Customers Take Control


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Customers Take Control

  1. 1. Customers take controlHow the multi-channelshopper is changing theglobal retail landscapeDecember 2011
  2. 2. Understanding how online shoppers are reshapingthe retail experienceRarely a day passes by that one their response. Our findings have both There’s much more inside this reportof us doesn’t have a conversation surprised us – for example, many more and please also visit our website,with a colleague or client about global online shoppers are following retailing. The specific brands using social media that we Thanks for reading, and we hope youdiscussions run the gamut from the would have thought – and confirmed the find report highlights insightful.prosaic, such as the tax ramifications much of the anecdotal evidence ourof selling online across borders, to the teams have been seeing across the Best regards,hypothetical, such as what the retail eight markets covered by the of the future will look like. One of the biggest overall conclusionsBut we always end up focused on is that consumers are leading theglobal consumers’ online behaviour. way in multi-channel shopping, Dennis van AmeijdenConsumers have amazing options at with many retailers lagging behind NL Retail and Consumer Leadertheir fingertips: information, services, in terms of meeting their needs.and – not least – the ability to shop Today’s global retailers have a hugefrom anywhere via any number of opportunity to enhance the thepersonal technology devices. mechanisms necessary to keep up with shoppers who are demanding moreThe question for retailers over the customisation in terms of delivery andnext three-to-five years is how online returns, product choice, and numbershopping behaviour will continue of channels from which to choose. Johan van Vulpento evolve. Retailers can glean somevaluable information from their To increase the value of this paper for Retail and Consumer specialistown customer data, but that doesn’t our clients, we’ve taken the libertyshed light on how millions of other of leveraging the insights from ourshoppers are behaving. data to make several observations about how retailers can better supportThat’s why we undertook this effort their online customers – and attractto study the habits and preferences of new ones. For instance, we note thatonline shoppers from eight different retailers need to become far moremarkets, including the U.S, China, innovative with their online presences; Joost HuismansHong Kong, Germany, France, the UK., reboot their physical formats to Retail and ConsumerSwitzerland, and the Netherlands. If emphasize quality and customer specialistwe can help our consumer and retail enjoyment, not price and selectionclients spot burgeoning trends in the (which is typically researched online);data, they will have a better chance and align themselves with how theof identifying patterns and planning growing middle classes in emerging markets research and shop for products.
  3. 3. ContentsIntroduction 4What we discovered 6The Holy Grail for retailers – most-favoured status 11The implications for retailers 16Global retail in 2020 20
  4. 4. Introduction ur ndin s are based on the most their products, run their stores, where shoppers least shop this way – comprehensive research of global and manage their supply chains. Hong Kong – the percentage registered multi-channel retailing that PwC has The successful business model of the at 4 . carried out. Some of the results have future will be different from that of The third kind of multi-channel surprised us and some have con rmed the past. The winners will be those shopping is using a range of different much of the anecdotal evidence our who have recognised these trends channels to make a single purchase. teams are seeing across the eight and are building agile organisations n example of this kind of transaction markets covered by the study. capable of delivering a consistent is researching a product online and This report is based on both the data pro table proposition in a multi- then buying it in-store. In fact, more we have collected through our survey, channel, multinational way. It’s no than 0 of all respondents research and our deep experience supporting place for the faint-hearted. online before they buy electronics, clients in the market. e nin u ti c nne s o in computers and books, music, and It s clear that multi-channel shopping What exactly do we mean by multi- movies. Fully 60 research online is not just here, but here to stay. channel shopping? There are, in fact, when buying clothing and footwear, The single biggest conclusion from three different types of activities toys, and health and beauty products. our study is that consumers are that multi-channel shoppers typically In other words, online research leading and shaping this trend, with engage in. The rst and most doesn’t just lead to online purchases, retailers lagging behind. There is a common type is spreading shopping it’s also critical in driving traf c to remarkable consistency in consumer across a number of different channels, physical stores. behaviour across regions and choosing the one that works best Our starting point demographics, as well as between for a particular occasion or type In conducting our rst global study developed and developing markets. of purchase. huge 6 of our of online shoppers, we wanted to The global consumer is becoming respondents are already shopping discover how certain markets around increasingly sophisticated and retailers across at least two channels, and the world were experiencing the cannot adapt their operating models 2 are using four or ve. migration from single to multi- at the same pace. nother variant of multi-channel channel retailing. Current research Closing the gap re uires a signi cant shopping is buying goods from the and forward-looking forecasts on the increase in agility and exibility by same retailer but doing it across more subject