Retail & Consumer Market Insights

Quarter 1, 2018

When it comes to consumer purchasing, the retail store still reigns supreme. However, consumers are increasingly using mobile to shop. Social media influencers are used by consumers to keep up to date with new products however, the use of AI tools such as chatbots and voice assistants is still in its infancy.

Despite a challenging festive season for retailers, confidence remains high with expectations for above trend economic growth in coming quarters.

In the last quarter of 2017, when shoppers were asked about their Christmas shopping intentions, we found that 72 per cent of shoppers expected to spend the same or more in the 2017 Christmas period compared to previous years. This expectation was highest among millennial shoppers (18-35 year olds), with 80 per cent anticipating to spend the same or more on their Christmas shopping.

We checked back in with these shoppers and found this expectation largely held true, with 71 per cent of shoppers spending the same or more for the 2017 Christmas period than they did in 2016. 77 per cent spent the same or more in the age bracket 18-24, and 74 per cent spent the same or more in the age bracket 25-34.

EFTPOS continued to be the preferred payment option, with 58 per cent of respondents using EFTPOS ‘always’ or ‘most of the time’, and 51 per cent of consumers reaching for cash ‘always’ or ‘most of the time’.  We are seeing online payment systems such as Paypal and Alipay gaining popularity as the market becomes more familiar with these payment platforms however, there is still some way to go before alternative technologies such as mobile payments and cryptocurrencies become a frequently utilised settlement method.

“Both locally and globally debit card transactions are on the rise and ‘Buy Now Pay Later’ options like Afterpay act as a facilitator for debit transactions. Afterpay enables customers to purchase items without needing to extend themselves and spend on credit. Over 85% of Afterpay purchases are made via debit card and this only shows signs of growing. In the future I would anticipate the popularity of Buy Now Pay later services to increase dramatically for online and a switch from the layby percentage to Buy Now Pay Later in-store.”

“Whilst convenience may not be the most notable barrier, any product or service that saves customers time and money will always be a preferred option. Usability is a key differentiator.”

Laura Yeomans - Afterpay

What does this mean for retailers?

Whilst technology is being embraced with regards to payment options, bricks and mortar stores still reign supreme, accounting for 71 per cent of Christmas gift purchases made in 2017.  PwC’s recent Global Consumer Insights Survey notes that in 2014, only 36 per cent of respondents say they shopped at bricks-and-mortar stores at least weekly. But since then, there have been increases in physical store shoppers from 40 per cent in 2015 and 41 per cent in 2016 to 44 per cent in this year’s survey.  Retailers have been working hard to attract shoppers to stores. For example, Lululemon, an athletic apparel retailer, offers yoga classes and Nordstrom is trying out wine bars to attract affluent shoppers. Retailers are using flagship stores to create excitement and exclusivity for their customers - keeping them in-store longer and ultimately increasing their spend.

Also noted in PwC’s recent Global Consumer Insights Survey, is the fact that mobile shopping has increased every year and will likely surpass purchases made by PC in the near future.  Purchases made by personal computer (PC) fell from 27 per cent to 20 per cent in the last six years, while purchases made by mobile devices has more than doubled (7 per cent to 17 per cent). Our insights also indicate that consumers are also more likely to shop and spend more with a retailer if they offer mobile payment solutions. 46 per cent of respondents say mobile payment is their preferred method when purchasing in-store, 47 per cent say they are more likely to shop with a retailer who offers mobile payment, and 42 per cent say they are more likely spend more when using mobile payment.

Retailers have long been advised to optimise web platforms and invest in streamlining their online shopping experience and in particular, the integration of this into their mainstream retail options.  Black Friday reaffirmed this need; sales for 2017 were up 112 per cent from 2016, with mobile shopping providing the highest amount of traffic and numbers of orders placed. Mobile enabled is now the dominant force for Black Friday, the second highest revenue day in the shopping season.

The trend towards mobile enabled shopping is largely being driven by millennials, and is expected to continue to grow as the ‘connected generation’ begin to account for an even larger proportion of retail spend in the next 5-10 years.  These consumers have grown up in a fragmented media age and have an average of 10 devices in their homes, sourcing their news and information from a variety of places. Youtube is now the most popular source of news for 18-34 year olds, with 83 per cent of this category turning to Youtube, over established TV channels, for their news on a daily basis.

As a result, brands must be visible in a variety of spaces, which includes not only optimising web platforms but, increasingly, moving into the ‘chatbot’ and AI space and investing in emerging technologies to reach these consumers in more imaginative ways.

The 2017 Christmas season saw just over half of consumers (51 per cent) turning to innovative retail technology, including ‘Click-and-Collect’ and ‘buy now, pay later’ options.  The growth in these technology options combined with the competitive forces expected with the entry of Amazon to the Australian market is set to drive even further competition in how Australian retailers innovate and compete for consumer spending.

In Quarter 1 of 2018, 74 per cent of consumers (cross demographics, not just millennials) confirmed they follow social media influencers (e.g. celebrities, brand ambassadors) as part of their regular retail experience. Facebook, Youtube and Instagram were the most popular platforms for these interactions.

For shoppers who follow social media influencers, the most common effect they have is an introduction or encouragement to try new products and brands (51 per cent), as well as ‘keeping up to date’ (24 per cent) and ‘inspiring me in some way’ (22 per cent).  Retailers are increasingly looking to engage social media influencers in order to connect with millennial consumers.

 

“All social is not created equal, retailers need to select the medium most appropriate for their consumer. For example, Instagram is huge for Fashion - whereas YouTube is providing much greater traction in beauty.”

“The use of social media influencers needs to be part of a broader strategy - they cannot work effectively on their own. Think of them as the top of the funnel for acquisition / awareness.”

Lana Hopkins - Managing Director, CO-CEO & Founder of Mon Purse
Late in 2016, we saw Facebook Messenger open up its messenger platform to allow businesses to build their own ‘chatbots’ as an alternative to developing standalone app solutions.  This opportunity was seen as a positive innovation given the known decline in recent years in the use of retailer specific mobile apps.

These ‘chatbots’ enable retailers to interact with consumers in a more personal, proactive, and streamlined way by understanding natural language entered into messenger and automating initial interactions with consumers to respond in a fast and effective manner. This is particularly key with the introduction of Amazon to the Australian market.  These automated interactions can resolve queries or elevate them to human responders, and are a key way that millennials can ‘do their homework’ on a brand, encouraging brand recognition and ultimately leading to sales.

These ‘chatbots’ have the potential to sit at the intersection between more mobile enabled users wanting to research and review products online and the inability of mobile based retailer apps to satisfy consumers requirements.  Additionally, they will enable more mobile minded consumers to look through different brands on one common platform.

Facebook Messenger is just one example. Chatbots are increasing their reach into consumers homes and lives through voice assistants on mobile phones and smart speakers offerings from Amazon, Google, and Apple.  Widespread adoption of chatbots is still largely in its infancy, with just over 1 in 5 shoppers surveyed currently using chatbots and voice assisted software, predominantly to find information rather than complete a purchase. There remains a huge potential to reach and engage the next powerhouse of the Australian Retail environment, the millennial, connected, consumer. 


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Contact us

Donna Watt

National Retail & Consumer Leader, PwC Australia

Tel: 613 8603 3136

Daniel Rosenberg

Retail & Consumer Leader, Financial Advisory, PwC Australia

Tel: +61 3 8603 3886

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