May 2018The evolution of shopper behaviour Stuart Wood 15+ 2 3 4500+ The evolution of shopper behaviourContinued developments in digital technology and advances in e-commerce mean that the way we shop for products and services is also evolving. Technologyhas created a digital retail landscape that is unrestricted by geography and the normal dynamics of bricks and mortar stores. Physical stores are also changing as they not only integrate technology in-store but better connect with the digital world to increasingly deliver a seamless omnichannel offering. As a result, we need to understand these changes and their implications when planning go-to-market strategies or optimising shopping marketing programmes. In this white paper we will look at five changes we're experiencing, look at why it's happening and reflect on how Ipsos is adapting to the situation in five distinct sections:1. Increasing complexity of choice promotes shortcuts in decision making Complexity of choice is an issue for shoppers buying everyday products. Continuous, iterative innovation and the proliferation of line extensions mean that most categories have become very fragmented. Trying to consider all options is a cognitive task that our brains simply cannot handle. Therefore, we use visual shortcuts to selectively focus on what is most important and filter out irrelevant information1. The brain has to eliminate unwanted stimuli to cope with the complexity of the surrounding environment. This is why shopping (both in store and online) is really about de-selection. This is arguably getting more acute with increasing expectations of convenience and dwindling attention span. Technology can of course help us make quicker decisions and we are seeing increasing adoption of Artificial Intelligence (AI), chat bots and voice activation*. rmance Ipsos Retail Perfo1. 2. 3. 4. 5.Increasing complexity of choice promotes shortcuts in decision making Pre-store preferences are a huge factor shaping purchases The digital revolution is reinventing shopper behaviour New disruptive e-commerce models evolve everyday Omnichannel brings together the physical and digital worlds*For more on this topic, read ourPPING HOW FOOD SHO G HABITS ARE BEIN TECH: NSFORMED BY TRAt, commerce, cha Conversational bots and all that Written by Dr Tim 2018 Ipsos. Allwhite paper How food shopping habits are being transformed by tech. Likewise, retailers can aid shoppers through increased curation of ranges and more intuitive navigation both at physical fixtures and online.January 2018Retail Intelligence of Denison, Director not bemay Proprietary information Confidential and consent of Ipsos. Contains Ipsos' written rights reserved. without the prior disclosed or reproduced2The evolution of shopper behaviour2. Pre-store preferences are a huge factor shaping purchases We are seeing through our LIFE Path research at Ipsos that a high percentage of brand decisions are being made pre-store, particularly for the things that we buy very frequently. Increasingly, complexity in-store certainly plays a role but so does the cumulative impact of brand touchpoints and of course product experience that drives repeat purchasing. Even for a category like confectionery, which may be traditionally thought of as a strong impulse category, we see that existing brand preferences are stronger than any influences encountered during purchasing; this means that brand building and saliency are critical in driving consideration and preference.The significant influence of pre-store preferences.... Preferred brand Brand in consideration setTouchpoints encountered during purchaseImpact on brand choice3A high percentage of brand decisions are being made pre-store, particularly for the things that we buy very frequently.The evolution of shopper behaviour3. The digital revolution is reinventing shopper behaviour Through our smartphones and tablets we have a wealth of information at our fingertips including reviews, comparative pricing, product features. We have the power to influence others through what we post on social media and of course through ratings and reviews, resulting in access to immediate and tangible information on products. This digital eco-system helps us to make more informed and rational decisions about the product choices that we make. We are also influenced by increasingly sophisticated and more targeted digital advertising. Digital goes beyond what we read on a screen. The rise of AI-powered digital assistants and voice-activated systems like Amazon Echo show a trend where we rely on these tools to help us make the right decisions. Arguably our decisions are at risk of being led by AI and the algorithms that drive them.5The evolution of shopper behaviour4. New disruptive e-commerce models evolve every day E-commerce continues to grow at a global level. Today e-commerce represents around 9% of total retail sales globally (averaged across all categories and markets), though is set to nearly double in the next five years. E-commerce is particularly strong in markets such as China (24%)2 and the UK (16%)3. However, e-commerce is not about simply buying the same products through a different channel. The digital environment reduces the cost of entry for new brands and so allows new players to emerge and create even greater choice. E-commerce also allows transactions to take place in very different ways and ultimately changes the way that we buy products. Here are a few of the many examples of disruptive e-commerce models:Direct-to-consumer models Direct to consumer models offer brands the opportunity to communicate directly and own relationships with shoppers. Dollar Shave Club is probably the most famous and one of the most successful direct to consumer e-commerce models. Founded in 2012 by a first-time entrepreneur Michael Dubin, it took on the male shaving category dominated by Gillette (at the time 72% of the market). The proposition was high quality razors at a fraction of the price delivered to your home on a subscription basis. The genius was making it feel less like a shaving supply company and more like a full scale men's club, driven by creative online advertising that went viral. Dollar Shave Club gained massive market share and in 2016 Unilever paid $1bn for the company. Today, Dollar Shave Club has revolutionised how many men buy their shaving products, spawning a multitude of copycat models including one from Gillette itself and (US) pharmacy chain CVS.We have the power to influence others through what we post on social media... 6The evolution of shopper behaviourAmazon, success through critical mass and innovation Amazon has become a dominant force in online retailing by providing ultimate convenience and setting the new expectations regarding ease of ordering and speed of delivery. In the US, Amazon now has more than 80 million Prime subscribers and data shows that these shoppers spend on average $1,400 a year vs $800 for non-Prime subscribers2. Amazon was also first to develop automated replenishment through the launch of Dash buttons providing instant reordering for frequently used everyday brands. Amazon has subsequently moved into Zero UI (user interface) shopping with the Amazon Echo allowing voice activated shopping. Adoption of Echo has been impressive; according to US PR consultancy, Walker Sands, 24% of US consumers now own a voice-activated device with another 20% planning on purchasing one in 2018. Amazon Echo was the best-selling product on Amazon Prime Day. This allbeing said, Amazon has recognised that being a pure play won't deliver the results it needs, especially in fresh groceries. Their acquisition of Whole Foods is a clear indication of the need to develop an omnichannel offering that blends physical stores with online convenience.E-commerce services A whole service economy has grown around technology that can link those who want something with those who are prepared to deliver. Compan