We have been in the transitory period for the last decade where organizations and industries have been undergoing digital transformation of their core as well as adjacencies in order to reach customers through new channels and stay competitive. COVID – 19 has accelerated the digitalization process across industries by several years in both emerged and emerging markets alike. Although the extent and strategy of digitalization varies across sectors but most of the changes are here to stay in long-term.
COVID – 19 has thrown new challenges for individual sectors and business leaders must address these in order to survive in short-term as well as carve out and ride the new growth trajectory in long-term. Consumer retail sector has already seen significant number of long-term changes due to the nature of the business. Evaporating margins due to fierce competition and significant cut in consumer discretionary spending, and intermittent lockdowns are the key factors which will keep customers interactions on digitalized path on long-term basis.
Source: Nielsen Global New Shopper Normal Study, May 2020
Most small and medium players are heavily dependent on the e-commerce channel now and brick and mortar stores have seen a near permanent setback. Household goods, medicines and groceries have seen the most significant gains. Other segments have seen some setback due to general reduction in spending capacity however the share of online sales as a percentage of overall sales has gone up across the globe.
Source: OECD
It is said that that rise of JD.com and Taobao which is Alibaba’s B2C business, in China owes a lot of credit to the SARS epidemic of 2002-03. We are seeing a similar trend now across the globe, with the biggest gainer being Amazon of course. A lot of the retailers and B2C operators have been now forced to invest in their online infrastructure or join hands with one of the bigger players.
At a high level, BFSI retail also looks a lot like consumer retail and is undergoing sustained long-term shift. We were already seeing an influx of digital only banks which has seen a further bolster this year. Fintechs are now mainstream, not only direct to customer but also in partnership with traditional banks. The most interesting adoption of digital banking has been a significant rise in adoption by the older generations. Customer journey and customer centricity will become focus and early adopters will see higher share of deposits and increase in cross selling of portfolio products.
The speeding up of digital transformation due to Covid-19 is not limited to the B2C space but is also seeing a significant impact on the B2B players as well.
With most teams working remotely, not just sales but service delivery and fulfillment is also happening remotely. One key indicator of this change is the surge in the consideration and usage of cloud platforms. The BVP Emerging Cloud Index (includes 54 leading providers of cloud services) has outperformed all major US indices on YTD basis by a large margin.
Source: Bessemer Venture Partners
Source: Bessemer Venture Partners
Digital roadmaps are being altered from the previously development streams focused on websites, to now more budget and time being allocated towards automating customer journeys. Additionally, it has also become very important to ensure all internal processes are suitably digitized and efficient. Technology is the glue which is holding together the operations in these unprecedented times of remote working. An interesting indicator of the same can be seen by seeing the ERP adoption by SMEs.
During the COVID crisis, small businesses are finding it almost impossible to use their existing ERP systems to manage huge jump in digital transactions, and demand for greater speed, agility. Major ERP solutions demand is expected to be driven by the cloud-based segment. Traditionally, most SME employees do not have access to computers while their employers were investing in computer-based ERP solutions. However we see this trend changing, as SMEs increasingly move towards better access to mobile based technologies, ERP providers expect an increase in demand for mobile based ERP solutions. Example, ERP providers are witnessing an increase in demand for mobile based accounting and tax solutions in the midst of COVID crisis.
COVID – 19 has undoubtedly emerged as the catalyst for expediting the digitization agenda across sectors. It may be too early to predict all the long-term trends across sectors, the journey ahead will certainly require greater innovation, digitization of customer journey, tech partnerships, and agility to navigate events similar to COVID – 19. CIOs are expected to have their agenda carved out prioritizing both mobile first and transformation of the legacy systems and processes.
References
Featured image credit: Geralt, https://pixabay.com/illustrations/digitization-transformation-hand-4689532/
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