suggest that this dynamic has retailers, driven by deeper understanding than one channel. Seventy-six percent been in place for some time and is set of their customers. This requires of our respondents have done this in to continue. ccording to Forrester changes to the ways they track and the , over 0 in Germany and the Research, more than 40 percent of measure consumer behaviour, market Netherlands, and even in the market the population in Western Europe 1. Online research was chosen to enable PwC to carry out a wider study than would have been achievable by a telephone methodology, with more robust numbers to provide a solid foundation for analysis of consumer multi-channel shopping behaviour in different territories. The online panels used are localised and in local language to ensure broad reach to those that are more inaccessible. The panels are used for research only and checks and balances are put in place to ensure that respondents are who they say they are, that they are demographically representative (by age, gender, region, etc), and that respondents are appropriate for the purposes of the study. The research was carried out under the MRS code of conduct, as well as equivalents in each other territory internationally. The caveat of conducting the research using this methodology is that those respondents who respond are more likely to be digitally-savvy, in their shopping and other behaviours. However this is a constant across all the territories in which research was conducted. Results are likely to have in ated the gures for familiarity and expertise with online shopping. 2. or the purposes of this report, we have considered Hong ong as a separate market within China. We have identi ed some points speci cally for Hong ong where the results have particularly stood out. 3. Forrester Research Inc.4 Customers take control
  5. 5. Figure 1. Sample size in each market UK 1,000 Germany Switzerland 1,000 US 1,000 1,000 Netherlands China France 1,000 1,000 1005purchase goods online. Germany, was twofold what’s the picture in Product categoriesSwitzerland and France all report other key geographic regions, and Grocery gures showing more than 0 of how should both global and domesticconsumers do so. Moreover, this trend retailers in those countries respond? DIYis set to continue, with the European Jewellery/watches In this report we outline key trendsaverage set to rise to 4 by 201 .3 from our study and ways in which Furniture and homewareMarkets such as the UK and the retailers can address these strategically. Sports equipment/ outdoorNetherlands are likely to see guresapproaching 0 . Methodology Toys PwC commissioned ,00 online Health and beautyPwC has been conducting surveys surveys1 across three continentsof online shopping in the UK since Clothing and footwear covering eight markets2 in ugust and200 , and it’s clear that online has Computer September 2011. Respondents in eachnow become an integral part of most market were chosen to re ect the Electricals and electronicsBritish consumers’ day-to-day national pro les in terms of age, gender, Books/music/moviesbehaviour. The question we posed to employment status, and region.ourselves in conducting this research Changing the retail landscape 5
  6. 6. What we discovered A world rife with online experts s we’ll see, this online savvy comes who purchase across all with increased demands for faster product categories service, more selection, and more One of the ndings that stand out transparent information in the – and one heavy with implications for shipping and tracking of goods. retailers – was the self-described Staying with this theme of online sophistication of the online shoppers customer expertise, one area where we surveyed. Many of our respondents there was a striking consistency was considered themselves to be highly the great breadth of consumers’ online capable in terms of researching and shopping 40 said they shopped purchasing via the Internet. In fact, online in all 11 categories we studied 6 of our respondents consider (see page ). This gure was broadly themselves to be either con dent’ or the same across all the developed ‘experts’ in this regard. In China, for markets, but once again consumers example, the proportion of these in China were the most committed ‘expert’ shoppers was highest, at 6 online shoppers, with 62 of those Why is this so relevant for retailers? questioned shopping across the whole range. Fig 2. 86% of the Chinese sample consider themselves accomplished online shoppers China UK US 1 0 1 2 1 2 2 3 2 6 2 6 3 11 3 23 3 21 4 62 4 51 4 47 5 24 5 19 5 25 0 50 % 0 50 % 0 50 % Experience level: (Beginner) 1– 5 (Expert) Q3. How sophisticated an online shopper do you think you are? Base: 7,005 Source: All charts are from PwC primary consumer research 2011 unless otherwise indicated.6 Customers take control
  7. 7. Taken overall, more than 0 of more often than their peer groups in90 % online shoppers buy books, music other countries. In China, around and lms, and clothing and footwear 0 of our survey respondents shop online. Even the categories at the online at least once a week, compared bottom end of the scale, such as with around 40 in the US and UK,of online shoppers buy books, jewellery, watches, sports equipment and around 20 for the Netherlands,music and lms, and clothing and outdoor goods, attract over France and Switzerland. Figure 4and footwear online. 60 of online shoppers. shows how online shoppers in China, in particular, dwarf those in other While generally our ndings show countries in terms of how often they that there is a great deal of consistency shop online on average per month. in online shopping behaviour around the world, online shoppers in China are unique in several ways, most noticeably in that they shop onlineFig 3. Number of categories shopped online in last 12 months 120 7.7 8.0 8.1 8.1 8.1 8.3 8.4 9.5 8.3 100 10+ % of online shoppers 7-9 80 42 47 43 47 46 42 48 48 70 4-6 60 1-3 22 18 27 23 25 32 40 26 24 25 21 21 17 19 16 20 20 19 19 10 12 14 11 9 12 6 7 4 9 0% ce ng s y S na l nd K nd Al an U U an Ko hi la la m C Fr er r er g he itz on G et Sw H N Categories: Grocery, DIY, Jewellery/watches, Furniture and homeware, Sports equipment/outdoor, Toys, Health and beauty, Clothing and footwear, Computer, Electricals and electronics, books/music/movies Changing the retail landscape 7
