Digital Consumers, Emerging Markets, and the $4 Trillion Future
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The value of digitally influenced spending in emerging markets will approach $4 trillion by 2022, amounting to about 50% of all retail spending in Asia, Latin America, and Africa. But the dynamics will vary widely between markets, requiring B2C companies to “de-average” their offerings in order to succeed.
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Digital Consumers, Emerging Markets, and the $4 Trillion Future
- 1. 0 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. Exhibit 1: Emerging Markets’ Use of Digital Is Booming 19 82 0 2017 56 2010 69 39 2017 27 9 2013 Sources: Forrester, Economist Intelligence Unit, Internet World Stats, International Telecommunications Union, World Bank and Oxford Economics; BCG analysis. Note: The emerging markets used for these analyses include Algeria, Angola, Brazil, China, Egypt, India, Indonesia, Kenya, Malaysia, Morocco, Myanmar, Nigeria, Philippines, Russia, South Africa, Thailand, Turkey and Vietnam. The Internet penetration data uses all 18 of these countries, smartphone penetration uses 13 of them, and mobile data tariffs uses nine of them. 50 23 22 44 Highest country Average country Lowest country Internet penetration Smartphone penetration Mobile data tariffs Internet users as a percentage of population Smartphone users as a percentage of population Cost of 1 gigabyte of data as a percentage of gross national income 0.11 1.03 2013 0.49 2017 0.03 Highest country Average country Lowest country Highest country Lowest country
- 2. 1 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. Exhibit 2: Digital's Influence on Emerging Market Retail is Expanding 8.3 5.4 3.9 1.8 0.8 0.2 1.7 0.5 2022F2012 2017 4.1 Sources: Forrester, Euromonitor, eMarketer, Economist Intelligence Unit, BCG Emerging Market digital survey 2018, BCG Center for Customer Insight surveys (2017-18); BCG analysis. Note: Digitally influenced expenditures reflect the dollar value of retail purchases that consumers make with the help of information they collect on the Internet. The figures here are for nine emerging markets: Brazil, China, India, Indonesia, Kenya, Morocco, Nigeria, Philippines, and South Africa. Respondents were asked about their activities in 15 product categories. Retail spending (USD tn) E-retail Digitally influenced Total 12% 5%% of total retail spending 33% 15% 47% 20%
- 3. 2 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. Share of total retail spending in 2017 (%) Digitally aware Digitally advancing Digitally evolved Indonesia 3.1 India 4.1 Brazil 5.0 South Africa 1.0 Philippines 1.2 Stage of digital maturity Digitally influenced E-retail 12.0 14.0 35.0 39.0 5.0 7.0 China 20.0 France 11.0 Germany 10.5 US 12.7 UK 15.7 Kenya 0.6 Morocco 0.8 3.02.4 Nigeria 0.3 4.8 Source: Forrester, eMarketer, Euromonitor; BCG analysis. Note: Digitally influenced expenditures refers to the percentage of all retail purchases that consumers make with the help of information they collect on the Internet. Exhibit 3: Countries Lie Along Three Different Stages of Digital Evolution
- 4. 3 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. Exhibit 4: How Product Categories Fare at Different Stages of Evolution Digitally aware Digitally advancing Digitally evolved 0 40 80 40 60 1008060 20 20 % Online shoppers % Digitally influenced shoppers Air travel PC, Laptop, Tablet Holiday booking Beauty products/CosmeticsFresh food Large appliances Cars Clothing FootwearSmall appliances Other food Home/personal/hair care Baby care products Mobile phone Loan and Insurance Air travel Fresh Food 20 80 60 40 0 80604020 100 % Online shoppers % Digitally influenced shoppers Mobile Footwear 0 100 60 40 20 80 8040 6020 % Online shoppers % Digitally influenced shoppers Air travel PC/ Tablet Fresh Food Clothing Source: BCG Emerging Market digital survey 2018; BCG Center for Customer Insight surveys (2017-18); BCG analysis. Note: Vertical axis shows the percentage of emerging market users who have made an online purchase in the category at least once. Horizontal axis shows the percentage of emerging market users who gather information from the Internet when they’re making a purchase in the category. Fresh food Air travel Clothing Footwear Cars CarsCars Holiday Booking Clothing PC/Tablet Large Appliances Large Appliances Mobile Loan & Insurance Mobile
