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A European survey conducted in 15 countriesA LOW COST TO SUIT EVERYONEFrom forced choice to smart purchase2023EDITORIALThe low-cost world is nothing new to LObservatoire Cetelem.Back in 2009,we were one of the fjrst publications to report on the Dacia craze and its various effects.Then,in 2010,we assessed its impact against the backdrop of the subprime crisis.Today,crises abound once again.The geopolitical crisis triggered by the war in Ukraine has been rumbling on alongside an economic crisis marked by the sudden,damaging return of infmation levels that we had mistakenly believed belonged to the past.In last years Cetelem Barometer,consumers were already anticipating the emergence and consequences of this infmation,particularly in terms of purchasing power.As a concept that has always been synonymous with the lowest prices,the low-cost approach seemed to be the natural choice when the theme of this latest Observatoire Cetelem was being chosen.Without revealing the full breadth of the studys fjndings,two key elements stand out.The fjrst is perfectly refmected in the title of this survey.Gone are the days when low-cost options might have been considered a shameful facet of consumerism,when one might have stepped through the doors of a shop almost with a feeling of embarrassment,hoping not to be seen.The low-cost segment is aimed at all consumers.It caters to everyone,whether they are in this market out of choice or necessity.People on high and modest incomes alike go for low-cost options for different reasons,chiefmy depending on whether they live in Eastern or Western Europe.Second,while the low-cost market enjoys a relatively positive image that has more to do with reason than passion,it is probably safe to say that it has signifjcant room for growth,particularly in sectors where it has yet to truly make its mark.But this growth should come with a condition.The low-cost philosophy must not forget its roots,its raison dtre.In other words,it must stay faithful to its cut-price DNA.Happy reading.Flavien Neuvy Head of LObservatoire Cetelem03LObservatoire Cetelem 2023TABLE OF CONTENTSA WELL-ESTABLISHED REALITY 08Awareness and perception of the low-cost market 10Sectors and brands:a dominant triumvirate 17A simple ofger 231THE ERA OF UNASHAMED LOW-COST CONSUMPTION 28Consumption:still a question of price fjrst and foremost 30Low cost for all,but for difgering reasons 352THE EXPANSION OF THE LOW-COST MARKET 46A future secured 48 By staying faithful to its cut-price DNA 553CONCLUSION 62THE COUNTRIES OF LOBSERVATOIRE CETELEM 63LOBSERVATOIRE CETELEMFounded in 1985 and headed by Flavien Neuvy,LObservatoire Cetelem is an economic research and intelligence unit of BNP Paribas Personal Finance.Its mission is to observe,highlight and interpret shifts in consumption patterns in France and abroad.To fulfjl this ambition,LObservatoire Cetelem has set up a range of tools that rely on diverse and complementary content,including:-The Observatoires:Two highly respected annual surveys conducted internationally:a worldwide survey on the automotive market(18 countries)and a European survey on consumer trends(15 countries).-The zOOm reports,which focus on lifestyles and explore major themes(“The French and their fjnances”,“Food at a time of tough fjnancial choices”,etc.)in three stages,by seeking the opinion of French consumers via three-wave surveys.Flavien Neuvy,Head of LObservatoire Cetelem: 33(0)6 47 59 35 54 fmavien.neuvybnpparibas- Patricia Bosc,Managing Editor: 33(0)7 62 78 73 48 patricia.boscbnpparibas-CONTACTSFOREWORD 060504LObservatoire Cetelem 2023The latest Cetelem Barometer,which was published at the start of the year,pointed to the“inevitability of infmation”,to quote one of the titles of the survey,and to the consequences European consumers were predicting last year.The aim of the report was no longer to predict its magnitude,but rather to assess the impact of an economic phenomenon which,for the preceding 40 years,was thought to have been eradicated for good.Through this recent Barometer,Europeans voiced their feelings about their purchasing power,which more than half of respondents felt had fallen.This sense was particularly strong in the Northern and Western European countries.In this turbulent economic climate,consumption was holding fjrm,while saving had fallen into decline,having risen in popularity during the public health crisis.Source:LObservatoire Cetelem 2023Fig.1 Over the last 12 months,have you decided against making any of the following purchases for fjnancial reasons?Share of respondents who answered“Yes”.In%.Travel,holidays 51 Leisure(sports,cultural activities,etc.)48 Fuel 29Day-to-day purchases (food,hygiene,etc.)29state that they have decided against making certain purchases relating to leisure activities or holidaysof the population surveyed say they have decided against making certain purchases64Y%state that they have on occasion decided againstspending money on fuel or day-to-day items39%FOREWORDAs for the consequences of rising infmation,this latest survey highlights the increased fragility of consumption,due to individuals having to make certain trade-offs.64%of respondents said they had decided against making certain purchases over the last 12 months.While these decisions were mainly to the detriment of travel,holidays and leisure activities(6 out of 10 respondents),expenses that people feel they can live without,nearly 4 out of 10 Europeans also refrained from purchasing day-to-day items or fuel,which are generally deemed essential(Fig.1).Mentioning infmation and a reluctance to consume in the same breath naturally raises the issue of price which,in these tough economic times,has become more crucial than ever.And consumers inevitably want prices to be as low as possible.The low-cost concept is a double-edged sword that is both universally appealing and a necessity for many.0706LObservatoire Cetelem 2023The English language has a gift for turning simple words into popular generic expressions that are used around the world.It has the ability to neatly denote a vast array of products,services,companies and even attitudes,which in spite of their diversity are linked together by a single idea,in this case low prices.It seemed essential for a survey devoted to the topic to underline the power of the concept and the degree to which it has been embraced by consumers.A WELL-ESTABLISHED REALITY10908LObservatoire Cetelem 2023Awareness and perception of the low-cost market“Low cost”is one of those expressions that have slowly established themselves over time,without it being possible to accurately pinpoint their origin(see part 3).Today,the term has become part of the economic vocabulary of industry professionals and consumers alike.A CONCEPT THAT IS WIDELY KNOWN AND RECOGNISED9 out of 10 Europeans interviewed for this survey had heard of the low-cost concept.In some cases,the term is almost universally recognised,with scores approaching 100%in a number of countries,including Italy,Bulgaria,Spain and Portugal.Most have more than a passing acquaintance with the notion,with 55%of respondents stating that they understand specifjcally what the term means.The most perceptive consumers can be found in Southern Europe,with 8 out of 10 Italians,Spaniards and Portuguese able to defjne exactly what the two words signify.In contrast,Poles,Austrians and Slovaks are not as familiar with the concept,with less than 3 in 10 being able to clearly defjne what is meant by“low cost”(Fig.2).Fig.2 Have you ever heard of the low-cost concept?Share of respondents who answered “Yes,and you know exactly what it is”.In%.Source:LObservatoire Cetelem 2023Less than 300%to 49P%to 69p%and over58 SwedenPoland21 38 Czech Rep.28 SlovakiaGermany 40Italy 80Spain 82Belgium 33United Kingdom 47France 63Portugal 8156 Romania72 Bulgaria59 HungaryAustria 2515-COUNTRY AVERAGE551110LObservatoire Cetelem 2023Source:LObservatoire Cetelem 2023A NOTED LEVEL OF DEVELOPMENTA similar proportion of Europeans also consider the low-cost market to be well developed in their country.6 out of 10 respondents are of this view.Only 11%go as far as saying that it is very well developed,which leaves the low-cost sector considerable scope to boost its visibility and therefore its economic clout.Geographically speaking,the highest proportions of consumers who state that the low-cost market is well developed can be found in Northern and Western Europe(7 out of 10 in Sweden,the UK and France)(Fig.3).LOW COST:AN ENTIRE CONCEPT IN TWO WORDSWhile different terminology is employed depending on the sector,from“low fare”to“hard discount”to“economy class”,the defjnition of low cost nonetheless rests upon several points of consensus.This is a business model geared towards signifjcantly reducing prices,one that is based on the implementation of a particular logistical and personnel management rationale,but also a functional service.These attributes provide a tangible description of an economic innovation that enables prices to be reduced by at least 25%compared to traditional retail.(Fig.4).Consumers are clearly well aware of this,since the words they are most likely to associate with the low-cost concept relate to this aspect:“low price”,“value range”and“promotion”.They also link the concept to the notion of“poor quality”,echoing an image of the low-cost market that evokes extremely sparse sales fmoors,the availability of only the most basic entry-level products,and minimal customer service(Fig.5).The low-cost approach allows prices to be reduced by at least 25%compared to traditional retail.Source:Emmanuel Combe,Le Low cost(published by La Dcouverte,2019).Fig.4/ContextDefjnition and fjelds of application of the low-cost approachLEANPRODUCTIONLoganLow-cost air travelDirect bankingLOW COSTRELOCATION TO A COUNTRY WITH LOW COSTSE-COMMERCEFig.3 Do you feel that the market for low-cost products and services is well developed in your country today?Share of respondents who answered“Yes”.In%.Less than 45E%to 59%to 69p%and over15-COUNTRY AVERAGE6073 SwedenPoland38 39 Czech Rep.43 SlovakiaGermany 60Italy 60Spain 64Belgium 55United Kingdom 71France 70Portugal 5142 Romania47 Bulgaria49 HungaryAustria 491312LObservatoire Cetelem 2023A DECENT IMAGE THAT COULD BE ENHANCED As we have seen,the low-cost market is well known,widely recognised and well established in the eyes of consumers,in addition to enjoying a generally satisfactory image.The average score assigned by Europeans as a whole is 6.5,with Romanians proving to be the most enthusiastic(7.3)and the Austrians and French the most sceptical(5.8 and 5.9).Indeed,not one country produces a score under 5 out of 10.It should also be noted that the bulk of opinions can be found in the median range between 5 and 7.The low-cost market is neither shunned nor very popular(Fig.6).Fig.6 Do you have a positive or negative image of low-cost products and services?Score from 1 to 10 Fig.5 When you hear the term“low cost”,what does it mean to you?What words spring to mind?To all respondents.The word cloud was generated automatically based on the exhaustivity of the spontaneous answers to the open-ended question.The size of each word in the image refmects the frequency with which it is used.The word displayed in the largest characters is that used most frequently in the answers of respondents.A words position in the cloud has no special signifjcance.Germany 6.2Austria 5.8Belgium 6.0Bulgaria 6.3Spain 6.8France 5.9Hungary 6.5Italy 6.9Poland 6.5Portugal 6.8Czech Rep.6.3Romania 7.3United Kingdom 6.5Slovakia 6.5Sweden 6.915-COUNTRY AVERAGE6.5Source:LObservatoire Cetelem 2023Source:LObservatoire Cetelem 2023LOW PRICESPOOR QUALITYPROMOTIONSOFFERS SAVINGSAIRLINESVALUE RANGEPRODUCTS REDUCED TO THE ESSENTIALSGOODUNBRANDED PRODUCTSGOOD VALUE FOR MONEYA SPECIFIC UNBRANDED PRODUCTLOW PRODUCTION COSTSDISCOUNT PRODUCTSSTORE-BRAND PRODUCTSWHOLESALE PRODUCTSENERGY SAVINGSPRICE CEILINGLAST-MINUTE OFFERSNEGATIVE CONNOTATIONSCONSUMING LESSHOUSE/APPARTMENTWith an average score of 6.5/10,the image people have of the low-cost model is no more negative than it is positive.1514LObservatoire Cetelem 2023Fig.7 Would you say that low-cost companies.To all respondents,in%.This impression that people feel somewhat ambivalent is refmected in the values they associate with the low-cost concept.For most of the items on which Europeans were asked for their opinion,there is a roughly equal share of positive and negative responses.58%of consumers believe that low-cost companies respect human rights,while 42lieve the opposite.55lieve these fjrms are in tune with their own ethical values,while 45%do not.The issues of environmental friendliness and fair pay for both staff and suppliers also split the individuals surveyed almost equally(53%and 47%).And again there is near parity on the topics of employment and transparency regarding the manufacture of products(Fig.7).While peoples opinions on the the low-cost markets values are not especially negative,they do seem to indicate that there is some scope for the concept to evolve by embracing practices that are more in line with current trends and consumer expectations.Yes,absolutely No,not particularlyYes,somewhat No,not at allCLOTHING,FOOD AND AIR TRAVEL:TOP OF THE LOW-COST TREEWhile the low-cost concept has gradually spread to all sectors,three in particular have grown to embody the concept more powerfully.Clothing,food and air travel are the three sectors most synonymous with low-cost products,according to 66%,62%and 58%of Europeans,respectively.In fourth place is mobile telephony,which refmects how successful operators have been in developing low-cost offerings in what is often a highly competitive fjeld.Conversely,the car industry,a market in which Dacias success caused something of a paradigm shift,is rarely associated with the low-cost concept(39%).The same goes for banks,despite the emergence of a substantial online market,as well as energy,a sector that has recently been opened to competition in a number of countries(Fig.8).Sectors and brands:a dominant triumvirateRespect human rights144434858 42Are aligned with your values/morals134236955 45Pay suppliers and employees a fair rate134038953 47Seek to grow while respecting the environment1340371053 47Are concerned with employment issues1339381052 48Are transparent about the raw materials they use and how their products are made1239391051 49Source:LObservatoire Cetelem 20231716LObservatoire Cetelem 2023Very well developed Not particularly well developedQuite well developedNot well developed at allLIDL,RYANAIR AND ALDI:A RENOWNED TRIOThus,three sectors stand out,but so do three brands.Lidl tops the list,having been cited spontaneously by 16%of Europeans,followed by Ryanair,the brand that revolutionized the airline industry,and Aldi,the fjrst established retailer to take the low-cost route(Fig.9).But although these three brands have a truly international reach,a geographical analysis highlights certain particularities specifjc to each country.Polands Biendronka,for example,is a decidedly local low-cost phenomenon(Fig.10).Clothing and textiles184827766 34Food retailers164630862 38Air travel1642311158 42Mobile phone operators 1340361153 47Household appliances114040951 49Furniture1140391051 49Hotels and accommodation1038401248 52Digital devices(computers,smartphones,tablets,etc.)1136411247 53Gardening and DIY937431146 54Rail,bus or coach travel1034411544 56Cars1029441739 61Banks1029412039 61Energy suppliers828422236 64Fig.8In your country,would you say that the market for low-cost products and services is well developed in each of the following sectors?In%.Source:LObservatoire Cetelem 2023Lidl 16 Ryanair 14 Aldi 11 EasyJet 7 Primark 4 Fig.9 Can you name 3 brands or companies that you think best epitomise the low-cost concept?In%of spontaneous answers.Top 5.Source:LObservatoire Cetelem 20231918LObservatoire Cetelem 2023LidlLidlAldiAldiHoferBiedronkaTescoWizz AirWizz AirRyanairRyanairRyanairRyanairRyanairRyanairFig.10 Can you name 3 brands or companies that you think best epitomise the low-cost concept?Most commonly named brand in each country.SwedenGermany ItalyBelgium United Kingdom France Portugal Poland Romania Czech Rep.Slovakia BulgariaSpain HungaryAustria COUNTRY/SECTORFOODDIYFURNITURE/INTERIOR DESIGNAIR TRAVELGermanyLidlAldiPennyNettoKaufmandBauhausActionEbayHemaKiKNKDIkeaGermanwingsAir BerlinEasyJetRyanairEurowingsAustriaHoferNormaLidlBauhausActionEbayWillhabenWizzRyanairEasyJetEurowingsVuelingTransaviaJet2BelgiumLidlAldiPennyBrico PlanitBrico DptMr.BricolageHUBOAction2ememainHemaLa FoirFouilleIkeaGifjTransaviaRyanairIberiaBlue AirVuelingEasyJetAir ArabiaBulgariaLidlPennyKaufmandMr.BricolageWizzRyanairTransaviaJet2SpainAldiLidlMereDiaPrimaprixBauhausMr.BricolageBrico DptActionGifjHemaVuelingIberia ExpressVoloteaRyanairEasyJetAer LingusTransaviaGermanwingsTuifmyFranceLidlAldiSupecoEdCostcoNettoPrimaprixBrico DptBrico manActionGifjHemaCostcoLeboncoinIkeaNormalEasyJetTransaviaRyanairVuelingVoloteaHungaryAldiLidlCoopBauhausWizzRyanairEasyJetVuelingJet2Fig.11/ContextEuropes biggest low-cost brandsSource:LObservatoire Cetelem 2023Source:C-Ways2120LObservatoire Cetelem 2023COUNTRY/SECTORFOODDIYFURNITURE/INTERIOR DESIGNAIR TRAVELItalyAldiLidlPennyEuroSpinINs MercatoMD discountBricocenterActionGifjIkeaVoloteaRyanairWizzTransaviaEasyJetBlueAirVuelingPolandKaufmandAldiLidlActionIkeaWizzSmartwingsVuelingRyanairEasyJetNorwegian.noPortugalAldiLidlBrico DptRyanairIberiaTransaviaNorwegian.noAir ArabiaEasyJetVuelingBlue AirEurowingsCzech Rep.LidlPennyKaufmandBauhausIkeaRomaniaCoraLidlMereKaufmandPennyMr.BricolageBrico DptWizzBlue AirRyanairVuelingUnited KingdomLidlAldiB&M(retail)PoundlandPoundstretcherGumtreeHemaIkeaSmartwingsEasyJetRyanairGermanwingsWizzNorwegian.noJet2VuelingAirEuropaTransaviaSlovakiaKaufmandLidlBauhausIkeaEasyJetRyanairSwedenNettoLidlBauhausIkeaRyanairAir ArabiaNorwegian.noVuelingWizzEurowingsEasyJetBlue AirFig.11/Context(continued)Europes biggest low-cost brandsSource:C-WaysA simple ofgeringLOW PRICES AND REDUCED SERVICESLow-cost offerings are marketed by powerful specialist brands and enjoy a strong presence in three key sectors,but does that mean they are well regarded by Europeans?The answer is a resounding yes.The overall image that just over 8 out of 10 consumers have of such offerings refmects the idea that these companies focus on keeping prices as low as possible,while providing services that are stripped down to the essentials.Ultimately,this is the“dictionary defjnition”of the low-cost approach.Almost as many associate low-cost offerings with companies that specialise in this approach.More interestingly,a similar number of Europeans associate the concept with the low-cost offerings of“traditional”brands that have chosen to develop products and services specifjcally for this market,in some cases selling them through specialist subsidiaries(Fig.12).This result suggests that the sector is not solely the preserve of“pure plays”,but that it is open and constantly evolving,offering opportunities to brands whose roots are elsewhere.From a geographical perspective,respondents from Mediterranean countries are again the most vocal on these issues.2322LObservatoire Cetelem 2023Companies that offer products and services at lower than the market rate by reducing products/services to the essentials30 83Companies and brands that specialise in this type of offering24 81“Traditional”companies and brands that offer specifjc product ranges or services at lower prices,or which have specialist subsidiaries22 79Brands or retailers that reduce their costs as much as possible,notably by relocating part of their business21 74Promotional deals(such as special offers,private sales and introductory prices)offered by“traditional”brands or retailers20 72Brands or retailers that reduce their costs as much as possible,notably by keeping wages low and offering poorer working conditions 19 68A market that now exists in every commercial sector17 67Fig.12 Based on what you know or on your perception of the concept,do you agree or disagree with each of the following statements about the low-cost market?The low-cost market includes.In%.Marketed by powerful specialist brands,low-cost product offerings are viewed in a positive light by 8 out of 10 Europeans.Fig.13 And more specifjcally,how accurately do the following statements portray low-cost products or services?In%.Reducing products to the essentials and eliminating anything that is non-essential(packaging,optional extras,etc.)185920377 23Easy to identify165723473 27Unbranded products and services185423572 28Products and services that offer inexpensive optional extras145724571 29A wide range of products and services145229566 34A level of quality comparable to that of traditional products/services124634858 42A negative impact on the environment1139401050 50Disappointing once purchased103942949 51A negative social impact1034431344 56Detrimental to the health or safety of consumers932421741 59Very accurately Not very accurately Quite accurately Not accurately at allAgree Including:Strongly agreeSource:LObservatoire Cetelem 2023Source:LObservatoire Cetelem 20232524LObservatoire Cetelem 2023CLEARLY IDENTIFIED PRODUCTS AND SERVICESTo defjne the low-cost concept more precisely,Europeans identify four key criteria(Fig.13).First of all,nearly 8 out of 10 say that low-cost products are identifjable by their lack of frills,in terms of packaging,optional extras,etc.This is a view held most fjrmly by the Italians and Spanish,while the Slovaks and Swedes are the least likely to point to this characteristic.An almost equal proportion believe that low-cost products are easy to identify,because they are unbranded and feature add-ons that are inexpensive when they are available(73%,72%and 71%).These are attributes that the Spanish and Italians are the most likely to highlight,along with the French and the British on certain points.Certain more“qualitative”criteria generate mixed responses in the European countries with the most advanced economies.Indeed,more than 1 in 2 German,French and British respondents believe that low-cost products have a negative impact on the environment or are disappointing once purchased.The majority of German and French consumers also agree that low-cost products have a negative social impact.DECENT VALUE FOR MONEYOverall,the qualitative aspects of low-cost products leave Europeans somewhat divided.57el that they offer good value for money(Fig.14).The vast majority of people are of this opinion and this is especially true in Hungary,Portugal and Slovakia.However,this is a minority view in Belgium and Bulgaria.Regular buyers of low-cost items are more likely to state that they offer good value for money(66%).Fig.14 Generally speaking,would you say that low-cost products and services are.In%.In%of those who often consume low-cost productsIn%of those who seldom or never consume low-cost productsProducts that offer good value for moneyProducts that are cheaper to buy but whose quality is poor2727Source:LObservatoire Cetelem 2023THE ESSENTIAL57lieve that low-cost products offer good value for money6 OUT OF 10 believe that the low-cost market is well developed in their country8 OUT OF 10 EUROPEANS associate the low-cost model with low prices and minimal services3 sectors that embody the low-cost approach:CLOTHING,FOOD AND AIR TRAVEL2755%know exactly what it is9 OUT OF 10 have heard of the low-cost conceptTHE LOW-COST MARKETS AVERAGE IMAGE SCORE6.5 out of 10LObservatoire Cetelem 20234 OUT OF 10 EUROPEANShave on occasion decided against purchasing day-to-day items or fuel57434654663426For a long time,at least in the minds of those who were unfamiliar with the concept,it was generally assumed that consumers of low-cost products were keen to keep a low profjle.Stores with a stripped-down interior design,limited product ranges and a minimal level of service were considered emblematic of a low-cost model aimed at households that could not afford to shop elsewhere.O tempora,o mores,as Cicero might have remarked.Although it is not exactly fashionable(yet?)to embrace low-cost shopping,the practice is now widespread,whether it be out of choice or necessity.2THE ERA OF UNASHAMED LOW-COST CONSUMPTION 2928LObservatoire Cetelem 2023The sudden eruption of infmation,like a volcano long thought to be extinct but which has suddenly reawakened,has meant that the issue of price is back at the heart of the economic debate and the daily lives of consumers.PRICE ABOVE ALL,ESPECIALLY FOR THOSE ON LOW INCOMESThe Europeans surveyed consider price to be the most important criterion when buying a product,far ahead of quality.Overall,this is true for 6 out of 10 respondents(Fig.15).It is particularly important for the Portuguese,Poles,Slovaks and Hungarians(76%,74%,69%and 69%),while Swedish and French consumers pay almost as much attention to price as they do to quality(52%and 55%).While all the generations place an equal emphasis on price,the differences observed between income groups are naturally much clearer.70%of Europeans on low incomes place this criterion above the rest,compared with only 51%of those on high incomes.PRICE OR QUALITY,IT ALL DEPENDS ON THE SECTORAnd yet,this overarching perspective and the dominance of the price factor mask the more diverse views expressed when consumer sectors are considered individually.In some sectors,price is clearly stated as being the dominant factor in spending decisions.For energy,the gap between price and quality is 24 points(55%vs.31%),while for transport it stands at 18 points(53%vs.35%).Consumption:still a question of price fjrst and foremostFig.15Generally speaking,which of the following statements best refmects your personal circumstances?In%.In contrast,peoples pursuit of quality clearly prevails when it comes to buying household appliances( 14 points),digital devices( 11 points)or vehicles( 8 points).Although these products tend to be costly,which one might imagine would prompt consumers to seek the lowest prices possible,their reliability,their durability and,therefore,their quality are nonetheless essential in their eyes.It is also worth noting that regardless of the sector in question,the brand or retailer is never the overriding criterion governing peoples choices.6139Price is the most important factor when choosing a product or serviceYou are willing to pay more for high-quality productsAge 18-346040 Age 35-495941Age 50-756238Low income7030High income5149Source:LObservatoire Cetelem 2023613130LObservatoire Cetelem 2023IN THE THREE SECTORS BEST KNOWN FOR THEIR LOW-COST OFFERINGS,OPINIONS ARE BALANCED If we focus on the three sectors that best represent the low-cost philosophy,price takes priority when it comes to air travel and clothing,but only to a moderate extent.Indeed,the gap between price and quality is 10 points for air travel and just 3 points for clothing.In the food sector,quality has a slim 1-point lead(Fig.16).Regarding air travel,only Italy and Spain choose quality over price,while the opposite is true chiefmy in Eastern European countries.As for clothing,Italy and Spain are again the keenest on quality,along with the UK and Sweden.Once again,two Eastern European countries,the Czech Republic and Slovakia,place the greatest emphasis on price.When it comes to food,six countries choose quality over price,with Italy leading the way in this area.Once more,Eastern Europeans prioritise price.Fig.16 What is your attitude to each of the following products and services?To all respondents,in%.Price-quality gap(in points)Energy suppliers553114 24Rail,bus or coach travel533512 18Mobile phone operators 483715 11Gardening and DIY473716 10Air travel483814 10Clothing and textiles434017 3Banks414217-1Food retailers424315-1Hotels and accommodation434413-1Furniture404515-5Cars364420-8Digital devices354619-11Household appliances344818-14Your top selection criterion is price Your top selection criterion is quality or services Your top selection criterion is the brand or retailerSource:LObservatoire Cetelem 2023Strongly agree Somewhat disagree Somewhat agree Strongly disagreeFig.17 To be able to consume more,what solutions would you choose?In%.AN OPPORTUNITY TO CONSUME MOREIn the current climate,where price is a crucial factor in peoples consumption,the low-cost model evidently allows them to consume more.Indeed,77%of respondents take this view.This is a similar score to that reported by LObservatoire Cetelem de la Consommation in 2009.If one considers that 82%of consumers believe that the hard-discount model,a close relation of the low-cost approach,is also a good way of achieving this goal,there is no doubt that they are well aware of how these two concepts are positioned(Fig.17).However,there is one solution that seems to be even more effective:reducing spending on non-priority items so as to boost ones purchasing potential(86%).When it comes to this trio of strategies for freeing up funds in order to spend more,Portugal and Romania clearly stand out from the other countries,while Belgium and France sit at the other end of the scale.Source:LObservatoire Cetelem 2023AgreeDisagreeObs 2009*Reduce spending on what you deem are the lowest-priority items4046104861491Use hard-discount stores3646135821879Purchase low-cost products2849176772376Shop online2447209712967Save less21452410663436Buy second-hand items rather than new products214224136337/Work more21382417594165Buy on credit82328413169213332LObservatoire Cetelem 2023A MULTI-FACETED APPEALBut while the low-cost model appeals for reasons of price,it is not the only argument that might convince consumers of its merits.A whole array of factors make it an attractive proposition.As well as allowing people to spend less so that they can afford to buy more products,the low-cost model caters for various expectations,particularly when it comes to offering value for money(26%vs.25%).The majority of Italians place the fjrst of these criteria at the top of their list,while the Portuguese favour the second(34%and 35%).Another often-cited element,which this time has little to do with choice,is the idea that low-cost offerings are the only option for Europeans with modest fjnancial resources,an issue that we will expand upon later(16%).Residents of Eastern European countries are more likely to stress this point than other respondents.Going down the low-cost route is also seen as an effective way of reducing spending or avoiding paying more for products that look the same,irrespective of where they are bought(13%and 12%).Lastly,people choose low-cost options due to their ease of access(8%)(Fig.18).Fig.18 What is your main reason for choosing low-cost products or services?In%.It allows you to spend less on some purchases,so that you have more money left over for others,or even to buy more items 26You feel that the low-cost market offers products and services that provide good value for money and meet your expectations 25You have no choice,for fjnancial reasons 16You want to consume less and it allows you to spend less by buying only the essentials 13You believe they are no different to the traditional(or premium)version of the same product or service,so there is no need to pay more 12These retailers/stores are near your home and easy to reach 8Source:LObservatoire Cetelem 2023Low cost for all,but for difgering reasonsDAY-TO-DAY CONSUMPTIONArmed with these advantages,and far from being merely a source of occasional consumerist opportunities,low-cost consumption has become a natural day-to-day habit for Europeans.Indeed,54%of those surveyed say that they regularly consume low-cost products.In this respect,no clear geographical trends can be identifjed,given that the concepts most enthusiastic proponents are to be found in Hungary(74%),Portugal(65%),Spain(63%)and the United Kingdom(62%).One must go to the Czech Republic,Slovakia and Belgium to fjnd a more moderate level of interest in low-cost consumption(33%,39%and 44%)(Fig.19).3534LObservatoire Cetelem 2023Fig.19 Do you ever consume low-cost products or services?Share of respondents who answered “I often consume low-cost products or services”.In%.60 SwedenPoland48 33 Czech Rep.39 SlovakiaGermany 55Italy 60Spain 63Belgium 44United Kingdom 62France 41Portugal 6554 Romania54 Bulgaria74 HungaryAustria 5315-COUNTRY AVERAGE54Less than 45E%to 59%to 69p%and overSource:LObservatoire Cetelem 2023HIGH INCOMES IN THE EAST,LOW INCOMES IN THE WESTAn income-based analysis suggests that everyone takes advantage of the low-cost market,whether they are on low or high incomes.The gap between these two categories is only 3 points(56%of the former and 53%of the latter).Further analysis reveals that there is a clear geographical divide between inhabitants of Western and Eastern Europe.In the West,low-income earners are more likely to state that they choose low-cost options than more affmuent individuals(59%vs.53%,which remains a ESSENTIAL ITEMS ARE THE MAIN FOCUS FOR THE LOW-COST MODELLet us continue to unpack this analysis of low-cost consumption relative to income by examining the impact of the latter in the different sectors,again with respect to the geographical location of consumers.In the East,the propensity of high-income households to embrace low-cost consumption mainly revolves around non-essential spending.When it comes to hotels,gardening and DIY,the gap is 5 points,while for air travel the difference is 4 points.However,in the case of clothing,food,energy and several other consumer sectors,the differential is reversed.In these categories,the least affmuent households buy more low-cost products than wealthy households.The same is true in the West,where in all the sectors associated with essential purchases,less wealthy households have a greater tendency to purchase low-cost options.In the food category,the gap between low and high-income earners reaches 8 points,the widest in this survey.For clothing,the difference is 6 points.The only sector in which higher-income individuals are more attracted to low-cost products is air travel.Indeed,why would those who fall into this social class,who tend to fmy more frequently,pay more than they need to for the short or medium-haul fmights they take for their weekends away?(Fig.21)far-from-negligible proportion).In the East,the trend is reversed,with a larger share of individuals on higher incomes indicating that they have embraced the low-cost concept(54%vs.46%)(Fig.20).This result might be considered counter-intuitive,given the cut-price approach that lies at the heart of the low-cost model,which would suggest that it is aimed primarily at those with limited resources.Gap between low incomes and high incomes(in points)All countriesLow incomes High incomes56 53-3Western EuropeLow incomes High incomes59 53-6Eastern EuropeLow incomes High incomes46 548Source:LObservatoire Cetelem 2023Fig.20Do you ever consume low-cost products or services?