www.pwc.com/totalretail They say they want a revolution Total Retail 2016 Online shoppers around the world are fundamentally disrupting retail—again. Will your organization be left behind? February 2016 In PwC’s most comprehensive Total Retail survey to date, we asked nearly 23,000 online shoppers around the world about issues ranging from mobile shopping to social media influence to innovation at retailers. Their answers reveal the changing behaviors that will drive the next retail revolution. 2 | Total retail 2016 It’s nothing short of a revolution, and the stakes have never been higher for retailers and consumer goods companies. Our Total Retail survey results, together with 2015 fourth- quarter retail results around the world, point to 2016 as a watershed for many of the trends that have been percolating over the past few years. From the unmistakable desire to be a member of a specialized retail community to buying more on their mobile phones, from becoming more reliant on social media to demanding a more service-focused and knowledgeable store employee, global consumers are pushing the boundaries of what shopping means. PwC's Global Retail and Consumer practice, in conjunction with PwC's Research to Insight (r2i), administered a global survey to understand and compare consumer shopping behaviors and the use of different retail channels across 25 territories: Australia, Belgium, Brazil, Canada, Chile, China/Hong Kong, Denmark, France, Germany, India, Italy, Japan, Malaysia, Mexico, Middle East, Poland, Russia, Singapore, South Africa, Spain, Switzerland, Thailand, Turkey, the United Kingdom and the United States.1 5 continents, 25 territories, nearly 23,000 online shoppers surveyed Russia Canada Denmark UK Poland Belgium Germany France Switzerland US Spain Italy Turkey Japan China Mexico Middle East India Hong Kong Thailand Malaysia Singapore Brazil Chile Australia South Africa 1Totals may not add up to 100% due to rounding. Total retail 2016 | 3 In this report, we 1. To understand future global 5. Mobile devices have turned shopping behavior, look to the corner as purchasing present and discuss China. Our historical data tools. Mobile commerce is now the findings of our shows that what China was firmly on the march toward global Total Retail doing several years ago, becoming the online shopping today’s consumers across the tool of choice. survey—together globe are doing. with additional PwC 6. Today’s consumers look to 2. We may live in the age of community. A deeper connection analysis and third- value—but price is still king. with retailers via customer party research—to Years of slow global economic “communities” is apparent as uncover these eight growth have resulted in a value consumers pick up on the perks dynamic, and affordability of membership. insights of the next is important in every income retail revolution. bracket, in virtually every 7. Social media is the “great country, across every age group. influencer.” Customers are relying on social media—in 3. Store traffic doesn’t matter addition to their family’s as much as overall customer opinions, advertising messages, conversion across channels. and media coverage—to make Customers are voting with their product decisions and gauge feet as they shop more online, brand authenticity. and for multi-channel retailers that means the need for an 8. There is room for retailers to increasingly focused, curated grab the “leading innovator” and engaging brick-and-mortar mantle. While consumers see store experience that creates plenty that is innovative about maximum conversion—no their favorite retailer, very few matter what channel ultimately retailers qualify as “leading records the purchase. innovators” in shoppers’ minds. 4. Retail talent (finally) matters. Ever-more sophisticated customers want employees who can enhance the brick- and-mortar store experience: associates with the product knowledge, technology know- how, and people skills. 4 | Total retail 2016 1: To understand future global shopping behavior, look to China The influential science fiction author Let’s start with some recent sales and technology essayist William data. Chinese online sales in 2015 Gibson is credited with saying, “The massively shifted to mobile. Single’s future is already here; it’s just not Day—the 24-hour shopping festival widely distributed yet.” that now dwarfs Black Friday in terms of sales—is often used as a Gibson’s credo is certainly accurate bellwether for China’s e-commerce when it comes to consumer market. This year, Alibaba's Single’s behavior, the future of which is Day online sales came in at $14.3 squarely centered in China. Not only billion, a 60% increase over 2014.2 does our Total Retail survey data Most significant, however, was the illustrate a continuing willingness shift to mobile. On Single’s Day on the part of Chinese consumers 2015, 69% of all transactions were to become early adopters of cutting- made on mobile devices, up from edge shopping habits such as mobile 43% in 2014.3 Chinese consumers are also leading “The future is here. It’s just not widely distributed yet.” the way in their willingness to leapfrog legacy technologies in —William Gibson, science fiction author favor of a “social” replacement. For example, the Chinese smart phone manufacturer Xiaomi, buying but, in conjunction with now the fourth largest globally, our studies from previous years, bypasses selling through telecoms it suggests that Chinese shopping carriers and, instead, sells 70% of behavior is a leading indicator for its products directly to consumers global shopping behaviors. In other online. This is done through words, what Chinese consumers are cultivating engagement on social doing today, shoppers in the rest of platforms among a core group of the world will be doing in the not- users (referred to as “Mi-fans”). too-distant future. Xiaomi uses social engagement tactics like contests, exclusive events and flash sales to turn new product releases into online shopping festivals. 