  8. 8. 22 % of online shoppers made their rst online purchases within the past year. While Internet shopping may have Fig 4. Chinese consumers are shopping online nearly 4 times as often as their gone mainstream, plenty of online European counterparts shoppers are relative newcomers. cross the world, 22 of our sample China 8.4 of online shoppers made their rst online purchase within the past year. Hong Kong 5.5 In the UK, this category of online 5.2 US shopper almost doubled from 2010, to 14 . The still fast-growing rate of UK 4.3 online shoppers around the world is Germany 2.9 one of our more surprising ndings, Netherlands 2.6 and indicates plenty of room for online retailing growth as more and France 2.6 more consumers around the world Switzerland 2.3 get connected. 0 2 4 6 8 10 Average number of purchases per month Q1. How often do you shop online? Base: 7,0058 Customers take control
  9. 9. The popularity of online shoppingis rooted in many factors our survey respondents. Interestingly, however, the top factor given is 24 24/7 access is the mostWhat is it that is so attractive about access to shopping, cited by 2 of important factor thatonline shopping, regardless of the online shoppers we surveyed. attracts online shoppersnationality or geography? There’s a Online shopping, it seems, is all aboutgreat deal of global consistency in the freedom, being able to shop wherevertop ve factors cited. The conventional and whenever you want. s forwisdom has settled on price as the selecting a speci c online outlet, thedriving force for the growth of online key factors are reasonable pricing, freeshopping, and, indeed, it does feature and fast delivery, and a wide range ofamong the top three reasons cited by products from which to choose. Fig 5. When it comes to online shopping the convenience factor rules I can shop whenever I want 28 Low prices / better offer 25 Quicker than visiting shops 18 Easier than visiting shops 11 Easier to compare products and offers 7 Better variety 4 To buy products unavailable elsewhere 4 Easy home delivery for big / heavy items 2 Better product information 1 Easier to find favourite brands 1 0% 5 10 15 20 25 30 Percentage of online shoppers Q4. What is the most important factor that attracts you to shopping online? Top mention Base: 7,005 Changing the retail landscape 9
  10. 10. The desired multi channel Fig 6. The customer purchase journey – online shopping has increased purchase “journey” is consistent the options from market to market Online shopping has opened up huge Research Compare Transact Receive Aftersales new choice for consumers, not just in terms of what they buy, but how they Store buy it. The Internet has empowered the consumer in three ways during Catalogue the decision-making process leading to the purchase; at the actual moment Mobile of purchase; and throughout the product ownership period, which Website might include product delivery, maintenance, and return. s gure 6 shows, understanding multi-channel is about breaking Certain geographic markets have Keeping up with multi channel shopping down into a journey that widely disparate online retail shoppers is getting more complex starts with research and comparison, presences in certain categories. Take the clothing category. lmost a crystallises at the moment of purchase, For example, more than 60 of third of our respondents said they and is followed by delivery and the online shoppers we surveyed prefer to research and purchase after-sales. t each stage, consumers in China say they research and clothing online, but this puts an onus can now choose from a range of purchase clothing and footwear on the retailer to manage the returns different channels, from conventional online, compared to just 23 of process. If items don’t t they get stores to online with home delivery to our utch respondents. sent back, so the retailer needs a online with store-pick-up. Moreover, model that can handle this kind of online shopping offers its own suite of This data gives retailers insight that transaction in a seamless manner, sub-channels, from the iPad to the can be used in making decisions particularly if it involves returning mobile phone to the PC. about where to consider investing, goods to another country. In short, and what kinds of returns they can Multi-channel shopping behaviour consumers want simplicity, but that’s reasonably expect. Is a physical store may be very consistent across age, translating into far greater complexity valued by my customers and why? demographic and nationality, but for retailers. Most consumers are not o those attitudes differ from when it comes to product category, wedded to any one channel, but most country-to-country? distinctive patterns emerge. In some retailers certainly are. categories, consumers still prefer The challenge – at least for some to shop via a single channel, either retailers – is that consumers are wholly online, or wholly in-store. starting to behave in far more For example, 4 of multi-channel sophisticated ways, whether they’re More than 60 buying expensive items or weekly % shoppers prefer to shop for groceries in-store, while at the other end of groceries. Because most retailers the scale, research and buy haven’t been quick enough to create their books, music and lms online. ef cient multi-channel models, Category data also illustrates that consumers are working it out of Chinese consumers for some categories, consumers shop for themselves, using different channels in ways that best suit them. research and across multiple channels, the most In essence, consumers are creating purchase clothing notable being electronics and furniture/homeware. their own multi-channel experiences and footwear online by leveraging multiple retailers compared to just 23% across a single category or product. of the Dutch.10 Customers take control