%of respondents who answered“I often or very often consume low-cost products or services”.3736LObservatoire Cetelem 2023Food retailersWestern EuropeEastern Europe66 58 63 61 Clothing and textilesWestern EuropeEastern Europe60 54 59 56 Mobile phone operators Western EuropeEastern Europe47 44 45 42 Rail,bus or coach travelWestern EuropeEastern Europe45 43 45 45 Energy suppliersWestern EuropeEastern Europe43 42 46 41 Gardening and DIYWestern EuropeEastern Europe44 43 40 45 Air travelWestern EuropeEastern Europe40 47 32 36 Hotels and accommodationWestern EuropeEastern Europe42 43 34 39 FurnitureWestern EuropeEastern Europe43 39 40 35 Household appliancesWestern EuropeEastern Europe43 36 37 36 Digital devicesWestern EuropeEastern Europe40 33 37 33 BanksWestern EuropeEastern Europe35 32 39 34 CarsWestern EuropeEastern Europe32 28 31 29 Low incomes High incomesFig.21 More specifjcally,in each of the following sectors,do you ever buy/choose low-cost products or services?In%who“Often consume”.Source:LObservatoire Cetelem 2023THERE IS NO SHAME IN GOING LOW COSTIn 2010,LObservatoire Cetelem de la Consommation remarked that“In many European countries,we are seeing a democratisation of the hard discount model,which means it is reaching new categories of clientele.Having initially attracted students and homemakers,we now see business executives and other professionals succumbing to the temptations of the hard-discount market.Wealthier individuals are no longer ashamed of entering these stores,because everyone ultimately wants to save money in these times of economic hardship.”Over a decade later,it is seen as no more demeaning to consume low-cost products,particularly for Europeans on high incomes.While 26%of all respondents view low-cost consumption in a negative light,only 22%of the most affmuent Europeans feel this way,compared with 30%of the most disadvantaged individuals(Fig.22).Overall,a similar difference can be observed in the East and West.However,from a macro-economic perspective,the idea that low-cost consumption is“shameful”is especially prevalent in the more developed economies.In Germany,the UK,Belgium and France,at least 30%of respondents feel this way.It is interesting to note that only 8%of Portuguese consumers share this view.3938LObservatoire Cetelem 2023This is doubtless because those who can afford to buy“high-cost”products have greater agency to opt for“low-cost”alternatives out of choice.When people consume low-cost products because they have chosen to,the above-average score they assign to the items purchased suggests that their level of satisfaction is greater,as(Fig.24).Only in three countries is low-cost consumption seen as a necessity by the majority of respondents:Hungary,Poland and Romania.Low-cost consumption out of choice is most widespread in Sweden,France and Spain.Fig.23 When you choose to buy low-cost products,is it usually.?To consumers of low-cost products.In%.Out of necessity,because you cannot afford to pay more45%Out of choice,because you believe that the range on offer perfectly meets your needs55%IN MANY CASES,IT IS AN ADJUSTMENT VARIABLELooking beyond the fact that low-income households make low-cost purchases out of necessity(36%),they also believe that doing so offers signifjcant advantages.32%state that the savings achieved allow them to make other purchases.An equal number declare that they are satisfjed with low-cost options and that it would be pointless to pay more(32%).Both of these factors are even more important to high-income earners(41%and 38%,respectively),while necessity due to income restrictions is much less commonly cited(21%)(Fig.25).Fig.22 And generally speaking,do you feel that buying low-cost products is demeaning?To consumers of low-cost products.In%.620443026meaning74%Not demeaningVery demeaning Somewhat demeaning Not particularly demeaning Not at all demeaningIn%who answered“demeaning”Age 18-34 53Age 35-49 54Age 50-75 58Often consume low-cost products 54Rarely consume low-cost products 57Low income 47High income 64Source:LObservatoire Cetelem 2023In%who answered“Out of choice”Age 18-3439 Age 35-4929 Age 50-7515 Low income30 High income22 Often consume low-cost products29Rarely consume low-cost products22 Western EuropeLow incomes High incomes30 22Eastern EuropeLow incomes High incomes31 19Source:LObservatoire Cetelem 2023LOW-COST CONSUMPTION,A CHOICE RATHER THAN A NECESSITY We saw that very little stigma was attached to low-cost consumption,but is it a choice or a necessity?For a slim majority of Europeans(55%),it is the former.This is more likely to be the case for older respondents(58%of over-50s)and especially for people on high incomes(64%,compared with 47%of low-income earners)(Fig.23).55%of Europeans go for low-cost options out of choice,rather than necessity4140LObservatoire Cetelem 2023PRODUCTS THAT ARE RELATIVELY WELL RATEDThus,it appears that low-cost products cater well for these expectations.However,enthusiasm for the genre is fairly measured,rather than being overwhelming,much like the image of low-cost consumption as a whole,as we saw in part one.With the average rating standing at 6.8,the vast majority of individuals surveyed assign these products a score of between 5 and 8(Fig.26).This is a score rooted in reason rather than passion,one that could be considered relatively high for the products and services in question.Fig.26 Generally speaking,are you satisfjed with the low-cost products and services you buy?Scores from 1 to 10.To consumers of low-cost products.In%.1 1%2 1%3 2%4 4%5 16%6 17%7 21%8 22%9 8 8%Not at all satisfjed(1 to 2)Not particularly satisfjed(3 to 4)Somewhat satisfjed(5 to 6)Quite satisfjed(7 to 8)Very satisfjed(9 to 10)AVERAGE SCORE6.833C%6%2%Source:LObservatoire Cetelem 2023Fig.24Generally speaking,are you satisfjed with the low-cost products and services you buy?Scores from 1 to 10.To consumers of low-cost products.In%.Overall16 59Consume low-cost options out of choice18 64Consume low-cost options out of necessity15 54Satisfjed(score between 7 and 10)Including:Very satisfjed(score between 9 and 10)Source:LObservatoire Cetelem 2023Fig.25 You consume low-cost products more often than a year ago,or you intend to do so.Is it mainly because.?To those who consume or intend to consume more low-cost products.In%.It allows you to save money so that you can spend it on other purchases 36 32 41 Most of the time you are satisfjed with these products and you no longer see the point in paying more,even if you can afford to 35 32 38 You can no longer afford the alternatives when making certain purchases 29 36 21 OverallLow incomeHigh income Source:LObservatoire Cetelem 20234342LObservatoire Cetelem 2023Fig.27 Generally speaking,are you satisfjed with the low-cost products and services you buy?Scores from 1 to 10.To consumers of low-cost products.Germany 6.8Austria 6.5Belgium 6.7Bulgaria 6.1Spain 7.1France 6.6Hungary 6.8Italy 7.0Poland 6.7Portugal 7.1Czech Rep.6.6Romania 7.4United Kingdom 6.9Slovakia 6.5Sweden 7.015-COUNTRY AVERAGE6.8Source:LObservatoire Cetelem 2023Breaking down the fjgures geographically reveals no real stand-out results.The highest and lowest scores are both produced in Eastern Europe,namely in Romania(7.4)and Bulgaria(6.1),respectively.Most other countries fall close to the overall average(Fig.27).77lieve that low-cost products are a solution that allows them to consume more54%regularly consume low-cost productsFOR 6 OUT OF 10 EUROPEANSprice is the main factor when buying a productONLY 26EL THAT LOW-COST CONSUMPTION IS DEMEANING55%CONSUME LOW-COST PRODUCTS OUT OF CHOICETHE ESSENTIAL45LObservatoire Cetelem 20234544While the low-cost model was immediately able to win over the least wealthy consumers,it took a while to be accepted by a wider clientele.There were also variations from sector to sector.It is undeniable that the concepts adoption by the airline industry,among others,has done a great deal to accelerate the trend.But as is often the case when we talk about growth and success,one might wonder if a ceiling has been attained regardless of whether or not it is“glass”or even if the model is losing ground.However,the low-cost approach is clearly not struggling yet,although it will need to remain true to itself if that is to continue.3THE EXPANSION OF THE LOW-COST MARKET4746LObservatoire Cetelem 2023 A future securedThe low-cost philosophy is now fjrmly established in the European consumer landscape.As noted earlier,the model successfully appeals to many outside what might be considered its natural target group,namely low-income households,although this appeal remains moderate and the concept arouses little passion.CONSUMPTION IS RISINGThe low-cost market appears to be able to rely on the trust of consumers for its continued growth.Over the last year,almost 4 out of 10 Europeans have increased their consumption of low-cost products.Only 16%have reduced it over the same period(Fig.28).The price advantages of low-cost products have a lot to do with this,especially in the current infmationary climate.Source:LObservatoire Cetelem 2023Fig.28 Over the last year,have you bought more,fewer or as many low-cost products or services?To consumers of low-cost products.In%.MoreFewerThe same amount391645Consume low-cost products out of choice351451Consume low-cost products out of necessity431938MORE LOW-COST CONSUMPTION IN THE FUTUREMany people have said yes to more low-cost purchases in recent times,and just over 4 out of 10 Europeans will also say yes in the near future.Just as many say they will consume the same amount.One country,Portugal,stands apart for its keenness to ramp up its low-cost purchases,with 6 out of 10 Portuguese respondents expressing this intention.There are no signifjcant differences between the surveys 14 remaining nations,with each country posting scores close to the overall average.With only 37%of consumers thinking of increasing their low-cost consumption,France posts the lowest fjgure,just ahead of Bulgaria and Belgium(39%and 40%)(Fig.29).4948LObservatoire Cetelem 2023Source:LObservatoire Cetelem 2023Fig.29And do you intend to consume more or fewer low-cost products in the future?Question to low-cost consumers.In%.Fewer The same amount More15-COUNTRY AVERAGE 13 44 43 Germany443917Austria453916Belgium40 4713Bulgaria394417Spain43489France3753 10Hungary45 4015Italy434512Poland424414Portugal60346Czech Rep.454114Romania483319United Kingdom474211 Slovakia42 4018Sweden424612Source:LObservatoire Cetelem 2023Fig.30And specifjcally in your country,do you think that in the future the market for low-cost products and services in each of the following sectors will.?In%.Food retailers2232368254 10Clothing and textiles2032388252 10New tech products1631429247 11Mobile phone operators 1729448246 10Energy suppliers17294110346 13Household appliances1432448246 10Air travel17274211344 14Rail,bus or coach travel16284410244 12Gardening and DIY1429478243 10Hotels14294311343 14Cars13284511341 14Renting or buying accommodation13264314439 18Banks13254910338 13Grow and become the norm Grow,but fail to catch up with traditional retailersRemain stable Decline,but not disappear DisappearCONTINUED GROWTH IN MOST SECTORSIf European consumers are to be believed,further growth is set to take place in the majority of sectors.Two of the industries that best represent the low-cost concept,namely food and clothing,enjoy the strongest growth prospects(54%and 52%).The third sector that typifjes the concept,air travel,scores slightly lower,but remains in line with the overall average(44%).This could be a sign that Europeans believe the sector has matured,but also that the current economic and political climate is less conducive to travel.Other sectors,which up until now had not been particularly closely associated with the low-cost model,are now fuelling the expectations of Europeans,who see new technologies,mobile telephony,energy and household appliances heading more resolutely down this path over the coming years.This is much less true for banking and housing,the two areas perceived as having the weakest growth prospects(Fig.30).5150LObservatoire Cetelem 2023Source:LObservatoire Cetelem 2023Fig.31And would you say that for each of the following items,you favour low-cost products/services more,less or as much as a year ago?Question to consumers of each of these low-cost products/services.In%.FOOD AND CLOTHES ARE THE MOST POPULAR ITEMSThe types of low-cost product most commonly consumed by Europeans confjrm the degree to which this model has become a part of their daily lives.Food and clothing are the two biggest winners in the growth of low-cost consumption.41%and 34%of recipients,respectively,state that they have increased the number of purchases they make in these two categories.As regards the other types of product examined,there is something of a status quo,with more than half of Europeans saying that they engage in neither more nor less low-cost consumption than in the past.In the food sector,the proportion of individuals who have increased their low-cost consumption is particularly striking in the United Kingdom,Portugal,Austria and Germany,where the fjgure reaches or approaches the 50%mark.When it comes to clothing,Portugal and Austria top the ranking,along with Spain and Italy,with scores of around 40%(Fig.31).LOW-COST FOOD,AN UNSTOPPABLE FORCEIn the food sector,the rising market share of hard-discount and soft-discount chains supports the views expressed by Europeans via this Observatoire Cetelem de la Consommation survey.Between 2014 and 2022,this market share grew by 5 points,from 21%to 26%(Fig.32).Fig.32/ContextMarket shares of discountersCountries included:Belgium,Czech Republic,Denmark,Finland,France,Germany,Greece,Hungary,Ireland,Italy,Netherlands,Norway,Poland,Portugal,Slovakia,Spain,Sweden.In%.201421201522 201622 2017232022*26Market share of the discount model in 2017 by countryIn%.Belgium 41 Germany 37 Poland 28 Austria 27 Hungary 23 Czech Rep.23 Italy 18 7-COUNTRY AVERAGE28Source:Nielsen.*2022 forecast by C-Ways.Food products414019Clothes344323Train,bus or coach tickets245422Accommodation during trips away235423Furniture and decorative items for the home235423Energy suppliers225721Mobile phone operators225721Plane tickets 225622Gardening and DIY products225523Household appliances215524Digital devices(computers,smartphones,tablets,etc.)205624Banking services176122A vehicle166123MoreAs muchLess5352LObservatoire Cetelem 2023LOW-COST FLIGHTS:A BLISTERING TAKE OFFThe growth of low-cost air travel has undoubtedly been the most remarkable of all the sectors examined.In 2001,low-cost airlines accountedfor just 5%of the overall market.Today,they are on their way to securing the lions share of business in the sector,with the current fjgure totalling 45%(Fig.33).The eight-fold growth of low-cost air travel over the last 20 years has been by far the most impressive of all the sectors examined.Source:OAG Schedules Analyser,CAPA Center for Aviation.20015.3 027.4 0310.2 0411.5 0514.4 0616.9 0720.3 0822.5 0924.0 1024.9 1125.7 1227.4 1328.2 1429.9 1531.6 1633.3 1734.9 1836.5 1937.3 2044.5%Fig.33/ContextMarket share of low-cost airlines between 2001 and 2020 By staying faithful to its cut-price DNANEW LOW-COST CONCEPTS ARE EMERGING WITH A KEY FOCUS ON PRICEAs we have seen,the low-cost model is an innovative consumer concept geared towards signifjcantly lowering prices in order to gain market share.Historically,this has been a fundamental aspect of the model,regardless of the terms one might associate with the concept.In all the countries and all the sectors in which it has been implemented,price cutting has always been central,almost to the point of obsession.This is as true today as it was in the United States in 1929,when the fjrst self-service store was opened during another major economic crisis.It was also the goal of brothers Theo and Albert Albrecht in 1950 when they opened the fjrst hard-discount store,Aldi(a contraction of Albrecht and Diskont),just as Germany was beginning to recover from the Second World War.Cut-price fares are also the credo of charter airlines,which fjrst emerged in the 1960s and reached their apotheosis in 1985 with the launch of Ryanair,the brand that truly heralded the dawn of low-cost air travel.And as time has gone by,companies entering new sectors have continued to aim for the lowest prices,making this the keystone of their business(Fig.34).5554LObservatoire Cetelem 2023Fig.34/ContextHistorical presence of low-cost models by sector Source:LObservatoire Cetelem 2023Fig.35For what reason(s)do you think the market for low-cost products and services will continue to grow?Select one or more answers.Question to those who think the market for low-cost products and services will continue to grow,in%.Because more and more consumers will experience fjnancial diffjculties and will only be able to afford low-cost products from this market 51 Because consumers are becoming better informed and will increasingly refuse to pay what they view as unjustifjably high prices for products 33Because consumers will place less and less importance on which products they buy,as long as they meet their basic requirements 28Because it offers products whose essential characteristics are of a quality comparable to that of traditional products 26Because given the climate emergency,it is preferable to keep developing products and services that are reduced to the bare essentials 24FINANCIAL CONSTRAINTS:THE MODELS MAIN DRIVING FORCEThe creation of low-cost businesses at a time of economic crisis does not appear to be a phenomenon that belongs solely to the past.According to Europeans,economic hardship will continue to fuel the concepts growth.Of those who expect the market to expand further,1 in 2 believe this will be due to the rising proportion of consumers who are destined to face fjnancial diffjculties.This argument is most likely to be expressed in Hungary,Austria and France,all of which have advanced economies(63%,60%and 54%,respectively).Looking at the other reasons why respondents expect the low-cost market to grow,consumers being better informed so that they pay a fairer price,the ability of the products purchased to meet basic requirements and the fact that the products offer a similar level of quality to branded products are much less likely to be put forward(33%,28%and 24%).It is worth noting that the strong relationship between low-cost consumption and economic woes relegates environmental concerns to last place in this ranking.Its hard to think green when prices make you see red(Fig.35).1972:1st But1967:1st Conforama1985:La Halle aux vtements1960:Charters1929:1st self-service store2000:Vet affaires HD1950:1st HD in Germany2000:Discountinterior designfurniture(Costco)1995:Auction Web,eBay1962:Motels 61963:1st Hypermarket2005:Le Bon Coin,Vinted1971:Low Cost1995:Low Cost(Ire)2000:Low Cost1988:1st HD2012:ActionCostcoUSAEuropeFranceFoodFurnitureClothingTransportSource:C-Ways1 in 2 Europeans believe that the greater peoples fjnancial diffjculties,the more compelled they will feel to buy low-cost products.5756LObservatoire Cetelem 2023Germany6337 Austria64 36 Belgium6040 Bulgaria5446Spain72 28 France64 36 Hungary64 36Italy6733 Poland6634Portugal77 23 Czech Rep.62 38Romania70 30United Kingdom7723Slovakia69 31Sweden68 32AN EFFECTIVE WAY OF PRESERVING PURCHASING POWER.From their perspective as sensible,thoughtful consumers,Europeans also believe that retailers and brands that are focused on cutting prices are best placed to preserve their purchasing power.Almost 7 out of 10 Europeans share this opinion.Along with the British,the inhabitants of both Iberian countries are the most likely to hold this view(77%,77%and 72%),while the Bulgarians are more sceptical(54%)(Fig.36).Source:LObservatoire Cetelem 2023Fig.36Do you trust low-cost retailers/brands to help improve consumer purchasing power?In%.Dont trust Trust15-COUNTRY AVERAGE 33 67 NEW LOW-COST PRODUCTS RATHER THAN SECOND-HAND BRANDED PRODUCTSWhile the second-hand market is evidently growing,especially on the Internet and for branded products,and while it allows consumers to buy goods more cheaply in these infmationary times,here again the low-cost model appears to be more popular with Europeans.More than 6 out of 10 respondents would prefer to buy a brand-new low-cost product than a second-hand branded product.Older consumers are more likely to be of this view than the younger generation.But the most enthusiastic in this sense are those who regularly consume low-cost products.Indeed,69%would rather opt for new low-cost goods,compared with only 54%of those who rarely or never make low-cost purchases(Fig.37).From a geographical perspective,this is most likely to be the case in Spain,Portugal and Italy.France has the highest proportion of respondents who declare their preference for branded products,even when they are pre-owned.Fig.37If you had to pick between a brand-new low-cost product or a second-hand branded product,which would you choose?In%.Source:LObservatoire Cetelem 2023Age 18-34 59Age 35-49 61Age 50-75 65Often consume low-cost products 69Rarely or never consume low-cost products 54A branded second-hand product38%A brand-new low-cost product62Y58LObservatoire Cetelem 202361616183LIEVE THAT THE LOW-COST MODELS LOW PRICES ARE A GOOD WAY OF IMPROVING PURCHASING POWERMORE THAN 4 OUT OF 10 EUROPEANSINTEND TO INCREASE THEIR LOW-COST CONSUMPTION IN THE NEAR FUTURE1 IN 2 CONSUMERS BELIEVE THAT the low-cost market will continue to grow due to peoples fjnancial diffjculties2 IN 3 EUROPEANS trust low-cost retailers and brands to help improve consumer purchasing power6 OUT OF 10 prefer to buy a brand-new low-cost product rather than a second-hand branded product41%OF EUROPEANS have been buying more low-cost food products over the last yearTHE ESSENTIALFig.38Do you agree or disagree with each of the following statements?The low-cost market (products or services).In%.Allows you to make purchases that you would not otherwise be able to afford,because they are usually too expensive315413285 15Is a way of improving the purchasing power of consumers by charging prices that are lower than the market rate275614383 17Caters mainly for the needs of those on low incomes295116480 20Forces“traditional”retailers to lower their prices in order to compete205521475 25Offers“fair”prices,while“traditional”(or high-end)brands/retailers make big profjts from the prices they charge215322474 26Is ideal,but only for basic consumer products175724571 29Offers low prices while maintaining the quality of products and services164928765 35Offers products that are as durable as those of“traditional”brands or retailers(e.g.,cars,household appliances,furniture,etc.)154830763 37Strongly agree Somewhat Agree Somewhat disagree Strongly disagreeTHE IMPORTANCE OF LOW PRICESThus,low prices and purchasing power are inseparable in the minds of Europeans.83%of Europeans believe that the low-cost model is a decent solution in this regard But they also see it as enabling the most disadvantaged households to keep consuming.85lieve that the low-cost market allows purchases to be made that would be too costly otherwise.80lieve that it caters well for the needs of the lowest-income groups.Moreover,the low-cost market is seen as providing a strong incentive for traditional brands and retailers to lower their prices(75%)(Fig.38).This may well be the(low)price they must pay to maintain their position and the market share that goes with it.Source:LObservatoire Cetelem 2023LObservatoire Cetelem 202360CONCLUSIONLong gone are the days when the low-cost market was seen as the poor relation of consumerism,one disdainfully ignored by established brands and retailers,and patronised mainly by households with limited budgets.Not only has it successfully made its mark in many sectors,in some cases to the point of setting the standard,it has also been able to adapt locally to attract more customers from across the social spectrum.Customers have opted for low-cost solutions either out of choice or necessity.Of course,it cannot be claimed that the frog has fully transformed into a prince.The low-cost models image has room to improve and its offer could be further enhanced,as demonstrated by those retailers that have chosen to offer certain branded products.Has the low-cost concept already had its golden age?Europeans tend not to think so.Consumers believe it has scope to expand in a number of sectors beyond the“golden trio”,i.e.,food,clothing and air transport.While it thrives during times of economic crisis,it has also shown that it can prosper during periods of growth.But one crucial element that this latest Observatoire survey makes clear is that the low-cost market must not forget its DNA and must continue to make low prices its primary,if not its only selling point.In other words,it must not forget its roots.But is that not true for every consumer market player?COUNTRY DATAGERMANY AUSTRIABELGIUM BULGARIASPAINFRANCE HUNGARY ITALYPOLANDPORTUGALCZECH REPUBLICROMANIAUNITED KINGDOMSLOVAKIASWEDENCONSO6362LObservatoire Cetelem 2023LObservatoire Cetelem 2023The Germans are a little less clear on the meaning of the term“low-cost”than the European average.In the land of“hard-discount”stores,respondents cite major companies from this sector(Aldi,Lidl,Netto).This is a market that appeals more to lower-income earners than wealthier consumers,a gap fuelled partly by the fact that one-third of Germans see low-cost consumption as demeaning(the highest proportion in Europe).Those who believe the market will continue to grow consider its main strengths to be its capacity to cater for those who face fjnancial diffjculties and,to a lesser extent,the fact that it offers fairer prices.GermanyGermany40 GermanyProducts that offer good value for money55 57Products that are cheaper to buy but whose quality is poor45 43Germany18 Aldi11 Lidl7 NettoMore and more consumers will experience fjnancial diffjculties50 51Consumers will increasingly refuse to pay more for products whose price is unjustifjed31 33Given the climate emergency,it is preferable to keep developing products that are reduced to the bare essentials28 24Allows savings to be made so that more money is left over for other purchases21 26Offers good value for money26 25A lack of fjnancial resources17 16Germany54 444317133944Germany55Germany6.2/1061 62Food retailers65 66Clothing and textilesGermany6.8/10463460 Germany64FwerThe same amountMoreMoreFewer The same amountPeoples awareness of the low-cost concept is very poor in Austria,where it is perceived to be only moderately well developed.The main brands cited are from the hard-discount segment(Hofer/Aldi,Lidl,Spar),which more than any other places an emphasis on attractive prices,but to the detriment of quality.Nonetheless,consumers(primarily those on lower incomes)state that they are relatively satisfjed with these offerings for their own reasons,whether it be through choice or necessity.Those who expect the low-cost market to grow are more likely than other Europeans to view it as a good solution for consumers facing fjnancial diffjculties.AustriaAustria25 AustriaProducts that offer good value for money50 57Products that are cheaper to buy but whose quality is poor50 43Austria20 Hofer15 Lidl12 SparMore and more consumers will experience fjnancial diffjculties60 51Consumers will increasingly refuse to pay more for products whose price is unjustifjed28 33Consumers will place less and less importance on which products they buy25 28Allows savings to be made so that more money is left over for other purchases26 26Offers good value for money23 25A lack of fjnancial resources17 16Austria57 454316133944Austria53Austria5.8/1057 62Food retailersAustria6.5/10432549 Austria58GT 53Mobile phone operators 63 66Clothing and textiles53 53Mobile phone operators 65646564Low-cost consumption,a well-established realityLow-cost consumption,a well-established reality15 countriesAwareness of the low-cost conceptIn%who answered“I know exactly what it is”Awareness of the low-cost conceptIn%who answered“I know exactly what it is”Sectors in which the low-cost segment is perceived to be the most well developedTop 3 sectors in which the low-cost segment is perceived to be the most well developed.In%who answered“Is well developed”Sectors in which the low-cost segment is perceived to be the most well developedTop 3 sectors in which the low-cost segment is perceived to be the most well developed.In%who answered“Is well developed”Perception of the level of development of the low-cost marketIn%who answered“Is well developed in the country”Perception of the level of development of the low-cost marketIn%who answered“Is well developed in the country”55 55 15 countries15 countries60 60 15 countries15 countries15 countries15 countries6.5/106.5/10Image of low-cost offeringsImage of low-cost offeringsPerceived quality of low-cost offeringsGenerally speaking,would you say that low-cost products and services are.?In%Perceived quality of low-cost offeringsGenerally speaking,would you say that low-cost products and services are.?In%LidlLidlRyanairRyanairAldiAldiTop 3 low-cost brands cited In%Top 3 low-cost brands cited In countries15 countries16 16 14 14 11 11 The era of unashamed low-cost consumptionThe era of unashamed low-cost consumptionTop 3 motivations behind low-cost consumption*In%Top 3 motivations behind low-cost consumption*In%Frequency of low-cost consumptionIn%who “Often consume”.Frequency of low-cost consumptionIn%who “Often consume”.Low-cost consumption out of choice or necessity*In%Low-cost consumption out of choice or necessity*In%Out of choiceOut of choice55 55 Out of necessityOut of necessity45 45 Is low-cost consumption considered demeaning*?In%who answered“Demeaning”Is low-cost consumption considered demeaning*?In%who answered“Demeaning”15 countries15 countries26 26*Question to consumers of low-cost products*Question to consumers of low-cost products The expansion of the low-cost market15 countries5415 countries5456VSS%Low incomeLow incomeHigh incomeHigh incomeSatisfaction with low-cost products and services*Satisfaction with low-cost products and services*15 countries15 countries6.8/106.8/10Reasons why it is expected to grow Question to those who think the low-cost market will continue to grow.In%Reasons why it is expected to grow Question to those who think the low-cost market will continue to grow.In%Expectation of future growthAnd in the future,do you intend to consume more or fewer low-cost products?In%Expectation of future growthAnd in the future,do you intend to consume more or fewer low-cost products?In%LObservatoire Cetelem 2023The expansion of the low-cost market15 countriesLObservatoire Cetelem 2023The majority of Bulgarians claim to be familiar with the term“low cost”,but only a minority feel that the sector is well developed in their country.They mainly associate the concept with air travel(WizzAir,Ryanair)and food retail(Lidl).Low-cost consumption in the country is in line with the European average and is almost equally popular among the low and high-income groups.However,here more than elsewhere the practice tends to be driven by necessity rather than choice and the level of satisfaction with these offerings is also lower.While they believe it has the potential to grow further in what is a tough economic climate for consumers,Bulgarians are slightly less likely than average to say they will make more low-cost purchases in the future.BulgariaBulgaria72 BulgariaProducts that offer good value for money49 57Products that are cheaper to buy but whose quality is poor51 43Bulgaria16 Wizz Air12 Ryanair12 LidlMore and more consumers will experience fjnancial diffjculties51 51Consumers will place less and less importance on which products they buy30 28Consumers will increasingly refuse to pay more for products whose price is unjustifjed27 33Allows savings to be made so that more money is left over for other purchases27 26Offers good value for money26 25A lack of fjnancial resources21 16Bulgaria52 Bulgaria54Bulgaria6.3/1055 62Food retailersBulgaria6.1/10482547 Bulgaria53T13Fewer4444The same amount3943MoreCompared to other Europeans,the Belgians are less well informed about the low-cost model,consider it less well developed and have a rather negative image of the concept.The market is structured around cheap,low-quality products that are considered less appealing than in other countries,regardless of income.Many Belgians feel that this type of consumption is demeaning.However,when they do opt for low-cost offerings(more often out of choice than necessity),consumers tend to be quite satisfjed.The markets image revolves fjrmly around the notion of price cutting and consumers believe it will continue to grow in a tough economic climate that could see more and more households tighten their budgets.BelgiumBelgium33 BelgiumProducts that offer good value for money48 57Products that are cheaper to buy but whose quality is poor52 43Belgium28 Ryanair16 Aldi14 LidlMore and more consumers will experience fjnancial diffjculties55 51Consumers will increasingly refuse to pay more for products whose price is unjustifjed31 33Consumers will place less and less importance on which products they buy28 28Allows savings to be made so that more money is left over for other purchases25 26Offers good value for money25 25A lack of fjnancial resources16 16Belgium58 404313134744Belgium44Belgium6/1055 58Air travel58 62Food retailers60 66Clothing and textilesBelgium6.7/10423155 Belgium46Dwer The same amountMore52 51Household appliances62 66Clothing and textiles67666766Low-cost consumption,a well-established realityLow-cost consumption,a well-established reality15 countriesAwareness of the low-cost conceptIn%who answered“I know exactly what it is”Awareness of the low-cost conceptIn%who answered“I know exactly what it is”Sectors in which the low-cost segment is perceived to be the most well developedTop 3 sectors in which the low-cost segment is perceived to be the most well developed.In%who answered“Is well developed”Sectors in which the low-cost segment is perceived to be the most well developedTop 3 sectors in which the low-cost segment is perceived to be the most well developed.In%who answered“Is well developed”Perception of the level of development of the low-cost marketIn%who answered“Is well developed in the country”Perception of the level of development of the low-cost marketIn%who answered“Is well developed in the country”55 55 15 countries15 countries60 60 15 countries15 countries15 countries15 countries6.5/106.5/10Image of low-cost offeringsImage of low-cost offeringsPerceived quality of low-cost offeringsGenerally speaking,would you say that low-cost products and services are.?In%Perceived quality of low-cost offeringsGenerally speaking,would you say that low-cost products and services are.?In%LidlLidlRyanairRyanairAldiAldiTop 3 low-cost brands cited In%Top 3 low-cost brands cited In countries15 countries16 16 14 14 11 11 The era of unashamed low-cost consumptionThe era of unashamed low-cost consumptionTop 3 motivations behind low-cost consumption*In%Top 3 motivations behind low-cost consumption*In%Frequency of low-cost consumptionIn%who “Often consume”.Frequency of low-cost consumptionIn%who “Often consume”.Low-cost consumption out of choice or necessity*In%Low-cost consumption out of choice or necessity*In%Out of choiceOut of choice55 55 Out of necessityOut of necessity45 45 Is low-cost consumption considered demeaning*?In%who answered“Demeaning”Is low-cost consumption considered demeaning*?In%who answered“Demeaning”15 countries15 countries26 26*Question to consumers of low-cost products*Question to consumers of low-cost products The expansion of the low-cost market15 countries5415 countries5456VSS%Low incomeLow incomeHigh incomeHigh incomeSatisfaction with low-cost products and services*Satisfaction with low-cost products and services*15 countries15 countries6.8/106.8/10Reasons why it is expected to grow Question to those who think the low-cost market will continue to grow.In%Reasons why it is expected to grow Question to those who think the low-cost market will continue to grow.In%Expectation of future growthAnd in the future,do you intend to consume more or fewer low-cost products?In%Expectation of future growthAnd in the future,do you intend to consume more or fewer low-cost products?In%LObservatoire Cetelem 2023The expansion of the low-cost market15 countriesLObservatoire Cetelem 2023Spain is one of Europes bastions of low-cost consumption.Its inhabitants are better informed than others about the concept and more likely to consider it well developed.They associate it most with the textile and airline industries.Blessed with a generally positive image,the low-cost market is synonymous with value for money in the minds of the majority of Spaniards,who tend to purchase these products out of choice and without any sense of shame.This is the equation that makes it more likely here than elsewhere to appeal to all types of consumer(low and high income).It is seen as a genuine alternative that enables consumption strategies to be optimised and which generates a much higher level of satisfaction than in other countries.SpainSpain82 SpainProducts that offer good value for money62 57Products that are cheaper to buy but whose quality is poor38 4365 58Spain20 Ryanair18 Primark9 VuelingMore and more consumers will experience fjnancial diffjculties52 51Consumers will increasingly refuse to pay more for products whose price is unjustifjed35 