online vs. offline preferences and drivers of customer ... are made online. however,...

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DeborahWeinswig,CEOandFounder,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2018CoresightResearch.Allrightsreserved.

February 26, 2018

1) Althoughe-commerceisthepreferredchannelforpurchasingapparelinChina,brick-and-mortarisstillveryrelevant.OurproprietaryconsumersurveyshowsthatthevastmajorityofChineseconsumers(96%)purchaseapparelbothonlineandoffline.

2) Brick-and-mortarpurchasesaredrivenprimarilybytheabilitytotouchandfeelaproductbeforebuying,whileonlinewinsforproductrange,priceandconvenience.

3) Uniqloearnedthetopspotforcustomersatisfactionamongthetop-tenapparelretailersinChina,whileTaobaorankedlast.

4) Accordingtoourkeydriveranalysis,theavailabilityofvalue-for-moneyproductsisthekeydriverofcustomerloyalty;fitandqualityarealsoimportant.

Deep Dive: Chinese Apparel Shoppers—Online Vs. Offline Preferences and Drivers of Customer Satisfaction

Deborah Weinswig CEO and Founder

Coresight Research [email protected]

US: 917.655.6790 HK: 852.6119.1779

CN: 86.186.1420.3016

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February 26, 2018

TableofContents

ExecutiveSummary.........................................................................................................................................3

1)ChineseShopBothOnlineandOfflineforApparel.......................................................................................4

2)ReasonsforShoppingforApparel:OnlineVs.Offline..................................................................................5

3)TopApparelRetailersinChina.....................................................................................................................7

4)DespiteBeingOneoftheTopApparelOutletsinChina,TaobaoLagsBehindinCustomerSatisfaction........7

ARecapofOurKeyFindings...........................................................................................................................12

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February 26, 2018

ExecutiveSummaryE-commerceis,withoutadoubt,ahighlypopularchannelforapparelpurchasesinChina.Some85%ofChineseconsumerswhoparticipatedinourproprietaryconsumersurveysaidthatoverhalfoftheirapparelpurchasesaremadeonline.However,brick-and-mortarstoresarestillveryrelevant.OursurveyshowsthatthevastmajorityofChineseconsumers(96%)infactpurchaseapparelfrombothonlineandofflinechannels.

Notsurprisingly,ourdatashowthatthetopreasoncitedforpurchasingapparelatphysicalstoresisshoppers’preferencetotouchandfeelaproductbeforetheybuy.

Thebenefitsofshoppingonline,ontheotherhand,includewideproductselection,convenienceandeasypricecomparison.Chineseconsumersalsotendtoshoponlineinordertofindthebestprices.

OursurveyalsofocusedonevaluatingChineseconsumers’customersatisfactionwithanumberofmajorretailersinChina.Amongthetop-tenapparelretailersinthecountry,Uniqloearnedthetopspot,whileTaobaorankedlast.Clothingfitandqualityarealsoimportantdriversofcustomersatisfaction.

Basedonoursurveyresults,customersaremuchlesssatisfiedwithTaobaointermsofthefitandqualityoftheirapparelcomparedtootheronlineapparelmarketplaces,indicatingthisisanimportantareathatthecompanycanworkoninordertoimproveitscustomerloyalty.

ResearchMethodologyOursurveywascarriedoutoverafive-dayperiodfromNovember2to7among1,055mainlandChineseInternetusersbetweentheagesof18and59whohadpurchasedapparelitemsinthepast12months.

ThesurveydatawereweightedaccordingtoageandgenderdistributioninChina’surbanareas,basedonthelatestavailablecensusdatabytheNationalBureauofStatisticsofChina.

WebelieveouronlinesurveyrepresentstheopinionsofthemajorityofurbanmainlandChinese,asInternetpenetrationhasalreadyreached69%,asofJune2017,accordingtotheChinaInternetNetworkInformationCenter(CNNIC).

