The majority of retailers still view their loyalty programs through a restrictive and narrow ‘purchase-and-get-points’ lens.
We are not discrediting the model; it has been proven effective, and given the challenging economic landscape, discounts and store credits still carry a lot of weightage. Having said that, brands will have to take into account the rapid commoditization in the loyalty marketing space (the average customer is part of 15+ programs) and relook at their loyalty program to give customers a compelling reason to come back beyond cost savings.
Expanding the Scope Of Your Loyalty Program
While discounts and cashbacks are great for attracting new customers and lowering the risk of commitment, there lies a massive opportunity for brands beyond the horizons of transactional loyalty.
A staggering 84% of consumers in a study said they would actually spend more with retailers that offer points for activities other than spending.
*Report by COLLOQUY
To boost customer retention and program ROI, brands will need to expand their loyalty program to incorporate behavioural, experiential and engagement-based rewards like QR code scans, store check-ins, app download, newsletter subscriptions, product trials, event access, social shares, and reviews in addition to transaction-based rewards.
Trailblazer Brands in the Non-Transactional Loyalty Space
China has been at the forefront of O2O, omnichannel, and loyalty marketing innovations and the underlying tech powering most of these transformations is WeChat – the largest messaging app in China with a whopping 1.2 billion monthly active users from a wide range of age groups.
Brands like Dyson*, Kipling* and Lee* have managed to crack the omnichannel customer journey code by incorporating omnichannel loyalty, non-transactional rewards, and of course WeChat.
1.The consumer sees the brand’s ad in the offline world, scans the QR code and starts following the brand’s WeChat account. He/she receives Welcome Bonus points for following the brand’s WeChat account. Based on the user’s demographic & location, the brand sends a personalized in-store promotion to the customer
2. The customer earns points for checking-in at the store and for completing a transaction. The brand also generates a real-time, limited period discount coupon for a different product.
3. Once the customer purchases the cross-sell product, he/she receives a feedback survey. The customer completes the feedback survey and earns more points in their account.
4. A few weeks later, the customer receives a notification for an online sale and is prompted to redeem their points to get higher discounts.
With this journey, the consumer has been incentivised to explore all of the brand’s touchpoints (WeChat, physical stores and online channels), thereby giving the brand a complete Omnichannel View of the customer.
Another great implementation of non-transactional rewards and gamification in loyalty is by Health Promotion Board (HPB)* – a statutory board under the Ministry of Health (MOH) of Singapore that was established to enhance and drive national health promotion and disease prevention programmes
HPB’s flagship program – Health Insights Singapore (hiSG) – seeks to understand the health behaviours and lifestyles of Singaporeans. Participants are offered a free Fitbit Ionic smartwatch that collects lifestyle and behavioural data across various health topics such as physical activity, nutrition and mental wellbeing.
With the Healthy 365 mobile app, participants in the programme earn HPB Healthpoints for diverse use-cases like: wearing the smartwatch, completing step count challenges, syncing fitness records, answering questionnaires, scanning QR codes and recording meal logs.
HPB uses Healthpoints to drive real-world changes in consumer behavior by rewarding users for healthier purchases (through barcode scans from food, drink or grocery consumption) and redeeming them for shopping and dining vouchers, as well for EZ-link top-ups.
[*Capillary has an active engagement with these brands]
Leveraging AI to Measure the Impact of Non-Transactional Rewards
Retailers have traditionally focussed on the transactional aspect of loyalty programs and for a good reason – it’s easier to quantify and track the ROI. However, advances in AI and Machine Learning have made it a lot easier for retailers to understand which non-transactional rewards and strategies drive sales. According to a Capgemini report, 70% of consumers with high emotional engagement spend 2X higher with the brand.
AI can help marketers understand the impact of different experiential rewards and engagement strategies in influencing a customer’s decision to make a purchase, move the item to a wish list or abandon the purchase cycle. The algorithm essentially compares multiple combinations of successful and unsuccessful reward, promotion, engagement strategies. The ones with positive influences can be further enhanced and the negative ones removed to optimize the process.
- The data reveals that a certain segment of customers is likely to purchase a product after a free trial. In this case, offering rewards for sampling and trials to that select group could increase the probability of a purchase.
- Your customer feedback suggests that product returns are spiking due to customers not realizing product value due to inconsistent usage. Offering rewards for continued product use can reduce returns and reinforce product value. This is a great use case for fitness trackers and electronics.
- Millennials are sidestepping your brand due to limited product reviews. Rewarding customers for publishing trustworthy online reviews could attract new customers. This is a quick hack for brands with limited digital mindshare.
Benefits of Non-Transactional Rewards
Nurture Emotional Loyalty
Non-transactional rewards are a great way to strengthen the emotional loyalty of a brand-customer relationship. Emotional loyalty is a combination of three components (Affinity, Attachment & Trust) and together they underscore the reason why customers prefer a brand over the others, beyond the monetary aspects.
A study by Wunderman Loyalty states that 79% of customers will only consider shopping with brands that show they understand and care about them. By rewarding all kinds of engagement, not just transactions, you demonstrate that you care about your customers beyond their wallet share. The simplest and easiest way to get started on this path is to offer personalized rewards on special occasions (birthdays, anniversaries etc.)
The biggest benefit of non-transactional rewards is by far the ability to sustain continued customer engagement outside of the purchase cycle. Unfortunately, most brands have a disconnect between their customer engagement strategy and their loyalty program. When layered together, they create almost endless opportunities like rewarding user-generated content, recycling initiatives, charity and donation drives, writing product reviews, product-related quizzes, or referring a friend. The rise of Smart Tags and IoT expands these use cases even further: for instance, brands can reward workout progress, going for a run in their new shoes, or minimizing carbon footprint.
Acquire Deeper Customer Insights
Non-transactional data allows marketers to glean a wealth of additional information about customers and their life outside brand interactions. Analyzing these data reveals what is important to program members, and allows marketers to craft more personalized and meaningful experiences that can further improve the engagement rates, thereby creating a positive feedback loop.
Tips to Incorporate Non-Transactional Rewards
The best way to adopt a non-transactional reward strategy is to see your loyalty program as a dualistic entity: one with marketing and Customer Experience components. The points, redemption and transactional part of your program flow into the marketing bucket while the engagement and emotional aspects are part of the Customer Experience universe. The important thing to remember here is that the experience has greater longevity in your customer’s mind compared to discounts.
A great mobile app experience can serve as the linchpin that connects these two aspects of your loyalty program. Several brands like Walgreens, Starbucks and Amazon have cracked this coded fairly well. For instance, in addition to earning, tracking and redeeming points, the Starbucks app allows customers to place orders, pay for an order and even stream music on the go. Likewise, the Walgreens app offers extended functionalities like upload/refill prescriptions and pay for purchases in addition to its loyalty program.
Incorporate Gamification Elements
Gamification is essentially the application of game design elements in a non-game environment. From a loyalty program perspective, this involves status and tiers, levelling-up and unlocks, missions and challenges, goal setting, progress feedback etc. The idea is to boost engagement as well as the stickiness factor of the loyalty program. In a Bond report, over half (53%) of members said they were interested in using game mechanics and 81% of members engage with game mechanics when they are present.
Bakmi GM*, a legendary restaurant in the Indonesian culinary scene leverages gamification-based loyalty initiatives like Spin and Win, Pick and Win to improve customer engagement and loyalty.
Virgin Red is another classic example of a gamification-driven loyalty Program; it incorporates several game mechanics like virtual treasure hunts, leaderboards, secret vaults that can be unlocked for prizes, and daily quizzes to earn extra points.
[*Capillary has an active engagement with the brand]
Invest in the Latest Loyalty Tech
Non-transactional rewards that are not contextual or value-driven will fail to spark customer interest. That’s why data should be at the core of a great loyalty program experience. Retailers should be able to integrate data from multiple sources like in-store, social media, website, app and customer helpdesk, not just purchases. A slew of technologies like CDPs, DMPs, CRM and advanced AI should work in tandem with your loyalty program to blend customer’s digital avatar with brick and mortar store behaviour to create the famed Segment of One. Once you have access to behavioural and transactional patterns of a customer, it becomes a whole lot easier to drive hyperpersonalized and contextual rewards at scale across online and offline channels.
The lines between the Brand, the Program and the Customer Experience are increasingly blurring but the Program remains a critical part of a customer’s relationship with the brand. As the Brand and the Program have become more intertwined, a new paradigm has emerged – one where the Program is an extension of the Brand and serves to enhance the Brand experience.
Except for supermarkets and convenience stores, most retailers see a customer an average of 5-6 times a year. The ongoing digital explosion will likely reduce the frequency to 2-3 in the coming days.
Unfortunately, traditional loyalty paradigms are built around the number of transactions and repeat purchases. To make it worse, even as customers’ behaviour and purchase journeys have become increasingly complex and non-linear, retailers are still stuck with a one-dimensional view of customer loyalty.
