harnessing the rise of digital consumers to stay ahead · direct sales model activist investors ......

Harnessing the Rise of Digital Consumers to Stay Ahead

Sep 20th 2017

2McKinsey & Company

Macro trend is reshaping consumer segments and changing customer expectation

Consumer

Industry

Tech-nology

DigitalGeneration

The millennials are taking the lead

Aging PopulationUrbanization

Explosive growth in middle class

Women with a career

The rich becomes richerShrinking family size

Easier to get distracted

Always online

Cloud computing

3D Printing

Internet everywhere

Artificial intelligence

Advanced robots

Big data operationMobile world

Internet of things

AR and VR

Genome

Wearable devices

Auto driving vehicles

Cutting edge materials

Direct sales model

Activist investors

Constant integration

Talent transfer and shortage

Cost inflation

Government intervention

New competitors

Vertical development

Cycle economics

SOURCE: McKinsey ”2030 Consumers” report

To be detailed

3McKinsey & Company

McKinsey iConsumer Research 2017 to understand consumer insights

N = 511

N = 364

N = 472

N = 572

N = 430

N = 249

N = 562

53% 47%Gender

Age

10%

13-17

17%

18-24

35%

25-34

20%

35-44

11%

45-54

7%

55+

Household monthly incomeRMB/month

36%6,500-10,999

4,000-6,499 15%

<4,000 11%

15,500+ 7%

11,000-15,499 31%

46%

14-21

54%

≥21

0%

<14

City tier

Internet intensityHours/week

Fresh

food

Consumer

electronics

Packaged

food

Personal

care

Apparel

Social

networks

Tier 1 9%

Tier 2 26%

Tier 3 21%

16%Tier 4

27%Rural

Shared

mobility

SOURCE: McKinsey iConsumer China 2017

Retail

O2O

Social networks

▪ Selected consumer interviews

▪ Industry experts interviews

▪ Consumer research, un-met

needs and value proposition

▪ Future customer experience

journey design, user

scenarios, user testing, and

mock-ups for key “significant

moments”

CX journey designConsumer survey N = 5,930

4McKinsey & Company

Experience:

Empathetic & Impulsive

Understand key consumer trends to foresee opportunities

• Adopting “omni-channel”

• Valuing offline touchpoints

• Conducting in-store mobile

research - the “showroom

effect”

• Suffering from information

overloading and inaccuracy

• Signifying opportunities in

data-driven personalization

and tailor-made

recommendations

• Expecting more than

standard SKUs and services

for unleashed demands

• Trigged by multi-scenario

• Catalyzed by immediate

accessibility e.g. O2O

delivery

• Captured by social

commerce, yet gap from

expectations

Touchpoint:

Omni-channel

Offering:

Personalization

A

B

C


To be detailed

5McKinsey & Company

“Showroom effect”: brands’ opportunity instead of threat

Sales maintained within brand

Potential sales leakage to brands

Impact Purchase decisions

Impact on final purchase decisionsPercent of online CE shoppers who research on mobile

phone while shopping offline

1

8

9

Not to buy at all

12

Buy from another

physical store

Buy from another

e-commerce site

Buy another brand

31

Buy in this

physical store

Buy other product

category

41

A


>40% chance: sales

captured by the offline store

>80% chance: sales

captured within brand’s boundary

VR immersive try-on experience at store

Offline showroom with online “endless aisle”

Opportunity: fix the basics and meeting advanced needs through omni-channels

In-store mobile research beneficial Limited pilots integrating online and offline in self-owned stores

6McKinsey & Company

Social B2C commerce promising yet relatively small

1 Have you used the following forms of “WeChat shopping”? (SE10), N=175

2 GMV = Gross merchandise value; based on iResearch 2017 WeChat Commerce report; 2017 data is estimated till year end

WeChat shopper base1

Million users

161148

64

162015 2017

15%

WeChat users penetration

31% 31%

5.1

GMV as % of online shopping2

7.0 8.9%

B

SOURCE: McKinsey iConsumer China 2017; iResearch

Opportunity: fix eCommerce basics in social scenario to grow GMV

63% unsatisfied

Gap vs consumer expectationsGrowing user base and GMV

• Convenience

• SafetyPayment

• Assortment

• Services

• Delivery

E-Commerce basics

Social elements

• Relevance “at the moment”

• Trusted recommendation

• Easy share with Friends & family

7McKinsey & Company

Standard SKUs and traditional service models no longer satisfy consumers today

C


Opportunity: offer more innovativeand customized solutions

Consumer pain points Limited pilots beyond providing SKUs

Need to bridge own-needs with product features“I would like to have one-stop-shopping to

meet my needs, to save time”

Large investment to “own” products with limited use“I bought the product for a specific use,

and after that, it sat on the shelf”

Risk in purchases triggered by impulses“I liked the product but they didn’t offer

product trials, so I had to buy it”

Leasing services for expensive

camera lenses

"Surface as a Service” to offer

one-stop solutions incl.

