The transition to a global digital economy in 2014 was sporadic – brisk in some countries, choppy in others. By year’s end, the seven biggest emerging markets were larger than the G7, in purchasing power parity terms. Plus, consumers in the Asia-Pacific region were expected to spend more online last year than consumers in North America. The opportunities to serve the e-consumer were growing – if you knew where to look.
These changing rhythms in digital commerce are more than a China, or even an Asia, story. Far from Silicon Valley, Shanghai, or Singapore, a German company, Rocket Internet, has been busy launching e-commerce start-ups across a wide range of emerging and frontier markets. Their stated mission: To become the world’s largest internet platform outside the U.S. and China. Many such “Rocket” companies are poised to become the Alibabas and Amazons for the rest of the world: Jumia, which operates in nine countries across Africa; Namshi in the Middle East; Lazada and Zalora in ASEAN; Jabong in India; and Kaymu in 33 markets across Africa, Asia, Europe, and the Middle East.
Private equity and venture capital money have been concentrating in certain markets in ways that mimic the electronic gold rush in Silicon Valley. During the summer of 2014 alone $3 billion poured into India’s e-commerce sector, where, in addition to local innovators like Flipkart and Snapdeal, there are nearly 200 digital commerce startups flush with private investment and venture capital funds. This is happening in a country where online vendors largely operate on a cash-on-delivery (COD) basis. Credit cards or PayPal are rarely used; according to the Reserve Bank of India, 90% of all monetary transactions in India are in cash. Even Amazon localized its approach in India to offer COD as a service. India and other middle-income countries such as Indonesia and Colombia all have high cash dependence. But even where cash is still king, digital marketplaces are innovating at a remarkable pace. Nimble e-commerce players are simply working with and around the persistence of cash.
To understand more about these types of changes around the world, researchers developed an “index” to identify how a group of countries stack up against each other in terms of readiness for a digital economy. The Digital Evolution Index (DEI) is derived from four broad drivers:
- supply-side factors : including access, fulfillment, and transactions infrastructure;
- demand-side factors : including consumer behaviors and trends, financial and Internet and social media savviness;
- innovations : including the entrepreneurial, technological and funding ecosystems, presence and extent of disruptive forces and the presence of a start-up culture and mindset;
- institutions : including government effectiveness and its role in business, laws and regulations and promoting the digital ecosystem.
The resulting index includes a ranking of 50 countries, which were chosen because they are either home to most of the current 3 billion internet users or they are where the next billion users are likely to come from.
As part of the research was to understand who was changing quickly to prepare for the digital marketplace and who wasn’t. Perhaps not surprisingly, developing countries in Asia and Latin America are leading in momentum, reflecting their overall economic gains. But the analysis revealed other interesting patterns.
Take, for example, Singapore and The Netherlands. Both are among the top 10 countries in present levels of digital evolution. But when considered the momentum – i.e., the five-year rate of change from 2008 to 2013 – the two countries are far apart. Singapore has been steadily advancing in developing a world-class digital infrastructure, through public-private partnerships, to further entrench its status as a regional communications hub. Through ongoing investment, it remains an attractive destination for start-ups and for private equity and venture capital. The Netherlands, meanwhile, has been rapidly losing steam. The Dutch government’s austerity measures beginning in late 2010 reduced investment into elements of the digital ecosystem. Its stagnant, and at times slipping, consumer demand led investors to seek greener pastures.
Based on the performance of countries on the index during the years 2008 to 2013, researches assigned them to one of four trajectory zones: Stand Out, Stall Out, Break Out, and Watch Out.
- Stand Out countries have shown high levels of digital development in the past and continue to remain on an upward trajectory.
- Stall Out countries have achieved a high level of evolution in the past but are losing momentum and risk falling behind.
- Break Out countries have the potential to develop strong digital economies. Though their overall score is still low, they are moving upward and are poised to become Stand Out countries in the future.
- Watch Out countries face significant opportunities and challenges, with low scores on both current level and upward motion of their DEI. Some may be able to overcome limitations with clever innovations and stopgap measures, while others seem to be stuck.
Break Out countries such as India, China, Brazil, Vietnam, and the Philippines are improving their digital readiness quite rapidly. But the next phase of growth is harder to achieve. Staying on this trajectory means confronting challenges like improving supply infrastructure and nurturing sophisticated domestic consumers.
Watch Out countries like Indonesia, Russia, Nigeria, Egypt, and Kenya have important things in common like institutional uncertainty and a low commitment to reform. They possess one or two outstanding qualities — predominantly demographics — that make them attractive to businesses and investors, but they expend a lot of energy innovating around institutional and infrastructural constraints. Unclogging these bottlenecks would let these countries direct their innovation resources to more productive uses.
Most Western and Northern European countries, Australia, and Japan have been Stalling Out. The only way they can jump-start their recovery is to follow what Stand Out countries do best: redouble on innovation and continue to seek markets beyond domestic borders. Stall Out countries are also aging. Attracting talented, young immigrants can help revive innovation quickly.
