Makers of health and beauty goods - particularly those selling in digitally developed Asia Pacific - should focus on the omni-channel market to capture the full sales potential that is developing there, according to our recent study conducted in four markets in the region.
That sales potential is driven by strong demand for omni-channel shopping in China, Japan, South Korea and Australia, compared to global averages.
Combine this with growing and aging populations, the emergence of a middle class in Asia Pacific, and savvy users of mobile internet devices, and the result is a significant opportunity for makers of health and beauty products.
To tap the demand in digitally developed Asia Pacific, companies need highly efficient online fulfillment processes and what's sometimes called "multi-channel literacy" - e.g. a seamlessly connected online and an offline presence that allows companies to engage with customers actively across both channels.
Such an integrated multi-channel approach is a route to short-term differentiation and long-term relevance in this and many other parts of the world where innovation is taking root in connected retail environments.
One interesting point about the markets surveyed is that older groups - those aged 55 and above - are also shopping in two channels, not just younger people. The digitally developed countries of Asia Pacific are an outlier region for multi-channel shopping in the FMCG sector and are pulling up the average age globally.
That said, what's driving this behavior and the growth of the multi-channel market in health and beauty FMCGs in China, Japan, South Korea and Australia?
The online sales portal Taobao, which is focused on China, and the high level of internet connectedness in Asia are certainly making a difference. Amazon is a big seller, too, in Japan and China, and it will be launched in Korea in 2015 or 2016.
But these are not the only reasons. Consumers in these markets are tech-savvy, and they're far more interested and willing to do their own mixing and matching among channels. In short, shoppers in these countries are very digitally engaged.
Fig 1: Digitally developed APAC shoppers purchase more online than the global average
Of course, many different reasons might explain the willingness to shop across channels. Besides the points I've mentioned already, other key drivers for online shopping could be competitive prices and convenience - e.g. a well-established logistics network.
Yes, this is something I'm inferring from the data, but to pull together diverse clues and see a connection among them is one of the first steps in coming up with a research hypothesis or an explanation. For me, the "pull" in the market is the incredibly connected Asian shoppers in these countries, both young and old, while the "push" comes from makers of health and beauty goods that provide or anticipate this need.
Given the extent of omni-channel behavior overall, there is opportunity to grow, and retailers and manufacturers who fail to see the opportunity put their businesses at risk.
How companies should react to high omni-channel activity in digitally developed APAC
What does this mean for our clients?
Marketers need to understand how traditional retail and mobile shopping channels connect from a consumer perspective - e.g. they must view the situation from a consumer journey/ purchase journey viewpoint to maximize the chance to convert consumers.
I believe that makers of health and beauty goods selling in digitally developed Asia must have a strong online presence and must engage with customers online.
In addition, companies need to organize their internal operations so online and offline "connect." That's because fulfillment is the new battleground. Customers will judge brands based on the quality of their fulfillment: "Did I get my package? Was it in good order? Was it fast and not too expensive? Was I able to click and collect in store, or order in store for home delivery?"
Indeed, online and offline can and should connect. Other ways include price parity, the ability to return goods to a store which are bought online, and links between TV advertising and digital communications.
In the end, it is these matters that separate the good from the great in a very practical way.