Ricardo leads theTechnology, New Ventures & Innovation team at PwC Brasil. He’s been working with clients on large scale tech implementation and strategy in Latin America, U.S. and Europe. In our interview, he talks about the changes in consumer behavior, the tech and social media influence on purchases and the Brazilian political scenario impact on business
BayBrazil: Your team works with Brazilian companies from various segments. Tell us about major changes some of your clients have done in order to stay innovative and competitive?
Ricardo: Companies have realized that innovation comes from a much farther grounds than within their own and their direct business partners (suppliers, clients, employees) frontiers. In order to reach new ideas, the company innovation processes are considering not just their own R&D and internal ideation sources, but also connecting to broader outside innovation ecosystems including innovation hubs, academia, accelerators, incubators, etc. Technology and business model breakthroughs are coming more from outside the company than from its own grounds. Several startups unicorns and disruptors of entire markets clearly attests this reality.
In Brazil, cases such as entrepreneurship hub Cubo (Itau & Redpoint eVentures) or startups accelerator Oxigenio (Porto Seguro) initiatives show clearly that corporations are reaching outside their own walls and attracting new ideas from wherever they come from. It is becoming clearer that innovation comes more and more from ideas on top of other ideas, i.e., combination of ideas that at first would seem not related at all. That is why workforce diversity has become so important in the workplace and companies are seeking to become closer to this diversity, either attracting a broad range of talents to its operations or trying to participate in organizations that bring it close to them.
BayBrazil: PwC recently published a comprehensive study on the retail industry. Although the retail e-commerce sales in Brazil are not significant in the total retail sales, will it be possible for a big company to survive without an e-commerce operation?
Ricardo: Consumers continue to raise the bar on their needs and requests: they want what they need, when they need, wherever they need it. Therefore, a so-called multi-channel or omni-channel strategy is a must for long-term success, since it allows retailers to reach and fulfill clients raising demands. However, it does not imply that everyone will necessarily need to have an e-commerce operation. For example, participating in marketplace business models might be an option for some brands or specific markets.
According to our Total Retail 2017 survey, online purchases have gained relevance in Brazil, both for convenience and price. At present, it is possible to verify that 55% of the interviewees use monthly sites as channel for acquisition of products. Among the available channels, the fact is that in recent years smartphones have shown the highest growth for virtual shopping: in 2014, it was used by 15% of people and now by 31%. The fact is also justified by the technological evolution of mobile devices.
Books, music, video games and electronic products are products that Brazilians prefer to buy online. Already in categories like foods, furniture and objects of decoration, the preference is for the purchase in physical stores. The idea behind this is: products that need to be tested, tried or proven are still popular in physical stores. In other cases, the greater convenience – and prices – justify the choice of the virtual channel.
However, the actual name of the game is “customer experience”, therefore more than an e-commerce channel, retailers need to work on how to improve their final consumer entire purchasing journey (from brand awareness, emotional attachment, needs identification, post-sales support, etc.) and therefore their satisfaction levels with the brand.
BayBrazil: Have you seen Brazilian retailers taking advantage of the smart use of the consumer behavior data that they can collect?
Ricardo: Yes, but it has been in its infant steps yet. Even though there’s has been some advancements, most of the Brazilian retailers haven’t really mastered the use of the huge amount of data they own to actually improve customer journey’ satisfaction and therefore their business results. Most of them are working in small batches or specific opportunity areas, such as dynamic pricing, merchandise logistics and routing, store assortment suggestions, etc.
Data analytics is a technology in which progress builds itself, i.e., the more you experiment, the more you learn and leverage past learnings to future results. Therefore, we expect that Artificial Intelligence (AI) connected to the Big Data owned by retailers will be producing significantly improved business results as companies continue to experiment and learn with it.
Furthermore, Brazilian retailers must keep investing to better understand customer needs based not just on data they own, but also data outside their operations. Since Brazil is a very large user of social media, “social listening” has become a very important source of customer behavior information for gauging the health of the brand in the eyes of their customers. Retailers are collecting this data, sometimes reacting based on that, but furthermore combining it with their own data to further understand customers perspectives, frustrations, and desires of the brand.
