Digital transactions at 53% of total sales in MENA outshines global revenue share of 46%

December 8, 2021 | By RetailME Bureau

Digital transformation

Offering a compelling omnichannel experience used to be the bleeding edge of retail. Now it’s a requirement for survival. Huge constraints in supply chain and workforce issues, accompanied by a jump in consumer demand for specific products added pressure on retailers. We saw this especially last year when digital ordering and omnichannel fulfilment became the focus of business strategies.

Retailers across the world have seen a 46 percent increase in revenues from digital channels, according to a study by Oracle – leading cloud technology company that provides organizations around the world with computing infrastructure and software to help them innovate. Transactions settled with credit and debit cards have jumped 44.9 percent in a year from June 2020 to June 2021.

To watch the webinar on How Retailers Are Ensuring Omnichannel Profitability click here

Peter Newham, Senior Director – Oracle Insight, Architecture and Industry Strategy at Oracle, says,“UAE’s digital growth is set to increase at an unprecedented rate of 18.6 percent Compound Annual Growth Rate (CAGR) until at least 2025, according to Euromonitor. As much as 63 percent of customers report that lacking visibility of inventory availability forced them to switch brands,” he said.

Omnichannel retailing refers to seamless transactions across multiple channels, which may include marketplaces, social channels, in brick-and-mortars and more.

The rise of e-commerce, changing consumer behaviors, and stiff retail competition has made omnichannel retail increasingly relevant. The use of digital devices before or during shopping will influence 58 percent of in-store sales by 2022, according to Statista.

Consumers use mobile devices in a myriad of ways, from making payments and managing loyalty cards to communicating with customer service agents and visualising products. And while stores remain the biggest retail channel, online sales have skyrocketed as the Covid-19 pandemic forced people to stay at home. In the US, e-commerce accounted for an estimated 21.3 percent of total retail sales in 2020, according to a report by CBI Insights.

“Channel mix has a profound impact on profitability,” Newham says. “Retailers need the ability to carry out Scenario Modelling, which considers impact of channel mix on Financial Planning, Merchandise Planning, Assortment Planning and Workforce Planning whilst not forgetting supply chains,” says Newham.

A Dubai Chamber of Commerce study forecasts that the retail industry will rebound by 13 per cent to reach $58 billion by the end of 2021, supported by pent up consumer demand, Covid-19 vaccination efforts and Expo 2020 Dubai.

It forecasts that UAE retail sales might maintain a 6.6 per cent annual growth in the medium term to reach $70.5 billion by 2025, with store-based retailing growth forecast at a CAGR of 5.7 per cent. However, in order to achieve a higher omnichannel profitability, retailers need to optimize business operations and financial tools to deliver better on-time results.

Gary Brocklehurst, ERP Business Development and Strategy Leader, Orcale, says, “It is important to embrace business model innovation as it will empower retailers to create and develop stable and recurring revenue streams in new growth areas. Rethinking, automating and optimising your business creates resilience and agility. It is important to ensure that the channel mix is customer centric and profitable.”

He said, it is important to accelerate the automated close by getting accurate information into the hands of decision makers as quickly as possible.

“We have reduced manual accounting by 42 percent, while 94 percent of bank transactions are auto matched and 75 percent of bank account reconciliations are fully automated. This enabled us to achieve 98 percent reduction in global expense allocation and 99 percent reduction in global accruals preparation time,” said Gary.

“A better customer experience leads to higher profits and loyalty only if the economics add up. Retailers must plan and adapt to disruptions to exceed customer experience.”

Consumer attention is dispersed across channels and they are embracing omnichannel services. One study found that almost 75 percent of shoppers use multiple channels to find discounts, compare prices, or use in-store tablets to browse products online. Omnichannel shoppers also spend more than single-channel shoppers, both online and in-store.

So it comes as no surprise that retailers using omnichannel strategies report higher annual revenue, an increase in average transaction size, and better profitability, according to a CBI Insights report.

One study revealed that over 85 percent of consumers prefer interacting with brands using both digital and physical channels — a preference that is consistent across all generations.”

The results of the right strategies are evident in the region’s retail sector, as witnessed by Kamal Osman Jamjoom Group and Nahdi Medical Company in Saudi Arabia. Both the company officials spoke about their digital transformation journey at the RetailME conference.

Philip Smith, Group Head of Digital, Kamal Osman Jamjoom Group, says, “Omnichannel enabled us to grow our profits from single-digit to double-digits. Our transformation journey started from physical to digital in early 2019, right before the pandemic.“Omnichannel was a right decision and we have now occupied 45 stores in the UAE.”

The company recently secured the master franchise for Subway, as a result of which they will be operating 130 to 140 stores in the UAE.

Aiman Ali Mohammed Alsakkaf, IT Applications Director, Nahdi Medical Company (NMC), says, his company has witnessed a phenomenal growth in e-consultation, e-prescription, and online purchase of medicines, following the pandemic.

The company, which started in 1986 with two stores in Jeddah, currently operates more than 1,110 stores in 2021 – a remarkable journey of expansion that has completely redefined the retail pharmacy market in Saudi Arabia.

“We have come a long way in developing multiple delivery channels of medicine, consultation, treatment, diagnosis and other healthcare services,” he said. “We are witnessing a shift towards digital channels for all services and we as a business have also evolved with the customer choice.”


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