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The Future of Commerce has Arrived: Understanding the New Asian Consumer

Friday, April 15, 2016 - 16:44

The new Asian consumer expects seamless shopping experiences that save time and make life easier. These expectations are evolving in a dynamic new marketplace that creates huge opportunities for consumer packaged goods (CPG) companies. But they must move now to capture them – or risk ceding control to the digital commerce players that have enabled the region-wide upsurge in digital commerce.

The future has arrived

How Asian consumers shop is changing dramatically. It used to be a linear process – from awareness through consideration to purchase. Now, in a connected marketplace, it’s much more complex, with multiple, overlapping touchpoints along the path to purchase.

In a market that’s redefined by digital, Asian consumers’ loyalties are shifting away from brands. Instead, they’re seeking solutions at the ‘micro moments’ where decisions are made along their purchase journeys. From now on, companies that stand out will be the ones that can provide these solutions – seamlessly and intuitively.

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It’s a huge opportunity for CPG companies. The goal? To become integral to consumers’ day-to-day lives: a ‘smart assistant’ offering personalised, relevant solutions. The reward? Winning consumers’ hearts, minds (and dollars) across the region.

But there’s also a growing risk. If they don’t take action now, CPG companies risk losing out to the new generation of digital commerce players. Having enabled the upsurge in digital commerce, these same disruptive platforms have become fearsome competitors. Amazon has already released its own private label line.1 How long until Alibaba does the same?

To help CPG companies address this mounting threat, Accenture and IPSOS recently carried out research into Asian consumers, tracking their e-commerce preferences, pain-points, and motivations. This point of view is based on the results of our online consumer communities.

The future is now: understanding the new Asian consumer

Recent research into Asian consumers by Accenture and IPSOS points decisively to a new marketplace dynamic. Today consumers expect to get what they want, when they want it. By 2020, they’ll be expecting what they want, how they want it...and, by 2025, before they want it.

This raises urgent priorities for CPG companies:

A booming digital marketplace

The Asian marketplace is an enormously attractive proposition. Crucially, it’s affluent and becoming more so. By 2030, eighty-five percent of predicted growth in the middle-class worldwide will come from Asia and the region will account for more than 50 percent of global middle-class consumption. Within the next five years, up to 40 percent of total growth in consumer goods and services will come from just five countries in Asia (China, Thailand, Indonesia, India and Singapore3 ). By 2019, Asia’s share of the global CPG market will be worth around US$1.25 trillion (the largest segment, packaged foods, will be worth US$780 billion).

In step with this explosive growth, and empowered by the proliferation of new digital technologies and connected devices, the highly evolved consumer has emphatically arrived in Asia. Across the region, digital is transforming the path to purchase, giving consumers more choice, more insights and, crucially, more power. Fast-growing consumer awareness and sophistication in online environments is a feature in all core markets (see figure 1 below) – and this will only increase from now on.

Figure 1 The Asian digital commerce shopping landscape

APAC Digital Commerce Shopping Landscape: China vs. Indonesia vs. Singapore

Introducing the highly evolved APAC consumer

So how do these highly evolved consumers make their purchasing decisions? And how will their expectations and behaviours change in the coming years? To answer these questions, we’ve mapped the consumer journey from today through to 2020 and on to 2025.

Shown in Figure 2, today consumers expect CPG companies to give them what they want, when they want it. By 2020, they’ll be expecting to get what they want, how they want it. -INSERT IMG-

And by 2025, they’ll expect smart assistants that can provide what they want, before they want it. Transformed by digital, it’s a journey that’s placing increasing amounts of control at consumers’ fingertips.

Figure 2. CGS IPSOS consumer revolution

The fundamental needs for consumers in 2016 are clear enough: convenience and value, combined with the right level of choice and information. But the path to purchase has shifted dramatically. Instead of being linear (awareness consideration purchase), it’s become much more complex, with technology interfaces at every touchpoint along the way (see Figure 3):

Most purchases are based on a mix of online and offline interactions. Consumers discover products in store, on websites, via social media and through advertisements. Prices are compared online and offline, blog reviews provide comparisons and feedback, and selections are driven by core considerations like value, quality, freshness and hygiene, depending on the product. Ultimately, whether to buy online or offline depends on convenience, time and price. And crucially, every shopping experience – good or bad – influences the next purchase decision.

