How COVID-19 Has Accelerated Digital Transformation

One impact of the pandemic that has hit the world in 2020 & 2021 is an elevated reliance on digital channels, when it comes to communication, work, commerce and extra.

This had led to some firms rushing up their digital transformation plans and tasks to react to altering buyer behaviour.

On this article, we’ll have a look at how the pandemic has affected attitudes to digital transformation, and a few of the companies which have needed to adapt rapidly.

Why speedy adoption of digital has been crucial

Digital transformation is nothing new, and most firms, to a better or lesser extent, have been rising their use of digital, from historically offline firms shifting into ecommerce, or better adoption of digital know-how to enhance processes and productiveness inside organisations.

The Covid-19 pandemic produced a whole lot of speedy modifications, one in every of which was the necessity to conduct transactions and interactions extra safely, usually at a distance.

As McKinsey stats present, digital interactions with prospects – gross sales, buyer providers and extra – have elevated quickly this yr. Nearly all of all buyer interactions globally are actually digital.

This may occasionally embody using Zoom conferences for workers working from residence, the adoption of know-how for customer support interactions and, after all, the elevated use of ecommerce for retailers.

These modifications has been compelled to some extent by lockdowns and different restrictions which meant premises had been closed, but additionally the necessity to attain these prospects who wanted to protect, or felt uneasy visiting shops.

Clients turned to ecommerce in large numbers. Ecommerce stats from Statista present that ecommerce accounted for greater than 30% of all UK retail gross sales in Might and June 2020.

Ecommerce as a share of UK retail gross sales: Might 2019 to July 2020.

The implications of falling behind with digital

Some firms have suffered greater than others throughout the pandemic. By this I imply companies which have been gradual to undertake digital channels to market and promote to their buyer base.

The pandemic has had a unfavourable impact on many firms, and sure sectors (vogue for instance) struggled greater than others. Nevertheless, these with robust ecommerce channels had been extra more likely to preserve revenues throughout lockdown, or no less than offset a few of their losses from bodily retailers.

LVMH, the group behind many well-known luxurious manufacturers reminiscent of Guerlain and Christian Dior is one such instance.

LVMH merchandise have historically been bought by boutiques and department shops, and the group (in frequent with different luxurious firms) have been comparatively gradual to undertake digital channels.

The expansion of on-line channels, each for advertising and gross sales, and the altering shopping for preferences of shoppers (youthful demographics particularly) made the arguments for digital onerous to withstand.

The appointment of a Chief Digital Officer in 2015 signalled the start of the group’s digital transformation, a course of which continues to be underway when the pandemic struck.

The compelled closure of shops earlier this yr led to a decline of 27% in group income, solely partly offset by ecommerce gross sales (LVMH didn’t present any numbers on on-line income).

Primark, a retailer which doesn’t promote direct on-line, reportedly misplaced £650m monthly in throughout lockdown, so maybe it’s going to lastly be satisfied to promote on-line.

The acceleration of digital transformation in 2020

One main consequence of Covid has been that firms have had a glimpse of a attainable future when bodily retail gross sales are a lot decrease, and the way they’d be capable of cope.

This has naturally led to present transformation programmes to be sped up, or for brand spanking new ones to be put in place.

There’s been a large development within the digitisation of merchandise in simply half a yr or so. From 35% globally in December 2019 to 55% in July 2020 in keeping with McKinsey.

McKinsey estimates that firms have accelerated the digitisation of provide chains and buyer interactions by three to 4 years, and their portfolios of digital merchandise by an astonishing seven years.

Maybe this acceleration of digital transformation will present how straightforward it’s if solely firms have the agility and impetus to make speedy choices, although one attainable flip aspect is that this acceleration of exercise takes away the room to experiment or to plan tasks with extra precision.

It might be that a few of these accelerated tasks will have to be tailored when time permits, however I believe it additionally proves past any doubt the case for digital transformation.