four percent of respondents believe that the cost of customer returns is impacting profits to at least some extent. Retailers in the U.S.  are less likely to experience profit erosion from customer returns than other markets.

The survey found that retail CEOs are increasing their investment in buy online, pick up in-store (BOPIS), with 51% of survey respondents saying they offer or plan to offer BOPIS in the next 12 months – up from 47% in 2016.

Buy online, ship to store has picked up steam in the past year with 48% of retail CEOs investing in this service or planning to, in the next 12 months.

Conversely, fulfillment options that are becoming costlier and less profitable are areas where CEOs are decreasing investments in 2017. These include same day delivery (reduced to 33%, down from 43% in 2016), and providing specific delivery time slots (down to 27% vs. 48% in 2016).

The rising costs of order fulfillment are also pushing executives to rethink their strategy overall. 2017 will see increased charges for online orders (57% plan to or will make this change in the next 12 months), a rise in minimum order thresholds for free standard home delivery (62% plan to or will make this change in the next 12 months) and raising the minimum order value for BOPIS (55% plan to or will make this change in the next 12 months).

“While retailers have increased fulfillment options over the last year to meet consumer demands, as BOPIS becomes a staple and buy online, ship to store emerges as another core fulfillment capability, retailers now need to balance the effectiveness and profitability of the fulfilment channels they offer - with customer satisfaction. Because if shoppers experience a problem with home delivery or in store pickups, that is a lost sale – and customer – that retailers can’t afford in a highly competitive market,” noted Gill.

“Since  the last survey done in 2014, we have witnessed unprecedented change sweeping across the retail industry that continues in earnest as retailers reimagine their strategies to transform the customer experience, making it seamless and personalized, no matter how they shop. Supply chain complexities and cost will continue to challenge retailers and the difference between winners and non-winners will be how much, or how little, retailers understand their customers moving forward,” concluded Gill.