Demystifyingthe online shopper10 myths ofmultichannel retailing             PwC’s annual global survey of             onli...
II	 Demystifying the online shopper: 10 myths of multichannel retailing
Contents                                        Separating fact from fiction to better serve today’s online shoppers      ...
2	 Demystifying the online shopper: 10 myths of multichannel retailing
Separating fact from fiction                                             to better serve today’s                          ...
Netherlands              Canada                                                                             Russia        ...
adoption of social media across our                            retail partners as they do so. According      products thro...
Myth 1: Social media will   soon become an indispensable   retail channel   On its own, social media isn’t likely to becom...
survey respondents—our group of “deal          Figure 2: Social brand lovers shop more often in every channelhunters’’—say...
PwC’s Sean O’Driscoll urges   companies to get beyond the   myths and take the long view   When Sean O’Driscoll and Jake M...
“If you allow risk concerns to                 paralyze you so that you don’t                 create that Facebook storefr...
So you don’t think negative social            One of our themes is that China’s                                           ...
But it’s not all bad news for retailers. Ithink products that are relational, ratherthan transactional, will be a much eas...
Myth 2: Stores will   become mainly showrooms   in the future   Many multichannel shoppers say they research   online, but...
category dominated by online research          Figure 4: The hold-outsand purchase, one in four of our survey             ...
Myth 3: The tablet will   soon overtake the PC as the   preferred online shopping   device   While tablets and smart phone...
Other roles for the tablet                                        Figure 5: Far more online shoppers use their PC’s to mak...
Myth 4: As the world gets   smaller, global consumers   are getting more alike   Although consumers shop with more global ...
Think different                              Figure 8: Why shoppers go online is dramatically different across countriesBu...
For them, the top reasons are               the other hand, want to see detailed                                          ...
The more specifically retailers                                        and brands can identify what                       ...
Myth 5: China is the future   model of online retail   China is at the forefront of some key trends, but   we believe its ...
Figure 10: Chinese shoppers are ahead of the curve when it comes to using newdevices and social media                     ...
Chinese consumers are also enthusiastic        The infrastructure effect                                                  ...
Far more Chinese consumers are          using a social media platform to          make purchases, compared to          the...
Myth 6: Domestic retailers   will always have a “home   field” advantage over global   retailers.   Foreign retailers are ...
Demystifying the online shopper I 10 myths of  multichannel retailing
Demystifying the online shopper I 10 myths of  multichannel retailing
Demystifying the online shopper I 10 myths of  multichannel retailing
Demystifying the online shopper I 10 myths of  multichannel retailing
Demystifying the online shopper I 10 myths of  multichannel retailing
Demystifying the online shopper I 10 myths of  multichannel retailing
Demystifying the online shopper I 10 myths of  multichannel retailing
Demystifying the online shopper I 10 myths of  multichannel retailing
Demystifying the online shopper I 10 myths of  multichannel retailing
Demystifying the online shopper I 10 myths of  multichannel retailing
Demystifying the online shopper I 10 myths of  multichannel retailing
Demystifying the online shopper I 10 myths of  multichannel retailing
Demystifying the online shopper I 10 myths of  multichannel retailing
Demystifying the online shopper I 10 myths of  multichannel retailing
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Demystifying the online shopper I 10 myths of multichannel retailing

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PwC’s annual global survey of online shoppers debunks the conventional wisdom about online consumer behavior I January 2013
This is the sixth consecutive year that PwC has published a study of online shoppers, and our second truly global survey.

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  1. 1. Demystifyingthe online shopper10 myths ofmultichannel retailing PwC’s annual global survey of online shoppers debunks the conventional wisdom about online consumer behavior January 2013 pwc.com/multichannelsurvey
  2. 2. II Demystifying the online shopper: 10 myths of multichannel retailing
  3. 3. Contents Separating fact from fiction to better serve today’s online shoppers 3 Myth 1 Social media will soon become an indispensable retail channel 6 Interview: PwC’s Sean O’Driscoll 8 Myth 2 Stores will become mainly showrooms in the future 12 Myth 3 The tablet will overtake the PC as the preferred 14 online shopping device Myth 4 As the world gets smaller, global consumers are getting more alike 16 Myth 5 China is the future model for online retail 20 Myth 6 Domestic retailers will always enjoy a ‘home field’ advantage 24 over global retailers Myth 7 Global online pure players like Amazon will always enjoy a scale 26 advantage over domestic online pure players Myth 8 Retailers are inherently better positioned than brands, 28 as they are closest to the consumer Myth 9 Online retail is cannibalising sales in other channels 30 Myth 10 Low price is the main driver of customer spend at their 32 favorite retailers Final thoughts 35 For more information 36 For a deeper dive into the “myths,” video interviews, and country data, visit our web presence at pwc.com/multichannel surveyPwC’s Multichannel Retail Survey 2012 1
  4. 4. 2 Demystifying the online shopper: 10 myths of multichannel retailing
  5. 5. Separating fact from fiction to better serve today’s multichannel shoppers By John Maxwell, Global Retail and Consumer Leader, PwC One thing I’ve learned in have a lot of options at their fingertips: Myth: any invented more than three decades information, services, and—not least— story, idea, or concept; working with some of the the ability to shop from anywhere via an imaginary or fictitious world’s biggest companies is all manner of personal technology thing or person1 that successful executives and devices: mobile phone, PC, iPad and, entrepreneurs often radiate soon enough, futuristic accessories like untiring optimism. And the wearable Google-developed smart rightfully so—the thick skin phone eyeglasses. And there are a lot and fortitude needed to make of new consumers buying more in the hard choices and succeed in emerging markets. Together, that should tough times is best paired with a positive, mean good long-term growth prospects inspiring vision. for global retailers and consumer goods manufacturers. And yet, sometimes the optimism needed to change the world can prevent even the Yet many companies see the multichannel best of us from coolly looking at the lay bullet train leaving the station and, of the land. It can be particularly difficult instead of feeling excitement, are actually for corporate executives to cut through more overwhelmed than anything the hype and separate fact from fiction else. Their confusion is heightened by when it comes to the global market for misinformation and false assumptions multichannel retail spending. that gain currency through anecdotal evidence, a few highly publicized The opportunity is real, but hype media stories of success (or failure), and half-truths­ myths, if you — and individual experience bias. In this will—abound report, based on a survey of more than In theory, digital technology can connect 11,000 shoppers in 11 different countries any retailer or CPG company to any spanning four continents, we debunk customer in the world who has access to some of the mythology concerning the Internet. For their part, consumers consumers and discuss what our findings mean for retailers and CPG companies. 