The truth about online consumers - KPMG
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Foreword Enabled by technology, the continued year over year growth in online shopping has been fueled by a new generation of consumers who want greater convenience, value and options. For consumer businesses, this trend poses both challenges and In this report significant opportunities. How do companies target Competition is no longer limited to local shops during business hours. Consumers Millennials who no longer today are shopping all the time and everywhere; and in a truly global online trust traditional advertising? marketplace, products can easily be purchased from retailers and manufacturers How important are payment located anywhere in the world—or from those with no physical retail locations at all. options in India? Which Consumer demand for richer experiences and greater convenience means that countries are most likely to retailers need to rethink their strategy, both online and in stores. Having the right buy from foreign websites? product mix is no longer sufficient to attract the new wave of consumers including Where are consumers Millennials, who are entirely focused on one transaction—theirs. Creating an online willing to buy groceries shopping experience enhanced by technology such as augmented and virtual reality or 3D is becoming at least as important as providing convenient and personalized online? In this report we ordering, payment and delivery options. answer these and other questions that can help However, despite the rise of online shopping, ecommerce still makes up a relatively small percentage of total retail spending. Retailers’ brick and mortar strategies also inform an online strategy need to evolve to continue to draw customers into their stores, and to compete that is more targeted, with the online retailers opening their own physical outlets. Increasingly, we are effective and customer- seeing innovative marketing strategies, as well as new technologies such as smart centric. shelves, robots, self-checkout, and interactive and virtual reality, being deployed in stores as retailers strive to compete on all fronts. Finding the ‘right’ strategy starts with one question: Given your brand promise, where do you want to compete? Only once a company understands their goals, customers and those customers’ needs can an appropriate strategy be designed. And the key to a sustainable strategy is being able to understand and meet customer needs both today and tomorrow, across geographies, and across generations. In this report, we aim to raise and answer some questions about your company’s approach to ecommerce. Our global research on online consumer behaviors, preferences and attitudes can be leveraged by consumer companies seeking to improve their approach towards winning and retaining customers online. I hope you find this report interesting and insightful. I would like to thank the survey respondents, company executives, and KPMG professionals who invested their time and insights to make this study possible. To learn more about this research, please visit kpmg.com/onlineconsumers or contact a member of KPMG directly. Sincerely, Willy Kruh Global Chair, Consumer Markets KPMG International ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Contents What do consumers really want?.......................................................2 The dilemma......................................................................................2 What 18,430 consumers told us........................................................3 Online purchase behavior....................................................................4 Online shopping as a rising trend.......................................................4 Product category trends....................................................................6 Rise of international trade and e-tailers.............................................8 Device preference trends.................................................................12 The path to purchase journey............................................................14 Stage 1 — Awareness: triggers and influencers..............................15 Stage 2 — Consideration: product and company research..............16 Stage 3 — Conversion: deciding where and when to buy...............20 Stage 4 — Evaluation: experience and feedback.............................22 Cycle duration..................................................................................24 Understanding consumer attitudes and motivations.....................27 What’s driving the shift to online?....................................................27 Overcoming the hurdles to selling online........................................28 Winning the online consumer..........................................................29 Payment options need to be regionally tailored...............................30 Building consumer trust...................................................................33 Are experience and trust enough to earn consumer loyalty?...........34 How KPMG can help..........................................................................35 About KPMG.......................................................................................36 Contact us.......................................................................................Back 2017 Global Online Consumer Report 1 ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
What do consumers really want? Advances in technology, logistics, payments and trust — coupled with increasing internet and mobile access and consumer demand for convenience — have created a US$1.9 trillion global online shopping arena, where millions of consumers no longer ‘go’ shopping, but literally ‘are’ shopping — at every moment and everywhere. A recent report by KPMG International The dilemma titled ‘Seeking customer centricity The burning question is, how can through omni business models’1, looked consumer and retail companies achieve at how consumer and retail businesses this nirvana of consumer mindreading? are transforming to adapt to the shift How can they identify and keep pace from traditional shop-centric business with the behaviors and preferences of models to a new world where the customers today and tomorrow? How customer is increasingly at the center can they ensure their online strategy of a perpetual shopping experience. In is acutely tailored to attract and win this ‘customer-centric’ reality, retailers the diverse and dynamic customer need to be exceptionally sensitive segments they serve? and responsive to when and where their potential customers are making purchase decisions (both consciously and subconsciously) throughout their ‘always on’ shopping journey. 