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(Notes on Futurist keynote lecture for Samsung client event in Mexico – audience of IT / computers, mobile phones and electrical appliance retailers from Brazil, Mexico, Colombia, Argentina, Peru, Venezuala, Chile, Ecuador, Guatemala, Haiti, Bolivia, Dominican Republic, Honduras, Salvador, Costa Rica, Uruguay and Panama.  Post written in 2014 - very accurate.)

Growth of Latin America Middle Class

The middle class has grown by 50 million people in Latin America over the last decade.  56% of the population of Brazil is now middle class – 113 million people. And in response we are seeing an explosion of larger retailers to meet their needs and desires.  And the wealth is spreading rapidly from major cities like Rio de Janeiro and San Paulo.

We are seeing the same in retail in Chile for example, where you will find Latin America’s largest shopping Mall – Costanera.  The same in Peru where Censosud alone is opening 14 huge new retail stores in 2014.

Need a world-class retail industry keynote speaker for your event? Phone or e-mail Patrick Dixon now

Economic trends impact on retail in Latin America

Mexico, Brazil and the US have marched almost in step together from 2003 to 2014, in timing of the 2009 economic crisis, the sharp partial recovery in 2010, and the gradual growth in GDP since, which in the case of Brazil was close to 4% in 2013.

The truth is that the global economy never stopped growing because of the engine of Far East emerging economies, including India and China.  We have seen astonishing growth in nations like Vietnam, and the entire region will continue to power into the future, sustained by the growth of their own middle class, and by pushing up the value of manufacturing from low grade goods to world class products.

Future of retail is about emotion

All great retail success is about understanding how customers think and feel.  And market research is a poor guide.  Market research tells you what your customers thought and felt yesterday but they are often wrong in being able to tell you how they will think and feel tomorrow.

Pay close attention to your customers, listen to what they are saying, especially about their experience buying from your store or website.  But don’t believe them when they are telling you about whether they are likely to start using a particular new technology or not.  People change their minds when they experience the future right in front of them.

The web has made us and our customers very impatient – most people in my audiences around the world tell me that they press the back button on a web browser in less than 5 seconds if a web page takes time to load.  That means losing 90% of customers in 5 seconds.  Or even if you don’t lose them, it means that they are counting the seconds and looking at their watches, becoming slightly irritated. Think about it. 

The same applies to robot answering systems in retail call centres.  Most of my audiences say that they get really cross when they are asked to press loads of buttons and options when they phone to get help.  Seconds matter.

So how long does it take to find a shop assistant to help with a question you have?  How long to wait in the checkout?  How long to complete an online transaction?  No surprise then, that every keystroke or mouse click you save on a redesigned web journey for your customers, will increase the numbers of customers passing on to the next step towards a sale.

Future of Shopping Malls

Shopping Malls are all about scale and customer experience: creating a huge “WOW” as people enter.  A place for leisure as well as shopping.  A destination in its own right.

So in consumer electronics, that means a place with large stores which stock the biggest and most eye-catching items.  People go in to browse, and usually come away with cheaper mass-market products, but the premium products in the window draw them in.

The future of traditional bricks and mortar retail will be all about theatre, creating atmosphere, memories.  Watching a demonstrator fly a small helicopter in a toy store, seeing someone have their nails polished using a revolutionary new technology, watching the bread being made, the meal being cooked.

Future of retail sales assistants - common mistakes

Successful stores in future will be those that know how to bring the customer to the point of sale rapidly without them feeling intruded on or forced.

One of the fastest ways to kill a sale is for the sales assistant to approach someone within 5 seconds of entering the store.

“Can I help you?”
“No – I am just looking.”

How many times have you been asked that question and how many times did it make you want to run right out of the store.

The best sales assistants are aware of customers as they work their way around the store, and offer sensitive help:

“I’m here if you need me.  There’s a great promotion on the shelf over there.”

Or – if you can see a customer is lingering:
“Yes it’s a great product – we like it because….”