1  Random House Dictionary, Random House Inc. 2012PwC’s Multichannel Retail Survey 2012 3
  6. 6. Netherlands Canada Russia U.K. Germany Switzerland U.S. China France Turkey Brazil Countries in 2011 survey Added in 2012 Building on last year’s results China, for example, 70% of our survey This is the sixth consecutive year that respondents shopped online at least once PwC has published a study of online a week, compared with about 40% in the shoppers, and our second truly global US and the UK, and around 20% for the study.2 In last years survey, which Netherlands, France and Switzerland. included seven countries,3 we talked In fact, our 2011 findings showed that about how multichannel shopping is here Chinese online shoppers were shopping to stay and how global consumers are online nearly 4 times as often as their becoming increasingly sophisticated. We European counterparts. found retailers were sometimes having trouble adapting their operating models But in a testament to the accelerated to keep up. pace of change in how consumers are shopping online, our results from last Some of our 2011 data was, to us, year—when compared to this year’s staggering; for example, more than 90% survey of 11 countries4—already seem of online shoppers bought books, music a bit dated. For example, in just one and films online. Even the categories at year we’ve seen a major increase in the the bottom end of the online shopping scale, such as jewellery, watches, sports 2  PwC commissioned 11,000 online surveys across four equipment and outdoor goods, attracted continents in July and August 2012. Respondents in each market were chose to reflect the national profiles in terms of more than 60% of online shoppers. age, gender, employment status, and region. 3  Our 2011 study included the U.S., U.K., China, Switzerland, Germany, France and the Netherlands Among different countries we also 4  Our 2012 study includes the U.S., U.K., China, Switzerland, found some eye-popping differences. In Germany, France, the Netherlands, Brazil, Canada, Russia and Turkey.4 Demystifying the online shopper: 10 myths of multichannel retailing
  7. 7. adoption of social media across our retail partners as they do so. According products through social media andglobal sample.5 Whereas last year 49% to our survey, more than a third of actually conducting a sales transaction.of our sample reported that they follow consumers have already bought products This example shows how otherwise goodbrands or retailers on social media, this directly from brands or manufacturers. information can be used to lend currencyyear 59% claimed to do so. Last year, just In China (56%) and the US (52%) more to a myth and, perhaps, encourage17% of our survey sample discovered than half of shoppers are going directly corporate strategy or investment thatbrands they previously didnt know to brand sites. goes in the wrong direction. The goal ofabout via social media; this year more this “10 Myths” paper is help companiesthan one-quarter—27%—did so. It was The making of myths and look before they leap when makingour simplest survey question concerning how to spot them those decisions.social media—how often do you use it?— The heart of the matter for boththat illustrated the starkest turnaround retailers and consumer companies Thanks for reading, and I hope you findbetween 2011 and 2012. This year, fully trying to expand their global footprint this report helpful.49% of our survey participants said they and manufacturers hoping to connectuse social media every day; thats an directly to their potential customers is Best regards,increase of 14% over last year. In a mirror this: What are the actionable takeawaysimage of that figure, 14 percentage from these year-to-year changes inpoints less of our sample—24%—said consumer behaviour? The answerthat they dont use social media at all. is not always so clear, which is why we decided to use this “10 Myths” John G. MaxwellLast year we were struck by how strongly framework. Recently weve noticed thatdomestic players dominated the lists much of the literature on online retailof top multichannel retailers. That’s shoppers seizes on a few data points andstill true for some countries, but non- parlays them into a trend. Presto—more John G. Maxwelldomestic retailers are also breaking conventional wisdom.through in some markets. In China, Global Retail and Consumer Leaderfor example, non-Chinese retailers/ Take social media, for example. Theresbrands numbered four out of the no denying that the world is changingtop 10 favorites. fast as consumers use social media to research brands, praise their favoriteBesides the tension between domestic products, and point out the weaknessesand foreign retailers, another kind of of other products.friction apparent in both last yearsand this year’s survey is that between But our survey data reveals that justretailers and manufacturers. Many 12% of our respondents have purchasedmanufacturers today have the stated goal an item through a social media site—of vastly increasing their sales directly to up from 5% in 2011—and only 18%consumers, potentially bypassing their purchased a product as a result of information obtained through a social5  Throughout this document the sample differences between media site. So despite rising participationour 2011 and 2012 study includes should be duly noted by the of online shoppers in social media, areader; namely our 2012 study includes four more countriesand 4,000 more online shoppers surveyed than our 2011 major disconnect occurs somewheresurvey. PwC’s survey arm, the ISU, has confirmed that validcomparisons can be made between the two studies. between researching and learning aboutPwC’s Multichannel Retail Survey 2012 5