1 https://www.kpmg.com/cmsurvey 2 2017 Global Online Consumer Report ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Baby Boomers Generation X Millennials Born 1946-1965 Born 1966-1981 Born 1982-2001 What 18,430 consumers told us The ultimate purpose of this research ways to filter and classify the data is During 2016, KPMG conducted an was to provide consumer goods and too copious to summarize in a single international study on consumer retail companies with the global and report, so in the following sections behaviors and preferences related to local insights into the specific behaviors we provide an overview of the global online shopping. The research was and preferences of the customers results, highlighting the most significant largely based on an online survey of they want to target. By understanding or interesting trends and comparisons 18,430 consumers living in more than the uniqueness of different customer among the major demographic groups 50 countries. The respondents were segments, companies can tailor their and product categories. between the ages of 15 and 70, each online strategies for maximum success. Executives interested in receiving more having purchased at least one consumer The depth of the data collected for this detailed insights are invited to contact product online in the past 12 months. study makes it possible for companies KPMG to have a member of our team In addition to scrutinizing their online to analyze and forecast the behaviors filter and analyze the full set of data shopping behaviors, preferences, and and preferences of their customers according to your specific requirements decision processes, the study also by geography, generation (Millennials, or target markets. explored consumers’ plans for future Generation X or Baby Boomers) and/ online purchases, factors affecting trust or product category. The number of and loyalty towards certain brands, and their sentiments and attitudes towards the companies that they do, or don’t, choose to buy from. 2017 Global Online Consumer Report 3 ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Online purchase behavior Survey respondents were The digital age and rise of online in Eastern Europe and Russia, Latin required to have purchased shopping have driven an unprecedented America, and the Middle East and Africa business model shift for consumer are less frequent (Figure 1.0). at least one consumer product manufacturers and retailers. product online in the past Many traditional consumer businesses A Generation X are the most 12 months. and new start-ups alike are moving active online shoppers away from models that are shop- Among the different age groups, centric or geographically-focused, to Generation X consumers (born between ones that are customer-centric and 1966 and 1981) made more online virtually borderless. To help inform purchases last year than any other age companies tackling this transformation, group, averaging nearly 19 transactions KPMG International’s recent survey of per year. Interestingly, despite the 18,430 consumers provides a unique, common belief that the upswing in comprehensive index of consumer online shopping is largely driven by online shopping behaviors and the younger and more ’tech-savvy‘ sentiments across countries, products Millennials (born between 1982 and and generations. 2001), Generation X consumers in fact made 20 percent more purchases last Online shopping as a year than their younger counterparts. rising trend The frequency of online purchases Stage of life and income levels are varies considerably by geography. certainly primary factors driving Consumers in Asia, North America and both online and offline shopping, Western Europe are most likely to shop and Generation X consumers, many online, while per capita online purchases of which are more established in their careers and building homes “There is a little Millennial in each of us. A number of Baby Boomers are starting to understand and appreciate the technology that is out there. They’re also trying to appreciate and experience the convenience of buying online.” — Mark Larson, Head of Consumer and Retail, KPMG in the US 4 2017 Global Online Consumer Report ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Figure 1.0 Average number of online transactions (per person per year) 19 18.4 22.1 11.9 18.6 Eastern Europe & Russia 15.6 15.1 Western Europe North America Report, KPMG International, 2017 Source: Global Online Consumer 16.1 11 Asia Africa & Middle East 9.2 Australia & New Zealand Latin America Baby Generation X Millennials Boomers and families, are likely buying more generation was more likely to buy Figure 1.1 consumer goods than the younger healthcare products, wine, household Average amount spent per Millennials overall. As Millennials goods and appliances, categories which transaction (USD) continue to enter the workforce and tend to have higher price points. adopt new lifestyle priorities, however, their online shopping activity is Men spend more online than expected to surge and even far surpass women levels currently exhibited by older While men and women shopped with generations. about equal frequencies, on average, the men spent more per transaction— $203 Don’t25underestimate US$220 vs. US$151 for women—on $190 the Baby Boomers their most recent purchase. This can $173 Compared to the digital-first Millennial Report, KPMG International, 2017 largely be attributed to the fact that Source: Global Online Consumer 20 generation, it is reasonable to presume the male consumers were more that Baby Boomers (born between likely to buy items in higher priced 1946 and15 1965) are less inclined to shop categories such as luxury goods (55 online. However, the Baby Boomers percent of luxury transactions were surveyed10 in fact shopped online by men) or electronics (72 percent of just as frequently as the Millennials. electronics transactions were by men), Furthermore, the Baby Boomers on while women were more likely to buy average5 spent more per transaction in lower-priced categories such as Baby Generation X Millennials Boomers than either of the two other younger cosmetics or food. generation groups (Figure 1.1). This 0 2017 Global Online Consumer Report 5 ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Product category trends Top online preference for streaming2 vs buying The online shopping landscape is media continues to put downward gradually changing in terms of the pressure on online sales of books and products by types of products being bought online. music, since even as Millennials get Generally, consumers’ planned online older this is one area where buying purchases indicated a year over year habits are unlikely to change. increase for most product categories (Figure 1.2). These results signal a higher willingness to buy new product On the other