Digital Transformation in the Service Sector: Insights from Consultations with Firms in Wholesale, Retail and Logistics

Firms increasingly rely on digital technologies such as e-commerce, cloud computing, big data, digital tracking and digital platforms that are reshaping business operations, business models and market structures. In this context, the Bank of Canada consulted with firms in wholesale, retail and logistics, as well as with related industry associations to yield insights on the adoption of digital technologies. Results show that firms are increasingly investing in digital technologies, most often to increase operational efficiency or to enhance customer experience. The survey also aimed to shed light on the various channels through which digital transformation may affect firms’ prices in order to discern the implications of digitalization for inflation. Survey respondents point to some disinflationary pressures overall: first, firms view e-commerce as putting downward pressure on prices, due to increased transparency and comparability in online markets, which amplifies competition and reduces firms’ pricing power. Second, thanks to the adoption of technologies, cost savings and efficiencies are in some cases being passed on to the customer although, for many firms, cost savings are yet to be realized. Finally, firms view digital technologies as a driver of actual or expected changes in market structure, citing consolidation and concentration of market power among dominant players, forcing smaller players out of the market.