Our research shows that today’s consumers see gaps in the current path to purchase. They want a seamless experience. And they’re frustrated when traditional CPG companies can’t provide it. It’s why digital-born companies are capturing increasing market share.

Fast forward to 2020, and priorities have evolved. Consumers are looking for instant solutions to life situations, personalisation and value – all delivered seamlessly. Expecting to get the solutions they want whenever and wherever they need them, they’re shopping in a truly omni-channel environment – across physical and virtual worlds. In this new marketplace, every purchase is based on multiple micro-moments, often happening simultaneously (see Figure 4 below) and, increasingly, companies that can act as ‘smart assistants’, providing solutions wherever they’re needed, are winning market share. The bottom line? Technology has made life easier for consumers in 2020, and the purchase journey has changed to address many of the frustrations they’re experiencing today (see Figure 5):

Figure 3. The path to purchase in 2016 Awareness Consideration Purchase

Source: https://www.techinasia.com/line-pulled-55-million-interested-shoppers-flash-sales-thailand-infographic http://www.nielsen.com/hk/en/press-room/2014/more-than-eighty-percent-hong-kong-consumers-will-engage-in-e-commerce-for-non-consumable-entertainment-related-products.html http://www.slideshare.net/iclick_interactive/china-online-retail-market-study-part-2
DBS Report: Asia Retail Sector, 30th April 2015

Figure 4. 2020 Path to purchase

Figure 5. 2020 – technology’s making life easier

By 2025, consumers’ lifestyles have evolved to become even smarter – and thanks to technology, shopping is becoming seamlessly integrated into their day-to-day lives. The purchase journey has accelerated and it’s in a continuous state of motion, with consumers expecting instant gratification and no hassles. Automated purchases are the norm for certain types of products. Leading companies are predicting when consumers need key items and delivering them automatically. They’ve become true ‘smart assistants’ and they’re reaping the rewards.

The rules of the game are changing rapidly (see Figure 6 below). Consumers’ lives are becoming increasingly seamlessly integrated with technology and, as this happens, we’re witnessing a dramatic evolution in the consumer journey.

Loyalties are shifting inexorably from brands to solutions and there’s a growing expectation that companies will be on hand to provide solutions at every micromoment along the path to purchase.

CPG companies need to recognize this shift and act now. Outside of China, where the e-commerce market is evolving rapidly, they have an opportunity to take the lead in fast-growing and increasingly sophisticated consumer markets – notably Indonesia and Singapore. Wherever they concentrate their efforts, the priority must be to focus on the new consumer, understand how their needs are changing and develop the capabilities needed to meet them.

CPG companies need to think about the strategic value of their product to Consumers. There are some products and brands where the consumers will want to have a deep engagement and relationship with the brand. Many of the cosmetic companies come to mind as brands that consumers have significant passion around and will look to engage in a deep way. Other products are more transactional. As a consumer goes through the micro-moments, it is important that the brand is there and relevant. While cooking or putting together a shopping list, a CPG company wants a consumer to think of their brand, not generically the category. Getting your specific brand on the “auto-mated shopping list” or default categories will be critical

Figure 6. Marketing Evolution - From 4Ps to 4Es

Source: http://www.ogilvy.com/On-Our-Minds/Articles/the_4E_-are_in.aspx

Digital changes everything...and there’s tough competition

Up to now, CPG companies across Asia have focused on building their brands and business value in a linear way (see Figure 7 below):

But just as the path to purchase has become less linear and more convoluted, so has the operating environment for CPG companies. There’s increasingly fierce online competition for shoppers’ hearts and minds from the same disruptive digital platforms that have enabled the upsurge in connected commerce across Asia. And with the region’s digital infrastructure growing more developed (and more pervasive) all the time, this competitive threat can only escalate.

