Blog Post - Minos Makris, Oct 4 2017

Why the Sound of Convenience is Number 1 around the world

Why the Sound of Convenience is Number 1 around the world

Customers crave innovation - Salmon’s 2017 research confirms it, with 60% of us preferring to purchase from a ‘digitally innovative retailer’, and a quarter of us now identifying as ‘digitally obsessed’. In the USA, the figure rises to 45%. However, a closer look at the research suggests that consumers desire innovations that make life easier and more convenient. Notably, they care less about being loyal to specific brands and retailers.

So, as a retailer, if you offer a better service based on convenience, you stand to win the customer… right?

Sounds plausible, but it’s not so straightforward - personal digital real estate is still fragmented in the West, so service provision now becomes much more multifaceted than we thought. While online shoppers predominantly shop with Amazon (39% of online spend in the UK by Salmon's count), our grocery shopping, provision of music and online messaging is typically with another provider. The message is clear – although Western consumers consider themselves advanced and increasingly ‘digitally obsessed’, the linear growth of retail has burdened them with historic associations. The adoption of technology also takes a more gradual, straight path, resulting in fewer revolutionary changes in shopping habits.

The Eastern consumer, on the other hand, is more technology free or, as we like to say, ‘traditionally futuristic’. Their digital adoption is non-linear, hence the proliferation of mobile whilst also maintaining traditional purchase habits, preferring direct relationships with vendors and cash-on-demand payments. Ecommerce has had comparatively more space for development in China than in the West – it has been less than 40 years since China’s economic reforms – and this has brought more opportunities for newcomers to gain significant market share.

So, what are the lessons?

Eastern retailers are beginning to offer multiple services through their platforms to attract their customers, and Western retailers need to pay attention. Innovation in China, for example, successfully combines social, ecommerce, messaging and payment services under the roof of single providers. WeChat and Alipay are great examples of this:

  • WeChat not only serves as a Chinese social media mobile application, but also allows companies to set up shops on the public channels, allowing users to simultaneously purchase and connect with friends on one online platform.
  • Alipay, China’s largest online payment service provider with over 520 million active users, works with Alibaba which provides an Escrow service, whereby money is sent to the seller once the customer has confirmed their satisfaction with the goods they receive.

Understanding the customer is, therefore, key, and making their lives better – through convenience married to attractive pricing – is the route to success. Call it the Amazon Prime effect if you like, but whoever can ultimately offer the best service – be that search, experience, payment, or delivery – will win the customer.

And by reducing the reasons for a customer to leave you, and establishing yourself as the default partner for all the user’s needs, you should be able to keep them. We call this ‘interface imperialism’ – if you own the interface, you own the customer and the data. Keep it that way, and you’ll own the future. This is why so much is invested into the next generation of interfaces – be that voice, gestures, or the brain computer interface (BCI).

Getting it right – around the world

With customer priorities shifting from brand loyalty to convenience and price, it is important that retailers offer consumers convenient services in abundance whilst harnessing innovative technologies in order to attract and retain their attention. The models of success are, therefore, those that consider what the customer actually wants.

Customers clearly benefit when a retailer or brand recognises the customer’s desire for ease and convenience when shopping online. Alibaba, China’s largest ecommerce marketplace, is one such Eastern company that recognised and took advantage of this. In June 2016, Alibaba raised its stake in Singaporean based ecommerce company Lazada to 83%. However, Western tech titans are also taking note, with Amazon swiftly following suit by entering into Singapore’s ecommerce market in July 2017 with its Amazon Prime offering. Incidentally, this marks the first time these giants have come together head to head, both set on expanding globally.

Yet, it is crucial to acknowledge that the services organisations provide and customers want isn’t so cookie-cutter; what customers expect often varies depending on geographical location. Customers in China appreciate that well-known, high-end brands guarantee high quality, authentic products and decent customer service, making it easier for them to trust the company. On the other hand, customers in the West rate convenience and price as the most important factors in their online shopping journey, with brand loyalty in decline. In fact, of 6,000 consumers surveyed in Salmon’s study, 88% were more concerned about how quickly an item would arrive, rather than the brand they purchase from.

Will your domestic ecommerce strategy translate equally well internationally?

The answer is no, but you knew that didn’t you? It’s worth remembering that while the growth of ecommerce means it’s now an integral retail channel, most organisations are still learning the commerce ropes – be it their C-level understanding, their organisational make-up or strategic questions. There is a distinct difference in experience between major ecommerce marketplace players and organisations establishing their ecommerce ambitions.

For a majority of organisations, most of the learning occurs in local markets where risks can be confined and consumer behaviours better understood. Indeed, global commerce expansion has been limited due to the fear of the myriad factors that need to be considered – including time zone management, data regulations, delivery, custom laws and politics.

The reality is there is not one winning template for ecommerce globally. Basics such as range, speed and delivery are all applicable, however there are also distinct differences. Although we like to consider ourselves a global community, topographical, legal, infrastructural, religious and cultural differences do exist. For example, Chinese law dictates that every company engaging in ecommerce with its own website domain must apply for an ICP License. An additional license is also required for companies that want to embed videos or podcasts on their site. Furthermore, data protection laws in China are deliberately vague and hard to interpret. (Read more here on ecommerce in China).

So, what are the international opportunities?

Salmon sees four areas that present an opportunity for European organisations. These include:

  • Payment. However, applying a Western view of what constitutes good payment may not be successful globally. More markets will open up incorporating more traditional payment methods
  • Investment in logistics and delivery. Delivery will undoubtedly need to be approached differently in different markets. ‘Grab’, Southeast Asia's leading ride-hailing platform, identified the key role that mopeds play in transportation in Malaysia, so they built this into its offering.
  • Consolidation services. Offering ecommerce, social and payment functionalities under one interface.
  • Merging online and offline. How the pure-plays will no longer stick to being pure-plays, but will use their data to revolutionise physical retail.

Perhaps the greatest disruption – and opportunity - is the overlap of digital and physical, which we are already observing in the US with Amazon, and China with Alibaba. Both ecommerce giants have realised the future of commerce lies in integrated omni-channel experiences – the pure-plays will no longer be playing purely online. A deep routed understanding of buying patterns using data will help them revolutionise the physical store experience by influencing stock (driven by online data), by linking together the online and offline experiences.

Ultimately, no matter how hard a company strives to engage their customers, the buyer’s ultimate opinion will inevitably be shaped by the standard of service they receive.

To find out more about how today’s shoppers want to shop tomorrow, download our new guide “Buying Tomorrow”.

Interested in more topics like this? Visit What We Think.