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THE FUTURE OF

E-C MMERCE
IN FMCG
IS SUE 3 | SEPTEMBER 2016

E-COMMERCE: THE GLOBAL FORECAST


DRIVING PICTURE 2025
GROWTH FOR HOW AND WHY REGIONS ARE PREDICTIONS FOR
FMCG? DEVELOPING DIFFERENTLY THE FUTURE
??? INTRODUC TION

E-COMMERCE:
DRIVING GROWTH FOR FMCG?
By Stphane Roger, Global Director of Shopper
and Retail

CONTENTS
In previous years, we have stressed the urgency Built on a different model to traditional FMCG
for packaged goods retailers and brands to retailers, they cater to the global consumers
invest swiftly and decisively in e-commerce. main demand convenience. Their rise presents
Simply put: we demonstrated that the FMCG an acute problem for incumbents: our figures
e-commerce market is unkind to latecomers. reveal that first-to-market online retailers enjoy
03 | Introduction For brands, the priority is to get on the shopping higher market share than their next competitor,
E-commerce: driving growth for FMCG? list. Our data shows that 55% of online shoppers a difference of at least 40% in France and up to
use the same shopping list from one purchase three times for the UK.
04 | E
 -commerce hot spots to the next, giving a significant first mover
The global picture advantage. These figures would suggest that online is
the place to invest for FMCG: huge business
06 |  Asia While the industry as a whole is relatively flat opportunities, valuable shoppers and an exciting
Eastern promise growing just 1.6% in the 12 months to June 2016 future. But unfortunately, its not quite as simple
08 | South Korea and forecast to slow further to 1.2% in 2017 as that. Of key importance for packaged goods
grocery e-commerce has a value growth of 15% retailers and manufacturers is making sure that
09 |  Japan
on the previous year. It now accounts for 4.4% going online doesnt cannibalise their offline
12 | E  urope of all packaged goods sales generating $48bn in business. Comparative research we conducted
A continent divided 2016. This is forecast to increase even further: by across the UK, France and China, showed that
2025, online packaged goods sales will be worth after one year of e-commerce adoption, British
13 |  France an estimated $150bn, growing to 9% of total and French shoppers spent less overall. This
14 | Germany FMCG value. demonstrates a major risk of lost value for the
15 | United Kingdom industry if there is no clear differentiation when
Consumers needs are changing as they become marketing offline and online offers.
16 | United States of America increasingly time-poor and value conscious.
Behind the curve In China, 79% of shoppers choose their store This report will focus on three pillars to
depending on its proximity to their home or help retailers and brands navigate a future
20 | 
Latin America commute. In Spain, 44% are looking for products in e-commerce:
Connected but conventional that help save them time. And where waiting
isnt an option, next hour delivery is becoming E-commerce hotspots this year, we have
24 | World of opportunity
increasingly available, although currently at a investigated the reasons why some of the worlds
 How brands and retailers are driving premium price. consumers have made the switch to online
online sales so seamlessly, while others stay wedded to
28 | Forecast 2025 Shifting demographics are hastening these legacy retail. By comparing individual countrys
changes. In the next 10 years, GenerationZ will similarities and differences, we can spot patterns
Predictions for the future
be making the shopping choices. This generation and successes, offering the right advice for each
30 | Conclusion has never drawn breath in a non-digital world. market.
Streamed shopping, the future of FMCG? They are constantly connected to their devices,
where social media elevates their voice and A world of opportunity generating additional,
gives them a direct line to once faceless brands. or incremental, spend is possible. By looking
Today, over half of the adult population owns a across retail channels, this section will help
smartphone; by 2020, 80% will. If brands wish to brands to understand whether e-commerce
reach shoppers, they need to meet them on their provides additional value to the offline business.
platform.
The future of e-commerce our experts will
Supply is fast meeting demand. The past 12 look at the market as it stands to predict how
months have seen a rise in the availability of new e-commerce will look in 2025, allowing retailers
offers from Alibaba, Amazon, Uber and Instacart. to prepare for the future today.

2
02 03
3
E-COMMERCE HOT SPOTS E-COMMERCE HOT SPOTS

DENMARK

BELGIUM POLAND
1.3% RUSSIA

0.9% 0.7% CZ 0.9%


NETHERLANDS 2.1%
1.7% GERMANY HUNGARY
The question retailers
UK 1.2% ITALY 0.8% SOUTH KOREA

6.9% 16.6% must ask is how to


US

1.4% FRANCE
0.4% ROMANIA

PORTUGAL 5.3%AUSTRIA 0.2% JAPAN


continue growth in
1% 7.2% the highly digital East
CHINA
0.3% 4.2%
SPAIN
1.7% TURKEY and encourage further
MEXICO
0.5% development
0.1% VIETNAM TAIWAN
in the West
0.3%
MALAYSIA
5.2%
0.3%
BRAZIL
0.1%
ARGENTINA
1%
Below: The three phases of FMCG ecommerce development
Online value share of market as at June 2016

PHASE 1 PHASE 2 PHASE 3


Source: Kantar Worldpanel, Europanel, Intage

Early adopters Mature markets Fully digital

THE GLOBAL PICTURE 18

16

Online grocery shopping is steadily While countries like South Korea and China are 14
growing across the world but, confusingly, embracing the digital shopping experience,
12 UK SOUTH KOREA
countries where we might expect to see a the US and Latin America remain less engaged
discernible adoption of online grocery in although e-commerce is still on the rise in 10
mature economies such as the US and Germany, these regions. The question retailers must ask is Frequency ARGENTINA
8 CHINA
and emerging markets including Brazil how to continue growth in the digital East, and JAPAN
FRANCE
e-commerces share remains small. encourage further development in the West. 6
PORTUGAL
Such a wide spectrum of adoption represents The future development of e-commerce is 4

a global puzzle of performance for FMCG strongly connected to the culture, habits 2 GERMANY
BRAZIL
e-commerce. and beliefs of each country. Retailers and MEXICO
SPAIN
brand owners need to understand where a 0
This year, we have endeavoured to investigate target country is positioned in order to design -10 0 10 20 30 40 50 60 70 80
-2
the reasons why some of the worlds consumers marketing and sales strategies which will Penetration
have made the switch to online so seamlessly, properly impact those shoppers. A one size fits
while others stay wedded to legacy retail. all approach will not work. Source: Kantar Worldpanel, Gfk, Intage, iri 2015