- 5. 4 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. Exhibit 5: How Consumer Attitudes Evolve at Different Stages of Maturity Source: BCG Emerging Market digital survey 2018, BCG Center for Customer Insights surveys (2017-18); BCG analysis. Notes: 1. % of digitally influenced shoppers who use each type of online platform to get information 2. % of online shoppers who select each benefit as the reason for shopping online versus in-store 3. % of online shoppers who select each reason as the basis for choosing an e-commerce website or app 4. % of online shoppers who prefer each type of e-commerce format 5. % of online shoppers who prefer each mode of payment 6. % of total shoppers who engage in each online post-purchase activity Respondents had the option of selecting multiple answers. What influences them online?1 Why do they buy online?2 What distinguish es a website?3 Pre- purchase Purchase Which platforms do consumers prefer?4 How do they pay?5 What do they do after buying?6 Post- Purchase Digitally Advancing Digitally Evolved Digitally Aware Online shopping websites Social media/ Chats Search engines Price Convenience Variety Price Variety Shopping experience Online marketplace or retail platform Social media Brand websites Cash on delivery Digital methods Post a review on a public platform Share an experience with friends/family using digital 62% 79%56% 14% 20%22% 13% 4%13% 35% 3%61% 52% 97%32% 15% 63%7% 44% 62%13% 60% 80%35% 48% 65%42% 63% 79%79% 46% 30%42% 67% 73%62% 29% 30%38% 72% 88%64% 50% 88%52% 10% 81%23% Very HighHighVery Low Low Medium Country’s maturity stage
- 6. 5 Copyright©2017byTheBostonConsultingGroup,Inc.Allrightsreserved. Innovative Business models Consumer- led products • Spot consumer trends • Co-create products/offerings • Customize solutions Targeted, socially activated brands • Scale up efficiently • Zero in on a clear audience • Activate social media promotion Seamless, personalized sales • Jump-start the business • Tailor the experience to the customer • Simplify the transaction End-to-end consumer engagement • Use a personal appeal • Connect with the customer after the purchase • Turn customers into advocates Exhibit 6: Digital is Disrupting Every Aspect of the Value Chain Source: BCG analysis.
Editor's Notes
- Markets are at different points in digital evolution: Digitally Aware, Digitally Advancing and Digitally evolved Digitally Aware: Digital influence< 10%, E-comm< 3% Digitally Advanced: Digital influence 11-35%, E-comm 3-5% Digitally Evolved: Digital influence >35%, E-comm >10% Uptake for digital influence increases rapidly as countries move from digitally aware to digitally advancing while for e-commerce uptake increases rapidly between digitally advancing to evolved Brazil, India and Indonesia next candidates for seeing rapid growth in e-commerce and already have a fledging start-up eco-system
- Winning using digital requires clients to focus on 5 key elements Examples: Xiaomi: Xiaomi uses its online community to gather new requirements for next releases and get feedback on the prototype. Fast-tracks development of its products (Co-create products) Three Squirrels: Three squirrel became china's No. 1 online snack brand by leveraging e-commerce platforms as a sales channel and digital marketing before starting offline stores. Built to over $500m before going to any offline distribution (Scaling-up efficiently) NYX Thailand: NYX Thailand leverages instant messaging and social media to engage users and sell their products (Activate social) Lenskart: Lenskart layered its online eyewear platform with multiple solutions to make buyers comfortable with online purchases. 3D Virtual Trials, at home sampling of products, offline stores linked to online ecosystem, free check-up at home (Simplified Transaction) Magazine Luiza: Magazine Luiza launched online platform and customer support to transition from offline to integrated offline-online shopping experience. launched Magazinevocê” (“You shop”) programme, where people create their own virtual store, to sell Magazine Luiza products to friends through social media for a small commission. (Ubiquitous Availability) Hema: HeMa Supermarket is offine store opened by Alibaba in China that offers seamless omni-channel shopping experience across physical and online stores. Customers use mobile phone app to shop in HeMa and find more information about different goods. HeMa tailors recommendations online and in the store using customer data from previous purchases. (Personalized Experience) Johnson & Johnson: Launched Babycenter, provides parenting information, instructional videos, useful tools, and expert advice for expecting parents (Personalized engagement) Nike in China: Nike built extensive digital touchpoints with app for running/ training, engaging with celebrities/influencers on social media and encouraging sharing of users generated content (related to Nike) on social media (Customer advocacy)