33Consumers will place less and less importance on which products they buy32 28Allows savings to be made so that more money is left over for other purchases28 26Offers good value for money27 25You want to consume less12 13Spain59Spain63Spain6.8/10Air travel71 66Clothing and textilesSpain7.1/10411664 Spain61e3Fewer4844The same amount4343MoreFrance is relatively familiar with the low-cost concept.While better understood and more likely to be perceived as well developed than elsewhere in Europe,the low-cost market enjoys a somewhat mixed image in France(low prices and low quality),which limits its appeal to consumers.Although in some cases this market is viewed as offering consumers a sensible alternative(as a choice rather than a necessity),they derive only moderate satisfaction from these purchases and are less likely than average to increase their low-cost consumption in the future.Yet,this market is expected to grow further,driven by a combination of budget constraints and an increasing desire to pay no more than a fair price.FranceFrance63 FranceProducts that offer good value for money52 57Products that are cheaper to buy but whose quality is poor48 4374 6274 5869 66France26 Lidl23 EasyJet18 RyanairMore and more consumers will experience fjnancial diffjculties54 51Consumers will increasingly refuse to pay more for products whose price is unjustifjed37 33Consumers will place less and less importance on which products they buy29 28Allows savings to be made so that more money is left over for other purchases26 26Offers good value for money25 25A lack of fjnancial resources15 16France59 374310135344France41France5.9/10Air travelFood retailersClothing and textilesFrance6.6/10413070 France42W 53Mobile phone operators FewerThe same amountMore69686968Low-cost consumption,a well-established realityLow-cost consumption,a well-established reality15 countries15 countriesAwareness of the low-cost conceptIn%who answered“I know exactly what it is”Awareness of the low-cost conceptIn%who answered“I know exactly what it is”Sectors in which the low-cost segment is perceived to be the most well developedTop 3 sectors in which the low-cost segment is perceived to be the most well developed.In%who answered“Is well developed”Sectors in which the low-cost segment is perceived to be the most well developedTop 3 sectors in which the low-cost segment is perceived to be the most well developed.In%who answered“Is well developed”Perception of the level of development of the low-cost marketIn%who answered“Is well developed in the country”Perception of the level of development of the low-cost marketIn%who answered“Is well developed in the country”55 55 15 countries15 countries60 60 15 countries15 countries15 countries15 countries6.5/106.5/10Image of low-cost offeringsImage of low-cost offeringsPerceived quality of low-cost offeringsGenerally speaking,would you say that low-cost products and services are.?In%Perceived quality of low-cost offeringsGenerally speaking,would you say that low-cost products and services are.?In%LidlLidlRyanairRyanairAldiAldiTop 3 low-cost brands cited In%Top 3 low-cost brands cited In countries15 countries16 16 14 14 11 11 The era of unashamed low-cost consumptionThe era of unashamed low-cost consumptionTop 3 motivations behind low-cost consumption*In%Top 3 motivations behind low-cost consumption*In%Frequency of low-cost consumptionIn%who “Often consume”.Frequency of low-cost consumptionIn%who “Often consume”.Low-cost consumption out of choice or necessity*In%Low-cost consumption out of choice or necessity*In%Out of choiceOut of choice55 55 Out of necessityOut of necessity45 45 Is low-cost consumption considered demeaning*?In%who answered“Demeaning”Is low-cost consumption considered demeaning*?In%who answered“Demeaning”15 countries15 countries26 26*Question to consumers of low-cost products*Question to consumers of low-cost products The expansion of the low-cost market15 countries5415 countries5456VSS%Low incomeLow incomeHigh incomeHigh incomeSatisfaction with low-cost products and services*15 countries15 countries6.8/106.8/10Reasons why it is expected to grow Question to those who think the low-cost market will continue to grow.In%Reasons why it is expected to grow Question to those who think the low-cost market will continue to grow.In%Expectation of future growthAnd in the future,do you intend to consume more or fewer low-cost products?In%Expectation of future growthAnd in the future,do you intend to consume more or fewer low-cost products?In%LObservatoire Cetelem 2023The expansion of the low-cost marketSatisfaction with low-cost products and services*LObservatoire Cetelem 2023Along with Spain,Italy is the European country where the meaning of“low-cost”is best understood.It is most likely to be associated with air travel and clothing,benefjts from a positive image(good value for money)and is seen as a shame-free opportunity,including by high-income earners.The Italians are more likely than other populations to opt for these products and services,but also to be satisfjed with them,since this is an approach that gives them more leeway to make certain fjnancial decisions(spend less on certain purchases to consume more elsewhere).This is a trend that is expected to continue,given the fjnancial strain that they believe more and more people will come under in the future.ItalyItaly80 ItalyProducts that offer good value for money64 57Products that are cheaper to buy but whose quality is poor36 43Italy36 Ryanair15 EasyJet12 LidlMore and more consumers will experience fjnancial diffjculties51 51Consumers will increasingly refuse to pay more for products whose price is unjustifjed31 33It offers products whose essential characteristics are of a quality comparable to that of traditional products25 26Allows savings to be made so that more money is left over for other purchases34 26Offers good value for money26 25A lack of fjnancial resources12 16Italy57 434312134544Italy60Italy6.9/1074 58Air travel61 62Food retailers65 66Clothing and textilesItaly7/10431760 Italy61wer The same amountMoreHungary is fertile ground for the low-cost model.Its inhabitants are familiar with the concept and see it as offering good value for money.Hungarians state that they are avid consumers of low-cost products and services and,much like in other Eastern European countries,these are more likely to be purchased by higher earners.In what is a tough economic climate,Hungary is the only European country where the consumption of low-cost products is motivated chiefmy by a lack of fjnancial resources and the feeling of having no alternative.This is a situation that is expected to last and which,in many peoples eyes,will lead more and more Hungarians to turn to these products and services in the future.HungaryHungary59 HungaryProducts that offer good value for money70 57Products that are cheaper to buy but whose quality is poor30 43Hungary54 Tesco34 Lidl30 SparMore and more consumers will experience fjnancial diffjculties63 51Consumers will increasingly refuse to pay more for products whose price is unjustifjed24 33Consumers will place less and less importance on which products they buy23 28Allows savings to be made so that more money is left over for other purchases21 26Offers good value for money22 25A lack of fjnancial resources29 16Hungary4245431513Hungary74Hungary6.5/1061 62Food retailers65 66Clothing and textilesHungary6.8/10581649 Hungary69vwer4044The same amountMore60 53Mobile phone operators You want to consume less12 1371707170Low-cost consumption,a well-established realityLow-cost consumption,a well-established reality15 countriesAwareness of the low-cost conceptIn%who answered“I know exactly what it is”Awareness of the low-cost conceptIn%who answered“I know exactly what it is”Sectors in which the low-cost segment is perceived to be the most well developedTop 3 sectors in which the low-cost segment is perceived to be the most well developed.In%who answered“Is well developed”Sectors in which the low-cost segment is perceived to be the most well developedTop 3 sectors in which the low-cost segment is perceived to be the most well developed.In%who answered“Is well developed”Perception of the level of development of the low-cost marketIn%who answered“Is well developed in the country”Perception of the level of development of the low-cost marketIn%who answered“Is well developed in the country”55 55 15 countries15 countries60 60 15 countries15 countries15 countries15 countries6.5/106.5/10Image of low-cost offeringsImage of low-cost offeringsPerceived quality of low-cost offeringsGenerally speaking,would you say that low-cost products and services are.?In%Perceived quality of low-cost offeringsGenerally speaking,would you say that low-cost products and services are.?In%LidlRyanairAldiTop 3 low-cost brands cited In%Top 3 low-cost brands cited In countries16 14 11 The era of unashamed low-cost consumptionThe era of unashamed low-cost consumptionTop 3 motivations behind low-cost consumption*In%Top 3 motivations behind low-cost consumption*In%Frequency of low-cost consumptionIn%who “Often consume”.Frequency of low-cost consumptionIn%who “Often consume”.Low-cost consumption out of choice or necessity*In%Low-cost consumption out of choice or necessity*In%Out of choiceOut of choice55 55 Out of necessityOut of necessity45 45 Is low-cost consumption considered demeaning*?In%who answered“Demeaning”Is low-cost consumption considered demeaning*?In%who answered“Demeaning”15 countries15 countries26 26*Question to consumers of low-cost products*Question to consumers of low-cost products The expansion of the low-cost market15 countries5415 countries5456VSS%Low incomeLow incomeHigh incomeHigh incomeSatisfaction with low-cost products and services*15 countries15 countries6.8/106.8/10Reasons why it is expected to grow Question to those who think the low-cost market will continue to grow.In%Reasons why it is expected to grow Question to those who think the low-cost market will continue to grow.In%Expectation of future growthAnd in the future,do you intend to consume more or fewer low-cost products?In%Expectation of future growthAnd in the future,do you intend to consume more or fewer low-cost products?In%LObservatoire Cetelem 2023The expansion of the low-cost market15 countriesSatisfaction with low-cost products and services*11 16 14 AldiRyanairLidl15 countriesLObservatoire Cetelem 2023The low-cost market has a very strong presence in Portugal and is most closely associated with air travel.The model is popular with a high proportion of consumers in the country,regardless of their income level.These products and services,which people tend to purchase out of choice rather than necessity,have two key advantages in their eyes:they guarantee good value for money and offer a high level of satisfaction.Low-cost consumption,which is widespread and well accepted in the country,is set to increase in the future,with the majority of Portuguese respondents stating that they intend to make more purchases of this kind,as they are keener than ever to feel that they are paying a fair price.PortugalPortugal81 PortugalProducts that offer good value for money67 57Products that are cheaper to buy but whose quality is poor33 43Portugal32 Ryanair25 EasyJet12 PrimarkMore and more consumers will experience fjnancial diffjculties53 51Consumers will increasingly refuse to pay more for products whose price is unjustifjed40 33It offers products whose essential characteristics are of a quality comparable to that of traditional products30 26Allows savings to be made so that more money is left over for other purchases27 26Offers good value for money35 25Enables you to spend less,because you only buy the essentials12 13Portugal59 6043613Portugal65Portugal6.8/1061 58Air travel59 66Clothing and textilesPortugal7.1/1041851 Portugal64gwer3444The same amountMorePoland is one of the countries where the low-cost concept is least well understood.Poles associate it with a variety of sectors,without any standing out in particular(clothing,food,but also mobile telephony,household appliances,etc.).The most frequently cited low-cost brand,ahead of Lidl and Ryanair,is a Polish supermarket chain(Biedronka).And if fewer Poles are able to defjne the concept,they are also less likely to consume these products and services.They are more likely than other populations to make such purchases out of(fjnancial)necessity than choice,but this does not mean that they are dissatisfjed with them.On the contrary,many highlight the good value for money these products and services offer.PolandPoland21 PolandProducts that offer good value for money59 57Products that are cheaper to buy but whose quality is poor41 43Poland10 Biedronka5 Lidl4 RyanairMore and more consumers will experience fjnancial diffjculties45 51Consumers will increasingly refuse to pay more for products whose price is unjustifjed31 33Consumers will place less and less importance on which products they buy29 28Allows savings to be made so that more money is left over for other purchases22 26Offers good value for money19 25Poland46424314134444Poland48Poland6.5/1055 62Food retailersPoland6.7/10542738 Poland47Hwer The same amountMore49 53Mobile phone operators 58 66Clothing and textilesA lack of fjnancial resources21 1649 48Hotels and accommodation49 51Household appliances73727372Low-cost consumption,a well-established realityLow-cost consumption,a well-established reality15 countriesAwareness of the low-cost conceptIn%who answered“I know exactly what it is”Awareness of the low-cost conceptIn%who answered“I know exactly what it is”Sectors in which the low-cost segment is perceived to be the most well developedTop 3 sectors in which the low-cost segment is perceived to be the most well developed.In%who answered“Is well developed”Sectors in which the low-cost segment is perceived to be the most well developedTop 3 sectors in which the low-cost segment is perceived to be the most well developed.In%who answered“Is well developed”Perception of the level of development of the low-cost marketIn%who answered“Is well developed in the country”Perception of the level of development of the low-cost marketIn%who answered“Is well developed in the country”55 55 15 countries15 countries60 60 15 countries15 countries15 countries15 countries6.5/106.5/10Image of low-cost offeringsImage of low-cost offeringsPerceived quality of low-cost offeringsGenerally speaking,would you say that low-cost products and services are.?In%Perceived quality of low-cost offeringsGenerally speaking,would you say that low-cost products and services are.?In%LidlLidlRyanairRyanairAldiAldiTop 3 low-cost brands cited In%Top 3 low-cost brands cited In countries15 countries16 16 14 14 11 11 The era of unashamed low-cost consumptionThe era of unashamed low-cost consumptionTop 3 motivations behind low-cost consumption*In%Top 3 motivations behind low-cost consumption*In%Frequency of low-cost consumptionIn%who “Often consume”.Frequency of low-cost consumptionIn%who “Often consume”.Low-cost consumption out of choice or necessity*In%Low-cost consumption out of choice or necessity*In%Out of choiceOut of choice55 55 Out of necessityOut of necessity45 45 Is low-cost consumption considered demeaning*?In%who answered“Demeaning”Is low-cost consumption considered demeaning*?In%who answered“Demeaning”15 countries15 countries26 26*Question to consumers of low-cost products*Question to consumers of low-cost products The expansion of the low-cost market15 countries5415 countries5456VSS%Low incomeLow incomeHigh incomeHigh incomeSatisfaction with low-cost products and services*Satisfaction with low-cost products and services*15 countries15 countries6.8/106.8/10Reasons why it is expected to grow Question to those who think the low-cost market will continue to grow.In%Reasons why it is expected to grow Question to those who think the low-cost market will continue to grow.In%Expectation of future growthAnd in the future,do you intend to consume more or fewer low-cost products?In%Expectation of future growthAnd in the future,do you intend to consume more or fewer low-cost products?In%LObservatoire Cetelem 2023The expansion of the low-cost market15 countriesLObservatoire Cetelem 2023Awareness of the low-cost model in Romania is on a par with the European average,although there is a sense that it is not as well developed in the country as elsewhere.Boasting an image that is more positive here than in any other European country,the market is associated mainly with air travel(Wizz Air and local airline BlueAir are named as examples)and attracts a proportion of consumers similar to the European average.Interestingly,wealthier consumers are more likely to engage in low-cost consumption,a tendency that typifjes Eastern European countries,although such purchases tend to be made primarily in response to tough fjnancial constraints,which can be partially offset by low-cost options.RomaniaRomania56 RomaniaProducts that offer good value for money56 57Products that are cheaper to buy but whose quality is poor44 43Romania25 Wizz Air17 BlueAir14 LidlMore and more consumers will experience fjnancial diffjculties45 51Consumers will increasingly refuse to pay more for products whose price is unjustifjed33 33It offers products whose essential characteristics are of a quality comparable to that of traditional products26 26Allows savings to be made so that more money is left over for other purchases25 26Offers good value for money24 25A lack of fjnancial resources19 16Romania48 484319133344Romania54Romania7.3/1058 58Air travel50 62Food retailers56 66Clothing and textilesRomania7.4/10522542 Romania49WwerThe same amountMoreIn the Czech Republic,consumers are less clear on the meaning of“low cost”and the concept is considered less well developed than in the rest of Europe.Here,it is mainly associated with airlines.While the proportion of Czech consumers who say they make low-cost purchases is the lowest in Europe,it is worth noting that a signifjcant share of those who do are in the higher-income group,as is the case in several Eastern European countries.Far from being considered demeaning,these offerings are deemed satisfactory and seen as offering good value for money by Czech consumers who are today compelled to make diffjcult fjnancial trade-offs.Thus,a signifjcant proportion say they will make this kind of choice more often in the future.Czech RepublicCzech Republic38 Czech RepublicProducts that offer good value for money62 57Products that are cheaper to buy but whose quality is poor38 43Czech Republic10 Ryanair6 EasyJet5SmartwingsMore and more consumers will experience fjnancial diffjculties48 51Consumers will increasingly refuse to pay more for products whose price is unjustifjed30 33It offers products whose essential characteristics are of a quality comparable to that of traditional products27 26Allows savings to be made so that more money is left over for other purchases24 26Offers good value for money23 25Enables you to spend less,because you only buy the essentials18 13Czech Republic57 454314134144Czech Republic33Czech Republic6.3/1052 58Air travel52 62Food retailers60 66Clothing and textilesCzech Republic6.6/10431939 Czech Republic325wer The same amountMoreA lack of fjnancial resources18 1675747574Low-cost consumption,a well-established realityLow-cost consumption,a well-established reality15 countriesAwareness of the low-cost conceptIn%who answered“I know exactly what it is”Awareness of the low-cost conceptIn%who answered“I know exactly what it is”Sectors in which the low-cost segment is perceived to be the most well developedTop 3 sectors in which the low-cost segment is perceived to be the most well developed.In%who answered“Is well developed”Sectors in which the low-cost segment is perceived to be the most well developedTop 3 sectors in which the low-cost segment is perceived to be the most well developed.In%who answered“Is well developed”Perception of the level of development of the low-cost marketIn%who answered“Is well developed in the country”Perception of the level of development of the low-cost marketIn%who answered“Is well developed in the country”55 15 countries15 countries60 15 countries15 countries15 countries15 countries6.5/106.5/10Image of low-cost offeringsImage of low-cost offeringsPerceived quality of low-cost offeringsGenerally speaking,would you say that low-cost products and services are.?In%Perceived quality of low-cost offeringsGenerally speaking,would you say that low-cost products and services are.?In%LidlLidlRyanairRyanairAldiAldiTop 3 low-cost brands cited In%Top 3 low-cost brands cited In countries15 countries16 16 14 14 11 11 The era of unashamed low-cost consumptionThe era of unashamed low-cost consumptionTop 3 motivations behind low-cost consumption*In%Top 3 motivations behind low-cost consumption*In%Frequency of low-cost consumptionIn%who “Often consume”.Frequency of low-cost consumptionIn%who “Often consume”.Low-cost consumption out of choice or necessity*In%Low-cost consumption out of choice or necessity*In%Out of choiceOut of choice55 Out of necessityOut of necessity45 Is low-cost consumption considered demeaning*?In%who answered“Demeaning”Is low-cost consumption considered demeaning*?In%who answered“Demeaning”15 countries15 countries26*Question to consumers of low-cost products*Question to consumers of low-cost products The expansion of the low-cost market15 countries5415 countries5456VSS%Low incomeLow incomeHigh incomeHigh incomeSatisfaction with low-cost products and services*15 countries15 countries6.8/106.8/10Reasons why it is expected to grow Question to those who think the low-cost market will continue to grow.In%Reasons why it is expected to grow Question to those who think the low-cost market will continue to grow.In%Expectation of future growthAnd in the future,do you intend to consume more or fewer low-cost products?In%Expectation of future growthAnd in the future,do you intend to consume more or fewer low-cost products?In%LObservatoire Cetelem 2023The expansion of the low-cost market15 countriesSatisfaction with low-cost products and services*55 45 26 60 55 LObservatoire Cetelem 2023Slovakians are among those Europeans who are least clear on the meaning of the term“low cost”.The sectors in which the concept is considered to be most developed are clothing,food and household appliances,but airlines are also seen as emblematic of the model.Despite this market offering products that respondents consider good value for money,it struggles to attract consumers(a lower proportion than the European average).Like other consumers,particularly in Eastern Europe,they fjnd themselves facing serious fjnancial constraints,but Slovaks on higher incomes are more likely to turn to this type of offering,whose positioning is considered to cater in part for those facing such pressures.SlovakiaSlovakia28 SlovakiaProducts that offer good value for money66 57Products that are cheaper to buy but whose quality is poor34 43Slovakia19 Ryanair6 Lidl6 Wizz AirMore and more consumers will experience fjnancial diffjculties54 51Consumers will increasingly refuse to pay more for products whose price is unjustifjed30 33Consumers will place less and less importance on which products they buy27 28Allows savings to be made so that more money is left over for other purchases24 26Offers good value for money22 25Slovakia53 424318134044Slovakia39Slovakia6.5/1053 62Food retailers62 66Clothing and textilesSlovakia6.5/10472743 Slovakia38Awer The same amountMoreAlthough less clearly understood in the United Kingdom than elsewhere,the low-cost model is deemed to have a strong presence in the country,not least in the clothing and food sectors.This is a market reputed more for low prices than for quality,but it is also perceived as meeting the requirements of consumers who want to pay a fair price for products that they simply expect to meet their needs.Today,this type of offering appeals to a signifjcant proportion of consumers,who tend to be drawn in for fjnancial reasons but are nonetheless satisfjed.While the image the low-cost model enjoys in the country is close to the European average,the feeling that this alternative form of consumption is demeaning is more prevalent than elsewhere.United KingdomUnited Kingdom47 United KingdomProducts that offer good value for money53 57Products that are cheaper to buy but whose quality is poor47 43United Kingdom31 Aldi27 Lidl10 AsdaMore and more consumers will experience fjnancial diffjculties51 51Consumers will increasingly refuse to pay more for products whose price is unjustifjed37 33Consumers will place less and less importance on which products they buy35 28Allows savings to be made so that more money is left over for other purchases26 26Offers good value for money28 25A lack of fjnancial resources16 16United Kingdom57 474311134244United Kingdom62United Kingdom6.5/1074 62Food retailers74 66Clothing and textilesUnited Kingdom6.9/10433371 United Kingdom70Twer The same amountMore58 51Furniture53 51Household appliancesA lack of fjnancial resources23 1677767776Low-cost consumption,a well-established realityLow-cost consumption,a well-established realityAwareness of the low-cost conceptIn%who answered“I know exactly what it is”Awareness of the low-cost conceptIn%who answered“I know exactly what it is”Sectors in which the low-cost segment is perceived to be the most well developedTop 3 sectors in which the low-cost segment is perceived to be the most well developed.In%who answered“Is well developed”Sectors in which the low-cost segment is perceived to be the most well developedTop 3 sectors in which the low-cost segment is perceived to be the most well developed.In%who answered“Is well developed”Perception of the level of development of the low-cost marketIn%who answered“Is well developed in the country”Perception of the level of development of the low-cost marketIn%who answered“Is well developed in the country”55 55 15 countries15 countries60 60 15 countries15 countries15 countries15 countries6.5/106.5/10Image of low-cost offeringsImage of low-cost offeringsPerceived quality of low-cost offeringsGenerally speaking,would you say that low-cost products and services are.?In%Perceived quality of low-cost offeringsGenerally speaking,would you say that low-cost products and services are.?In%LidlLidlRyanairRyanairAldiAldiTop 3 low-cost brands cited In%Top 3 low-cost brands cited In countries15 countries16 16 14 14 11 11 The era of unashamed low-cost consumptionThe era of unashamed low-cost consumptionTop 3 motivations behind low-cost consumption*In%Top 3 motivations behind low-cost consumption*In%Frequency of low-cost consumptionIn%who “Often consume”.Frequency of low-cost consumptionIn%who “Often consume”.Low-cost consumption out of choice or necessity*In%Low-cost consumption out of choice or necessity*In%Out of choiceOut of choice55 55 Out of necessityOut of necessity45 45 Is low-cost consumption considered demeaning*?In%who answered“Demeaning”Is low-cost consumption considered dem
2023-12-22
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Embracing the Online Shopper:A 2024 WishlistWHAT 2023 HOLIDAY SHOPPING INSIGHTS TEACH US ABOUT POTENTIAL 2024 ECOMMERCE INITIATIVESTable of ContentsTable of ContentsOverview.3PART I:Looking Back:The 2023 Holiday Season.4Cyber Week sets the stage.5Post-holiday performance bodes well for 2024.10PART II:Looking Ahead:The 2024 Online Shopper Wishlist.19WISH#1:Make sure my shopping experience is efficient.20WISH#2:Curate an attractive assortment,as theres no substitute for a good product.21WISH#3:Make promotions a year-round tradition.22WISH#4:Tell me what I want is in stock and deliver it fast.25WISH#5:Ensure all channels are consistent and optimized,letting customers make the choices based on circumstances.26CONCLUSION:Roadmap for SOverviewIt might be a clich,but theres truth to it:The new year brings new opportunities.But first,every retailer should reflect on their past years holiday performance.So thats where well start,too.Looking Back on 2023 covers Cyber Week and the rest of the holiday season.Our Post-Holiday Retrospective survey included an open-ended question asking respondents how they will shop differently in 2024,given their 2023 experience.Its not always easy diving into 1,000 responses,but its rewarding,providing a human point-of-view.Looking Ahead:The 2024 Online Shopper Wishlist highlights five online shopper wishes youll want to pay attention to calling out retailer opportunities for each.Roadmap for Success:The job of every retailer should be to keep these themes in mind as they invest in anything from the user experience to logistics.Shoppers expectations are already high,and you are just one click away from becoming an abandonment statistic.Now is the time to roadmap 2024 to deliver a superior customer experience with revenue growth that meets and exceeds performance and profitability objectives.3 Bizrate Insights surveysSurvey:Cyber FiveRespondents:1,000Time Frame:11/2812/10Survey:Post-Holiday RetrospectiveRespondents:1,000Time Frame:12/26-1/9Survey:Holiday ToplineRespondents:1,239Time Frame:11/27-1/2PART I:Looking Back:The 2023 Holiday SeasonRecurring themes abound.Shoppers look for a holistic shopping experience across channels and gravitate to promotions year-round,especially during the fourth-quarter holiday season.In-stock products coupled with fast delivery are also integral to their sense of a superior online 5Cyber Week sets the stageA robust Cyber WeekCyber Week the five days between Thanksgiving and Cyber Monday drove$38 billion in spending online(up 7.8%YoY),according to Adobe Analytics.1No matter how hard we try to avoid reality,retailers have created a“deal world”that may be here to stay.When asked what they were focused on going into Cyber Week,half of the online shoppers indicated they would purchase gifts if the prices and promotions were appealing.Along the same line,42%suggested they would buy something for themselves if the deals were good.One group of shoppers(25%)say they only purchase something when its on sale.Overall,the case for discounting is strong.For 24%of shoppers,they knew they had a job to do,so completing their holiday shopping was top of mind.And we must remember that not everyone is thinking about shopping(14%).Or didnt plan to make a purchase(9%).1 Adobe-Media Alert:Adobe:Cyber Monday Surges to$12.4 Billion in Online Spending,Breaking E-Commerce RecordWHAT WERE YOU FOCUSED ON GOING INTO THIS YEARS CYBER WEEK?(Multiple responses allowed)PART I:LOOKING BACK AT THE HOLIDAY SEASONSource:Bizrate Insights 2023 Cyber Five survey of 1,000 online shoppers I am focused on deals,coupons,and saving money overall.Places with those things will be on my priority list for shopping.The 2024 S6Thanksgiving-weekend shopping is almost on par with Cyber Monday and Black FridayLets set the record straight with a handful of Cyber Five facts from Bizrate Insights research shoppers dont discriminate when it comes to the days they shop.The most shopped days were Cyber Monday at 59%and Black Friday at 58%.Thanksgiving weekend has really come on as shoppers have downtime between football and leftovers.This suggests that every day is an opportunity for selling based on the complete package retailers present,from products to prices.One shopper stated,“I will try to shop for presents throughout the year vs.relying on finding what I need in just November and December.”Another said,“I will continue to shop in advance of major holidays and special occasions to take advantage of lower shipping costs and promotions.”DID YOU SHOP ONLINE DURING ANY OF THE FOLLOWING DATES?(Multiple responses allowed)Source:Bizrate Insights 2023 Cyber Five survey of 1,000 online shoppersPART I:LOOKING BACK AT THE HOLIDAY SEASON761%of shoppers spent between$101-$500 during Cyber WeekAccording to Pixley TurnTo,the 174 million Americans who shopped during Cyber Week spent an average of$335.2 Our research reached a similar conclusion regarding shopper spending patterns.HOW MUCH DID YOU SPEND ONLINE DURING CYBER WEEK(NOVEMBER 2327)?2 10 Stats from Black Friday and Cyber Monday|Pixlee TurnTo BlogPART I:LOOKING BACK AT THE HOLIDAY SEASONSource:Bizrate Insights 2023 Cyber Five survey of 1,000 online 8Personal shopping is a core component of Cyber WeekNo matter the season,online shoppers are always in the market for something they need or want(especially when its on sale).In fact,half of online shoppers completed at least 25%or more of their Cyber Week purchases for themselves.This behavior was likely a result of the strong promotional nature of the season.While the talk is all about gifting,we should remember shoppers quickly take advantage of promotions to meet personal needs,and retailers fuel such activity.PART I:LOOKING BACK AT THE HOLIDAY SEASONSource:Bizrate Insights 2023 Cyber Five survey of 1,000 online shoppersWHEN SHOPPING ONLINE DURING CYBER WEEK,WHAT PERCENTAGE OF PURCHASES WERE FOR SELF-CONSUMPTION RATHER THAN GIFTS?Percent purchase for self-9The economy was on the minds of holiday shoppersWe wondered what role the economy played in shopper budgeting for the season.Here,43%of online shoppers said the economy was one of the most important factors,or the most important factor.Though ironically,40%said it was not a factor at all.The remaining 17%considered the economy but didnt factor it into their budgeting.Budgets and buying often come down to personal circumstances and finances and can be seen in feedback regarding the economy.When asked how they would shop differently in 2024,several shoppers spoke explicitly about the economys role.Retailers must always be mindful of the economy as it will likely play some role in shoppers decision-making.One very honest shopper emphasized,“I will buy less because of inflation.We simply must do without.”Another alluded to the fear of the unknown,“Im not planning on changing anything,but the state of the economy will dictate what happens.”DID YOU CONSIDER THE STATE OF THE ECONOMY WHEN DETERMINING YOUR HOLIDAY SHOPPING BUDGET?PART I:LOOKING BACK AT THE HOLIDAY SEASONSource:Bizrate Insights 2023 Cyber Five survey of 1,000 online shoppers I will browse more stores and compare prices across more websites than normal,and I like to pinch every penny I can especially in this economy.The 2024 S10Post-holiday performance bodes well for 2024Online is the channel of choiceThree in four online shoppers bought at least 50%of their purchases online.Shoppers are comfortable with the convenience of the online channel,particularly during the hectic holiday season.THINKING ABOUT ALL OF YOUR 2023 HOLIDAY PURCHASES,APPROXIMATELY WHAT%OF ITEMS WERE BOUGHT ONLINE?PART I:LOOKING BACK AT THE HOLIDAY SEASONSource:Bizrate Insights Holiday Topline survey of 1,239 online shoppers Probably do more online shopping.I found this year that the online shopping I did compared to going to the stores was easier without the hassle of parking in the lot and just getting frustrated with the crowds.The 2024 ShopperPercent items bought 11Source:Bizrate Insights Holiday Topline survey of 1,239 online shoppersConvenience48%No crowds,no traffic,no hunting for parking30%It was so easy why expend more energy29%I could shop when stores arent openTime-savings40%Buying online takes up less time than going to storesMoney33%Free shipping18%Lowest total costProducts20%I couldnt find what I wanted to buy in local stores19%I was sure to get the items I wanted to buy19%Items were only available onlineLogistics12%Guaranteed on-time delivery11%Shipping directly to a recipientPART I:LOOKING BACK AT THE HOLIDAY SEASONConvenience and time/money savings dominated why shoppers bought onlineThe top reasons for shopping online are easily divided into five distinct 12Getting on the seller priority listWhether youre large or small,it is essential to understand where shoppers choose to buy and why if you want to compete effectively you have to be one of the stores on their radar.10%of shoppers only frequented Amazon in 2023,leaving room for other retailers to take market share.And thats further backed up by the 29%willing to try new retailers.Additionally,its good to see that 12%had shopped more at smaller retailers as it brings diversity to the retail ecosystem.All of this is good news for those wanting to get on the holiday shoppers shortlist.Most shoppers go to a handful of retailers,switching out based on needs.With 51%suggesting they typically frequent this limited group,the goal of most retailers is to get on that list.The 48%who switch out retailers acknowledge they do so based on their needs,so this group will likely remain intact.THINKING ABOUT THE RETAILERS WHERE YOU MADE PURCHASES ONLINE,WHICH OF THE FOLLOWING IS TRUE?