2 theatlantic.com, Alibaba Brought in $1 Billion During the First 8 Minutes of China's Black Friday, November 11, 2015. 3 Business Insider, November 14, 2015. Total retail 2016 | 5 Our Total Retail data echoes what’s than the rest of the world has. But happening in the Chinese market. the percentage of our global sample In our China sample, 65% say they that shops online every day (7.1%) shop online via their mobile at least has now overtaken where China was monthly, and only 12% have never in 2012 (4.3%), and is increasing done so. In our global sample, on steadily. When it comes to adopting the other hand, just 28% say they mobile, our global sample is about shop online via their mobile at least three years behind the Chinese. once a month, and 46% have never shopped online via their mobile. Figure 1: Almost one in five of our surveyed Chinese consumers There are several reasons that shops online daily explain why mobile is so advanced in China. One is the relative lack of Those who personal computers compared to the penetration of mobil e phones; 19.6% another is that Chinese e-commerce shop players such as Baidu, Alibaba, 18.7% or Tencent are leaders in mobile online daily personalization through their huge data analytics platforms. So Chinese online shoppers are presented with personalized information based on 13.8% their income level, shopping habits and location in a city, even if they are walking or driving at the time. But how do we know that other 7.1% shoppers will adopt the behaviors of Chinese online shoppers? Projecting 6.0% from the relative trends in the 5.5% past few years, we can expect the 4.3% world to follow Chinese shopping 2.9% behavior. As Figure 1 illustrates, in the past four surveys we have asked how often respondents shopped online. The percentage of Chinese shoppers who shop online every day BUY NOW BUY NOW has increased at a much faster rate China Global Source: PwC, Total Retail Survey, 2016 2012 2013 2014 2015 6 | Total retail 2016 Compared to our survey one year China was in 2014. In terms of the ago, we’ve also seen a massive statement “My mobile phone will jump in the number of Chinese become my main tool through which shoppers who say they have used to purchase items”, for example, the their mobile/smartphone to pay for global results for those respondents a purchase, from 18% to 43%. At agreeing with that statement in the same time, our global sample this year’s survey (34%) is still far jumped from 12% to 20%, just behind the percentage of Chinese slightly higher than China last who agreed with the statement in year. If online shoppers around the 2014 (55%). world follow Chinese consumers again in the next year, we’ll see a Figure 2: The mobile phone is getting more popular as a major boom in the use of mobile purchasing tool payments globally. Q: Please indicate how strongly you agree or disagree with the following statements. For some shopping behaviors, though, the rest of the world is far 60% enough behind China that it will 56% take years to catch up. Over the I am willing to past several years, for instance, we 30% 33% load credit onto my have asked our survey respondents mobile phone to to agree or disagree with a number provide payment for products of statements about the use of their mobile device. In Figure 2, we see that when it comes to trust (“I am willing to load credit onto my mobile phone to provide payment for products”) and using a mobile 59% 55% phone as a purchasing tool, the China sample and global sample are My mobile phone increasing at the same rate—but it 30% 34% will become my will likely take some time before the main tool through which to rest of the world catches up to where purchase items Global China Base: 1,000 Source: PwC, Total Retail Survey, 2016 2014 2015 Total retail 2016 | 7 2: We may live in the age of value—but price is still king Tepid economic growth in the Figure 3: Online shoppers choose a favorite retailer because the US and Europe over the past few price is right years has resulted in an economic bifurcation of shoppers in these Q: Thinking of your favorite retailer, why do you shop here? regions. In a recent PwC report we have labelled consumers as “survivalists” and “selectionists.” 