Global Consumer Trends

I recently took part in a webcast hosted by The Conference Board on the topic of global consumer trends. Here are some of my notes from the discussion. I used research from Nielsen, The Conference Board, eMarketer and others to prepare these notes.

Global consumer today

The power has significantly shifted in consumers’ favor in the digital age.

Today 4 billion people or 53% of global population are connected to the internet, and nearly all of them (92.6%) do so using their mobile phones. Everyday 85% of users or 3.4billion people connect to the internet and spend, on average 6.5 hours online[1]. This constant connectivity and explosion of experiential applications is impacting their lifestyle and behavior in a number of fundamental ways.

They want seamless, convenient, custom and agile experiences across online and offline worlds. Connecting the two worlds and meet changing consumer expectation is the biggest challenge for companies. This transition from the limitless realm that allows a consumer to experience ‘what I want’, ‘when I want’ and ‘how I want it’ to ‘you have to experience what someone else wants you to experience’ usually does not end well for that someone.

Consumers are also living their values more than before and they are expressing those values with their wallets. Agile, trusted and actionable measurement of evolving consumer behaviors, their innate human truths, is fundamental to long term success.

On a more positive note, consumers are generally feeling good about their prospects around the world. Connectivity is on the rise. A lot of them are eager to get in the game and join the global economy and try new products and services and are willing to collaborate with companies by sharing their personal information, provided they trust the company and that they get a fair return on this exchange.

Are current consumer sentiments good news?

We have learned over the years that consumers are very apt in assessing the economic climate and responding by tuning the way they spend their spare cash. However, not all categories are created equal, some are more resilient to small changes in consumer sentiments, while others show a higher degree of variability with even a small change. It needs to be analyzed how these changes impact your brand and in which market.

We are seeing two trends: (1) economies that are coming onto the stage and getting connected with the global economy. There is generally a higher level of buoyancy there, like Asia Pacific clearly takes the lead. (2) On the other side there are markets that are more mature and consumer sentiments there, be it for cultural reasons or otherwise, tend to be more moderate. US has been an outlier in terms of sentiments, however, we are seeing some early signs of softening there that we need to watch.[2]

However, we do want to go deeper and connect these results to other data sets to fully understand market potential. In the US, where we have been seeing some of the highest levels of confidence. Looking at the CPG world, we see some interesting trends:

·      Overall US Consumers made 0.3% more trips to stores than 2017. Dollar stores and Mass Merchandise stores saw the most increase in number of consumer trips.

·      Private labels/store brands are growing at much faster rate as compared to named brands. With rising consumer sentiments, price sensitivity toward private label is fading over time.[3]

Is Asia Pacific the most exciting region?

Asia Pacific continues to boast some of the highest levels of GDP growth, the world’s most optimistic consumers (increasingly so year on year) and solid FMCG growth.

Across many Asian markets, average incomes have been growing often by double digits, usually off a very low base. And so more consumers are feeling that their financial situation has improved in Asia than any other region. If we look at Top 10 markets across the world, Asia dominates with Vietnam ranking the highest at 86% and other markets like China, Indonesia, India and Philippines in the world top six.[4]

But the real story in Asia, like in some other parts, lies in understanding market at sub-national level. In a research done by The Demand Institute on China, they challenged the consumer facing businesses to look beyond Tier 1 cities and painted the tremendous growth potential Tier 2 and 3 markets present. In a latest report on ASEAN markets by Nielsen, contrary to general belief, they observed:

-         Philippines accounted for 25 percent of demand in the top 50 markets across 8 product categories

-         Growth rates can be 7 times large for some regions within countries than the national average

-         Mega cities represent the largest consumer markets is a myth.

That said, given the sheer population and especially young population and rising number of connected spenders, China and India will continue to dominate spending across several categories. Vietnam, Thailand, Indonesia and Philippines are interesting to watch out.

Mature Asian markets like Australia, Japan and South Korea will continue to experience sector specific growth for e.g. in health care and holidays/vacation.

New tech purchase sentiments are softening, what's happening?

Asia Pacific consumers have one of the highest adoption rates of new technologies and there we are seeing some softening in purchase intentions for this category[5].

If we look at the world of technology, a lot of innovation is happening on existing platforms/devices, which are maturing. So, consumers have been topping up their existing devices to continue to expand their experiences. However, a new wave of innovations is going to ignite this space.

For e.g. Nielsen forecasts that mobile Xtended Reality (AR/VR/Mixed) consumer market will go from $5.9B in 2018 to $34.1B by 2022. While gaming will continue to hold the largest share, we will see $ growth in other sectors like location-based entertainment VR.

As for the US, I think a lot would hinge on the upcoming privacy related regulations to see how quickly companies would be able to adopt to the new scenario.

How can companies use Global Consumer Confidence data?