  11. 11. The Holy Grail for retailers –most favoured statusMulti channel consumers This seamless experience is vital, In addition, according to our data 4are consolidating their because our study indicates that for of our global sample shopped acrossshopping destinations many consumers, multi-channel multiple channels with ve retailers orIt’s clear from our study that there is shopping is leading to the development fewer. By country, online shoppers inno magic formula for a successful of personal portfolios of favourite China and the UK have the largestmulti-channel operation. Those stores, which attract a higher retail portfolios, shopping with 3.2retailers getting it right are doing proportion of that individual’s spend. multi-channel retailers, compared toso in a variety of different ways, 2.5 for all respondents. While It’s achieving this ‘most-favouredbut one factor unites them a deep delivering a seamless experience retailer’ status that will be a keyunderstanding of their customers. The requires discipline and investment on success factor in the future. This isleading multi-channel players in the the part of retailers, those who do not because consumers are clearlydifferent geographic markets are those make the necessary changes to their consolidating spending amongst thesethat truly understand their consumer business models run a very real risk of preferred retailers, who tend to beappeal, and can then replicate that losing market share, as this process of the ones that are managing theirconsumer experience across all their consolidation spend could accelerate business in a genuinely integratedchannels, backing it up by seamless very quickly. way (see g ).behind-the-scenes execution. Fig 7. 54% say the shop across channels with less than 5 retailers 40 35 30 25 20 34 15 30 24 10 5 8 3 1 0 None Only 1 retailer 2 to 5 6 to 10 11 to 20 20+ Q13. Have you shopped with any of the following retailers over the last 12 months? Have you shopped with any through more than one channel? Base: 7,005 Changing the retail landscape 11
  12. 12. It s achieving this most favoured retailer status that will be a key success factor in the future. How retailers try to set media, even though this trend has themselves apart absorbed a lot of the big retailers’ time Looking at the data as to why certain and mind-space over the last few years. stores become customer favourites, For individual retailers, though, a the reasons given are strikingly much more varied pattern emerges conventional. The top reasons cited by from our survey, one that gives our sample are product (63 ) and signi cant clues as to how the trust (5 ), factors which are core to successful players are making any retail operation, online or in-store. multi-channel work for them. It’s only at reasons three and ve that For example, pple has built its speci c multi-channel factors come success on innovative products and into play a user-friendly website at marketing, and our survey shows 53 , and ef cient delivery at 4 . that its loyal shoppers are much Intriguingly enough, there are no less in uenced by price. factors on the list relating to social Fig 8. Traditional retail factors for success are also critical for multi-channel retailing success I like the products they offer 63 I trust them 59 Easy to use website 53 I know theyre always cheap / reasonably priced 51 Fast / reliable delivery 48 I like the store 44 They always have the items I want in stock 39 Good returns policy 37 I can return items to store 36 Website stores my address and personal information 30 They do free returns 25 I can reserve or purchase items for in-store collection 25 I get points / rewards 24 I like the staff 23 They have innovative products 23 0% 10 20 30 40 50 60 70 80 Multi-channel factors Retail factors Q15. What attracts you to your favourite multi-channel retailer? Base: 3,906 – all who selected at least one top retailer12 Customers take control
  13. 13. Apple has built its success on innovative products and marketing.In the UK, rgos still has a genuine Figure 9 below shows how Marks & online shopping. Both 3 Suisses andcompetitive advantage in its reserve Spencer scores highly on intangible La Redoute bene t from an appealingand collect operation, and shoppers qualities like trust, as well as website, and ef cient delivery andlike its prices. But it is clear that its operational factors like ease of returns returns. The number four retailer,product range, quality of physical and quality of both stores and staff. Yves Rocher, a health & beautystores and delivery are not as The key point here, though, is how retailer, has built its success on aattractive to shoppers. Tesco attracts little Marks & Spencer shoppers broad range of positive factorsloyal customers with its prices and its focus on price. It is the brand that including price, delivery andreward points programme, but again consumers identify with and trust. availability, all supported by its uniqueis not attracting customers with its product. Returns policies are much In France, Fnac gets high marks onproduct range. The company has less important to its customers, as the trust, product range and the qualityhuge numbers of loyal customers who consumer need for returns is far lower of its stores from our respondents,want to consolidate their spending in cosmetics than in other categories despite a reputation for high prices.with Tesco, and would probably such as clothing & footwear. But in Interestingly, two of the other four topbuy more with a more compelling the cosmetics sector this is far less multi-channel operators in France areproduct offerings. signi cant than in a category such former catalogue operators that have as clothing and footwear. successfully made the transition to Fig 9. Marks & Spencer scores above average on many factors All UK shoppers % M&S shoppers above/below average I like the products they offer 72 12 Easy to use website 61 -1 I trust them 60 10 Always cheap / resonably priced 54 -32 I like the store 52 18 Fast / reliable delivery 49 -2 I can return items to store 44 22 Good returns policy 42 15 In-store collection 35 9 Always in stock 33 -4 I like the staff 25 12 I get points / rewards 25 -3 Website stores my address and personal information 24 2 They do free returns 23 10 They have innovative products 18 -3 0 10 20 30 40 50 60 70 80 -40 -30 -20 -10 0 10 20 30 Q17: what attracts you to your favourite multi-channel retailer? Base: Those who stated M&S is one of their favourite multichannel retailers. M&S shopper sample size = 102 Changing the retail landscape 13