4 Their prices are good 60% For survivalists, affordability is They usually have the items I want in stock 32% at the core of future purchase decisions. For these shoppers, I trust the brand 32% discounts and deals are critical. They sell things I cannot find anywhere else 25% Selectionists, on the other hand, maintain an appetite for brand and They have a good returns policy 25% a distinctive store experience. They have fast/reliable delivery 24% In this year’s survey, we asked Their website/mobile site is easy to use 22% several questions about price I can check the in-store availability of to gauge the extent of this 21% a product online phenomenon. We found that They have a great loyalty program 20% affordability is, indeed, a major driver for shopping behavior around Their store prices match prices online 17% the world, across income bands and across national borders. And yet, it’s Superior online customer reviews 14% just part of the larger value story. Sales associates are knowledgeable 14% and responsive Just as important as the actual price They provide me with personalized is the perceived value of a purchase. 12% offers/marketing They provide advice or help me 11% choose products They have inspiring online content which 11% catches my interest They are a socially/environmentally 7% responsible retailer They are an independent retailer with 6% a community feel Base: 22,618 Source: PwC, Total Retail Survey, 2016 4 PwC, 2015 Holiday Outlook. 8 | Total retail 2016 For example, in many countries, Figure 4: Depending on the country, price and convenience rule convenience is as much a part of value as price, as shown in Figure 4. Q: What has been your main influencer for buying online in the last 12 months? Take South Africa. When we asked South African online shoppers what I buy online because I buy online because I buy online for other “has been your main influencer it is convenient it is cheaper reasons for buying online in the last 12 Australia 40% 47% 13% months,” 57% of our sample said Belgium 43% 39% 18% that convenience was their main Brazil 42% 54% 5% influencer, compared to just 30% for Canada 46% 37% 17% price. And when we looked at the Chile 24% 63% 13% United States—58% of our sample said that convenience was the main China 62% 36% 1% influencer for buying online. For Denmark 38% 50% 12% our entire global sample in fact, France 47% 47% 7% convenience (47%) was a slightly Germany 56% 35% 9% bigger influencer than price (43%) when buying online. Clearly there is Hong Kong* 47% 47% 7% more to value than price. India 65% 31% 4% Italy 49% 42% 9% In our simplest and most straight- Japan 49% 44% 7% forward question on value, we Malaysia 50% 42% 9% asked, “Thinking of your favorite retailer, why do you shop here?” Middle East** 42% 42% 15% Price trumps all other reasons in Mexico 36% 48% 16% this context: 60% of our global Poland 51% 43% 6% sample named price; the second- Russia 47% 45% 8% most named option at 32% was Singapore 40% 55% 5% “they usually have the items I want in stock.” But even in this question, South Africa 57% 30% 13% value had an intangible component. Spain 48% 43% 9% The third most-named option out Switzerland 54% 32% 14% of the 18 options was “I trust the Thailand 51% 38% 11% brand,” at 32%. Turkey 36% 56% 8% United Kingdom 55% 37% 8% United States 58% 32% 10% Global 47% 43% 10% * For Hong Kong, the base size was 100 survey respondents **Middle East includes UAE, Egypt & Saudi Arabia Base: 22,618 Source: PwC, Total Retail Survey, 2016 Total retail 2016 | 9 Not only are our respondents Even among high earners, finding looking for deals, they’d even deals is a priority. If we combine purchase outside their country of the two highest-earning brackets residence to get them. This year we across three of our countries— asked for the first time what would Brazil, Canada, and China—the lead our global sample to purchase high earners in each country still from an out-of-country online would shop out-of-country mostly retailer in the next 12 months. because of price. For Brazil, 73% of Price was king—56% of our global high earners say they would; while sample said that “better prices 61% of high earners in Canada said available” would convince them. they would; and in China, 61% said they would look to an out-of- country online retailer for a deal. Figure 5: Even high earners will search far and wide for a good deal On what products are these shoppers looking for deals from The two highest-earnings income brackets an out-of-country retailer? Fifty- one percent of our sample named in each of our surveyed countries plan to purchase clothing and footwear, 44% from an out-of-country online retailer in said consumer electronics and computers, 40% chose books, music, the next 12 months for better prices movies and video games, and 31% chose health and beauty products. The only real dent in the armor 73% 65% of affordability comes from the Millennials. When we look at 61% 61% Millennials’ (ages 18-34) answers to the question “Thinking of your favorite retailer, why do you shop here?” just 56% chose “their prices are good,” compared to 63% for everyone else. Millennials also shop at their favorite retailer for brand affinity (33%), superior online customer reviews (17%), reliable delivery (25%) and an easy-to-use website or mobile site (23%). Global Brazil Canada China Base: 1,000 Source: PwC, Total Retail Survey, 2016 10 | Total retail 2016
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