More consumers in Hong Kong and other Greater Bay Area (GBA) cities in the Chinese Mainland expect retailers to adopt ESG values that align with their own. However, they are not only buying based on their values - they also expect to be rewarded for making sustainable purchasing decisions, according to a recently published joint survey by KPMG China, GS1 Hong Kong and HSBC.
The sixth edition of the study on omnichannel retail trends, titled Retail Recharged: Engaging consumers with Technology, Purpose and Trust,” surveyed 2,065 consumers and 342 senior retail industry executives in Hong Kong and nine Chinese Mainland GBA cities, to explore how businesses and consumers are embracing the trends and technologies in a retail ecosystem that has been dramatically changed by the global Covid-i9 pandemic.
The study finds that consumers are, in particular, expecting greater commitment from brands on sustainability and social responsibility. Over 80% of consumers in Chinese Mainland GBA cities and 65% in Hong Kong said they like to use brands that share the same social values as they do, while 24% and 22% respectively want to be given the option to offset the carbon impact of their purchases.
While consumers’ regard for sustainability is positive overall, among Chinese Mainland GBA and Hong Kong respondents, 8i% and 69% respectively said they would be interested in being rewarded or making more sustainable purchasing decisions.
“As consumers are increasingly aware of retailers’ behaviour, those who demonstrate the right behaviour while ensuring their purpose is aligned with customers' values and expectations will hold a strong position. When consumers aspire to buy products from socially responsible brands and be rewarded or their conscious purchasing decisions, brands must invest in sustainability,” said Daniel Hui, Head of Consumer & Retail, Hong Kong, KPMG China. Retailers would benefit from promoting sustainable purchases at no additional cost to he customer, even going further to offer incentives for such purchases, he added.
The survey also found that 48% of retailers are using eco-friendly, recycled or recyclable materials and 47% eco-friendly packaging, while roughly one third recycle or reuse materials in commercial production. The findings also point to gaps in retailers' practices to share sustainability goals and commitments with consumers. Only 43% said they incorporate sustainability into their brand story and just i5% said they were informing customers of the carbon impact of their purchases.
Pat Woo, Head of Environment, Social and Governance, Hong Kong and Global Co-Chair, Sustainable Finance, KMPG China, said that in the near future, assessment of the carbon impact across retailers’ entire supply chains will be increasingly demanded by stakeholders, creating an urgent imperative for retailers to assess, valuate and obtain relevant information from their supply chain partners.
The majority of the carbon footprint for retailers lies in the supply chain, which are considered Scope 3 emissions. However, only a limited number of retailers are systematically measuring and engaging their supply chain partners to obtain accurate information on their cope 3 emissions. This will be essential going forward as regulators, customers and stakeholders increasingly require this information in the coming one to two years,” Woo said.
Examining how the online-to-off line dynamic has changed
The study observed that consumers are continuing to migrate from physical channels to online, even as pandemic restrictions have been relaxed in some markets. Consumers who prefer contactless shopping have increased to 80% of those in those GBA cities in the Chinese Mainland and 61% of those in Hong Kong. This sentiment is the strongest in Chinese Mainland GBA cities among those aged 55 plus (85%) and in Hong Kong among Gen Z (73%).
Importantly, consumers want to be able to navigate a brand's online and offline channels depending on their preferences, with less people agreeing that’ they can live without physical retail stores’ compared to last year's findings. That figure has fallen from 24% in Hong Kong and 23% 1n Chinese Mainland GBA cities to just 18% across all cities surveyed.
"As consumers increasingly place importance on physical retail alongside an accelerating demand for digital retail, brands must realise the value of in-person connections with customers and the touch-and-feel shopping experience,” Hui explained.
Consumers expect greater convenience, but are less willing to pay premium prices
The survey also highlighted that consumers polled expect a wide range of service and delivery options but are less willing to pay premium prices for those services. In Hong Kong, roughly one in four of the consumers surveyed said they were not prepared to pay a premium for any service at all, compared with 9% of those from Chinese Mainland GBA cities. Of Chinese Mainland GBA respondents, 20% would pay extra for enhanced order tracking and 16% for weekend delivery, 1n both cases, four percentage points down on the 2021 survey.
When asked which delivery and fulfillment options they expected online retailers to offer, Hong Kong consumers said they preferred having a variety of options, with smart lockers (69%), home delivery (68%) and convenience-store pickup services (66%) all 1n demand. In addition, 59% said they expect in-store pickup, known as’ click and collect,'while office delivery was expected by about 40%.
Consumers - especially Gen Z - expect a more immersive experience
Meanwhile, consumers - particularly Gen Z, known as a generation of digital natives - are looking to brands to use artificial intelligence (Al), augmented reality (AR) and other technology to improve the customer experience by enabling greater connection with brands.An overwhelming proportion of consumers polled said they are confident and comfortable using technology, especially 1n Chinese Mainland GBA c1t1es, where 88% consider themselves mobile-savvy and 81% tech-savvy.
The study also found that Chinese Mainland GBA consumers in particular are increasingly interested in the opportunities the metaverse may offer in terms of connecting with brands and ultimately shopping, with 45% of them saying they would use the medium to view or virtually try on products prior to purchase
"Gen Z consumers are digital natives with extensive experience 1n gaming and the metaverse. Retailers can consider "retailtainment" and include elements of the metaverse to enhance the purchasing experience of consumers," said Anson Balley, Head of Consumer & Retail, ASPAC, KPMG China.
Trust in Key Opinion Leader (KOL) endorsements is falling
In addition, the study found that consumers are becoming wary of product endorsements by Key Opinion Leaders (KOLs) - such as live-streaming celebrities and bloggers - as well as user-generated reviews and product ratings. Instead, they are turning to friends and family for advice and trusting information from brands’ websites or store staff for guidance. This is particularly evident among Hong Kong consumers surveyed, where trust in live streamers and bloggers is down from 34% in our 2021 survey to 28% in 2022, and is now the least relied upon source of product information.
This trend is creating opportunities for brands and retailers to tailor their loyalty programs to encourage their customers to share purchasing decisions on social media and encourage referrals to family and friends.
Search for talent to address the challenge of maintaining data security and securing consumer trust
Consumers surveyed said that while their trust in retailers’ promotional information is important in driving top-line sales, they also care about how their data is being protected. Our corporate survey reflected that these concerns are mutually held by retailers, with data security identified as the leading challenge retailers are currently facing. Other top concerns include seamless data integration across channels and recruiting and retaining relevant talent.
"Consumer wariness about data protection is on the rise, given ongoing reports of data breaches and the rising threat of increasingly sophisticated cyberattacks. At the same time, regulators are sharpening their focus on data security and continuing to address regulatory obligations related to consumer data management and protection These factors are creating unprecedented pressures for retailers to respond appropriately to ensure customer trust," said Chad Olsen, Head of Forensic Services, Hong Kong, KPMG China.
Consumers express strong confidence in using digital payments, and increasingly expect embedded finance options
Our research confirms that the use of digital payments continues to accelerate. Some 76% of Chinese Mainland GBA respondents surveyed for our study felt more comfortable using digital payments along with 68% of Hong Kong respondents.
The results also suggest growing consumer interest in a number of different embedded finance options. For example, In Chinese Mainland GBA cities, 70% of respondents said they had purchased goods using Buy Now Pay Later (BNPL), including 57% within the past year and plan to continue. Hong Kong consumers polled are also expressing interest, with 31% of respondents saying they had used BNPL during the past year and a further 20% said they were aware of it and intended to use it in the future.
To download the full report including case studies from leading retail industry players, please visit: shorturl.at/jrPS8