(Multiple responses allowed)Source:Bizrate Insights 2023 Cyber Five survey of 1,000 online shoppersHOW DO YOU TYPICALLY DETERMINE WHERE TO SHOP?Source:Bizrate Insights Post-Holiday survey of 1,000 online shoppersPART I:LOOKING BACK AT THE HOLIDAY SEASON13Online satisfaction rates are strongTheres always room for improvement,but its hard to beat the current satisfaction rates.Regarding the online retailers ability to meet holiday shopping needs,43%of shoppers scored them a perfect 10,while a total of 80%gave at least an 8 to their online experience.Source:Bizrate Insights Holiday Topline survey of 1,239 online shoppersPART I:LOOKING BACK AT THE HOLIDAY SEASONOVERALL,HOW SATISFIED ARE YOU WITH ONLINE RETAILERS ABILITY TO MEET YOUR HOLIDAY SHOPPING NEEDS?43%5%2%2%Customer scores out of 14The most significant 2023 improvements were seen in delivery,promotions,and features that simplify shoppingIts undoubtedly positive to see delivery rise to the top of things shoppers cite as an improvement.54%of shoppers felt that retailers positively addressed logistics,a world where Amazon has set a high bar.Promotions,at a substantial 49%,saw improvements.Many other shoppers are still vocal about disappointments in this regard,and we will share feedback in the white paper.The next group showing improvement revolved around making shopping easy at 40%.The mobile shopping experience got an honorable mention from 29%of those surveyed.That is significant since it is the preferred shopping method for many.Improvements in merchandising were more limited.Merchandising that inspired me to browse(23%)and personalized sites(14%)may need further review from retailers.THINKING ABOUT THE KEY COMPONENTS OF YOUR ONLINE SHOPPING EXPERIENCES,WHICH OF THE FOLLOWING DID YOU FIND IMPROVED OVER THE PAST YEAR?(Multiple responses allowed)PART I:LOOKING BACK AT THE HOLIDAY SEASONSource:Bizrate Insights Post-Holiday survey of 1,000 online 15The most frustrating aspects of Cyber Week centered on promotionsThe positives are plentiful,but retailers can still learn lessons from shopper frustration during Cyber Week.PART I:LOOKING BACK AT THE HOLIDAY SEASON41%Promotions not as high as expected34%Not knowing if end-of-season prices would be lower30%Higher prices than 202222%Hot products didnt seem to have associated promotions22%More retailers had requirements tied to receiving free shipping A week prior the items on my wishlist/shopping cart prices went up by 15 %and then went back to normal prices during Black Friday/Cyber Monday and the site showed it was a drop in price/discount by 15 %.I avoid those items and continue to wait.The 2024 S16What shoppers saidTaking it one step further,our survey respondents shared,“Certain websites raised the price and discounted it to look like a sale,but it was just the everyday price.That feels like a scam.”Another found it,“SOOOOOOO frustrating when you stay up until midnight or 3 am for a sale,only to see the next day that it was extended,and sometimes with added deals!This should NOT be legal.”Logistics and inventory also received more limited callouts.Some were unsure when their product would be delivered(15%).Others didnt know if products were in stock(14%).One commenter said,“Lots of out-of-stock items,items sold out too quickly,ordering items that were already out of stock,and only being notified several days later.”DID YOU FIND ANY ASPECTS OF YOUR CYBER WEEK SHOPPING FRUSTRATING?(Multiple responses allowed)Source:Bizrate Insights 2023 Cyber Five survey of 1,000 online shoppersPART I:LOOKING BACK AT THE HOLIDAY SEASON17Standing out means adhering to the fundamentalsA natural starting point for retailers to assess where they stand is to take a quick look at the top elements that make a store stand out.Prices are essential to that,and 83%of shoppers cite them.Interestingly,product quality came in second at 67%,exceeding the products they sell at 51%.That indicates retailers care about quality,and shortchanging shoppers will result in challenges.Plus,shoppers shared that quality matters,“I will shop less.Promotions and sales were not enticing enough,product quality has dropped,and product variations are far too limited.”Another thoughtful shopper said,“Start earlier on gift buying,utilize more Black Friday/Cyber Monday deals for personal purchases,and aim for more online retailers that sell higher quality products that arent harmful to the environment.”One in three shoppers surveyed noted the importance of quick delivery.I might even venture to guess that could even be higher,as today shoppers have come to expect that orders will be delivered promptly.In the end,shoppers seek a complete package.They have long memories,and one noted,“I will use those that provided me with great experiences first.”Another shopper suggested such a package:“I will still look for the best price offered,coupons,and cost of delivery and return charges.”WHAT ARE THE TOP ELEMENTS THAT MAKE A STORE STAND OUT OR BECOME ONE OF YOUR FAVORITES?(Top Three)Source:Bizrate Insights Post-Holiday survey of 1,000 online shoppersPART I:LOOKING BACK AT THE HOLIDAY SEASON I will continue to look for great products with fast and consistent delivery.I will continue to look for the best deals but also look for quality.The 2024 S18A recurring theme:Stock status and promotions drove purchases from new brands or retailersOne of the most important questions was about where shoppers chose to make purchases for the first time.Stock status and promotions were the top reasons.What shoppers are seeking is not complicated.43%want products they purchase to be in stock,and another 43%want better pricing and promotions.Retailers should review and understand if they can profitably do better when it comes to both of these aspects.Of course,theres no substitute for a good product,and 26%of those surveyed tried out a new retailer,citing interesting products.Along the same lines,11%noted they got what they needed at their favorite retailer.That may be a stock issue or simply the item itself.IF YOU PURCHASED FROM A BRAND OR RETAILER FOR THE FIRST TIME,WHY DID YOU BUY FROM THEM?(Multiple responses allowed)Source:Bizrate Insights Post-Holiday survey of 1,000 online shoppersPART I:LOOKING BACK AT THE HOLIDAY SEASONPART II:Looking Ahead:The 2024 Online Shopper WishlistBased on our extensive holiday research,its time to look at our customers five top wishes.Each wish will include key findings and charts to support it,shopper commentary on how they will approach 2024,and opportunities that can guide retailers in their road 20WISH#1:Make sure my shopping experience is efficientOnline shoppers are in a hurry,expecting that they will be able to find products,get educated,make decisions,and quickly check out.From an efficiency standpoint,many shoppers expressed frustrations,including“getting the wrong size coat,long checkout time online,and websites that werent working.”THE OPPORTUNITY:EFFICIENCY Conduct an audit of your site to ensure there are no roadblocks to check out Design a shopping cart that has just the right number of steps Integrate customer service information to answer shopper questions so shoppers dont leave the site Build with a mobile-first mentality when designing the user experiencePART II:LOOKING AHEAD:THE 2024 ONLINE SHOPPER WISHLISTSource:Bizrate Insights Post-Holiday survey of 1,000 online shoppersIF YOU COULD ASK RETAILERS TO CHANGE THEIR ONLINE SHOPPING FOR 2024,WHICH IMPROVEMENTS WOULD LEAD YOU TO BUY EVEN MORE ONLINE?(Top Five)KEY FINDINGEfficiency improvements that would lead to more online purchasing include better product information and robust product images,easier,more straightforward checkout,improved search results,and faster website 21WISH#2:Curate an attractive assortment,as theres no substitute for a good productShoppers are on the hunt for products they need or are simply eye-catching.Some shoppers prefer more curated stores where they appreciate the retailers selections.Examples might include specialty stores such as Crate&Barrel,Sephora,Dicks Sporting Goods,local boutiques,or a direct-to-consumer brand that has products unique to them,like Lululemon or Warby Parker.Alternatively,some shoppers enjoy the broad assortments on marketplaces like Amazon or Etsy or department stores like Macys.At these stores,they can cull through their options and make the best selection without the fear of missing out.THE OPPORTUNITY:ASSORTMENT Scour the market for new products Make more of your assortment exclusive and visible Develop a series of merchandising themes organized to engage shoppersPART II:LOOKING AHEAD:THE 2024 ONLINE SHOPPER WISHLIST KEY FINDINGCustomers tried new retailers to find interesting products and when they couldnt find what they needed at their favorite retailer.IF YOU PURCHASED FROM A BRAND OR RETAILER FOR THE FIRST TIME,WHY DID YOU BUY FROM THEM?(Multiple responses allowed)Source:Bizrate Insights 2023 Cyber Five Survey of 1000 online shoppers My use of online shopping will probably increase.I find it increasingly easy to use with a wider selection of goods.Quick and free delivery is a bonus.The 2024 S22WISH#3:Make promotions a year-round traditionThe retail world has created a shopper focused on finding the best deals.Promotions drive purchasing,and shoppers aggressively seek deals,especially free shipping.As those deals appeared,shoppers pounced on them.Interestingly,there was also a discipline to how some shoppers approached,often powered by comparison shopping.Shoppers are strategic,as reflected in responses like,“I will look for better deals on products,holding off on buying things if they are not on sale”and“With prices increasing needlessly,Im waiting to purchase more non-essentials until they are on sale if I dont need them right away.”WHAT PERCENTAGE OF YOUR PURCHASES MADE ONLINE HAD A PROMOTION BEYOND FREE SHIPPING?Source:Bizrate Insights 2023 Cyber Five survey of 1,000 online shoppersPART II:LOOKING AHEAD:THE 2024 ONLINE SHOPPER WISHLIST KEY FINDING60%of online shoppers had promotions on at least half of their 23Free shipping is most sought after promotionWhen asked to describe the role of promotions in their holiday shopping,the top 3 behaviors to be reckoned with were:1.I sought out free shipping whenever I shop online:63%2.I shopped throughout the holiday season whenever I saw a good promotion:59%3.I comparison-shopped to get the best price on products:57%Source:Bizrate Insights Post-Holiday survey of 1,000 online shoppers PART II:LOOKING AHEAD:THE 2024 ONLINE SHOPPER WISHLISTHOW WOULD YOU DESCRIBE THE ROLE OF PROMOTIONS IN YOUR ONLINE HOLIDAY SHOPPING?(Multiple responses allowed)I will start sooner but wait until later for some purchases,as they always seem to have better deals later in the season.The 2024 S24The 2024 ShopperLooking ahead to 2024,we asked which promotions and circumstances would drive even more online shopping.The list was all-encompassing.A discount on my total purchase(%off or$off):49%Free shipping with no minimum:48%Free returns shipping:31%Free gift with purchase:29%Free shipping with minimum order value:28%Price matching:27%THE OPPORTUNITY:PROMOTIONS Deal shopping is here to stay,so decide where and when to deploy Understand what promotions you can profitably make available throughout the year From a free shipping vantage point,if its not something you can offer unconditionally,tie it to a minimum order or rewards in hopes of increasing your average order size Aggregate products or themes that feature low prices and label them accordinglyWHICH OF THE FOLLOWING PROMOTIONS WOULD CONVINCE YOU TO BUY A GREATER PERCENT OF YOUR 2024 HOLIDAY PURCHASES ONLINE THAN YOU DID IN 2023?(Multiple responses allowed)Source:Bizrate Insights Post-Holiday survey of 1,000 online shoppers PART II:LOOKING AHEAD:THE 2024 ONLINE SHOPPER WISHLIST I intend to look for pricing first and foremost!That includes shipping costs and delivery time.The 2024 S25WISH#4:Tell me what I want is in stock and deliver it fastBeyond promotions,inventory and in-stock factors were seen in much of the findings.We have combined inventory and delivery for our fourth wish,as stock is essential in timely execution.THE OPPORTUNITY:STOCK AND DELIVERY Key items with strong visibility on the site should be in stock Smartly manage your inventory to ensure in-stock status Stock status should be called out for shoppers on the product page and via navigation Highlight products that are available to ship today Determine the time it takes to deliver products to your customers and assess where you can improve Explore if same-day delivery is appropriate for your brandWHAT WAS YOUR APPROACH TO ONLINE DELIVERY DURING THE HOLIDAY SEASON?(Multiple responses allowed)Source:Bizrate Insights Post-Holiday survey of 1,000 online shoppers PART II:LOOKING AHEAD:THE 2024 ONLINE SHOPPER WISHLIST KEY FINDINGShoppers are keen to get fast delivery,buying more from Amazon and those retailers with a strong track record.Shoppers pay attention to in-stock products and delivery messaging.I will try to order sooner to accommodate the influx of out-of-stock and shipping delays.The 2024 S26WISH#5:Ensure all channels are consistent and optimized,letting customers make the choices based on circumstancesShoppers have learned to adeptly switch channels knowing which can best meet current needs based on past performance and current desires.WHERE DO YOU SPEND MOST OF YOUR TIME SHOPPING?Source:Bizrate Insights Post-Holiday survey of 1,000 online shoppersPART II:LOOKING AHEAD:THE 2024 ONLINE SHOPPER WISHLIST KEY FINDINGIts still about multi-channel shoppers.59%of survey respondents indicate they prefer a combination of channels to accomplish their shopping needs.It is crucial,however,to acknowledge the 28%whose favorite stores are mostly online.I would not change my shopping routine.I check items online and then purchase them online.I rarely go into a store because I know the designers/brands I like and their clothing sizes that work for me.If it is another product,I rely on good images to determine if I will complete the purchase online.The 2024 Shopper59(Online shoppers are“omni-oriented,”seeking out store information,inventory,and scheduling pickupsAccess to store information must be visible for shoppers,as 42%of online shoppers looked up such information during their Cyber Week shopping.A critical element of channel selection is related to curbside and BOPIS.The new year is an opportune time to revisit your pickup options and their execution.Testing them out or reviewing satisfaction surveys will provide data to inform your decisions.THE OPPORTUNITY:Revisit buy online and pick up in-store capabilities Ensure cross-channel inventory is visible and apparent on your site Review satisfaction surveys to assess potential improvementsDID PHYSICAL STORES PLAY ANY PART IN YOUR CYBER WEEK SHOPPING EXPERIENCE?(Multiple responses allowed)Source:Bizrate Insights Post-Holiday survey of 1,000 online shoppersPART II:LOOKING AHEAD:THE 2024 ONLINE SHOPPER WISHLIST I really liked buying online and picking it up in-store.This assured me that if the product was the wrong item,not what I thought it was,or the wrong size,I could exchange it immediately.Also,I knew it wouldnt get lost in the mail!The 2024 SCONCLUSION:Roadmap for SuccessNow is the time to make these online shoppers wishes come true.Ideally,this should be a team effort.It requires introspection,looking honestly at where your shopping experience stands today,and how to take it to the next level.Consider the following steps to get started.Remember,this is a process where efforts must be tried,tested,and evaluated,knowing that change is the only constant in the shopper experience.1.Tackle the fundamentals,starting with the right products and prices2.Ensure your shopping experience is both efficient and effective3.Channel excellence and consistency are mandatory4.Monitor promotions,manage expectations,and make adjustments with profitability in mind5.Know your stock and deliver fast6.Take care of the customer,and they will be backWe Can HelpGET MORE INSIGHTS WITH OUR CUSTOMER FEEDBACK SOLUTIONLearn more about your customers and their preferences by adding Bizrate Insights ADA-compliant voice-of-customer(VoC)solutions.Our surveys collect detailed user feedback and ratings from verified shoppers at zero cost to the merchant.With our robust data analysis,comments and ratings collected from your customers are automatically formulated into KPIs that can be benchmarked and tracked over time giving you a 360-degree assessment of your performance.Take your ecommerce strategy to the next level and get all the tools you need to build a best-in-class customer experience.Take a quick walkthrough of the Online Buyer Survey with a member of our team
2023-12-22
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WHAT CHINAS BIG CELEBRITY CRACKDOWN MEANS FOR LUXURY1WINTER 2021JINGDAILY.COM$350INSIGHT SERIES 2021 Herlar,LLC.All rights reserved.Jing Daily is a registered U.S.trademark of Herlar,LLC.REPORTSAbout Jing DailyLaunched in 2009,Jing Daily is the leading digital publication on luxury consumer trends in China.It is our mission to understand the forces shaping the future of the luxury industry by bringing our readers the latest news,analysis,features,and reports exploring developments in that landscape.We seek to understand how the definition of luxury,and by turn its consumption,are changing,how the digital landscape in China is developing,and how brands are adapting and taking advantage of those changes.Our readers are industry leaders seeking to understand Chinas complex and rapidly evolving luxury industry.The Jing Group The Jing Group,which includes Jing Daily,China Film Insider,MOVE THE MIND,Jing Travel,and Jing Culture&Commerce,is one of the most trusted English-language sources of news and information about global trends in culture,technology,and the business of luxury and fashion,including Chinese culture and commerce,for institutions,companies and professionals worldwide.The Jing Group also encompasses Jing Academy,which brings together the expertise of a team with decades of experience in the China luxury,culture,technology,branded content,and travel industries.Report CreditsAuthors:Avery Booker,Sky Canaves,Zihao LiuContributors:Julienna Law,Jiaqi Luo,Lisa Nan,Gemma A.Williams,Wenzhuo WuEditor:Marc Einsele Designer:System StudioCover Photo:ShutterstockFor editorial inquiries:Daphne Hsia,For partnership opportunities:Daphne Hsia,JINGDAILY.COMWINTER 20213About the Jing Daily Insight SeriesThe Jing Daily Insight Series offers brief and timely reports that highlight key revenue-generating trends for luxury brands,focusing primarily on Chinas rapidly evolving market and the implications for the global consumer landscape.In our latest Insight Series report,we turn our focus to the Chinese governments recent campaigns targeting the countrys enthusiastic celebrity culture and the fan economy,two areas that have expanded rapidly over the past several years and that are now at a crossroads.Among the key questions covered by this report:What spurred Chinas current crackdown on celebrities and fan culture?What effect might the spate of recent high-profile“cancellations”of stars have on luxury marketing in China in 2022?What are the long-term implications of the celebrity crackdown for global luxury brands and retailers?What options do luxury brands have apart from working with celebrities in China?Could the celebrity crackdown ultimately be a net positive for luxury brands in China?ABOUT4Executive SummaryJing Daily Trend RatingIntroductionAn Entrenched Celebrity CultureWhy the Fan Economy Matters The Dark Side of the Fan EconomyThe Road to Chinas Celebrity CrackdownSidebar:The Xinjiang Cotton ControversyCelebrities in the CrosshairsClamping Down on the Fan Economy and“Sissy Men”Where Do Luxury Brands Go From Here?The Silver LiningAppendix:Timeline of Chinas Key Initiatives on Celebrities05081015172124262832374150Chapter 1Chapter 2Chapter 3Chapter 4Chapter 5Chapter 6Chapter 7Chapter 8Chapter 9Chapter 10Chapter 11Chapter 12TABLE OF CONTENTS5CHAPTER 1EXECUTIVE SUMMARY5CHAPTER 16Government crackdowns are nothing new in the Peoples Republic of China,with Beijing authorities regularly issuing new regulations on business,tech,and entertainment at the drop of a hat,leaving companies both foreign and domestic scrambling to adjust.But in 2021,the expanding scrutiny of Chinas booming celebrity culture carries especially strong long-term implications for the marketing efforts of luxury brands that have come to depend on the Chinese market as critical to their post-COVID recovery.Fourteen years after Chinas powerful State Administration of Radio,Film,and Television(SARFT)now known as the National Radio and Television Administration(NRTA)banned voting by at-home audiences in an attempt to quell the rabid fan club activity inspired by the American Idol-style program Super Girl 超级女声1,Beijing has again placed the countrys enthusiastic fan and celebrity cultures in its crosshairs.Over the course of 2021,regulators from the NRTA and the increasingly influential Cyberspace Administration of China(CAC)tightened their grip on what can be shown on television or streaming platforms,while high-profile“cancellations”(and even arrests)of hugely popular celebrities have served to show hundreds of millions of Chinese fans who is really in charge.During this time,major global brands even those who avoided getting caught up in recent political dust-ups,such as the Xinjiang cotton controversy in March(see inset on page 26)have found themselves embroiled in a complicated and contentious new era in China.Having come to rely on the Chinese market to drive revenue in the wake of the COVID-19 pandemic while depending heavily on domestic celebrities and major influencers(aka KOLs,or key opinion leaders)to promote their products,brands may now need to seriously reconsider their long-term marketing strategies.CHAPTER 1EXECUTIVE SUMMARYGovernment crackdowns can come rapidly in China,leaving brands rushing to comply.Image:ShutterstockAs 2022 approaches,question marks remain as brands wonder about the long-term effects of the celebrity and fan culture crackdowns of 2021,and whether next years National Congress means the crackdown will show no signs of slowing for months or years.Do celebrity or influencer-led marketing campaigns even make sense anymore in China?What are the alternatives?Are“virtual idols”a better bet,or just a passing fad?And what can brands do to minimize the potential of scandal in such a politically sensitive environment?This Insight Report looks at what Chinas crackdown on celebrity culture and the“fan economy”could ultimately mean for luxury,examining the possible implications for marketing efforts over the years to come.1 Laurie Ouellette.A Companion to Reality Television(London:John Wiley&Sons,2014),521.7CHAPTER 2JING DAILYTREND RATING 7CHAPTER 18The Jing Daily Trend Rating is tabulated based on risks and rewards of a given trend.In the context of Chinas current crackdown,we look at four key measurements:three negative against one posi-tive:Negative:Ability of the trend to negatively influence luxury consumer behavior.Negative:The short-term potential for a revenue decline for luxury brands due to the trend.Negative:The long-term potential for a revenue decline for luxury brands due to the trend.Positive:The potential for positive opportunity for brands as a result of the trend.Based on the current state of Chinas celebrity crackdown,Jing Daily assigned the following ratings to each measurement on a scale from 0 to 5:Consumer Influence:3.5/5( 3.5 points)While Beijing authorities may be cracking down on celebrity behavior and the“fan economy,”there is scant evidence thus far to suggest that the crackdown is making consumers less interested in celebrities or celebrity culture.However,the potential for greater scrutiny among authorities of“luxury lifestyles”may make some consumers put off luxury purchases in the months ahead or shy away from sharing their purchases publicly via social media.Potential For Short-Term Revenue Decline:4/5( 4 points)The crackdown may see luxury brands struggle with short-term revenue if the governments crackdown extends to putting brand marketing efforts under the microscope while more actively championing CHAPTER 2JING DAILY TREND RATING local brands.Potential For Long-Term Revenue Decline:3/5( 3 points)Looking at the last 20 years of growth and evolution in the China luxury market,there are indications that the current crackdown may not extend in its current state far beyond 2021,which is a politically sensitive year as the ruling Communist Party of China celebrates the centenary of its founding.With the Beijing Winter Olympics just around the corner,the war on celebrities and fan culture will likely have seen its most intense activity in late summer 2021.As such,it is only moderately likely that luxury brands will see long-term revenue declines as a direct result of the crackdown.However,greater scrutiny of marketing messaging and brand ambassadors may force brands to work harder to choose the right spokespeople and avoid upsetting authorities with upcoming campaigns.Potential for Positive Opportunity:2/5( 3 points)While the current crackdown gives brands a chance to rethink their marketing,celebrity,and influencer strategies for China which could ultimately bring long-term benefits three points are deducted due to the additional stress and resource load required to retool strategies,recalibrate budgets,and potentially seek replacements for current brand ambassadors or influencers.(Total Points)/4=Trend Rating of 3/5 With a trend rating of 3.3 out of 5,the risk of Chinas celebrity crackdown is moderate for luxury brands.However,as we outline in this report,regulations can change at the drop of a hat in China,meaning brands must plan ahead for a stricter marketing and advertising environment in the months ahead.CHAPTER 3INTRODUCTION9CHAPTER 310CHAPTER 3 INTRODUCTIONChinas latest crackdown on celebrities and fan culture did not appear out of thin air.Rather,it has been a drawn-out process,years in the making,that began long before the summer of 2021,which saw the arrest of megastar Kris Wu,the end of an era for the hugely popular idol competition show genre,and a slew of official commentaries,notic-es,and regulations to control celebrities,content,and the so-called“fan economy.”Back in 2015,the powerful Central Committee of the Communist Party of China(CCCPC)issued a statement supporting President Xi Jinpings vision of patriotic and morality-infused entertainment,which had been outlined in a previously unpub-lished speech from October 2014.Directives outlined in the CCCPCs document in-cluded a clear emphasis on the continued promo-2 China Film Insider.“Chinas Filmmakers Directed to Heed SocialismWill Hollywood Follow?”October 31,2015.https:/ arrest of superstar Kris Wu sent a chill through Chinas entertainment business in 2021.Image:Shutterstocktion of socialist values,patriotism,traditional Chi-nese culture,and the“Chinese dream”(中国梦),while warning against market-driven media trends and asserting the continued role of the Commu-nist party in guiding the development of the arts according to these principles.2 Over the course of 2015,there were clear indications that Chinas booming entertainment industry had no compunc-tion falling into line.In November of that year,the Chinese Alliance for Radio,Film,and Television(CARFT)organized a symposium in Beijing to pro-mote the self-discipline initiative,with high-profile representatives such as China Film Co.chief ex-ecutive Jiang Ping,superstar actress Fan Bingbing,11CHAPTER 3 INTRODUCTIONWolf Warrior and its sequel broke Chinese box office records.Image:PRand screenwriter Gao Mantang voicing support for the governments push for morally upright and pa-triotic culture.3In the six years since,Chinas entertainment in-dustry has indeed pumped out an ever-increasing amount of patriotic content,with the countrys 2015 blockbuster Wolf Warrior and a 2017 se-quel breaking box-office records and inspiring the phrase“Wolf Warrior diplomacy”to describe Bei-jings more assertive and aggressive presence on the world stage.4More importantly,Beijing has more recently turned its attention not only to more actively policing the content of films and television programs but also the popular and influential stars cast in them.In 3 China Film Insider.“Chinese Stars Promise to Behave,Or Else.”November 15,2015.https:/ The Diplomat.“Interpreting Chinas Wolf-Warrior Diplomacy.”May 15,2020.https:/ The Guardian.“Chinese star Fan Bingbing reappears after near-ly a year in wilderness.”April 25,2019.https:/ what was perhaps the most significant ex-ample of muscle-flexing to date,Fan Bingbing(who had vowed to uphold morality and patriotism at the aforementioned CARFT symposium in 2015)disappeared from the public eye for nearly four months,having been placed under house arrest for tax evasion.Even after formally apologizing and paying a reported RMB 883 million($129 million)in fines and unpaid taxes,5 Fans reputation has yet to fully recover.12CHAPTER 3 INTRODUCTIONAlso in 2018,Chinese authorities announced a sal-ary cap for acting talent as part of a broader cam-paign against tax evasion and“money worship”in the film industry.6 This move saw the pay for actors in Chinese films and television programs capped at 40 percent of total production costs,with ac-tors in lead roles prohibited from receiving more than 70 percent of the total budget for the cast.Since then,Beijings unspoken message has been the same it doesnt matter how rich and inter-nationally famous you are,if you step out of line or forget whos really in charge,well quickly remind you.Top actress Fan Bingbings 2018 tax scandal sent a chill through Chinas entertainment industry.Image:Shutterstock 6 BBC.“China caps film stars pay over money worship and tax evasion.”June 28,2018.https:/ 3 INTRODUCTION7 SupChina.“Chinas Red New Deal:A guide to all the different crackdowns on companies going on right now.”September 9,2021 https:/ Laurie Ouellette.A Companion to Reality Television(London:John Wiley&Sons,2014),5219 Ibid.,534.10 CNBC.“China has launched another crackdown on the inter-net but its different this time.”October 26,2017.https:/ The Diplomat.“China Looks Ahead to 20th Party Congress in 2022.”December 7,2020.https:/ tightened media environment of 2021 follows a consistent pattern.The aforementioned crack-down on competition reality shows in 2006 and 2007 took place in the lead-up to the 17th National Congress of the Chinese Communist Party(CCP),an event at which senior CCP members are ap-pointed and ahead of which the Party“always tightens controls on media and enacts measures to maintain the status quo.”8Indeed,media and entertainment crackdowns did take place ahead of the National Congress in both 2012 and 2017.In 2012,limits were placed on the total number of reality shows,variety shows,and talk shows that could appear on television as well as their air time.9 In 2017,an even more wide-rang-ing clampdown targeted video streaming websites,virtual private networks(VPNs),and foreign televi-sion programs.10 With the 20th National Congress set to take place in October 2022,11 there is prec-edent to expect the media and entertainment at-mosphere in mainland China will remain tense in the months leading up to the event.In many ways,the 2021 tech,business,and entertainment crackdowns reinforce the essential traits of the Chinese Communist Party on the centenary of its founding:its commitment to ideological conformity and intolerance of regime challenges.Yet much of the activity,seemingly directed by the top leader,X Jnpng,and his Common Prosperity agenda,is driven by the need to address the extreme wealth inequality that came with four decades of capital-fueled growth.7As SupChina noted in September 2021:CHAPTER 4AN ENTRENCHED CELEBRITYCULTURE14CHAPTER 415CHAPTER 4AN ENTRENCHED CELEBRITY CULTUREChinas celebrity culture and its attendant“fan economy”(粉丝经济)is among the most active in the world,with top entertainers boasting legions of diehard fans willing to buy virtually anything theyre selling to show their support and ensure the continued commercial success of their favorite stars.In the years since the governments 2015 directive on the arts,Chinese celebrities have only grown more influential thanks to the rise of domestic social media and content platforms such as Weibo,Douyin(TikToks Chinese counterpart),and Bilibili.Meanwhile the major video streaming platforms owned by tech giants Baidu,Alibaba,and Tencent have produced an ever-increasing supply of idol competitions,hit dramas,and reality shows that both mint new stars and give existing celebrities greater visibility,while also fueling rise of the fan economy through cross-platform promotion and sponsorships.Chinese government regulators were bound to step in at some point.As much as they have promoted the development of Chinas entertainment infrastructure and the production and distribution of“created-in-China”content,they also loathe the prospect of any competing center of power.As a result,Chinas vibrant and sometimes unruly fan culture,coupled with a spate of celebrity scandals,have provided Beijing with an opportunity to take a more forceful approach than in years past.Young Chinese fans can make or break a new stars career.Image:Shutterstock16CHAPTER 5CHAPTER 5WHY THE FAN ECONOMY MATTERS17CHAPTER 5WHY THE FAN ECONOMY MATTERSWhat exactly is the“fan economy”?According to China Daily,at its simplest level,the fan economy is a business model“that seeks to profit from fans devotion to celebrities.”12 But this translates to more than just fans spending money to see a celebritys new film or buy their merchandise the fan economy in China is,essentially,a two-way street in which a celebritys success is gauged by how large,vocal,and enthusiastic his or her fan base is.In this symbiotic relationship,celebrities rely heavily on their fan bases to obtain more work and greater commercial value(e.g.,through brand sponsorships),with their fans happy to help by any means necessary to ensure that their favorite stars can appear in as many advertisements,films,and programs as possible.The celebrities success is their success.Celebrities in China arguably depend far more on the fervor of their fans than in any other market.Image:ShutterstockThis gives fans a remarkable amount of power in launching and sustaining a celebritys career,and Chinese entertainment agencies have been eager to tap this power to cultivate up-and-coming stars,with agencies as well as film and TV studios organizing official clubs.As of 2020,Chinas fan economy was estimated to be worth around RMB 100 billion($15.5 billion).1312 China Daily.“粉丝经济(fns jngj):Fan economy.”May 18,2018.http:/ Sina.“爱奇艺宣布取消选秀节目 QQ音乐限制专辑购买 粉丝经济要走到头了?”August 30,2021.https:/ 5WHY THE FAN ECONOMY MATTERSTo understand the importance of Chinas fan economy,one must only look to who appears in recent campaigns for global luxury brands.Over the past five years,in the China market Hollywood stars have been steadily replaced,almost entirely,by local faces,particularly young actors and C-pop stars with deeply devoted fan followings.In October of 2016,British luxury brand Burberry appointed the Canadian-Chinese rapper Kris Wu(more on him later)as its global brand ambassador,making him the groups first non-British spokesperson.More recently,Chanel brought on 24-year-old actor Wang Yibo as brand ambassador,while Givenchy collaborated with popular young stars Fan Chengcheng(b.2000,brother of Fan Bingbing)and Ouyang Nana(b.2000).Collaborating with a young Chinese entertainer with an ardent fan base has become a shortcut Burberrys nearly five-year association with Kris Wu brought it to the attention of his millions of social media followers.Image:Burberryto success for brands hoping to reinvigorate sales.In 2019,Prada was struggling to turn around deteriorating growth in the Chinese market when it appointed young idol Cai Xukun(aka Kun,b.1998)as its newest brand ambassador.14 Within 24 hours,news of the announcement had racked up 730 million views on Weibo,while a campaign video featuring Kun drew more than 76 million views.In a matter of weeks,Cais fans had shared posts of more than 50,000 shopping receipts for Prada goods,and the brands keychain featuring the name“Kun”sold out worldwide.In an interview with Chinas GQ Lab,Miuccia Prada noted that“fans dont know about Prada through us;they know Prada through Kun.”1514 Vogue Business.