04 05
ASIA ASIA

ASIA:
EASTERN
PROMISE
CHINA

EMBRACING THE
CHALLENGE OF CHANGE
By Jason Yu, General Manager, China
E-commerce in Asia is very good at record high sales of 91.2 billion RMB
creating artificial festivals or events ($20 billion), 62.6 billion spent through
Asia has been leading the way The swift level of adoption of the This closeness between groups and as internet reds) trying new lipstick to celebrate a certain day. Often the mobile app alone. It plays to key
in e-commerce for the past online shopping models in Asia doesnt individuals in society means that products from Maybelline. Consumers this manifests through an acronym category strengths for e-commerce:
decade, most notably in China where necessarily follow economic strength or adoption of new technologies diffuses could comment via a live message or a word that sounds similar to 30% of sales were baby related; 22%
more online purchases are made than even growth. So what does unite it in its fast. Trends, word-of-mouth, and board within Meipai and a direct link something else, to create a reason comprised cosmetics.
anywhere else in the world. South Korea race to digitisation? activities where people can work embedded in the video stream directed for people to buy something for their
is the worlds largest market by value together are valued highly, particularly visitors to the Tmall site of Maybelline, loved ones. This year, P&G China and Alibaba
share for purchasing packaged goods One possible explanation is that Asia, in comparison to cultures which value where they could buy the lipsticks they VR Lab jointly launched the VR
online (16.6%). Japan, Taiwan and China like Latin America, shares a collectivist third-party advice and research over saw. 10,000 lipstick products were sold An example of this is Chinas May Boy Friend and VR Girl Friend
are the next biggest in Asia. culture: one that is based on valuing recommendations or advocacy. in just two hours. the 20th (520) celebration. When marketing campaign on 20thMay,
the needs of a group or a community pronounced in Chinese, 520 sounds using VR technology on Alibabas
In contrast, there are many developing over the individual. This manifests Celebrities and social influencers Whilst the shopping festivals play like I love you. Using this wordplay Taobao app. In their virtual world,
markets within this region that still rely in a higher incidence of risk-seeking are unsurprisingly huge drivers of to many types of product besides as the perfect excuse retailers fans can have their idols wake
on more traditional trade and have very behaviour because of what sociologists e-commerce in China, particularly groceries, there is a natural benefit for created the internets answer to them from their sleep, make them
low online adoption, but it is possible call the cushion effect, a trait found in among younger audiences. retailers and brands in this space as the Valentines Day. Meanwhile, 520s breakfast; even propose to them, all
that as they develop they will skip over places like China, by which family and familiarity of buying online spreads. platonic antidote Singles Day through VR technology. And thats
the stage of modern trade, such as social networks will help out any group This year, using the video sharing Singles Day has led to an increase in (11th November) has become the not all, their idols also shopped with
supermarkets, and go straight to online. member who loses a lot of money after app Meipai, Maybelline promoted a families trying the e-commerce channel largestonline shoppingday in the them for P&G Rejoice products, which
selecting a risky option. In contrast, live internet stream of its new brand for groceries from 30% in 2013 to 49% world, with profits exceeding the USs were easily added to their carts or
in individualist cultures such as the ambassador, Angelababy, and various in 2016. Black Friday. Last year, it achieved followed through a click.
US, a person is expected to bear the other internet celebrities (known locally
consequences of their own decision.

06 07
??? ASIA

WHY IS SOUTH KOREA


LEADING?
VALUE SHARE

SOUTH KOREA Urbanisation 16.6% LOYALTY

21.1%
Free delivery

Range and
ALMOST
100%
promotion
South Korea has the worlds most developed
digital economy and owes this largely to a
combination of innate cultural appetite for new Internet & Wifi
technologies and digital accessibility. Thanks everywhere
of consumers
+35%
to high internet speeds and 85% smartphone
penetration, almost 100% of consumers aged
between 10 and 40 shop online, especially Smartphone aged between
penetration
through mobile. In additional, South Korea is very
advanced in their financial payments systems, 10 and 40 JAPAN
which makes the purchase process easier.
Digital creativity shop online
The situation is different from the early days of
online retail, four or five years ago. Now, the
online channel is positioned as one of the most PENETRATION
important purchase channels, particularly for
the baby categories. And it is becoming more Figures for 12 months to June 2016
66.9%
pronounced due to the increase of cross-over Source: Kantar Worldpanel
shoppers, who make purchases on- and offline.

Traditionally, Koreans used the internet for social


and recreational purposes but not necessarily for
commerce. Marketers looked for innovative ways
to draw consumers online socially: strategies such
as building and maintaining chat rooms, sending
out regular e-newsletters or special deal emails
JAPAN: THE MOBILE SHOPPER
to opt-in consumers, developing company blogs
or advertising on social network websites helped Intage, our partners in Japan, share their
lead users from social communities towards
communities of transaction.
insight on how changing media consumption
is shaping the online shopper.

14
This is now being mirrored in China with the
advent of social commerce. Chinese e-commerce Changing media consumption Therefore, when considering
company JD.com has partnered with social in Japan promotional activities for e-commerce,
platform WeChat, enabling its users to browse Smartphone usage has been growing we need to consider the ways in which
merchandise offered by JD.com while staying in in Japan for many years: as of the end people access information. Using data
the chat app. of 2014, 64.2% of all households had a from its internet-based panel, Intage
smartphone1. segmented consumers in accordance
In the next decade, South Korea is expected to with how they access information in
see online FMCG share surge to 25%. Because Moreover, with the widening range of order to identify information exposure
crossover shopping will accelerate and omni- content available, the ways in which patterns. This resulted in the creation of
shoppers will become more common, existing people access information e.g., a profile of specific segments designed
e-tailers will be trying to enter the offline market, watching TV content through the to identify which promotions might be
and existing offline retailers will be trying to Internet is growing more diversified. effective for each audience.
develop their online business.
1. 2014 Communications Usage Trends Survey, Ministry of Internal Affairs and Communications