  8. 8. Myth 1: Social media will soon become an indispensable retail channel On its own, social media isn’t likely to become an important retail channel anytime soon. But it’s becoming more popular every year— and it’s driving more shopping across all channels, not just online ones. Our survey data shows that social excursions. For example, for those brand how much some shoppers will buy, both media will for the near future remain lovers who say they interact with brands online and in stores. So, despite the a backwater sales channel, if you can via social media, 53% go shopping in a fact that social media has not emerged call it a sales channel at all. The use physical store daily or weekly, compared as a stand-alone retail channel, the of social media sites like Facebook to 45% of the overall sample, and 58% impact social media has on the brand has exploded in recent years—the site buy something in a physical store at needs to be part of every multichannel recently hit one billion users. But our least once a week. Forty-five percent of strategy discussion. survey sample shows that while about this same group reports that they make half of respondents say they’re checking an online purchase at least once a week Indeed, while social media is not yet out social media sites daily, only a tiny (see Figure 2). a separate retail channel for most minority uses the sites frequently to markets, it’s clearly a robust marketing shop. In fact, seven out of ten online As it turns out, despite its inability to and communications tool for retailers shoppers who took our survey say they lead directly to a purchase, social media and consumer product companies. never shop this way. That should remain activity is a pretty strong indicator of According to our data, nearly half of our the status quo for the immediate future, as only about 5% say they’ll shop more via social media in the next 12 months. Figure 1: Brand lovers, deal hunters and social addicts have different motivations for visiting brand social media sites So what are online shoppers doing Q: What attracts you to go to a particular brand’s social media site? on social media? Essentially they’re commenting on companies and products they know and discovering new ones. Attractive deals/promotions/sales 49% But there are differences in motivation Interested in new product offerings 28% among these social media users, and Friends or expert recommendation 26% we’ve divided them into three groups Friends also interact with this brand on social media 17% based on their behavior: “brand lovers,” Follow the brand because I shop with them 17% “deal hunters” and “social addicts” Opportunity to participate in contests 16% (see Figure 1). Feedback about a good or bad experience 11% To research products before I buy them 10% In this year’s survey, trends around brand Interested in interacting with the brand 9% Deal hunters lovers are the most striking. We found that Brand lovers Interested in interacting with others that follow this brand 7% 38% of our respondents are following their Social addicts Access to customer service through social media 5% favorite brands and retailers, up from 33% last year. Brand lovers may be using social media as a way to “warm up” for Sample size: 8,335 social media users out of the 11,067 online shoppers responding future online or physical store shopping6 Demystifying the online shopper: 10 myths of multichannel retailing
  9. 9. survey respondents—our group of “deal Figure 2: Social brand lovers shop more often in every channelhunters’’—say they’ll click through to a Q: How often do you shop in (each of these channels)?specific online store if offered a good saleor an attractive special offer. Appealingto deal hunters looking for good offers In a physical storeand contests can be a great way to drive Via PCtraffic to your website. Via a catalogue/magazineAnd companies can’t afford to ignore Online via tablet computer“social addicts,” either. While there arefewer social addicts than brand lovers or Online via mobile or smart phonedeal hunters, a minority of consumers Online via social media sitesare also using social media to talk abouttheir experiences with brands, learn Via TV shoppingwhat their friends like and recommend, 0% 10% 20% 30% 40% 50% 60%find customer service answers, andsubmit ideas and product feedback to Consumers who use social media to interact with their favorite brandscompanies. Getting the message out to Consumers who use social media to follow their favourite brands or retailers Total samplesocial addicts can support the brand,while ignoring them carries significantreputational risk, as these very active Sample size: 11,067 online shoppersonline users tend to have huge socialmedia networks and wield an outsizedinfluence among them. All in all, there’s good reason for retailers to continue focusing on social mediaThe China factor investment. Most of the world’s topAs so often is the case in this and other retailers, of course, already realizes this.studies that look at online retailing Campalyst analysed the world’s 250internationally, China is in a class by biggest internet retailers and found thatitself. If China eventually serves as 97% of them are already on Facebook,any kind of barometer, social media 96% have a presence on Twitter, andmay indeed one day become a viable 90% use YouTube.6 The social mediasales channel. According to this year’s traffic generated in many cases issurvey, more than one in four Chinese impressive; 43 of the 250 can claim moreshoppers made purchases through a than one million followers on Facebook,social media site. led by Victoria’s Secret, with over 18 million followers.7In general, Chinese shoppers seem to bemore actively engaged with social media: 6 http://blog.campalyst.com/2012/05/15/top-250-internet-57% of them say they’re following brands retailers-on-social-media-q1-2012-infographic/ 7 Ibid.or retailers on social media, comparedto 38% of our global sample. And moreChinese online shoppers are using socialmedia to interact with brands, providecomments on companies and products,and find new brands.PwC’s Multichannel Retail Survey 2012 7
  10. 10. PwC’s Sean O’Driscoll urges companies to get beyond the myths and take the long view When Sean O’Driscoll and Jake McKee co-founded consulting firm Ant’s Eye View in 2009, it didn’t take them long to assemble a blue-chip client list consisting of, among others, Google, Microsoft, P&G, Starbucks, Bloomingdales, Unilever and AT&T. It turns out that many organizations need help getting customers more engaged with their brands through social media, which was one of the Seattle-based firm’s greatest service strengths. PwC acquired Ant’s Eye View in August 2012, with Sean and Jack joining as principals.We talked with Sean about his take on our social media–related myths. Sean O’Driscoll Sean, one of our 10 myths centers products through friends on Facebook around the role of social media or on Twitter, which eventually leads Principal, PwC and its future as a retail channel. to a purchase, that obviously goes on We posit that, based on our online all the time. shopper responses, social media isn’t likely to become an important Part of the issue is the debate on retail channel anytime soon. What’s what exactly constitutes an online your take on the future of social as transaction. From a survey perspective, a sales channel? people may say they aren’t buying on There have been quite a few attempts at a social network, but isn’t Amazon a Facebook commerce, and most of these social network? It certainly is an online pilots have been pretty disappointing. community. Jeff Bezos made it social I’d call them nothing more than through the strength of Amazon reviews experiments. Setting up a storefront on and how much credibility people give Facebook—companies are still trying those reviews, in addition to the social out how to do that successfully and data that enables the experience to be in some cases debating if it’s even the shared with others. right model. There are some notable exceptions. You can purchase a Delta The value of advertising on Facebook Airlines ticket through Delta’s Facebook is certainly a debate. It’s quite big news page and Ticketmaster has been an to talk about companies walking away innovator. One issue is that there are from Facebook or other sites because some limitations from a design point of the number of ad impressions or the of view with Facebook. On the other perceived lack of productivity of those hand, learning about a company and its investments. It’s just not as interesting to talk about the nuts of bolts of how brands8 Demystifying the online shopper: 10 myths of multichannel retailing
