impact of covid-19 on hong kong consumers behaviours...consumers in hong kong have become more savvy...

Impact of COVID-19 on Hong Kong Consumers’ BehavioursNovember 2020

Table of Contents

Overview

Key findings – Retail

Key findings – Financial Services

Methodology overview

Key focus areas

01

02

03

05

04

Overview

3

© 2020 KPMG Advisory (Hong Kong) Limited, a Hong Kong limited liability company and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited ("KPMG International"), a private English company limited by guarantee. All rights reserved.

The financial position of consumers in Hong Kong has been negatively impacted by COVID-19. On average, 41 percent1 of survey respondents in Hong Kong admit that they are being more selective in their purchases and expect this to continue in the mid-term.

According to our analysis, consumers in Hong Kong have significantly reduced their spending in luxury and non-essential goods and have re-allocated this spending to day-to-day essentials such as groceries.

Consumers in Hong Kong have become more savvy and selective when making financial decisions

Consumers in Hong Kong are increasing the use of digital platforms to purchase goods. We have noted that consumers value a good digital experience and are spending more with companies that provide this experience. In addition, consumers have shifted their preferred payment methods to those that offer better rewards for online spending.

Trust in a brand has become a key experience driver for consumers. In light of COVID-19, companies that are empathetic to their consumers’ priorities (i.e. personal safety) in addition to delivering a consistently positive experience have experienced increased loyalty. Consumers have demonstrated strong preferences to organisations they trust to be able to provide consistent high-quality experiences during these challenging times.

1 2

Overview

3

Source: 1 Consumers and the new reality, COVID-19 pulse survey, Wave 5 update, KPMG International, Sep 2020; Q: To what degree do you feel your spending behavior has changed since the start of the COVID-19 situation?

Consumers are experiencing economic constraints and are prioritising value for

money

Consumers are becoming more digitally savvy and value the ease with which they can

interact with organisations through digital channels

Trust is key and consumers are willing to spend with brands that are aligned with their

values and priorities

4


Source:1 Hong Kong Department of Health 2 gini Transactional Data 2019-2020

Our analysis of transactional data reveals how the Hong Kong consumers’ spending behaviour has changed

Overview

As a result of COVID-19, consumers in Hong Kong have changed their spending behaviour. Our analysis of spending data2 since September 2019 indicates the following:

• Consumers have focused their spending on essential products such as groceries.

• There has been a significant drop in non-essential products as consumers continue to postpone big purchases.

• We have observed indications of “COVID-fatigue” as evidenced through a slight recovery in non-essentials spending after the Second Wave.

Consumer spending in non-essential goods has dropped as a consequence of COVID-19.

Second Wave (15/3)

First Wave (25/1)

Third Wave (05/7)

Eating Out Groceries Transport Utilities

Health and Beauty Vacation Shopping/Leisure

Essentials

Non-Essentials

HK COVID Cases1

HK

CO

VID

-19accum

ulated cases 1

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

-80%

-60%

-40%

-20%

0%

20%

40%

Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20

% C

hang

e on

Mon

thly

Spe

nd (

HK

D) 1

From

Sep

201

9

Key findings –Retail


As consumers spend less on luxury, value for money has become a key purchase driver


Source: Consumers and the new reality, COVID-19 pulse survey, Wave 5 update, KPMG International, Sep 2020; Q: Thinking about you as a customer, what type of things do you think grocery / non-grocery retailers should be focusing on now, as a result of COVID-19?

6

-100

-80

-60

-40

-20

0

20

40

60

80

100N

orm

alis

ed v

olum

e (%

)

Luxury fashion retailers Online fashion platforms Physical fashion retailers

Source: gini Transactional Data 2019-2020

Luxury retailers have yet to recover from the impact of COVID-19.

Third Wave (05/7)

First Wave (25/1)

Second Wave (15/3)

• Since the first wave of COVID-19 in late January 2020, we observed a drop in consumers’ spending in non-essential products such as luxury retail products.