8 09
ASIA
ASIA

TREND-CHASERS
Gender age distribution n Male 48.3% n Female 51.6%

15.0 14.8
14.3

10.4
11.8
10.5
9.3

6.4
4.3
3.2
0.0

Age 10s 20s 30s 40s 50s 60s 10s 20s 30s 40s 50s 60s

Personality certain demographic and age groups. In to be authentic


People in this segment spend a lot Japan particularly, the older generation Items that stand out on the shelf
of time watching TV, often using are not as technology-illiterate as many Content marketing information
their smartphone at the same time. assume. This group moves most easily from
Easily influenced by mass media, the a television commercial to the
A look at the extent to which each trend-chasers view adapting to and Information / brands to which they manufacturer website or official

A look at the extent to which segment shops online and collects


online shopping information shows that
getting along with other people as very
important.
respond best
Brands and products seen in
social networking page

each segment shops online e-commerce shopping is particularly


prevalent in the Trend-Chasers and Brands and retailers should not make
magazines/commercials
Limited edition/out of stock products
Preferred medium
Out of home advertising
and collects online shopping Positive Individualists segments. assumptions about the behaviour of Brands and products claiming Facebook

information shows that Their profiles suggest that their attitudes

POSITIVE INDIVIDUALISTS
and behaviours are widely divergent:
e-commerce shopping is whereas one segment is easily

particularly prevalent in the


influenced by mass media, the other is
responsive to information that is highly Gender age distribution n Male 49.7% n Female 50.3%

Trend-Chasers and Positive individualistic. By identifying these


groups and what makes them tick, 16.0 16.8
Individualists segments retailers working online in Japan can
focus their marketing and advertising 12.5
accordingly.

11.8
10.3
Interview with Mayuko Suzuki, Intage Japan 9.1
7.4 7.3 6.1
2.5
How is the retail landscape thinking about hybridisation. At least retail too: Japan views its malls like 0.0 0.0
changing in Japan? one online retailer has a service where one-stop shops for everything you
Online has certainly developed and goods are delivered to a locker. They need; youll not only see a cash store, Age 10s 20s 30s 40s 50s 60s 10s 20s 30s 40s 50s 60s
effected a change in the landscape. then let the purchaser know which but also a hospital and nail care service
But, it is interesting that even though locker the parcel is in to go and pick up all in one place.
we have an online channel now, we still whenever they want to. Personality Information / brands to which they Preferred medium
have the same shopping frequency in Online were starting to see retailers For this group, expressing individuality respond best YouTube
offline channels compared to 20 years Where do you see the retail not only selling wine or liquor but is important. They enjoy finding and Brands and products that Curation apps
ago. landscape going in the near future? advising what kind of liquor or wine sharing information based on their own differentiate them from others Instagram
Actually, the innovation that were is recommended for you. Its this tastes, and actively interact with other Brands that express their
Is the future of retail more having is not just around the product, additional helpful human element that people. individuality/taste
convenient and accessible? but how a service is wrapped around is thriving in Japan. Brands that are talked about
Definitely. Even online retailers are it. There are hints of this in traditional Information and brands trending on
social media

10 11
EUROPE EUROPE

EUROPE:
A CONTINENT
DIVIDED
well here because it satisfied the same
WHY IT WORKS replenishment and stock-up shopping
OVER HERE, BUT mission as the hypermarket but adds
NOT OVER THERE the crucial element of convenience, with
no extra charge.
At an internet penetration rate
of 73.5%, the European region is Secondly, in France, Drive attracts
FRANCE
second only to North America in suburban families: while for the overall
terms of connectivity. Still, varying French population penetration is around
levels of FMCG e-commerce share 22%, it jumps to 50% for families with
across the continent remains a young children.
puzzle. The UK (6.9%) and France
(5.3%), for example, stand far ahead
of Germany (1.2%), despite their LESSONS
proximity both geographically and as By Frdric Valette, FROM FRANCE
three of the five largest economies in
the world.
Director of Retail Market-leading supermarket chain
Insights, France E.Leclerc has embraced Drive as a
In fact, this incongruity should key element of its channel strategy.
barely come as a surprise. Unlike As a notoriously individualistic culture The concept of hybridisation is
their Asian and Latin American and home to the hypermarket, France something that traditional retailers
counterparts, European countries would initially be seen as an unnatural will pursue, not merely as an
remain extraordinarily different from ground for e-commerce growth. But opportunity but in order to rein in
one another in terms of cultural in recent years the popularity of the their expenditure and maximise
values. Here our experts explore three unique Click-and-Drive model has their margins. Retailers simply cant
nations and how e-commerce is soared; now accounting for 5% of all afford to keep buying vans and
working to meet the diverse needs of FMCG value share and has grown by hiring drivers and pickers, its a very
each population. 20% in the last year. A drive-thru version expensive way to make money.
of click-and-collect, it allows shoppers

$69 online
to order online and then pick up their Supermarkets should try ideas
orders without having to leave their car. such as part-bagging, where staple
goods are packaged for consumers
So why is this model so peculiar to just before they arrive at a store, freeing
one country? While click-and-collect them up to shop for other more
certainly exists in other markets, peripheral items.
nowhere else is it the dominant format
for e-commerce sales. Anything that retailers can do to
get consumers to take part in the
Firstly, the French retail network is shopping experience rather than do
$32 in-store rooted in its own invention the it themselves is important for their
hypermarket which represents 50% continued success.
Average spend in France of all sales. The Drive model works so

Source: Kantar Worldpanel 2016


12 13
??? EUROPE

Chop Chop mobile app small basket


deliveries by bike within an hour.

ONLY
N
 ew entrants: AmazonFresh finally
launching in the UK, with two hour

6%
UNITED KINGDOM delivery to some parts of London.

N
 ew approaches: Tesco trialling lower
minimum spend (25) with success
By Ed Nash, Director but has now reverted back to 40 for

of Shopper and logistic reasons; Asda developing the


Drive (Click & Collect) model which
Retail, UK offers the retailer a margin somewhere
in between shopping in store and

of the population
E-commerce share of grocery in the home delivery; Morrisons teaming up
UK is the third-largest globally, which with Ocado to address logistics.

prefer to make in relative terms means that the UK is


fairly developed. Its growing fast too: Cracking the logistical challenge of

advanced the past few years have seen it grow


around 20% annually (although more
delivering groceries profitably is central
to the future growth of e-commerce
payments recently slowing to under 10%). groceries in the UK. If these issues are
successfully overcome then retailers can
This doesnt mean it is simple for turn their attention to the twin growth
online retailers to operate in this drivers of attracting more shoppers
channel effectively, or that the average to e-commerce, and increasing the
UK shopper sees it as a complete commitment of existing shoppers to the
replacement for more traditional routes channel.
to buying groceries.