ExchangeRatesWeusedanaverageforeignexchangeratefromS&PCapitalIQforNovember2017,whichresultedinarateof¥6.6203to$1.00(¥1:$0.1511).

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February 26, 2018

1)ChineseShopforApparelbothOnlineandOfflineAccordingtoourproprietaryconsumersurvey,whenitcomestoapparel,thevastmajorityofChineseconsumers(96%)areomnichannelshoppers.Inotherwords,theybuyapparelbothonlineandoffline.

Theresponses,however,showaclearpreferenceforonlineshopping,with85%ofsurveyparticipantssayingthatmorethanhalfoftheirapparelpurchasesweremadeonline.Ofthis,53%saidtheyboughtmostoftheirapparelonlineand30%saidtheyboughtaroundhalfoftheirapparelonline.

Thosewhosaidtheypurchasetheirappareleitherentirelyonlineorentirelyofflineareanichesegment,eachrepresentingonly2%ofsurveyedconsumers.

Intermsofincomesegmentation,slightlyfewerrespondentsfromthehigherincomegroupareomnichannelapparelshoppers,at90%.

Figure1.%ofApparelPurchasesMadeOnline,November2017

Base:Allrespondents(N=1,055);lowerincome(N=478);middleincome(N=430);higherincome(N=147).Note:Lowerincomemeansmonthlyhouseholdincome(MHI)of¥10,000orbelow;middleincomemeansMHIof¥10,000–¥19,999;higherincomemeansMHIof¥20,000orabove.Source:CoresightResearch

2%13%

30%

53%

2%

ProporSonofApparelBoughtOnlineOmnichan

nelSho

ppers(96%)

Some85%ofsurveyedChineseconsumerssaytheypurchasemorethanhalfoftheirapparelonline.

90%

97%

96%

96%

HigherIncome

MiddleIncome

LowerIncome

AllRespondents

OmnichannelApparelShoppers(ByMonthlyHouseholdIncome)

█AllBoughtOnline

█MostBoughtOnline(MuchMorethanHalf)

█Some,ButNotMost,BoughtOnline(AroundHalf)█ALittleBoughtOnline█NoneBoughtOnline

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February 26, 2018

2)ReasonsforShoppingforApparel:OnlineVs.OfflineAlthoughe-commercehasbecomethepreferredchanneltopurchaseapparelinChina,brick-and-mortarisstillveryrelevant.Withthatinmind,welookfurtherintothedifferentreasonsconsumerschoosetopurchaseappareleitheronlineoroffline.

ReasonsforShoppingforApparelOnlineOursurveyrespondentsindicatedthatthemainreasonstheyshopforapparelonlineare:tosavetime(64%),lowerprices(59)%andconvenience(60%),i.e.,itsavesthemtheeffortofvisitingmultiplestores.

Chineseconsumerswhosaidtheybuymostoftheirapparelonlineconsiderthewiderproductselectionandeaseofpricecomparisonasthemainbenefitsofshoppingonline,whilethisisnotsoimportanttothosewhopurchaseonlysomeoralittleoftheirapparelonline.

Forthoseconsumerswhosaidtheybuymostoftheirapparelonline,widerproductselectionwasthemainreasoncitedforshoppingonline,at63%,justslightlybehindthosewhocitedtosavetime,at65%.Thiscomparesto56%ofallChineseonlineconsumerswhochosewiderproductselectionastheirreasonforshoppingonline.

Theresultsindicatethatconsumerswhobuymostoftheirapparelonlinevaluethewiderselectionofproductsandeaseofpricecomparisonmorethanthosewhobuysomeoralittleoftheirapparelonline.