hand, bigger items such as household goods and appliances, furniture, home décor and sporting geography categories online, particularly those In most countries, media, goods show some of the highest more traditionally sold in shops. For electronics, and apparel are growth potential. According to example, greater options for shipping among the 5 products most respondents’ planned online purchases and delivery have made it easier and often purchased online. for the coming year, online sales of more common to buy bulkier products household goods and appliances are online—including furniture, appliances expected to increase by 3.5 percentage and even vehicles. Meanwhile, although points, furniture and home décor by ‘easier to ship’ products such as books, 4.3 points and sporting goods and music, electronics, accessories and equipment by 4.4 points. Telecom apparel remain the most popular online products and fragrances are categories categories, relative growth in these that are also expected to grow, by 4.5 segments is expected to be minimal. and 2.8 percentage points respectively, In fact, we see a possible downward as are wine, liquor and art. trend for books and music, currently In general, growth categories tend to the number one online category, be those which do not need trial and/or as Millennials purchase these items where consumers can have relatively Books and online less often than the older more faith in product quality. music generations. It will be worth watching this particular category over the next few years to see if Millennials’ “Clearly, ecommerce has been growing globally A across many ‘usual suspect’ categories like apparel, books, and music. But what we are now starting Electronics to see, and where we expect more growth, is from categories where showrooming often occurs, such as mobile phones and laptops, as well as furniture and decoration items. Even in the grocery retail market we see opportunities. Very few retailers get their online grocery model right, but when they do, it can be very successful. Winning companies in this segment have focused on Millennials and young professionals, Apparel where the focus on prepared fresh meals has been a growth driver.” — Willy Kruh, Global Chair, Consumer Markets, KPMG International 2 https://www.purposegeneration.com/buzz/article/streaming-the-future-millennials-and-media 6 2017 Global Online Consumer Report ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
The following products were Figure 1.2 also among the top 5 in these Actual vs planned online purchases: geographies: Last year vs next year Growth in % points Wine Books/ 53 0.5 Music 54 Australia and Electronics/computers/ 47 (0.6) Belgium peripherals 47 Apparel – 40 1.0 women 41 Accessories Household goods 36 3.5 and appliances 39 US, Indonesia and Accessories 40 (1.0) Turkey 39 Apparel – 34 2.3 men 36 Telecom products Food/ 33 1.4 groceries 34 and men’s Toys/games/ 29 1.7 footwear video games 31 India, Russia, and Cosmetics/ 30 0.8 skin care 31 the UAE Furniture/ home décor 26 4.3 31 Sporting goods/ 26 4.4 Cosmetics equipment 30 Asia-Pacific, Russia Shoes – women 27 2.0 29 and CEE Telecommunications/ phones 23 4.5 27 Shoes – men 25 2.2 Pharmacy and 27 healthcare Apparel – 22 0.8 children 23 products Apparel Bags/ 20 1.5 Brazil and Greece leather goods 21 Perfume/ 18 2.8 cologne 21 Household Pharmacy/ 20 1.6 healthcare 21 goods Wine 15 2.7 Africa and the 17 Middle East Shoes – 13 1.3 children 15 Fine jewelry/ 12 0.7 watches 13 Groceries 14 Baby (1.0) UK and China products 13 Eyewear 12 0.8 Report, KPMG International, 2017 12 Source: Global Online Consumer Sporting goods Pet food and supplies 11 1.0 12 Finland Liquor 9 1.5 11 Beer 10 0.8 Children’s 10 clothing, toys Artwork 5 1.1 6 and games Percentage that purchased the Percentage planning to purchase France product in the past 12 months the product in the next 12 months 2017 Global Online Consumer Report 7 ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Figure 1.3 Expected category growth by generation: Percentage point difference between last year and next year 5.9 4.8 4.7 3.6 Report, KPMG International, 2017 Source: Global Online Consumer 3.1 3.1 2.8 2.5 2.6 2.6 2.1 2.2 1.9 2 2 1.8 1.5 1.5 1.6 1.4 1.1 1 .9 .8 .6 .7 .5 .4 .3 –.7 –2.1 –.7 –.6 –2.2 –.3 Artwork Eyewear Fine Pharmacy Perfume/ Bags/ Furniture/ Cosmetics/ Shoes — Household Books/ jewelry/ /healthcare cologne leather home décor skin care women goods and music watches goods applicances Acces- sories Baby Boomers Generation X Millennials Generational trends — to buy a category such as household among Millennials. As Millennials’ a closer look goods (Figure 1.3) is different. In this interest in art, comfort with buying When looking at differences by age case, fewer household goods purchases art online, and disposable incomes all group to spot trends, further analysis is by younger age groups is more likely grow, we see this as another category required to determine when an apparent due to the ‘age effect’ or ‘cohort effect’3, showing solid potential. trend indicates sustainable future where behaviors are tied to age or stage of life rather than to lasting attitudes. Rise of international trade and behavior, versus when it is simply due to e-tailers a difference in age or income. In fact, as Millennials grow older, the potential for buying household goods Cross-border shopping is on the rise For example, contrary to the earlier online is probably quite strong. globally, driving international retail trade. example suggesting that media sales As part of this study we looked at the level may continue to decline even as Artwork is a small category in terms and nature of online purchases made Millennials mature, the interpretation of of the percentage of total consumers outside consumers’ own countries. this generation’s similar lower tendency buying it online, however this category’s online sales seem to be growing quickly “Much of the future growth in ecommerce will be millennial-driven. In 2 or 3 years, Millennials are forecasted to be the largest demographic in North America. As Millennials delay leaving their parents’ house and delay getting married, they spend their money on other things. Brands like Uber and Apple, and the craft beer industry have all to some degree been ignited by Millennials. Grocery spending, on the other hand, has been eclipsed by restaurant spend. Millennials like to share meals with friends—it’s all about shared experiences.” — Willy Kruh, Global Chair, Consumer Markets, KPMG International 3 https://en.onpage.org/wiki/Cohort_Analysis 8 2017 Global Online Consumer Report ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Figure 1.4 Percentage of online purchases imported from other regions 43 50 Eastern Europe & Russia 44 15 14 21 Western Europe