Harnessing the Rise of Digital Consumers to Stay Ahead Sep 20 th 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
SOURCE: McKinsey iConsumer China 2017
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
SOURCE: McKinsey iConsumer China 2017
>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
SOURCE: McKinsey iConsumer China 2017
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
SOURCE: McKinsey iConsumer China 2017
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
13McKinsey & Company
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
14McKinsey & Company
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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