By Sabrina Zavahir
Innovative approaches adapted by business enterprises in the form of a digital transformation will certainly enhance customer experience which will automatically lead to higher conversion rates to the digital world with boundless optimization.
This optimization is the integration of digitalization into each scope in a business enterprise where this integration leads to prioritizing essential changes as to how financial institutes or any nature of key industries would be operating and delivering a prolific value to their business partners and customers.
Establishments have fundamentally changed due to digitalization where customers can experience a complete and autonomous corporate correspondence or interaction based processes with a high-level involvement with an approach being more personalized. Thus, the future displays that organizations need to be highly adaptive to digital transformation, adding more significance undoubtedly by the espousal of digitalization. Ms Mahesha Amarasuriya – Director, Mastercard Sri Lanka / Member of the CIMA (UK) Global Council shared her expertise with BMD in this connection.
Q: Execution of processes is tedious from existing traditional systems. So, how do you see a positive growth in overall Ecommerce and digital commerce?
I think it would be good to start by elaborating on the two terms E commerce and digital commerce first.
These two terms are sometimes used as synonyms, but do have different meanings. Some years back, a business could be just selling online by having a basic website and a payment gateway system. As the retail landscape becomes more complex, consumers want to be able to engage and to be engaged with businesses across multiple channels at their own convenience, access information, pay in a way that suits them and enjoy a seamless end-to-end experience.
Hence merely “selling online” is not adequate and therefore a shift from E commerce to digital commerce becomes necessary. I would say simply, E commerce is a function and digital commerce is a culture. While E-commerce refers to the functional aspects of selling products online, such as managing supply chains, getting a storefront set up on a website or processing transactions and collecting payments, digital commerce is about people, technology and data-driven processes that raises retail to a different level.
Digital commerce includes wider concepts such as content management, data analytics, user design and experience, customer engagement and retention and the ability to quickly adapt and roll out features to each and every customer-touchpoint easily. Digital commerce is customer-centric and is concerned with optimizing customer experience at every single touchpoint along the consumer’s journey.
Whilst Covid-19 brought about many Economic and health disruptions, one positive benefit it brought was the growth in Ecommerce and overall digital commerce.
The COVID-19 global e-commerce surge was initially born out of necessity. Online shopping provided a practical alternative as shops closed and people were forced to stay at home. This resulted in global E commerce rising from 15% of total retail sales in 2019 to 21% in 2021. As at June it is around 22% of sales. The question is as consumers began shopping in person again will e-commerce growth continue?Studies carried out by Morgan Stanley show that the E commerce market has plenty of room to grow and could increase from US$3.3 trillion today to $5.4 trillion in 2026 and the that the Covid-driven bump will not flatten future E commerce growth. It is expected to reach 27% of global retail sales by 2026. Across the world, there is yet no ceiling for E commerce penetration.Whilst Covid19 has subsided across the world many other factors including logistics, mobile device ownership and marketplace expansion is driving Ecommerce and digital commerce.
If we look at a local perspective as to where Sri Lanka stands in terms of E commerce and digital commerce, internet based payments alone have grown by three fold when comparing 2020 Q 1 with 2022 Q 1. It was US$ 10.8 billon in 2020 Q1, $19.68 billion in 2021 Q1 and $43.3 billion in 2022 Q 1.
Sri Lanka saw a surge of E Commerce during the Pandemic, more as a need to survive. Covid was a test of agility and adaptability. Whilst previously one spoke of “survival of the fittest,” it became survival of the fastest. All retail businesses from grocery and vegetable shops to beauty accessories to clothing stores had to adapt to the need of the hour and convert into online sales if any sales were to be done at all.
While it was mere survival strategy back in 2020, two years into the online and E commerce business many organizations are changing their strategies permanently and embracing a digital commerce culture. Statistics show that revenue in the E commerce market in Sri Lanka will surpass $ 2.7 billion in 2022 and is expected to surpass $ 4.8 billion in 2025. The number of users is expected to amount to 9.2 million users by 2025. User penetration of 35.2% in 2022 is expected to hit 42.3% by 2025. Internet penetration in Sri Lanka is forecast to reach to 46.9% in 2025.
Q: Digitization is certainly a process, how important is it for a company to go through the journey of digital transformation?