  14. 14. Fig 10. Tchibo scores above average in specific characteristics important to customers, resulting in its position as favourite in Germany All German multi-channel shoppers % Tchibo shoppers above/below average I like the products they offer 72 60 12 19 I trust them 59 12 Fast / reliable delivery 54 8 I know theyre always cheap / reasonably priced 50 10 Good returns policy 41 0 Easy to use website 40 5 Always in stock 40 -4 They do free returns 36 -2 I like the store 35 2 I can return items to store 28 -1 Website stores my address and personal information 24 -11 I get early or exclusive access to sales / products 23 -11 They have innovative products 21 4 Collect in store 18 -6 I get points / rewards 16 1 0 10 20 30 40 50 60 -40 -30 -20 -10 0 10 20 30 Q17.What attracts you to your favourite multi-channel retailer? Base: Those who stated Tchibo is one of their favourite multichannel retailers. Tchibo shopper sample size = 92 It is interesting to note that in the Customers in different markets chieving ‘most-favoured’ retailer results for Germany, as compared So what are we to deduce from these status, regardless of which country to other countries, department results? It’s evident that the online a retailer is located in, is all about stores don’t feature in the top ten shoppers in almost every country we knowing what customers value and multi-channel retailers. This might surveyed go through a similar purchase delivering that experience effectively be because neither Kaufhof nor journey, using the same multiple and seamlessly across all channels. Karstadt – two of the leading channels across product categories. But But that’s not enough on its own. department stores – have offered it is notable that the reasons for using Retailers also need to get the basics a truly integrated multi-channel the channels differ between countries. right across the whole value chain online service. The implication for retailers wanting to Brand, product, price, and delivery. expand to new markets is that they The same factors that make retailers Tchibo, one of Germany’s largest need a value proposition that is broad successful in stores make them retailers, and top-rated by Germany’s and deep enough to meet the customer successful across multiple channels. online shoppers we surveyed, wins needs in those different markets. over its customers with a good selection of affordable products, fast delivery and an easy-to-use website.14 Customers take control
  15. 15. Becoming a favoured retailer is oneroute to multi-channel success, but it’s Multi channel marketingonly part of the picture. The players demands a deepwho will win in a multi-channel world reconsideration of existingwill be those who inspire theirexisting customers to spend more channels and costswith them, and know how to use theirwebsite/app/TV channel not only asa sales channel, but to drive traf c tothe physical stores.Multi channel managementManaging the online side of amulti-channel business is still a real strategy linking brand advertising, can have all the information when theychallenge for many traditional search engine optimisation, pay-per- make what could be very expensiveretailers. Unlike a bricks and mortar click electronic and email promotions, decisions. For example, pay-per-clickshop, you can’t just open an online and good old-fashioned word of advertising may look good in theory,site – however appealing – and expect mouth. The fact remains, however, but it can be very expensive for certaintraf c. There is no Fifth venue, that many traditional retailers are popular key words, and can even endHigh Street, Champs-Elysees, or not organised to link these activities, up generating a loss. The key pointNanjing Road to attract shoppers. and lack the vision and digital talent here is that e-commerce is driven byOnline customers arrive at a web required to do this effectively. direct marketing, and there’s oftensite from numerous different routes, a dearth of the right skills and Multi-channel marketing demandsand managing these possible paths experience in traditional store-focused a reconsideration of existingto an online retail site is a Herculean marketing teams. channels and costs, so retailerschallenge requiring an integratedSocial media is here to stayThe results of our survey are Fig 11. Percentage of online shoppers following brands through social mediaparticularly interesting when it comesto how consumers are using social HK 44media. Overall, more than one in 40three of our respondents were using Chinasome form of social media every day, US 32be that Twitter, Facebook, or some 20 UKsimilar site. While only a very smallminority have used these networks to Switzerland 16shop (3 ), the story is a bit different Germany 15when it comes to following brands and Netherlands 10individual retailers via social media,particularly in the US and China, France 8including Hong Kong. In Hong Kong, 0 10 20 30 40 5044 of our survey sample followed Q24. Do you interact with brands online through social media?speci c brands or retailers. In China Base: 7005that gure was 40 , and in the US32 . So while online shoppers aren’tquite yet ready to purchase itemsthrough a social media site, they areclearly using the medium to researchand follow brands they love. Changing the retail landscape 15
