Strictly Private and Confidential April 2014 Fung Retailing
Annual Conference 4 April 2014, Hong Kong Omni Channel Retailing
The latest developments on the Chinese Mainland (Part 1) Colin
Light PwC China Digital Consulting Leader
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PwC April 2014 2 Omni Channel Retailing The latest developments
on the Chinese mainland Presentation agenda 1 2 3 What are digital
mega trends in China are defining the current retail revolution?
How is digital and O2O transforming the whole customer journey? How
are international retailers adopting digital solutions to improve
performance? Colin Light China Digital Consulting Leader +[852]
2289 2655 [email protected]
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Digital mega trends in China are defining the current retail
revolution Mobile internet and smartphones Smartphone usage Social
mediaMobile marketingPrivacy eCommerce mPayments
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PwC April 2014 4 Omni Channel Retailing The latest developments
on the Chinese mainland Mobile internet access The introduction of
the smartphone in 2009 has seen mobile represent the primary method
Chinese access the internet Mobile first Number of mobile internet
users in China, % of internet access of mobile (2007 2013) With 81%
of Chinese internet access over mobile content is being seen and
interacted with through the small screen of a smartphone not a PC
monitor 500M mobile Internet users in 2013, 80 million more
compared to 2012 81% of Internet users use mobile to access
Internet in China 288m mobile Internet users in US Source: CNNIC
(2013) mobithinking (2013)
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PwC April 2014 5 Omni Channel Retailing The latest developments
on the Chinese mainland Smartphone usage by activity PwC research
shows that Chinese consumers use their smartphones for a wider
range of activities than international peers The most popular
smartphone activities are the same in China as we see elsewhere
Purchasing merchandise 71% China 32% U.S. Stream TV 69% China 25%
U.S. Stream movies 71% China 21% U.S. Purchase movie tickets 32%
China 7% U.S. Made dinner reservations 37% China 13% U.S. 31% China
8% U.S. 35% China 5% U.S. 95% China 97% U.S. 81% China 87% U.S. 88%
China 87% U.S. News, weather & sports Finding a location Social
networking But some activities are far more popular here than the
rest of the world, particularly online transactions and content
consumption Source: PwC "Mobile advertising: What do Chinese
consumers want?" (2014)
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PwC April 2014 7 Omni Channel Retailing The latest developments
on the Chinese mainland User engagement with mobile marketing PwC
research shows that Chinese users display high-levels of engagement
for mobile as a channel for branded advertising Clicked
accidentally Clicked intentionally and interacted with brand
Clicked intentionally and did not interact with brand Did not click
on an ad Our research on ad preferences showed that mobile ad
relevance was likely to drive user engagement Liklihood to click on
an ad if it was relevant to you and we also found that Chinese we
actively engagingg with mobile ads far more than global peers Past
month nature of mobile ad clicks UK 33% US 29% China 78% 26% 20%
34% 32% China 7% 10% 39% UK 6% 9% 49% 37% US 12.4% CAGR of China
total advertising market 6.7% CAGR of China non-digital advertising
21.5% CAGR of China digital advertising
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PwC April 2014 8 Omni Channel Retailing The latest developments
on the Chinese mainland Willingness to share personal data Our
research shows Chinese users are also much more willing to share
their personal data if they receive something of value in return
Source: PwC "Mobile advertising: What do Chinese consumers want?"
(2014) Mining data to make inferences on user behaviour and
preferences is only one approach however; advertisers in China
shouldnt ignore possibilities to encourage users to openly share
personal data with them UK 28% US 30% China 58% UK 27% US 26% China
59% Willingness to share personal data for a free app? PwC Mobile
advertising: What do Chinese consumers want (2014) Willingness to
share personal data for fewer adds?