“Prada turnaround struggles to take hold in China.”August 1,2019.https:/ Jing Daily.“How Luxury Brands Prosper From Chinas Scary C-Pop Fans.”July 2,2021.https:/ 5WHY THE FAN ECONOMY MATTERSFans proudly supporting the brands promoted by their favorite idols by sharing their receipts has become a common fan-club activity,albeit one the Chinese government has an eye on.In June 2021,one hashtag community for actor and singer Wang Yibo(#王一博粉丝晒单#,or“Wang Yibos fans receipt center”)featuring proofs of purchase for everything the idol promotes,from Chanel watches to Kentucky Fried Chicken meals surpassed two million posts.16The growing presence of C-pop stars in luxury campaigns is perhaps no surprise,considering the increasing spending power of their core demographics,“post-90s”and“post-00s”Chinese consumers in their late teens and early to mid-20s.But more broadly,the choice of these celebrities to head up luxury campaigns is representative of the shift in the balance of power towards the Pradas collaboration with Cai Xukun was a massive success for the brand.Image:PradaGreater China market over the past decade,more significantly since the onset of the COVID-19 pandemic in early 2020.With China a rare bright spot for many luxury brands over the past two years,harnessing the fan economy to spur sales was a natural move.16 Ibid20CHAPTER 5WHY THE FAN ECONOMY MATTERS20CHAPTER 6THE DARK SIDE OF THE FAN ECONOMYCHAPTER 621CHAPTER 6THE DARK SIDE OF THE FAN ECONOMYHowever,the fan economy has also been ripe for exploitation,particularly as both supply of and demand for reality shows especially idol competition shows ballooned in China.Major brands paid heavily to sponsor these shows and sought to recoup their investments by leveraging the fervor of fans to make purchases as a way of obtaining extra votes that they could cast for their favored contestants.However,in May 2021 this strategy backfired spectacularly during the third season of iQiyis hugely popular idol competition,Youth With You 青春有你.Title sponsor Mengniu,one of Chinas biggest dairy producers,offered additional votes via QR codes found on the inside of the bottle caps in a line of flavored milk drinks.While the product itself appealed to young consumers,fan groups took it to the next level,engaging in massive coordinated group-buying efforts.But without an actual need for the products,in many cases the purchased milk was simply discarded.A video depicting huge quantities of the Mengniu drinks being dumped into a drainage ditch by a group of mostly middle-aged women(apparently hired by the fans)went viral on Chinese social media,leading authorities to order a halt to the filming of the shows highly anticipated finale and drawing sharp rebukes from across state media.In response to the Youth With You crackdown,more than 200 fan clubs including those of Cai Xukun,Jackson Wang,and Ouyang Nana released initial The“Youth With You”milk scandal showed how easily a fan base can go out of control.Image:iQiyiproposals to protect the long-term sustainability of Chinas idol industry.These included calls to“maintain a boundary between real life and online platforms,”respect celebrity privacy,promote“rational speech,”and end cyberbullying.While no luxury brands were immediately affected as a result of the Youth With You scandal,the incident highlighted the potential dangers faced by brands when looking to harness the fan economy to drive revenue,specifically since some fans have shown themselves happy to do whatever it takes to promote their favorite idol,even quite literally throwing money down the drain.Choosing a brand ambassador based on the size and enthusiasm of his or her fan base is far from a foolproof plan.In the spring of 2020,Este Lauder and Olay were among the major brands caught in the crossfire of a fan dispute involving Xiao Zhan,one of Chinas most popular young celebrities.The actor and singer,who rose to fame after starring in Tencent Videos hit 2019 fantasy drama The Untamed 陈情令,quickly became one of Chinas most bankable stars and made deals with numerous brands.The Mengniu milk drink that caused the Youth With You season 3 controversy.Source:Tmall store 真果粒旗舰店22CHAPTER 6THE DARK SIDE OF THE FAN ECONOMYYet Chinas fan economy ultimately backfired on these brands via a convoluted chain of events.On February 29,the U.S.-based nonprofit fan-fiction site Archive of Our Own(AO3)was suddenly blocked in China after being accessible in the country since its founding more than a decade ago.Members of the AO3 community in China were quick to pin the blame on Xiaos fans,believing that they had reported the site to authorities over sexually explicit content that was hurting Xiaos reputation,such as fan-written stories that portrayed Xiao engaged in a homosexual relationship with his Untamed costar Wang Yibo.To retaliate over the loss of AO3,an expansive campaign to boycott Xiao was launched on Weibo and quickly became a top trending topic,drawing more than 220 million views and 306,000 comments within days,along with related calls to A fanfic controversy caused headaches for numerous brands in China due to no fault of their own.Image:陈情令 official Weiboshun any brands associated with Xiao.Although Xiaos 20-plus endorsements included many consumer brands such as Crest,Lays,and Budweiser,his higher-profile relationships with beauty labels Olay and Este Lauder were more frequently called out on Weibo as targets of attack.Although the controversy ultimately blew over with little damage to Olay,Este Lauder,or Xiao Zhan(who kept a low profile for several months before returning to the spotlight),the incident caused the brands involved significant distraction at a time at a time when they were gearing up for major marketing campaigns around the International Womens Day holiday on March 8.23CHAPTER 7THE ROAD TO CHINAS CELEBRITY CRACKDOWNCHAPTER 724CHAPTER 7THE ROAD TO CHINAS CELEBRITY CRACKDOWNChinas crackdown on celebrity culture and the fan economy came amid several other crackdowns in 2021,a year of heightened political sensitivity with the centenary of the founding of the Communist Party of China.17 First to incur the wrath of Beijing was the Alibaba-affiliated Ant Group,which saw its planned November 2020 IPO suspended following comments from founder Jack Ma that criticized Chinese regulators.Attention turned next to Chinas booming e-commerce market,putting the monopolistic business practices of Alibaba and competitors like Tencent under the microscope and resulting in a record-breaking$2.8 billion fine for Alibaba for abusing its dominant market position.18A slew of additional regulatory activity has targeted unfair competition,consumer protection,data security and privacy,gaming,online tutoring,Alibaba was first in Chinas firing line as a string of crackdowns began in late 2020.Image:Shutterstockand“wealth flaunting,”all signs pointing to the governments desire to strictly manage a wide range of sectors.17 Chinese government website.http:/ CNBC.“Alibaba shares rise 6%in U.S.premarket trading after$2.8 billion anti-monopoly fine.”April 11,2021.https:/ 7THE ROAD TO CHINAS CELEBRITY CRACKDOWNTHE XINJIANG COTTON CONTROVERSYEven brands that strive to remain apolitical can be unwittingly dragged into a highly politicized controversy in China and face damage that can impact sales for weeks,months,or even longer.In March 2021,some global brands with sizable retail footprints in mainland China were on the receiving end of a nationalistic backlash over their stance on the use of cotton sourced from the northwestern Xinjiang region of China.Nike,for example,was found to have voiced concerns about using supplies from the region19 while H&M had ceased use of Xinjiang cotton.20With these companies quickly facing boycotts H&M was among the brands hardest hit by the Xinjiang cotton controversy of spring 2021.Image:Shutterstockencouraged by the central government in Beijing and undoubtedly by opportunistic local brands looking to leverage the nationalistic fervor virtually any foreign brand that had made a statement in the past about Xinjiang(or failed to make a statement overtly supporting Xinjiang cotton)was dragged into the fray.The scrutiny expanded to members of the Better Cotton Initiative(BCI),a non profit governance group promoting better cotton farming standards and practices across 21 countries,including China which had previously suggested that cotton from the Xinjiang region is controversial.19 Nike statement on Xinjiang.https:/ BBC.“Nike,H&M face China fury over Xinjiang cotton concerns.”March 25,2021.https:/ 7THE ROAD TO CHINAS CELEBRITY CRACKDOWNBurberry ambassador Zhou Dongyu stepped down as a result of the Xinjiang cotton boycott.Image:Shutterstock21 South China Morning Post.“Xinjiang cotton controversy spills into virtual battle,as Tencent removes Burberry outfit from Honour of Kings,Chinas top game.”March 25,2021.https:/ Jing Daily.“Whats Burberrys Next Step in China?”July 13,2021.https:/ Business of Fashion.“Burberry,H&M,Nike and Others Lose China Ambassadors Over Xinjiang.”March 25,2021.https:/ Fashion Network.“Burberry not hurt by Xinjiang cotton row says CEO.”May 14,2021.https:/ the boycott brigade came for BCI member Burberry which has long made it a policy not to use materials from the Xinjiang region21 the brand saw a hotly anticipated collaboration with Tencents hit game Honor of Kings cancelled just days before its official launch.Meanwhile,perhaps under pressure to prove their patriotism,some of Chinas biggest celebrities began posting messages of support for Xinjiang cotton and chastised brands that failed to do the same.Within days,a number of fashion brands lost their China brand ambassadors,with Burberry seeing the departure of popular young actresses Zhou Dongyu and Song Weilong.22 Others that lost their Chinese representatives included Adidas(Dilraba Dilmurat,Eason Chan,and Liu Yifen),Uniqlo(Ni Ni,Jing Boran,and Wang Yuan)and Calvin Klein and Converse(Lay Zhang).23Burberry chief Marco Gobbetti conceded in May that the Xinjiang cotton controversy had presented a challenging situation for the brand,telling analysts that the business“had to and will continue to navigate through”the issues in China while noting that its ultimate impact on revenue had been“limited.”24Like many politically charged events in China,the Xinjiang cotton controversy blew over fairly quickly.However,brands that were blindsided learned an important lesson in the need to always have some sort of contingency plan for boycotts that are initiated or supported by the government in the future.27CHAPTER 8CELEBRITIES IN THE CROSSHAIRSCHAPTER 828CHAPTER 8CELEBRITIES IN THE CROSSHAIRSWhile authorities had cracked down on celebrities before(see Chapter 3,Introduction),2021 saw a number of high-profile“cancellations”of stars with strong connections to major luxury brands.Within a local context of slowing income growth and soaring living costs,media censors began to clamp down more strictly on content depicting extravagant lifestyles on social media.In May,Su Mang,the former editor-in-chief of Bazaar China,faced a significant backlash after remarking on a cooking show that a RMB 650($100)budget was not enough for breakfast.25 That same month,in an attempt to tame an outbreak of celebrity and fandom scandals,Beijing authorities launched a media crackdown initiative called“Qinglang”清朗,aiming to remove all celebrity content that potentially promotes negative values to the countrys youth,such as reckless spending and drug use.26Former Bazaar China editor-in-chief Su Mang was among the celebrities who faced a widespread backlash in 2021.Image:Su Mang WeiboMultiple celebrity scandals compounded in August.Perhaps the most stunning turn of events came when aforementioned pop star Kris Wu a go-to brand ambassador for brands like Porsche,Louis Vuitton and Bvlgari was detained by Beijing police on suspicion of sexual misconduct following explosive allegations that he“repeatedly seduced young women into sexual relations.”27 Even before his arrest,Wus social media accounts were deleted and brands swiftly moved to distance themselves from the 30-year-old,with Bvlgari replacing Wu with You Are My Glory star Yang Yang.2825 South China Morning Post.“Chinese celebrity pay scandal:backlash after famous editor complains on reality TV show that daily meal allowance not enough.”May 26,2021.https:/ G.“国家网信办部署开展“清朗”系列专项行动.”May 9,2021.http:/ Jing Daily.“What the Kris Wu Scandal Says About China.”August 2,2021.https:/ Jing Daily.“Bulgari Says Goodbye,Kris Wu,Hello,Yang Yang.”September 9,2021.https:/ 8CELEBRITIES IN THE CROSSHAIRSYoung actor Zhang Zhehan was caught up in a Yasukuni Shrine controversy in August 2021.Image:WeiboWu was not the only star to see his reputation tumble overnight.On August 12,actor Zhang Zhehan,fresh off a star-making turn in the hit fantasy costume drama series Word of Honor,found himself embroiled in a serious political controversy after Instagram posts of his visit to the Yasukuni Shrine in Tokyo a symbol of Japans war legacy were exposed on Weibo.Though Zhang issued a public apology letter claiming he was sorry for his ignorance about the historical background of the shrine,the state-owned Peoples Daily immediately wrote that“as a public figure,Zhang has been deficient in historical knowledge,and completely unaware of the nations trauma,which is totally unreasonable.”29 Soon after,rapper and singer Lucas Huang a brand ambassador for Guerlain announced on Instagram and Weibo that he would be pausing all promotional activities and conducting“deep self-reflection”after women who claimed to have been his girlfriends accused him of cheating and gaslighting them.3028 Jing Daily.“After Kris Wu,Zhang Zhehan Is the Next Luxury Headache in China.”August 13,2021.https:/ Jing Daily.“Luxury Friend Lucas Huang Blasted For Bad Be-havior.”August 25,2021.https:/ 8CELEBRITIES IN THE CROSSHAIRSAlso caught up in scandal in August was actress Zheng Shuang,who was fined almost RMB 300 million($46.4 million)for tax evasion,following a high-profile surrogacy scandal at the beginning of 2021 that saw her blacklisted and dropped by Prada as a brand ambassador.31 Although Prada moved quickly to distance itself from Zheng,the brands shares fell 1.7 percent on the Hong Kong stock market on the day her scandal broke.32 Meanwhile,A-list actress and Fendi brand ambassador Zhao Wei suddenly vanished from Chinas internet,with her name removed from all her works on Chinese video platforms and her social media accounts scrubbed,for reasons that,as of October 2021,still remain unknown.Celebrities arent going anywhere in China,but the events of late summer 2021 indicate that brands need to be more cautious than ever in who they choose to work with,lest they get caught up in a scandal that results in negative attention.A-list actress and producer Zhao Wei was caught up in an as-yet-undisclosed scandal in August 2021.Image:Shutterstock31 CNN.“Accused of abandoning two babies in the US,this Chi-nese celebrity has sparked a national debate about surrogacy.”January 23,2021.https:/ Greads.“深度|在未来，品牌还需要“流量艺人”吗?”October 28,2021.http:/ 9CLAMPING DOWN ON THE FAN ECONOMY AND“SISSY MEN”CHAPTER 932CHAPTER 9CLAMPING DOWN ON THE FAN ECONOMY AND“SISSY MEN”In addition to cracking down on celebrity behavior,in 2021 China also took aim at two closely interlinked phenomena that have become impossible for brands to ignore in recent years:“little fresh meat”(小鲜肉)male idols and the fan economy that surrounds them.Best defined as handsome young male celebrities whose appearances belie traditionally masculine aesthetics,“little fresh meat”idols have become brand darlings in recent years.One of the earliest breakout stars was singer and actor Lu Han(b.1990),who has worked with Gucci,Louis Vuitton,and Cartier,33 while a more recent favorite is Chanel brand ambassador Wang Yibo(b.1997),who has donned the brands iconic womenswear in TV shows and on magazine covers to exalt a fashion-forward look that defies gendered expectations.Wang famously paired a pink Chanel jacket with a mini purse on the reality show Street Dance of Luxury ambassadors are often called“Little Fresh Meat.”But if China has its way,there could be a shift away from these androgynous stars.Photo:Cai Xukuns WeiboChina and wore a womens tweed jacket to a red carpet event held by Tencent.34For several years,Chinese authorities have been railing against the cultural influence of androgynous K-pop stars.In 2016,the countrys 13th Five-Year Plan instructed the Ministry of Education to“study the influence of the phenomenon of Internet celebrities on youth values and countermeasures,”35 and in 2019,state-run Chinese media condemned“little fresh meat”idols and K-pop stars,calling 33 Jing Daily.“6 Male Luxury Brand Ambassadors in China You Need to Know.”October 11,2017.https:/ South China Morning Post.“Why are Li Xian and Wang Yibo wearing womens clothes?Male Chinese celebrities are leading a gender-neutral fashion trend at odds with the countrys anti-K-pop traditional values.”August 30,2021.https:/ Chinese government website.“中华人民共和国国民经济和社会发展第十三个五年规划纲要.”March 17,2016.http:/ 9CLAMPING DOWN ON THE FAN ECONOMY AND“SISSY MEN”them“sissy pants”and warning that a“sick”and“decadent”culture would threaten the nations future.36The official stance hardened in 2021,and plans for legislation to prevent male“feminization”were revealed during government meetings earlier in the year.37 Although vague,the announcement indicated more complicated times ahead for brands,particularly in the beauty space,that have come to rely on using male brand ambassadors to promote their products in China.The budding war against“little fresh meat”also ties into the governments concerns over the fan economy,bringing simultaneous crackdowns on both as it is the rabid fans of young idols driving the mass purchases of the brands they endorse(see Chapter 6,The Dark Side of the Fan Economy).In the midst of the multiple celebrity scandals of August 2021,the Cyberspace Administration of China(CAC)released ten measures to further regulate the fan economy,with a ban on all celebrity ranking lists at the top.This was a highly significant move,as a major motivator for fan clubs in China was competing to help their favorite stars top the charts.But the measure was also a setback for brands as well as marketing agencies that relied on celebrity rankings to decide who to work with.K-pop groups like BTS have been highly influential in China,but officials hardening stance against“little fresh meat”stars could nip that in the bud.Image:Shutterstock36 South China Morning Post.“Chinese boys train to be real men to fight the BTS idol effect,but the make-up could be here to stay.”May 8,2019.https:/ New York Times.“A Masculinity Crisis?China Says the Boys Are Not All Right.”February 5,2021.https:/ 9CLAMPING DOWN ON THE FAN ECONOMY AND“SISSY MEN”Fans of popular brand ambassador Wang Yibo caused a scandal by fighting with another stars fan club in 2021,hastening the fan club crackdown.Image:ShutterstockThe CACs August measures also included key provisions targeting star management companies and the behavior of fan clubs,including a prohibition on online fighting between rival groups.This move was likely hastened by a Weibo spat during which fans of actress Zhao Liying harassed fans of Wang Yibo after being upset by a rumored upcoming collaboration,deeming the stars previous partnership a failure.38On September 2,in perhaps the strongest-ever salvo against young male idols,the National Radio and Television Administration(NRTA)issued a directive banning“effeminate men and other abnormal aesthetics”from appearing on entertainment programs,signaling in essence an official end to the reign of“little fresh meat”idols.39 That same day,the Communist Partys propaganda department elaborated on the NRTAs directive with a notice to prevent“performing artists who have made moral missteps”(失德艺人)from returning to the entertainment industry.The notice also bars minors from becoming members of idol groups and participating in talent competition shows and fan club activities,following a recent controversy over Panda Boys,a Chengdu-based boy band with members between the ages of 7 and 11 that drew heavy criticism and was disbanded within days of its debut.4038 South China Morning Post.“Thousands of Weibo accounts suspended after online battle between celebrity fan bases.”August 27,2021.https:/ Jing Daily.“China Bans Effeminate Men and Abnormal Esthet-ics From TV.”September 2,2021.https:/ Vice.“Half of This Boy Bands Singers Are 7 Years Old.Is It Child Labor?”August 25,2021.https:/ 9CLAMPING DOWN ON THE FAN ECONOMY AND“SISSY MEN”Major streaming platforms took rapid steps to comply with the governments wishes,with iQiyi announcing that it would cancel all of its idol competition shows for the next few years.Although iQiyis main rivals,Tencent Video and Youku,had yet to make similar announcements as of early October 2021,the latest directive from NRTA might be making those decisions for them.Meanwhile,Tencent Music blocked users from repeated purchases of digital albums,another blow to a fan economy that often saw followers buy multiple copies to support their favorite performers and boost their chart rankings.Since August 2021,celebrity rankings and fan groups have rapidly disappeared from popular platforms such as Weibo and Douyin,with the CACs new directives allowing only specific works to be ranked by popularity(without any mention of individual performers).Major streaming platforms are rushing to keep up with government regulations.Image:ShutterstockJing DailyAll of this could mean the value of Chinas fan economy,estimated at RMB 100 billion($15.5 billion)in 2020,could shrink considerably as a result of the latest crackdowns.Already,the number of newly registered celebrity agencies has witnessed a notable decline:just 265 as of late September 2021,compared to more than 1,000 annually over the last five years,peaking at more than 3,000 in 2018.41 For brands,Chinas crackdown on the fan economy means fewer opportunities for marketing in China.The days when newly minted stars could snap up dozens of endorsement deals and quickly promote brands to their followers are gone.Instead,brands will have to take a longer-term view or engage in more heated competition to partner with the few remaining“safe”celebrities.Meanwhile,the end of the idol competition show era means that a key source for new stars has dried up.41 Sina.“爱奇艺宣布取消选秀节目 QQ音乐限制专辑购买 粉丝经济要走到头了?”August 30,2021.https:/ of Newely Registrated Celebrity Agencies in China,2015-202136CHAPTER 10WHERE DO LUXURY BRANDS GO FROM HERE?CHAPTER 1037CHAPTER 10WHERE DO LUXURY BRANDS GO FROM HERE?The likelihood of a stricter crackdown on celebrities and the lifestyles they represent should be a key concern for any luxury brand active in China today.In the early days of Xi Jinpings presidency,lavish gift-giving and expensive purchases among government bureaucrats were targeted,sending shockwaves through Chinas luxury market at a time when the country was emerging as a driver of growth for global brands.42 According to regulators,the recent rules against idol programs and“abnormal aesthetics”on television are also designed to address problems like wealth flaunting and celebrity worship while cultivating greater respect for morality.Beijing could continue to increase its focus on areas where content,culture,and commerce interact.Namely,the government will likely step An area of concern for luxury brands is whether China will implement stricter regulations against“wealth flaunting.”Image:Shutterstockup its support and promotion of local brands at a time when for the luxury sector in particular global brands have become heavily dependent on the mainland Chinese market.China has already seen a long-term consumer shift towards local brands,which came to a head in early 2021 when global giants like Burberry found themselves embroiled in the Xinjiang cotton controversy(see page 26).Former Burberry ambassador Zhou Dongyu explained her rationale for breaking her contract with Burberry by saying 42 Jing Daily.“Luxury Gift-Giving In China:Down,But Definitely Not Out.”January 17,2013.https:/ 10WHERE DO LUXURY BRANDS GO FROM HERE?that the brand had not“clearly and publicly stated its stance on cotton from Xinjiang.”43 With other global players such as Nike also caught up in the imbroglio,local rivals such as Li Ning and Anta saw their sales spike,once again underscoring how international brands are always just a scandal or crackdown away from a revenue slump in China.Foreign brands are operating in a more complex environment in China that has only become more challenging in the aftermath of the coronavirus pandemic.Chinas rebound from the pandemic from the summer of 2020 onwards brought with it an associated outburst of national pride that fueled an uptick of interest in Guochao(“national trend”)brands and products that incorporate specifically Chinese cultural elements.Additionally,the economic downturn in overseas markets further prompted Chinese brands to shift their focus to domestic demand,in line with the governments efforts to drive consumer spending.According to data from iiMedia Research,more than half of consumers surveyed prefer to purchase Chinese brands on e-commerce platforms or official online stores,and e-commerce platforms have courted this trend with aplomb.Since 2018,Alibaba and Tmall have launched an annual Guochao plan to support Chinese brands,with extensive campaigns promoting local champions.44To date,rising brand nationalism in China has yet to impact global luxury brands as much as it has the likes of Nike or H&M.While China boasts world-class designers who are founding their own labels and taking their collections to fashion weeks in London,Milan,New York,and Paris,a domestic powerhouse brand has yet to emerge that can rival Herms or Louis Vuitton in the eyes of Chinese consumers.45 However,there are indications that luxury brands are unlikely to escape the current crackdown environment scot-free.43 Reuters.“Burberry becomes first luxury brand to suffer Chi-nese backlash over Xinjiang.”March 26,2021.https:/ Jing Daily.Chinese Cultural Consumers:The Future of Luxury.September 1,2021.https:/ South China Morning Post.“Chinas millennials embrace local brands as fast fashion giants like H&M face changing tastes.”September 22,2021.https:/ CBC.“Canada Goose fined by China for misleading consum-ers about parka material.”September 8,2021.https:/www.cbc.ca/news/business/canada-goose-china-1.6168160Domestic Chinese brands like Li Ning looked to take advantage of controversies that ensnared foreign rivals in 2021.Image:ShutterstockSince the Xinjiang cotton controversy of spring 2021,other actions by regulators have indicated how higher-end brands could find themselves in sticky situations.In September 2021,Toronto-based Canada Goose was fined RMB 450,000(approximately$70,000)for allegedly misleading consumers about the materials it uses in its popular down jackets.While only obliquely related,the punishment was referenced in Canadian press alongside broader punitive action targeting Canada in response to the detainment of Huawei CFO Meng Wanzhou(who was ultimately released in late September 2021).4639CHAPTER 10WHERE DO LUXURY BRANDS GO FROM HERE?Canada Goose is just one brand to get caught up in a minor,although annoying and time-consuming,scandal in China in recent months.Image:ShutterstockLuxury brands must take care to check and double-check the language of their marketing materials,lest they find themselves caught up on the receiving end of negative publicity and a symbolic,but still annoying,fine.What all of this means for the year ahead is that luxury brands will need to be extremely careful about what they say in China and who they hire to say it for them.As in previous years,a sensitive geopolitical environment means that brands could find themselves caught up in government-initiated or“encouraged”boycott scenarios at the drop of a hat in 2022.With international travel unlikely to reach pre-pandemic levels for Chinese tourist-shoppers for the next 12 to 18 months47 an estimated 100 million mainland Chinese tourists will travel abroad in 2021,down from 155 million in 201948 the domestic retail market remains key to driving sales.Right now,Beijing arguably has more power than ever to crack down on luxury brands that say something they dont like(or hire someone they dont like)in marketing campaigns.47 McKinsey&Company.“Chinas uneven travel recovery:Long road to international travel furthers domestic opportunities.”August 30,2021.https:/ Orioly.“100 Million Chinese Are Expected to Travel Abroad in 2021.”December 3,2020.https:/ 11THE SILVER LININGCHAPTER 1141CHAPTER 11THE SILVER LININGExpert“sneakerheads”are hugely influential in driving sales for sought-after footwear in China.Image:ShutterstockDespite forcing a major rethink of marketing with celebrities,the ongoing crackdown may ultimately be a net positive for luxury brands in China,forcing them to get more creative about who they want to represent them,rather than simply enlisting the hottest new idol or jumping on every viral trend.Streetwear,Sneakers,and KOCsAlready,a significant amount of marketing innovation in China has come from streetwear and sneaker culture,where subject matter experts and enthusiasts are establishing themselves as influential trendsetters who can also move products.A growing number of deeply knowledgeable Chinese consumers have successfully leveraged their expertise by launching their own online stores to resell sought-after sneakers,accompanied by chat pages that invite customers and other sneakerheads to share comments and ideas.This type of knowledgeable individual,who is happy to share opinion on style,brands,and trends,is known in China as a Key Opinion Consumer(KOC).Unlike key opinion leaders(KOLs),who can have tens of thousands to millions of followers,KOCs may just have a few hundred social media followers,yet they are likely to be seen as more trustworthy owing to their more authentic content.49 In the West,KOCs are also known as 49 Daxue Consulting.“KOC marketing in China often gets more bang for the buck than KOL marketing.”October 21,2020.https:/ 11THE SILVER LINING“Genuinfluencers”who are more interested in“sharing advice,discussing their passions and spreading unbiased information,rather than pushing a new product or collection”.50In fast-growing yet still niche communities such as the one revolving around rare sneakers,previously obscure KOCs have become top influencers,offering luxury brands the possibility of turning to experts within specific communities to promote new lines or collections.In-House Content CreationAlong the same lines,Chinas current crackdown-heavy environment offers brands an opportunity to experiment with a strategy that was more widely adopted during the early days of the COVID-19 pandemic:in-house influencers.When stores were shuttered and events canceled during Chinas 2020 lockdowns,brands and merchants quickly flocked to platforms such as Taobao Live and Douyin to stream video from their showrooms,deputizing in-house staff as expert“hosts.”This strategy could prove highly effective for brands interested in the KOC route but concerned that the individual will be less well-versed in the brand than an in-house staff member or be unable to accurately answer questions.Other brands have gone further than just taking influencer marketing in-house,opting to build extensive content infrastructures.In March 2021,the Procter&Gamble-owned Japanese cosmetics brand SK-II announced the launch of its own production arm,SK-II STUDIO,with a mission to explore the current social pressures and challenges faced by women.The studios first short film,The Center Lane,directed by former Palme dOr winner Hirokazu Koreeda,drew a positive response from Chinese audiences,attracting more than 3 million views for the#SK-IIstudio hashtag on Weibo.51 Japanese cosmetic brand SK-II launched its in-house movie studio in 2021.Image:SK-II50 Vogue Business.“Meet the“genuinfluencers”who dont want to sell you anything.”August 9,2021.https:/ Jing Daily.“SK-II Launches a New Film Studio to Explore Brand Storytelling.”April 2,2021.https:/ 11THE SILVER LININGAthlete InfluencersElite athletes are another influential group that more luxury brands may turn to amid the celebrity crackdown.With outdoor and winter sports lines and brand collaborations becoming a goldmine for luxury brands in China,brands may look more to high-profile athletes,particularly in the run-up to the 2022 Winter Olympics in Beijing and after,as a new crop of medal-winning Chinese athletes is set to draw much adoration from patriotic fans.However,they will not be completely spared from the ongoing crackdown.On September 30,the Chinese Olympic Committee warned in a statement that fans should“chase Olympic stars rationally and avoid improper words and deeds,”noting that“recently,out of their love for national team athletes,fans have displayed excessive behaviors in public areas such as airports,such as pulling and pushing athletes,which has caused a negative social impact.”52So far,there is little indication that the central government is quite as concerned about foreign athletes as it is about foreign celebrities.As such,luxury brands may enlist more sports stars such as 18-year-old British tennis phenom Emma Raducanu(whose mother is Chinese)for upcoming campaigns in China(Tiffany&Co.has already snapped her up as a global ambassador.53)British tennis phenom Emma Raducanu was named a Tiffany&Co.brand ambassador in September 2021.Image:Emma Raducanu Instagram52 Reuters.“China tells fans chase stars rationally.”October 1,2021.https:/ Tatler.“Shes got the Midas touch:Emma Raducanu sparkles ever brighter with Tiffanys deal.”September 21,2021.https:/ 11THE SILVER LININGArtists and CreativesCollaborating with notable Chinese artists and creative talents presents an opportunity for luxury brands to highlight their cultural awareness in the burgeoning post-”little fresh meat”era.For example,beauty and fragrance brand Byredo partnered with artist and photographer Chen Man to develop a CGI avatar in the iridescent shades of its latest makeup collection in September 2021,54 while Burberry worked with five young Chinese photographers to create a series of brand films highlighting local musicians in late 2020.55Collaborating with emerging Chinese artists is proving to be a popular marketing strategy to reach Chinas young and culturally savvy consumers.In February 2021,Net-a-Porter partnered with Shanghais ART021 to launch the“Incredible Female Artist Award,”a competition aimed at elevating the profile of contemporary female Chinese artists,with actress Tan Zhuo as project ambassador and judge.56 Ahead of the Sothebys Impressionist,Modern,and Contemporary Art auction series in New York in the spring of 2021,LVMH-owned Spanish brand Loewe collaborated with the auction house on a collection of artisan-crafted clay chestnut roasters as interpreted by three emerging artists from around the world,including Chinas Min Chen.57Other brands are finding success working with established artists,such as Hennessy,which teamed up with contemporary Chinese artist Cai Guo-Qiang on a colorful daytime pyrotechnic display that saw the artist set off 20,000 fireworks from the surface of the Charente River in France to celebrate 150 years of Hennessy X.O.cognac.58 In September 2020,Prada teamed up with Chinese filmmaker Jia Zhangke on an installment of its Prada Mode private club pop-ups at its Prada Rong Zhai space in Shanghai,with around 2,000 VIPs passing through the halls of the venue over the course of two days of exhibitions,talks,and parties.59Byredo x Chen Man avatar,September 2021.Image:Byredo Instagram54 Byredo Instagram.September 26,2021.https:/ Jing Daily.