DOI: https://doi.org/10.62204/2336-498X-2025-2-6

PROSPECTS AND THREATS OF DIGITAL TRANSFORMATION IN THE RETAIL INDUSTRY OF UKRAINE

Sviatoslav Stets
Postgraduate student,
National University of Kyiv-Mohyla Academy,
svyatoslavstets@gmail.com; ORCID: 0000-0003-0251-0269

Annotation. The article analyzes various aspects of digital transformations and the need for their implementation in the retail industry of Ukraine. The risks and threats to enterprises that may arise in the process of implementing changes are also characterized. As a result, the main components of digital changes, measures and tools necessary for their implementation, the expected result and potential impact on the enterprise are identified.

Keywords: retail, digital transformation, organizational changes, digital technologies, retail network.

Introduction. In recent years, digital transformations have become increasingly widespread and necessary to ensure the competitiveness of enterprises and the possibility of development in the digital age. Ukraine sets a good example of digitalization for other countries by developing and implementing digital technologies in various areas of public administration and regulation, as well as interaction with citizens. The best example of this is the Diia resource, which is recognized as one of the world’s best GovTech products. At the same time, large-scale digital transformations have taken place in the banking sector (Monobank, Privatbank), logistics (Nova post), and other areas. However, such transformations require significant investments, the involvement of highly paid specialists, and, above all, an understanding of the need for such changes. Therefore, today there are a significant number of companies that are only at the stage of implementing digital changes and those that have not yet started them.

At the same time, according to a study conducted by the Mckinsey consulting agency, described in the article “Unlocking success in digital transformations” [1], it is noted that digital transformations are more complex than any other changes, and their implementation, according to surveys, does not lead to a significant improvement in the performance of the enterprise. Only 16% of respondents reported a successful positive impact of digital transformations on the company’s operations, while 7% of respondents said that digital transformations had led to an increase in the company’s efficiency, but this effect was not long-lasting. It is also important to note that even in Tech or IT companies, the success rate of digital transformations did not exceed 26%, which is very low for companies in these sectors. That is why, analyzing the prospects and threats of digital transformation in the retail industry, we form a hypothesis that the risk of unsuccessful digital transformation for this industry is critically high, despite the fact that the company will have to spend significant resources on such transformations.

Purpose of the article. The purpose of the article is to formulate recommendations for the implementation of digital transformations in retail enterprises based on the results of a comparison of the analysis of potential digital changes that may be important for the respective enterprises and an audit of the current state of enterprises to determine the need for digital transformations.

To achieve this goal, the following tasks were formulated and solved:

• to determine the level of digital activity of retail enterprises by analysing materials from open sources and benchmarking;
• to audit digital infrastructure, digital activities (including processes) and digital literacy at a retail enterprise;
• to conduct a targeted survey among retail enterprise employees on the topic of enterprise digitalisation and their digital literacy;
• based on the data obtained, the prospects and potential threats of digital transformations in the retail industry are identified.

Problem statement. Retail is one of the key sectors of Ukraine’s economy, accounting for a significant portion of gross value added in the service sector and is an indicator of economic well-being. Retail is also important in providing jobs, with over 1 million people working in the industry, according to the State Statistics Service of Ukraine. Moreover, during the full-scale invasion of russia, retail has become a kind of guarantor of food security and the confidence of Ukrainians in the ability to get everything they need to live in such a difficult time. At the same time, there was a significant drop in the purchasing power of the population due to lower incomes and inflation, as well as savings to help the defence forces. The share of online commerce has also grown significantly, as has the popularity of this method of purchasing goods. Despite all the challenges and critical circumstances – shelling, hostilities, occupation (significant irrecoverable losses of people, outlets, warehouses, technical support, etc.)

– Ukrainian retail managed to restore its position to the indicators of 2021, and in some cases exceed them. The development of retailers in such a challenging environment is essential to ensure the sustainability of the country. The war factor is now one of the key drivers of change in the retail sector. Despite the market demand for changes to remain competitive and introduce new technologies, retailers are forced to work on force majeure process optimisation, change employee functions (lack of line staff due to mobilisation and emigration of a significant part of the working population, and, accordingly, consolidation of functions in one position), establish new supply chains (due to the closure of supplier companies, reduction in production volumes, rising logistics costs, threats of shelling), etc. That is why it is important to study the digital transformation of retailers, which will potentially help optimise resource use and ensure the sustainability of enterprises. Along with potential positive changes from digital transformation, it is also important to analyse potential risks and ways to minimise them. Research methodology. When studying digital transformations at Ukrainian enterprises, we have identified the specifics of such transformations in the retail sector, and accordingly, the methodology has been adapted to the existing research needs. First of all, this article is based on the analysis of primary market research, the use of analytical and predictive methods and our own research conducted in the Ukrainian national retail network, as well as the method of hypothesis formulation and scientific generalisations. The method of assessing digital maturity was used to determine the state of the enterprise. The prerequisite for the results and conclusions of this study was a general audit of the enterprise through the analysis of all organisational components and processes of the enterprise. Thus, it was established that the company needs to implement a number of digital changes, some of which are of high priority, and their absence not only blocks the potential development of the company, but also threatens its further functioning and stops the loss of market positions.