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PwC April 2014 9 Omni Channel Retailing The latest developments
on the Chinese mainland eCommerce Chinas e-commerce (B2C & C2C)
market will soon overtake the US as the worlds no. 1, and is
projected to reach RMB3.6tn in GMV by 2016 Source: iResearch (2012)
C2C market size B2C market size Online retail as % of total retail
1,304 1,850 2,450 3,020 3,600 Online Shoppers (M) (Penetration) Per
Cap Spend. (RMB) 230 (46%) 270 (50%) 314 (53%) 358 (56%) 400 (58%)
5,6656,8857,8008,4489,000 Online (B2C,C2C) Retail Shopping Market
by GMV(1) (Unit: RMB in billion) 7% US online retail as % of total
retail The mix of C2C and B2C will change as consumers prefer to
shop on B2C portals for the sake of product quality and variety
choices
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PwC April 2014 10 Omni Channel Retailing The latest
developments on the Chinese mainland Mobile payments Consumers are
also embracing mobile payments with Alipays mobile wallet
application dominating global peers in mobile transaction volumes
The Market Size of Chinas 3rd Party Mobile Payment 2010-2017 (in
Billion Yuan) In China we are also seeing how mobile payment
solutions are integrating with financial services to offer
consumers a wide range of traditional banking products including:
investments, money management and credit services Source: iResearch
(2012) 133m Monthly unique users 906bn GMV mobile payments (2013)
15m Monthly unique Users (exc. WeChat payment) 52bn GMV mobile
payments (2013) 167bn GMV mobile payments (2013) 143m active
accounts 124bn GMV mobile payments (2013) 2m+ Users (2012)
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So what does this mean for retailers and how is digital and O2O
transforming the whole customer journey? DiscoverTransactFulfilUse
and care
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PwC April 2014 12 Omni Channel Retailing The latest
developments on the Chinese mainland The impact of digital on
retailers operating in China is far more pervasive than simply
shifting spending patterns from bricks and mortar to online. We
think of O2O as much than eCommerce Discover How is digital
changing the way Chinese consumers are making decisions. Where are
they going and what are they doing to learn, share and interact
with products? Transact How frequently are Chinese users using
alternative digital channels to make transactions and what sort of
experience do they expect on-line or in-store? Fulfill In what ways
does product availability and fulfilment options influence the
decision for Chinese users to purchase from brands websites versus
3 rd parties Use and care What do Chinese consumers value in
after-sales services and what expectations do they have for on-line
support functions O2O
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PwC April 2014 13 Omni Channel Retailing The latest
developments on the Chinese mainland Digital Commerce Approach Our
approach goes from strategy through to execution, defining the
desired customer journey and implementing digital solutions to make
it a reality Insight & analytics Solution deployment Customer
design Understand your customers and define a strategic vision
Design customer interactions across digital framework
TransactDiscoverFulfillUse & care Agile delivery approach
Ideate -> test -> learn Contextual O2O Social insight and
listening Macro-location targeting Interactive in-store
environments Mobile loyalty Digital wallet services eCommerce
fulfilment Instore sensors and facial recognition Analytics apps
Visualis- ations Performanc e managemen t Data warehouse Advanced
analytics Data architecture Design, build and implement Digital
commerce framework Business structuring An eCommerce journey for
Tax Efficiency Assessing up Tax risk control vs. Saving
opportunities Planning cross- border cash flow under current
account VAT compliance & efficiency review for offline and
online integration Import duty clearance & transfer pricing
planning Regulatory compliance for online business Corporate
structure review & planning for multi-channel retailing O2O
Digital Commerce Solutions
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PwC April 2014 14 Omni Channel Retailing The latest
developments on the Chinese mainland A range of retailers like
those within the Li & Fung group are implementing a range of
digital solutions powered by analytics - to grow Luxury Casual /
branded lifestyle Toys Grocery and beverage Interactive in- store
environment Contextual O2O Social insights Micro-location Digital
wallets Mobile loyalty BurberryLego VertuTesco MacysWalmart GapToys
R Us Aurora Fashions Sephora Tesco Eat
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PwC April 2014 15 Omni Channel Retailing The latest
developments on the Chinese mainland Interactive in-store
environment Enabling retailers to use digital to provide greater
shopper engagement within the in-store experience Dual-screen
advertisingInteractive billboards Augmented reality
displaysIntegrated digital POS Consumers want access to product
information, trusted opinions and deals regardless whether theyre
shopping online, in store or both. Digital technologies enable
retailers to create an immerse in-store environment that drives
engagement and blurs the line between a digital and physical
experience Benefits to retailers Integrated advertising experience
Higher ROI and customer intent Extend from TV advertising to mobile
or in-mall/store Use Analytics to deliver highly contextual, but
privacy-aware, offers
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PwC April 2014 16 Omni Channel Retailing The latest
developments on the Chinese mainland Burberry Using digital
technologies to create a physical manifestation of the Burberry
online store 21%+ Retail profits YoY Takes a digital first approach
as it adapts to customers wanting instant service and ongoing