  11. 11. “If you allow risk concerns to paralyze you so that you don’t create that Facebook storefront, or you don’t engage consumers in a way they enjoy, then you are missing opportunities to create lasting value.” can create engaging and participatory Back in the 1990s the industry was content in social spaces that builds terrified that membership complaints traffic to traditional e-commerce, or about being locked into an annual even in-store purchases. That’s the real contract would move online and be issue: how can brands build compelling visible to everyone. For that reason, content, engagement and advocacy many health clubs were very slow to through their social environments, and create a social community for members, leverage the content and relationships to which was strange since this is an inspire intent to purchase? industry in which people connect and share their goals and experiences. Frankly, this is no different than the world of brick and mortar. If you put up Companies should really think about four walls, fill it with product and add it the other way—have they created a sales people, will you be successful in dynamic, participatory presence for the retail? Not likely. Success comes down vast majority of their customers who to creating a distinct experience that like them? If you allow risk mitigation engages a shopper. Social media is a concerns to paralyze you so that you compelling part of successfully creating don’t create that Facebook storefront, that sort of engagement online, but or you don’t engage consumers in a simply being in the channel isn’t good way they enjoy, then you are missing enough—you must make it compelling opportunities to create lasting value. to the user. Do you run a risk of a negative customer What can companies do to turn their experience creating negative buzz social media presence into that kind online? Of course, but you run that risk of participatory environment that regardless of what you do. So embrace leads to a purchase? the moment, and ensure that you have There is a philosophical challenge that a great online presence and protocols is stopping many of them. A lot of the to listen, discover and respond to those brands have been fearful because, in moments of truth. a sense, they are creating a channel for negative sentiment. If they create a channel, will they create a group that dislikes them? One example is the health club industry.PwC’s Multichannel Retail Survey 2012 9
  12. 12. So you don’t think negative social One of our themes is that China’s media comments are a big deal online shopping model is unique and for brands? not replicable in other countries. It’s something a company needs to deal What’s your experience with China? with, sure, and most have set up “listening South Korea, Northern Europe, these posts” so they can engage in complaint are populations with heavy smart phone management and customer recovery, and broadband access over the past 10 whether that’s through coupons or some years, and they are at the “tip of the other outreach. We’ve seen brands like spear” in terms of social engagement Comcase, AT&T, Wells Fargo, and Jet with brands and retailers. It’s amazing Blue doing that. But as a brand you can to think that the most shared piece of spend all your energy managing the risk content ever on Youtube is Gangham and save a couple of bucks, or you can Style from a South Korean pop singer! embrace the social media opportunity And in China and, say, India, I think you and generate a lot more revenue and will see similar engagement now that growth. I can’t think of a business that these huge economies are skipping right ever managed their risk into growth. over land lines. In our survey, we asked about I’m not fully discounting the idea that consumers’ “purchase journeys,” consumers behave differently in different and how those are evolving. Whether countries, but I think consumer behavior it’s setting up a Facebook storefront as we think of it may be more related or trying to attract buyers over to infrastructure than we realize. In Twitter, it’s really about changes in China they are not evolving into this the purchase journey, right? behavior; they are leaping straight into to That’s right. The questions both brands it because the lack of land line /physical and retailers should be asking themselves infrastructure constraining the change. are, how is the buyer’s journey changed from 10 years ago, and at what points Another of our myths focuses on the does that journey touch digital channels? direct-to-consumer phenomenon. We think that retailers may lose some As a brand, if you haven’t significantly ground to manufacturers in terms of changed your channel, connecting and where consumers go to purchase. marketing mix over this timeframe, then Direct-to-consumer sales are going to you’re clearly not optimized. I chose the explode over the next five years, and phrase “10 years” for a specific reason. retailers will be hit hard. I expect that in It seems like for many of these trends, 10 years, today will seem like the Stone not much seems to change over five Age in terms of the consumer product years, but absolutely everything changes sales dynamic. over a decade. Look at your own survey. I’ll bet over five years, shopping trends online aren’t that much different. But 10 years ago? Hardly anyone around the world was shopping online.10 Demystifying the online shopper: 10 myths of multichannel retailing
  13. 13. But it’s not all bad news for retailers. Ithink products that are relational, ratherthan transactional, will be a much eas- “Direct-to-consumer sales are going toier sell from the manufacturer. If people explode over the next five years, andattach their identity to a certain item ofclothing or brand of sneaker, they will be retailers will be hit hard. I expect thatmuch more likely to buy directly from the in 10 years, today will seem like thefashion house or the sneaker manufac-turer, assuming the manufacturing can Stone Age in terms of the consumertap into the natural advocacy associated product sales dynamic.”with their brands. Other items—takea can of Coca-Cola—that may be emo-tional items for some will likely not be abig direct-to-consumer product, becauseit’s omnipresent in the channel.PwC’s Multichannel Retail Survey 2012 11