What does the future hold? The next billion consumers to come online will be making their digital decisions on a mobile device – very different from the practices of the first billion that helped build many of the foundations of the current e-commerce industry. There will continue to be strong cross-border influences as the competitive field evolves: even if Europe slows, a European company, such as Rocket Internet, can grow by targeting the fast-growing markets in the emerging world; giants out of the emerging world, such as Alibaba, with their newfound resources and brand, will look for markets elsewhere; old stalwarts, such as Amazon and Google will seek growth in new markets and new product areas. Emerging economies will continue to evolve differently, as will their newly online consumers. Businesses will have to innovate by customizing their approaches to this multi-speed planet, and in working around institutional and infrastructural constraints, particularly in markets that are home to the next billion online consumers.
We may be on a journey toward a digital planet — but we’re all traveling at different speeds.
Short video about this article : http://bcove.me/nbmmm7et
America’s national food, beverage and household brands struggle to regain favor in the hearts and minds of US consumers for the fifth year in a row, according to Deloitte’s annual “American Pantry” study (June 2015) of more than 354 brands across 34 product categories.
Consumer packaged good is a type of good that is consumed every day by the average consumer. The consumer packaged goods industry is one of the largest in North America, valued at approximately US$2 trillion. Although growth has slowed in this industry, companies that provide CPGs still benefit from large margins and strong balance sheets.
Nearly 3 in 4 (73 percent) consumer packaged goods (CPG) categories show an overall decline in their brands’ “must-have” status, meaning that shoppers would purchase whether on sale or not. However, this year’s study also showed a drop in store brands’ appeal, improved consumer perceptions of the economy, and shoppers’ willingness to pay a premium for attributes such as health and convenience–which may signal a turning point that is set to further disrupt the CPG industry after years of consumer caution.
While the majority of consumers say they are committed to sustained frugality year after year, findings point to early signs that they may finally be responding to a belated but increasingly strong economic recovery. It creates tremendous opportunities and risks for companies in this sector, given households’ lack of commitment to national brands brought on by years of stretching dollars to the limit. Brands that get things right can use the economy’s momentum to regain their place on consumers’ shelves, but those that move too slowly could very well be left behind.
While previous years of economic stagnation fueled consumers’ interest in store brands, this year’s study revealed that trend may be reversing as recession-weary consumers loosen their purse strings. The number of consumers who view store brands as a sacrifice (43 percent) jumped 10 percentage points, while fewer consumers (65 percent) indicate they are more open to trying store branded products, an eight percentage point decline.
Moreover, roughly one-quarter (25 percent) of consumers indicate they are willing to pay 10 percent or more for a product that is new or innovative, and one-third (33 percent) will do so for a craft version of food or beverages.
Digital paves the “path to purchase”
According to the study, more than half (55 percent) of consumers turn to digital tools to research products , up from 45 percent last year, and ahead of the number who do so to compare prices (48 percent), which remained flat compared with last year. This is a good example of the consumer informedness. Additionally, four in ten (37 percent) use devices to make shopping lists or meal plans. These behaviors signal multiple points to interact with people along the path to purchase outside of traditional discounts, from building today’s list to planning next week’s dinner.
Consumer packaged goods companies should note that when it comes to online orders and delivery, there is a noticeable gap between consumers’ interest levels and current activity. For example, 38 percent of consumers are interested in online grocery orders for in-store pick up, but only 11 percent already use this service. Similarly, 27 percent are interested in home delivery orders placed online for recurring purchases, but only 11 percent already use such a service. The study suggests there may be a shortage of services consumers seek, creating significant unmet demand that CPG companies can pursue for growth.
Winning at the shelf: Price is just one tool
Understanding the drivers of at-the-shelf purchases can help brands improve their promotional strategies and better connect with consumers, according to Deloitte’s study.
Roughly half (51 percent) of consumers make purchase decisions at the shelf, and while discounts and promotions are important, they are not the only deciding factor. When asked what triggers an impulse buy, 89 percent of shoppers cite discounted prices, but many also indicate that they bought an item because they remembered it when they spotted it in the store (81 percent), and nearly two-thirds (63 percent) say they did so because they wanted to try a new product.
Although price remains the single biggest factor influencing at-the-shelf purchases, many other aspects can also catch shoppers’ attention. CPG companies should step back and consider challenging the status quo, rather than immediately resorting to discounts and promotions. Focusing more effort on non-price related triggers might seem risky in the short-term, but may improve long-term brand health, loyalty and margins.
Health and wellness attributes also rank high on consumers’ shopping lists. Nearly nine in 10 consumers (86 percent) prefer convenient options that are also healthy, and 25 percent are willing to pay a 10 percent premium or more for healthier versions of a product. Further, 41 percent chose the product at the shelf because the label addressed their health and wellness concerns.
Do you recognize yourself in these findings?