Archive for July, 2016

E-commerce – penetration and value of retail sales, across 5 countries

In Q4 ’15, India surpassed the US to become the #2 market in terms of Internet users behind China. However, e-commerce sales in India are nowhere near the value they generate in the U.S. or in China. So here’s a look at internet penetration, digital buyers and e-commerce sales of the top 5 countries by total retail Sales.

We’ve been interested in this topic for a few years now ; in this post almost two years ago we tried to gauge the penetration of e-commerce in four BRIC countries by comparing the proportion of their population that was active online vs. the proportion of population that actually shopped online. In today’s post, we’ve gone one step further and looked at the value of sales originating from those that shop online, i.e. the proportion of total retail sales value that is contributed through the e-commerce channel. For this purpose, the countries that we’ve chosen are those that are the top 5 in terms of total value of retail sales, namely USA, China, Japan, Germany and India, in decreasing order of sales value.

ECom_Contrib

[Since there’s a lot of information in this infographic, here’s how to read it :

Each of these five countries is linked to two sets of concentric circles, one in the top half of the chart and one in the bottom half of the chart. The set of concentric circles on the top had population numbers and that at the bottom has sales figures. Now for the details.

Let’s consider India as an example. The outermost circle in the top set of concentric circles for India tells us that our country has 925 mn people aged 14 years or more. The circle inside it shows that of these 925 mn people, 221 million or 24% are internet users. The innermost circle shows that only 82 Mn – or 9% of the 925 mn people – are digital shoppers and make online purchases of goods and services other than travel and events.

The bottom circle linked to each country shows the total value of retail sales and the proportion that is conducted via e-commerce. For instance, total retail sales in India are estimated at 818 Bn USD, and that conducted over e-commerce is just 14 Bn USD, or 1.7% of the total.]

So in spite of all the hype around this channel and the huge spend on advertising by the e-commerce players, a mere 9 % of our population shops online, and these purchases account for only 1% of total retail sales. Why only 1% ? Either due to a lower frequency of shopping online vs. visiting a retail store and / or due to a lower value of goods being purchased online. The latter seems unlikely since a large proportion of online sales are for mobile phones and accessories, followed by apparel and footwear, so it must be the low frequency to blame. Two big obstacles for e-commerce to surmount are now clear – the low penetration of online shopping amongst internet users, and the low frequency of online shopping among those that do shop online.

On to our neighbour China. While 56% of their total population is online, over half of these make purchases online. No wonder that sales through the e-commerce channel are 15.9% of total retail sales in China, as the bottom circle shows.

Surprisingly, though the US has a far greater proportion of population that makes purchases online ( 65% of its total population buys through e-commerce), these account for only 7.1% of total retail sales. Wonder whether it’s the ugly frequency problem rearing its head again, or whether it’s due to low unit value of goods purchased.

  • Ravindra Ramavath
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July 25, 2016 at 11:16 am Leave a comment

Does this smell ring a bell ?

About the link between fragrances, our memories and emotions, and buying behaviour.

Our last post described the phenomenon behind ‘petrichor’- that marvellous freshly wet mud smell, and why we love that smell so much. In this post, we intend to touch upon a few other such fragrances – natural as well as man-made.  But first, a few facts about our sense of smell.

Humans have five to six million odour detecting cells ; if that sounds like a lot, consider the fact that your pet dog has about 100 – 220 million, depending on the breed ! Multiple sources mention that the human nose can sense about 10,000 distinct scents ; though a paper published in the journal Science in 2014 stated that this number was closer to a trillion scents ! Incredible, isn’t it ? So how does our sense of smell work ?

When an odour enters the nose, if affects the olfactory epithelium that is made up of millions of nerve endings ; the nerve endings pass the ‘message’ along the olfactory tract to the olfactory bulb and it then enters the limbic system. The limbic system comprises a set of structures within the brain that are regarded by scientists as playing a major role in controlling mood, memory, behaviour and emotion. This is why fragrances have such a strong link to our memories, emotions, and moods. Hence the soothing influence of some fragrances (e.g lavender) and the energising effect of others (e.g lime).

This article goes a step further and mentions that smell sensations are relayed to the cortex, where ‘cognitive’ recognition occurs, only after the deepest parts of our brains have been stimulated. Thus, by the time we correctly name a particular scent as – for example – ‘vanilla’, the scent has already activated the limbic system, triggering more deep-seated emotional responses.

