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Radically changing consumer and retail industry offers China CEOs a choice – transform now, or be left behind

Radically changing consumer and retail industry...

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Optimising customer engagement, brand value, and distribution channels are key for revenue growth, finds KPMG survey

With China’s consumer executives facing increasing challenges from new technologies and changing customer behaviour, business model transformation and optimising customer engagement are key imperatives for success, finds a joint survey conducted by KPMG and Consumer Goods Forum (CGF).

The 6th annual Global Consumer Executive Top of Mind survey features insights from 530 senior executives (including 49 from mainland China and Hong Kong, and 146 from Asia Pacific), from companies headquartered in 28 countries and regions from the food, drink and consumer goods, manufacturing and/or retail sectors. 

The survey finds that four in ten China respondents highlighted ‘shifting demographics, behaviours and expectations’ as a key challenge over the next two years. Declining brand loyalty (39 percent), demand for immediate gratification (35 percent) and shorter consumer attention spans (31 percent) were identified as the main consumer-related challenges.

These are further emphasised by the finding that 94 percent of China respondents view ‘optimising customer engagement, brand value, and distribution channels’ as key for revenue growth, higher than the average in Asia Pacific (87 percent) and globally (85 percent).

The survey also highlights that customers’ expectations of seamless / frictionless shopping experiences is creating added pressure for companies. In addition, the advent of platform businesses such as Alibaba, JD.com and Tencent has made switching brands virtually easier.

Jessie Qian, Partner, Head of Consumer & Retail, KPMG China, says: “These ‘mega platforms’ are reshaping consumers’ behaviour and lifestyle in China. Within these ecosystems you can go on social media, shop online or in store, pay your utility bills, order meals, book a shared economy bike – they’re very good at creating stickability. As a consumer, you can do so much within these ecosystems, there’s little incentive to go anywhere else.”

In order to stay ahead of the game, more than half of the surveyed China executives indicated that ‘understanding consumer wants and motivations better (by collecting and interpreting data)’ is the top priority in terms of their customer strategy, followed by ‘connecting with consumers 24/7’ (43 percent). 

Anson Bailey, Partner, Head of Consumer & Retail, Asia Pacific, KPMG China, adds: “In Asia Pacific, to better deliver on customer strategy, we are seeing a lot more focus on online-to-offline (O2O) – the fact that it’s not just about online, but you’ve got to have offline. We see some of the pure-play e-commerce players that are coming into the market. They’ve also spent resources and money on their own brick-and-mortar stores or set up their own flagship stores.” 

In line with these observations, 57 percent of China respondents expect physical stores and digital channels in their industry to be fully integrated by 2020; 53 percent expect that physical stores will serve primarily to provide experiences, services, advice or entertainment. 

Qian says: “In China, the shopping mall is doing very well. Mega shopping malls are allocating a large percentage of space to food and beverage outlets, bookstores and cinemas. Consumers will go to a shopping mall to socialise, meet friends and family for dinner or watch a movie. Brick-and-mortar stores need to transform and provide experiences. People are looking more to enjoy their lives through experience rather than owning a physical, tangible, item.”

The survey notes that consumer companies are actively looking to invest in new technologies to enhance customer experience and integrate their online and offline channels. While only 20 percent of Hong Kong respondents indicated that they spent 5 percent or more of their annual revenue on new technologies last year, 60 percent of them plan to do so by 2020. This proportion reached 47 percent for respondents in both mainland China and Asia Pacific, compared to 41 percent and 26 percent in the last year, respectively. 

Around one-third of mainland China respondents plan to start using big data and predictive analytics technologies in the next two years. In Hong Kong, one-third of respondents plan to use digital assistants such as chatbots in the next 24 months.

Bailey concludes: “Technology is a great enabler for the development of the consumer sector. By investing in areas such as big data analytics, cloud-based solutions and artificial intelligence, retailers will be able to transform their businesses, optimise their supply chains and develop a seamless omnichannel platform based on real-time data and machine learning.” 

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About the Global Consumer Executive Top of Mind survey

Now in its sixth year, this annual survey was conducted by telephone and online between March and April 2018. A total of 530 senior executives from companies headquartered in 28 countries and regions participated in the survey. The respondents were senior executives at global companies from the food, drink or consumer goods, manufacturing and/or retail sectors, 87 percent of which had at least USD 500 million in annual revenues. The companies in the survey represent over USD 3.2 trillion in consumer sales.

About KPMG China

KPMG China operates in 18 cities across China, with around 12,000 partners and staff in Beijing, Beijing Zhongguancun, Changsha, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Wuhan, Xiamen, Hong Kong SAR and Macau SAR. With a single management structure across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located. 

KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 154 countries and territories and have 200,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG China was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong office can trace its origins to 1945. This early commitment to the China market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in the Chinese member firm’s appointment by some of China’s most prestigious companies. 

About The Consumer Goods Forum

The Consumer Goods Forum (“CGF”) is a global, parity-based industry network that is driven by its members to encourage the global adoption of practices and standards that serves the consumer goods industry worldwide. It brings together the CEOs and senior management of some 400 retailers, manufacturers, service providers, and other stakeholders across 70 countries, and it reflects the diversity of the industry in geography, size, product category and format. Its member companies have combined sales of EUR 3.5 trillion and directly employ nearly 10 million people, with a further 90 million related jobs estimated along the value chain. It is governed by its Board of Directors, which comprises more than 50 manufacturer and retailer CEOs. For more information, please visit: The Consumer Goods Forum

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