Rethinking Loyalty Program Paradigms
In the last few decades, customer loyalty got heavily tied to discounts, points and promotional offers – basically a purely transactional or functional form of loyalty. The biggest reason for this is sheer convenience – it’s easier to nail down the rational aspects like repeat sales, basket size, and customer lifetime value (CLV). However, this only provides a one-sided view of loyalty – for instance, a customer might detest a brand but continue purchasing their products due to lack of choice (Comcast?).
There are critical downsides to measuring customer loyalty from a purely transactional standpoint. And these downsides are becoming increasingly accentuated in the digital world.
Today’s ever-connected customers have hundreds if not thousands of choices at any given point. And as humans typically do when presented with a lot of choices – they rely on several factors like brand experience, emotional connect, convenience, price and reviews from friends and families to guide their choice. With so many variables on the table, how do brands begin to predict customer behaviour?
The answer lies in seeing customer loyalty with a dualistic mindset: one with an emotional as well as a transactional nature. And with each passing day, it’s becoming imperative for brands to view customer loyalty from this new vantage point.
What is Emotional Loyalty
Rather than give you a long-winded and boring definition, we’ll try to explain it with an example. Imagine a tourist exploring a new city. After a long day of sightseeing, he feels drained and craves a coffee and sights:
Phew, I badly need a coffee, is there a Starbucks nearby?
That sums up emotional loyalty – it’s a fast and almost instantaneous positive preference for a brand with zero rational or logical deliberations. Unsurprisingly, Starbucks also has one of the best loyalty programs in the F&B space.
Components of Emotional Loyalty
A customer feels an affinity for a brand when they deliver great goods and the branding matches their lifestyle. It’s important not to confuse ‘Affinity’ with ‘Loyalty’ . A customer might feel an affinity for a brand but it doesn’t mean he/she will be loyal to it. In a sense, ‘Affinity’ lies closer to ‘Preference’ or ‘Liking’. For instance, customers who only have an affinity for a brand will easily switch to a competitor with a better product or lower price.
As the name implies, ‘Attachment’ implies a connection to a brand. A large part of attachment is tied to how a company engages with customers. Make the effort to build meaningful connections through highly personalized communications that are relevant and useful to the customer to strengthen this aspect of emotional loyalty. Another great way to improve the brand attachment quotient is by rewarding engagement, in addition to transactions, and recognizing premium customers with exclusive benefits and acknowledging their status in every communication.
Trust is the most important element in the emotional loyalty construct. It’s essentially the framework on which Affinity and Attachment are built upon. Brand communication and customer engagement are critical in establishing trust. To create a sense of trust, offer authenticity, great support, timely communications, respect for customer privacy and ability to provide feedback.
How to Measure Emotional Loyalty
Marketers typically track behavioural loyalty metrics like conversion rates, customer value, basket size to gauge the effectiveness of a loyalty program. However, it’s equally important to analyze emotional loyalty metrics that gauge intent, sentiment, perceptions, and customer experience :
Net Promoter Score (NPS) :
Envisioned by Fred Reichheld of Bain & Company and Satmetrix Systems, NPS measures customer responses to the famed single question: “How likely is it that you would recommend our company/product/service to a friend or colleague?”. It is a highly popular framework due to its simplistic nature and how the score calculations are clearly defined. However, that simplicity can often hide the root of the problem. For instance, brands with very dissimilar distribution of Detractors, Passives & Promoters could arrive at the same NPS score. Therefore, NPS scores should always be used in conjunction with other Customer Experience metrics and business results.
Customer Satisfaction Levels :
Tracking customer satisfaction levels through simple surveys can offer brands a sense of how customers perceive the brand. These informal surveys allow marketers greater freedom in tackling specific issues and reporting them. Granted that they might not offer the clear metrics and apples-to-apples comparison NPS offers but they can reveal abstract and often hidden insights. For instance, when Expedia aligned Customer Satisfaction with other loyalty metrics, it discovered a key insight: customers are frustrated when offered two one-way flights at a lower price than a roundtrip due to the hassles with changing flights. This helped Expedia to streamline the booking process thereby elevating customer satisfaction.
Sentiment Scores :
Sentiment Scores are a good way to unearth the overall brand perception and customer intent. The common way to do this is through text analysis of internal and external customer feedback (blog comments, surveys, call center transcripts and social media data). Sentiment analysis generates a word cloud that uncovers what’s working well and what are the most painful aspects of the customer journey. A word of caution: Sentiment Scores are perceptions and might not directly translate to action so it’s important to overlay them behavioural metrics like repeat sales, churn rate etc.
How to Nurture Emotional Loyalty
Building emotional loyalty requires an integrated and dynamic mix of activities and interactions between your brand and customers that will drive personalized engagement at every touchpoint. Here’s how successful loyalty programs build affinity, attachment, and trust among customers:
Create unique, personalized experiences
From premium rankings to exclusive event passes, customers expect unique, personalized rewards and experiences that make them feel special and appreciated. Ensure your loyalty program offers these one-of-a-kind rewards by leveraging loyalty data to understand customer preferences and interests. Alternatively, offer early access to sales or limited-edition rewards to make customers feel good and build a greater emotional attachment to the brand.
Anticipate your customer’s needs
Just as customers expect a more personalized experience, they also expect brands will leverage customer data to predict their next likely action with a brand. Brands can add value for customers by demonstrating they understand their needs and are committed to creating a better brand experience for them. Enterprise loyalty program platform like Loyalty+ offers predictive modelling capabilities which capture customers’ contextual and behavioural data and leverages it to predict next-best-action in the customer’s journey.
Prioritize data security
Make data security a top priority— invest in loyalty management best practices that protect customers against fraud and spam. Doing so ensures great customer experiences while driving greater trust with brand advocates who know their data and privacy are respected.
Encourage two-way communication
A strong emotional relationship requires honest communication. The same holds true for emotional loyalty. Allow customers to connect with you to provide their feedback and opinions. This creates a sense of being valued, appreciated, and respected; creating attachment and trust. Conduct VOC polls and surveys to validate your product concepts or messaging while generating data that can be used to create more relevant, targeted experiences that will resonate with your target audience.
The UAE and the Middle East as a whole poses several challenges for marketers and brands. This is because individual markets within the geography display similarities in culture, language and habits but at the same time have varying differences. For instance, the UAE and Saudi Arabia are geographical neighbours and both are part of the GCC council, however, the spoken dialect of Arabic differs considerably from each other.
To serve this complex, multi-cultural and multilingual cultural landscape there are a plethora of media, which makes it challenging for brands to reach out to their audiences. For instance, there are over 300+ TV channels in the region and over 3,000 officially registered print titles. In addition to this, there is a large number of blogs and digital publishers which further makes the digital media landscape even more fragmented.
The Convergence & Contradiction
Despite the regional and cultural differences, one area where there is convergence and similarity amongst the GCC countries is trends around media consumption and advertising spends.
For a long time, even as early as 2015, TV and newspapers accounted for the majority of advertising revenue in the Middle East. But this has been changing recently and the region’s digital marketing spends have been steadily increasing.
Internet advertising spend in the MENA region is expected to reach more than $5 billion, according to eMarketer and digital ads are expected to make up about 40% of that. Continuing its growth, regional spend on digital ads is expected to reach 28 percent of total ad dollars spent by 2022, with Google search ad spend accounting for the lion’s share.
The contradiction here is that despite declining ad spend, television consumption in the region shows no sign of slowing down. Even though the greater portion of time spent with media is through the internet in UAE – an average daily time a user spent is over 7 hours – there is still a significant TV viewing time of 2 hours 30 minutes. And MENA as a region has a substantial 5 hours average daily tv viewing time.
The surge in free to air channels, the rising penetration of video on demand and streaming networks, and COVID-induced quarantines are all expected to further contribute to a spike in TV consumption patterns at least for the near future.
The key takeaway here is that marketers and brands in the UAE are presented with a unique opportunity in terms of a large population (9.6 million), that consumes media across diverse traditional and digital channels (Television, Newspaper, Facebook, Instagram, Google Ad Networks, Snapchat, Tik Tok etc.) and are extremely tech-savvy (99% social media penetration) and connected (99% internet penetration).
The Omnichannel Marketing Imperative
Omnichannel marketing is simply unifying multiple marketing channels in a way that creates a logical progression for your target audience to progress from one stage to the next. The various channels (SMS, Email, Ad Networks, Facebook, YouTube, Instagram etc.) need to work together and provide context for the messages your customer receives as they move from one channel to another. The biggest advantage of omnichannel marketing is that it creates a win-win situation for both the consumer as well as the brand. From a brand’s perspective, it improves engagement/conversion rates at a higher ROI; for customers, it provides a connected brand experience regardless of the channel they chose to interact with the brand.
An omnichannel marketing strategy essentially stands at the crossroad that connects in-store retail, ecommerce, customer engagement & marketing.
There are several reasons as to why retailers and brands in the UAE are perfectly poised to leverage the benefits of omnichannel marketing to improve brand loyalty.
Let’s dive in.