• Luxury fashion retail sales have remained significantly lower compared to September 2019, while non-luxury fashion retailers are faring slightly better.

• Consumers in Hong Kong value free delivery, special offers and discounts, as household spending has tightened.

Value for money, the ease of the shopping experience and product quality have become key purchase drivers.

Top grocery initiatives Social distancing &

hygiene measures

59%

Grocery purchase drivers Ease of buying

69%Value for money60%

Quality of product56%

Top non-groceryretail initiatives

66%Free delivery & collection

Social distancing & hygiene measures

57%

Non-grocery retail purchase drivers Ease of buying

69%Value for money

68%Quality of product61%

Special offers & discounts

50% 48%Free delivery & collection

Special offers & discounts

51%

7


Consumers have accelerated their use of online channels for retail purchases


Grocery retailers that provide strong online experiences have captured market share while physical-only retailers are clearly losing out.

-7

-11

-2

0

7

2219

17

11

29

20

2

-6

-12

7

3

25

21 21

14 13

4

11

7

1

6

-5

32

24

10

4

14

5

-19-16

7

-14-11

14

-3-5

9 9

-10 -10

-14

5

8

20

14

2

-3

11

1

-37-34

-10

-24

-9-10

-12

-28

-21

-7

-17

-4000%

-3000%

-2000%

-1000%

0%

1000%

2000%

3000%

4000%

Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20

% C

hang

e fr

om S

ep 2

019

Leading online grocery store 1 Leading online grocery store 2 Leading online grocery store 3

Leading physical grocery store 1 Leading physical grocery store 2 Leading physical grocery store 3

40%

30%

20%

10%

0%

-10%

-20%

-30%

-40%


Source: Consumers and the new reality, COVID-19 pulse survey, Wave 5 update, KPMG International, Sep 2020; Q: How have your shopping habits with grocery retailers/non-grocery retailers changed during COVID-19? And how likely it is that you will continue using these methods in the future, once all restrictions are lifted?

84%are likely to continue using online channels to buy groceries in the future

75%of consumers have used online channels as frequently or more often than before to buy non-grocery retail

97%of those likely to continue using online channels to buy non-grocery retail in the future

73%of consumers have used online channels as frequently or more often than before to buy groceries

First Wave (25/1)

Second Wave (15/3)

Third Wave (05/7)

Online shopping for groceries and non-grocery retail has increased.

8


Consumers continue to show a willingness to spend with brands and experiences they trust


Food delivery companies have been able to grab and maintain a share of customers’ wallet by delivering consistent and trustworthy services.

36% 38% 39% 38% 36% 37%42% 44% 46% 41% 39%

44% 45%

64% 62% 61% 62% 64% 63%58% 56% 54% 59% 61%

56% 55%

Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20C

ombi

ned

spen

ding

on

food

per

con

sum

er

Food deliveryEating out & groceries

• Online food delivery services have built up a strong foundation of loyal consumers during this period. These organisations have consistently delivered high quality experiences aligned with their brand promise of providing food in a fast, convenient, and safe (via social distancing) manner.

• These organisations are now evolving and expanding their services to other areas such as grocery delivery as they build on the trust and loyalty they have established with consumers.

First Wave (25/1)

Second Wave (15/3)

Third Wave (05/7)


Key findings –Financial Services

10


In Financial Services, the Hong Kong consumer places importance on the value, quality and experiences of the products and services they receive

• Consistent with overall consumer trends, value for money, quality of products and services, trust and a great customer experience are most important to consumers.

• Financial Services organisations will need to continuously deliver in these areas to capture and retain leading positions.

• Although “value for money” in Financial Services is not as tangible to end consumers compared to retailers, leading organisations are becoming more creative in communicating this value to their clients.

• By leveraging strong partnerships, leading organisations remain relevant to the end consumer by providing value through an ecosystem with multiple engagement points in the overall client journeys.