  14. 14. Myth 2: Stores will become mainly showrooms in the future Many multichannel shoppers say they research online, but more still prefer to buy products at a physical store. If the store format can adapt, it may still have a bright future. To paraphrase the American author Figure 3: The purchase journey across selected categories Mark Twain, the death of the physical Q: Which method would you most prefer for researching and buying? store has been greatly exaggerated. In fact, far from cannibalizing store traffic and turning physical locations Research and buy in store Research and buy online into showrooms or museum pieces, Research online, buy in store Store-to-web web product research drives far more shoppers to make a physical Books, music … store purchase than vice versa. It’s even conceivable that stores, in some Electronics categories, are realizing more traffic and sales due to web-only coupons and deals. Electricals For starters, 23% of our respondents H&B research consumer electronics online and then go to a store to buy the product, Clothing compared to only 2% who do it the other way around (see Figure 3). A similar Furniture ratio holds true across several shopping Grocery categories. With the exception of the books, music, movies and video game 0 20% 40% 60% 80% 100% category, consumers don’t yet seem ready to erase the traditional retail outlet Sample size: 11,067 online shoppers from their shopping landscape. Some things never go out of style immediately is important to almost as The centerpiece of the There’s more evidence when you take a many—and no online shop can offer purchase journey look at survey participants’ answers to either of these advantages. All told, We also can’t emphasize enough a question on what makes shopping at our global sample makes more daily or that the physical store remains the a physical store attractive. The ability to weekly purchases in brick-and-mortar centerpiece of the purchase journey see, touch and try products still ranks stores than they do online. And while for many categories. In nine out of as shoppers’ number one reason to visit significant numbers of shoppers intend eleven categories, in fact, the majority a store in person. Getting the product to shop more online next year, most don’t of consumers use physical stores for plan to concurrently cut purchases from both researching and purchasing the physical stores. products they want to buy. Even when it comes to consumer electronics, a12 Demystifying the online shopper: 10 myths of multichannel retailing
  15. 15. category dominated by online research Figure 4: The hold-outsand purchase, one in four of our survey In each of the 11 countries in the survey, a significant percentage of internet usersparticipants responded that, for them, said they rarely, if ever, shop online.the store plays a dominant role along thepurchase journey. 3 – 4 time s a y esFigure 3 also illustrates another intriguing ear tim –2 ar 1 edynamic: for every shopping category, ay Russia 32%the majority of consumers still prefer a Canada 25% Occasional ye ar“single-channel shopping experience.” In <1 a Brazil 23%other words, the majority of respondents France 19% Onlyprefer to use just the web or a store for Netherlands M o nthly once 13%both researching and purchasing their ever US 13% Neverproducts, and in nine out of 11 categories UK 12%the physical stores wins out. Frequent Never Germany 12% China 12%We should also mention the significant Da Turkey 11% ilyminority of internet users who still s Switzerland 11% menever or almost never shop online. l ti k We ekly ve r a e e Se a wOur overall sample of approximately11,000 respondents does not include asignificant number of internet users that Sample size: 11,067 online shopperswe approached who said they never, oralmost never, shop online. In fact, 2,343internet users from our original poolof 13,410—that’s 17%—said they shop online men’s clothing retailer Bonobosonline less than once per year. In Russia, recently set up a ‘guide’ store in Boston.for example, the percentage of online Customers can set up appointments tohold-outs is more than 30%. These come in and try things on, and then ordercustomers would clearly prefer to go to them online.8 Bonobos is also partneringa brick-and-mortar store rather than with upscale retailer Nordstrom toshop online. showcase its products in more than 100 of Nordstrom’s department stores.9Of course, there may still be a placefor the store as a showroom—as a 8 http://connected.retailnetgroup.com/index.php/2012/06/12/supplement for online pure players, online-to-offline-retailing-when-pure-players-and-brands-go- brick-mortar/rather than a new model for bricks-and- 9 http://dealbook.nytimes.com/2012/04/11/mortar retailers. Some German pure stores-go-online-to-find-a-perfect-fit/players have belatedly begun to offerstores where customers can gather to see,touch, and test their products. In the US,PwC’s Multichannel Retail Survey 2012 13
  16. 16. Myth 3: The tablet will soon overtake the PC as the preferred online shopping device While tablets and smart phones are catching up, shoppers are still overwhelmingly using their PCs to shop online. There’s no doubt that the tablet market Smart phones aren’t making serious A bellwether in China?? is growing fast. In 2012, the world saw a inroads as a shopping device, either. As The future of both tablets and smart 100% increase in global tablet sales and with tablets, most of those using these phones as shopping devices looks by 2015, Gartner expects tablet sales to devices don’t expect to use them more for stronger when one considers China. reach 320 million units.10 Tablets aren’t shopping in the near future. And many While only 17% of global online shoppers just replacing smart phones or laptops— still don’t use them for shopping at all. In turn to their tablets to buy something they’re expanding the ways people use fact, the overwhelming majority of our at least once a month, 39% of Chinese online devices. Three-quarters of tablet respondents still use their PC to make online shoppers do, and 21% make tablet users reach for their device at least once purchases (see Figure 5). That situation purchases every week. Around a third of a day and nearly half spend more than 11 doesn’t look likely to change anytime Chinese online shoppers make purchases hours per week on their tablets.11 soon. More than one-third of our global at least once a month via their smart sample expects to increase their PC phone. In fact, half of those who shop By 2015, the manner by which shopping next year, far more than the with online pure player leader Taobao consumers will access the Internet will percentage who say they expect to shop used their smartphone. look much different than it does today, more using other devices (see Figure 6). with the smart phone accounting for An astounding 87% of our Chinese 40% of Internet traffic, computers 34% That said, using smart phones at the end respondents are using their PCs to shop and tablets 26%. Global spending on of the purchase journey, particularly every month, 20 percentage points mobile apps is projected to soar from $7 in-store, is a growing trend. A September higher than the sample overall. So billion in 2010 to $35 