Analysis of recent research and publications. As the retail industry is one of the most important sectors of Ukraine’s economy, the results of its activities are the focus of research by Ukrainian scientists. The research suggests that one of the key areas of change is digital transformation and various aspects of its implementation. A large number of studies now focus on the development of the retail industry in wartime [2]. Scholars also often compare global and Ukrainian retail [3,4,5], but the key topic among researchers is digital transformation and the introduction of the latest technologies, including artificial intelligence [6,7,8]. The topic of digital transformation in enterprises of various industries definitely deserves the greatest attention in view of the development of technologies and the requirements of the present. That is why it is important to conduct a comprehensive study of it with the development of practical recommendations for the feasibility of implementation in specific industries, including retail.

Main material. The development of the digital economy has a diverse impact on businesses operating in the retail sector. First of all, the issue of combining physical and digital formats of interaction with consumers has arisen. This creates new business opportunities, allows for increased sales volumes due to proximity to the consumer, increased inclusiveness by creating online shopping opportunities along with delivery of goods to the consumer, tracking and predicting consumer behaviour using artificial intelligence and data collection tools, and more effectively influencing consumer decisions, for example, using the BNPL (buy now, pay later) technique. On the other hand, digital transformation creates the need to upskill or retrain employees, possible changes in the organisational structure, and the need to introduce new positions (e.g., digital change managers). The nature of enterprise security is also changing due to the growing possibility of cyberattacks, which entails potential cybersecurity costs. Digital transformations of an enterprise must be implemented comprehensively, but given that their implementation is extremely resource-intensive, it is important to correctly determine the order of implementation of certain changes, ensuring the necessary logic and consistency.

To determine the need for digital transformation at an enterprise, it is first of all necessary to conduct a comprehensive audit of all structural units and processes. In order to identify the needs for digital transformation, we used the matrix for identifying the digital maturity of an enterprise (Fig. 1), proposed by researcher Nadiya Proskurina in her article Digital Maturity of Retail Enterprises in Ukraine: Technology of Definition and Directions of Improvement [8].

Fig. 1. Determination of the level of digital maturity of a retailer (compiled by the author on the basis of the study from Ref. 8)

In the course of researching the topic of digital transformation, an audit was conducted at the retailer, which significantly improved the quality of the results obtained. The audit identified the organisational units and processes that primarily require digital change. The results were compared with data from market research and scientific studies. First of all, there is a need to develop digital literacy and awareness among employees. It is clear that in order to implement digital changes, it is important for as many employees as possible to become supporters of such changes, which should be accompanied by incentives for employees to acquire or deepen digital skills. In turn, this creates a positive perception of future changes by employees. It is worth noting that the need to improve digital literacy mostly concerns line staff. According to the author’s survey of supermarket chain employees, 54% of line staff (sellers, cashiers, loaders, pickers, etc.) do not use computers, smartphones or other digital tools in their work at a sufficient user level or at all. Accordingly, the achievement of a significant part of the goals aimed at digitalising the enterprise will depend on the results of the development of digital literacy among line workers. For example, the first obstacle we encountered when conducting a general audit at the enterprise was the inability of a large number of employees to complete an eNPS survey to assess the level of digital engagement via the Google form resource. This significantly complicates the survey itself and the processing of the results. Accordingly, the same problem will arise when conducting any subsequent surveys or other data collection.

Limited digital literacy is also an obstacle to setting up effective communication channels that ensure the speed and quality of information exchange between management and employees, and the establishment of continuous feedback. That is why the transition to the use of specialised communication platforms that allow for two-way communication within the enterprise and the development of concise, clear communication channels significantly increases the efficiency of the enterprise.

Accordingly, the development of digital skills among employees is fundamental to the success of future digital transformations. The competencies of employees should be fully aligned with the goals of the transformation. If necessary, new roles of integrators or digital change managers may be introduced to establish interaction between the digital and traditional parts of the company’s business processes.

Another challenge in digital transformation is the need to implement various electronic automation and accounting systems. In the process of enterprise development, such systems become a necessity, and despite their high cost, complexity and length of implementation, which usually require a fundamental change in management approaches and processes, companies are ready to invest in them. These include CRM systems (Customer Relationship Management), HRM systems (Human Resources Management), WMS systems (Warehouse Management System), ERP systems (Enterprise Resource Planning), which are important not only to implement but also to integrate into one system to achieve maximum efficiency.