Around a quarter of households have WAYS TO WIN


shopped online for groceries in the
latest year but not all of those are as
IN THE UK
committed as we might think. In fact, Improve the experience:
the majority of an online shoppers currently, only 13% of households
spend (around 75%) is still in bricks and use mobile devices for online grocery
mortar stores. shopping. Improving the online
WAYS TO WIN shopping experience in line with the
IN GERMANY Whats more, most retailers are
forced to impose minimum basket
development of devices and apps
alongside omnichannel strategies
Once payment on receipt rather sizes typically 40 as well as should increase this figure.
than on order is offered on a delivery charges in order to maintain
By Helen benefits of e-commerce greater broader scale, Germany will profitability. Current e-commerce Be convenient: new entrants into
Passingham- convenience, more information, lower
costs are already being met to a high
likely see an uptake in demand
for online grocery. Its existing
offers therefore can only serve potential
shoppers with their main shops, rather
the market including AmazonFresh
and subscription-based offers
Hughes, Managing standard. decentralised infrastructure lends than the significant number of smaller including HelloFresh, Etify, and Gusto
Director, Europanel Unlike France, Germany has a
itself well to both click and collect
and home delivery models and
trips that shoppers make in between. are all tapping into convenience and
top-up shops, thus addressing a
With only 1.2% value share, Germany well-established and distributed both will be driven by propositions This isnt new news to retailers: the race current gap in the market. Offering a
represents one of the rich laggards in decentralised power meaning that travel promising real utility (perhaps to change and improve logistics is hotter service is one thing, finding sufficient
GERMANY FMCG e-commerce standing out with time to stores is rarely a problem and broader assortment, better deals than ever. Its also no surprise that there consumers willing to pay the
the USA as a strong, technologically- accessibility to goods is high. or cheaper goods) rather than is a reasonable amount of anticipation inevitable premium is another hurdle
competent economy which emotion. of Amazons future in this space. Recent in the way.
paradoxically enjoys a comparably But it is the available payment developments include:
slow diffusion of new models for FMCG methods which really hinder Germanys Improvements in logistics should Be innovative: developments
distribution. e-commerce revolution. Most of the also aid the deployment of free, E
 xpanded offer: Amazon teaming up already seen across the Atlantic
population (94%) prefer to receive an next-day and same-day delivery with Morrisons to include private label will likely mark the future for
Why? Firstly, while the proponents invoice for goods or services rendered formats which will better suit the products in their product offer. e-commerce in the UK. Octocopters
of e-commerce assume that the rather than pay up-front; while Germans need for immediate delivering packages for Prime Air and
incumbent model is unfit for purpose, key online retailers operate almost transactions. C
 onvenience: Sainsburys trialling Instacarts personal shoppers.
Germans often find that the typical universally on advanced payments. same day delivery around London;

14 15
UNITED STATES OF AMERIC A UNITED STATES OF AMERIC A

USA: Interview with Bryan Gildenberg,

BEHIND
US
Head of Research at Kantar Retail

THE CURVE
Why has FMCG e-commerce In the UK, if you put down four poles:
not taken off in the States as one in central London, one somewhere
we might have thought? between Manchester and Liverpool,
When considering what enables a retail one in the northeast, and one in
The US has long been at the ecosystem to be successful, we break Scotland, youd probably get 80% of the
crux of the e-commerce puzzle it into three variables: connectivity purchasing power in the UK from about
of performance. Home to Silicon (can people access the system easily?), 100 kilometres of those four poles. Thats
Valley, Uber, Amazon and the city consumer (culture, income, geography) a good market for e-commerce because
that never sleeps, its staid efforts at and profitability (can anybody make you can very easily reach lots of people
moving grocery shopping online have any money doing this?). who are spending a lot of money. Thats
baffled onlookers. why e-commerce developed the way
Its also important to understand it did in the UK, where youve got a
Last year marked the painful end of the primary category holding back very strong home delivery component.
Tescos ill-fated American venture, value share. In the States, the share of That was the way everybody initially
Fresh & Easy. Most American non-food e-commerce in is relatively approached the problem because the
shoppers, especially those in consistent with other technology- assets you need to make e-commerce
car-dominated California, are connected markets. There are certainly work are small: anybody can go buy a
accustomed to grocery shopping selected grocery categories that have van.
on a considerably larger scale. The very relatively high e-commerce share,
company was also forced to expand like diapers for example. The way e-commerce developed in
quickly, and on unsatisfactory retail France is more indicative of how it may
sites, to try to meet the overheads of Geography evolve in the US. Frances geography
its large-scale infrastructure.
Bryan Gildenberg, Head of Research The population density of the US is
difficult for e-commerce because people
is a lot more like the States: a couple
of very big cities on opposite sides
Analysts pegged the poor uptake of atKantarRetail: in incredibly densely populated areas of the country; about 15 or 20 major
the small convenience retail model or very sparsely populated areas and population centres in the middle, and
on a tacit misunderstanding of youve got a number of population then a lot of empty space. Home
American values. Reports showed centres that are quite significant. delivery doesnt make any sense in
that US shoppers disliked Fresh &
Easys shrink-wrap food packaging
and its self-checkout system: alien
to a nation that prefers to reward
personal service. Pre-packaged
sandwiches went squarely against
the supermarket tradition of deli Frances geography is a lot
more like the States: a couple
counter dishes prepared to order
in-store where people prefer to ask
for precise measures of ingredients to
suit their taste. of very big cities on opposite
There are clear parallels here to the
sides of the country; about 15
lagging e-commerce market. The
high level of individuality ingrained
or 20 major population centres
deep in American culture makes it in the middle, and then a lot of
very difficult for businesses which
require the relinquishment of choice empty space
and autonomy on the part of the
shopper to succeed in the long term.