  16. 16. The implications for retailers Even reasonably competent multi channel retailers are still managing their web operations solely as sales outlets. Focus on the consumer Even some retailers with an extensive Other website best practices for It’s clear from our study that retailers online presence face some of the retailers include personalised are lagging, not leading, the multi- same challenges, because they’re recommendations, augmented channel trend. Some are more still running their online and in-store product information and product advanced than others, certainly, but operations as separate silos. In extreme reviews, and rapid checkout. there are still some businesses that cases this can lead to inconsistent This consumer-facing activity needs de ne ‘customers’ as people who are product ranges or prices throughout to be supported by an organisational in their physical stores. consumer a retailer’s different channels, structure that integrates the two brand like pple, by contrast, is focused undermining the web’s role in allowing different operations and forces them ruthlessly on the consumer. They don’t customers to research prior to visiting to work collaboratively together. mind which route consumers take, the store. Even reasonably competent Likewise, budget and incentives need as long as they arrive. multi-channel retailers are still to be allocated to the online outlet managing their web operations solely Some retailers, particularly those that based not only on sales, but on the as sales outlets, and failing to capture started life with bricks and mortar, have traf c it drives to the physical store. or measure their role in driving traf c inherited business models and cultures Some retailers appoint ‘multi-channel to the physical stores. focusing entirely on running an directors’ in response to these ef cient shop operation, and may Ikea is one retailer that understands challenges, but in our view that misses not be as exible when the need arises this. The company’s website is perfectly the point. Multi-channel embraces the to accommodate new consumer geared to push people to their local whole business – it is the business – so demands. For example, many retailers store, providing detailed information if anyone’s running it, it should be the lack a central database for managing on what’s available, on a unit by unit CEO. By contrast, some of the savvier customer information across channels. basis. Other retailers could learn operators are now devising roles Change is hard, not just in operational from this by designing websites that with titles like digital director, with and commercial terms, but because actively encourage quick and ef cient responsibility not just for e-commerce, it requires new organisational online research, and making it easy but for marketing and social media. structures, new governance systems, to translate that research into either and new incentives. an online or local store purchase. Features like wish-lists or the ability to book an appointment to view an item in-store can help build the same bridge.16 Customers take control
  17. 17. Multi channel embraces the whole business – it is the business.In many cases this is not just a major So for China and other markets, smaller outlets, as is the case for thecommercial shift, but a signi cant retailers should consider the roles of ultra-convenience end of the grocerycultural change, and that degree of their stores now and in the future. category. Of course, the degree totransformation cannot be achieved re they agships for the brand, as which this dynamic plays out will alsoeither cheaply or overnight. Getting pple stores are? re they showrooms depend on geographic market andmulti-channel right has the potential for product range, as is increasingly other factors. s we’ve already seen,to be both a signi cant differentiator the case with white goods? Chinese online shoppers already haveand a major competitive advantage for less of a connection to physical stores The most likely scenario is that storesthose retailers who can achieve it. But than their Western counterparts. will serve two distinct purposes.that means having the business model, The rst is as a showroom, where The degree to which physical storesthe data, and the consumer insight to customers come for inspiration, to become more tangential to retailerstarget the right consumers, in the right browse and to physically interact with has rami cations for systems,way, through the right channel. the products. The second is as a warehousing and distribution.The role of the physical store convenient transaction and collection epending on the category, retailersis changing point, where customers come to may need to stock less in-store and key issue for all retailers with complete a journey started on the web. maintain larger depots with smarterlarge numbers of physical stores is In this second case, whether the allocation systems. Whatever athe role those stores should be playing customers’ online research included retailer’s product range, there’s a needin a multi-channel world, and how click and collect or not, the point is that for greater transparency and morethat differs by country. Chinese online they enter the store knowing what they accurate real-time data, which hasshoppers, for example, embrace the want and what price they expect to pay. major IT and systems medium more quickly than They are using the store simply as a There’s no question that the costs andshoppers from other countries. Even way of completing the transaction. complexities of delivering a state-of-though online shoppers in China are the-art multi-channel operation arerelative newcomers in terms of average Recognition of these two distinct store signi cant, but the stakes are high.number of years since their rst roles will cause many retailers to chieving such a state not only meansonline purchase, they have the segment their estates. There will be survival, but the taking of markethighest level of perceived expertise some agship stores focused on the share from weaker competitors. Failingand shop more frequently than our showroom function and, most likely, in the effort means losing market shareother surveyed markets. a larger number of strategically-placed to more savvy competitors. Changing the retail landscape 17