Source: Consumers and the new reality, COVID-19 pulse survey, Wave 5 update, KPMG International, Sep 2020


Banking

Quality of products and services

49%Customer experience

45%

Personal safety

45%

Quality of product, personal safety, trust and consumer experience are important for consumers purchasing banking products.

Trust in the brand

44%

Value formoney

57%

Insurance

Quality of products and services

55%

Customer experience

43%

Value for money, trust, consumer experience and quality of products are key drivers for consumers buying insurance products.

Trust in the brand

44%

Q: Which of the following is important to you now when buying a product or service?

11


Consumers in Hong Kong are showing preferences for payment options that award their online shopping behaviours

Consumers have shown increasing appetite for cards with generous cash rebates, particularly on online spending, beating those offering travel loyalty benefits.

2019 Q4 2020 Q2

Leading Card 2 with travel loyalty rewards

Leading Card 5 with additional “online” reward cash rebate

Leading Card 1 with reward cash rebate

Leading Card 3 with loyalty reward

Leading Card 4 with travel loyalty rewards

• Hong Kong credit card usage trends show that the new realities of online shopping has also impacted consumers’ decisions on their payment preferences.

• Credit cards that have been marketed as providing more rewards for online purchases have overtaken cards that provide less valued rewards due to the current situation (i.e. travel).

• We expect this trend to continue as leading Financial Services have accelerated their partnerships with many online retailers and food delivery companies.

41.1%

22.3%

19.6%

9.2%

7.8%

41.9%

27.8%

16.3%

8.7%

5.2%

41.3%

17.6%

16.3%

15.3%

9.5%



2020 Q1

12



Leading financial services organisations are providing enhanced digital experiences to their consumers. Consumers are expected to continue the increased usage of digital channels for standard activities. As a result, leading organisations are taking this opportunity of increased consumer digital engagement to focus on providing improved personalised, digitally enabled and efficient experiences.

-6%

-2%

-2%

-5%

-2%

4%

3%

4%

6%

6%

3%

1%

1%

9%

7%

3%

-10% -5% 0% 5% 10%

Get a quote

Make a claim

Renew my policy

Make an inquiry

-7%

-6%

3%

2%

-6%

2%

-2%

1%

6%

8%

3%

4%

8%

8%

9%

-8% -6% -4% -2% 0% 2% 4% 6% 8% 10%

Check balance

Manage account

Inquire about new products

Conduct a high-value transaction

Open a new account

Banking consumers in Hong Kong are expected to continue using digital channels for standard daily activities.

Less use More use

Open a new account

Conduct a high-value transaction

Inquire about new products

Manage account

Check balance

Insurance consumers in Hong Kong are also expected to continue to engage through digital channels.

Make an inquiry

Renew my policy

Make a claim

Get a quote

AppE-mailWebsiteBroker F2F (offline)

Source: Consumers and the new reality, COVID-19 pulse survey, Wave 5 update, KPMG International, Sep 2020Q: Considering the following methods of communication with your bank, which method did you mainly use before and during COVID-19?

Source: Consumers and the new reality, COVID-19 pulse survey, Wave 5 update, KPMG International, Sep 2020Q: Considering the following methods of communication with your insurer which method did you mainly use before and during COVID-19?

Less use More use

AppWebsiteIn-branch (offline)

Consumers expect banks and insurers to deliver enhanced digital experiences

13



Areas where banks should focus on to continue providing a great digital experience.

45%

42%Provide digital security to protect my account(s)

41%Clear direction about how I should contact them at the moment

Advice to avoid online fraud and scams

30%Source: Consumers and the new reality, COVID-19 pulse survey, Wave 5 update, KPMG International, Sep 2020% shows top mentions. Q: Thinking about as a customer , what type of things do you think that banks should be focusing on now, as a result of COVID-19?

Better functionality on their website and app

Source: Consumers and the new reality, COVID-19 pulse survey, Wave 5 update, KPMG International, Sep 2020Q: Many banks aim to provide their customers with a tailored offering and service online. Which of the following are most important to you, when interacting with banks online?