North America 35 Asia Africa & Middle East Australia & New Zealand Report, KPMG International, 2017 Source: Global Online Consumer Latin America Figure 1.4 shows the percentage of online In Australia and New Zealand, the online (50 percent of purchases). This purchases that consumers made outside percentage of online purchases is particularly true in the UAE, where their own region. North American and imported from outside this region 58 percent of online purchases were European consumers made the fewest was 35 percent, with 25 percent of imported—with 80 percent coming from international purchases,14 and 15 those imports from North America Asia, North America and Western Europe. percent respectively of their total online and Europe. The geographically more In many countries, the tendency to purchases—not surprising given the remote location of these countries is buy internationally is highest among maturity of these markets, where the most likely one of the key drivers. Millennials. This could indicate potential popular products can already be sourced The bottom three regions in Figure 1.4 growth for cross-border online shopping domestically at competitive prices. 50 are the markets most likely to make as consumers increasingly seek unique Asian consumers’ imports averaged 21 international purchases online. In or specialized products from other percent—although it varied significantly 40 Eastern Europe and Russia, 43 percent countries. In the US, for example, by country. While Hong Kong, Singapore of all online purchases were imported, 15 percent of Millennials’ recent and Vietnam had significant imports at mainly from Asia (15 percent), Western purchases were imported, compared 31, 43 and 55 percent, respectively, 30 of Europe (13 percent) and North America to 9 percent for Generation X and just their online purchases, other countries (8 percent). In Latin America, 44 percent 3 percent for Baby Boomers. It will be such as Indonesia, Japan and India each of online purchases were imported, interesting to see how the new US 20 imported only 12 percent or less of their with nearly 60 percent of those imports administration’s proposed focus on online buys outside Asia. China, with 20 from North America. African and Middle domestic protectionism might affect percent imports from outside Asia,10lay Eastern consumers were the most likely the trend for younger US consumers to somewhere in the middle. to import consumer products bought shop outside the country. 0 2017 Global Online Consumer Report 9 ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Case study Nespresso Roger Staeheli, Country Manager, Hong Kong Nespresso’s omni-channel Integrated channels and Nespresso SA was evolution customer relationships founded by Nestlé 30 Roger Staeheli, Nespresso’s Country The company is very clear on the role years ago, to introduce Manager for Hong Kong, explains that of each of its channels, he says. “Retail Nespresso operates autonomously is very much about delivering the brand a revolutionary system from Nestlé, due to its unique direct- experience. Online is about Nespresso of coffee machines and to-consumer (B2C) model that requires ‘anytime, anywhere’. Trade is focused on the company to have their own sales machine sales and is a channel through portioned encapsulated channels. The company’s four B2C which we can recruit new members. The coffee. Initially in 1986, channels include: retail boutiques, an Customer Relationship Center, which online boutique, coffee machine trade used to be a transactional channel, the company focused points, and call centers called Customer today is about building relationships.” Relationship Centers, where more than on the corporate offices 1,000 coffee specialists offer support to Typically, new customers that are initially recruited through a Nespresso boutique, market, and a few years Nespresso Club members. then become online customers. later expanded to selling Nespresso’s sales channel evolution Subsequently, these customers are evolved in the opposite way than regularly invited back into the boutique direct to consumers. that of many similar long-standing or shop to try new coffee innovations Today, Nespresso’s retailers. After initially selling through to enable Nespresso to engage directly its Customer Relationship Centers, with them. Since in most cases, 450 retail boutiques Nespresso launched its Nespresso customers are also members of the website in 1996, began to take orders can be found in 64 online in 1998, and opened its first retail Nespresso Club, the company is able to gain a good understanding of their countries throughout boutique in 2000 in the city of Paris. individual customers’ behaviors and preferences, therefore enabling them to the world. Nespresso’s According to Staeheli, this progression tailor their marketing campaigns or offer from online to retail shops was born boutiques are an out of necessity, rather than choice. customers personalized experiences. important branding and “Thirty years ago, coffee that was sold Offline vs. online in Hong Kong at retailers was instant coffee. So we sales channel for the decided to retail our own products Despite the fast growth of Nespresso’s ourselves. We first established the online channel, Staeheli highlights the company, although the call centers then evolved into different two main challenges to ecommerce fastest-growing part of channels from there.” in Hong Kong. “We want to offer our online customers greater convenience, their business in some Staeheli says the goal today is to offer but going out to the shops in Hong a consistent experience to customers Kong is already very convenient, since countries such as Hong across all channels, both offline and most households are within five to ten Kong, is online. online. “It’s about consistency in the minutes of a mall. So to better serve product, price and promotion.” our online customers, we offer same- day delivery during a certain period of the day. The other challenge for Hong Kong then becomes the high cost of distribution.” 10 2017 Global Online Consumer Report ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