innovation. The flagship store is designed as a physical
manifestation of their website, with digital mirrors, RFID chips,
interactive displays What is the impact? 14%+ Retail revenues YoY
"I've seen what happened to brands like Kodak that did not keep up
with digital change. That's a lesson in what to avoid Angela
Ahrendts, ex-CEO of Burberry (now Head of Retail at Apple) Digital
and social media investments cited as the key reasons for improved
retail performance Source: theonecentre
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PwC April 2014 17 Omni Channel Retailing The latest
developments on the Chinese mainland Lego Embracing digital
technologies to turn interaction with Lego from bricks into clicks
Once a traditional toy manufacturers, Lego is now one of the worlds
most innovative businesses. The Digital Box uses augmented reality
kiosks to provide an interactive 3D digital experience in store
What is the impact? 5bn+ hrs/Y were spent on playing Lego across
physical and digital "We see the digitization, as we call it, to be
an important thing that we need to respond to and its critical to
our strategy. John Goodwin, chief financial officer at Lego
Physical and digital innovation and a superior interactive digital
experience have been the key factors contributing to Legos leading
market position Source: CoDesign, Geek, The WashingtonPost
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PwC April 2014 18 Omni Channel Retailing The latest
developments on the Chinese mainland Contextual O2O (Geo-location)
Driving consumers from intent (online) to footfall (offline)
through analytics and promotions Geo-location based services
enables retailers to pinpoint customers exact location and deliver
highly relevant content that engages and influences purchasing
decisions or brand awareness Benefits to retailers Integrates
in-store displays with online content to offer a true O2O shopping
experience Identifies and rewards implicit loyal consumers Measures
the effectiveness of promotional displays Drives incremental
revenue Source: Entrepreneur, AT&T
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PwC April 2014
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PwC April 2014 19 Omni Channel Retailing The latest
developments on the Chinese mainland Tesco Combining location based
advertising and customer analytics to execute highly targeted
campaigns 40% did, or intended to, take advantage of the offer
Steps into location-based advertising by integrating billing
information with location-specific data to trigger a SMS coupon
when the target demographic enters geo-fences around designated
Tesco stores What is the impact? 68% previously unaware of
proposition Its about putting the customer in control, and enabling
him or her to engage and transact with Tesco in whatever way best
suits themphysically or digitally, transactionally or
non-transactionally. Philip Clarke, CEO of Tesco Location based
advertising raises awareness of discount offers to increase basket
value and drive footfall Source: Weve
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PwC April 2014 20 Omni Channel Retailing The latest
developments on the Chinese mainland Vertu Pinpointing affluent
shopping areas to drive footfall into high-end Vertu boutiques in
London 24% click through rate for video Uses GPS tracking to
geo-target affluent shopping areas in the UK to send users SMS ads
and prompt them to call the nearest boutique. Sponsored mobile
daily news and shopping app to integrate ads and video showcased
products. What is the impact? 92 sec. time-in-ad doubled industry
benchmark Working with [amobee] has shown us how powerful mobile
advertising can be to reach a niche, luxury audience with smart
media placement and sleek creative design. Mark Izatt, Head of
Digital for Vertu Local mobile advertising boosts brand engagement
and encourage customers to physically visit stores or register
their interest via email Source: [amobee] Advertiser Solutions
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PwC April 2014 21 Omni Channel Retailing The latest
developments on the Chinese mainland Micro-location Retailers are
deploying a range of digital technologies to bring online analytics
to the bricks-and-mortar store Wi-Fi Video Audio Most retailers
have been blind to customers in store. Micro-location enables
retailers to identify and engage customers, following customers
from outside the store, all the way to the POS to create a
differentiated shopping experience Benefits to retailers Identifies
priority shoppers to provide a more tailored service Benchmarking
of display performance Analyse customer flows to determine the most
effective layouts in-store
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PwC April 2014 22 Omni Channel Retailing The latest
developments on the Chinese mainland Macys Micro-location
technologies like iBeacons enable retailers to create a
differentiated in-store digital experience Offers retail-based
iBeacons to prompt targeted deals and recommendations(tied with
at-home browsing) for customers to peruse items. No need to open
app to receive in-store alerts and recommendations. What is the
impact? "Shopkick has had great success with our customers. Over
half of the shopkick users have been to Macys because they use the
app. Its been terrific. Martine Reardon, CMO, Macys Creates a
bridge between the online and offline shopping worlds which
improved the retail performance $500m revenue were driven for
retail and brand partners in 2013 Source: macrumors
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PwC April 2014 23 Omni Channel Retailing The latest
developments on the Chinese mainland Walmart Using in-store
location based tracking to improve the bricks-and-mortar retail
experience 12% sales come from in-store mode Uses customers
location to provide an app designed specifically for that store.