BayBrazil: The consumer habits of Brazilians have been highly impacted by their access to the web and social media outlets. Who is the new consumer?
Ricardo: Our survey has shown the importance of social media in the behavior of the consumer and their relationship with their favorite brands. According to the survey, when choosing a product to purchase, 61% of Brazilians take into account shared reviews and comments on social networks. In addition, the study showed that 40% of Brazilians feel motivated to make a purchase by visiting the retailer’s social media page. The interaction with the favorite brand in the networks also means that 64% of Brazilians indicate the company to their friends and family. The consumer’s relationship with the retailer in the social media still assists in increasing sales, evidenced by the fact that 53% of the respondents spend more on the brand when interacting with it. Survey information shows that brands and retailers need to understand changes in consumer behavior if they want to stay relevant in the coming years. The change that is taking place is inexorable and must be taken very seriously.
BayBrazil: As consumer behavior keeps changing, is there any area where Brazilian retailers should avoid investing on?
Ricardo: Investments need to be taken according to the overall business strategy. What the Brazilian retailer can do is not exactly stop investing, but prioritize investment areas according to their strategy. When we look deeply into the journey of shopping on the smartphone, we see that consumers have preferred to shop on the retailer’s mobile site instead of their specific app. The use of apps has been plummeting among users because it is a tiring process of installing multiple applications to use only a few times and occupy the memory of the smartphone. For example, in May 2016, the top 15 app publishers in the US recorded a 20% reduction in downloads over the same period last year. Therefore, investing in adaptation of the site for mobile phones, while improving app to be lighter, simpler, faster might be the way to go for some retailers.
BayBrazil: The Total Retail Survey 2017 set out 10 different types of investments that retailers can make to stay ahead of the competition in a market where consumers are in the power position. Does it mean traditional retailers need different business models?
Ricardo: We have been working with several clients in Brazil on a “Capability Driven Strategy” approach, where investments associated with the defined business model are prioritized according to the maximization of its results to the overall business strategy of the retailers.
Any retail innovation in relation to the shopping experience today can be rapidly disseminated. And the consumer, seeing this experience happening anywhere in the world, demands to be treated in the same way in the country where he lives. Thus, the traditional retailer must have, at least, a business model that has an operational basis with capacity, through its processes and technological aspects, to respond quickly to this type of demand, even if this experience could not be replicated to its whole network stores.
It’s that old story: “It’s easier to park a bicycle than a ship,” and in that sense, some large traditional retailers are just starting to work in tandem with technology startups, or creating their own innovation incubators to enhance their business model in order to provide new experiences. As Magazine Luiza has explored the marketplace in Brazil or Hirota with its grab-n’-go store format.
BayBrazil: How are the latest developments in the Brazilian political scenario impacting business?
Ricardo: The political and economic crisis directly influenced consumers and businesses. Consumers saw their available income be significantly affected by rising interest rates and inflation, as well as falling credit and high levels of unemployment, deteriorating consumer confidence. Companies have slowed the pace of investment due to the unstable scenario, as well as the drop in revenue due to the deceleration of consumption. The government has, in a way, created mechanisms to avoid increased spending and macroeconomic changes that recover the confidence of investors and consumers.
Meanwhile, the Brazilian consumer sees the end of this crisis with caution, demonstrating that it will leave it mature in relation to the control of expenses. When asked what they would do when they regain the confidence to consumers, 41% said they would consume in restaurants and other forms of entertainment that were repressed during the crisis. At the same time, 41% also said they would maintain their buying pattern acquired in the crisis to save money. And about a little over a third of Brazilians said they will make more purchases in cash to reduce debt.
What is clear to us is that the Brazilian consumer coming out of this crisis will be more conscious and demanding for both purchasing “value” and overall journey experience. Brazilian retailers will have to continue to invest to maintain and evolve the client basis of their brands under this new scenario.