Investments in AI & Big Data
Omnichannel marketing leverages AI and Big Data to improve personalization and improve ROI by automating the channel mix for every customer based on his/her response and conversion rates. And the UAE government has been focussed in investing heavily into AI and digital initiatives. His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai recently approved the UAE’s action plan on artificial intelligence and digital economy. In 2019, Sheikh Mohammed had appointed a full-time minister to increase the contribution of the digital economy from 4.3 percent of GDP to 8% in the next 5 years.
Omar bin Sultan Al Olama, Minister of State for Artificial Intelligence, Digital Economy and Remote Work Applications, recently released a comprehensive plan that focuses on providing tools and infrastructure to support the UAE’s leadership in digital transformation initiatives. The larger business community in the region shares a similar view in terms of technological adoption; a PwC report states that digital transformation is the key priority for 88% of Middle East retail CEOs.
Faster Retail Recovery from the COVID Crisis
The United Arab Emirates is predicted to be 6th best performing market in 2020 (of the 49 economies compared by GlobalData) with spend growth remaining in the positive territory, mostly due to the short lockdown period of just two weeks for non-essential stores.
With lockdown restrictions for non-essential items being lifted in the UAE, retailers have started reopening stores with safety and hygiene measures that are likely to be used as a benchmark for other brands that are considering how they can operate safely.
While the recovery in retail and consumer consumption is optimistic, brands are likely to be cautious about launching large scale campaigns. Omnichannel marketing presents a unique opportunity for brands to launch highly targeted and personalized campaigns and loyalty program initiatives even with a constrained budget.
As adoption of 3G and 4G services gathers pace, the next stage of the region’s mobile revolution will be driven by the launch of 5G networks.
This technology, the GSMA estimates, will cover about 30 percent of the region’s population by 2025, with Ericsson predicting 17 million 5G subscriptions by 2023. To put it into perspective, that’s almost the same number as the total number of mobile connections in the region two decades previously.
The UAE is also the third most-connected country globally, after US and Switzerland and the Telecommunications Regulatory Authority of UAE has established three committees, including all stakeholders (operators, manufacturers, academia and users), to synergize the 5G rollout in the region. This initiative by the TRA works with several strategic partners to make UAE a leading country in deploying 5G.
Accelerated Ecommerce Growth
Even before the pandemic, the UAE was the first growing ecommerce market in the region and was projected to grow at 23 percent annually between 2018 and 2022.
A recent survey conducted by Ernst & Young found that 92 per cent of the consumers in the UAE have changed their shopping habits – including shifting to online purchases. Around 68 per cent of UAE consumers said that Covid-19 led to their first online grocery purchase, while 70 per cent have made their first online purchase from pharmacies.
According to PwC, 53% of Middle East respondents had increased their use of smartphones for shopping in response to the pandemic. The results also suggest in particular that shopping via smartphones will continue to rise after lockdown ends, with 92% of those consumers who increased their shopping via smartphone reporting that they were “very likely” (63%) or “likely” (29%) to continue with this purchase method once social-distancing measures are removed. In essence, the impact of COVID-19 has forced change: consumers who were previously resistant to using mobile payment channels discovered that purchasing goods and services on their smartphone was not only easy but convenient too.
Recently, ZON, hailed as the “the region’s first fully decentralized mobile-only ecommerce network,” raised $8m in seed funding, ahead of its launch later this year. Meanwhile, Mumzworld, an online baby shop, reported an 800% increase in activity across channels. There have also been instances of traditional retailers partnering with online retailers – for instance, Emaar Malls partnered with Noon.com to launch a Dubai Mall virtual store to support retailers and the community during the lockdowns.
Significant Millennial Population
Millennials account for 30% of the population in the UAE and they are characterized by extreme digital-savviness and high spending potential. Being digital natives, they also account for the heaviest consumption of digital content, clocking at least 6 hours of Internet usage every day across multiple channels. Video content networks, especially YouTube is an extremely popular channel within the millennial demographic with more than 50% acknowledging that their shopping was influenced by YouTube videos/ads.
Surge in Social Media Usage
With 9.73 million social media users, UAE has a whopping 98% social media usage rate. YouTube leads the pack with 8.65 million users, followed by Facebook (7.77 million), and Instagram (6.68 million). Amongst the messaging apps, WhatsApp has the highest adoption rates with 7.77 million active users. Millennials account for 45% of social media users. Marketers can leverage omnichannel marketing to create highly engaging, rich media content across multiple platforms to progressively nudge users to the next step in the purchase cycle.
While omnichannel marketing is universally relevant and seeing rapid adoption across the globe, the United Arab Emirates is fortuitously placed in unleashing the full potential of the technology.
It is shrinking. And shifting.
According to the 2019 survey by McKinsey, brand loyalty among the Middle Eastern consumers has eroded. 18% of the Middle East consumers confessed trading down (purchasing lower-priced consumer goods) in 2019 as compared to only 8% in 2015. Not surprisingly, the trend has only grown stronger with the 2020 pandemic.
These consistent and visible changes in consumer behaviour are a result of various concurrent factors – economic slowdown, the volatility of oil prices, government reforms, tax policies, and, more recently, COVID-19.
Overall, the Middle East consumers are less optimistic about their financial prospects and prefer to save more. Interestingly, retail analysts have observed that shoppers are shifting to lower-priced brands and intend to ‘stick’ with their new choices, even if their financial prospects improve. It indicates that the perceived (and real) quality of lower-priced brands has increased, with more consumers trying them.
Apart from price-sensitivity, we also see a shift towards more ‘conscious shopping.’ Preference has increased across all age groups, including the younger generation, for environmentally sustainable goods, all-natural ingredients in food and beverages, and locally sourced products.
Distrust for the conglomerates and larger brands, tripled with a sense of belonging towards the nation and a responsibility to revive the economy, is also visible in the purchase behaviour of millennials. They are ditching years of brand loyalty in favour of lesser-known local brands.
COVID has also accelerated the shift towards online shopping by leaps and bounds. So much so, that over 90 percent of consumers in the UAE and Saudi Arabia have shifted their purchases online. For example, Carrefour has experienced an 800 percent spike in online grocery orders in Saudi Arabia. Similarly, Majid Al-Futtaim Retail has welcomed a 300 percent growth in online sales from March to May 2020 as against the same period in 2019.
Loyalty Program Trends in the Middle East
With such drastic changes in shopping behaviour, retailers need to adapt and change the way they engage the Middle East consumers with their brand, ethos, and products. Quick fixes like deep discounts and price cuts would not be a sustainable approach and might lead to long term damage to the brand’s bottom line. Hence, engagement through emotional loyalty aligned with the evolved needs of the millennials becomes extremely important for the Middle East retailers to adopt.
On that note, here are our top loyalty trends that are likely to prevail in the Middle East.
Digital-first, omnichannel loyalty programs
Smartphones have eroded the differences between online and offline shopping experiences.
70% of loyalty program members currently access their rewards using an app. Like for everything else, consumers want to be in greater control of things. And loyalty is no exception. Businesses adopting omnichannel strategies using the latest loyalty software are seeing 91% higher customer retention rates than those that fail to adopt these techniques.
Retailers should thus focus on investing in channel-agnostic loyalty marketing technologies that provide a convenient, win-win platform for brands and consumers to interact and engage as well as exchange and track value across channels in a highly transparent manner.
Sustainability and social-consciousness in reward programs
As the younger generation becomes a truly glocal one, ‘responsible consumerism’ is fast catching up.
48% of MENA’s millennials only buy from socially responsible brands. And 45% prefer buying from local brands as an expression of solidarity with the local economy.
For brands that want to retain their customers in this heat of economic upheaval and rising competition, it becomes essential to offer a reason more substantial than a “points-based loyalty system.” Retailers should thus look at helping their consumers support a cause they care about when shopping for the category (say environmentally safe packaging in food or indigenous community-led fashion production).
Data-driven, engagement-based loyalty program
According to research by Forrester, emotion is the #1 driver of loyalty.
A study by Capgemini further reveals that ‘Consumers with high emotional engagement’ buy the brand 82% of the time whereas ‘Consumers with low emotional engagement’ buy it only 38% of the time.
The emotional engagement of consumers has today become extremely easy to notice, measure, and reciprocate. Positive interactions on brand’s owned channels (Instagram, Facebook Live), reviews and references, and participation in online activations (contests, etc.) – are all signs of emotional bonding. As price sensitivity increases in the Middle East, brands should appreciate and reward such non-spending but emotion-driven behaviour.
Coalition reward programs
A consumer’s shopping list is a long one.
And your brand is just one of the line items. Thus, when formulating loyalty programs, it is vital to consider the consumer’s entire lifestyle and allow scope for deriving loyalty benefits across the board.
Shared loyalty programs do just that. They allow redemption of loyalty rewards in multiple ways, at various places, and in numerous categories. Led by the participating brands themselves or independently branded by loyalty rewards program providers (such as Plenti in the US and Nectar in the UK), these offer freedom and flexibility to consumers. They also attract new customers from related categories if you strategically choose a partner with a shared demographic of customers.
Personalized, contextual rewards
The person before purchases.