16 17
UNITED STATES OF AMERIC A UNITED STATES OF AMERIC A

Amazon is starting to be more


strategically focused on speed of
delivery in densely populated urban
areas. AmazonFresh is obviously a big
part of that on the food side, but theyve
also been leaning forward on their Prime
Now service where, for a select number
of items, two-hour delivery is free.

Amazon is beginning to reset peoples


expectations on how long something
should take when you order it online,
and that real-time delivery capability
is one that a number of retailers are
either going to have to replicate or,

When you ask people in all likelihood, outsource to people


that already have efficient last mile
under 35 what a distribution models in place.

stress-free shopping What are the models most


likely to succeed in the
experience is, two-thirds United States?
The most successful e-commerce
of them will describe it models in the States are those that

as a digital experience were built-for-purpose. Firstly, Im


confident that Amazon will figure out
AmazonFresh, particularly in the context
of Prime Now. Theyre too smart and
spending too much money not to.

Secondly, Walmart will continue to


be in a position to provide the many
Americans who earn well below the
France for a variety of reasons, and I think the biggest reason why most Amazon that the idea of being able as possible poll very highly. Theres a two-thirds of them will describe it as a average salary with help to spend as
thats probably one. French retailers Americans werent buying food online is to buy your groceries on the web is very strong value-centric notion to a lot digital experience. For older shoppers, little money as possible on everyday
found a way to create built-for-purpose that the retailer that they bought food very foreign. The US is the only market of how Americans buy food. They are its inverted: two-thirds physical versus needs. We have many positive attributes
facilities that drove e-commerce while from didnt offer it, and most Americans in the world in which Amazon first used to an environment in which price one-third digital. For the boomers, its as a nation but the ability to spread
meeting the needs of that geography. are creatures of habit. The reality is that introduced e-commerce to people. In is a really big driver of deciding where probably about a 50-50 split. prosperity is not one of them. Indeed
a lot of Americans still buy their food many European markets, it was largely theyre going to get products. The cost from an income distribution point-of-
Fragmentation of retail from companies that just simply dont food retailers. In China, it was the of delivery associated with e-commerce Today, the problem of last mile view, the US is better aligned with China
landscape have that capital to go out and build a marketplaces like Alibaba and JD.com. doesnt fit. economics is being solved by businesses than France.
Because the US is so much bigger than robust e-commerce infrastructure. that have nothing to do with retail.
France, all of the retailers that sell food What do you think the retail Interestingly, over the last couple of Walmart last month started testing Lastly the Instacart model owning
within those different geographies, Non-food-centric landscape will look like in years, the third variable I want to home delivery with Uber in Phoenix no produce itself, rather acting as the
except for Walmart and Kroger, are approach to retail 2025? have a stress-free shopping experience and Lyft in Denver. You go online, pay e-commerce engine for retail partners
fairly local businesses. The food industry Lastly, a key barrier is simply the very When you ask American shoppers why has become almost as important to the normal delivery charge with your is likely to be very successful in meeting
in the US is still driven largely by regional nature of how e-commerce has grown they pick the retail outlets they do, American shoppers as the first two. groceries, and then Walmart pays the needs of high-end spenders; willing
supermarket chains and by Walmart up in the States: shoppers expectations I want to feel like I got a good deal When you ask people under 35 what Uber. This has the potential to start to and able to pay a premium for the food
and then by Kroger. of e-commerce is so defined by and I want to save as much money a stress-free shopping experience is, accelerate the growth of e-commerce. they want, delivered to their door.

18 19
L ATIN AMERIC A L ATIN AMERIC A

CULTURAL BARRIERS TO
E-COMMERCE ADOPTION
By Cecilia Alva, Client Business
Development Director, Latin America
For the majority of Latin America, One issue faced across the entire Latin
e-commerce is lagging far behind American market is a lack of trust in
LATIN AMERICA traditional methods of shopping, with e-commerce. This firstly lies in payment
the exception of Argentina where it is methods where shoppers dont feel safe
exceeding usage compared to the rest sharing their credit card details and
of the region. data online. Secondly, there is the lack
of trust when purchasing fresh FMCG
This Argentinean anomaly provides a items. This is even seen in regular online
guiding light for online retailers trying shoppers, they tend to avoid buying
At first glance, it might be easy to succeed in Latin America. Compared fresh meat, fruit and dairy through
to dismiss the lagging growth to those countries which are not e-commerce, favouring those items less
of FMCG e-commerce as a seeing notable growth in e-commerce, likely to expire.
mere symptom of the regions Argentinas main customers are seniors
comparatively poor connectivity. and small families looking for the Another barrier for e-commerce in Latin
convenience of getting regular trolley America is that shoppers perceive online
Nicaragua and Guatemala, for items, delivered to their front door. to be more expensive than traditional
example, report a woeful 27.1% and Other countries have a much younger bricks and mortar stores. Both these
31.5% penetration respectively, audience and do not reach these other obstacles for retailers can be combated
far below the global average of demographics. by educating shoppers to help them
49.7%2. overcome these concerns.
The lesson to be learnt here is that other
But Latin America as a whole territories in Latin American need to Research from Kantar Worldpanel
succeeds the Middle East, Asia, expand their shopper base by attracting confirms how this negatively affects the
and Africa in the proportion of its and then recruiting new consumers. very premise of e-commerce more than
population using the internet. More That said, Argentina needs to catch the other regions. It explores confidence
developed markets like Argentina, attention of the younger shopper to issues related to this unwillingness to
Chile and Brazil boast more continue to see growth. change, and how brands and retailers

LATIN AMERICA:
internet users per capita than Italy, can overcome them.
Turkey or even China.