This explains the phenomenon often noticed in consumer research on fragrances ; even people who struggle to name a fragrance or to describe it in simple terms like fruity / flowery / lemony / woody / musky etc., can often describe how it makes them feel or what they associate it with –their first girlfriend, grandmother’s morning prayer rituals, a sun-dappled garden with rows of brightly coloured flowers, a hike to the top of the hill in the rain, cake baked by mum fresh from the oven, you get the picture, right ? This is noticed far more during consumer research in India than abroad, as our vocabulary for fragrances is not as developed ; everyone recognises sweet / flowery and citrus / lime, but few can tell a woody fragrance from a musky or a green one, making the act of decoding through associations even more important.

To return to the topic with which I began this post, apart from petrichor, which other fragrances are universal ones, that all or most of us recognise ? In India, jasmine would be one recognised by everyone – whether by the name ‘chameli’ in the North or ‘malleepu’ in the South; sandal would probably be another – calm, soothing, eternal. There probably are a lot of man-made fragrances that we all recognise too. For instance, some of the most common scent associations are those related to food. Ever stood near a shop selling freshly-made chhole-batoore and inhaled deeply before reaching for your wallet ? Or walked past Mysore Concerns in Matunga area of Mumbai and felt the fragrance of freshly ground coffee beans waft up to your nostrils and languorously beckon you to the counter? Maybe it’s just me, but I can think of loads more – fragrant biriyani, or cardamom chai (any masala chai, actually), ripe mangoes, the smoke from a tandoor, garlic naan are among the few that come to mind. Some of this understanding is used commercially too – noticed how there’s often a baking smell that you inhale as you walk past a cookie-shop in a mall ? That’s to make you feel hungry and tempt you to loosen your purse-strings.

But not all universal scent associations are food-related. There’s the salty tang of the sea, mild but still perceptible even in the polluted waters off Bombay, the smell of wet khus on coolers in North India during summer, the smoky smell hanging in the air after a lot of fire-crackers have been burst, the strong antiseptic smell associated with hospitals, the warm n’ fuzzy ‘awww’ inducing smell of a freshly powdered baby after a bath.

There are powerful stories and anecdotes about the way consumers’ relate to the fragrances of products and their strong connection with the same. For instance, consider Johnson’s Baby Powder, a product with one of the most recognisable scents in the world. Introduced in 1893 to soothe irritation on plastered skin, it was soon being used to help alleviate diaper rash too. The aroma of Johnson baby powder is so strongly connected to the image of a happy, clean baby that it is often identified as ‘the baby smell’. In fact, close to a decade ago, a baby products brand trying to enter India found this an impassable barrier and had to retreat – while young mothers liked their products and were happy with them, the grandmothers were rejecting them as ‘the baby didn’t smell like a baby anymore’. What the grannies were missing, in fact, was the smell of the Johnson’s baby powder on their precious grandchild, but their identification with it was so complete that it was ‘the baby smell’ to them.

 

fragrance - iconic products, some ingredients 2Scents are such powerful triggers to our emotions – thence to our loyalty, and commercially speaking, our purse-strings – that many iconic brands have kept the initially successful fragrance unchanged for decades or more. Examples of such instantly recognisable fragrances are Johnson’s Baby Powder, Pond’s Cold Cream, Dettol antiseptic liquid, Old Spice cologne, Pears soap etc.  Of course, a challenge faced by such brands is remaining contemporary and relevant to their audience while retaining the physical product attributes such as fragrance. But that’s another story, meant for another post altogether.

  • Zenobia Driver

 

July 7, 2016 at 12:12 pm Leave a comment

Updates – fragrance of the rain

Thanks to two readers of our blog, we have some more information related to our last post.

Click on this link to read about Geosmin, one of the molecules that plays a role in petrichor. In fact, its name is derived from the Greek words ‘Earth’ and ‘smell’.  Another interesting point, the human nose is extremely sensitive to geosmin and is able to detect it at concentrations as low as 5 parts per trillion. Geosmin is responsible for the muddy smell in many freshwater fish ; Geosmin breaks down in acidic conditions and becomes odourless, hence vinegar and other acidic ingredients are often used in recipes to cook these fish. Thanks for all this info, Oinks.

And this link is about a fragrance called ‘mitti attar’ made in Kannauj, which captures that refreshing energising fresh smell of wet mud after the rain. Thanks for sharing this article, Ruks. This article that is quoted in the earlier one mentions one fascinating factoid , albeit unrelated to petrichor. Apparently after the Empress Mumtaz Mahal passed away, Shah Jehaan never wore perfume again , attars had been one of the couple’s shared passions.

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Zenobia

July 1, 2016 at 1:09 pm Leave a comment


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