What millennials expect from brands is to be understood, followed, and remembered as human beings. It is all about making them feel special. According to statistics, 91% of consumers are more likely to shop with brands that provide offers specific and relevant to them, and 31% of shoppers wish their shopping experiences were more personalized than they currently are.
It means something like offering a complimentary fashionable face mask to a consumer who may have ‘liked’ and ‘shared’ it from your Facebook page but didn’t end up buying. Today, there’s technology like Capillary’s engagement-based loyalty program to make it happen at scale!
Gamification and geolocation in loyalty programs
A good loyalty program has neuroscience behind it and is experiential in nature.
Brands that incorporate gamification into their customer engagement strategies see a 47% rise in engagement and a 22% rise in brand loyalty.
Loyalty gamification starts with a clear idea of what consumer behaviour to inspire, a simple-to-follow set of rules, and an easy way to know where the participant stands in the process. Starbucks, for example, uses push notifications to alert customers of their rewards status. And Florida’s Good Vibes Juice Bar makes loyalty shareable by inviting customers to post pictures of their glass bottles online.
The 2020 COVID pandemic has made it very clear to retailers that shopping behaviour can change overnight. Consumers who had never shopped online before or never cared to try little-known local brands are doing so out of financial uncertainty and a sense of responsibility towards their country. Softer aspects of personalization and corporate social responsibility (CSR) are adding their weight alongside technology and gamification. Embracing these shifts will require a considerable realignment in the way retailers engage with new-age shoppers and earn their loyalty.
It is the dawn of a new age of consumerism – one where consumption is a way of self-expression.
Even before the COVID pandemic, consumers and businesses in the Middle East were reeling from the socio-economic impact of tumbling oil prices, digitization and geopolitical instability.
Consumer sentiments around job and financial security in the region have been steadily declining in the last 2-3 years. A 2018 report by Mckinsey that surveyed Saudi Arabia and Egypt and UAE found that more than half of the consumers (55%) now look to spend less and save money. This trend will be further amplified by the ongoing COVID crisis, but supplemented with higher adoption of digital channels.
The Winds of Change
The pre-existing purchase power fluctuations and the recent apprehensions around health/hygiene have heavily impacted the shopping behaviour of consumers in the Middle East. And more importantly, it has fundamentally shaken long-standing customer-brand relationships and led to a large number of customers migrating to cheaper, better-value alternatives.
The McKinsey report also reveals that more than half (54%) of those who have chosen lower-priced alternatives were satisfied with their decision; which is an indication that the trend is likely to be sustained in the future.
These shifts in consumer behaviour are especially interesting in the Middle East context – it’s often perceived as a bastion for luxury shopping and where the large majority of the populace prefer to purchase from a narrow and select set of brands. The rise of ecommerce in the Middle East led to consumers searching out lower prices and offers on their preferred brands. The current zeitgeist seems to be a cost-conscious hunt for cheaper alternatives.
What’s Eroding Customer Loyalty in the Middle East
Consumer behaviour shifts usually don’t hinge on a single entity and are typically driven by a collective system of change factors. Here are the major ones impacting customer loyalty in the Middle East.
Rapid Rise of Ecommerce
While ecommerce had a slow start in the region, it has steadily picked up pace in the last 2 years. Saudi Arabia’s ecommerce market is expected to hit 9 billion USD by 2025, rendering it one of the fastest-growing ecommerce landscapes in the world. The COVID crisis further accelerated ecommerce adoption in the region, especially for the grocery and personal care segment.
The ecommerce shift will surface new-age brands and expose consumers to high-value, cost-effective alternatives to their preferred brands. For instance, the rise of ecommerce in India has led to traditional companies in the personal care, FMCG and electronics space losing wallet share to digital-first consumer brands like BoAt, WoW Skin Sciences and MamaEarth. Consumer affinity towards these brands is highlighted by the fact that most of them have crossed INR 100 crore in revenue within 24-36 months of launch, a feat which used to take 5+ years earlier.
The Middle East also enjoys a high smartphone, internet and social media penetration which has connected the digitally-savvy population with global brands and digital-first labels. The integration of native commerce by social networks like Facebook, Instagram and Pinterest is further likely to entice consumers towards newer brands that are more cost-effective and promise higher value.
The COVID Pandemic
The pandemic contributed to declining customer loyalty in two ways: by accelerating ecommerce adoption and shrinking the consumer wallet share. The closure of shopping malls and stores as part of lockdowns imposed to curb the spread of the virus has compelled a large segment of consumers to shop online.
This shift in consumer behaviour is particularly visible in GCC, according to research by Ernst & Young (EY). The firm conducted a survey in the first week of May that revealed that 92% of consumers in the UAE and Saudi Arabia had changed their shopping habits, with 52% terming the change “significant.” While Carrefour’s online grocery platform in Saudi Arabia saw an 800% spike during the COVID pandemic, Majid Al-Futtaim Retail witnessed a 400% YoY growth in orders and a 300% YoY growth in online sales between March-May 2020.
The COVID-induced job losses and salary cuts have also led consumers to tighten their purse strings and look for ways to save money. According to a report by Inmobi, 19% of users in Saudi Arabia said they had seen salary cuts or a loss in business, while 15% said they were laid off or had to shut down their business. The impact has been more severe in the UAE where 28% of people polled in the survey said that they have already dealt with salary cuts or a loss in business. According to a Mckinsey report, 92% of consumers in the UAE have tried a new shopping behaviour in the post-COVID world (in terms of new store, brand, product or channel)
The Large Millennial Population
The Middle East is home to around 108 million millennials and they account for about 60% of the population. Globally, millennials are notorious for their fickle brand loyalty and only 7% of millennials identify themselves as brand loyalists. However, millennials in the Middle East are an outlier here – a Google Consumer Barometer study found that millennials in the region demonstrate more brand loyalty than their peers in the US, the UK, Japan or Australia.
A significant number of millennials in Saudi Arabia and the UAE considered just one brand before a purchase But there is a flip side to this narrative. However, higher millennial loyalty has a price tag attached to it in the form of higher expectations.
The Google report also mentions that Arab millennials have a shorter supply of patience and are less forgiving when it comes to encountering bad user experience, especially on mobile devices. It mentions that 43% of millennials in Saudi Arabia will switch to a mobile-optimized site if they experience any problems.
While this trend will not directly lead to a decline in brand loyalty, the lack of focus on customer experience and user experience – especially by newer entrants who rushed their ecommerce launch- will cause a significant number of consumers to switch loyalties.
How Brands Can Adapt to the New Loyalty Narrative
Adapting to these rapid changes and fluctuations in customer behaviour and brand loyalty can be tricky. But it’s not impossible. Based on our experience with 400+ global retailers and insights from millions of customer interactions, here’s what works :
- Create Digital-first, Omnichannel Loyalty Programs
With a large segment of consumers migrating to ecommerce, retailers should ensure that their loyalty programs seamlessly adapt to digital channels like websites, mobile sites and apps. More importantly, they should maintain a unified platform for storing user data, purchase history and other membership details to enable a great omnichannel experience, regardless of whether the customer shops online or in-store.
- Offer Adaptive & Personalized Rewards
With consumer behaviour in constant flux, it’s vital for brands to offer a highly personalized loyalty scheme that adapts quickly to these behavioural changes. Personalized loyalty programs powered by advanced analytics lets you predict the probability of a customer to redeem an offer, target specific segments at the right moment in the purchase cycle or dynamically change offers/promotions/points based on recent purchase behaviour of a specific customer.
- Drive Deeper Engagement through Emotional Loyalty
In a crisis situation where the purchase intent tends to be low and there is higher friction towards spending, it’s important for brands to shift away from the traditional earn/burn loyalty program models. Emotional loyalty programs that are built around communication and engagement rather than transaction has been proven to be especially effective in these circumstances. For instance, retailers can leverage the higher social media and digital usage to reward customers for writing reviews, liking/sharing brand posts or taking part in contests.
- Double Down on Customer Experience
Perhaps the single biggest factor that influences customer loyalty is Customer Experience. Ecommerce brands in the Middle East and everywhere in the globe should prepare for higher traffic, orders, returns/cancellations etc in a strategic way. The first thing to consider is your ideal customer segment and their immediate shopping list (eg:- grocery, personal care, safety/hygiene products etc). Next up, fix disrupted supply chains, and have clear communications with manufacturers about production capacities. And finally, make sure you communicate supply chain issues, delay in delivery or fast selling products on your product pages. This honest and open communication allows you to manage customer expectations and prevent negative experiences later.
The COVID crisis and the digitization policies by GCC governments will make the fight for customer wallet a whole lot fiercer in the coming days. Brands and businesses in the Middle East seeking to gain a competitive edge should leverage smarter analytics, engagement-based loyalty programs and new-age customer experience platforms to ensure they stay ahead of the competition.
The New Lost Generation, The Disruptive Generation, The Loneliest Generation, The Burnout Generation….
The above monikers have been tagged to Millenials at various points in the last few years. The veracity of the above terms are subjective but one thing we can collectively agree on is that they are the ‘Most Researched Generation’.