“How Burberry Connects To Chinas Gen-Z Consumers Via Emerging Artists.”December 10,2020.https:/ Jing Daily.“Net-a-Porter and ART021 Launch the Incredible Female Artist Award.”February 18,2021.https:/ Jing Daily.“This Sothebys x Loewe Collab Is the Future of Brand Partnerships.”May 19,2021.https:/ Quill&Pad.“Hennessy Teams Up With Artist Cai Guo-Qiang to Mark the Explosive 150th Anniversary of Its X.O.Cognac.”December 15,2020.https:/ Jing Daily.“Pradas Shanghai Pop Up Fuses Art and Luxury.”September 3,2020.https:/ 11THE SILVER LININGMature Celebrities and InfluencersThe year ahead may also see more luxury brands working with older celebrities and influencers for campaigns,going against the trend of working with Gen Z“flavor of the month”stars.As noted in the recent report Transcendent Retail:APAC by Jing Daily and Wunderman Thompson,Chinas baby boomers are starting to make their mark on online commerce,showing impressive social media prowess.Boasting millions of fans,“The Fashion Grandmas,”a collective of around two dozen members ranging in age from their late 50s to mid 70s,use Beijings streets as their runway in videos sprinkled with nuggets of wisdom on life and love,serving up pop-up ads and livestreamed product sales along the way.And the Fashion Grandmas are far from alone,with“Grandma Wang Who Only Wears High Heels”boasting 16 million Douyin followers.The popular reality show Call Me By Fire featured celebrity contestants in their thirties,forties,and fifties.Image:披荆斩棘的哥哥 WeiboAccording to Wunderman Thompson research,81 percent of Chinese aged over 55 say they are more comfortable using digital technology post-COVID,more than any other age group.60“Chinas mobile internet industry has earned money from every group:men,women,youngsters,parents,but not the elderly,”Bian Changyong,chief executive of Beijing Dama Technology Company,which handles the Fashion Grandmas social media,told AFP.“This could be the last structural opportunity of the industry.”60 Jing Daily.“Transcendent Retail:APAC|Lessons From Chinas Trend-Setting Commerce Market.”July 15,2021.https:/ 11THE SILVER LININGSome brands have moved more quickly than others in tapping older spokespeople.In 2020,the Este Lauder-owned niche fragrance brand Kilian enlisted 49-year-old actress Ning Jing,the winning contestant in the hit idol competition show Sisters Who Make Waves,as the brands first brand ambassador ahead of its mainland China debut.More recently,the 2021 reality show Call Me By Fire,featuring male stars in their thirties,forties,and even fifties,became one of Chinas most popular reality shows in the wake of the aforementioned celebrity scandals and fan culture crackdown.What brands may find is that working with more established celebrities in China offers more peace of mind,given the lower likelihood that they will rock the boat and put their cushy lifestyles at risk.Although their social followings are smaller than todays A-list young idols,mature celebrities have proven reputations through a long-term dedication to their craft.Also,their fans are more loyal,rational,and critical than the fickle fans of younger talents.61Already,some brands have started to enlist more seasoned spokespeople into marketing campaigns with an eye on China,with Cartier naming renowned actress Gong Li(b.1965)as the global ambassador for its high jewelry collections in September 2021.62 However,as the example of Zhao Wei shows(see Chapter 8,Celebrities in the Crosshairs),even those with decades-long careers are never a 100-percent safe bet.61 Jing Daily.“Can Older Chinese Stars Save Luxury Brands?”August 28,2021.https:/ The Hollywood Reporter.“Gong Li Joins House of Cartier as Global Ambassador.”September 17,2021.https:/ 11THE SILVER LININGVirtual Idols and InfluencersSome intrepid brands have taken the route of working with virtual idols,computer-generated celebrities who sing,dance,and offer great versatility without the potential for controversy or scandal inherent in humans.According to data from iiMedia Research,Chinas virtual idol industry was worth an estimated$540 million in 2020,an increase of 70.3 percent year-on-year,and could reach$970 million in 2021.63While virtual influencers are still a novelty in the West,in China they have become an accepted part of many brands marketing strategies.Since her debut nine years ago,virtual singer Luo Tianyi has worked with a wide array of local and global brands,among them LOccitane,Bausch&Lomb,and Clarins.Xing Tong,a virtual idol from Tencents QQ Dance game,was tapped by Li Ning as a brand ambassador and appeared in a Levis campaign during Shanghai Fashion Week in 2019.64 Virtual influencers have even headlined major events such as the first all-virtual version of Bilibilis annual BML(Bilibili Macro Link)concert in December 2020 and Kuaishous“cross-dimensional”Spring Festival concert in February 2021.65Since the beginning of 2021,several Chinese companies have turned to the stability of digital spokespersons,among them C-beauty giants Florasis and Perfect Diary,haircare label Centaine,and jewelry maker IDO,while global luxury brands Prada and Miu Miu have worked with Aime,a virtual influencer created by Alibaba for Tmall Luxury Pavilion.But the use of virtual influencers is a rising trend on a global level as well,with brands like Prada and Calvin Klein collaborating with virtual sensation Lil Miquela66 and Dior,Zegna,and LOral creating their own in-house avatars.Virtual idols like Ayayi have become an option for brands concerned about real-life celebrities causing controversy.Image:Ayayi Weibo63 Jing Daily.“Introducing Chinas Top Virtual Idols:Ayayi and Luo Tianyi.”September 30,2021.https:/ Jing Daily.“Why Chinas Young Consumers Love Brand Collab-orations.”December 17,2021.https:/ Jing Daily.“What the World Needs to Learn From Chinese Content Commerce:Part Four.”April 12,2021.https:/ Substack.“Future Tech China:The Next Wave of Virtual Influencers.”October 22,2020.https:/ 11THE SILVER LININGExperience-Based OutreachAnother approach taken by some luxury brands and retailers in the current environment is to sidestep celebrity and influencer marketing altogether and focus on providing more interesting and engaging experiences within China.In May 2021,Munich-based luxury e-commerce platform Mytheresa held a private event in Beijing hosted by Chinese designer Ye Ming Zi and Lucia Liu,fashion editor-in-chief of Huasheng Media,speaking in depth about customer fashion and shopping experiences.The following month,London luxury retail mainstay Harrods held the second installment of its Residence Project in Beijing,following a similar event in November 2020 in Shanghai.The immersive,invitation-only space featured extensive offline events such as whisky tastings that brought together customers with similar interests and passions.67 In September 2021,Valentino presented a special show in collaboration with the Shanghai offshoot of the immersive theater UK luxury retailer Harrods has held its Residence Project pop-ups in cities like Beijing,Shanghai,and Chengdu.Image:Courtesy of Harrodsshow Sleep No More to showcase the brands Fall/Winter 2021 collection.Titled“Reborn in Dreams,”the collaboration invited an audience of fashion insiders to explore an installation that combined fashion,arts,and theater at the historic McKinnon Hotel playhouse.68Whatever route they take in their choice of brand spokesperson or partner,luxury brands forced to rethink their China marketing strategies out of necessity could see the most sustainable success in the market.Rather than focusing on short-term success from season to season and signing on the latest star to emerge from idol shows or hit dramas,brands that build stronger relationships with the subject-matter experts,athletes,or established celebrities their target audience cares about could avoid being caught up in embarrassing scandals or crackdowns they could do without.67 Jing Daily.“How Global Luxury Retailers Entice Chinese Shoppers.”June 22,2021.https:/ Jing Daily.“Prada Wows with Local Market Takeover in Shang-hai.”October 1,2021.https:/ 12CHAPTER 12APPENDIX:TIMELINE OF CHINAS KEY INITIATIVES ON CELEBRITIES 50CHAPTER 12CRACKDOWN TIMELINEChinas 2021 Celebrity and Fan Economy CrackdownJing DailyREPORTSWINTER 2021Social Links 2021 Herlar,LLC.All rights reserved.Jing Daily is a registered U.S.trademark of Herlar,LLC.JINGDAILY.COM
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1/26WHITEPAPER QUICK ANSWERS 2 min readWhat are common B2B digital transformation pitfalls?How can you map the B2B buying journey?How does digital maturity influence customer value along the B2B buying journey?Which strategies drive success in B2B digital transformation?The infinite B2B buying journey Your ultimate guide to increasing customer lifetime value in B2B e-commerce23 min read THIS IS AN INTERACTIVE WHITEPAPER!BEST EXPERIENCED WITH ACROBAT READER2/26WHITEPAPER Mauro BoffardiCustomer Success Manager at IntershopAs businesses adapt to the changing needs of their customers,under-standing and optimizing the B2B buying journey becomes crucial.From the initial spark of awareness to the post-purchase interactions,we explore the cyclical nature of business engage-ment and uncover strategies to build lasting customer relationships,increase digital buyer convenience,and boost customer lifetime value and profits.Happy reading!ContextTHE EXPERTMastering the B2B buying journey is of utmost impor-tance for B2B companies seeking to maximize revenue and enhance customer satisfaction.In this guide well identify common pitfalls and success strategies in digital transformation,reveal the secrets behind optimizing the B2B buying journey,and examine how digital matu-rity impacts customer value.At each stage of the B2B buying journey,from initial discovery to final purchase,usage and beyond,opportunities abound to drive sales,nurture relationships,and foster long-term customer loyalty.And the good news is:If you do a good job,the journey never truly ends but transforms into an infinite loop of engagement and interaction that continually evolves,presenting further opportunities for growth and success.Contact us3/26WHITEPAPERDIGITALIZATION CHALLENGES3/26WHITEPAPERQuestionWhat are common B2B digital transformation pitfalls?This chapter identifies seven critical pitfalls B2B companies must avoid in their digital transformation journey.From neglecting changing B2B buying behavior to lacking innovation in B2B sales and services and thinking and working in silos,each pitfall underscores the importance of customer-centric strategies and inte-grated approaches.By prioritizing customer experience,innovation,and collaboration across departments,busi-nesses can build the whole customer lifecycle and drive sustainable growth.Read moreDIGITALIZATION CHALLENGESQUICK ANSWERSWhat are common B2B digital transformation pitfalls?How can you map the B2B buying journey?How does digital maturity influence customer value along the B2B buying journey?Which strategies drive success in B2B digital transformation?4/26WHITEPAPERQuestion:What are common B2B digital transformation pitfalls?In an era marked by rapid technological advancement and shifting market dynamics,the B2B sector is undergoing a profound trans-formation.As companies strive to adapt and thrive in this new digital landscape,the concept of the infinite B2B buying journey has emerged as a critical focal point.This journey,character-ized by its ongoing,cyclical nature,demands a nuanced understanding and strategic approach to digital transformation.However,this path is fraught with challenges.Many B2B companies,despite their best efforts,fall into common pitfalls that can significantly hinder their progress and impact their competitiveness.Recognizing and avoiding these traps is essential for organizations aiming to successfully navigate the complexities of the digital age.This chapter examines seven pitfalls that B2B companies must steer clear of to ensure their digital transformation initiatives not only succeed but also enhance the infinite B2B buying journey.1 Overlooking changing B2B buying behavior B2B buyers have fundamentally altered their approach to making purchasing decisions.Gone are the days of relying solely on sales representatives or catalogs;instead,buyers increasingly favor the convenience and autonomy offered by online research,self-service options,and personalized interactions.What are common B2B digital transformation pitfalls?DIGITALIZATION CHALLENGES5/26WHITEPAPERQuestion:What are common B2B digital transformation pitfalls?Companies that overlook or underestimate the significance of these changing behaviors do so at their own peril.Failure to adapt and align with the preferences of modern B2B buyers can swiftly render even the most established businesses obso-lete in todays hyper-competitive environment.To remain relevant and competitive,B2B organizations must proactively engage with and understand the evolving needs,expectations,and purchasing patterns of their target audience.2 Ignoring customer experience In B2B e-commerce,customer experience(CX)still often takes a backseat to product features and pricing strategies.Yet,neglecting CX in the digital transformation journey can be detrimental.B2B buyers now demand consumer-like experiences seamless,intuitive,and engaging.Enhancing CX through digital channels can boost customer satis-faction,loyalty,and ultimately,drive growth.By prioritizing intuitive website navigation,person-alized marketing,and seamless transactions,busi-nesses can delight customers at every touchpoint.Data analytics and AI-driven insights offer valuable opportunities to tailor offerings and interactions to meet customer needs effectively.3 Lacking innovation in B2B sales and services Sticking to traditional sales and service models in times of digital transformation can leave B2B companies trailing behind their more innovative counterparts.In todays landscape,innovation is not just a buzzword but a strategic imperative.Meeting the expectations of modern buyers effi-ciency,convenience,and value requires a willing-ness to embrace change and explore new frontiers.Innovation in B2B sales and services encompasses a broad spectrum of possibilities.It may involve harnessing emerging technologies such as AI,machine learning,or blockchain to streamline operations and enhance customer experiences,or offering digital-first services tailored to the needs and preferences of the contemporary B2B buyer.4 Approaching customers inside-out The approach businesses take to engage with their customers can make all the difference between success and stagnation.Unfortunately,many B2B organizations still cling to an inside-out approach,where internal processes and perspectives take precedence over the needs and experiences of their customers.This tunnel-visioned mindset can severely limit the effectiveness of digital transfor-mation efforts.Moreover,companies risk losing sight of the ultimate goal:delivering exceptional value to their customers.5 Underestimating the role of data Data serves as the bedrock of any effective digital transformation strategy for B2B organizations.It provides insights into customer behavior,market trends,and operational efficiency,guiding informed decision-making and strategic planning.However,many B2B companies underestimate the impor-tance of data analytics,potentially missing out on valuable opportunities to optimize operations and tailor offerings to meet specific customer needs.Data-driven insights not only enable organizations to personalize customer experiences but also optimize internal operations,driving efficiency and facilitating sustainable growth.Investing in robust data analytics capabilities is essential for driving informed decisions and maximizing the impact of digital transformation initiatives.6/26WHITEPAPERQuestion:What are common B2B digital transformation pitfalls?6 Thinking and working in silos Organizational workflows often operate in silos,a legacy from the pre-digital era when companies structured themselves into distinct business units or departments.These units,while diligently opti-mizing their processes,tend to exist in isolation,separated by metaphorical walls and occasionally conflicting goals.This structure leads to customers encountering disparate contact points,processes,and information as they navigate their journey,resulting in a less-than-cohesive experience.Digital transformation demands a departure from this siloed mentality,urging the fostering of collaboration,innovation,and a seamless flow of information across all departments.By encouraging cross-functional teams and integrated systems,businesses can break down these barriers,paving the way for a successful digital transformation that truly meets the needs of their customers.7 Providing isolated and sepa-rated experiences In the digital landscape,the expectation for a cohesive buying journey across all touchpoints and channels is higher than ever.Yet,many B2B compa-nies continue to offer isolated and disconnected experiences,significantly risking customer frustra-tion and damage to their brand reputation.This disjointed approach often sees companies providing a rudimentary introduction to their offerings on a website,followed by a direct jump to the purchase phase sometimes requiring non-digital actions like calling a sales representative or contacting a distributor,with no guidance for the customer in finding the right product.After the purchase,theres a noticeable void;the company loses sight of how the customer is using the product,their level of satisfaction,or even if theyre using parts from competitors.The only re-engage-ment occurs when a need arises for maintenance or service.NEEDMAINTAINPURCHASE7/26WHITEPAPERA CONTINUOUS LOOP OF ENGAGEMENT7/26WHITEPAPERQuestionHow can you map the B2B buying journey?The traditional B2B buying journey has evolved into an infinite cycle,encompassing the eight stages Need,Research,Select,Purchase,Receive,Use,Maintain,and Recommend.By strategically addressing customer needs at each phase and leveraging digital tools and personalized experiences,B2B organizations can navi-gate this dynamic journey,fostering lasting relationships and driving ongoing success.Read moreA CONTINUOUS LOOP OF ENGAGEMENTQUICK ANSWERSWhat are common B2B digital transformation pitfalls?How can you map the B2B buying journey?How does digital maturity influence customer value along the B2B buying journey?Which strategies drive success in B2B digital transformation?8/26WHITEPAPERQuestion:How can you map the B2B buying journey?A never-ending journey As a B2B organization looking to digitalize sales and service processes and optimize customer experience,understanding and effectively navi-gating the B2B buying journey is key to success.The journey is no longer linear but rather a continuous cycle,characterized by multiple touchpoints and interactions.Mapping this journey requires a deep understanding of the buyers needs,behaviors,and preferences at each stage.In this chapter,well explore the phases of the infinite B2B buying journey and outline strategies for B2B organizations to effectively optimize customer experience in each step.How can you map the B2B buying journey?A CONTINUOUS LOOP OF ENGAGEMENT9/26WHITEPAPERQuestion:How can you map the B2B buying journey?RECOMMENDUSE PRODUCTNEEDBUYOWNPURCHASEMAINTAINRESEARCHSELECTRECEIVEThe infinite B2B buying journey1 Need At this initial stage,the potential buyer identifies a specific need and begins searching for a solution.The key strategy here is to attract the buyer by presenting a well-structured web page that not only describes products but also showcases why the company is best suited to solve the need.Leverage content marketing:Utilize the capabilities of a CMS to create and manage informative and engaging content that highlights the benefits and applications of your products.This can include case studies,whitepapers,and industry insights that resonate with your target audience.Optimize website experience:Ensure your website is well-structured and user-friendly,with clear navigation and easy access to product information.Utilize compelling visuals and persuasive messaging to captivate potential buyers and demonstrate your expertise in solving their challenges.Utilize targeted messaging:Tailor your marketing messages to address specific pain points and challenges faced by your target 10/26WHITEPAPERQuestion:How can you map the B2B buying journey?audience.Showcasing how your solutions can alleviate these pain points will resonate with potential buyers and increase their attention.2 ResearchOnce trust has been established with potential buyers,they enter the research stage,where they begin evaluating different products to find the best fit for their specific needs.B2B organizations can effectively engage buyers in this stage by providing valuable guidance and assistance in selecting the right product,focusing on practical use cases rather than technical specifications.Highlight use cases:Showcase real-world applications and success stories that demon-strate how your products have solved similar challenges for other customers.It will help buyers envision the value of your solutions in their own context.Implement intelligent search and personal-ization:Enhance the research experience for buyers by implementing intelligent search func-tionality and personalized recommendations on your digital platforms.This enables buyers to quickly find relevant products that meet their specific requirements,improving their overall research process.Utilize a powerful PIM system:By leveraging a PIM system,you can provide buyers with comprehensive and up-to-date product infor-mation,facilitating informed decision-making and enhancing the research experience.3 SelectOnce the potential buyer has identified the right type of product,they move on to making more precise choices regarding options,configurations,accessories,and services.The key strategy here is to convert their interest into a commercial proposal that aligns closely with their needs,while also leveraging opportunities for upselling additional products and services.Leverage personalization:Personalize the product selection process by tailoring recommendations and offers based on the buyers previous interactions,preferences,and purchase history.By providing relevant and targeted suggestions,you can guide buyers towards the most suitable options and increase the likelihood of conversion.Utilize CPQ systems:Implement CPQ systems to streamline the configuration,pricing,and quoting process for complex products and services.These systems enable buyers to customize their orders according to their specific requirements,while also ensuring accu-rate pricing and timely delivery of quotes.Extend your offering:Consider expanding your product offerings by integrating products from third-party suppliers into your online catalog.This strategic partnership can provide buyers with a wider selection of products and services,increasing the likelihood of finding the perfect solution to their needs.4 PurchaseAt the purchase stage,buyers have identified the right products and are now focused on completing the transaction.However,various factors beyond product quality influence their decision-making process.B2B organizations must address concerns related to the purchase process,pricing trans-11/26WHITEPAPERQuestion:How can you map the B2B buying journey?parency,documentation,approval,and payment methods to ensure a seamless transaction expe-rience.The strategy here is for B2B organizations to get paid and remove all obstacles and friction points,facilitating a smooth transition from product selection to the conclusion of the sale.Streamline the purchase process:Simplify the purchasing journey by optimizing sales processes and eliminating unnecessary steps.Provide intuitive navigation and guidance to ensure buyers can easily progress from product selection to transaction completion.Addition-ally,integrate seamless payment solutions to facilitate secure transactions and enhance buyer convenience.Ensure transparent pricing:Enhance trust and transparency by providing clear information on pricing factors and additional costs.Utilize dynamic pricing engines to offer personalized pricing options based on buyer preferences,fostering transparency and confidence in the transaction.Offer comprehensive B2B e-commerce capabilities:Provide buyers with a robust e-commerce platform equipped with specialized B2B functionality tailored to their unique needs.Features such as user roles and responsibilities,quoting,quick order,order templates,contracts,budget and cost center management,order history,and a personalized“My Account”dash-board enhance the purchasing experience and streamline transactions.5 ReceiveThe receive stage of the B2B buying journey marks the critical moment when the customer takes possession of the product and begins its integra-tion into their operations.At the customer-side questions inevitably arise during this phase:Is everything proceeding according to plan?Are all necessary preparations in place for installation and usage?Do we have all the requisite certifications,documentation,CAD drawings,and quality insur-ance information?Can I track the production and shipment of the product to my facilities?Do we need training?Leveraging a strategy of proactive communication and comprehensive support,coupled with the integration of robust systems,ensures that B2B organizations can address these questions effec-tively,fostering a smooth transition and maximizing customer satisfaction.It is important in this stage to not only deliver the product but also deliver added value as a supplier,keep the customer informed,leverage the engagement to perform up and cross-sell,and provide all information in real-time to boost reliability.Communicate proactively:Keep the lines of communication open with the customer by providing regular updates on the status of their order,including production,shipping,and delivery timelines.Anticipate potential chal-lenges and address them promptly to minimize disruptions and maintain customer confidence.Provide comprehensive support:Equip customers with a wealth of resources to facili-tate the seamless integration and utilization of the purchased product.Offer access to training materials,technical documentation,CAD drawings,and quality assurance information to empower customers and enhance their under-standing and confidence in the product.12/26WHITEPAPERQuestion:How can you map the B2B buying journey?Utilize integrated systems:Harness the power of integrated systems such as MRP,ERP,and CRM to streamline logistical processes and ensure efficient coordination across sales,administration,production,and logistics teams.By leveraging these interconnected systems,B2B organizations can optimize efficiency,mini-mize errors,and deliver exceptional customer experiences.6 UseOnce the product arrives,the journey continues into a critical phase where the customers experience shapes their satisfaction and loyalty.Assessments focus on the products performance,its effectiveness in solving intended problems,and its impact on productivity or cost savings,making maximizing ROI paramount.Strategy-wise,providing robust support is key,aiding customers in gathering vital information and understanding the products value proposition.This feedback is equally crucial for the engineering department to enhance product quality and efficiency,opening avenues for innovative business models like servitization.Implement a digital customer portal:Provide customers with a user-friendly digital portal where they can access comprehensive informa-tion about their purchased products.Include details such as warranties,service history,main-tenance schedules,and relevant documentation for their installed base.This level of transpar-ency and accessibility enhances the customer experience by empowering them to manage their products more effectively.Additionally,leverage the portal to offer proactive support and personalized recommendations(e.g.,consumables,wear parts,tools,and equipment)based on each customers specific needs and usage patterns.Utilize advanced analytics and AI:Leverage data analytics and AI/ML algorithms to gain insights into product usage,predict main-tenance needs,and optimize performance,enhancing the customer experience.Enhance reporting and training:Develop comprehensive reporting systems to provide customers with detailed insights and offer robust training materials and support services to optimize product utilization.7 Maintain In the maintenance stage of the B2B buying journey,the ongoing upkeep and support of the purchased product/machine is key.Customers will need to execute routine maintenance tasks and procure essential consumables and spare parts to ensure operational efficiency and minimize down-time.In this stage,the B2B organizations strategy is to retarget customers with tailored solutions,lever-aging past interactions and data insights to antici-pate and fulfill future maintenance requirements.Streamline parts identification and procure-ment:Implement an efficient system for customers to easily identify and order the parts and consumables they need for maintenance.Utilize after-market PIM solutions to manage product information and ensure accurate part identification.Additionally,integrate e-com-merce functionality into your digital platforms to enable seamless ordering and fulfillment processes.Offer comprehensive maintenance support:Provide customers with access to compre-hensive maintenance resources and services,including detailed manuals,instructional 13/26WHITEPAPERvideos,and troubleshooting guides.Implement ticketing systems to facilitate the resolution of maintenance-related issues promptly,allowing customers to request assistance and track the progress of their requests.Embrace predictive maintenance tech-nologies:Leverage AI and machine learning algorithms to analyze operational data and predict maintenance needs before they occur.By proactively identifying potential issues and recommending preventive measures,you can minimize downtime and optimize the perfor-mance of your products.Additionally,explore innovative business models such as stock insur-ance,servitization,subscriptions,and warranties to provide added value and flexibility to your customers.All these tasks can be streamlined and managed efficiently through a comprehensive digital customer portal,offering a centralized platform for accessing maintenance resources,ordering consumables,and exploring support options.8 RecommendIn this stage of the B2B buying journey,the goal is to cultivate strong customer advocacy and loyalty by delivering a seamless and delightful experience.Customers who have had positive interactions with a supplier are more likely to not only make repeat purchases but also recommend the supplier to others.The key strategy here is to delight customers by consistently exceeding their expectations and providing unparalleled service.By creating a sense of dependency,where customers rely on the supplier to meet their needs effectively,B2B organizations can solidify their position as the preferred choice for their customers,making it diffi-cult for competitors to compete solely on price.Foster customer advocacy:Encourage satis-fied customers to become brand advocates by providing incentives for referrals or testimonials.Word-of-mouth recommendations from happy customers can significantly boost your credi-bility and attract new business.Personalize recommendations:Utilize data analytics and CRM tools to personalize recom-mendations based on each customers past purchases,preferences,and behavior.Tailoring your offers to meet the specific needs of indi-vidual customers enhances their experience and increases the likelihood of repeat business.Continuously monitor and improve:Regu-larly analyze customer feedback,engagement metrics,and sales data to identify areas for improvement and refinement in your recom-mendation strategies.By staying responsive to customer needs and preferences,you can continuously optimize your approach and main-tain high levels of customer satisfaction.This final stage of the B2B buying journey may mark the end of one cycle,but its merely a milestone in the ongoing journey.The B2B buying journey represents a continuous loop of engagement,where understanding and meeting customer needs perpetuate ongoing relationships and opportu-nities for growth.By consistently delivering value and exceeding expectations at each stage,B2B organizations establish themselves not only as trusted partners but as integral components of their customers success stories.In this way,the B2B journey is not merely a transactional process but a dynamic relationship that evolves with each interaction,ensuring that businesses remain at the forefront of meeting future needs and challenges.14/26WHITEPAPERQuestion:How can you map the B2B buying journey?Decoding the B2B buying journey:Stakeholders,strategies,and solutionsSTAGECUSTOMER THOUGHTSSTAKEHOLDERSSTRATEGYSOLUTIONS/TOOLSNEEDWhat specific challenges or pain points am I experiencing in my business operations?How can I find solutions or approaches to address these challenges effectively?MarketingAttractCMS/content RESEARCHWhat products or services are available in the market that could potentially solve my problem?How do various offerings from different vendors compare in terms of meeting my requirements and offering value?Marketing,engineering EngagePIM,intelligent search and recommendations,personalization,PIM SELECTWhat options are best for me?What configuration should I consider?Which accessories and services compose the best solution?Engineering,sales,distributorsConvertCPQ,personalization,e-commerce,3rd party products/services PURCHASE Is the purchase process efficient and comfortable?Can I use my procurement system to order the product?What are the factors that influence the final price?How can I pay?Sales,distributorsGet paid CPQ,dynamic pricing engines,digital signature platforms,e-commerce,payment solutions,documentation platforms RECEIVE Is everything proceeding according to plan?Are all necessary preparations in place for installation and usage?Do we have all the requisite certifications,documentation,CAD drawings,and quality insurance information?Can I track the production and shipment of the product to my facilities?Do we need training?Sales,production,logistics,administration,distributors DeliverMRP,ERP,CRMUSEHow is the machine performing?Am I solving the problem/need I had?Do I benefit from savings or increased productivity?How do I increase the ROI?Engineering,aftermarket Support IoT monitoring,data warehouse,AI/ML,reporting,training platform,e-commerce MAINTAIN Can I easily identify the part I need?Do I need tools or equipment to replace it?Can I use the service of the manufacturer or of a certified partner to do it?Engineering,aftermarket,distributorsRetargetAftermarket PIM,ticketing systems,AI/ML for predictive maintenance,e-commerceRECOMMENDHow satisfied am I with the overall buying and service experience?Would I feel confident recommending this supplier to my colleagues or industry peers?How likely am I to continue working with this supplier in the future based on my past experiences?All departmentsDelightAnalytics,reporting,personalization,CRM15/26WHITEPAPERSTAIRWAY TO DIGITAL EXCELLENCE15/26WHITEPAPERQuestionHow does digital maturity influence customer value along the B2B buying journey?Digital maturity plays an important role in shaping customer value and driving B2B business success.As organizations progress along the digital maturity continuum,ranging