Figure2.ReasonsforShoppingforApparelOnline(%)

Base:Thosewhopurchasedapparelonline(N=1,030)orataphysicalstore(N=1,035).Source:CoresightResearch

18%

17%

19%

25%

40%

50%

63%

60%

61%

65%

17%

18%

19%

20%

37%

45%

56%

59%

59%

64%

ProductsOnlyAvailableOnline

EasiertoFindSuitableSize

AvoidCrowdsinStores

EasiertoReturnPurchases

OffersorPromoions

EasierProduct/PriceComparison

WiderChoiceofProducts

SavesEffortofVisiingStores

CheaperPrices

SavesTime

AllOnlineShoppers ThoseWhoBuyMostApparelOnline

ThemainreasonsChineseconsumerspurchaseapparelonlineare:tosavetime,lowerpricesandconvenience—i.e.,itsavesthemtheeffortofvisitingmultiplestores.

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February 26, 2018

ReasonsforShoppingforApparelatBrick-and-MortarLocationsThetopreasoncitedforshoppingforapparelatbrick-and-mortarstoresisconsumers’preferencetotouchandfeelaproductbeforetheybuy.Some73%ofallChineseofflineshopperssurveyedindicatedthisasthereasonforshoppingforapparelatbrick-and-mortarstores.

Ontheotherhand,63%ofChineseshopperswhopurchasemostoftheirapparelonlinealsochosethisastheirmainreasonforshoppingatbrick-and-mortarstores.

So,basedonthesurveyresults,wecanseethatbeingabletotouchandfeelaproductbeforemakingapurchaseislessimportanttoshopperswhopurchasemostoftheirapparelonlinecomparedtoallofflineshoppers.

Figure3.ReasonsforShoppingforApparelatBrick-and-MortarStores(%)

Base:Thosewhomadeanapparelpurchaseeitheronline(N=1,030)orataphysicalstore(N=1,035).Source:CoresightResearch

5%

6%

9%

16%

17%

28%

36%

37%

37%

63%

2%

4%

11%

7%

13%

25%

38%

36%

35%

73%

LimitedInternetAccess

PricesOfflinePerceivedtoBeCheaper

DislikePayingDeliveryCharges

DislikeWaiingForOnlineDelivery

SpecialOffersatSpecificStores

EasiertoReturnIn-StorePurchases

EnjoyBrowsingProductsinStores

ProductsOnlyAvailableinPhysicalStores

GetAssistance/AdvicefromSalespeople

PrefertoTouchandFeelProduct

AllOfflineShoppers ThoseWhoBuyMostApparelOffline

Thetopreasoncitedforshoppingforapparelatbrick-and-mortarstoresisconsumers’preferencetotouchandfeelaproductbeforetheybuy.

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February 26, 2018

3)TopApparelRetailersinChinaTaobaoandTmallarethetwo-most-popularretailoutletsinChina,andalmosteveryChineseconsumerhaspurchasedapparelatoneorbothofthesetworetailersinthepast12months.Accordingtooursurvey,91%ofshoppershavepurchasedapparelatTaobaoand89%atTmall.Overhalfofthesurveyedconsumersalsoshopregularlyforapparelonthesetwoonlinemarketplaces.

Thethird-most-popularappareloutletisindependentboutiques,with77%ofsurveyedconsumerssayingtheyhavepurchasedapparelfromanindependentboutiqueinthepast12months.However,only13%ofoursurveyrespondentssaytheyshopregularlyatindependentboutiques.

Thisholdstrueforotherbrick-and-mortarretailers.Overhalfofoursurveyrespondentsindicatedtheyhadpurchasedapparelatseveraldifferentphysicalretailers,butonlyasmallportionsaytheyareregularcustomersthere.

Figure4.Top-TenApparelRetailersinChina(%)

Base:Thosewhopurchasedapparelinthepast12months(N=1,055).Source:CoresightResearch

91

89

77

74

65

59

57

57

55

52

59

65

13

29

15

7

19

3

5

7

Taobao

Tmall

IndependentBouiques

JD.com

Uniqlo

Semir

Vipshop

JeansWest

Yishion

H&M

%WhoShoppedatEachRespeciveRetailer

%WhoShoppedReguarlyatEachRespeciveRetailer

Accordingtooursurvey,91%ofconsumershavepurchasedapparelatTaobaointhepast12monthsand89%atTmall.