But why are the millennials in the Middle East and around the world so intensely scrutinized?
On the surface, it’s easy to attach straightforward and templatized personas to this segment – they are born between 1981 and 1996, they don’t leave their homes without their smartphones, they’re obsessed with social platforms like Snapchat and Instagram, and they’re more vocal when it comes to issues like social inequality, climate change and oppression of freedom.
So why are brands and research agencies spending millions of dollars to study their psychographics and behaviors?
There are many, but these two are the biggest reasons :
First is their sheer spending potential – In 2018, the global millennial spending power was calculated at a whopping $2.5 trillion!
And secondly – their familiarity with technology is at once disrupting and shaping the future of everything from media, manufacturing, education, retail and transportation.
How are millennials in the Middle East different from their global peers?
Numbering around 108 million, millennials account for about 60% of the population in the Middle East. And while they share a lot of common behavioural and ideological traits with their counterparts in the rest of the world, there are certain areas where they deviate considerably from their peers.
Here are a few of them :
Higher Spending Power: According to Visa, when concerning travel-related spend, millennials in the Middle East are the highest spenders globally, typically spending twice as much as their European counterparts. As the Middle East’s largest consumer base, brands need to be asking themselves: ‘How do we attract and engage this market?’
Wider Generation Gap: Due to widespread online connectivity which has opened visibility to a diverse world, the gap between millennials and the previous Arab generation is considerably wider than is the generation gap in most other cultures.
Juan Cole in his book “The New Arabs: How the Millennial Generation is Changing the Middle East” shares that millennials in the Arab world are universally less religious and observant than generations that have preceded them. Cole adds that many millennials in the Arab world also tend to be more liberal than older generations.
Greater Brand Loyalty: According to a Google study, millennials in the Middle East have more brand loyalty than their peers in the US, UK and Japan. A significant number of millennials in Saudi Arabia and UAE considered only one brand when they buy.
More Entrepreneurial: A report by HSBC states that UAE and Saudi Arabia are home to the highest number of millennial entrepreneurs globally, outpacing China and Hong Kong. The average age of Middle Eastern entrepreneurs is around 26 years and they also seem to work the hardest – clocking 12.5 hours average workday which is 2.5 hours more than the global average.
Middle Eastern Millennials: Brand Preferences, Life Priorities & Personality Traits
Not Afraid to Challenge the Status Quo
Most of the Millenials in the Middle East were brought up with a strong sense of the region’s tradition and culture. This has fostered a strong sense of identity and pride amongst this segment which they intend to pass down to the next generation. However, they are not the ones to follow traditions blindly and being an increasingly global generation, they are open to change and question certain ideologies that are a hindrance to the progress of the country. In a nutshell, millennials in the region are an empowered generation who are vocal about their feelings and not afraid to express themselves even if it goes against societal norms.
Always Connected & Extremely Digital-savvy
According to the 11th annual Arab Youth Survey, 9 of every 10 millennials in the Middle East use at least one social media channel every day, and more often than before. The specific platforms usage differ greatly by country.
Facebook continues to find a large, growing audience. With 38 million users each day, Egypt is the MENA region’s largest Facebook market. Visual social networks like YouTube and Instagram have seen rapid growth in the region. Instagram has 63 million users in the Middle East and Turkey is the sixth largest Instagram market in the world, while Kuwait, Bahrain and Israel also have a large percentage of Instagram users.
Saudi Arabia leads the pack when it comes to YouTube – the country contributes 90 million views every day, 50% of which comes from smartphones. The rise of video consumption and content creation via YouTube has made online video the weapon of choice for marketers targeting millennials in the region. Other popular social networks are WhatsApp (75% penetration), Snapchat (large user base in Saudi Arabia and Turkey) and Viber.
Millennials in the Middle East are generally less interested in traditional forms of democracy and showed little to no interest in political parties. Only 36% of young people in the Middle East believe that the situation in Arab countries has improved after the Arab Spring.
According to the Burson-Marsteller Arab Youth Survey, 53% of Arab millennials believe it’s more important to have stability than democracy and 67% think that Arab leaders must work harder to improve citizens’ human and privacy rights in the region, as well as women’s rights. Millennials in the Middle East are also generally less religious than previous generations with 52% stating that they believe religion plays too central a role in the Middle East.
Millennials in the region care about the world they live in and want to make it a better place. The digital explosion has armed them with instant access to information and they keep a close tab on CSR initiatives undertaken by brands and the overall behaviour of a business. 48% of the millennials in the region said they only buy from socially responsible brands and 45% of them recognize and support local emerging brands as long as they resonate with their ideals.
This generation has a lot on their minds – increasing cost of living, unemployment, loans/financial burdens and a wide range of social and political issues within their country. A survey by IPSOS revealed that only 6 in 10 millennials are optimistic about their future, especially under the current economic conditions and they are spending even more cautiously than they have in the past. However, many of the millennials enter the workforce with high aspirations of climbing the career ladder or setting up their own business.
Engagement Strategies for Connecting with Millennials in the Middle East
The key to being successful is to create an engagement strategy that incorporates the above insights while being mindful of the socio-economic backdrop of the region.
Here are a few tips to help you get started :
Personalized, Cross-channel Engagement across Social Media
As evident from the above stats, Arab millennials rely heavily on social media for their daily dose of news, entertainment, product discovery, and of course, catching up with friends and family. So it’s no surprise that getting social right can make or break your engagement strategy in the region.
Brands will need to step away from creating siloed, disconnected and generic social media content and create a connected, holistic and personalized engagement across multiple channels like Facebook, Instagram, YouTube, Viber, WhatsApp and Snapchat.
The key to achieving this is through investments in two emerging technologies: Customer Data Platforms to create a Single View of customers and intelligent customer engagement platforms with cross-channel capabilities, like X-Engage.
Authentic, Story-driven Approach
In the Middle East, millennials have significantly more brand loyalty as compared to their global peers. A large majority of them believe that the brands and products they use reveal a lot about their lifestyle and personality. Therefore it becomes doubly important to clarify what your brand stands for and its core values.
Be authentic in your tone and try not to think of social media as another “sale-sy” advertising outlet. While this rings true for any audience, it is especially relevant when it comes to millennials. Make your content story-driven, especially when showcasing your products or how it positively impacts the lives of customers. According to an analysis conducted by the Institute of Practitioners in Advertising (IPA), emotional storytelling outperformed their rational counterparts with almost double effectiveness.
Video & Visual Content Focussed
It’s no surprise that brands with great visual and video content garner massive engagement in the region. Millennials in the Middle East spend over three hours per day on online video – that’s more than both messaging apps and games combined. They are also twice as likely as their global peers to post content online and show others how to do things online. We recommend a mix of educational, entertaining, engagement-provoking and promotional visual content across Facebook Live, Instagram stories, YouTube and TikTok to maximize your engagement in the region.
Brands and marketers will need to think of mobile as more than just a medium or channel. It’s going to be a critical entity in almost all future digital experiences like AI, VR, AR, IoT etc. Millennials in the Middle East have a higher propensity for smartphone usage compared to their global counterparts. More than a third of millennials in Saudi Arabia use ONLY mobile phones as their internet access device and 34% of youngsters in the UAE watch videos on their smartphones several times a day. This makes them less-forgiving while encountering accessibility issues and other rendering glitches on the mobile.
Millennials are fidgety, distracted and want to get a lot done in less time. They want digital experiences that revolve around their lifestyle. Brands will need to adopt agile marketing strategies and technology solutions to keep up with their constantly evolving interests, needs and behaviour. While it might seem like a whole lot of effort to capture the attention of this audience, their massive spending power and strong brand loyalty more than makes up for it in the long run.
The future looks good.
Despite the bleakness, we see at the moment. Or…may be, to some extent, because of it.
India is all set to exhibit a very organic and real boom in the eCommerce space in the next 5-7 years.
Tier-II and Tier-III cities will propel this boom, ably supported by public policy and private investment to fuel the adoption of the internet, smartphones, and digital wallets. PwC’s report, ‘Propelling India towards global leadership in eCommerce,’ highlights that the Indian eCommerce market will exceed 100 billion USD by 2022.
That is huge!
‘Retail & E-commerce. Shaping New India’s Economy’, a report by Invest India, National Investment Promotion and Facilitation Agency illustrates that by 2025, internet penetration is likely to reach 55% or more of the entire population of the sub-continent. And the number of online shoppers is estimated to multiply from the current 15% to 50% of the online population by 2026.
Interestingly, this next set of eCommerce users in India, coming from the semi-urban and rural societies, will be very different from those today.
With newfound purchasing power and generations of unmet aspirations, coupled with attractive avenues for consuming glocal products and services, today’s business assumptions, strategies, and technology will not suffice in the fast arriving tomorrow.
Paradigms will break.
Stereotypes will shatter.
And newer opportunities will manifest themselves in manifold ways.
Retailers in India and abroad, looking to co-write this Indian growth story will need to be mindful of various ecommerce solutions along with the softer aspects of this new Indian online shopper.