from basic information portals to autonomous,AI-driven interactions,their ability to deliver seamless experiences and add value to customers undergoes significant transformation.By understanding these digital maturity levels and their associated benefits,businesses can strategically leverage digital technologies to enhance efficiency and customer loyalty along the B2B buying journey.Read moreSTAIRWAY TO DIGITAL EXCELLENCEQUICK ANSWERSWhat are common B2B digital transformation pitfalls?How can you map the B2B buying journey?How does digital maturity influence customer value along the B2B buying journey?Which strategies drive success in B2B digital transformation?16/26WHITEPAPERQuestion:How does digital maturity influence customer value along the B2B buying journey?Digital maturity advancing sophistication in digital commerce We all agree that it is essential to pay equal atten-tion to all aspects and stages of the B2B buying journey.However,the effectiveness of operational processes and the level of digitalization can limit an B2B organizations ability to deliver superior online experiences throughout the entire buying journey.In B2B e-commerce,digital maturity refers to the extent to which a company has adopted and integrated digital technologies into its business processes,operations,and customer interactions.These“levels of digital commerce sophistication”range from basic informational portals to advanced autonomous portals and encompass an organiza-tions ability to leverage digital tools and strategies effectively to meet customer needs,drive opera-tional efficiency,and stay competitive.As companies progress along the digital maturity continuum,they become better equipped to deliver seamless online experiences,personalize interactions,and optimize various aspects of their B2B operations.This evolution not only leads to increased customer satisfaction but also drives enhanced operational efficiency,higher sales,greater customer loyalty,and ultimately,a higher customer lifetime value.Lets explore each digital maturity level in detail to understand its implica-tions for B2B companies and their customers.How does digital maturity influence customer value along the B2B buying journey?STAIRWAY TO DIGITAL EXCELLENCE17/26WHITEPAPERQuestion:How does digital maturity influence customer value along the B2B buying journey?INFORMATIONPORTALTRANSACTIONPORTALSELF-SERVICEPORTALPERSONALIZED,VISUALPORTALSMARTPORTALAUTONOMOUSPORTALReactivePublish companyinformation&products onlineBrand awarenessB2B shop for efficient ordering and improved customer experienceIncreased sales New marketsActiveIntelligent integration of customers&partners for massive self-service and efficient orderingEfficiencyReduced costsCustomer empowermentProactivePersonalized search based on installed base,historical and real-time data3D product visualization for improved product experienceCustomer experienceHigher conversionPredictiveloT and smart device integrationOptimizing the buying and service experienceDigital twin connecting physical and digital worldOptimized supply chainPredictionsIntegratedRecommendations for administrators of customers/partners based on pattern recognition and AlImmersive customerexperience with AR/VR/mixed realityInnovationData-driven decision-makingPrescriptiveSales/transaction costsOnline buyer convenienceCustomer lifetime value/profitsDigital maturity levels in B2B e-commerce18/26WHITEPAPER Information portal When B2B organizations embark on their digitali-zation journey,the first step often involves imple-menting an information portal.At this initial stage of digital maturity,businesses aim to provide compre-hensive insights into their product and service offerings,laying the foundation for future digital advancements.While customers cannot directly place orders online,they gain valuable knowledge about the companys offerings,contributing to brand awareness and customer loyalty.Recent research from Copperberg indicates that even organizations with no online revenue can benefit from digital transformation initiatives by focusing on providing information,customer services support,and enhancing the overall customer experience.For B2B companies just starting their digital journey,developing an informa-tion portal with 24/7 access to product information across various devices represents a crucial first step towards digital maturity,driving customer satisfac-tion and efficiency.As they continue to evolve digitally,it is essential for B2B organizations at this level to invest in a robust B2B e-commerce platform that supports scalability and future digitalization efforts.Transaction portal In the transition to a transaction portal,B2B organi-zations elevate their digital presence by integrating an online shop into their platform.This portal not only offers comprehensive product and service information but also enables customers to make purchases directly.Some companies may find it particularly beneficial for distributing consum-ables,spare parts,and services efficiently,thereby enhancing after-sales business and fostering customer loyalty.Others may choose to sell complex products such as heavy machinery and highly customized industrial equipment online as well,depending on their ambitions,business model and customer preferences.Many B2B companies are at this stage exploring opportunities to innovate,scale,and expand their business internationally.Integrating features like 360 product displays,personalized product recommendations and interactive product config-urators can further enhance the buying experi-ence and boost conversion rates for customers.Moreover,by streamlining the ordering process and improving the overall customer experience,businesses can achieve reduced process costs,contributing to greater operational efficiency.Self-service portal The trend towards digital self-services and their implementation in a digital customer portal continues to pick up speed in the B2B industry.A self-service portal empowers customers with tailored,individualized self-service options,granting them 24/7 access to product and service infor-mation,personalized e-learning modules,and the ability to independently manage their data,service contracts,workflows,and budget allocations.By seamlessly integrating customers and partners into the digital ecosystem,B2B companies optimize the B2B buying journey,drive after-sales revenue growth,and enhance overall customer satisfaction.Copperberg research highlights self-service features as a best practice for enhancing the buying journey and boosting online revenue.Organizations that prioritize self-service and customer-centricity witness higher levels of online engagement and revenue generation.19/26WHITEPAPERQuestion:How does digital maturity influence customer value along the B2B buying journey?Personalized,visual portal B2B organizations reach a new level of digital maturity with personalized,visual portals,where products,information,and services are tailored to individual customer needs.Through intelligent algorithms and data analysis,customers receive personalized search results,individually negoti-ated prices,and insights into their installed base,including compatible replacement parts and consumable materials.The incorporation of 3D product visualization enhances the customer expe-rience,providing an immersive and interactive plat-form for exploring products and making informed purchasing decisions.This advanced level of customization and visualization not only improves customer satisfaction but also drives higher conver-sion rates,ultimately leading to increased sales and revenue for B2B organizations.Smart portalWith a smart portal,B2B organizations harness the power of IoT(Internet of Things)and smart device integration to offer intelligent services tailored for Industry 4.0.By seamlessly linking a digital customer portal to IoT devices and smart technology,businesses provide customers with exceptional services and advanced capabilities such as virtual reality-enabled support,tool monitoring,consumption optimization,and predictive mainte-nance all aimed at reducing risk,enhancing opera-tional efficiency and minimizing downtime.Leveraging digital twins virtual representations of real products or systems coupled with sensors,data,and algorithms,B2B companies can monitor and optimize machine performance,consumption,and wear in real-time.The result is increased customer loyalty and efficiency,cost reduction,and minimized machine downtime,positioning businesses at the forefront of digital innovation and customer satisfaction in the Industry 4.0 era.Autonomous portal The autonomous portal represents the intelligent future of e-commerce,seamlessly integrating buyers,retailers,suppliers,partners,and IoT devices in a self-governing system.In this final stage of digital commerce sophistication,B2B orga-nizations leverage AI-supported personalization functions,comprehensive self-service options in digital customer portals,IoT integration,intelligent machines,and OS-independent mobile technolo-gies to revolutionize the sector and streamline the B2B buying journey.This level of automation and intelligence brings unparalleled benefits,including high innovation and seamless knowledge transfer.Autonomous portals enhance the customer experience by enabling companies to create seamless and personalized buying experiences through machine learning-driven analysis of customer data,leading to tailored product recommendations and promo-tions.Additionally,they empower B2B companies to gain competitive advantages by efficiently providing services,automating repetitive tasks like inventory management and order processing,resulting in increased efficiency,cost savings,and ultimately facilitating scalability and business growth.20/26WHITEPAPERQuestion:How does digital maturity influence customer value along the B2B buying journey?1 The higher the digital maturity level of B2B organizations,the more effortlessly they can provide a seamless B2B buying journey,leading to increased customer satisfaction,enhanced operational efficiency,higher sales,greater customer loyalty,and ultimately,a higher customer lifetime value.2 The vision of autonomous commerce serves as a guiding light for ambitious digital trans-formation initiatives and inspires businesses to strive for greater levels of automation,intelligence,and customer-centricity.3 B2B organizations require a powerful,scal-able e-commerce platform that supports every step of their digital transformation journey and enables them to deliver excep-tional experiences throughout the entire B2B buying journey.4 Intershop is the ideal partner for digital transformation initiatives in B2B e-commerce.With its award-winning,highly scalable e-commerce solutions featuring an AI-core,Intershop provides a solid foundation for building a future-proof,customer-centric,data-driven commerce platform.Already,B2B autonomous commerce tools such as Intershop Copilot,a virtual assistant for e-commerce managers,and SPARQUE.AI,a market-leading,AI-driven website search and recommendations engine,are available out of the box.Digital maturity lessons learned:21/26WHITEPAPERSUCCESS STRATEGIES21/26WHITEPAPERQuestionWhich strategies drive success in B2B digital transformation?The key strategies that drive success in B2B digital trans-formation include approaching customers“outside-in,”breaking down internal silos,digitalizing step by step to build the entire customer lifecycle,making the customer experi-ence more relevant,prioritizing digital buying convenience,leveraging the power of AI,and continuously innovating the B2B buying journey.By implementing these strategies,you can enhance customer satisfaction,drive revenue growth,improve operational efficiency,and maintain a competitive edge in the highly competitive e-commerce landscape.Read moreSUCCESS STRATEGIESQUICK ANSWERSWhat are common B2B digital transformation pitfalls?How can you map the B2B buying journey?How does digital maturity influence customer value along the B2B buying journey?Which strategies drive success in B2B digital transformation?22/26WHITEPAPERQuestion:Which strategies drive success in B2B digital transformation?As we have seen in the preceding chapters,digitalization presents both opportunities and challenges for B2B organizations.Building upon these foundational insights,we now turn our attention to key strategies that will empower your organization on its digitalization journey.These strategies are designed to not only propel your organization towards greater digital matu-rity but also to enable you to provide excep-tional experiences for your customers across the entire B2B buying journey.Lets explore these strategies in detail and uncover action-able insights that will drive success in your B2B digital transformation initiatives.1 Approach your customers“outside-in”.Approaching your customers from an“outside-in”perspective is more than just a strategy;its a fun-damental shift in mindset that can drive true digital transformation within your organization.This ap-proach involves recognizing that the customer experience extends far beyond individual touch-points it encompasses the entire journey and interaction with your brand.By prioritizing your customer as the strategic starting point,you can unlock the potential for delivering exceptional expe-riences and strengthening your competitive position.Look beyond internal processes and structures to gain insights into what customers truly value,how they navigate their journey,and the pain points they encounter along the way.By gaining this outside Which strategies drive success in B2B digital transformation?SUCCESS STRATEGIES23/26WHITEPAPERQuestion:Which strategies drive success in B2B digital transformation?perspective,you can identify opportunities(sweet spots)to innovate and improve,ensuring that every interaction adds value and meets your customers needs.Furthermore,embracing a data-driven culture can enhance your understanding of your customers.By analyzing customer data,you can uncover valuable insights into behavior,preferences,and needs.This information serves as the foundation for developing targeted marketing campaigns,improving customer service,and creating products and services that align precisely with your customers expectations.2 Break down the silos in your organization.Successful B2B organizations recognize the impor-tance of breaking down internal silos to deliver a cohesive and seamless customer experience.Find-ings from a recent Copperberg survey highlight the critical role of internal collaboration in optimizing digital B2B buying processes.Unfortunately,many organizations face significant challenges in this regard,with 57%of respondents indicating infre-quent or non-existent cross-departmental collabo-ration.This lack of collaboration not only hampers efforts to enhance convenience for customers but also results in fragmented data management,leading to incomplete insights into the buying journey.Addressing this issue requires a concerted effort to break down silos,foster collaboration across departments,and integrate experiences cohesively.By promoting a culture of internal alignment and cooperation,you can overcome barriers to digital transformation and deliver exceptional experiences that drive customer satisfaction and loyalty.3 Digitalize step by step&build the whole customer lifecycle.Its essential to recognize that B2B organizations at every maturity level can add value for their customers.Although higher digital maturity levels offer greater potential for value addition,each buying journey stage presents opportunities to enhance the customer experience.Rather than attempting to overhaul all processes at once,you should prioritize incremental digitalization efforts that align with customer needs.By breaking down the digitalization process into manageable steps,you can effectively address specific pain points and deliver value to your customers at each stage of interaction with your brand.This strategy allows for greater agility and flexibility,enabling you to adapt to changing market conditions and customer preferences.Adopting a Minimum Viable Product(MVP)approach can be beneficial,allowing you to iteratively introduce new digital capabilities while gathering feedback and refining their offer-ings.To what extent does your organization collaborate across departments to optimize online B2B buying processes?NEVER6%RARELY15%SOMETIMES36%FREQUENTLY32%ALWAYS11$/26WHITEPAPERQuestion:Which strategies drive success in B2B digital transformation?4 Make the customer experi-ence more relevant.By segmenting or targeting your customers,you can tailor communication to each group,providing product and service offers and specific information that cater to their unique needs and preferences.Additionally,incorporating self-service functions and features,such as design tools,configurators,training modules,and document management,can further enhance relevance by addressing specific customer needs.However,relevance goes beyond segmentation and targeting.It extends to personalization,where orga-nizations leverage customer and behavioral data to deliver highly customized offers and services that resonate with individual customers.Despite the potential of personalization,Copperberg research found that only 7.5%of organizations effectively leverage customer data for this purpose.This high-lights an area where organizations can significantly improve their ability to tailor experiences and enhance customer satisfaction.Implementing customer portal solutions with self-service capabilities for various personas with the customer organization and tailored services for your customers installed base can be a strategic move towards delivering a more relevant and personalized customer experience.5 Make digital buying conve-nience a top priority.Prioritizing convenience in the digital buying process is essential for B2B organizations seeking to enhance customer satisfaction,drive revenue growth,and improve operational efficiency.By making it easy for customers to interact with your business online,you can reduce friction and create a seamless buying experience across every touch-point in the B2B buying journey.McKinseys research on“experience-led growth”emphasizes the importance of exceptional customer experiences in driving business growth and customer engagement.Adopting a customer-centric approach involves prioritizing convenience in operations and marketing strate-gies,leading to stronger brand loyalty,increased revenue,and a competitive edge in the market.These findings are also confirmed by Copperberg:The ease or difficulty with which a digital buyer interacts with a business has a significant impact on customer satisfaction,revenue growth,oper-ational efficiency,and overall competitiveness.Positive experiences at every stage of the buying journey,from product discovery to repeat orders and services utilization,contribute to enhanced customer satisfaction and loyalty,ultimately boosting the share of wallet and maximizing customer lifetime value.In short:By identifying areas for improvement and understanding sweet spots and friction points in each stage of the buying journey,you can reduce frustration,increase efficiency,and drive business growth.6 Leverage the power of AI.Leveraging the power of artificial intelligence(AI)is crucial for driving seamless B2B buying journeys and increasing digital buying convenience.AI technologies enable businesses to analyze vast amounts of data,identify patterns,and make predictions to personalize the customer experience and streamline operations.25/26WHITEPAPERQuestion:Which strategies drive success in B2B digital transformation?AI can enhance the B2B buying journey in several ways:Personalization:AI algorithms can analyze customer data to understand preferences and behaviors,allowing businesses to deliver person-alized product recommendations,pricing,and content tailored to individual customers.Predictive analytics:By leveraging machine learning algorithms,AI can predict customer behavior and anticipate their needs,enabling proactive engagement and timely interventions.Chatbots and virtual assistants:AI-powered chatbots and virtual assistants can provide immediate support and assistance to customers,answering questions,resolving issues,and guiding them through the purchasing process.Process automation:AI can automate repet-itive tasks such as order processing,inventory management,and customer support,freeing up human resources to focus on higher-value activities.Data insights:AI-driven analytics can uncover valuable insights from customer data,helping businesses identify trends,optimize marketing strategies,and make data-driven decisions to improve the customer experience.7 Continuously innovate the B2B buying journey.Innovation is your key to success.Implementing a scalable e-commerce platform enables you to seamlessly integrate new features,AI capabilities and best-of-breed solutions,allowing you to contin-uously innovate the B2B buying journey and adapt to changing market requirements and evolving customer preferences.With such a platform,youre not just investing in a tool youre investing in the future of your business.Whether its leveraging AI for personalized product recommendations,implementing chatbots for real-time customer support,or integrating advanced analytics for deeper insights and predictive mainte-nance offerings,a scalable platform with a compos-able,headless architecture provides the flexibility and agility you need to experiment and innovate with confidence.By embracing innovation and continuously evolving your digital strategy,you can create exceptional experiences throughout the entire B2B buying journey,increase your digital maturity,and drive sustainable growth.Naturally,you want to gauge the effectiveness of your efforts in optimizing the buying journey.This not only informs you about what resonates with your target audience but also highlights areas that may need adjustment.Measurement options include well-known metrics like Customer Satisfac-tion Score(CSAT),Customer Effort Score(CES),and Net Promoter Score(NPS)for assessing customer loyalty.By regularly measuring and analyzing these metrics,you can ensure that your digital initiatives are aligned with your business goals and customer expectations.26/26WHITEPAPERAbout IntershopIntershop is the engine that drives digital commerce.Our powerful B2B e-commerce platform enables the worlds leading manufacturers and wholesalers to transform their business and increase revenue in a digital-first world.Our cloud-based solutions give you an essential foundation for digital success,plus the flexibility to deliver unique experiences and quickly react to changing needs.With a global presence and extensive partner network,we support your success every step of the waycreating opportunities to scale,innovate,and gain a competitive edge.Intershop is built to boost your busi-ness.Discover what we can do at .ABOUT INTERSHOPAlways DIRECTLY WITH ONE OF OUR EXPERTS
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G2 SOFTWARE BUYER BEHAVIOR REPORT 202312023 G2 Software Buyer Behavior Report The Value-Driven BuyerEconomic challenges drive businesses to invest in technologyand expect fast resultsG2 SOFTWARE BUYER BEHAVIOR REPORT 20232With every year that passes,its easy to feel stunned by the disruption in every corner of the corporate world and dwell on how easy the years prior seem.Its been over 3 years since the economic effects of the pandemic set in,weighing on business in every sector and geography.And this year,governments around the world have taken major steps to curb inflation while businesses deal with the ramifications of the economic upheaval.But software continues to eat the worldunphased.In fact,G2s latest research shows that despite the upheaval,most businesses are increasing their software spend.To help software vendors navigate this turbulence and find growth on the other side,G2 surveyed over 1,700 global software buyers to understand their plans,behaviors,and attitudes.Our research uncovered that vendors vying for a piece of that increased spend still face significant roadblocks.Notably,businesses facing pressures to show results are urging vendors to not just tell them how their offerings can drive value but show themwithin 6 months.Our research uncovered 5 insights defining todays(and tomorrows)software buyer and delivers recommendations for you to move the insights into action.Security remains an important theme,but 2023 will undoubtedly be remembered as the year AI stormed onto the scene with the spotlight on large language models and generative AI.Simply put,organizations are looking at how AI can save costs and support business growthand theyre willing to pay for it,as indicated by larger deal sizes.The G2 team is thrilled to share our analysis to help you win,serve,and retain customers in 2023 and beyond.We hope that as you read,you identify tactics that can inform your own go-to-market strategies and support future growth.Chris VoceVice President of Market Research at G2Cautiously optimistic buyers expect more value from their software purchases.Economic challenges are putting software buyers in a difficult position:continue investing in tech with lower budgets and less room for error.3G2 SOFTWARE BUYER BEHAVIOR REPORT 2023Table of ContentsForeword 2Buyers forecast spending increases in the face of economic uncertainty 4Sellers face challenges as buyer expectations and scrutiny grow 65 factors shaping the buyer over the next 12 months 91.Buyers see AI as foundational to their business strategy 102.AI will drive legal teams to be increasingly involved in software purchases 123.Buyers stick to processes but still succumb to timing pressure 134.Value,scalability,and ease are top considerations for software buyers,but priorities shift based on company size 145.Solutions that work together without added complexity are key 15Recommendations 16G2 SOFTWARE BUYER BEHAVIOR REPORT 20234Buyers forecast spending increases in the face of economic uncertainty Businesses are increasing their software spend in the face of broader macroeconomic concerns as they lean into the competitive advantage of a digital strategy.Despite fears of a tech spending pullback,G2s 2023 Buyer Behavior study shows buyers are willing to invest in software 49%Spending will increase42%Spending will remain the same9%Spending will decreaseBUYER SPEND OUTLOOK FOR 202349%of buyers say spending will increase this year(2023).Only 9%say it will decrease:77%(overall)say economic uncertainty was a factor in the change 76%of those who say spending will increase say economic uncertainty was a factor in the change(compared to 80%of those who say spending will decrease)G2 SOFTWARE BUYER BEHAVIOR REPORT 2023555%Spending will increaseExecutive leadersPercentage of respondents who predict spending will increase39%Spending will remain the sameSenior-level employees6%Spending will decreaseEntry-mid levelIn 2024,55%say spending will increase,and only 6%say it will decrease:76%say economic uncertainty is a factor in the change 75%of those who say spending will increase say economic uncertainty is a factor in the change(compared to 78%of those who say spending will decrease)BUYER SPEND OUTLOOK FOR 2024BUYER SPEND OUTLOOK FOR 2024 BY ROLEThere was little change in buyers spending outlook from last year to this despite the economic environment.The outlook for software spend in 2024 is even brighter.Even pessimistic buyers are optimistic about next year.Of those who say spending will decrease this year,39%say it will increase in 2024,compared to 25%saying it will decrease(37%say it will stay the same as this year).Executive leaders(VPs,SVPs,C-suite)are the most optimistic about spending in 2023 and 2024,outpacing senior-level employees(managers,directors,high-level individual contributors)and entry and mid-level employees.6058%2%7%78CUQP403020100Spending will increaseSpending will remain the sameSpending will decrease40%6G2 SOFTWARE BUYER BEHAVIOR REPORT 2023Butsellers face challenges as buyer expectations and scrutiny grow.Seek quick returns on their investments.Vendors are on the hook to show quick value.Of respondents who anticipate software spending to increase in 2024,the necessity to realize an ROI within 6 months is the most important consideration during the purchase process.The urgency to quickly demonstrate ROI is even greater in APAC as shorter contract lengths increase the pressure to show value within 6 months of purchase.Though businesses will spend more than ever,sellers will face headwinds as buyers:1 year1 year1 year6 months or less6 months or less6 months or lessAPACEMEANORTH AMERICAAVERAGE CONTRACT LENGTH BY REGION2 years2 years2 years474$#%9V%7G2 SOFTWARE BUYER BEHAVIOR REPORT 2023 Struggle to balance speed and security.The disconnect between buyers recognition of the importance of addressing security and privacy concerns and their behavior continues to be an issue.Overwhelmingly,88%of respondents cite“needed to move quickly to deliver results from software so didnt have time”as the main reason for leaving IT and InfoSec teams out of the software purchasing decision.Additionally,even with 86%requiring a security assessment prior to software purchase,more than half(54%of respondents)admit to buying software that has not been approved or vetted for security by their organizations IT or InfoSec team.All of this can lead to purchase delays and needless customer churn.86%of buyers require a security assessment prior to purchase,but only 24%involve a security stakeholder during the research phase of the buying process.14%leave it until implementation.8G2 SOFTWARE BUYER BEHAVIOR REPORT 2023 Favor the incumbent.Buyers prefer to work with sellers whose products they already use.83%of buyers prefer buying products from the same vendor instead of switching vendors.This is because using multiple vendors to build a tech stack offers buyers a chance to explore best-of-breed solutions but adds complexity.It requires managing more contracts and potentially complicates integrationand 82%of buyers say its important for the software they buy to integrate with tools they already have.HAVE YOU EVER PURCHASED SOFTWARE AT WORK THAT HAS NOT BEEN APPROVED OR VETTED BY YOUR IT OR INFOSEC TEAM?WHAT PROMPTED YOU TO PURCHASE SOFTWARE THAT WAS NOT APPROVED OR VETTED BY YOUR IT/INFOSEC TEAM?54%Yes88%Needed to move quickly to deliver results12%We dont have a clear process for this2%I dont know44%NoG2 SOFTWARE BUYER BEHAVIOR REPORT 202395 factorsshaping the buyer over the next 12 months.G2 SOFTWARE BUYER BEHAVIOR REPORT 202310Hype around generative AI has spurred a genuine frenzy of businesses looking to secure a competitive advantage.In fact,81%of respondents say that it is important or very important that the software they purchase moving forward has AI functionalityand less than 5%say AI functionality is not important at all.Buyers trust AI-powered solutions78%trust or trust strongly the accuracy and reliability of AI-powered solutions.This built-in level of trust is a competitive advantage for any AI-powered product.78%trust the accuracy and reliability of AI-powered solutions.81%of buyers say its important that the software they purchase has AI.AI buyers are.More willing to spend.Companies are willing to spend on AI despite economic uncertainty,and often because of it.59%of AI buyers anticipate spending in 2024 will increase10 percentage points higher than overall.Involved in bigger deals.84%are typically involved in deals larger than$50,000 compared to 75%for non-AI buyers.72%are typically involved in deals larger than$100,000 compared to 60%for non-AI buyers.Often eschewing IT.55%have purchased shadow IT.Circumventing established IT and InfoSec vetting processes,particularly with complicated AI-powered solutions that handle sensitive data,may present significant future business risks.Buyers see AI as foundational to their business strategy.G2 SOFTWARE BUYER BEHAVIOR REPORT 20231184%trust or trust strongly the reliability and accuracy of AI-powered solutions(6 points higher than overall),and 88%say its important or very important that the software they purchase moving forward has AI functionality(7 points higher than overall).AI buyers are leaning into its importance for their businesses and trusting the technology to drive results.Trust in AI remains high overall,but APAC buyers,in particular,are hungry for AI-powered solutions and willing to trust them to deliver a competitive edge in a rapidly growing market.APAC buyers trust AI solutions reliability and accuracy more than their EMEA and North American counterparts.47%of APAC respondents trust strongly in AI reliability and accuracy16 percentage points higher than North American respondents and 10 points higher than those in EMEA.PERCENTAGES OF RESPONDENTS WHO TRUST STRONGLY IN AI:Unsurprisingly,AI buyers trust AI and view it as an important part of their technology strategy going forward.APAC47%EMEA37%NA31G2 SOFTWARE BUYER BEHAVIOR REPORT 202384%of overall respondents indicate their IT department is responsible for conducting security or privacy assessments when evaluating software.But 40%indicate their legal department is involved as well,and this shoots up to 55%in EMEA countries due to its more stringent digital regulations.Over the coming year,G2 believes legals role will become increasingly prevalent around the globe.This is because generative AI solutions increase the necessity for legal involvement.Buyers and vendors have to scrutinize how their own companys data will be treated and the risks associated with generative AI output.AI will drive legal teams to be increasingly involved in software purchases.APAC38%NA36%EMEA55%PERCENTAGE OF ENTERPRISE RESPONDENTS WHO SAY THAT LEGAL IS RESPONSIBLE FOR CONDUCTING SECURITY AND PRIVACY ASSESSMENTSThe department responsible for the buying decision.Legal departmentIT departmentInfosec departmentPERCENTAGE OF RESPONDENTS WHO IDENTIFY A DEPARTMENT AS RESPONSIBLE FOR CONDUCTING SECURITY OR PRIVACY ASSESSMENTSIT Departments run security assessments,but Legals responsibility is increasing.20%001(G2 SOFTWARE BUYER BEHAVIOR REPORT 2023A majority of companies have a set process in place for buying software.83%of respondents say they have an official buying process,though only 67%of small businesses say they have an official process.Research is the most time-consuming aspect of the buying journey,according to 36%of respondents,with evaluation coming in second at 29%.But,business pressure still drives changes in behavior.Of those who purchased shadow IT,medium-sized companies(87%)and enterprises(93%)did so because they needed to move quickly,compared to 76%of small businesses.Processes in large companies tend to be more complicated and slower,while their departments or business units demand faster results.Buyers stick to processes but still succumb to timing pressure.RESPONDENTS SAY RESEARCH IS THE MOST TIME CONSUMING PART OF THE BUYING JOURNEYResearch0 )60 %EvaluationDecisionImplementationRespondents who say they spend the most time on a stage.G2 SOFTWARE BUYER BEHAVIOR REPORT 202314Out of a list of 14 considerations for purchasing software,the top 5 were consistent regardless of company size.Small business buyers prioritize ease of use and ease of implementation.Medium-sized and enterprise companies need solutions that will be able to keep up with their growth,with both ranking scalability as the third most important criteria.Buyers prioritize value over cost;regardless of size,buyers are more concerned about showing value than focusing on software costs or total cost of ownership(TCO).Small businessesMedium-sized companiesEnterprises1How easy the tool is to implementReceive ROI within 6 monthsHow easy the tool is to implement2How easy the tool is to useHow easy the tool is to implementReceive ROI within 6 months3Receive ROI within 6 monthsAbility to scale as my my team/company growsAbility to scale as my team/company grows4Receive ROI within 1 yearHow easy the tool is to useReceive ROI within 1 year5Ability to scale as my team/company growsReceive ROI within 1 yearHow easy the tool