In a digital, multichannel, social media world, the key is not selling at people, but becoming an expert advisor or friend to them along their journey of life.

Growth of e-commerce in Latin America - impact on retail

If you want to see the future of online retail in Latin America, just take a look at North America, Europe or Asia.

70 million people are already online in Mexico (58% of adults), 88 million in Brazil (46%), 28 million in Argentina (67%), 10 million in Chile (59%) and 10 million in Peru (34%).

While it is true that in these nations, most consumers are still very uncomfortable about buying online, that is changing fast.

Compare with the UK where 33% of some groups of people have stopped watching conventional TV because they only watch TV online, and where 12% of all retail is now online shopping, of which over 50% of purchases are using a mobile device.

Global e-commerce hits $1.5 trillion in 2014

Online sales will exceed $1.5 trillion in 2014, of which $100bn will be in Latin America, $6.2bn in Mexico (up 40% in a year).  Most of Latin America’s online sales are on websites owned by traditional retailers.

And sales per online user each year are also growing fast – averaging $578 across Latin America:  $854 in Mexico, $717 in Brazil and $380 in Argentina.

How are people paying?  With low penetration of credit cards and bank cash cards, newer payment systems are booming.  PayPal for example has seized 52% of all online payments in Mexico.

Expect Mobile boom in Latin America retailing

Mexico will see 6 million new mobile users in 2013 – reaching around 30% of the population, the highest in Latin America.  30 million people in Mexico already own a smartphone – up 49% in a year – and 60% of 25-34 year olds are using smartphones.

The Android operating system is now installed on over 70% of all new smartphones in Latin America, winning market share mainly from Blackberry during 2012 and 2013.

Impact of smartphones on Brazil Retail

Mobile use influenced 72% of all retail sales in Brazil in 2013, among phone owners, according to Cisco.  The main influence is still family and friends but with the boom in social media, that influence is increasingly likely to be via Facebook (>1 trillion page views a month) or some other social platform. 

The second most important influence is manufacturers, while the third is online consumer reviews of retailer websites.

Compare with impact of mobile on UK retail

Mobile influenced $29bn of retail sales in the UK in 2013 and as mentioned above, over 50% of all online retail sales in the UK are now made on a mobile device.

But we are only in the first hour of the first day of the digital retail world.  What about tomorrow?

Location – based marketing is the next big thing

The world of mobile is opening up a whole new world to marketers, who are hungry for live streams of “Big Data”. They want to know where a customer is to help predict what kind of things a customer may ready to hear about.

Here’s an example of location-based marketing.  Coca Cola has developed an App which records your favourite drink, and also a vending machine that can produce infinite variations of different taste elements to create a customized drink for you.

As you walk around, Coca Cola can (with permission) see where you are.  If you are close to a machine, it tells you.  As you approach, it makes and delivers the drink.  As you take it, the machine knows to charge your phone for payment.

Here is another example.  I step into a London taxi where a flat screen is running news items. The taxi can sense that I am wearing a pair of glasses which contain an RFID chip (radio frequency identification device). These are the size of a grain of sand, and are able to transmit basic data when asked, such as what the product is, where it was sold and so on.

So the taxi now knows that:

- I am wearing variable lens glasses – which means I need reading glasses as well as correction for distance.  That means I am probably over 50 years old

- I am wearing designer glasses – which means I am probably interested in premium brands and have a middle class income

So without any further data, the taxi computer is able to select a customized advert for…..

“Have you thought about laser correcting eye surgery from a local London clinic – press this button now for a 25% discount if you ask this cab to drive you there for a brief explanation…”

Phone companies will know more about customers than banks

We can go a stage further.  My mobile phone company can see I am on the move, after making my way slowly down the street.  A logical deduction is that I am in a taxi.  Pattern recognition shows that this usually happens at around this time of day, on Tuesdays and Thursdays.  So now the mobile phone company can probably make a very accurate guess about my destination.  And since the mobile phone company may also be seeing over 50% of all my online purchases and over 50% of web searches, we can begin to see that the mobile company is in a very powerful position to understand my life (in a positive way).