There are three words that are often used as synonyms but with different meanings; digitization, digitalization and digital transformation. These are inter connected words that have different meanings.
Digitization is the process of transforming information from a physical format to a digital version. For example, something simple as E signatures would be digitization. Digitalization is the next step of utilizing technology to improve processes. For example, a bank can digitalize its paper based loan approval or credit card approval process by using technology. In this example, the bank is enabling, improving and transforming business operations through the use of digitized data and technologies to change how organizations conduct business and improve productivity and efficiency.
Digital transformation therefore is another step above where an organization would leverage knowledge and integrate it in all business areas to enhance engagement and create new value. An example of something we are familiar with, McDonalds. Rather than focusing on “making fast food faster” the team focused on customer experience; improving in-store, drive-“thru,” and home delivery (ordering, payment, mobile) systems. With the use of digital technology such as interactive ordering units, aIl drive-through and smart mobile app experiences they managed to reduce that customer experience gap.
Dominos used digital transformation by introducing a “Pizza Tracker” allowing customers to monitor, ordering, preparation, baking, boxing and delivery through the app.
While the surge of E commerce was a need of the hour in 2020 many companies have gradually realized the benefits of the same and hence adapting and changing its overall business models to reach gradual digital transformation. Digital transformation has many benefits for a company :-
a) Increases Customer Satisfaction
Customer expectations are continuously increasing and they demand for personalized services coupled with seamless experiences and to be in control. With the use of digital tools, a company can provide a more personalized, efficient and seamless customer experience.
Present day companies are no longer expected to merely deliver products but deliver experiences. As a consumer, you are not just paying for the end product but for the seamless, frictionless and customized service that you get.
It is also important to note that over 80% of customers will shift the goods /service provider for a better experience and 40% of consumers who have faced transaction declines on their 1st visit to a site will not try that site again. Therefore, it becomes important for any company to get it right the first time.
b) Drives Data-Based Insights
Important and a very significant benefit of digital transformation is that a business can collect and analyze data that can turn into actionable, revenue-generating insights. For example, a supermarket chain collects data on what day of the week each customer shops, what he/she purchases, which outlet he / she visits often. This data would be available but in a scattered form or such data may not be available at all. But digital transformation enables to collect such data, create tools to analyze and translate data into information and make informed decisions. Thereby, the same supermarket chain can make decisions on what products are purchased in which outlet. It can even go into more personalized levels of offering discounts to selected customer bases. As a consumer you would be thrilled if a personalized discount is offered to you on a particular shampoo brand because you have purchased the same brand continuously for six months. This would be a discount you get and not the entire customer base.
c) Increases Agility
Digitalization started as a means to achieve agility. A business model that encapsulates digital transformation does not have heavy overhead costs. It is not brick and mortar driven. Hence, changing business models and adapting to the environment becomes easier. A company can possibly start operating across different continents through virtual channels faster than trying to move a brick and mortar office from say Colombo to Galle.
d) Increases Operational Efficiency
Digital transformation increases operational efficiency. Complicated, messy and time-consuming manual processes converted to seamless digital processes. A lot of repetitive work can be eliminated. When you automate manual repetitive processes, you free your employees from monotonous job tasks and allow them to focus on more difficult and innovative initiatives that will help your business function more efficiently. And
e) Reduce Operational Costs
Every business has the objective to save time and money. Manual tasks and processes are intrinsically slower than automated activities and processes since they are conducted one at a time.
Inefficient processes could cost organizations up to 30% of annual revenue. When business procedures are done manually, there is a far greater chance of resources being wasted. It is said that well planned digitalization has the potential to save up to 90% on operational expenses.
Q : Cultivating a culture of innovation is certainly promising hence, what do you see as the future of digitalization?
When we watched Knight Rider in the 1980s we never expected that a few decades down the line the fancy driverless car will come to existence. Similarly, the future of digitalization and digital transformation has no limit. I remember some years back when drone technology was novel and tech gurus spoke of using drone technology to deliver medicine to rural parts of the world where delivery by road would take hours.
Only a few years later we witnessed use of industrial drones in Sri Lanka for agricultural purposes and also use of drones to deliver medicines to Covid19 quarantine areas during 2020.