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February 26, 2018

4)DespiteBeingOneoftheTopApparelOutletsinChina,TaobaoLagsBehindinCustomerSatisfactionTogaugeChineseconsumers’customersatisfactionwithanumberofapparelretailers,weuseNetPromoterScore(NPS),whichalsomeasurestheirwillingnesstorecommendtherespectiveretailertoothers.

Amongthetop-tenapparelretailersinChina,Uniqloearnedthetopspotwithascoreof32.TheJapaneseapparelretailerisrenownedforitsexceptionalcustomerservice.AccordingtoparentcompanyFastRetailing,98%ofthe3.6millioncustomerfeedbackreviewsitreceivedinChinawerecomplimentary.

DespitebeingthetopappareloutletinChina,TaobaocamelastwithanNPSof9.Tmallperformedbetterwithscoreof25,butwasstilllowerthanitsonlinecompetitorsVipshopandJD.com.

Inthenextsection,welookattheregularshoppersofthetop-fiveapparelretailers,andexaminethefactorsthatdrivecustomersatisfactionateachoftheretailers.

Figure5.NetPromoterScore®(NPS)oftheTop-10ApparelRetailersinChina(LeftAxis,NPS;RightAxis,ThoseWhoRegularlyShopforApparel,%)

Base:Thosewhopurchasedapparelinthepast12months(N=1,055).Note:NetPromoter,NetPromoterScoreandNPSareregisteredtrademarksofBain&Company,FredReichheldandSatmetrixSystems.Source:CoresightResearch

65

59

29

1915

13

7 75

3

25

9

30

28

32

9

26 26

16

31

0

5

10

15

20

25

30

35

40

0

10

20

30

40

50

60

70

80

Tmall Taobao JD.com Vipshop Uniqlo Indep.Bouiques

H&M Semir Yishion JeansWest

NPS

RegularS

hopp

ers

Amongthetop-tenapparelretailersinChina,Uniqlocameoutontopwithascoreof32.

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February 26, 2018

JD.comandVipshopOutperformTaobaoonMostAspects,andAreOnParwithTmallinMostAreasTaobaolagsbehindJD.comandVipshopintermsofoverallcustomersatisfaction,aswellasonmostoftheserviceareaswesurveyed.Tmall,whichhasaNPSsimilartoJD.comandVipshop,isonparwiththetwoonlinemarketplacesinmostserviceareas.

JD.comleadsinmanyareas,includingdeliverytime,customerservice,selectionofbrandsandwebsite/app.ShoppersareparticularlysatisfiedwiththedeliverytimeandcustomerserviceofJD.com,whileitsselectionofbrandsandwebsite/appareonlyslightlyaheadofthecompetition.

Vipshopleadsinclothingfitandquality,whileJD.comisaclosesecond.BothTmallandTaobaolagbehindintheseareas.

Figure6.Shoppers’SatisfactionwithRetailersAccordingtoDifferentCriteria(MeanScore,Scaleof0–10)

Base:Taobaoshoppers(N=627);Tmallshoppers(N=686);JD.comshoppers(N=310);Vipshopshoppers(N=200).Source:CoresightResearch

0

1

2

3

4

5

6

7

8

9

6.5 7.0 7.5 8.0 8.5

Taobao

Tmall

Vipshop

JD.com

DeliveryTime

DeliveryCost

SelectionofBrands

CustomerService

ClothingStyleandRanges

ClothingFitandQuality

ValueforMoney

WebsiteandApp

JD.comleadsinmanyareas,includingdeliverytime,customerservice,selectionofbrandsandwebsite/app.

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February 26, 2018

ClothingFitandQualityAreaKeyIssueforTaobaoAccordingtoourkeydriveranalysis,theavailabilityofvalue-for-moneyproductsisthekeydriverofcustomerloyalty,whichacompanyshouldleverageinordertoexpand.