And that means that they can – if they are clever enough – begin to become my expert advisor on my journey through life, rather than a crude marketer who is constantly pestering me with unwanted messages.  A big difference.

Mobile payments and mobile banking – retail revolution

We have already seen that in Latin America, most people online are uncomfortable with using their bank account details or a credit card (even assuming they have one). So how can people pay for things online?

Just look at what is happening in other emerging markets in mobile payments and mobile banking.  Over 70% of the 200 million mobile payments made in 2013 were made in just one continent…..

Africa – yes that is correct.  Not North America, Not Europe.  Not Asia.

And in Africa, most mobile payments are being carried out in just one country….

Keyna – using the mPesa network which developed from simple SMS technology using ordinary mobile phones.   mPesa payments now account for one third of Kenya’s entire GDP.  We are talking about 17 million customers transmitting $9bn a year, most of whom have no bank account, sending money to other people who also have no bank account.

One of my clients is Singtel – based in Singapore.  They have in their partner networks and their own, over 430 million customers of whom possibly 200 million do not have access to a bank account and have never owned an insurance policy.  On current trends, it is likely that over half of these – around 100 million people – will gain access to a bank account and a wide range of financial services, for the first time, through a mobile phone, in the next 5 years.

This is a massive change and will transform online retail in countries where at present few people have the means to buy online.

At the same time we are seeing huge growth in  the number of companies offering simple plug in devices for smartphones which convert phones instantly into bank card readers.  Square is just one company offering this service, converting tens of thousands of small traders into card accepting outlets.

Fusion of online and offline retail sales

In the past people used to talk about traditional retail and about e-commerce but mobile has changed all that.

Take Brazil for example:  50% of shoppers are researching online and buying instore.  40% are researching instore and buying online – from the same company or a competitor.  But an increasing number are buying online and arranging for collection instore.  Or buying onstore for delivery at home.   And across all these changes we are seeing the rise of price comparison sites.

Growth of “click and collect”

In Europe – especially Germany and the UK – we are seeing an explosion of “click and collect” retail outlets. 

Last year we saw delivery companies attempt to deliver over 1.3 billion packages to people’s homes in the UK alone, of products bought online.  The trouble is that most people are at work when vans call, so delivery companies have to make multiple trips to find people at home. And then in blocks of apartments and other locations it can be hard for delivery companies to gain access.

Click and collect allows the buyer to chose whwere the package ends up:  at home, or at the local garage or news store for example.  Experience shows that where customers are given the choice, most will chose click and collect, rather than home delivery.

In the UK over 3000 Parcel shops have opened in 12 months.  This is great news for smaller retail outlets who have been increasingly squeezed by larger shopping malls.  Click and collect provides a life-saver in additional income, and also pulls shoppers into their stores where they may end up buying other things.

Shopping becomes local and small scale again

In Europe, shopping is going full circle and some reail is becoming very local again.  Remember we saw above that in the digital age 5 seconds feels like a long time. That means people are prepared to pay extra for local shopping. Waiting in heavy traffic to reach a superstore can feel a little crazy if you only need small items.

Waiting for 24 hours to have an online sale delivered can feel like an eternity.  That is why we are now seeing couriers and taxi companies form partnerships with online retailers to deliver products within the same day.

But even that is not fast or convenient enough when you run out of bread, sugar, coffee or milk.

In places like Mexico and the UK we are seeing huge growth in 24 hour convenience stores.  Brands like Oxxo in Mexico have over 7000 outlets already (owned by Femsa). Tesco, Sainsbury and other similar UK retailers have calculated that up to 70% of all sales for smaller local “Express” convenience stores are coming from people who live less than 700 metres away.

So the logic is to open up more and more convenience stores for time-pressed digital citizens.

In summary:  retail is changing at astonishing speed, as online and offline worlds collide into a mobile-enabled way of life.


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