We’ll also take a more in-depth look at everything from demographic changes to the social-economic impact of the COVID pandemic.
…and, of course, the not-so-silently spreading digital footprint in this multi-lingual, multi-ethnic, multi-cultural phenomenon that we call Bharat.
Factors Spurring India’s Ecommerce Growth Story
By 2030, India will have nearly ninety million (90 million) new households headed by millennials. And, with a median age of thirty-one (31) years, India will remain one of the youngest nations in the world. This demographic dividend will not only provide a healthy and dependable workforce to the manufacturing and service sectors but also set in motion the network effect from faster and more widespread technology usage and innovation.
By 2021, India will likely have more internet users (846 million) than the entire population of ‘six G7’ countries. Roughly 80% of these users will be on mobile. The ‘Digital India’ thrust by the government, and the success-in-making of Jio’s affordable smartphone and incoming 5G revolution, are achieving just that. It is only evident that these ‘late adopters’ and the ‘late majority’ will look for novel ways to get things done at their fingertips.
Almost overnight, more Indians than ever before have started buying day-to-day essentials and non-essentials online, triggered by the fear of catching the COVID infection in crowded public places, even the neighborhood stores. This dramatic attitudinal shift is likely to continue and become the status quo post the pandemic as well. As parts of India open up their economy and relax the lockdown, more and more Indians will shop online, discarding decades of inertia in months or even weeks!
By 2022, the Indian middle class (with annual income between 7.5k-37k USD) will be the largest segment of the population. The new entrants into the consuming class will also include rural India, where per capita consumption will grow by 4.3 times compared to 3.5 times for urban Indians. Thus, easy access to basic amenities and high disposable income will increase their’ ability’ to purchase products and services hitherto unexperienced by them.
How Brands Can Stay Ready for the Next Wave of E-commerce in India
With roughly 40% of the population estimated to be unexposed to the internet by 2022, India has a lot of headroom for eCommerce growth, but not without some challenges.
For instance, the new eCommerce regulation policy which was redrafted, but put on hold, given the COVID situation.
Corollary to this is the Personal Data Protection Bill, which proposes to localize data storage.
These policies, coupled with the general economic slowdown, create a ‘not-so-straight’ way forward for the eCommerce sector in India.
Hence, we have put together some strategies in the eCommerce space, which will help you secure your market presence and dynamically adapt to the changing equations:
The upcoming big Indian eCommerce blast will be ‘social commerce.’ Success stories from giants like Facebook and Instagram and start-ups like Mall91 and Meesho have set the stage. Embracing social commerce – with video selling, chatbots, and group shopping for discounts – will help sustain in the new normal.
Personalized communication is to eCommerce what face-to-face interaction is to brick-and-mortar. Capturing data will be necessary to link disconnected bits of information (across devices and omnichannel) into a coherent consumer understanding – unique for each individual.
The new e-shoppers will prefer simple conversations to website interfaces. With more app installs for WhatsApp than for Amazon or Flipkart, semi-urban India is already well primed for something like ‘WhatsApp for Business,’ or simply referred to as WhatsApp Commerce which facilitates catalogs, customer engagement, checkout, and payments, all via chat.
Consumers will shop on different devices, from different locations, online and offline. Tying it all together will be extremely important to identify, analyze, and influence purchases. eCommerce players will need to use cross-channel integration platforms like Customer Data Platforms (CDPs) to unify data across email, mobile, digital wallets and in-store POS systems.
Artificial Intelligence (AI) and Augmented Reality (AR)
Adopting AI and AR will remove various eCommerce limitations. AI will enable chatbot based commerce over apps like Facebook Messenger, using Natural Language Processing; AR will digitize the brick-and-mortar experience for enhanced sensorial appeal and seamless data capture.
Getting your own website ‘eCommerce ready’ by investing in ecommerce platforms will be necessary. It will help reduce dependency on marketplaces like Amazon and Flipkart to enable transactions. You will not only increase your bottom-line but also get complete ownership of your shopper conversion cycle and access to rich consumer data.
To bridge the app-browser divide and integrate mobile in their digital strategy from the very first steps, eCommerce brands can utilize Progressive Web Apps to offer app-like experience and even send push notifications via mobile browsers. This will be critical for a country like India where the majority of smartphone users own a mid-segment device which has limitations in terms of memory and storage.
Amazon’s drone-based delivery and DMart’s ‘Pick up Points’ are both inspired by the need for on-time, hassle-free product delivery. Similarly, brands may need to automate their logistics and partner with hyper-local courier services to walk that extra mile for every consumer.
To sum it all up, we would like to conclude with this thought: When the bad times are over, good times will come. Prepare yourself, enhance your capabilities!
We had previously covered how retailers can successfully deal with the Covid pandemic and chart out a road to recovery based on our learnings from China.
Southeast Asia, India & the Middle East are now 3-4 months into the pandemic and the crisis has impacted each of these regions in different ways; depending on the socio-economic factors, lockdown extensions and how the government in each region responded to the crisis.
While there have been spikes in online commerce, especially around essentials in all of these regions, we wanted to dissect the in-store data of the 50+ brands across 10,000 stores in these regions to :
- Understand the overall retail impact of Covid-19 in Southeast Asia, India, China & the Middle East from March 2020 to May 2020
- Do a deep dive on the current state of Apparel & Fashion industry in these regions
- Analyse how consumers are shopping in these uncertain times
Impact of Covid on Southeast Asia’s Retail Market
At a broader level, the restaurant and hospitality segments in Southeast Asia have been badly hit. The Sales-Per-Store has been on a steady decline across retail over the last 3 months and plunged to more than 80% in the first week of May.
Surprisingly, the Apparel & Fashion sector in SEA has a relatively lower dip in sales and store footfalls are at 50% of pre-Covid levels.
Covid Impact on Southeast Asia’s Apparel & Fashion Industry
Apparel sales in SEA tanked during the peak of lockdown and the highest dip of 66% was observed at the end of March. Overall, sales have been hovering around the 30% mark until the first week of May.
Finding 1 :
Within the Apparel segment, the footwear category is worst hit, with sales still lower by 65% as compared to last year
Finding 2 :
The second week of May saw a surge in Apparel sales (+6%), possibly due to a shift in Ramadan dates this year.
Finding 3 :
Customer footfall is still at approx 50% as compared to January and has remained stable from Mid-April to Mid-May.
Correlating Finding 2 & 3, we predict that the worst may be over for the Apparel & Fashion industry (excluding footwear segment) in SEA and sales will continue to increase steadily over the next few weeks.
Impact of Covid on India’s Retail Market
Channel-wise data indicate severe disruption for Indian retail brands with a sharp 60%+ drop in sales and footfalls have been at 36% of January even after the easing of lockdowns.
While grocery and essential sales are relatively less affected and should recover soon; food, hospitality and apparel brands may have to wait a while for sales to reach pre-Covid levels.
Covid Impact on India’s Apparel & Fashion Industry
The apparel sector in India saw a severe slump during the lockdown, with sales grinding to zero for most of the brands.
Finding 1 :
There has been a revival in apparel sales from Single Brand Outlets in the first two weeks of May
Finding 2 :
Sales data from the first two weeks of May indicate people are purchasing more number of lower-priced products, possibly in bulk quantities
- (+) Average Transaction Value, (+) Average Basket Size, (-) Average Product Price
- Key Insight
There have been some positive signals in terms of sales & customer footfalls in the first two weeks of May. We expect it to sustain and improve as the lockdown restrictions are further eased.
Impact of Covid on Middle East Retail Market
The online food & grocery retail is experiencing a major surge in the Middle East with average sales increasing by 200% and Order Values increasing by 50%. However, the closure of malls resulted in almost 50-60% slump in sales across F&B, Jewelry, Fashion & Luxury categories.
Amongst these worst-hit categories, the Luxury segment has seen a massive slump with sales dropping by 90% from the 1st week of April and footfalls hovering around 9% of what it was in the first week of January.
Covid Impact on Middle East Apparel & Fashion Industry
The apparel market in the Middle East has shown a decline of -65% during the peak but there has been an uptick in sales during the first two weeks of May.
Compared to January 1st week, store footfall levels are currently at 38% after hitting a peak slump of 20%.
The surge in apparel sales during the first two weeks of May could be attributed to malls gradually reopening with reduced hours, and partial reduction in restrictions in the region. While it’s too early to make a conclusive prediction, our data hints at the early stages of a revival.
Impact of Covid on China’s Retail Market
Overall retail sales in China plunged 20% in March as it struggled to contain the pandemic. Our data revealed a drop of over 65% in Average Sales per Store between January & March.
Two months later, the country has seen a sharp drop in new coronavirus cases and consumers have started venturing back into malls and restaurants. Restaurants that have rolled out plans for curbing the risk of infection are now allowed to open and most of the stores have reopened, though big brands like IKEA and Apple Inc have restrictions on crowds.
Covid Impact on China’s Apparel & Fashion Industry
From mid-April onwards, the sales per store which took a big hit during the lockdown are slowly coming back to pre-Covid levels. However, this differs from retailer to retailer – some have healthier sales than last year while others have fared worse.