“Overseas born Australians have been a contributing factor to ecommerce growth. In cities like Sydney, Melbourne and Brisbane with large percentages of overseas born nationals, consumers have always been comfortable buying goods online as it was often the only way to get the products they liked.” — Trent Duvall, Head of Consumer Markets, KPMG in Australia E-tailers dominate the online (69 percent), Italy (68 percent) and who are less prone to shop around for marketplace South Africa (65 percent). The share for price and who prefer to buy from familiar The rising power of e-tailers such as e-tailers in these countries is far above websites, made their most recent Taobao, Alibaba or Amazon, to name the global average of 50 percent. purchase from an e-tailer, compared to a few, is apparent around the world. Millennials with e-tailer purchases at 48 A trend of younger consumers being Their dominance is particularly evident percent. Conversely, Millennials were less likely than Baby Boomers to buy in China and India—where over 80 30 percent more likely than the Baby from e-tailers could indicate a future percent of online purchases were Boomers to buy directly from a retail slowdown in this platform’s growth. from e-tailers—as well as in Japan shop’s website (Figure 1.5). Fifty-four percent of Baby Boomers, Figure 1.5 Where most recent purchase was made (%) 5 5 12 11 5 8 10 7 6 7 6 18 13 10 10 34 33 Eastern Europe & Russia Report, KPMG International, 2017 Source: Global Online Consumer 42 5 27 34 35 Western Europe 11 10 North America 10 16 51 45 45 11 Asia 28 70 54 50 48 Africa & Middle East Baby Generation X Millennials Boomers Australia & New Zealand 46 43 An online-only retailer Latin America Retailer’s website 56 Manufacturer or brand’s website 29 Other 36 2017 Global Online Consumer Report 11 ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Figure 1.6 Preferred device for shopping online (%) Report, KPMG International, 2017 Source: Global Online Consumer Eastern Europe & Russia 59 48 60 5 54 71 55 5 Western Europe 10 5 19 8 6 67 11 6 North America 8 4 9 6 10 27 18 29 Asia 25 63 20 28 29 Africa & Middle East 6 Baby Generation X Millennials 7 Boomers 59 54 Australia & New Zealand 6 Laptop or PC 6 5 24 8 Smartphone Latin America Tablet 29 No preference 33 Device preference trends or laptops, while 17 percent said they evident in China, where 26 percent Despite the global proliferation of preferred to use a mobile device and 27 favored a mobile device. As expected, mobile smart phones and tablets, percent had no preference (Figure 1.6). Millennials were the generation most the majority of consumers still prefer likely to use a smartphone for shopping Device preferences varied significantly traditional desktop PCs or laptops when (11 percent of recent purchases) by region, with Asian consumers being shopping online. More than half (57 although 54 percent of them still used more than twice as likely (19 percent) as percent) of online purchasers globally a laptop or desktop PC for their most the global average (8 percent) to shop said they prefer to use desktop PCs recent online purchase. on a smart phone. This was particularly “One of the reasons that China is so mobile-centric is because third-party payment systems using mobile apps are widely accepted in China both online and in shops. Chinese consumers are unique in their high confidence in third-party payment systems. Another120 reason is the high penetration 120 of smartphones—largely due to the number of local manufacturers and competitive prices. Lastly, a lot of people have leapfrogged to ecommerce 100 because of the lack of 100 shops or brands available to them. The smartphone literally 80 brings shops to rural consumers 80 for the first time.” — Jessie Qian, Head of Consumer Markets, KPMG in China 60 60 40 40 20 20 12 2017 Global Online Consumer Report ©2017 KPMG International 0 Cooperative (“KPMG International”). KPMG International 0 provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
“Companies should be channel agnostic, meaning it does not matter if they start with online or offline, what matters is that all channels are interlinked to give consumers the convenience they need. Online plays a major part in the customer journey or ROPO (research online, purchase offline). The most successful multi-channel companies established their online channels as early as the late nineties, went on to establish ‘click and collect’, eradicated silos across the entire organization and established a channel agnostic incentive program so retail staff do not consider online as a separate business.” — Paul Martin, UK Head of Retail, KPMG in the UK Smart phones keep offline (79 percent), CEE (78 percent) and the generation of respondents said they shoppers connected US (77 percent), whiles many European had checked their mobile devices while While mobile may not be the most consumers are about 10 to 15 percent in a shop. preferred online sales channel, over two- less likely than average to look up What were consumers looking up? thirds of the consumers said they had products online while out shopping. Comparing prices was the main reason used a smartphone for product research Millennials in all regions were more for doing online research while out while in a physical shop (Figure 1.7). likely than their older counterparts to shopping, followed by looking up This was particularly common in look up information on a smartphone product information and checking online Singapore (83 percent), Brazil while out shopping (77 percent). reviews (Figure 1.8). However, even half of the oldest Figure 1.7 Figure 1.8 Percentage of consumers that have Percentage of consumers that looked used their smartphone to look up a up the following information about a product while in a shop product while in a shop 77% 65% 61% 49% 70% Price comparison with Product information/ Online other retailers specifcations reviews 50% Report, KPMG International, 2017 Report, KPMG International, 2017 Source: Global Online Consumer Source: Global Online Consumer 35% 16% Product options Store inventory/ (e.g. color, size, style, etc.) availability Baby Generation X Millennials Boomers 2017 Global Online Consumer Report 13 ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
The path to purchase journey The ‘path to purchase’ is a traditional consumers’ decisions during a typical shopping concept that has evolved online transaction, a simplified cyclical significantly over the past decade due path to purchase model was used for to the internet, digital innovation and this study (Figure 2.0). Respondents the subsequent rise of online shopping. were asked to describe their behavior Although the digital revolution hasn’t during their most recent online altered the fact that consumers transaction at each of four stages: still experience the same stages of Awareness awareness, consideration, conversion When they first became aware of or had and evaluation, the journey itself has a desire for the product changed. Instead of a path to purchase that is traditionally linear, it has Consideration become more of a cycle or even a web. When they were researching the Consumers move through and back and product online or offline forth between the stages, influenced Conversion by a myriad of both offline and online When they were deciding where and factors at every stage. when to buy the product In order to investigate the drivers, Evaluation motivators and inhibitors