At the same time, despite russia’s full-scale invasion, a significant number of Ukrainian enterprises, including retailers, still use the russian-made 1C accounting system and do not plan to change it to a modern international system or the same system of Ukrainian origin in the near future, despite the fact that 1C was sanctioned in May 2017. [10]. We see several risks in this. First of all, this is a system that is a bridge for the enemy to access any data, although it is not properly maintained and updated by the developer within Ukraine. As a result, companies are running outdated versions that cannot be properly integrated with other modern systems. There was also an urgent need to switch from russian email services and cloud storage, which, among other things, pose a threat of information loss or third-party interference.

In addition, with the introduction of various automated systems, the threat of disruptions or data loss due to cyberattacks is also growing. For ukrainian businesses, the issue of cybersecurity has become very acute, as the enemy has significantly increased the number of cyberattacks. The most common problem is data protection from DDOS attacks, the intensity of which has tripled compared to previous years 11]. To protect against constant cyberattacks and set up an appropriate environment, companies have begun to engage external cyber defence specialists more often, but at the same time are developing their own service departments. For retailers, the implementation of measures to preserve and protect information, internal and external communication processes is key, as they operate in the B2C segment with an extremely large number of clients/consumers. Therefore, although the implementation of new software is a lengthy and financially costly process, it is necessary to maintain the effective functioning of the enterprise.

When studying digital transformations at retailers, it is also important to highlight the setting up of effective customer relations as the most important external stakeholders of retail companies, as their loyalty and, accordingly, demand is the key to achieving the companies’ business goals. Fig. 2 below shows the 10 largest retailers in Ukraine by the number of visits to their e-commerce resources in 2024, according to Forbes Ukraine, and the fig 3 shows dynamics of growth in the number of active e-commerce users. As you can see, the role of e-commerce is extremely significant, so it is important for companies to work on developing this channel.

Fig. 3. Dynamics of growth in the number of active e-commerce users in Ukraine in 2018-2024, million people (compiled by the author).

With the development of digital technologies, the format of customer interaction with retailers is changing and is accompanied by its gradual transition to the online environment. The key task for retailers is to create a convenient interaction for the customer, ensure the speed of purchase and simplify the payment system, while reducing the need for direct contact between the customer and the place of trade. This also includes new approaches to the development of loyalty programmes based on in- depth research of customer behaviour using artificial intelligence and data collection. In addition, the Q-commerce model of customer interaction, which involves ensuring fast delivery of goods to customers within 60 minutes, is growing rapidly. Self- service checkout technology is also developing rapidly, which significantly saves time for customers and allows businesses to reduce staff. Self-service cash registers are combined into one system with loyalty programmes, and customer identification makes it possible for personalised offers to a particular customer. We should also highlight M-commerce, which is realized through the use of mobile devices to make quick purchases at any convenient time or other interaction with the client (notifications about various promotional offers, encouragement to purchase a certain product targeted to a specific buyer, etc.) In recent years, social networks have become an increasingly important channel of digital commerce, directly used for making purchases. This way, a comprehensive interaction with the customer is built, which indicates the deepening of omnichannel. In general, the goal of applying various approaches to customer interaction is to create a holistic positive experience of interaction and blur the boundaries between digital and physical spaces.

Digital transformations have become a prerequisite for business development today. A study by McKinsey Consulting Company published in the article Unlocking success in digital transformations [1] were identified 21 criteria for the success of digital transformations. Let’s summarize and highlight some of them that we consider to be the most important and priority. First of all, it is the deep involvement of senior managers in the implementation of digital changes, who, together with initiative leaders, should work to involve employees in the relevant transformation processes. The company’s management should encourage employees to quit old ways of working and get involved in implementing digital changes. Involving employees in the role of active integrators of change processes, creating a favorable environment for generating ideas about which processes need digital transformation in the first place, significantly increases the level of motivation and gives a sense of shared responsibility for future changes. In addition, it is important to complement the top management team with specialists in technological innovation to effectively implement digital changes.

Thus, it is advisable to identify three key indicators for assessing the digital maturity of a trade enterprise:

• level and scale (scope) of digitalization of infrastructure and processes;
• level of digital skills of staff, their sufficiency for the full use of digital tools and readiness to introduce new ones;
• level of use of digital tools and solutions in marketing to establish continuous communication with the client in various communication channels;

• the effectiveness of combining offline and online work

The research made it possible to summarize in Table 1 the key necessary actions in the direction of digital transformations that will ensure the effective functioning of the retail enterprise in modern conditions.

 Table 1

Components of digital transformations and their impact on retail enterprises (compiled by the author)

Conclusions. Thus, the success of digital transformation of retail enterprises lies in providing a holistic vision of changes and rethinking the approach to doing business, the readiness of the management to abandon old approaches, even if they are convenient

and understandable. The modern trade model is moving beyond just buying and selling goods, it is increasingly integrating into the customer’s life, adapting to their preferences, and influencing their decisions. Therefore, digital transformation is a necessary process of change in the retail industry, and it must be comprehensive and inclusive, dynamic and adaptive to maintain competitiveness or become a leader in its field. 

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