Finding 1 :
Customer numbers (compared to the 1st week of Jan) indicate that around 70% of customers have come back to the store in the first two weeks of May.
China seems closest to pre-Covid levels of sales and consumption amongst all countries. However, there have been shifts in consumer behaviour that brands will have to be cognizant of as they prepare for the new normal.
The Way Ahead
While the worst may be over for retailers and brands, it will take some time for normalcy to set in. Until then, the key to surviving this crisis lies in sharing insights and learnings while adopting best practises from peers and partners across the globe. We would love to hear your thoughts and comments on how your brand is gearing up to face this challenge; do write to us at firstname.lastname@example.org.
For most of us, Covid-19 is the first time we have lived through a globally traumatic and emotion-inducing event, in real-time, with the whole world connected. From a brand’s perspective, Covid-19 has reminded us, rather dramatically, that emotions are a big part of our decision-making process and how fear, anxiety and panic can impact sales.
Based on our interactions with 400+ brands, Thought Leaders and Retail Experts, we’ve compiled some strategies focussed on enhancing engagement, maintaining top of mind recall and creating long-term emotional connect with your customers during these tough times.
Key Strategies to Build Emotional Connect
One of the easiest ways to connect with your customers is to empathize with the challenges and struggles that they are undergoing due to the crisis. There has been a massive shift amongst consumers preferring socially conscious and sustainable brands in recent years and this is a good time to showcase your brand as socially responsible and empathic when the times are tough.
Campaign Ideas :
The core idea should be to replace sales-oriented marketing campaigns and promotions with human stories centred around your staff, your customers and the larger community. This positions the brand as someone who cares about what consumers truly value rather than what sells. And by creating content that evokes empathy, consumers are more likely to take action – sharing, responding, and even prompting change within their own communities.
- First and foremost, remind your customers that you are there for them in any which way you can be.
- Your customers are your community – let them know how you’re responding to the crisis, how you’re conducting business, and what health precautions you’re taking.
- Ask your customers how you can support them during this time, and let them know how they can support your brand as well.
- Share stories that reiterate your commitment towards your frontline staff like paying their salaries in advance or setting up an emergency fund through SMS and on social media. Most importantly, encourage your employees to comment and share these posts to ensure maximum reach.
- Send a community wellness mailer on what your brand is doing for the community – for instance, opening up warehouses for providing refuge during quarantine, increase health care or basic pay for employees who are unable to make it to work etc.
Example: Store Closure Communication by Reformation
Sustainable fashion brand, Reformation, sent out this email to its customers that addressed how they’re responding to the crisis along with a note at the end asking them what they should be talking and posting about. By being candidly vulnerable about not being sure as to what they should talk about, they have been able to create empathy for themselves with their consumers. This small detail shows that they care about their consumers and are open to ideas (in the process elevating them to collaborators rather than just end users).
Align your message with ongoing health & safety protocols
Brands can echo or amplify government and health organization guidelines by serving as PSA disseminators during this crisis. By rallying your customers around a larger and pertinent cause, your brand gains a dual advantage – you cultivate the team spirit and tribe-like mindset amongst your brand audience, and more importantly, you position the brand as sensitive to the realities of life; thereby making it more humane and relatable.
Campaign Ideas :
These campaigns are great for apparel and sportswear brands where there is a strong brand preference and following amongst their customers. The key is to get the overlap between your brand story and the overarching PSA message right.
- Explore ways to weave your brand story into the ongoing narrative around safety and hygiene
- Use your Brand Heart (purpose, vision, mission, and values) as your North Star to remind yourself what your brand stands for, and how it relates to the current crisis
- Build a community activity around this, fostering a feeling of “we all are in this together”, and hence a large extended family.
Example : ‘Play Inside’ by Nike
The apparel giant put out a great campaign that encouraged people to ‘play inside’ to comply with the ongoing social-distancing measures enforced by governments. With the campaign, Nike managed to stay true to its inspirational branding while communicating a timely and relevant message. The brand encouraged customers to share home workout and fitness snaps on Twitter and Instagram to maximize brand reach and foster a feeling of community- online challenges are a great way to drive the cohesive mantra.
Focus on value-driven content
With the majority of the world’s population being home-bound, digital content consumption is at an all time high during the crisis. This is a great opportunity for brands to build stronger emotional connect with their customers by going beyond the usual transaction-based promotions and communications. Research in behavioural science and consumer behaviour has proven that these non-transactional engagements serve as building blocks for long term brand loyalty.
Campaign Ideas :
These campaigns are heavily context and content-driven so don’t worry too much about getting the technicalities right. A simple video shot on a mobile phone will do the trick if the story and content is engaging. Just be mindful of toning down the sales pitch and instead, focus on delivering helpful content.
- DIY videos and webinars are a great place to start – brands can communicate a range of useful and educational content around upcycling (Fashion & Apparel), repairs (Appliance & Electronics), recipes (QSR & Hypermarkets), beauty tutorials (Cosmetics) etc
- Curate ideas on optimizing WFH schedules, staying fit and other styling advice
- Gaming has also become a viable medium for brands to connect with their customers
- Offer free home trials of products, or leverage immersive technologies like AR to help customers visualise a look once they enter their basic body size parameters like chest, waist etc.
- Serve as a source of trustworthy information and even inspiration amid widespread uncertainties about public health and the pandemic’s economic consequences
Example : B Bounce by Burberry
Burberry has launched an engaging and playful game in which players race a deer-shaped character to the moon, using supercharged Thomas Burberry monogram puffer jackets. Players compete for special B Bounce prizes, and winners are awarded custom made GIFs and virtual Burberry puffer jackets edited onto a digital picture of their choice. With this campaign, the British fashion house intends to maximize digital share around its latest collection of down jackets.
Support a cause and provide an avenue for your consumers to engage with the community
Cause Marketing creates a win-win situation for the brand, the consumer and the charity. Across the world, consumers increasingly expect the companies they buy from to act responsibly and stand up for issues that matter. A survey by Havas found that meaningful brands that take a stand more than double the performance of stock indices on average.
Campaign Ideas :
If your finances permit, consider giving a percentage of each sale to an organization working to fight the Covid-19 crisis. This allows consumers to support the brand they love while also supporting those working to alleviate the impact of the epidemic. Here are some other ways to run a Covid-19 support campaign
- Make donations shoppable – select a charity helping those affected by the virus, then add an option to ‘buy’ the donation in your catalog.
- When customers “purchase” the donation, you can reward them with exclusive loyalty program perks
- Allow customers to use their loyalty points/birthday vouchers to donate to a specific fundraiser with brand matching the donation amount
- If financial contributions are not an option, consider letting out warehouses to host vulnerable sections of the society, or repurposing factories to produce hand sanitisers and face masks.
Example : Feed the Daily Wager by Zomato
Zomato launched the campaign to support the 450 million daily wage workers in India who have lost their livelihoods due to the lockdown. The brand has managed to raise USD 3 Million through donations and has distributed more than 100,000 ration kits. The campaign was widely circulated on various social media by Zomato employees and consumers and raked massive engagement in the digital universe. The Covid-19 clearly showed that customers prefer connecting with brands that go beyond their business model and work towards the larger good of the community. It’s notable to see that Zomato as a brand simply served as a platform for this campaign while all the donations have come from consumers and employees.
As you go about using these strategies, it’s important to remember that while business stability might be the primary focus for you, your customers are facing physical, emotional and financial strains during this time. In such troubled times, it is best to over-communicate rather than under-communicate. Much of the problem in the current crisis is uncertainty and the associated anxiety. Try to alleviate it by being in touch with your customers on social media and other communication channels. Send personalized messages to your customers to check in on them and share any uplifting or inspirational news about your brand as and when it happens.
Most of all, stay safe, and please feel free to reach out for anything.
*Note: This article was first published on March 30, 2020, and it has been updated on May 19, 2020
Predicting the Road to Recovery: Key Findings & Insights for Retailers on tackling the impact of Covid-19 *across China, Singapore, India and the Middle East
Roughly 50 days later after the initial lockdown, China has successfully stunted the spread of the virus, and the country is not only witnessing the recovery of economic fundamentals but showing signs of upward momentum.
China’s economic scale, strong resilience, digital penetration and flexible macro policies are among the major factors which led to the rapid recovery. We believe there are some important lessons to be learned from China on how to successfully deal with this epidemic and chart out a road to recovery in the coming months.
Our position as a leading omnichannel retail solutions provider for more than 400 retail brands in China, India, SEA and the Middle East has offered us a ringside view of how the epidemic unfolded. We collated data for 50+ brands across 10,000 stores in these three regions to understand the impact on retailers, the timeline as it unfolded and measures that can be taken to minimize the negative impacts of the epidemic.