affecting After they made the purchase “To create loyalty with Millennials, brands need to first cover the basics—that means top notch customer service and quick, individualized responses, through the channels they use such as social media and messaging. But beyond that, brands need the right content strategy. They need to engage Millennials with communications that are both entertaining and informative. Elements of gamification or exclusivity can work well. Some of the footwear brands that are popular with Millennials use limited editions to create product and brand buzz. Millennials will line up physically and digitally to get their hands on these exclusive products.” — Joel Benzimra, Global Advisory Lead for Consumer Markets, KPMG International 14 2017 Global Online Consumer Report ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Figure 2.0 Simplified path to purchase Stages of the online purchase journey 1. Awareness: triggers and influencers 4. Evaluation: experience and feedback 2. Consideration: product and company research 30 Online: 59% Offline: 52% 22 3. 16.7 Conversion: 15 where and 15 15 when to buy 13 12 9 are effective in creating Stage 1 — Awareness: 10 10 Using a multi-channel strategy offline channels 8 to create awareness consumer awareness and demand, triggers and influencers 7 Retail websites or online shops were especially when they are used together. When comparing the impact of the most common source of initial This is true for both corporate-controlled online versus offline touchpoints in product awareness, cited by nearly channels (shops, websites, advertising), creating the first trigger moment, it is a third of consumers, and online as well as third-party sources of interesting to observe that 52Inpercent Awareness: In an online shop a social media postadvertisements or blog were Incited by 15 a physical triggers and shop information. After I saw a friend with websites, it shops or ofInconsumers cited at least one offline an advertisement In an email promotion percent. At the same time,with Talking influencers physical my friends online advertising, orthe in a print magazine newspaper most common channel as review a source of initial awareness, In an online article orshops In an online magazinewere the second most Talking withpopular my family I saw it on TV or in a movie sources of product awareness were and 59 percent cited one or more online source of awareness, cited by online reviews (cited by 15 percent), channels (Figure 2.1). 22 percent of consumers. talking with friends (15 percent), social Evaluation: Consideration: experience Ecommerce is clearly far from being product and media (13 percent) or seeing a friend and company with it (12 percent). an online-only affair. Both online and feedback research Conversion: Figure 2.1 deciding where and Channels where consumers saw the product before purchasing when to buy Any online Any offline channel: 59% channel: 52% 30% 22% 15% Report, KPMG International, 2017 Source: Global Online Consumer 15% 15% 13% 12% 10% 10% 9% 8% 7% Online shop Social media post or blog Physical shop Saw a friend with it Online Email promotion Talking to friends Print magazine or newspaper advertisement Online article or magazine Talking to family On TV or in a movie Online review 2017 Global Online Consumer Report 15 ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Consumers’ increasing reliance on by online sources such as social Stage 2 — Consideration: peers or ambassadors means that media or peer reviews—they are also customers are among the most more likely to be influenced by offline product and company influential promotional conduits for channels. Millennials were 25 percent research companies. Both online and offline, more likely than Baby Boomers to have During the consideration stage, the the frequency of peer opinions as seen their most recent purchase in a importance of online channels continues top awareness influencers highlights shop, nearly 50 percent more likely to prevail, with the top two channels for the significance of creating brand to have talked to a friend about it, and research being online reviews (cited by ambassadors and delivering a positive more than twice as likely to say they 55 percent of respondents) and company customer experience. saw a friend with it (Figure 2.2). websites (47 percent) (Figure 2.3). Awareness triggers by Although Millennials are certainly digital Offline channels are also a significant generation natives first, they are also at least as source of information, with 26 percent Millennials are not only more likely than active and influenced as their parents of consumers saying they visited a the older generations to be influenced are beyond the digital world. physical shop during the research stage and 23 percent saying they spoke to Figure 2.2 friends or family about the product. Offline channels where consumers saw the product before purchasing, by generation 24% 22% 17% 17% 18% 13% 12% Report, KPMG International, 2017 Source: Global Online Consumer 11% 8% Physical shop Talking with friends Saw a friend with it Baby Boomers Generation X Millennials Figure 2.3 Percentage of consumers using the following channels to research products they bought online Report, KPMG International, 2017 Source: Global Online Consumer 26% 23% 55% 47% Online search for reviews and Visited the Visited physical stores Spoke with my friends recommendations company website to see, try or fit the product or family about it 16 2017 Global Online Consumer Report ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Case study Ryohin Keikaku (Muji) Kenji Takeuchi — Executive Officer Targeting different segments Muji, founded in the Muji’s target market is not based solely goes home and is able to measure and on demographics, but on market size see if it will fit in their space. To allow 1980s, is a globally and respective consumer behaviors. customers to then purchase the items renowned Japanese “We target customers who are trend-conscious and are leading total online, we ensure that they can be easily ordered and quickly delivered.” retail brand selling more consumer spending in each region. For example, Generation X are the main Communicating content instead than 7,000 household target in Japan because they have a high of specific products goods, apparel and food interest in shopping, and also have the Muji does not advertise their specific disposable income.” items. Their products products but instead relies on In China, on the other hand, “Millennials consumers seeking new trends, styles, are sold both through are the main target because we regard and information. According to Takeuchi- their online store, and in them as the most up-to-date on trends and they are highly engaged digitally”, san, “Our advertising style