So, with 55.9% of the population For the majority of Latin America,

CONNECTED BUT
online, why is e-commerce and
specifically FMCG e-commerce e-commerce is lagging far behind
traditional methods of shopping, with
still in such an embryonic stage?
Generating just $345 million each

CONVENTIONAL
year, it accounts for only 0.2% of
the total FMCG market value. The the exception of Argentina where it is
appeal of online grocery shopping
to Latin American shoppers is
exceeding usage compared to the rest
unarguably extremely low. of the region
2
www.internetlivestats.com

20 21
L ATIN AMERIC A

WAYS TO WIN IN LATIN AMERICA

1. 3.
Encourage Emulate
incremental change offline customer
Routes to success: a Familiarity is the key to success service
customers perspective in Latin America. Retailers should The proliferation and development
Research from Kantar Worldpanel begin introducing technology into of smart devices has created a world
asked shoppers across Argentina, stores such as cashless payments and of opportunity in which retailers
Bolivia, Brazil, Chile, Colombia, Ecuador, easy-to-use interfaces where customers and brands can retain a service
Mexico, Peru and Venezuela what can compare products and pricing. relationship with their customers
was stopping them from purchasing Store-to-door delivery would be a outside the store. Our data shows
online. The answers were unsurprising: preferable model in this stage of the the act of using the internet to
Latin Americans simply prefer the market. Customers have all the benefit search for information is a good
conventional shopping experience, they of home delivery while minimising the indicator of their propensity to buy.
like to see produce, touch it and be uncertainty created by a long time
advised by salespeople they trust. distance between payment and true Service personnel should use their
ownership. advisory role, prized among Latin

2.
The road to a thriving market for FMCG American shoppers, to recommend
e-commerce across Latin America is Guarantee value websites and apps which can help
undoubtedly strewn with deep-rooted Wanting to see and touch the shopper navigate the online
barriers. But, it is not without its produce is top on the list resources available.

4.
proponents. The majority of shoppers of many consumers reasons for not
recognise the benefits of shopping shopping online, but it scratches the Ignite advocacy:
online: in Mexico, 58% actually enjoy surface of a much larger issue: quality online shopping
the process of ordering from home. In of goods. This has been overcome as a social norm
Colombia, over half of those we spoke
with admitted the channel was effective 72% 47% in other more developed markets by
promising, even guaranteeing, that only
Countries in Latin America invariably
have a collectivist culture; that is to
at avoiding long lines at the checkout the best quality goods will be chosen. say, there is a high reliance on and
and saved time. loyalty to their community. The
Models through which the customer most powerful marketing tool,
Four-fifths of shoppers in Brazil pays on delivery would not only better therefore, is advocacy. Brands and
appreciate that e-commerce enables 30% emulate the traditional door-to-door retailers should provide the tools
them to shop at any time. Over half of trade understood by Latin American needed to encourage e-commerce
Peruvians declared a value in accessing
exclusive online promotions and over
63% consumers but would also cede them
greater control, allowing them to refuse
shoppers to recommend the
service to their peers, reducing the
two-thirds of Argentineans think home purchase of products deemed to be not perceived risks with which it is often
delivery is the biggest benefit offered by up to standard. associated.
e-commerce. 70%
These advantages have been well
communicated by retailers and brands Almost half of Generation X finds sharing the focus remained purely commercial
alike. Consumers understand them their personal information too much a and value-oriented. Exclusive online
clearly, but their cultural tendency risk. The Boomers (over-50s) simply do promotions came top, with 48% quoting
toward loss aversion means that the not have access to the internet, and it as a reason they or their fellow
messages are often not strong enough n In the store I can see and take even if they do have little or no idea shoppers would shop more online.
to outweigh the risks. In short, to the product at the same time how to use it.
succeed, retailers and brands must n I would rather buy something The second and third most suggested
either heighten the end-value of these for my house at the store Even among the 15% who have made improvements relate to delivery: speed
benefits or significantly lower the n In the store the salesperson online purchases in other sectors, the and cost respectively. This correlates
barriers preventing shoppers from can answer my questions phrase most used to describe why this well to the main benefit of traditional
enjoying them. n The stores offer more behaviour had not extended into FMCG shopping: being able to order an
promotions was a simple: I am not used to it. item and take it home immediately.
For many, a lack of knowledge fuels n I do not trust giving my By shortening the time between the
their uncertainty and suspicion. Even personal information Our research asked shoppers what would point of purchase and the moment
Millennials shy away from FMCG need to happen in order to increase of delivery, consumers would not only
e-commerce, with 76% reporting that Source: Kantar Worldpanel 2016 online purchases in FMCG. Interestingly, reduce uncertainty anxiety but also
they like to see a product before making having previously cited a lack of trust retain the impulsive reward-based
a commitment to purchase. In older and physical contact as barriers to entry, enjoyment of shopping in general; a
generations, this uncertainty grows into their recommendations did not include characteristic much more prevalent in
mistrust. either as items for improvement. Instead, the Latin American culture.

22 23
WORLD OF OPPORTUNIT Y WORLD OF OPPORTUNIT Y

BRAND MASTERCLASS
HOW BRANDS AND
RETAILERS ARE DRIVING In China as beauty products represent
By creating innovative ideas and
listening to the culture of the
Adding something extra
Online shopping can feel like a

