Digital transformations have been underway in many sectors since the mid-2000s and have accelerated in recent years as technology costs have fallen while capabilities have improved.
Companies can harness the power of innovation by acquiring, integrating, and applying innovative technologies to reinvent their business model and create new value.
In early 2015, Gartner released a report on the ‘algorithm economy,’ reporting that leading global businesses had started their own initiatives to become digitally transformed into what the company calls ‘born digital’ enterprises.
Most notably, digital transformation has helped E-commerce flourish in the last decade.
E-commerce giants like Alibaba and Amazon have already made significant progress in providing consumers with a wide variety of products, prices, and information that a physical store cannot offer. Products are becoming cheaper by the day as well as easier to find via search engines.
In fact, manufacturers are now counting on digital transformation in the retail space. How does that work out for them? Let’s find out.
Why Rapid Adoption of Digital Integration has Been Necessary?
The Internet has given small businesses a chance to compete with big global brands like Nike or Estée Lauder because they can now reach millions of buyers worldwide through online stores instead of one local boutique or department store.
Small businesses have been able to efficiently track their financial performance using cloud computing software, which also manages vast amounts of information from employees and customers alike.
Many companies rely on this same technological advancement to expand their internal capacity for data storage in order to keep up with the increasing demand for electronic information.
In a survey of 200 participating manufacturers, the results showed that companies are focused on improving digital supply chains, B2B E-commerce sites, and tech integrations. The survey showed that most manufacturers unanimously agreed on digital transformation being a priority in business.
90% of them said they lost business because of integration problems, while 42% said they’re facing a loss of over $500,000 a year.
Meanwhile, 90% of the companies said unstructured data types, lack of EDI standards, and inadequate application programming interfaces were creating problems during onboarding.
According to the report, “Not every manufacturing company has the same approach to digital transformation, but on average about half agree on what the essential elements should be.’’
These include:
- Better distribution capabilities
- Participation in B2B marketplaces
- Improved electronic data exchange
- Usage of application programming interfaces
In another survey, 89% of the manufacturers said they have started appreciating technology more in the past five years.
To make it a part of their business ventures, companies are planning on entering the B2B marketplaces and expanding their E-commerce avenues through omni-channel strategies.
Role of Covid-19
Another reason digital transformation has become a necessity in the retail space is the spread of a global pandemic. Covid-19 raised the need for many operations to be shifted online, such as customer-business interactions and transactions.
Owing to this, companies have to incorporate digital transformation into their business approach or be okay with losing their clientele.
Thus, companies that adopted digital transformations managed to stay afloat during the pandemic, while those that did not had to close up shop.
The digital transformation also brought the replacement of the physical storefronts with online storefronts, which allow businesses to expand globally, bypassing problems such as strict regulations and high cost of transportation.
Digital technologies and software have enabled companies to collect data on a global scale. This gives them better insights into their customers, what products they want, how much they are willing to pay for them, and where they are located.
Why Could Falling Behind With Digital Trends Be Fatal For Companies?
Companies that fell behind on digital transformation and omni-channel retail approach during the pandemic lost much of their sales compared to those that were already digitally advanced.
As retail e-commerce expands, there will be more opportunities for companies to start adopting digital transformation practices and toolsets that help them stay competitive.
An example of such a brand is LVMH. It’s the parent company behind many luxury businesses, like Christian Dior and Guerlain. Traditionally, the group’s products have been sold in department stores and boutiques.
Moreover, their digital transformation approaches have been slow as compared to other luxury brands. When the pandemic forcefully closed shops, the financial group lost up to 27% of its revenue.
Likewise, Primark lost £650m every month during the pandemic merely because it doesn’t sell online directly. These statistics are proof that companies that fail to follow up on digital transformation are bound to experience their ‘financial death’ in no time.
Digital Transformation is Accelerating in 2021
The pandemic has served as a wake-up call to companies, showing them the negative aspects of sleeping on digital transformation and an omnichannel business approach.
AI has been making strides within the retail industry: the recent past saw Walmart introduce an AI assistant for customers, Amazon open two cashier-less stores, and Macy’s implement a computer vision system into one of its flagship locations to improve store layout decisions.
These companies are doing so because they understand how important it is to offer seamless omni-channel experiences to their customers.
Thus, it is vital for businesses to incorporate these technologies into their business models in order to benefit from potential future growth in the market.
A McKinsey report has shown digitization growth to be 55% in 2020, which is a 20% jump from December 2019.
Thus, it shows that more and more businesses are taking the digital transformation route to provide personalized solutions to customers, increase revenue generation, and leverage omnichannel strategies.
Conclusion
To wrap up, digital transformation is the need of today, and manufacturers across the globe are counting on it to stay ahead of the competition. The manufacturing sector has the potential to revolutionize how we do business with improved operational efficiencies, agility, and cost savings.
Covid-19 has taught the sector that it’s high time for them to embrace digital technology for a more productive future. As discussed above, digitization saw a 20% increase in 2020, and the percentage is forecasted to be much higher for 2021.