is focused on the communication of a concept. over 700 shops around says Takeuchi-san. He also notes that, We use our online asset ‘MUJI.net “In Japan, where the retail market community’ and online loyalty program the world—mainly in is very mature, there are not many ‘MUJI passport’ to communicate Japan, as well as in over differences between generations in concepts and provide information terms of online shopping. The only that can be shared on Facebook or 26 other countries. As difference Muji sees is that Millennials Instagram, to entice consumers to visit an Executive Officer at contribute to information diffusion, our website or stores.” while Generation X consumers lead in Ryohin Keikaku (RKJ), consumption. Muji uses its loyalty program to encourage customers to provide Kenji Takeuchi is in charge Muji is a true omni-channel feedback and promote the company’s products online. Members receive of Muji’s corporate retailer ‘MUJI Miles’ not only for making planning, finance and IT. Muji actively pursues synergies purchases, but also for checking into between its offline and online channels, stores, posting product comments or and they have formal key performance participating in other promotions. indicators (KPIs) in place that ensure Japan business leads in these synergies are maximized. Online community is a point of ecommerce According to Takeuchi-san, “The number differentiation of customers that visit our shops is a Ecommerce is a key part of Muji’s The MUJI.net community is considered KPI for our ecommerce division. One of business, although there is still to be an area of differentiation for the objectives of that group is to direct room for growth in their online sales, Muji. The brand has developed a loyal consumers shopping online to come especially outside of Japan. According member base through this community, into our physical locations.” to Takeuchi-san, “In Japan, Muji’s online with which they regularly communicate transactions account for around 10 In addition to online to offline, Takeuchi- regarding trends and products. Takeuchi- percent of total sales, whereas in other san discusses how their customers san explains, “We provide interactive countries it is lower; in Germany and also go from shopping offline to online. content, and columns to publish our China for example, only about 4 percent “Furniture is a category that people views on social issues, and we engage of sales come from online.” often prefer to shop for in person, so customers in product development by they can see and touch the products. asking for their ideas and opinions. This However, the final purchase decision contributes to building loyalty among may not be made until the consumer our customers.” 2017 Global Online Consumer Report 17 ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Millennials are 50 percent more reliance on online reviews vs corporate price and promotions, product features likely than Baby Boomers to websites than other regions (Figure (23 percent) or brand reputation (22 visit a store 2.5). This comparatively lower trust percent) were also commonly identified in corporate content can be a risk for as the top considerations when making As in the awareness stage, Millennials companies in these regions since they a final product choice (Figure 2.6). are more likely than both Generation X lack control over messaging and product and Baby Boomer consumers to use Product decision factors varied by information contained in consumer offline channels during the consideration category. For fashion, food and reviews. In addition to having informative stage. While online reviews and product luxury items, brand reputation was a websites, these companies need to pay websites are most frequently consulted, particularly important consideration, particular attention to ensuring that have Millennials were also nearly 50 percent although price was still the top decision favorable reviews on social media and more likely than Baby Boomers to factor (especially for luxury items, cited other third party forums. research a product by visiting a store or by 33 percent). For cosmetics, however, talking to friends and family (Figure 2.4). Factors driving final product brand reputation and online reviews decisions were the leading considerations (27 Trust in online reviews vs Overall, price or promotions (identified and 21 percent respectively), and for company websites varies by electronics, product features were most region by 27 percent of respondents) were the factors most likely to influence important (25 percent), closely followed In Asia, Eastern Europe and Russia, consumers’ decision regarding which by price, brand reputation and online consumers seem to put a much heavier product or brand to buy online. After reviews (each cited by one-fifth of the electronics buyers). “Consumers are firmly in charge today and they are looking at personalization of services. Today’s consumer is more similar to the 1920’s consumer with a personal relationship with shopkeepers. Therefore, big data is important – retailers should understand what individual consumers buy and what they do. They should cater to consumers as individuals.” — Paul Martin, UK Head of Retail, KPMG in the UK Figure 2.4 Channels used to research online purchases — by generation Online channels Offline channels 56% 56% 52% 48% 48% 45% Report, KPMG International, 2017 Source: Global Online Consumer 30% 26% 27% 20% 19% 20% Did online search for Visited the Visited physical stores to see, Spoke with my friends or reviews & recommendations company website try or fit the product family about it Baby Boomers Generation X Millennials 18 2017 Global Online Consumer Report ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Figure 2.5 Percentage of consumers using the following 64 channels to research online purchases — by region 66 50 52 48 44 44 5 42 42 Online channels Eastern Europe & Russia 32 30 11 22 25 25 19 3131 Did online search for Western Europe 55 reviews & recommendations North America 55 50 Visited the 49 53 company website 49 Asia Africa & Middle East 28 2222 Report, KPMG International, 2017 Australia & New Zealand Source: Global Online Consumer 20 Latin America 20 16 Offline channels Visited physical stores to see, try or fit the product Spoke with friends or family about it Figure 2.6 Factors driving purchase decisions Decision factors by region In Asia, on the other hand, brand was Consumers in Australia, New Zealand, typically more important than price, particularly in China and India, where Report, KPMG International, 2017 27% Price/promotions Canada, France, Belgium and South Source: Global Online Consumer 23% Product features Africa were most likely to be influenced brand reputation was cited twice 22% Brand as often as price (31 percent vs 15 by