  18. 18. The world is getting smaller: players expand their offerings to more to replicate this success elsewhere, Local players beware customers internationally, these local which could make these companies a Our survey results show that within retailers could nd themselves facing signi cant competitive threat in their individual markets there exists a strong stiff competition. If these companies overseas markets. bias towards the most well-known face increased risk, others have a Multi-channel clearly offers signi cant retailers based in those respective signi cant new opportunity. risks and new opportunities for the countries (see gure 12). For example, There are whole markets that are ripe retail sector as a whole, both for the the survey shows that the top ten for expansion, including ustralia, pure online players like mazon, and retailers shopped across channels in Russia and China, and we’re already the more traditional retailers that also the last 12 months include Walmart in seeing international revenues growing have a substantial online presence. The the US (41 of local online shoppers) signi cantly for some of the leading former may prove to be the winners in rgos (39 ) and Tesco (30 ) in the US and UK players, such as mazon, categories which can use an existing UK, and Taobao in China (34 ). sos, Sports, New Look, Next and distribution network (like books Marks & Spencer. But as it gets easier to buy across delivered by post), while the latter borders, and as some of the top Likewise, once a retailer has worked have real, if under-utilised, advantages multi-channel and online-only out how to do multi-channel well in in their store estate, if they can only their home market, it’s relatively easy work out the right way to use them. Fig 12. The online shoppers we surveyed overwhelmingly favour well-known domestic brands UK Germany Netherlands 50 50 50 40 40 40 30 30 30 20 39 20 20 30 10 10 10 16 15 13 14 12 15 13 11 10 9 10 10 10 0 0 0 Argos Tesco Marks & Asda Boots Tchibo Weltbild Schlecker Lidl Aldi HEMA H&M Blokker Kruidvat Albert Spencer Heijn France US China/Hong Kong 50 50 50 40 40 40 30 30 30 20 20 41 20 34 10 21 10 24 20 10 24 16 16 20 20 16 15 15 12 13 0 0 0 Fnac 3 Suisses La Yves Carrefour Walmart Target Best JC Kohl’s Taobao Suning Gome Joyo 360 Buy Redoute Rocher Buy Penney Amazon Switzerland 50 40 30 20 10 24 22 14 13 11 0 Migros Coop Apple Nespresso Inter- discount Q13b: Which of the following [retailers] have you shopped across multiple channels?18 Customers take control
  19. 19. Global retail in 2020Customisation, innovationand efficiencyThe global nature of this year’s Social media will in uence a larger The multi channel grocer:study allows us to make some broader proportion of sales, driven both by convenience, range, ef ciencyforecasts for the future. Let’s start consumers, who will become much In 2020, big grocery chains like Tesco,with the implications for the way more active in sharing their buying Carrefour, uchan, and Walmartretail works. preferences among their friends, will have established a commanding and by retailers that will have become position, not only in food but inCustomised retail much cleverer at exploiting and many other categories such asBy 2020 retailers will use all the targeting their followers and fans and electronics and toys, where the specialistresources of graphics, video, using that interaction to drive sales. s competitors are all but extinct.interactivity, and personalisation to the different forms of media converge,enhance the consumer experience. The business model will be based on a it will be possible to target marketingThey may well be more collaborative combination of small ultra-convenient and advertising far more precisely.too, working with compatible associate outlets throughout each market, asbrands – or even competitor brands Transformed supply chains well as larger mega-stores in large– to create virtual shopping malls. t the back end, supply chains population hubs. Home delivery in will have undergone a complete one-hour slots will be a key aspect of s online evolves, so too will mobile, transformation. More products will the operation, with an even widerwith new tools designed to support likely be delivered to homes, and range of both food and non-foodthe consumer’s purchase journey, online ordering and in-store pickup online than in-store, and click andfrom research, to store navigation, will also gain in popularity, enabling collect available for both at the localto in-store ordering, and a richer, streamlined and free returns. convenience stores on a 24/ basis.fuller integration with social networks. The customer-facing website will be In addition, the hard work ofOnline retailers will become much slick, ef cient and highly trusted, consolidating stock will happen farmore sophisticated in how they help selling not just products but services more often at warehouses, rathercustomers navigate increasingly too like insurance, travel and photo than stores. For retailers this willlarge assortments. llowing the processing, that consumers will be mean less stock and less workingcustomer to move easily from viewing compelled to buy in order to gain capital, leading to greater ef ciencya category assortment of perhaps reward points. Companies will be and higher pro tability.200 products, to identifying the three effectively mining and analysing – inmost suitable for them, will become nd what about the different real-time – the ow of customer data.a key differentiator for the successful retail formats? Let’s look at amulti-channel retailer. few possibilities. Changing the retail landscape 19
