2X growth in organisations undertaking digital transformation: Kearney

April 19, 2023 | By Rupkatha B

2X growth in organisations undertaking digital transformation: Kearney

While digital has been a buzzword for over a decade, the real value creation has been more recent, particularly post pandemic, stated Tamanna Padhi, Principal – Consumer Industries and Retail Practice, Kearney during her presentation at IMAGES RetailME’s debut edition of the Internet Commerce Summit (ICS) MENA.

Tomorrow’s consumers will be digital-first, curious to experience and explore more. While technology has been evolving faster than ever so are consumers. While existing business models are still playing catch up, new business models are emerging rapidly to cater to this widening gap. And companies that have invested in digital transformation are clear winners with “super normal topline growth and commensurate profitability in many cases.”

“The fundamental pillars of retail – assortment, engagement, experience, channel and fulfilment – may still be the same but digitisation has certainly disrupted each of these pillars,” Padhi observed.

For understanding:

  • Direct-to-consumer brands have proved to be successful, quick to launch and able to personalise products, some clocking 2-4X growth within two years of launch. Examples include Huda Beauty while Nike Direct has doubled in five years and contributes almost 40% to the brand’s topline growth.
  • Almost 80% consumers are influenced by social media in their shopping behaviour. L’Oréal invests almost 70% on digital media.
  • Almost 40% of consumers refuse to do business with brands that don’t offer the option to shop across their preferred channels, and one-third consumers will let go of a brand based on one bad experience.
  • On the other hand, a 1.5-5x higher spend has been noticed among multi-channel customers making it imperative to understand unique customer journeys with data; connect large number of silo-ed touchpoints with technology.

“Therefore, connected commerce is the future at the heart of which is data and technology to understand consumer behaviour. Think about 6thStreet’s phygital store!” Padhi stated.

Another key focus area is fulfilment where overall warehouse automation is expected to go up to 80% in 2023 from barely under 25% currently. “Improving unit economics for last mile has to be a critical value add for any digital investments.”

A growing interest in the metaverse is apparent with 40% consumers globally keen to engage with retail and brand activities in the metaverse. Closer home, 1 of 2 consumers in the MENA region is keen to experience the metaverse. Brands such as Chalhoub Group are, thus, investing a lot in this area.

“Yet, several brands struggle to create value via digitisation,” Padhi pointed out. A few hindrances include lack of desired talent and organisational capabilities; organisational culture – shifting from a siloed product centric to a consumer centric culture; legacy technology architecture limiting scalability and reliability; and finally lack of ability to nurture innovation.

A successful digital transformation roadmap must, thus, include five goals:

  • Redefine an organisation’s vision and ambition to have a clear north star for digitisation.
  • Invest in the right foundation of technology and data – architecture, teams, governance.
  • Prioritise use cases and digital solutions that will maximise customer value and strategic value.
  • Accelerate digitisation through mergers and acquisitions and partnerships; co-create with external ecosystem.
  • Positive, long-term return on investment should continue to be a key success measure in assessing digital investments.

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