Clothingfitandqualityareanotherkeydriverofcustomerloyaltyforshoppers,withacorrelationcoefficientof0.51.Taobaocustomersaremuchlesssatisfiedwithclothingfitandqualitycomparedwithotheronlineapparelmarketplaces,whichindicatesthatthisisanimportantareathecompanyneedstofixinordertoimprovecustomerloyalty.

Figure7.CustomerSatisfactionwithTaobao(XAxis,SatisfactioninRespectiveAreas[AverageScoreBasedonaScaleof0–10];YAxis,CorrelationwithNPS)

Base:RegularTaobaoshoppers(N=627).Source:CoresightResearch

ClothingFitandQuality

ClothingStyleandRanges

ValueforMoney

CustomerService

SelecionofBrands

DeliveryTime

DeliveryCost

Website/App

0.3

0.5

0.7

6.0 7.0 8.0

Fix Leverage&Expand

LowGain Maintain

Accordingtoourkeydriveranalysis,theavailabilityofvalue-for-moneyproductsisthekeydriverofcustomerloyalty;clothingfitandqualityarealsoimportant.

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February 26, 2018

OccasionalTaobaoShoppersAreAlsoConcernedAboutProductQualityAmongoccasionalTaobaoshoppers,concernsaboutproductqualitywascitedasthemainreasonfornotpurchasingapparelthereregularly.Specifically,71%oftheseshopperscitedconcernsaboutproductauthenticity,and55%citedpoorqualityofclothing.

AlibabaGroupFounderJackMaacknowledgedthisissueinJunelastyearattheGateway’17eventinDetroit,callingcounterfeitgoodsthe“cancer”ofhiscompany.Indeed,thee-commercegianthasbeenrunninganti-piracycampaigns,andbegansuingsellersofcounterfeitgoodsinearly2017.However,thishasnotbeenaneasytask.TherewerestillnumerousreportsofcounterfeitproductsemergingafterthemostrecentSingles’DayinNovember2017.

Figure8.ReasonsforNotShoppingRegularlyatTaobao(%)

Base:OccasionalTaobaoshoppers(i.e.,thosenotshoppingregularlyatTaobao)(N=421).Source:CoresightResearch

9%

13%

16%

21%

27%

55%

74%

WebsiteDifficulttoBrowse/Search

DeliveryNotGood/CheapEnough

RangesNotUptoDate

DifficulttoFindSizesThatFit

NotEnoughBig-NameBrands

PoorQualityofClothing

WorriedaboutCounterfeitProducts

Some71%ofoccasionalTaobaoshopperscitedconcernsaboutproductauthenticityand55%citedpoorqualityofclothingasreasonsfornotpurchasingapparelregularlyonthesite.

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February 26, 2018

ARecapofOurKeyFindings• Althoughe-commerceisthemainchannelforpurchasingapparelin

China,brick-and-mortarisstillveryrelevant.OurproprietaryconsumersurveyshowsthatthevastmajorityofChineseconsumers(96%)purchaseapparelbothonlineandoffline.

• Brick-and-mortarpurchasesaredrivenprimarilybyshoppers’abilitytotouchandfeelaproductbeforetheybuy,whileonlinewinsonproductrange,priceandconvenience.

• Amongthetop-tenapparelretailersinChina,Uniqloearnedthetopspotforcustomersatisfaction,whileTaobaocamelast.

• Accordingtoourkeydriveranalysis,theavailabilityofvalue-for-moneyproductsisthekeydriverofcustomerloyalty;clothingfitandqualityarealsoimportant.

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February 26, 2018

DeborahWeinswig,CPACEOandFounderCoresightResearchNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comEddieWongSeniorResearchAssociateCharliePoonResearchAssociateHongKong:2ndFloor,HongKongSpinnersIndustrialBuildingPhase1&2800CheungShaWanRoad,KowloonHongKongLondon:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomNewYork:1359Broadway,18thFloorNewYork,NY10018

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