We are happy to share with you these insights as you go about strategizing and planning your road to recovery during this crisis
TL-DR: In this article, we have tracked and analysed :
- Covid-19’s category-wise impact on China’s retail sector
- Key findings and insights on Covid-19’s impact in China before, during and after the lockdown period in Wuhan
- Key findings and insights on Covid-19’s impact in Singapore before and after the Dorscon Orange Alert + expected recovery timeline for Singapore’s retailers
- Key findings and insights on Covid-19’s impact in India + expected recovery timeline for India’s retailers
- Key findings and insights on Covid-19’s impact in the Middle East after the nationwide lockdown + expected recovery timeline for retailers
- Recommendations on charting a road to recovery for retailers
Covid-19’s Impact on China Retail
Recovery Period: 6th March 2020 to 15th March 2020
Overall, the epidemic has had a large short-term impact on the Chinese consumer market, and retail sales of goods have fallen sharply. From January to February, the total retail sales of consumer goods fell by 20.5% (YOY) while the retail sales of automobile and petroleum goods fell by 37% and 26.2% respectively; catering revenues fell sharply by 43.1%, and room revenue of accommodation businesses fell by nearly 50%.
Finding 1: Over 65% Drop in Average Sales per Store and a 79% decrease in Customers per Store
Finding 2: There was an increase in retail sales starting from March 6th,2020
After just 8 weeks since the initial lockdown, the retail market in China appears to be in the early stages of recovery. This is indicated by the surge in two key metrics: Sales Per Store & Customers Per Store in the past few weeks.
Pre-lockdown : 1st Dec 2019 to 25th Jan 2020
Lockdown Period: 26th Jan 2020 to 5th March 2020
Probable Recovery Period: 6th March Onwards
Compared to the lockdown period, in the “Probable Recovery Period”-starting from March 6th (we are calling it PRP as we see a surge in related metrics, need to see if this is sustained) retailers witnessed 22% increase in sales and 43% increase in customers.
*Update as of 19th May 2020
Finding 3: Store footfalls have reached 65-70% of base levels (1st week of January) starting from the first week of May
Finding 4: Sales per store which took a big hit during the lockdown is slowly coming back to similar levels as last year
- We are seeing an uptick in sales and customers after 6th March 2020. If we consider this date as a cutoff period, it has taken around 1.5 months for recovery to start after the Wuhan Lockdown (25th Jan to 5th March).
- It took around 3 months for sales and store footfalls to reach pre-COVID levels in China.
Covid-19’s Impact on Singapore Retail
Expected Recovery Period: Ongoing
*Timeline Reference :
Prior to Dorscon Orange Alert : From Jan 1st-Jan 23rd,2020
Post Dorscon Orange Alert : From Jan 24th-27th Feb,2020
Probable Recovery Period : Ongoing
Singapore witnessed a perceptible drop in retail sales but not as significant as that of China. A possible reason could be that Singapore has managed to contain the infection fairly well and avoided a lockdown. Our analysis of sales and customers per store data of 10 leading brands across 1000 stores also reiterates the positive outlook for the Singapore retail market.
- Prior to Dorscon Orange Alert: From Jan 1st-Jan 23rd,2020 sales per store was 18% lower and the number of customers per store was 8.5% lower compared to the same time period in 2019
- Since Dorscon Orange Alert: From Jan 24th-27th Feb,2020 sales slumped by 45% and the number of customers per store was 26% lower compared to the same time period last year.
- Currently: From 28th Feb to 1st March, we saw a sudden surge in sales and customers per store. Post 1st march,2020, we are observing 34% decline in sales per store compared to the previous year (compared to 45% drop during Orange Alert), and 10% decline in the number of customers per store(compared to 26% drop during Orange Alert)
- We have been getting reports of the retail market being back to normal (even though tourism is severely impacted), with footfall in malls is now 95% of what it was before.
- Although the number of customers per store has increased post the Orange Alert, we have not noticed a significant jump in sales indicating customer reluctance in spending
*Update on 6th April 2020
- With the impending lockdown, the recovery period is predicted to be delayed further, at least until the end of May/Mid-June.
Business Recovery Prediction for Singapore
The retail sales recovery period for Singapore seems to have started and expected to be ongoing. However, with the ever-increasing restrictions imposed on the movement of people in malls and restaurants, the recovery trends may be inconsistent and could deviate till the end of April.
*Update on 6th April 2020
- The business recovery prediction in Singapore is expected to be delayed until the end of May/Mid-June due to the recent announcement of the nation-wide lockdown indicate, however, we foresee a faster recovery period of 1 -1.5 months in Singapore compared to the 2.5 months in China.
Covid-19’s Impact on India Retail
Expected Recovery Period: First Week of May
*Timeline Reference :
Prior to lockdown: From Jan 1st-March 25th,2020
Probable Recovery Period:1st week of May
India seems to have entered Stage 3 of the Covid-19 outbreak, however, the government has stepped up its effort and is leaving no stone unturned in fighting the epidemic. The epidemic broke out when the Indian economy was already reeling under a slowdown in consumption for everything from cars to confectionaries.
Lifestyle and fashion retailers are likely to be impacted most due to the restrictions and lockdowns, resulting in demand squeeze in the short-term. However, we expect the combination of young demographics, rising disposable income and the positive headroom growth for organised retail to mitigate many of these challenges in the long term.
- Until 16th March, the consumer retail sales and walk-ins did not see many dips compared to last year, this could be due to festive shopping (Ugadi, Gudi Padwa, Navratri etc).
- However, the India consumer retail witnessed a big drop in sales by 46% and 55% fall in the number of customers per store from 17th to 25th March, which is expected to drop further in the coming weeks due to the ongoing nation-wide lockdown.
*Update as of 19th May 2020
Finding 2: Multi-brand Supermarkets witnessed ~70% drop in YoY sales
Finding 3: Single Brand Apparel Outlets have witnessed a spike in sales from 1st week of May
Business Recovery Prediction for India
Considering the ongoing recovery trends observed across China and Singapore, and provided that there is no further extension on the lockdown, the retail sales recovery period for India might kickstart from the first week of May.
Covid-19’s Impact on Middle East Retail
Expected Recovery Period: Third Week of May
*Timeline Reference :
Prior to lockdown: From Jan 1st – March 25th,2020
Lockdown Period: Ongoing
Probable Recovery Period: 3rd week of May
The first case of coronavirus in the Middle East was reported on January 23rd in the UAE. Since then, the outbreak has spread to Saudi Arabia, Iran, Syria, and Iraq, with Iran being the worst hit. The epidemic is expected to have a severe impact on the region’s retail market since tourists, especially Chinese shoppers, account for a significant chunk of sales to the Middle East’s luxury goods market. Governments in the Middle East have put in place a series of measures to contain the highly contagious outbreak with several nations going into indefinite lockdown mode.
Our data shows a steep decline in sales and customers per store post-March 15th, which is expected to deepen after UAE’s announcement of lockdown on malls and stores.
*Update as of 19th May 2020
Finding 2: The luxury retail sector is badly hit with sales dropping by 90% compared to last year
Finding 3: There has been an uptick in Apparel sales from the first week of May
Business Recovery Prediction for the Middle East
Although the governments continue to impose lockdown, trends and experts indicate that retailers in the Middle East may start observing an uptick in their retail sales from the third week of May 2020 provided there are no further lockdowns imposed by the end of April.
Key recommendations for Retailers on Charting their Road to Recovery
Let’s admit it, the short term impact of COVID-19 on retailers will be severe. Few Offline retailers may have to temporarily or permanently shut down stores, few may face cash flow challenges, almost all of them may have to cut costs and reduce overheads. Even online businesses are likely to face delivery restrictions, delays and supply chain disruptions during this time. From our findings, below are a few takeaways on how retailers can tackle this crisis.
Being Omnichannel = Being resilient
From our findings, the most resilient retailers surviving this epidemic are the omnichannel retailers. Brands who invested in enabling a personalized omnichannel shopping experience are experiencing the fruits of their labour. For instance, Chinese apparel brands like Peacebird, Gloria and Youngor who had started their omnichannel digital transformation journeys (through the integration of online and offline channels) experienced a consistent increase in their online sales despite the uncertain in-store sales.
Live commerce as an emerging trend
China has become the epi-centre for live stream commerce. Chinese e-commerce platforms Taobao and JD.com are leading the live commerce world by enabling the live stream viewers to purchase items while they watch. Live commerce as they term it, has become an emerging trend to bank upon amidst the COVID-19 sales slump.
Merging the offline and the online data to upgrade online selling
At a company level, offline teams should coordinate with the online team to divert the traffic to their ecommerce website/app and clear out the inventory. Brands can also improve the quality of customer engagement across relevant channels by merging store behaviour data with CRM data to communicate and notify its customers about store operating hours, delivery timelines or to send any form of notifications. Integrating data across online, social and offline channels can improve the micro-segmentation of customers and enhance the relevance of personalised communication.
The Covid-19 epidemic is a crisis unlike anything we have faced in the recent past. We are still on the tip of the iceberg when it comes to uncovering the impact of the coronavirus. However, as the events unfold, retailers should be prepared to accelerate their omnichannel engagement and technology initiatives. Until then, stay indoors, practice social distancing and do your part to stop the spread of COVID-19.