billion in 2015.12 2012 research study finds that two-thirds even in a country where consumers use of technology industry insiders believe their smart phones and tablets more When it comes to shopping, that smart phones will outpace both cash extensively, the PC still has a clear lead the PC still rules and credit cards as a payment option by over both. One thing we can say for sure: So does that mean tablets will soon take 2020.13 The technology is called Near there is ample enthusiasm in China to over as the preferred online shopping Field Communication (NFC) and many shop across all devices. device? Our survey research suggests smart phones already offer it. While the the answer is still no, at least for the time experts interviewed didn’t agree how 10  http://www.gartner.com/it/page.jsp?id=1980115, http:// being. Only 9% of shoppers say they long it would take to gain consumers’ www.gartner.com/technology/research/ipad-media-tablet/ future-of-tablet-market.jsp they’ve changed their habits to shop with trust in payment by mobile, most 11  Online Publishers Association, A Portrait of Today’s Tablet a tablet more often—and around three believed the question is when, not if. User Wave II, June 2012 out of five don’t use this type of device to 12 PwC, Best Practices in Advertising Effectiveness, 2012 shop at all. Our respondents don’t expect 13  http://www.computerworld.com/s/article/9226268/ to increase their tablet purchases much 14 http://www.ebayinc.com/content/press_release/ Millions_of_Reasons next year either, with only 11% thinking they’ll shop more with their tablet.14 Demystifying the online shopper: 10 myths of multichannel retailing
  17. 17. Other roles for the tablet Figure 5: Far more online shoppers use their PC’s to make purchasesand smart phone Q: How often do you go shopping* using the following shopping channels?There are also signs that both tabletsand smart phones have a significant roleto play in other aspects of the shopping Daily Weekly Monthly Less than once a month Neverexperience. Separate research suggeststhat users are turning to their tablet to PCresearch products across all advertisingcategories, from consumer electronics Tablet PCto personal care and beauty to homefurnishings.15 For retailers, the potential Mobile/smartphoneof these devices as an advertisingchannel may be even more important.One recent study showed that tablet Social mediausers in particular are highly receptive 0% 20% 40% 60% 80% 100%to advertising, with 47% reporting thatthey interact with ads on their tabletsat least once a week.16 We believe that Sample size: 11,067 online shoppersdigital channels will play an increasinglyimportant part of the advertising mixgoing forward.17 Figure 6: More than one-third of shoppers expect to use their PC more often for shopping next year15  Online Publishers Association, A Portrait of Today’s TabletUser Wave II, June 2012 Q: How do you think the frequency of your shopping behavior16 Ibid. (e.g. buying clothes, books, electronics etc) will change over the next 12 months17  Reaching the connected consumer, PwC, December 2011 using the following shopping channels? Don’t know Never use this More Same Less channel PC Tablet PC Mobile/smartphone Social media 0% 20% 40% 60% 80% 100% Sample size: 11,067 online shoppersPwC’s Multichannel Retail Survey 2012 15
  18. 18. Myth 4: As the world gets smaller, global consumers are getting more alike Although consumers shop with more global retailers than ever before, there is a wide range of local difference in consumer behaviors. For the first time since the Industrial as green tea, raspberry, and blueberry. Figure 7: Emerging market cities will Age, the global economic engine is The result was a 60% growth in annual set the pace for retail sales growth being powered by southern hemisphere sales, making the Oreo the best-selling Retail sales growth per annum, Cities of nations, not northern, Organization for cookie in China.20 Opportunity, 2012–2025 Economic Co-operation and Development (OECD)-type countries. Global So while it was slightly different take on Beijing 9.9 manufacturing and GDP (factoring the product, an iconic Western brand Shanghai 8.9 in purchasing power parity) reached was successfully exported. Which brings Mumbai 7.7 a 50/50 split between the developed us to the Holy Grail for retailers and CPG São Paulo 5.6 economies and emerging economies in companies alike: an ever-growing global Kuala Lumpur 5.4 Buenos Aires 5.2 2010.18 Most significantly, the income middle class aspiring to the same suite of Istanbul 5.2 gap between people of the developed and global brands. Online retail destinations Johannesburg 4.9 developing worlds is shrinking faster than can now be accessed from New Zealand Abu Dhabi 4.7 Hong Kong 4.5 any time in history.19 to New England. And borderless New York 4.0 communication is increasing the speed of Seoul 3.1 Now fast-forward 15 or 20 years. Instead retail and consumer trends. So you might Los Angeles 3.0 of one billion people on the planet expect that most consumer habits would London 3.0 Moscow 3.0 wanting to live better, three or four turn out to be highly transferrable to Chicago 2.9 billion people will. But what will these other markets and cultures. Mexico City 2.8 consumers buy, and how much of it will Singapore 2.6 And there are a few similarities. Toronto 2.5 look like what’s selling now? Figure 7, Stockholm 2.1 from PwC’s Cities of Opportunity project Across the world, lower prices, free Paris 1.7 research, shows how cities in the shipping, and ease of comparison are Madrid 1.7 emerging markets will deliver the most top reasons to shop online, while being Sydney 1.5 Tokyo 1.5 annual growth in terms of retail sales. able to touch and see the product, and San Francisco 1.4 getting it immediately and at no extra Berlin 0.7 Many companies are doing their own charge are top motivators for going to a Milan 0.5 experimentation to find out who will physical store. be buying what consumer goods in the Retail sales ($US billion, 2012 constant prices future. Take Kraft, for example. Several 18  After the Storm, PwC economic paper, PwC economist and exchange rates), growth per annum (%) years ago, after its Oreo brand had Per Berglund, 2010. Mature-cities avg = 2.6% per annum been underperforming in the Chinese 19 Ibid. 20  2012 GMA/PwC Financial Performance Report Emerging-cities avg = 5.6% per annum market for about a decade, Kraft decided that it had to adjust to local Sources: Oxford Economics; PwC, Cities of Opportunity tastes, developing new flavours such16 Demystifying the online shopper: 10 myths of multichannel retailing