DIGITAL SECURITY

67% “Ensure security of my personal information”

24/7 CUSTOMER SERVICE

29% “Offer me 24/7 live chat customer service support”

PERSONALISED EXPERIENCES

32% “Provide me more personal services and products that are relevant to me”

SEAMLESS INTERACTIONS

41% “Let me be able to continue what I want to do across different devices (e.g. PC, tablet, phone)”

As consumers in Hong Kong expect an increased level of digital engagement and experiences with their banks, there is a need for banks to continue to maintain the highest levels of cybersecurity. From our survey, consumers want banks to focus on digital security first, and this underpins their trust in the organization.

Areas of greatest importance to the consumers’ digital experience

Consumers place a high level of trust in banks and expect banks to be digitally secure

Key focus areas

15


Organisations need to rethink their value propositions to adapt to changing behaviour and continue focusing on enhancing digital experiences

Summary

Key focus areas

Organisations will need to:

• Consider and enhance its offerings to remain relevant to the consumer and their changing behaviour

• Provide consumers with value in every touchpoint in the end-to-end customer journey

• Partner with others in the eco-system to further strengthen the value of the overall experience for the consumer


• Move beyond basic digital experiences and functionalities to meet increasing consumer expectations

• Ensure consistent and customer-focused messaging across digital and traditional channels

• Understand the changing digital customer journey and proactively invest for the future consumer


• Understand their consumers’ priorities and continue to focus on the areas that have established trust in the brand

• Translate brand values into the consumer experience

• Continue to prioritise digital security and protection of the consumers’ data with the expectation that online transactions and activities will continue to increase

1 2 3

Consumers are experiencing economic constraints and are prioritising value for

money

Consumers are becoming more digitally savvy and value the ease with which they can

interact with organisations through digital channels

Trust is key and consumers are willing to spend with brands that are aligned with their

values and priorities

17


Survey participants12,334 consumers globally; representative sample of 1,000 in Hong Kong, across four sectors (grocery, non-grocery, banks and insurance)


We have conducted consumer research to better understand the impact of COVID-19 in Hong Kong consumers’ changing spending behaviours to enhance customer experiences across a number of different sectors.

Consumer behaviour data (customer needs and expectations during COVID-19, purchase drivers, channels interaction and trust).

DatesMay – September 2020

Collection method Online-based questionnaire to track customer trends

Participating territoriesCanada, US, Brazil, France, Germany, Italy, Spain, UK, Mainland China, Hong Kong (S.A.R), Japan and Australia

Transactional data

Time period segmentation:From September 2019 to August 2020

Sample size:~8.000 consumers

Age break-down• 18-25 – 34%• 20-25 – 30%• 30-35 – 17%• 35-45 – 15%• 45-60 – 4%

Data anonymised


Let’s get in touch! Isabel ZisselsbergerHead of Strategy & Performance for Financial Services, Hong KongKPMG ChinaT: +852 2826 8033E: [email protected]

Sean RenAssociate Director, Strategy & PerformanceKPMG ChinaT: +852 2847 5818E: [email protected]

Marta PochSenior Consultant, Strategy & PerformanceKPMG ChinaE: [email protected]

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


The KPMG name, logo are registered trademarks or trademarks of KPMG International.

Ray WyandCEOT: +852 9316 2793E: [email protected]

Victor LangCOOT: +852 9198 5017E: [email protected]

Stephanie JohnsonCMOT: +852 5966 3400E: [email protected]

The gini transaction data research may not be used in any form, in its entirety or in part, without the written permission of gini.

KPMG gini

Impact of COVID-19 on Hong Kong Consumers’ BehavioursSlide Number 2Slide Number 3Consumers in Hong Kong have become more savvy and selective when making financial decisions Slide Number 5Key findings – �RetailSlide Number 7Slide Number 8Slide Number 9Slide Number 10Slide Number 11Slide Number 12Slide Number 13Slide Number 14Slide Number 15Slide Number 16Slide Number 17Slide Number 18Let’s get in touch!

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