devices, accessories, software,

services, and support

8McKinsey & Company

From insight to impact: McKinsey’s digital design methodology and approach to digitize core business and core process

▪ Agile development: Small step develop-

ment/testing, rapid iterations and phased

rollout

▪ Co-development: cross-function collabora-

tion, product operation, capability transfer

Discover, Design Deliver, Derisk

Digitize business & process

Customer value and E2E customer

experience

Digital product development and

Operation capability build-

up

▪ Design thinking: customer

perspective, empathy with users,

immersive, no boundary

▪ Zero-based design: vision,

highlights, prototype, MVP

SOURCE: McKinsey Digital Lab

To be detailed

9McKinsey & Company

Marry classic analytical thinking with human-centric design thinking

Analytical Thinking Design Thinking

Fact/data driven: what people say and act

Quantitative survey/analysis based: “what is”

Focused on answers to improve status quo

Empathy driven: what people feel and need

Ideation & co-creation based: “what if”

Targeted for inspirations to innovate the future

Key questions:

What are the consumer demographics/segments and

respective behaviors?

What are the most important factors, and pain points along

current decision journey?

What are the most important improvement levers for consumer

experiences?

Key questions:

What are the key personas, their individual stories and

underlying needs?

How do they see/feel/think along E2E experience and what

are the key scenarios?

How does the future customer experience journey look

like, in “significant moments”?

Current gaps, and implementable levers/ initiatives Future potentials, and out-of-box concepts/ ideas


10McKinsey & Company

China C2M1 apparel platform-Red Collar

Engage consumers, small

business, individual

entrepreneurs and suppliers

through one digital platform

Case studies across Retail, Property and Manufacturing

2 3

China’s leading residential real estate player

Establish end-to-end omni-

channel customer

experience with digital

1

Starbucks

Redefine channels, lifestyles

and offerings in “New Retail”

era

Retail Property Manufacturing

1 C2M: Consumer to Manufactory

11McKinsey & CompanySOURCE: McKinsey showcases

Discover

Distill

Concept

Prototype

Discover, Design

1

• Market trendscape

• Immersive in-field user

research

• Persona

• Customer needs

• Ideation workshops

• Current journeys

• Opportunity areas

• Value proposition

• User scenarios

• Moments of delights

• Future journeys

• Concept sketches, flows &

wireframes

• User testing (concept)

• Visual assets

• Script & storyboard

• Vision video

• Clickable prototypes

• CX service blueprint

• Minimum variable product

Starbucks: Redefine channels, lifestyles and offerings in “New Retail” era

To be detailed

12McKinsey & CompanySOURCE: McKinsey showcases

2

Discover customer needs Define future experience Design wireframe and plan

Iteration Iteration Iteration

Phase 1 Phase 2 Phase 3

Ideation workshop

Persona profile

First drafts of E2Efuture journey and

ecosystem map

Refine E2Efuture journey

Customer interaction blue

print and key program

Wireframe of key customer

interaction and program

Implementa-tion plan and

execution

Iteration

• Customer

survey/interview

• Customer

testing

• Customer

testing

• Customer

testing

Discover, Design Deliver, Derisk

China’s leading residential real estate player: Establish end-to-end omni-channel customer experience with digital

Digital product

Customer Data

platform

DTC sales &

marketing 1

Broker

enablement 2

Sales rep

support3

DTC customer

service4

To be detailed


Customer order Flexible production

RCMTMplatform

Red Collar leverages its O2O RCMTM1 platform to make custom-made clothing digital, global and platform based.

• ￥3 billion revenue with zero inventory2 in year 2014

Order Design Cutting Sewing

Logistics Warehouse storage

Packaging Quality testing

Ironing

Total lead time: 7 working days

Leverage big data technology to

enable fast lead time of

customized design

Use 3D printing technology to

achieve the automatic process

through the end-to-end value

chain

Smart hanger (RFID3) for smart

internal material handling

ERP system to ensure the

implementation of flexible

production system

3 Red Collar: Engage consumers, small business, individual entrepreneurs, and suppliers through one digital platform

SOURCE: McKinsey analysis, Shandong Economic and Information Technology Committee

1 RCMTM: Red Collar Made To Measure

2 Zero inventory of finished clothes

3 RFID: Radio Frequency IDentification


Key takeaways for harnessing the rise of digital consumers

Quick-wins

Integrate online and offline in self-owned stores as the 1st step

for omni-channel play

Trigger impulses across daily life scenarios, and facilitate a

smooth transition to conversion

Pilot in helping consumers express their individuality

Present information in intuitive and interactive ways

Capability-building

“Zero-based design” thinking as company's default way of

innovation

“Agile development” with small step development/testing, rapid

iterations and phased rollout

“Data-driven” approach to leverage digital data to assist offline

service to augment human-based experiences

McKinsey iConsumer 2017 Report

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harnessing the rise of digital consumers to stay ahead · direct sales model activist investors ......

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