  19. 19. Think different Figure 8: Why shoppers go online is dramatically different across countriesBut our data from this year’s study Q: What are the most important factors that attract you to shopping online in general?suggests that consumers in differentcountries are still much more differentthan they are alike. Internet users’ SUI 52% BRA 75%appetite for online shopping and socialmedia varies widely. And growing Lower prices/better dealspurchasing power doesn’t automatically BRA 29% NLD 61%translate into shopping enthusiasm. More convenient (fast checkout, 24/7 etc.)The same is true for physical stores.Turkey has suffered less from Eurozone TUR 34% SUI 59%weakness over the past several yearsthan some European countries, and has Easier to compare and research products and offersa relatively strong retail sector. Still,just 16% of our survey respondents US 35% SUI 59%there say they like to shop just for sheerenjoyment. Instead, thrifty Turkish Home delivery optionshoppers are laser-focused on price. HK 29% USA 42%60% say that attractive deals, sales orpromotions are a reason to go shopping Wider variety of productsin a brick-and-mortar store, compared tojust 40% of the sample as a whole and a BRA 16% RUS 40%mere 19% of Chinese shoppers. Chineseshoppers, on the other hand, show much Customer reviews of products availablemore passion when it comes to shopping GER 14% CHN 27%in physical stores. Nearly half of ourChinese respondents said they enjoy this Highest response Easier to find my favorite brands online Global averagekind of shopping as a pleasure. UK 10% RUS 20% Lowest responseThe differences are just as dramaticwhen it comes to how consumers think Better product informationspecifically about online shopping(see Figure 8). Overall, the top reasonconsumers say they turn to the Internet is 0% 10% 20% 30% 40% 50% 60% 70% 80%in search of deals. That’s especially trueof Turkish, French and British shoppers. Sample size: 11,067 online shoppersShoppers in Switzerland, on the otherhand, are much less likely to see bargainsas the reason to shop online.PwC’s Multichannel Retail Survey 2012 17
  20. 20. For them, the top reasons are the other hand, want to see detailed convenience and home delivery. And information about products. And while the majority of shoppers across the in Turkey, having a wide variety of total sample do view online shopping as payment options is almost as important more convenient than going to a physical as getting information about specific store, it’s not a universal view. In the products—48% of shoppers say it makes Netherlands, 61% of shoppers think a specific online store attractive. That it’s easier to go online, but just 29% of compares to just 19% of shoppers in Brazilian shoppers would agree. France or China. And more than twice as many Turkish as Brazilian shoppers say Open-minded shoppers in China that vouchers or coupons prompt them to One result in particular is worth noting. visit a specific online store. Less than half of Chinese shoppers go to an online store to look for a particular No “one” global consumer product or brand, perhaps because, as No matter how global multichannel stated earlier, many view shopping as retailing may get, we see precious little a source of pleasure. That’s radically evidence for a global pattern of consumer different from the mature markets habits or preferences. Even developed (Canada, France, Germany, Netherlands, markets show few similarities. The Switzerland, the UK and the US) in our more minutely retailers and brands can sample, where in each case a majority of identify what differences do exist among customers are visiting a specific online their potential customers, the more they shop to look for a particular product. will be able to appeal to these consumers. Obviously Chinese shoppers are still And the Kraft example cited earlier in more open-minded at that point than this section? Perhaps the lesson was not their peers in the developed countries. that ‘the global consumer’ adapted to the For retailers, that might imply that Oreo, but that the Oreo adapted to local Chinese consumers are more open to tastes with its different local flavors. deals and promotions that are offered on websites, and might even be more open to change their mind depending on these offers. The list of differences among countries goes on: Chinese shoppers are much less interested in free shipping; for them, customer reviews of products are most important. Russian shoppers, on18 Demystifying the online shopper: 10 myths of multichannel retailing
  21. 21. The more specifically retailers and brands can identify what differences do exist among their potential customers, the more they will be able to appeal to these consumers.PwC’s Multichannel Retail Survey 2012 19
  22. 22. Myth 5: China is the future model of online retail China is at the forefront of some key trends, but we believe its multichannel and online model is unique. Our research21 confirms that Chinese of the financial strength of Alibaba, Figure 9: Chinese consumers shop consumers have adopted the Internet as in May 2012 Yahoo got over $7 billion online much more frequently a retail channel much faster than their for its stake in the company, for which Q: How often do you go shopping? global peers—even though fewer are it paid $1 billion in 2005.22 That’s a long-time online shoppers. Only 30% huge jump in value, in line with the Global China of our Chinese respondents have been phenomenal growth China is seeing shopping online for more than five years, in online commerce. In fact, Alibaba Daily 3% 4% compared to 44% of the global sample. founder Jack Ma believes his company Several times But they’re already shopping much more will soon become bigger than Amazon a week 12% frequently (see Figure 9). and eBay combined—and may someday even surpass Walmart in the breadth of Ahead of the digital curve its presence.23 Weekly 14% 36% Chinese shoppers are also ahead of the curve in terms of using new devices and Some fundamental differences social media. As we’ve already pointed between Chinese and other out, far more Chinese online consumers consumers have already shopped via tablet and So can online retailers now expect smartphone (see Figure 10). And nearly emerging trends in China to set the tone Monthly 32% one in four Chinese online consumers around the world? We think the answer 18% say they plan to use their tablets or their is an emphatic ‘no’. Online shopping smartphones more often to shop in the habits are dramatically different in next twelve months, compared to only China. Take recommendations and around 11% of the global average. Their reviews, for example. One of the key 3–4 times a year usage of social media as a shopping reasons Chinese consumers go online is 18% 22% channel follows a similar pattern. Far to find reviews. As shown in Figure 11, more Chinese consumers are using a when it comes to deciding on which social media platform to make purchases, online shop to visit, recommendations 1–2 times a year 5% compared to the global average. from friends and experts are much <1 times a year 6% 5% more important to Chinese consumers 3% Only once ever 3% Even the giants of online retailing, than they are to shoppers elsewhere 2% Amazon and eBay, are facing challenges in the world. 9% 7% from Chinese competitors. Taobao.com Never and Tmall.com, owned by China’s 21 Hong Kong was considered as a separate market within Alibaba Group, will likely give both a run China for this survey. Upon request Hong Kong survey data Sample: Global: 11,067 online shoppers can be made available. for their money. Just as one barometer 22  www.bostonglobe.com; May 21, 2012 China: 900 online shoppers 23 http://www.internetretailer.com/commentary/2012/09/13/ alibaba-claims-be-e-commerce-leader?p=120 Demystifying the online shopper: 10 myths of multichannel retailing