Asia is seeing a fast-growing population of connected consumers – and a vibrant new ecosystem of suppliers and vendors with strong footholds in the digital space (see Figure 8 below):

Figure 7. Traditional CPG value chain

Figure 8. The new digital infrastructure Developed Infrastructure

Source: Forrester Predictions 2016: The Entitled Customer Emerges In Asia Pacific Nov 2015 http://www.emarketer.com/Article/Asia-Pacific-Boasts-More-Than-1-Billion-Smartphone-Users/1012984 http://www.idc.com/getdoc.jsp?containerId=prSG25293414 http://www.adweek.com/socialtimes/social-media-asia-pacific-stats/614053 http://www.nielsen.com/in/en/press-room/2015/more-than-half-of-global-consumers-are-willing-to-buy-groceries-online.html https://www.techinasia.com/talk/top-10-ecommerce-businesses-asia-startups-learn Accenture Shift to Digital - Perspectives on digital transformation in Consumer Goods industry, Jan 2015

Looking ahead, projected growth in digital technologies – from connected devices, wearables,5 and virtual reality6 to 3-D printing7 and advanced machine learning8 – will empower consumers to seek even greater control along the path to purchase. Companies that are ahead of the curve in Asia realize this. They’re using these technologies to influence purchase decisions and capture a greater share of the marketplace (see Figure 9 below).

Technological advances are derailing traditional CPG ways of thinking. The shift to how consumers will shop and buy in future has already begun. And driven by early adopters in this space, it’s gathering momentum. Companies like Amazon, FedEx and Google are using drones to speed delivery times way beyond their competitors.9 With augmented reality, Ikea’s customers can see products in their homes before they buy them.10 Consumers can watch the ‘Hilfiger Collection’ runway via 360-degree 3D virtual reality, before shopping the collection online.11 And Mondelez stores can now display products on smart shelves with sensors that analyse faces and behavioural characteristics for consumer profiling.

Figure 9. The new digital toolkit Consumer Needs

For companies like these, it’s all about using new technologies to ensure that consumers are central to everything they do. Leading disruptors like Alibaba13 have redefined the entire value chain to achieve this objective (see Figure 10 below): From its roots as an e-commerce company serving small and medium-sized business, Alibaba’s steadily expanded its offering.

From incorporating online payment services and launching an online marketplace, to adding monetisation platforms and developing a cloud computing platform, it’s put in place a future-focused infrastructure for e-commerce that leaves most CPG companies trailing in its wake.

We’re seeing technology evolve at a rapid pace to keep up with new consumers. Leading-edge companies like Alibaba are embracing these developments and creating new ecosystems to facilitate consumers’ paths to purchase and meet their demands for improved digital engagement.16 How can CPG companies compete?

Figure 10. Alibaba redefines the value chain

Alibaba has been self tuning & reinventing; it has constantly factored consumer needs e.g. contributing to the payment ecosystem with Alipay

The digital commerce opportunity for CPG companies

However rapidly the market’s being transformed by digital, it’s clear from our research that consumers are still not satisfied with their purchase journeys. Today’s top ‘ask’, according to our online consumer communities,17 is for a single platform where they can search, buy, share experiences and be rewarded. In other words, seamless shopping experiences are still in short supply.

This represents an outstanding opportunity for traditional CPG companies. The objective? Focus on using digital commerce technologies to bridge existing gaps in consumers’ purchase journeys and provide the seamless shopping experiences they’re looking for.

We know that the battle for consumers is already being fought in the micromoments that make up each purchase journey. The priority for CPG companies is to expand their view of digital channels beyond the ‘buy’ button so they can begin to harness new opportunities for driving sales and measuring success in as many of these situations as possible (see Figure 11).

Figure 11. The new normal path to purchase

The first step is to develop a strategic e-vision for the future. This needs to be built on in-depth understanding of the trajectory of travel for APAC consumers and familiarity with the ‘new normal’ path to purchase. To shape this e-vision around their needs, CPG companies need to start asking the right questions (see Figure 12 below):

Once their e-commerce vision takes shape, they’ll be ready to take essential next steps. These might include:

Enhance interactions across multiple touchpoints Partnering with e-commerce platforms to reach new consumers/markets Leveraging value from cross-border e-commerce Investing in brand building, with integrated marketing initiatives spanning online/offline Adopting a ‘Mobile First’ approach Integrating e-commerce initiatives with social platforms to engage consumers and build trust Investigating opportunities for product testing and product development through crowd-sourcing Leveraging insights from big data to enhance and fine-tune consumer interactions across multiple touchpoints.

Enhance interactions across multiple touchpoints CPG companies need to discover the role of each digital touchpoint in the consumer journey (shown in Figure 11), unbundling activities along the path to purchase and beyond into smaller, more manageable (and win-able) scenarios.