price or promotions. In these 17% Online reviews countries, more than 38 percent of percent). Asian consumers, especially 5% Newest trends or arrivals consumers said price and promotions in China, Japan, Hong Kong and India, 4% Peer influences/ were the factors that drove their most were also more likely than consumers recommendations recent product choice. in any other country to base their final 2% Complementary product decision on online reviews products (Figure 2.7). Figure 2.7 Factors driving purchase decisions — by region 12% 19% 9% 15% 13% 27% 22% 12% 22% 38% 19% 17% 23% 22% 15% 17% 29% 24% 19% 26% Asia Australia or North America Eastern Europe New Zealand or Russia Report, KPMG International, 2017 Source: Global Online Consumer 11% 9% 9% Price/promotions 30% 13% 29% 16% 16% 34% Product features Brand Online reviews 18% 24% 24% Other 25% 25% 17% Western Europe Latin America Africa and Middle East 2017 Global Online Consumer Report 19 ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Stage 3 — Conversion: Figure 2.8 deciding where and Most important attributes when deciding where to buy when to buy In the conversion stage of the online Best 36% price purchase journey, the consumer exercises two decisions: where, and Preferred website 30% when, to buy a product. In the online Best delivery shopping arena, however, successfully options/price 17% engaging consumers during the first two Stock 40% stages of the purchase journey far from availability 14% guarantees success in the third stage. Peer 35% advice 2% Informed online consumers will not 32% Returns 31% hesitate to glean their inspiration and policy 1% information from one or more sources, 27% Source: Global Online Consumer only to buy from another. Understanding Report, KPMG International, 2017 the priorities of different types of consumers during this critical stage can give companies the advantage they Generally speaking, the decision factors or being relatively more online savvy need to win the coveted final sale. most often considered by consumers or comfortable with online shopping in Deciding where to buy choosing vendors were consistent general. across age groups, although Millennials As during the final product decision Having a trusted website will always were considerably more likely than the stage, price remains as the most be important,Preferred but even asBest Millennials’ older generations to choose aPreferred vendor Best common consideration when consumers website incomes grow, price competitive website pricepricing based on price than website preference are deciding where to buy (Figure 2.8), is expected to continue to rise in (Figure 2.9). This could partly be due to particularly in certain categories such importance during vendor selection. Millennials’ lower disposable incomes, as electronics. Having a website that consumers like and/or trust is also Figure 2.9 important, especially in Asia, where consumers said buying from a preferred Top attributes when deciding where website was more important than price. to buy — by generation In developed nations such as North America, Australia, New Zealand, and Western Europe, stock availability was a higher priority than in it was for consumers in other countries, particularly when buying fashion or 27% luxury items. Consumers buying fashion 31% items were also on average three times 33% 33% more likely to choose a vendor based on 31% their returns policy. 27% Report, KPMG International, 2017 Source: Global Online Consumer Baby Generation X Millennials Baby Generation X Millennials Boomers Boomers Preferred website Best price 20 2017 Global Online Consumer Report ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
Case study Grana Luke Grana, CEO Winning and creating loyal online customers GRANA’s ‘fun and cheeky’ social media Luke Grana is CEO presence boosts rapport and in turn, brand loyalty, with their customers. They and Co-Founder of the boast over 23,000 ‘likes’ on Facebook, Returning customers comprise 50 as well as over 24,000 followers on innovative online fashion Instagram. It is on these social media percent of GRANA’s sales. Luke attributes this loyalty to quality, pricing, retailer, GRANA. He, platforms where they interact with their swift delivery and attention to customer core market of Millennials, in a way service—such as the personalized along with Pieter Paul that goes beyond just showcasing their handwritten thank you cards that are Wittgen (COO and Co- fashions. included with each delivery, or the real- time live chat option available on their Founder), have overseen Never having invested in traditional advertising or promotion methods, website. the company’s growth GRANA instead relies on social media, Looking at the future digital campaigns and word-of-mouth from a small startup recommendations to build brand Initially, GRANA experienced most of just two years ago to awareness and drive online conversion. their sales in Hong Kong where it is still To support their ecommerce platform, strategically headquartered. However, an international brand, GRANA has also created over twelve their highest growth market is now the now shipping to twelve pop-up stores in Australia, Hong Kong, US. The company is planning to open their next pop-up showroom experience Singapore and the US, in addition to a countries. GRANA’s core flagship showroom called ‘The Fitting in New York City, in an effort to increase Room by GRANA’, located in Sheung their US customer base even further. aim is to manufacture Wan, Hong Kong. The startup also recently attracted and sell high-quality These physical locations serve a Alibaba’s Entrepreneur Fund as a new investor, and with their support, GRANA clothing at affordable dual purpose: they introduce the plans to enter the mainland China brand to those who have not already prices, by cutting the encountered it online, and they allow market in 2017, complete with a Chinese language website. costs associated with both new and existing customers to “We’re really excited to have investment feel the fabrics and try on clothing to most traditional sales and find the right fit. Although The Fitting support from Alibaba, and we’re looking Room and pop-ups carry no inventory, forward to working closely with their distribution channels. the buying experience is easy for those team to enter the mainland market,” unaccustomed to online shopping, as says Luke. “Chinese consumers have staff are at hand to help customers already matured when it comes to the order items online, on the spot, for adoption of online shopping, and we delivery to customers’ homes. see tremendous potential there in the medium-to-long-term.” 2017 Global Online Consumer Report 21 ©2017 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.
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