  23. 23. Figure 10: Chinese shoppers are ahead of the curve when it comes to using newdevices and social media One-stop shopping in ChinaQ: How often do you go shopping? Online via Tablet PC? Online via mobile phone orsmartphone? Online via social media platform? Taobao, the undisputed powerhouse of Chinese online 62% commerce, is a cross between 58% 56% Amazon’s Amazon Marketplace and eBay that serves both as a marketplace for small sellers and as an auction site. In fact, 95% of 30% 28% all the Chinese online shoppers 24% we surveyed have shopped with Taobao in the last twelve months. Smartphones Tablets Social media platform When one looks at how many Chinese consumers Global consumers shoppers use the top online player across all countries surveyed,Note: Respondents who say they are shopping daily, weekly, monthly, or less than once a month. the average is just 72%. TheSample: Global: 11,067 online shoppers ; China: 900 online shoppers company’s success has been attributed to its AliWangWang service (a direct communicationFigure 11: Recommendations are a top reason Chinese consumers channel to sellers) as well asvisit specific online shops reliable seller ratings and its own Alipay payment system. PossibleQ: What prompts you to visit a specific online store? growth paths include offering additional services, as has been Friends or expert recommendation shown by American counterpart Price comparison website Amazon. For example, Looking for a particular brand/product Taobao doesn’t yet provide I know this shop fulfillment services. Social media interactions Search results Advertising Personalized recommendations on other websites Receiving a promotion via email or text Flyer or recommendation in-store 0% 10% 20% 30% 40% 50% 60% China GlobalSample: Global: 11,067 online shoppers; China: 900 online shoppersPwC’s Multichannel Retail Survey 2012 21
  24. 24. Chinese consumers are also enthusiastic The infrastructure effect users of voucher/coupon sites. In fact, Yet another reason that China may not be more than twice as many Chinese a model for the future of online shopping shoppers are likely to visit an online store is the manner in which technology has because of a voucher or coupon offer, as enabled new waves of middle class opposed to search results. But the world Chinese consumers to bypass traditional isn’t following China in this regard; if methods of shopping. “I think consumer anything, search engines are getting behavior as we think of it may be more more important for background research related to infrastructure than we realize,” on products and brands. says Sean O’Driscoll, a principal at PwC whose social media consulting firm, Demographically, China’s online Ant’s Eye View, was purchased by PwC shoppers are the youngest and most in August 2012. “In China they are employed not evolving into this behavior; they Demographically, China might be are leaping straight into it because of different enough that its path may not the lack of landline and other physical be applicable to other countries. The infrastructure.” online survey audience we used for each country was nationally representative If the Chinese online shoppers embrace for age, gender, employment status and of social media and mobile shopping is region. China had by far the youngest related mostly to infrastructure reasons, online shopping percentage, with 81% it stands to reason that while other of our respondents being 34 years old or emerging markets, such as India, may younger. Just by comparison, only 41% mimic the Chinese dynamic, developed of our French sample was 34 years old markets will not be influenced by China or younger. and will continue their much slower adoption of mobile commerce and Then there is employment. In our purchasing through social media. Chinese sample, 66% of respondents said they were employed full-time, with Russia the next closest at 54%. All of which is to say that the Chinese online shopper is young and relatively well- off, while developed market online shoppers reside in countries with aging populations and shrinking purchasing power. It may be that the behaviors Chinese shoppers are exhibiting in this survey are those of young, happily employed shoppers—which some countries lack, and will continue to for the foreseeable future.22 Demystifying the online shopper: 10 myths of multichannel retailing
  25. 25. Far more Chinese consumers are using a social media platform to make purchases, compared to the global average.PwC’s Multichannel Retail Survey 2012 23
  26. 26. Myth 6: Domestic retailers will always have a “home field” advantage over global retailers. Foreign retailers are making inroads into consumers’ lists of favorite multichannel retailers. In our 2011 survey we were struck multichannel retailers include seven In Germany, the three non-German by how strongly domestic players companies from its bigger neighbor to companies in the top ten list—C&A, H&M dominated the lists of top multichannel the south. German consumer electronics and Esprit—all have large networks of retailers. To some extent that’s true retailer MediaMarkt is almost as popular physical stores. The same is true for Ikea, this year, too. In many mature online in the Netherlands as it is in Germany. which made Germany’s list last year. markets, domestic retailers have a Switzerland’s multichannel scene For C&A, H&M and Esprit, Germany is significant advantage. In France, for includes several players from bigger their biggest market and the retailers are example, not one foreign retailer made European countries, like Weltbild and probably no longer viewed as ‘foreign’ consumers’ top ten. Ikea. And Sweden’s H&M is tied for by Germans; in fact, Dutch retailer C&A second place in Germany, moving up even now has one of its two headquarters Some challenges to domestic from third place last year, and comes in located in Düsseldorf. Walmart, Apple, retailers third on the list in the Netherlands. Ikea and Carrefour all make the top ten What’s interesting is the large number in more than one country outside each’s of exceptions to this rule. Geographical But there’s more at work than just home base. It’s no coincidence that these proximity, of course, facilitates location. The level of investment seems companies have made a point of making expansion. Canada’s top ten favorite to make a significant difference, as well. investments in key international markets. Take Walmart in Brazil. The company entered the market back in 1995. In 2004 and 2005, major acquisitions gave it a large network of stores throughout the country.24 From 2006 through 2012, the company invested several billion dollars in further expansion.25 With 533 stores, nine brands, and five store formats, Walmart is the third largest retailer in Brazil.26 In our survey of the favorite multichannel retailers in Brazil, the company comes in fourth (see Figure 12). 24 http://online.wsj.com/article/SB1000142405311190400610 4576502562571349884.html 25 http://www.retailingtoday.com/article/ walmart-invest-756-million-brazil 26 http://worldcrunch.com/business-finance/ why-walmart-can-039-t-beat-the-competition-in-brazil/24 Demystifying the online shopper: 10 myths of multichannel retailing

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