There is an opportunity for companies to ingest data from the Global Consumer Confidence Index into their existing data ecosystem to understand how their products and services get impacted by changes in consumers’ perspectives.

Not all categories get impacted in the same way and therefore, it’s important to build that analytical relationship. I believe that there is reasonable volume of trended data available to be able to build a robust model.

Building right messaging in tune with changing consumer view of their prospects will resonate. For example, in a low-income market, showcasing high end benefits of cheap products may be a good ploy to get sales lift, while in markets with more moderate confidence, deeper and purpose driven consumer engagement would drive growth.

What has been the impact of mobile on consumer purchasing behavior?

Mobile provides an amazing opportunity to connect with consumers. And it's no surprise that mobile has the highest share of total ecommerce retail order growth worldwide, equaling the share of computers in Q1 2019 (eMarketer).

However, it has the lowest conversion rate when compared to desktop/laptop and tablets as well as the smallest average order size[6].

That said, its allowing for a huge amount of interaction with consumers, meaning an opportunity to gain share in consumers’ digital life.

According to Forrester, 64% of us multi-task with our devices: watching TV, texting with friends, browse the net and scrolling through social media, at the same time.

Combined that with average 6.5 hours on the net[7], means a lot of time and multitude of interactions, which means a lot of opportunity for businesses to connect with consumers.

However, mobile platform comes with a challenge. There is infinite distribution but there is no infinite shelf.

For e.g. you can have 230 SKUs of cereal in an average brick and mortar grocery, while you can only get 20 items listed on 1 page of Amazon on a mobile device. We know that 70% of consumers do not go beyond page 1 and there is a 50% volume loss going from page 1 to 2.[8]

Now that’s a very challenging environment to be playing in. and so unless your are a brand where a consumer knows what she is looking for, like auto makers, you are fighting to even get into consideration.

Another element is reviews. After pricing, product reviews are the biggest driver of sales. There is 30% lift in interest from positive reviews, and 50% drop in interest with a negative review.[9]

Across markets, there are several differences between categories that are driving growth in m-commerce.

For e.g. in the US, consumers are more heavily drawn towards omni-channel experiences for grocery categories, they want to be able to see a product in a brick and mortar store, before they buy it online. EU consumers want a unified product between online and offline, while in China, consumers expect to see exclusive online only products. Consumers also tend to look for healthier products online.

Another exciting development in the mobile world is Augmented Reality that is revolutionizing brand positioning as well as impacting the path to purchase. Already we are seeing likes of IKEA, Sephora, Wayfair and Anthropologie starting to leverage it. We will continue to see an expansion of several categories that historically were not very successful in selling online, can now increase that probability with this technology, like carmakers.

Is voice commerce going to be a big player?

If we combine the consumers’ preference for simplicity and convenience with the fast proliferation of voice activated computing across a number of daily use devices, it's obvious that businesses are seeing an opportunity. It also fits nicely with the notion of removing resistance in consumers’ path to purchase.

In my view, we need to see more end to end integration between 3rd party systems, before consumers move this interaction from informational to transactional. So, yes, I do believe this will have an impact, but I don’t see that lift in 2019.

Way Forward – key messages for consumer facing businesses

1)     ‘Always on’ measurement of experience and merging it with other data to enable consumer facing businesses to predict outcomes. Specially in the context of the changes in the marketplace with technology.

2)     Importance of thinking about owning a higher share of consumers digital life. Not only in terms of getting in front of them, but also stretching our engagement with them. What I am also seeing when we talk about customer journeys is that organizations are creating eco-systems to bring as much of consumers’ life into their view as possible. Think of Delta air App that connects passengers to a ride hailing company or a CPG manufacturer extended its recipe app to connect it with a store for fulfilment and then a distribution company to bring the items to the consumer. This not only improves consumer journey; it also allows companies to understand multiple facets of that journey.

Not only that marketers need to be able to put a value to each of these interactions so that they know which ones yield the most return. In a survey done by the Data and Marketing Association and Winterberry Group, 2/3rd of US marketers were putting a higher priority on attributions for the coming year. However, according to EConsultancy, only 15% are using advanced attribution models to measure effectiveness.

3)     Innovation does not only mean speed. It means smart speed. We hear a lot of notions taken from software companies and lean startups about failing fast. According to a Nielsen report, 77% of US companies recently said that they are skipping at least 3 key steps in their innovation journey to get to market faster. We also need flexibility in the way we build insights. With personalization and pace of development, we need to be able to create more flexible organizational structures as well as measurement mechanisms that allow us to get to what’s next faster and act upon it quicker.

[1] Nielsen

[2] The Conference Board’s Global Consumer Confidence Survey

[3] Nielsen

[4] The Conference Board’s Global Consumer Confidence Survey

[5] The Conference Board Global Consumer Confidence Survey

[6] eMarketer

[7] Nielsen

[8] Nielsen

[9] Nielsen