ONLINE SALES
50% of all e-commerce purchases market they are aiming at, the gamble for many consumers, with
in FMCG, we do not see this risk of below brands are establishing a the potential to fail to live up to
cannibalisation yet. Online purchase is strong e-commerce market on a expectations in real life.
still a premium or prestige occasion and global scale.
a greater tool to connect with brands To combat this, LOral launched
The issue of cannibalisation AVERAGE MARKET SHARE OF ONLINE that are not available offline. Driving sales through a MakeUp Genius app which
Brands and retailers the world over are AMONG SHOPPERS WHO USE THE CHANNEL communications has now been downloaded over 6
having to invent new ways to engage Once shoppers have begun shopping Some brands have found success million times allowing shoppers to
with shoppers online. With the risk of 25 online they are more likely to continue by pairing social media marketing virtually try on makeup, swapping
cannibalisation of bricks and mortar doing so. Among this group in the UK, directly with e-commerce to drive out colours and shades all while
stores, its vital for them to offer for example, almost a quarter (23.3%) frictionless sales. Last year, Coca- teaching you how to better apply
20
something new and exciting to drive of all spend is through e-commerce, Cola launched Freestyler in the UK. the products.
them to this channel, without losing resulting in fewer trips to physical stores. The app allows users to create a
interest in physical channels. 15 cocktail of 100 Coca-Cola brands, Accelerating the new
n Korea Online has proven to be fertile ground including Lilt and Dr Pepper. Recipes product development
Comparative research we conducted 10 n UK for brands. Kantar Worldpanel data can be saved and taken to places process
across the UK, France and China n China shows that the share of the market for with a Freestyle machine, where In China, many players have
showed that after one year of branded goods is on average much they simply scan a QR code to get started to launch their innovations
5 n France
e-commerce adoption, British and higher online than it is in store. For their personalised beverage. Users exclusively in Tmall stores to capture
n Spain example, in Spain brands have a 75%
French shoppers spent less overall. This can also share their favourite mixes the lucrative early bird sector,
is partly because online still fails to 0 n Japan share of market online compared to with other users and friends over create the vibe through digital
generate impulse purchases: 55% of 2013 2014 2015 64% offline. social media. The concept has also campaigns as well as executing a
shoppers re-use the same shopping list been launched in the US, where the very pragmatic test and learning
for the next purchase. app has 1.1 million downloads. process that is useful to fine-tune
Source: Kantar Worldpanel 2016
the marketing mix when launching
Creating a frictionless in other markets or channels.
PERCENTAGE EVOLUTION OF ONLINE PLUS OFFLINE SPEND 2015 VS 2016 product experience
The possibilities afforded to brands Protecting your offline
by the much-touted Internet of sales
CHINA FRANCE UK Things are already being realised. Brands need to find ways to make
Nestl has recently introduced a online an additional way to sell
Nespresso coffee machine, Prodigio, products, not cannibalise their
ALL SHOPPERS +5.4% +0.7% +0.3% that connects to an app on a
consumers phone via Bluetooth.
in-store activity. Offering products
exclusively through certain channels
Prodigio keeps count of how many is a popular move.
capsules used, the app knows how
many have been ordered. P&G China sells lines specific to
Alibabas Tmall while in Japan,
ONLINE
+5.9% +0.6% +0.8%
The app then alerts the consumer Nestl has launched the first ever
ADOPTORS 2016 when they are running low and Kit Kat made with toppings on
offers a one-touch re-order button. it individually packaged in a
The technology blurs the digital with customised box which is available
the physical, providing a seamless only in Kit Kat Chocolatory shops
journey from consumption to in Tokyo or through the LOHACO
ONLINE delivery. online store.
REPEATERS +8.1% -1.4% -2.4%
2015 AND 2016

Source: Kantar Worldpanel 2016

24
25
WORLD OF OPPORTUNIT Y WORLD OF OPPORTUNIT Y

RETAIL MASTERCLASS
The loyalty of online While the cannibalisation of offline sales
makes for a potentially damaging entry into
Shoppers could select products directly from
posts about its Story on a Plate campaign and
shoppers is greater e-commerce for retailers, they cannot afford to head straight to the checkout.
ignore it. Our insight shows there to be a huge
than the average first-mover advantage and, with pure-play tech Reclaim the shelf appeal
offline shopper. companies like Amazon opening in markets
across the world, securing a shopper base early is
In an effort to close the gap between how
people actually shop for FMCG and the existing

Customers spent three crucial to survival. mobile commerce platforms, augmented


reality platform, Grability, launched in 2013. It
times more per trip Online offers many opportunities to grow. There
is growing evidence, for example, that the loyalty
mimics shopping habits in a digital environment,
bringing the experience of actually going to a
online than offline. In of online shoppers to store is greater than that
of the average offline shopper. Whats more,
physical store, seeing a product, wrapping it up
and putting it into a basket.
Spain, the average customers spend three times more per trip online
than they do offline. And when comparing online
spend online is $42 spend to big formats in physical stores, there is

compared to $14 in-


still a considerable gap. In Spain, the average
spend per supermarket trip is $14 compared to

store $42 online.

Remembering what people want from


purchasing their everyday goods convenience,
value, time-saving retailers need to configure
their whole offer across all channels and come up
with an approach to how they service customers
which works.

Understand shopping missions


Certain categories naturally play well to
convenience and time-saving needs. Bulky items
which are difficult to carry toilet tissue, nappies Amazon: same day delivery
and bottled water, for example cede a lot of to door
value share to e-commerce. In the last year, Amazon has introduced
several innovations, the most prominent being
This is easily explained in consideration of the AmazonFresh, its grocery delivery service.
underlying shopper missions which tend to be Customers can use the service to shop for fresh
much more specific online and in France, USA groceries online, like dairy, meat and fresh fruits
and the UK especially are heavily driven by the and vegetables, as well as prepared meals,
need to stock up the store cupboard, and are health and beauty products, pet supplies, baby
hence a bigger trip. products, and other household goods. There
were over 95,000 different items available at
Think differently about impulse launch, which can be delivered on the same day
purchases if the orders are placed by 10am or next day if
Our data shows that impulse purchases in the ordered later. The service has now been launched
traditional sense buying extra products during in London and major cities across the US.
an unplanned shopping mission considerably
wane when customers move online. But with Alibaba: larger selection,
the proliferation of mobile, an impulse purchase branded stores
no longer has to take place when someone Alibaba has increased the number of
is already shopping. Now, consumers can be international brands on its Tmall platform over
persuaded to buy anytime, anywhere. the past year. The e-tail giant has worked with
manufacturers Unilever and Mondelez, as well as
Last year, Birds Eye used the e-commerce tool supermarkets like Sainsburys, expanding product
Slingshot to allow British fans to add items to lines from across the globe. Instead of appearing
online baskets at Tesco, Sainsburys, Waitrose alongside other manufacturers brands, each
and Ocado with one click on a Facebook ad. partner has its own online shop within a shop.