  20. 20. The inspirational brand: The next generation department The showroom itself will be deliberately loyalty, excitement, innovation store: service, quality, enjoyment designed as a destination in its own Brands like pple and bercrombie In 2020 the conventional department right, with live demonstrations, & Fitch will still be ourishing in store will have evolved into an expert advisors, and personal shoppers 2020, building enormous followings operation fronted by a small number available. The website will support of loyal customers. Their model is of strategically-placed showrooms. customers in between store visits in a grounded in a small number of round half of all sales will be variety of ways, whether for making a agship stores designed to allow conducted in these showrooms, purchase, requesting after-sales service, people to touch, see and feel the which showcase only selected or researching products. There will brand with great staff, a high level highlights of the range available be parallel mobile and tablet apps of service, an outstanding designed online. The showrooms likewise will designed to drive traf c to the space, and state-of-the-art interactive hold little stock, but will be able to stores by highlighting upcoming experiences. These stores will be able arrange extremely swift and ef cient events and showing video and other to take orders, but most purchases delivery. The de ning characteristic promotional material. will take place online via dedicated of the whole product range is mobile phone and tablets apps. selection, because the retailer has tapered down the breadth of choices to just the best-in-class items.20 Customers take control
  21. 21. We ve seen the multi channel future, and it’s China We were surprised there was such uniformity in This compares with 36 in the UK and 31 the study results across the world. But Chinese in Germany. online shoppers, including those in Hong Kong, Moreover, mobile shopping is signi cantly more had markedly different survey responses than popular in China, as mobile phone usage and online shoppers in other countries. network access have outpaced broadband roll-out. First, Chinese multi-channel shoppers in It looks very much as if China is skipping the our survey purchase a far higher proportion of their ‘online by PC’ phase and moving straight to purchases online than do our respondents from handheld devices. other countries, and do so across all categories. Social media certainly is one of the big stories in For example, according to our survey, they China. ccording to our survey, Chinese online purchase about 60-65 of their clothing, footwear, shoppers use social media (90 ) far more than books, music and lms online. The comparable those in other countries, so it follows that social gures for the rest of the markets are around media has a relatively bigger impact on their 35-45 . They also lead the way in going direct to purchasing decisions. Simply put, retailers brands, with around 60 online shoppers in China targeting the Chinese shopper – whether based in having bypassed retailers to shop online directly China or abroad – should do so through social from the brand. media, not traditional channels.The new catalogue category: If these could be some of the winners, Not needing a signi cant physicalhelpful, handy, at home what about the losers? Certainly those presence would make the cost of entryGone will be the cumbersome paper facing the highest degree of risk into those markets much lower, andcatalogues so expensive to distribute. are bricks and mortar specialists in could have signi cant implicationsInstead, customers will receive categories already in the process of both for domestic operators and thosea dedicated tablet computer moving wholly online. Books, music, international companies looking todesigned for sofa-based browsing electronics and toys will be the build a presence there.and one-click buying. Catalogue obvious sectors. There will still be The behaviour of Chinese consumersretailers will update their product physical store estates offering clothing, observed in our study might well berange on a real-time basis, and there furniture and jewellery, but the a leading indicator of how marketsare a number of support features department stores and grocers will like Brazil, India, Indonesia, andsuch as live web-chats, advice on provide ever- ercer competition. South Korea could develop, allowingaccessorising, and a parallel TV Emerging markets will lead them to leapfrog the traditionalchannel designed to build the brand the way Western model. In 2020, in theseand generate excitement. This could indeed be a vision of the markets, it won’t only be aboutThere will be local stores in some future in mature markets like the developing shopping centre, orkey locations and a larger number US and UK, but it could start much distribution networks; it will be aof local collection and return points quicker in emerging markets, brand new retailing world, and a– some operated by third parties – to especially those that don’t already very mobile one at that.manage deliveries and accept returns. have a hefty retail infrastructure. Changing the retail landscape 21
  22. 22. ContactsGlobal R&C Leader The NetherlandsJohn Maxwell Dennis van AmeijdenT: +1 973 236 4780 T: +31 (0)88 792 35 20E: E: Johan van VulpenCarrie Yu T: +31 (0)88 792 44 86T: +852 2289 1386 E: Joost HuismansFrance T: +31 (0)88 792 74 77Sabine Durand-Hayes E: +33 (1) 56 57 85 29E: UK Mark HudsonAnne-Lise Glauser T: +44 (0)20 7804 5141T: +33 (1) 56 57 84 53 E: Puneeta MongiaGermany T: +44 (0)20 7212 3643Gerd Bovensiepen E: +49 211 981 2939E: US Lisa DugalClemens M. Bachmann T: +1 617 471 6916T: +49 211 981 2588 E: Mark JensonSwitzerland T: +1 678 419 1096William Wright E: +41 (0)58 792 8243E: Ian W. Kahn T: +1 646 471 4580Mike Foley E: +41 (0)58 792 8244E:
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