The world has moved from “virtual realty” to “augmented reality” which is the integration of digital information with the user’s environment in real time. It has become part of daily life, some of the examplese being virtual fit-on rooms used by some of the retailers, Google Street View, Pokemon Go game and numerous other Interior Design and Photography Apps.
Near future as we see it today would be Metaverse Centric. As much as Knight Rider’s driverless car, the concept of Metaverse came in Neal Stephenson’s science fiction novel Snow Crash back in 1992.
Mark Zuckerberg on his vision of the future has said “In this future, you will be able to teleport instantly as a hologram to be at the office without a commute, at a concert with friends, or in your parents’ living room to catch up.” He also says that by end of the decade, over one billion people will be working and playing in the immersive three dimensional world referred to as the Metaverse.
Q: In the backdrop of Sri Lanka’s deepening economic crunch, what’s the role that banking institutions play in your perspective?
Sri Lanka faces an unprecedented economic downturn currently with the Sri Lanka Government having declared default on all of its external debt in 2022 with the debt to GDP rising over 120%. Sri Lanka’s total foreign exchange reserves were at $ 1.7 billion in July 2022.
Colombo Consumer Price Index (CCPI) based headline inflation accelerated to 64.3% year-on-year (YoY) in August 2022 (from 60.8% in July 2022). Food inflation (Y-o-Y) increased to 93.7% in August 2022 (from 90.9% in July 2022) and Non-Food inflation (Y-o-Y) increased to 50.2% in August 2022 (from 46.5% in July 2022).
In March 2022 Central Bank of Sri Lanka (CBSL) decided to revoke the mandate on the exchange cap of Rs 203 per US dollar, allowing the Sri Lanka rupee to depreciate against USD which resulted in the dollar/rupee rate surpassing Rs 365 per dollar during the next quarter.
Continuous increases in prices of essential items such food, medicine, gas and fuel together with shortages of fuel, gas and some of the critical medicines continues, though attempts are being made to resurrect the economy.
In this situation, banks as the backbone of the economy are playing a very crucial role, managing both the needs of the economy as well as the needs of the customer. Banks have been in the forefront of supporting the country to bring foreign currency and at the same time being its shield in protecting the outflow of foreign currency.
The present economic downturn has many ripple effects on many of the industries. The tourism and hospitality industries were heavily impacted while the automobile and construction industries are also being among many others that were impacted due to the depreciating rupee and curtailed imports. Banks having exposure to these sectors are faced with severe asset quality pressure having to manage the overall customer relationship as well as non-performing assets.
Q : Inflation is stereotypically the result of an imbalance be it in supply or demand. As responsible individuals how can one manage investments and savings during hyper inflation?
As mentioned, the Colombo Consumer Price Index (CCPI) based headline inflation recorded at 64.3% on a year-on-year basis in August 2022 (from 60.8% in July 2022) and food inflation (Y-o-Y) increased to 93.7% in August 2022 (from 90.9% in July 2022).
In such a situation, time value of money is diminishing rapidly and therefore it is important to identify best investment opportunities.
As an immediate measure in a hyper inflation situation, purchasing non-perishable items in itself is an advantage. For example toiletries, detergents and even food items and medicines with long shelf life can be purchased for a few months ahead. I must note here that I am not encouraging hoarding and collecting in addition to what is required. But collecting a few months ahead is what I mean.
Next is to look at the medium term. One must have a mix of high liquid assets and low liquid assets that can then earn capital gains.
Having cash in hand is important for emergency payments, unforeseen events or even for quick investments. Currently banks and financial institutions have attractive investment options in the form of fixed deposits, money market accounts, etc.
Share Investments and other investment options must also be looked at. Share prices of a lot of industries were low due to the overall economic downturn but have greater potential of turnaround when the economy picks up. It is important to stick to market fundamentals when investing in the share market and not depend on speculative gains. Share investments should not be considered as a gamble but more of an informed decision.
Property is an investment with long term potential for capital gains. Overall, land is a scarce resource hence greater potential for capital gains.
There are some not so common investments such as jewellery, antiques, art, etc., which may not be liquid immediately but continue to appreciate in value.
One should also look at investments in a personal safety net perspective, in the form of a family health insurance. Many insurance companies have multiple offerings for health insurance with or without life cover.
One golden rule is “not to put all your eggs into one basket” and ensure it is a diversified portfolio.BMD