Establish partnerships with e-commerce platforms It sounds counter-intuitive, but CPG companies should consider developing partnerships with the same digital players that threaten to seize competitive advantage in many Asian consumer markets. Some CPG companies are already doing so. Last year, for example, Unilever partnered with Alibaba to extend its access to China through the digital native’s data-driven ecosystem.18 Key areas for collaboration between the two organisations include rural China penetration, cross-border e-commerce, consumer protection and big data. Unilever’s also forged a partnership with JD.com to expand its direct selling capabilities in China.19 By launching a flagship store on the JD.com website, the company can now promote some of its most popular global brands to a massive new audience.

Figure 12. Asking the right questions

What is our eCommerce vision?

Partnerships like these will help CPG companies to secure market share in a hyper-competitive connected marketplace. But it’s essential for them to protect their brands on these digital platforms. Robust data management is key. So is sophisticated analytics that can deliver real-time insights into consumer experiences on digital platforms – and how these can be improved.

Identify ‘Hunger marketing’ opportunities In the ‘internet of me’ world, CPG companies need to explore opportunities for ‘hunger marketing’ – creating exclusivity for specific products through online-only offers. We know that 22 percent of impulse food sales are online exclusive items. The same trend applies in categories including baby products and personal care. Online-only offerings can also include product customisation (targeted at urban consumers with high expectations) and value-based promotions (retailing prices on e-commerce platforms are typically 20-30 percent lower than in-store prices).

Leverage value from crossborder e-commerce Catering to demand for genuine, quality, foreign products, cross-border e-commerce platforms are driving the development of a completely new ecosystem with sellers and consumers at its heart (see Figure 13 below):

It’s a massive opportunity for CPG companies. Cross-border e-commerce is predicted to soar in value; in China alone, a compound annual growth rate (CAGR) of over 50 percent has been predicted for the period 2014-2020 (from US$21 billion to US$245 billion).

Think ‘Mobile First’ Asia’s gone mobile: the number of unique users of smartphones in the region will double between 2014 and 2019 (from one billion to two billion),21 Singapore already has the world’s highest smartphone penetration (at 85 percent)22 and mobile internet penetration in Indonesia should top 56 percent by 2019. Today’s Asian consumer expects to remain connected round the clock and CPG companies’ digital commerce strategies have to be built to deliver. That means ensuring information fits screen sizes, contains deep details and appetising images and, above all, is easy to use and navigate from start to checkout.

Develop online-to-offline capabilities By 2020, 65 percent of transactions in Asia will begin online and finish offline. CPG companies must develop seamless online-to-offline (‘O2O’) capabilities that complement and expand e-commerce related opportunities. Amway, the health and beauty products business, shows what can be achieved. The company’s already built seven experience spaces in China, soon to expand to 50. These include interactive installations that allow consumers to better understand its brand and help create unique brand experiences in physical settings. The efficiency of internet-based business models allows stores, and sales representatives in Amway’s case, to offload a large amount of inventory online and focus on more interesting areas in-store, such as serving its customers and creating an experience that reflects the company’s brand values.

Figure 13. Platform-based business ecosystem Cross-border B2C Platform-Based Business Ecological System/p>

Moving ahead: next steps

CPG companies have an outstanding opportunity to position themselves as leaders in fast-growing digital markets in Asia, including China, India, Indonesia and Singapore. Development of more scalable technology platforms and back-end processes will be key to delivering seamless omni-channel shopping experiences. Implementing advanced analytics is another priority. This will equip companies to predict and influence purchases, helping them move closer to the role of ‘smart assistant’ where they can provide hyperpersonalised solutions – before consumers request them. Meanwhile, the addition of subscriptions to existing e-commerce ventures should jumpstart growth by positioning CPG companies to secure and retain a greater share of the consumer’s shopping basket.

To help companies get started on this journey, Accenture has developed an e-commerce value assessment (EVA) methodology. Designed to gauge e-commerce readiness and identify priority actions for the business, this provides our clients with audits and assessments of their existing ecommerce solutions, suggestions for improvement, and identification of future ecommerce growth opportunities, along with technology architecture and integration opportunities, governance models, optimum partnership/operating models and omni-channel commerce frameworks. We recommend companies select partners who can straddle the bigger spectrum of services and provide value based deals, as opposed to working with multiple smaller niche vendors. To find out more, please visit: https://www.accenture. com/sg-en/service-accenture-interactiveomni-channel-commerce

Case study
Indonesia consumer experience

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