by Bernard Helders
The emergence of brand-hungry consumers in developing markets like China, India and Brazil presents a significant growth opportunity for the fashion industry, but understanding shopper behavior is key to success.
The fashion industry is exciting, innovative and above all, rapidly changing. Many factors contribute to the retail evolution, including the evolving modern-day consumer, who demands more and wants things fast. This means companies must be one step ahead when it comes to technology innovations, and above all, a more easily accessible global marketplace. In fact, the industry, which has recovered from the economic downturn, is expected to grow by double-digit rates over the next few years, with much of that coming from developing markets.
The emergence of brand-hungry consumers in countries like China, India and Brazil presents a significant growth opportunity for the fashion industry; however it is not easy to take brands global. Among the challenges are understanding local consumer shopping trends, recruiting and training local employees, and grasping differences across business cultures.
Digital has also changed the face of fashion retail in developing markets. Our research shows that shoppers in developing markets place significant importance on being able to shop through digital channels, so companies looking to make the move should plan to put a comprehensive digital strategy in place.
Use caution when exploring high-growth developing markets
It’s also important for fashion companies to take into account the factors that will make it profitable to operate in these markets, including the level of ambition and aggression of entry as well as a suitable portfolio and operating model. After evaluating the pros and cons of entering and serving the market, it is important to ensure that the assessment approach is structured and rational enough to avoid biases that can over-inflate the size of the prize. Considering the market potential and not just the current size is also key as the markets will be nascent by definition and have low consumption per capita.
Fashion companies should also never under-estimate the local competition. While some regional competitors may not have large marketing budgets, they often have very granular local consumer knowledge, lower cost bases, and an ability to act quickly and take bigger risks. Western companies must also make careful portfolio decisions that balance global standards with local taste, packaging, channel and format preferences.
Digital drives the fashion business
Clearly, there’s a lot to consider when deciding whether to enter a developing market. Perhaps the biggest key to ultimate success is understanding local shopping behavior.
Digital channels have become significantly important in the fashion industry overall. Our Digital Shopper Relevancy study (1) found that more than half of shoppers had purchased fashion products online in the prior six months, making it the second most popular category for online shopping, after electronics. Fashion shoppers also make extensive use of mobile apps and social media during their shopping journeys. And compared with consumers in other retail categories, fashion shoppers purchase more products in a single transaction online than in physical stores.
Shoppers are also more likely to spend more money in a physical store if they have researched the products using digital means prior to their shopping trip. This is a strong indication that digital complements physical for fashion shoppers.
Digital shoppers dominate in developing markets
Developing markets are currently leading the way when it comes to digital shoppers. Our research reveals that the majority of digital shoppers in China, India, Brazil, Mexico and Turkey are what we call digital shopaholics and social digital shoppers (see sidebar). By comparison, these digitally savvy segments account for a smaller percentage of the total digital shopper population in mature markets.
There is no ‘one’ digital shopper
Capgemini’s Digital Shopper Relevancy study included a detailed segmentation analysis, which identified six distinct segments of digital shoppers, ranging from the least digitally savvy to the most: techno-shy shoppers, occasional online shoppers, value seekers, rational online shoppers, digital shopaholics and social digital shoppers.
Each segment uses digital channels and devices in different ways during their shopping journeys. For example, digital shopaholics are early adopters and experimenters; they use digital channels and devices like smartphone apps and in-store technology very actively throughout the shopping process. In contrast, value seekers are price-sensitive shoppers with low interest in digital shopping and new technologies. They shop online primarily to find the best deals on products they know they want and seldom use smartphone apps, social media or in-store technology when shopping. And techno-shy shoppers are not interested in new technologies and do not consider digital channels or devices important during any phase of the shopping journey.
Shoppers in developing regions place greater importance on all digital channels, regardless of the phase of the shopping journey. This may be due in part to the lack of traditional retail infrastructure in these markets as well as the tendency in developing markets to leapfrog entrenched approaches in favor of the latest tools and formats. Consider that 72 per cent of respondents from India and 69 per cent from China said they purchase more products in a single transaction online than in a physical store, compared with just 24 per cent of those from Finland and 31 per cent from the US.
Shoppers in developing markets are also more engaged with retailers and consumer products companies through digital channels. Nearly three-quarters of respondents from India and 68 per cent of those from China said they would like to be able to follow retailers through social media, far more than those in the mature markets.
A little bit of digital won’t do
Given the dominant role digital channels play in both the fashion category and among shoppers in developing markets, it’s clear that a little bit of digital won’t do. To be relevant to fashion shoppers in developing markets, companies must organize their business around their customers in new ways that define the relationship and create loyalty. This demands true convergence of physical and digital channels, making it possible to provide an integrated, meaningful and personalized experience to customers across all relevant touchpoints at the moments that really matter.
Achieving convergence requires fashion companies to embark on a digital transformation journey. The good news: digital transformation makes good business sense. A study by the MIT Center for Digital Business and Capgemini Consulting (2) found that most digitally mature companies are 26 per cent more profitable than their industry competitors.
Some fashion companies have captured the true business benefits of a digital transformation. Most, however, are only beginning their journey to transform. Our research points to a real “digital advantage” for those that are able to effectively execute against a clearly defined digital transformation roadmap. And that advantage may be the difference between success and failure for fashion companies entering developing markets.
(1) Digital Shopper Relevancy: profiting from your customers’ all-channel experience. Capgemini, 2012
(2) The Digital Advantage: how digital leaders outperform their peers in every industry. MIT Center for Digital Business and Capgemini Consulting, 2012
Bernard Helders is global leader, consumer products and retail, Capgemini.