The in-store mode can guide shoppers to find the product on their
shopping list and enable them to scan bar codes to get product
information What is the impact? 45% app users visit that store more
often "Almost every facet of our lives has been transformed by a
smartphone, almost every facet of our lives has been transformed by
a smartphone." Gibu Thomas, mobile chief of Walmart Location based
tracking and integration with online channels are the key drivers
of footfall in- store Source: CNET
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PwC April 2014 24 Omni Channel Retailing The latest
developments on the Chinese mainland Social Retailers are using
insights from social to make business impact across the entire
organisation, not just the marketing department Social insights is
about using powerful analytics to drive to the root-cases and
identify business insights that can be converted into tangible
changes in your business. Not pretty pie-charts Collect social data
Analyse content Deliver insights Take business action Traditional
social listening Social Insights
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PwC April 2014 25 Omni Channel Retailing The latest
developments on the Chinese mainland Gap Using social insights to
understand the comparative performance of key store and product
characteristics against competitors Social insights used to assess
the performance of key product and in-store experience Assessing
competitors against the same criteria allows comparable analysis
Regular listening allows Gap to change processes and measure the
impact in realtime
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PwC April 2014 26 Omni Channel Retailing The latest
developments on the Chinese mainland Digital Wallets Digital
wallets are about much more than just payments, they connect the
physical and digital worlds Brand awareness & targeted
messaging Drive footfall and retail experience Loyalty rewards and
retention Transactions, and closed loop ROI Analytics and
insight
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PwC April 2014 27 Omni Channel Retailing The latest
developments on the Chinese mainland AURORA FAHIONS Uses PayPal
Eagle Eye technology to create an OTT solution that bypasses the
POS Enables customers with a PayPal account to make in-store
purchases. It adapts to customers who have made online purchases
using PayPal to process refunds and exchanges in-store What is the
impact? Customers demand more from physical stores: outstanding
service and a more personalised experience enabled by new
technology. Catering for payment flexibility is a now a crucial
part of ensuring we are providing customers with a seamless
experience by merging digital commerce with physical retailing. Ish
Patel, Group Omnichannel Director at Aurora Fashions Digital wallet
creates a simple, secure way to use a mobile phone to pay in retail
stores. This improves footfall and retail experience as well as
linking advertising with fulfilment at the POS Source: retail
assist, eagle eye
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PwC April 2014 28 Omni Channel Retailing The latest
developments on the Chinese mainland Tesco Digital wallets remove
the barriers of different standards of contactless payment to speed
up the payment process Announced the launch of a digital wallet to
allow customers to scan their mobile phones when checking out,
without the barrier of spending limits that are usually seen on
other contactless payment systems What is the impact? As a retailer
we know that if we dont embrace the digital culture were finished.
It is as stark and as simple as that. Change or die! Mike McNamara,
CIO of Tesco Expand multi-channel portfolio and speed customers
through its checkouts, which potentially save on staffing costs.
Sit alongside other digital services to make up a futuristic
multichannel journey for its customers. Source: the Grocer,
diginomica, ComputerWeekly.com
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PwC April 2014 29 Omni Channel Retailing The latest
developments on the Chinese mainland Mobile loyalty Smartphone
users want to be influenced pre-purchase with exclusive benefits
and experiential outcomes not just coupons and discounts Loyalty
programs 46% Early access to sales 45% Exclusive updates about new
products / services 39% Exclusive offers for those who downloaded
the app 38% Early access or sneek peaks to new release 36%
High-quality images and/or video 36% Services and VIP privileges
for top customers 36% What features do affluent Smartphone owners
want from a luxury brand mobile app Source: PwC worldwide study on
mCommerce behaviour (2014), Luxury Institute and Plastic Mobile,
"Mobile Apps and Commerce for Luxury Brands" (2012) 58%23%11%17% To
inspireTo evaluateTo transactTo review When during your shopping
process do you Chinese generally use their smartphone?
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PwC April 2014 30 Omni Channel Retailing The latest
developments on the Chinese mainland Sephora VIB Rouge club offers
exclusive benefits for those who spend over $1,000 per year 1
Welcome me into the club 6 Allow me to share my privileges and
experiences 2 Wow me with great content thats relevant to only me 3
Excite me with unique digital experiences 4 Make my purchasing easy
and frictionless 5 Offer me rewards you know I care about
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PwC April 2014 31 Omni Channel Retailing The latest
developments on the Chinese mainland EAT. One of the first
retailers to use loyalty to close the loop on advertising and
redemption Took the first trial of iBeacon technology in the UK by
launching a mobile loyalty app that enables customers to redeem
offers by showing their phone at checkout. A game changer,
redefining loyalty for the 21 st century Ramesh Bukka, Eat, Head of
IT Strategic pillar in communicationsallows us to access more
information about customer behaviour and how that can be influenced
Holly Lee, Eat, Group Marketing Director Source: the Drum, Mobile
Marketing
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Thank You. This content is for general information purposes
only, and should not be used as a substitute for consultation with
professional advisors. 2014 PwC. All rights reserved. PwC refers to
the China or Hong Kong member firm, and may sometimes refer to the
PwC network. Each member firm is a separate legal entity. Please
see www.pwc.com/structure for further details.