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How to Plan for the Shopper of Tomorrow

Global e-commerce growth presents a wave of new opportunities for logistics companies, opening up emerging markets where online technologies have become a part of everyday life.

Imad Nusheiwat | UPS

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Online retail provides the opportunity to sell to customers in previously unreachable marketplaces.

It is not just how customers search for products online, but where they live, that can provide valuable information about consumer trends.

This is data that logistics companies are mining to provide a clearer blueprint for how to thrive in a world where the line between brick-and-mortar stores and digital is increasingly blurred.

The rise of mobile shopping has also overlapped with a steady increase in spending in urban areas, highlighting the need for logistics companies to get ahead in assessing their customers’ needs and identifying essentials that may be unique to a particular market.

The Oxford Economics’ Global Cities 2030 report forecasts that, by that year, an estimated 60% of the world’s high income consumers will live in the world’s top 750 cities. It also forecasts 3% growth in consumer spending in the United States over the remainder of this calendar year compared with 2.8% for the globe.

Changes in consumer spending patterns, whether reflective of technology or of where patrons live, will have major implications for companies preparing their businesses to succeed in these diverse markets.

As the economic landscape changes over the coming years, and as cities attract more and more high powered consumers, companies will need to rethink everything, from their supply chains to the types of products and services they offer across the world.

[Also on Longitudes: Finding a Silver Lining in Online Returns]

Buying online

how to plan for shopperRegardless of their preferred platform, shoppers across regions say they want to make purchases online, the recent UPS Pulse of the Online Shopper Global Study shows.

The analysis highlights shopping patterns in five key global markets, namely the United States, Asia, Europe, Mexico and Brazil, and shows the similarities and differences in how consumers behave.

Businesses of all sizes can use this information to help meet customers’ expectations by identifying areas of growth and trends in online shopping around the world. In this environment, retailers and logistics companies need a clear understanding of the shopping behaviors and influences in each market.

One of the great opportunities provided by online retail is the ability to sell to customers in previously unreachable marketplaces.

In this survey, shoppers worldwide said that nearly a quarter of their purchases were made with online retailers outside their own country. And the desire to buy goods over the Internet will only grow in coming years.

Global e-commerce growth is estimated to reach 16% in 2015, moving from $1.47 trillion in 2014 to $1.7 trillion, according to eMarketer. Growth in the market is expected from expanding online and mobile user bases in emerging markets, increased m-commerce sales, and growth in new international markets.

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 Globalization means consumer needs can be fulfilled from everywhere no matter how unique they may be.

Smartphones and tablets are changing how consumers communicate, how they access information, and how they shop.

eMarketer estimates that, in 2015, mobile search will grow beyond that of desktop search and that, by 2018, smartphone purchases will make up 26% of m-commerce in the US.

Even as customers seek goods beyond their own borders, they still expect the same services provided by a local retailer.

Whether it is a purchase from a mom and pop shop in Scranton or a boutique in Paris, no matter the device, customers want their shopping experience to be seamless.

[Also on Longitudes: Turning Browsers to Buyers]

Bricks and clicks

iStock_000040484900_MediumThe Online Shopper survey tells us that consumers need to touch and feel or try on the goods. Thus, it is not surprising to see that many shoppers will typically visit the store, and mobile may be accelerating this behavior shift by making research easier.

This includes accessing store information such as directions and store opening hours, through to checking inventory and even reserving products prior to their store visits.

However, when asked what percentage of purchases were made in store compared to online, even the avid online shoppers surveyed in this study said that over half were made in physical stores, although Brazil was an exception, with 56% of purchases made online. Conversely, Mexico has the highest percentage of physical store purchases with 60%.

In all countries, consumers who researched in store and then purchased online cited finding better prices and availability online and the desire to do additional research as the top reasons for their channel selection.

The future of the store will most certainly involve mobile. Think line busting checkout via handheld devices. Wi-Fi access storewide and tablet based selling may be the new standard in a few years.

The role of logistics providers

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We develop solutions that enhance the relationship between retailers, logistics companies and consumers.

UPS is finding new ways to link key players to consumers in this global environment.

It is why we are United Problem Solvers. We develop solutions that enhance the relationship between retailers and logistics companies and consumers and apply our expertise to help create a more agile, more responsive supply chain.

To help navigate this global complexity, UPS i-parcel links retailers in the two of the largest e-commerce markets, the US and the UK, to consumers around the world.

This helps local online consumers shop and purchase in their own language, use local currency and automatically add
customs duties and taxes into the final cost.

The emergence of online shopping has also required logistics leaders to develop new strategies for handling peak purchasing periods, particularly during the holiday season.

Whatever the new normal will be, logistics firms that recognize the differences among markets and aim to hit every touch point are best positioned to win.

All consumers do what they can to receive free shipping, with American online shoppers willing to wait the longest, five to seven days, to qualify.

Online shoppers in Asia and Mexico are the least patient and often willing to pay for next day service, the Online Shopper Global Study says.

Globalization means consumer needs can be fulfilled from everywhere no matter how unique they may be.

The opportunity to capitalize is now. The technology and infrastructural support exists.

Spending patterns

how to plan for shopper 2In addition to online tendencies, new data on consumer spending provides valuable indicators of how retailers and logistics companies can be more responsive to customers’ needs.

The aforementioned Global Cities report outlines many of these disparities in consumer spending, pointing out that purchasing patterns typically change in line with increases in household income.

Today, consumer spending patterns vary significantly across cities. And while the gap will close slightly over the next fifteen years, differences in 2030 will still be sizable.

For example, the average consumer in Lagos, Nigeria will spend 35% on food and non-alcoholic beverages, compared with less than 10% in Tokyo, meaning that consumers in Tokyo will have that much more to spend on non-essentials.

The spending by Lagos residents on recreation, dining out and accommodation will comprise just 7% of total spending in 2030, compared with 25% for residents of Tokyo.

As more young people move to cities, and the demand for sophisticated labor increases, more wealth will be concentrated in these urban areas. These changes are only expected to accelerate over the next decade.

Understanding where certain products and services are in demand, in addition to the wants and needs of consumers in those markets, will be critical to businesses looking to capitalize on this growth.

Sustainability

For logistics companies, the steady increase in consumer spending in urban areas is a tremendous opportunity for growth.

But success will belong only to those that stay ahead of the debate, not only in what consumers will want, but also on what it takes to continue to help make the city environment in which they live sustainable.

If challenges like air quality and congestion become too severe, then they can threaten the prosperity of a city because people, and, therefore, businesses, start to question whether they really want to be there.

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Economic cycles mean that consumer spending patterns will regularly rise and fall.

It is for these reasons that UPS is working with city, national and regional governments to develop innovative ways of keeping logistics moving in a dense urban environment: from our ORION technology that reduces city driving miles to our electric vehicles, which eliminate city exhaust pipe emissions.

In partnership we can keep the wheels turning and the city buzzing.

Of course, economic cycles mean that consumer spending patterns will regularly rise and fall.

China’s leaders, for example, are hoping to spark greater consumer spending as they seek to scale back investment amid a general economic deceleration.

Variations among cities and in business conditions mean companies will need to be capable of quickly adapting products, services and supply chain operations to meet fluctuating demand.

That said, businesses should be prepared for steady growth in consumer spending in urban areas over the coming years.

Armed with this data, logistics providers can avoid being left in the dark about the needs of individual markets, both in the digital and the physical spaces, while cultivating a strategy more in line with sustaining an urban environment. goldbrown2

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Imad Nusheiwat is Managing Director of UPS Global Solutions.

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Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.

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