26 27
THE FUTURE OF E-COMMERCE THE FUTURE OF E-COMMERCE

IN 2025 FMCG ONLINE WILL BE A USD


2025 FORECAST 150BN BUSINESS FROM 4% TO 9% SHARE
Stphane Roger, Global Director of Shopper and Retail
Paul Murphy, Global Director of Data Science 15 12
25
The future of retail is somewhat Greater convenience through apps on their phones.
challenging, as the population grows The quest for more convenience, Augmented reality brings the much
and the sales of FMCG/CPG slow. to make FMCG shopping easier for needed human element to the digital
However, this oncoming storm could increasingly time-poor consumers, will world, allowing those more sceptical
provide the perfect opportunity for continue. For the e-commerce channel, cultures to have better control of their
e-commerce to thrive. By looking getting the delivery right will also be shopping experience.
forward and predicting the needs of more important than ever in terms
consumers, as well as tackling the of both speed and the price. We can The Internet of Things
issues found in todays market, such already see from our data that in the Surely the Holy Grail for the technophile
as cannibalisation of offline and a most developed e-commerce market, retail marketer is the cupboard that
decrease of impulse shopping online, South Korea, fast and free delivery is a talks directly to an online retailer and
SOUTH KOREA $7BN CHINA $36BN UK $14BN
e-commerce retailers can build a bright key factor and we will see this continue orders your food, in effect cutting out
future. to grow in other parts of the world. the middle man. The much-talked-
about but still nascent Internet of
Digital has blown the doors open on A payment revolution Things is making its mark but is far from 11 8 6
new ways for brands and retailers to Improvements to, and development of, becoming mass market.
reach consumers, offering a plethora payments must also be a consideration
of channels to market; from social for retailers and brands looking to A recent piece of research in the UK
commerce allowing consumers to buy forge further ahead into e-commerce. by Salmon, the digital e-commerce
direct through a businesss social media Anything that makes it easier to pay experts, into what they term
page, to the much-touted (but, so far, for your e-commerce delivery will be programmatic commerce, has found
little-utilised) Internet of Things, from welcome. We can already see this in that 57% of consumers will be ready for
augmented reality that lets consumers smartphone payments and apps like Ali automated purchasing within the next
use their smartphone to overlay their Pay or Apple Pay which allow shoppers two years, and they will be most keen to
living room with prospective new buys, the convenience of not even needing purchase FMCG goods.
to hybridisation. a wallet to pay in stores. Making the
process quicker and more streamlined is Online forecast FRANCE $11BN TAIWAN $1BN USA $50BN
Here are our predictions for the a must. In Latin America and Germany Our projections show that, in 2025,
future that todays retailers should for example, paying on delivery and in online FMCG will be a $150bn industry,
be preparing for: cash would make a big difference in the grown from 4% value share today to 5 4 3
attractiveness of e-commerce shopping. 9% globally. South Korea and China will
New shoppers continue to lead the way and Asia in
As of the end of 2015, more than Seamless shopping experiences general remains at the cutting edge of
4 billion people were still not connected The blend of online and offline makes online adoption.
to the internet, and 10% of the worlds for an exciting playground. How can
population was living outside the range e-commerce retailers make shopping Interestingly, while it took between 10
of cellular connectivity. As connectivity more real, and bricks and mortar and 15 years to build 5% e-commerce
improves, a new group of consumers will store more interactive? The use of value share in France and 7% in the UK,
be available to shop online for the first augmented reality is allowing shoppers with the benefit of better knowledge
time, most likely on mobile. to try before they buy, or shop for and clearer business models, the USA
groceries in a virtual supermarket, and Latin America are likely to catch up
much faster. NETHERLANDS $1.3BN GERMANY $6BN LATAM $4.5BN

28 29
CONCLUSION

STREAMED SHOPPING,
THE FUTURE OF FMCG? ABOUT US
Luis Simoes, Global Chief Strategy Officer
For more information, please contact About Kantar Worldpanel
Though very impressive, the rise of the Manufacturers need to add new performance
e-commerce channel is not adding revenue to indicators such as presence in the shopping list Stphane Roger, Kantar Worldpanel is the global expert in
the FMCG sector as a whole. Indeed, the impact and visibility on screen, but the development of Global Shopper and Retail Director shoppers behaviour.
is often quite the opposite as deal hunting digital shopping and delivery platforms offers stephane.roger@kantarworldpanel.com
becomes easier and shopping lists limit impulse them an opportunity to cut the middleman and +34 93 581 96 62 Through continuous monitoring, advanced
purchases. own the relationship with shoppers. Here also, analytics and tailored solutions, Kantar
there is more competition to expect from new Or to find a local contact please see Worldpanel inspires successful decisions by
What the development of FMCG e-commerce brands whose cost of entry has dropped as they www.kantarworldpanel.com brand owners, retailers, market analysts and
does mean though is that an unprecedented can either go direct or use online marketplaces. government organisations globally. With over
shake-up and redefinition is taking place in The findings in this report are based on 60 years experience, a team of 3,500, and
the industry. The cards get thrown up into For now, shoppers clearly benefit from tracking the purchase of more than 500,000 services covering 60 countries directly or through
the air, with traditional players being offered this growing rivalry as it puts pressure on shoppers in key countries spanning three partners, Kantar Worldpanel turns purchase
opportunities to better or transform. This results price, increases their options and improves continents. All of the data is correct as of June behaviour into competitive advantage in markets
in the most complex, competitive, unpredictable convenience dramatically. Not only do we 2016 and annual increases are the 12 months as diverse as FMCG, impulse products, fashion,
and interesting era in the industry yet. see greater competition among more players leading up to this date. baby, telecommunications and entertainment,
but, more importantly, a blurring of purposes among many others.
Bricks and mortar retailers have the most appear between them: traditional retailers go We monitor every purchase via every channel
contradictory task: investing in online online, pure players consider developing stores on a continuous basis. This means we can
development, all the while knowing it will and manufacturers become also retailers. We understand online dynamics and its impacts
cannibalise their in-store sales rendering them can also foresee payment giants and media on offline business. We also identify ways to
less profitable. Their challenge is to combine their owners joining the party where media and retail drive revenue by showcasing best-in-class
online presence with their physical stores and converge to deliver a seamless and integrated performance from a brand or retailer
a unique understanding of shopper behaviour. path to purchase. Only time will tell how many perspective from around the world.
They also need to redesign their relationship with players actually survive this battlefield.
manufacturers and brands, which are both eager
to go direct to shoppers. Eventually, with the growing ubiquity of
connected technology in our homes, I can
Pure players are the new kids on the block and anticipate a world of fulfilment without shopping,
they have little to lose: born digital, they can where my things are able to precisely order
focus on attracting shoppers and delivering what I need, where replenishment is delivered
quickly. Until they need to make a profit which conveniently, where grocery becomes a service I
might prove more complex these agile players subscribe to and forget about. Our data partners
are disrupting all sectors and challenging the
incumbents. Much the way streaming is the new experience
of music, isnt the future of shopping actually not
shopping at all?

30 31
www.kantarworldpanel.com

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