Promoting the digital revolution in the Western Balkans

Productivity growth, higher quality services, better decision-making, greater customer reach, and even happiness have been linked to the digital transformation of businesses and economies.

And yet, the path towards digitalisation is uneven. In the Western Balkans, as in other EBRD regions, a large urban-rural divide in broadband coverage, underdeveloped digital infrastructure and low levels of digital literacy present barriers to reaping the benefits offered by digitalisation.

A challenging digital landscape

“The process of digitalisation is a challenge for both small businesses and public institutions alike,” says Dejan Spasovski, CEO of DE-TA Dejan, a wholesaler of undergarments in North Macedonia. Most official and business documents are still signed in paper form across the region, and distrust in and security concerns about the digital ways of working pose barriers to the implementation of digital tools.

But with the Covid-19 pandemic, the need for – and benefits of  – a digital transition have become that much more pronounced. From the six-year-old that had to operate an iPad to learn online, through the manager that had a whole suite of new collaboration technologies to master, to whole businesses that needed to quickly adopt new operational tools as consumers moved online, the pandemic forced society into the digital sphere.

Businesses like Dorat MC, a renowned importer and retailer of a wide range of souvenirs and memorabilia in Serbia under the brand Ekspedicija, quickly understood the need to digitalise.

Greater reach

“Digitalisation is the key segment that enables your business to develop,” says Milos Cetkovic, CEO of the company. “From a consumer perspective, digital tools allow you to find and buy the products and access the services you need at the click of a button. While for business, the advent of the internet and smartphones can create new sales channels and reach new customers.”

Working with a consultant, Ekspedicija sought to improve its business performance during the pandemic by completely digitalising its sales. The team built a new web store and upgraded its e-commerce infrastructure.

“We have managed to grow our revenues by about 25 per cent in 2021. Our biggest growth was made in online sales, which are 5.5 times higher than in 2020,” Milos notes.  

The flip side

But greater customer enablement by digital channels can come at a cost, particularly if consumer demand outpaces the capacity of the business.

“When we expanded our online presence, the increased level of online sales affected our warehouse operations, challenging the way inventory was traced and managed,” remarks Kriton Prendi, owner of MITO by Caterina Firenze, a shoe production and exporting company in Albania. The different sales channels made it difficult to see an accurate picture of customer preferences and product performance, which is crucial for effective decision-making.

This is why, he argues, implementing digital solutions that create operational efficiency is far more important than tools that increase reach. And it’s why MITO by Caterina Firenze worked with the EBRD to implement an automated warehouse management system, leading to faster processing of received orders, improved inventory management and accurate reporting.

Faster and superior

“Companies that are digitalised are more innovative and able to compete on both local and international markets,” agrees Tomislav Djorojevic, CEO and co-owner of MPM doo, a leading retailer and wholesaler of beauty products in Montenegro. “Digital tools can improve the efficiency of a company management.”

With innovation as its end goal, and with support from the EBRD, MPM doo digitalised its loyalty programme, creating a mobile application that replaces physical loyalty cards and enables online shopping. So far, some 73,000 users have downloaded the app.

“Automation increased the quality of data we have on our customers, as well as improved the customer experience. Our overall processes have improved, as have our results,” he explains.

A need for skills

The trouble with the increasing rate of technological transformation is that those who don’t get onboard the digital agenda risk being left behind. The EBRD’s Transition Report 2021-22 finds that people in the Bank’s regions tend to have fairly poor ICT skills, and the low level of digital literacy is a recurring concern in the business sphere.

 “Successful digitalisation goes hand in hand with investing in knowledge, training and equipment, and would help the Western Balkans market to position itself in the European market,” says Kriton Prendi.

So where to begin? The EBRD is at the forefront of the digital skills gap. 

With specific products aimed at closing the gap such as Youth in Business and Skills in Business, the EBRD is stepping up to help its regions address the skills divide. The Bank’s recently launched Digital Transition Approach sets out the ways it will achieve this by 2025, including through delivering specific advisory projects on skills development, and enhancing our clients’ capacity to forecast needs. And with the generous support of donors that lead the digital way such as Norway, the Bank is poised to succeed, helping Western Balkans economies to thrive.

The projects above were implemented through the EBRD’s Advice for Small Businesses programme, with funding from Norway through the EBRD's Small Business Impact Fund (Italy, Japan, Korea, Luxembourg, Sweden, Switzerland, TaiwanBusiness - EBRD Technical Cooperation Fund and the USA). Digitalisation is one the three key strategic priorities for the EBRD, as well as for its SME Finance and Development Group, for 2021-2025.