is to use6At least weekly usage by all usersAt least weekly usage by all usersAt least weekly usage by all users7Quality of customer supportQuality of customer supportQuality of customer support8Number of featuresThat the tool easily integrates with other software we already useThat the tool easily integrates with other software we already use9That the tool easily integrates with other software we already useNumber of featuresNumber of features10How much the software costsHow much the software costsWhat kind of security does the software provideValue,scalability,and ease are top considerations for software buyers,but priorities shift based on company size.44THE TOP 10 CONSIDERATIONS FOR PURCHASING SOFTWARE,BY COMPANY SIZE15G2 SOFTWARE BUYER BEHAVIOR REPORT 202382%of respondents mention it is important to them that the software they buy integrates with their existing solutions.Buyers rank ease of integration higher than the cost of the software,the kind of security it provides,or its TCO.Buyers prefer to work with fewer vendors(78%)and use a single solution instead of multiple tools(84%).When multiple solutions are required,77%of buyers prefer to buy complementary products from the vendors they already work with.When it comes to contract renewals,83%of respondents(36%strongly agree,47%agree)prefer buying products from the same vendor instead of switching vendors.As for the products,60%always conduct research and consider new alternatives,but 45%renew without considering new options.5Solutions that work together without added complexity are key.I WOULD PREFER TO PURCHASE ONE TOOL TO SOLVE MULTIPLE BUSINESS PROBLEMS THAN MULTIPLE TOOLS.84%AGREE82%AGREE83%AGREE78%AGREEIT IS IMPORTANT TO ME THAT THE SOFTWARE I BUY INTEGRATES WITH TOOLS I ALREADY HAVE.I LIKE TO BUY COMPLEMENTARY PRODUCTS FROM A SINGLE VENDOR I ALREADY WORK WITH.I PREFER TO RENEW A PRODUCT THAN SWITCH TO A NEW VENDOR.16G2 SOFTWARE BUYER BEHAVIOR REPORT 2023Lead with a richer view of valueSimple ROI calculations fail to capture the full impact of a solutions potential on a customers environment.Vendors are more frequently employing business value advisory consultants to learn about and advise on how solutions create business value over time.More complete assessments include bottomline cost savings or risk mitigation,topline business growth examples,and strategic growth opportunities.For instance,digital workspace solutions that enable remote work can lower the bottomline.They enable device cost savings using thin clients and reduce breaches.But they also potentially allow contact center workers to help more customers.Buyer interest in AI opens up opportunities to communicate both bottomline and topline value.Use buyers preferred channels to earn their trust Buyers are decreasing their reliance on salespeople and gravitating to other trusted sources of information and self-service.The top 85%of most influential sources include industry experts,colleagues or professional networks,online reviews,and other internal influencers.A Software company salesperson is the least influential source in purchasing processes at 1%,decreasing from 3%year over year(YoY).The importance of vendor-published content has reduced from 10%to 7%YoY.Vendors must build product awareness across communities,experts,and review platforms.Buyers still trust software company websites and rely on them most when making major purchasing decisions for their company,but they are slowly reducing in importance YoY,going from 38%in 2021 to 33%in 2022,and 32%in 2023.66%of respondents say salespeople at a software company are not generally involved in the research phase of the purchasing processup from 63%who said this in 2022 and 60%in 2021.To win,serve,and retain customers in the upcoming year,G2 believes vendors should:84%YesNo16%PERCENTAGE OF BUYERS WHO USE ONLINE REVIEW SITESRecommendations17G2 SOFTWARE BUYER BEHAVIOR REPORT 2023Offer self-service options across multiple channels throughout the process Buyers are looking for self-service options at every stage of the buying process.Enterprise buyers,in particular,want the majority of the software purchase process to be self service.Regionally,APAC buyers prefer self service the most:PERCENTAGE OF RESPONDENTS THAT ARE LOOKING FOR SELF-SERVICE OPTIONS AT EVERY STAGE OF THE BUYING PROCESSPERCENTAGE OF RESPONDENTS WHO WANT ALL OR MOST OF THE FOLLOWING PARTS OF THE BUYING PROCESS TO BE SELF SERVICEImplementation is not as cut and dry as the other stages,particularly for more complicated pieces of software,doubly so for complex solutions that need to integrate with an entire tech stack of different tools.Buyers may want the majority of the implementation process to be self service(the importance buyers attribute to ease of implementation,ranked first among buyer considerations across all respondents,highlights this),but just 41%of enterprise buyers want all of the process to be self service.ResearchEvaluationDecisionImplementation60504030201003445B2F6A6G%ResearchEvaluationDecisionImplementation10080 xtx80706050403020100NASmall businessEMEAMedium-sized companiesAPACEnterprises18G2 SOFTWARE BUYER BEHAVIOR REPORT 2023Buyers are flooded with contacts from salespeople every day and may take steps to avoid even more.For example,61%of respondents indicate they are less likely to purchase software if the vendor requires personal information(email address,name,etc.)prior to releasing pricing data or product demos.This indicates buyers want time to conduct research before entering into discussions with sales.ARE YOU LESS LIKELY TO PURCHASE A SOFTWARE PRODUCT IF A VENDOR REQUIRES YOU TO PROVIDE INFORMATION(EMAIL ADDRESS,NAME,ETC)PRIOR TO RELEASING PRICING INFORMATION OR PRODUCT DEMOS?Offer multiyear deals for buyers seeking consistency in their tech stacksIntroduce offerings to help buyers but they may not want to talk just yet.Multiyear deals are rare(across all respondents,only 12%say their typical contract length is 2 years or more),but there are levers to pull to entice buyers to sign longer-term contracts.THE MOST POPULAR REASONS WHY SOMEONE WOULD SIGN A MULTIYEAR CONTRACT:Only 3%say nothing would sway them,they prefer yearly or monthly deals.Enterprises tend to sign more multiyear deals,at 14%compared to 10%for medium-sized companies and 10%for small businesses.The primary driver for larger companies to sign multiyear contracts is discounts,but 16%of enterprise buyers look to multiyear deals for leverage to request product enhancements and integrations.Enterprise buyers also consistently research alternatives more than their mid-market and small business counterparts(63%always research alternatives when a product is up for renewal).To limit the risk of customers researching alternatives,sellers should look to secure multiyear deals by leaning into customer feedback on product development,desired features,and integrations.Discounts are a common lever for securing multiyear deals.Sellers who are responsive to customer feedback and open to product roadmap suggestions have an additional tool that may help them secure consistent business.54a%I dont knownoYesDiscountsConsistent tech stackTime and resource saving30$%G2 SOFTWARE BUYER BEHAVIOR REPORT 202319Small businesses are less likely to have security or privacy vetting process requirements than larger companies,but most still do.77%of small businesses require a security and privacy assessment when purchasing software,compared to 86%of medium-sized businesses and 89%of enterprises.To accommodate buyers from these verticals and company sizes,vendors must:1.Lead with product security credentials 2.Conduct buyer interviews to dive into their security and privacy vetting process3.Design information or implementation according to buyer needs and resourcesWhen it comes to selecting IT services,cost(50%consider it to have a high influence)and customer satisfaction(51%consider it to have a high influence)ratings are the most important factors that influence selection.49%consider alignment with industry compliance standards(ISO,ASTM,ANSI,etc.)to be very important in a service provider.Meeting project requirements and staying within budget are the most important qualities in a service provider,according to respondents.COST AND CUSTOMER SATISFACTION RATINGS ARE THE MOST IMPORTANT FACTORS WHILE SELECTING SERVICES PROVIDERSThe process of software implementation is arguably as important as the product itself.In fact,93%of respondents say that the quality of the implementation process has a significant influence on the decision to renew a software product.Respondents prefer vendors implementation teams over third-party and in-house implementation teams.63%of respondents have used the vendors implementation team,while 53%have worked with third-party implementers.In comparison,only 37%have used in-house teams to implement software.For those who worked with a third-party implementation provider,33%chose a provider based on the software vendors recommendation,the highest of any options,followed by peer suggestion(25%)and third-party reviews(24%).Help buyers navigate complex security requirements Bridge the software implementation gap0 QPIF9%Customer satisfaction ratingsCostAlignment with industry standardizationsDomain expertise/certificationsGeo presence(languages,global ofce locations)The number of projects completedG2 SOFTWARE BUYER BEHAVIOR REPORT 202320Authors Gabriel Gheorghiu Rachana HasyagarPatrick SzakielChris VoceSarah Wallace DesignersJason OrtizMike PuglielliContributorsSinchana MistryJigmee BhutiaShanti NairNicole ZhangJenny GardynskiSara RossioLaura HortonPalmer HouchinsChris PerrineSarah ReksMethodology G2 fielded an online survey among 1,704 B2B decision makers with responsibility for,or influence over,purchase decisions for departments,multiple departments,operating units,or entire businesses.Respondents had job titles ranging from individual contributor to manager,director,VP,or higher.G2 defines small business as a company with 1-100 employees,mid-market as a company with 101-1,000 employees,and enterprise as a company with 1,001 employees.The survey was fielded in March 2023 and includes a global pool of respondents across North America,EMEA,and APAC.About G2G2 is the worlds largest and most trusted software marketplace.More than 80 million people annually including employees at all Fortune 500 companies use G2 to make smarter software decisions based on authentic peer reviews.Thousands of software and services companies of all sizes partner with G2 to build their reputation,manage their software spend,and grow their business including Salesforce,HubSpot,Zoom,and Adobe.To learn more about where you go for software,visit and follow us on 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THE GO-TO PUBLICATION FOR PET INDUSTRY PROFESSIONALS SINCE 1988OCT 2023GERMANY,AUSTRIA&SWITZERLANDRegional report&retailer interviewFOOD&INGREDIENTSMachinery,preservatives&freeze-dried treatsDEEP DIVEPRIVATE LABEL ON THE RISE?DRY&COOK&BAKE SOLUTIONS New All-in-One technology:Dehydrating,cooking and baking by forced convection Acceleration of Innovation:Allows to develop new foods and treats for pets Great Versatility:Possibility to dry&cook&bake any type of product and format Process Optimization:Continuous system,with superior performance and lower energy consumption Full Connectivity 4.0:Full control of the BAKEHEALTHIER TREATS HAPPIER PETSHIGHLIGHTS IN THIS ISSUE PETS INTERNATIONAL|OCTOBER 2023|HIGHLIGHTS IN THIS ISSUE 379Germany,Austria andSwitzerlandHow is the pet industry doing in the DACH region?We present some facts and figures and a more detailed analysis of online sales in Germany.We also sit down with the largest European pet retailer,Fressnapf,for an interview.Food and ingredientsWhy does private label perform better in Europe than in the US?We also look at the trend of freeze-dried treats and developments in pet food manufacturing equipment.Additionally,youll discover a research update on additives like copper and zinc,as well as preservatives.65Global pet industryHows the hot category of CBD for pets doing?What are the latest trends in beds and cushions?How important is social media for pet brands?Can a lower VAT rate help combat rising prices?Find all the answers.Plus,more details on the GlobalPETS Forum and supermarkets entering the pet space.Retailer interviewWhat has Europes largest pet retailer been up to?How are they performing in the DACH region and what are their future plans?An interview with Fressnapf.Page 76Private labelThe private-label pet food category is performing better in Europe than in the US.What are the reasons behind this difference?Page 13Freeze-dried treatsFreeze-dried pet food is increasingly popular.Is the same trend extending to treats?We look at the data and the latest innovations.Page 102 PETS INTERNATIONAL|SEPTEMBER 2023|SECTION NAME AVAILABLE IN THREE NEW COLOURSWWW.TRE-PONTI.ITVIOLETEMERALDTEALPL031PL032PL033COMFORT AND SAFETY FORLARGE PETSPrimo Plus is a structured harness that offersunbeatable comfort with its ergonomic back,frontpadding and adjustable girth.Available in three new colors in sizes M to XXL.PART OF PETS INTERNATIONAL|OCTOBER 2023|EDITORIAL Editorial team Philippe Vanderhoydonck(Managing Director)David Palacios Rubio(Head of Editorial)Lisa van Roon(Head of Operations)Heiny van den Ham(Senior Editor)Editors:Jessica Martindale,Lynn Radford,Mandy Wolters-Savage,Elizabeth Youens Graphic design Jack WaasIntermedium Publishers BV James Cookstraat 13 1056 RW Amsterdam(NL) 31-33-4225833 contentpets.nl Copyright 2023,Intermedium Publishers BV.All rights reserved.While we,as the publisher,aim for accuracy and completeness of the information presented,we cannot guarantee that.We cannot be held liable for using this information.And we are not responsible for the content of advertisements or sponsored Is the pressure now on?In the current inflationary environment,price is becoming an increasingly important factor for consumers.So what we all want to know is how pet owners will respond in the near future.How will purchasing behavior change?Are private label products likely to become more popular?And how does their popularity differ in Europe and the US?Theres also considerable debate on the impact of lowering VAT for pet food products to help alleviate the financial burden for consumers.While there is some pushback around CBD in various countries,it is a segment that is definitely picking up steam.So youll find a market overview that makes interesting reading.And weve partnered with Yummypets to ask consumers how they feel about using CBD and whether theyve yet tried it for theirpets.On the pet food front,freeze-dried is all the rage.Thistime,we take a good look at the data around freeze-dried treats.We also analyze how pet food machinery needs to evolve to meet changing consumer demands.And youll learn more about the preservatives used in food for pets.In this issues regional deep dive,we look at one of Europes largest markets:the DACH region.How is the pet industry doing in Germany(D),Austria(A)and Switzerland(CH)?Theres an update on Germanys online landscape.And we sat down with Europes largest pet retailer,Fressnapf.Finally,we are unveiling more details of our upcoming GlobalPETS Forum in Venice.Youll discover what the event is all about its theme,the format,some of the keynote speakers,and the nominees for the GlobalPETS Forum award.Tickets are selling fast,so I hope to see you there!Happy reading,Philippe VanderhoydonckManaging DirectorP.S.If you dont receive our newsletters yet,go to and sign up to keep a finger on the pulse of the industry.4 PETS INTERNATIONAL|OCTOBER 2023|PET INDUSTRY HIGHLIGHTS PET INDUSTRY HIGHLIGHTSStay up-to-date on whats shaping the pet industry.Subscribe to our newsletter:Latest round of investmentsPrivate equity firm L Catterton continues its venture into the pet industry with a strategic investment in Withmal,one of Japans largest veterinary services groups.This puts the veterinary group in a good financial position to accelerate its domestic expansion,while building on its service quality and relationships with pet parents.Investment firm Jebsen Group has recently acquired Hong Kong online retailer Vetopia.The group emphasizes that the deal aligns with its ambition to continue its investment“in the thriving pet care and retail industry”in Greater China.London-based fresh dog food company Butternut Box has raised 280 million($351M/327M),led by its new private equity investor General Atlantic,and existing investor L Catterton.The company plans on using the investment to expand its brand presence in Europe,including a new manufacturing facility.In the US,Kansas City-based pet insurance and animal wellness company Companion Protect closed an investment of$27 million(24.9M)in a Series A round.The company said that the investment will help on its journey to“disrupt the pet health space and bring pet healthcare to the masses”.Veterinary software company Otto closed a$43 million(39.65M)Series B funding round with existing investors Mercury Fund and Boehringer Ingelheim.Hills Pet Nutrition joined as a new investor in the start-up,which is based in Austin,Texas.Los Angeles DTC firm Jinx has raised$17.85 million(15.9M)in Series B funding.The company believes that this new capital injection underscores Jinxs capacity to thrive in challenging environmental and economic conditions.US pet supplements company Native Pet has secured$11 million(10M)in a Series B round of funding to accelerate its growth through category innovations and retail expansion.Native Pet products are sold on the companys website,as well as through Amazon,Chewy,Thrive Market,CVS and Target.German pet supplement company Mammaly has raised 14million($14.9M)in a Series A round.At present,Mammaly sells its supplements through German retailer Fressnapf,but it wants to scale up its presence in the retail channel after the capital injection.3 out of 10 UK dog owners dont know what theyre feeding their petsA recent survey commissioned by UK-based fresh dog food brand Butternut Box found that almost half of surveyed dog owners(48%)could only identify up to 3 ingredients in their pet food.And 3 in 10 did not know what they were feeding their pets.A sizeable 36%of dog parents were worried that their pet wasnt receiving proper nutrition,while almost a quarter(23%)found it hard to understand the listed ingredients.4 out of 10 respondents admitted to finding their pets diet more stressful than their own,and 41%wanted clearer labeling.44lt confused by contradicting advice on what makes a dogs diet healthy.PETS INTERNATIONAL|OCTOBER 2023|PET INDUSTRY HIGHLIGHTS 5PET INDUSTRY HIGHLIGHTSYes,Alphia has been acquired!The rumors circulating about a potential sale of US pet food manufacturer Alphia turned out to be true.Private equity firm PAI Partners has agreed to acquire Alphia from its owner J.H.Whitney.The terms of the deal have not been disclosed,but previous reports suggested that the company was looking to sell its business for$1 billion(920M).Alphia manufactures over 1 billion pounds of dry pet food and treats yearly.The Denver-based company has 6 facilities in the US.HelloFresh enters the pet food industryBerlin-headquartered meal kit company HelloFresh has launched a private label personalized pet food service in the US called The Pets Table.This marks an expansion of its home delivery portfolio into subscription-based premium pet food.For now,the service will be available in all US states,excluding Alaska and Hawaii,to target the rapidly growing premium dog food market.The new private-label pet food brand currently offers 4 plans fresh,air-dried,mixed,and half of fresh and the company looks forward to developing a premium range of treats.Canadian pet retailers to expand distribution capabilitiesLegault Group is setting up a new 400,000 sqf automated warehouse and distribution center in Quebec to supply products to Mondou stores and to fulfill online demand.The plant will cost over CAN$90 million($66.6M/62.4M)and is expected to be operational by 2025.Pet Valu also announced the opening of a new distribution center.The 670,000 sqf premises are located in Brampton,Ontario,and will bring“unprecedented”scale and automation to Canadas pet sector.When in operation,it will be the largest distribution center and robotic automation installation dedicated to serving the pet specialty industry in Canada.The company expects that the new plant will have the capacity to process all orders the same day,while improving productivity by more than 50%.Fressnapf opens new logistic warehouse Fressnapfs new 47,500 sqm facility,located close to Berlin,will supply products to more than 400 stores across Northern and Eastern Germany,Poland and Scandinavia.Christian Buschmann,Vice President of Logistics,Engineering and Real Estate for the Fressnapf Group,says the company is“pleased to now move into the property and put it into operation quickly”.It is believed that the new warehouse will create 150 new jobs.6 PETS INTERNATIONAL|OCTOBER 2023|PET INDUSTRY HIGHLIGHTS PET INDUSTRY HIGHLIGHTSDehner gets into top of Bavarias best dealerslistGarden and pet retailer Dehner has been ranked 20th out of 371 firms in Bavaria,Germanys largest state,in the SZ Institute Best Dealers list.Dehner is one of the leading groups of garden centers in Germany and Austria,with around 130 stores.The ranking system allowed customers to decide which outlet they thought was the best,and Dehner had an average score of 2.35.The study collected over 33,000 responses,and participants rated the best retailers based on their personal experiences and expectations.South Koreas plan to expand the local pet industrySouth Korea has announced its latest plans to expand the East Asian countrys pet industry to 15 trillion($11.4B/10.3B)in 3 years time.In a statement,the Ministry of Agriculture,Food and Rural Affairs said that the plans seek to“address evolving market trends,such as pet humanization”.Korean officials valued the local pet industry at 8 trillion($6B/5.5B)in 2022.According to a survey,South Koreas annual expenditure on pets reached an average of 353,000($269/244)per person in 2022.How prices of US canned pet food could increase by up to 30%A proposal to increase the tax applied to imported tinplate steel by up to 300%is under consideration at the International Trade Commission and the US Department of Commerce.If adopted,it is expected to have a noticeable impact.The Pet Food Institute warns that imposing these additional tariffs on consumer goods will increase the production costs of canned cat and dog food.The Consumer Brands Association(CBA)has stated that if the tariffs go into effect,companies will be forced to raise food prices.It is estimated that the cost of canned food and products could increase between 19%and 30%if the new tariff receives the green light from US officials.According to CBA,the additional cost would be mainly transferred to the end consumer.The increase per can across all food categories could be between$0.36 and$0.58(0.330.53).So the tariffs could considerably impact the wet cat food segment,as this accounts for the largest percentage of sales after dry food,representing 45%.PETS INTERNATIONAL|OCTOBER 2023|PET INDUSTRY HIGHLIGHTS 7PET INDUSTRY HIGHLIGHTSGerman medical firm SYNLAB sells vet business to MarsSYNLAB Vet will join the Mars Petcare portfolio and become integrated into the services provided across veterinary health and diagnostics,nutrition,innovation and technology.The move also allows Mars Science&Diagnostics division to expand its European footprint.SYNLAB,which did not reveal the value of the deal,has allegedly decided to sell the business to Mars to refocus on its core human diagnostics operations.According to some sources,the firms veterinary diagnostics unit generated only 1%of the groups 3.2 billion($3.4B)revenue in 2022.SYNLAB operates across 40countries.Safety and reliability are top priorities for pet owners when it comes to their beloved animals.The increasing demand for premium quality,high flexibility and limitless reliability is constantly presenting petfood producers with new challenges!Whether wet food in cups,cans,jars and thermoformed packaging or clipped products,such as dog sausage and fresh petfood filled to the exact gram,or snacks,such as filled and unfilled chews,treats,sticks or stripes:VEMAG offers reliable solutions with flexible machine systems!VEMAG:Boundless Passion for YOUR Solution! e-mailvemag.dePurina launches new Eastern European divisionA new division within Purina Petcare Europe will cover Central and Eastern Europe as well as Southeastern Europe.Jean Grunenwald,who has been operating as Regional Business Head of Nestl Purina PetCare in Asia,Oceania and Africa for the past 4 years,is leading the new division.8 PETS INTERNATIONAL|OCTOBER 2023|PET INDUSTRY HIGHLIGHTS PET INDUSTRY HIGHLIGHTSChewys expansion into Canada:an easy conquest?Some months ago,US online retailer Chewy made a huge announcement saying it plans to expand operations into neighboring Canada this year.Toronto-based e-commerce expert Ran Ravitz believes that unlike other US companies like Target and Nordstrom that have tried and failed to enter the market the expansion of Chewy into Canada sounds like a“more simple conquest”.Ravitz,the founder of e-commerce agency Ecommerce Pathways,adds that Amazon dominates Canadas e-commerce market and believes it will stay like this after Chewys arrival.However,he predicts that the presence of the US online pet retailer will initially take market share from traditional retailers.“It will challenge and eat away at their e-commerce sales,”he comments.Online competition is expected to intensify as soon as Chewy enters the country,with its competitors aiming to retain as much market share as possible.Some well-established players will promote their e-commerce stores more widely,and leverage omnichannel strategies to capture more customers.It is believed that 23%of Canadas pet spending is online,while this represents around 34%in the US.That presents a favorable opportunity for Chewy to enter the market as a new player,but it will need to adapt to a new reality.Study shows vegan cats are healthier than meat-fed onesFindings from a new study from the University of Winchester(UK)suggest that cats are not“obligate carnivores”,as has been previously claimed,and indicate better health and lower vet visits among cats fed a vegan diet.The research among 1,300 cats concluded that vegan cats made 7.3wer visits to the vet at an unusual frequency,suggesting less need for emergency treatment.Vegan cats also had a 14.9%reduction in medication use and were 54.7%less likely to progress onto therapeutic diets.There was almost a 4%reduction in the veterinary assessment of cats being unwell,and a drop of 8%in cats displaying severe sickness.Owners opinions of their cats being unwell were also 23%lower.Pets Corner:expanding their wings in Europeand the USUnder its Pet Family parent company,Pets Corner has been recently expanding across Europe and the US.The firm currently operates 150 locations in the UK.One of the latest developments was the purchase of 30%of the retailer Cats and Dogs.The Belgian retailer,that currently has 7 stores in the Antwerp region,will keep its own identity and operate independently.Pets Corner hopes to open 20 stores in Belgium over the next 5 years with the new partnership.The UK retailer has also reached an agreement with US pet retailer Krisers Natural Pet to expand its footprint in North America,a market where it already sells its products to independent stores.The first opening will be in Raleigh,North Carolina,and that state will remain the focus for the coming years.Food and ingredientsWhy does private label perform better in Europe than in the US?We also look at the trend of freeze-dried treats and developments in pet food manufacturing equipment.Additionally,youll discover a research update on additives like copper and zinc,as well as preservatives.US consumers are loving freeze-dried treats 10A European approach to pet-food private labels 13Dietary AGEs and their impact on pets 16Search for sustainable fish-oil alternative leads to microalgae 19A balancing act:the nutritional seesaw of copper and zinc 21Should there be a limit on the concentration of copper in dogfood?23Grain-free diets re-visited:an update on pulses in pet food 25Trends revolutionizing pet food manufacturing equipment 29Pet food labeling and preservative use 32Preserving pet food safety and regulations 3510 PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS Freeze-dried and air-dried pet food options have grown in popularity in the US pet food space,and the trend has crossed over into the treats market as well.While many marketers of frozen raw food have already been offering freeze-dried treat options,traditional treat and kibble manufacturers are now entering the category too.This is a sure indication of the potential of these products.Potential to meet todays demandFreeze-dried and air-dried(or dehydrated)treats are popular because they offer some of the same nutritional benefits of raw products,in a cleaner,significantly more convenient format.The treats dont require refrigeration and avoid the mess frequently associated with raw products.Marketers offering freeze-dried options are tapping into a range of treats market trends,such as single and limited ingredients,weight management,and health and wellness in general.US consumers are loving freeze-dried treats Purchase rates for treats and chews by specialty formulation(past 12 months,%of dog and cat treats/chews purchasers)Whole animal parts(such as rawhide,ears,snouts,bone,hooves)900 =30%Freeze-dried/dehydrated720 =24f0 =22%Refrigerated(as sold in store)560 =18B0 =14%Raw(other than freeze-dried)420 =14$0 =8%Frozen360 =12!0 =7%Source:Packaged Facts May 2023 Survey of Pet Owners50=Dogs 50=Cats PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS 11Because freeze-dried treats tend to feature simpler ingredients,they are also part of the humanization trend,offering owners a treat product with recognizable ingredients and a finished product that more closely resembles human food.These treats also address pet owners demand for clean labels and ingredient transparency.Purchasing to sampleData from the Packaged Facts May 2023 Survey of Pet Owners shows that by specialty formulation freeze-dried/dehydrated treats were second in popularity only to treats/chews made from whole animal parts such as rawhide.Some 24%of dog owners and 22%of cat owners who had purchased treats in the US in the past 12 months purchased freeze-driedproducts.This purchase rate is somewhat higher than that for pet foods in the same category,with Packaged Facts survey data from February 2023 showing that 12%of dog and cat owners had purchased freeze-dried pet foods in the past 12 months.The difference in purchase rates is probably due to pet owners being much more likely to purchase treats to sample than to make a major change to their pets food.Additionally,a small bag of treats is less of a commitment than a large bag of pet food.More varieties on offerIllustrating the popularity of freeze-dried treats,Global Pet Expo 2023 featured several new product introductions from the likes of Made by Nacho,A Better Treat,and Montana Dog Food Co.A number of other companies are active in the freeze-dried and air-dried treats category.One of these is West Paw,which markets several freeze-dried treats,including its superfood-based duck variety.Another is K9 Bros with“gently dried”treats in salmon,chicken and beef as well as fruit-based and vegetable-based varieties.And PureBites has a wide range of freeze-dried and air-dried treats.One of the top raw food players in the pet treats and chews market is Vital Essentials,offering several varieties of packaged raw freeze-dried treats.These range from beef liver nibs to bully sticks.The company also sells VE RAW BAR selections of freeze-dried animal parts individually and in bulk containers.Pet retailers are getting involved as well,with both Petco(WholeHearted)and Chewy(Tylees and American Journey)offering private-label freeze-dried treatoptions.The futureBecause freeze-dried,air-dried and dehydrated pet treats align with so many overarching pet market trends,demand for these products is definitely expected to grow.Pet owners appreciate how the treats feature minimal processing and recognizable ingredients in a convenient format,allowing them to enjoy guilt-free bonding time with their pets.Latest investments Underscoring the positive outlook for freeze-dried treat products are the number of recent mergers and acquisitions,as well as investments that involve marketparticipants.Last October,BrightPet Nutrition Group acquired Bravo Pet Foods,which manufactures frozen raw and freeze-dried pet foods and treats.And in September 2022,Ziwi Ltd,a premium pet food exporter and maker of air-dried food and treats in New Zealand that also does a lot of business in the US acquired Freeze Dried Foods,another New Zealand company.One of the biggest acquisitions in this space,in February 2023,was pet market giant Mars Petcares acquisition of Canada-based Champion Petfoods and its Orijen and Acana pet food brands,both of which offer freeze-dried treat products.Shannon BrownPet Brand Manager Packaged FactsFreeze-dried treats also address pet owners demand for clean labels and ingredient transparency.12 PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS Every detail mattersWithout the little things,no great results.Private label producer of high-quality dry&wet pet food,biscuits and snacks for cats and dogs.www.unitedpetfood.euPet Fair South-East Asia 25-27 October booth H09PLMA Chicago 12-14 November booth F8726Visit us!PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS 13The private-label pet food category is performing better in Europe than in the US.What are the reasons behind this difference?Private labels in the European pet food market have seen a notable year,crossing the$6 billion(5.5B)mark and regaining ground in terms of market share.A well-established categoryWith a significant share of the market(55%in volume and 34%in value),private label is a well-established category within the fast-moving consumer goods(FMCG)sector in Europe.The market share in North America is considerably lower in comparison(38%in volume and 17%in value).There are a few reasons to explain this difference:European retailers have been more aggressive than their US counterparts in promoting their private label brands European consumers are more willing to try new products and have less brand loyalty than American consumers European retailers have succeeded in building a more premium image for their private label brands,which has helped them to differentiate themselves from manufacturers brands European retailers tend to work in a more centralized manner than US retailers.This gives them greater control over their supply chains,which makes it easier for them to develop and promote their own private label brands.Evolution of pet-food private labelsThe dominance of the private label category is slightly less pronounced in the European pet food segment,with a 47%volume share and a 31%value share.The comparatively lower prevalence of private labels in pet food has historically been attributed to consumer preferences.When it comes to caring for others,consumers tend to focus more strongly on quality and therefore choose manufacturers brands over private labels.This trend can be seen in segments such as baby care as well as pet care.A European approach to pet-food private labels see next page14 PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS Over the last few years,more sophisticated and premium ranges of private-label pet food products have been developed.However,these have struggled to secure a foothold in the market dominated by manufacturers brands,with both the volume share and value share declining by around 1 percentage point.Nevertheless,there are signs of a shift driven by the recent increase in inflation rates and the erosion of consumer spending power.The purchase of private label products has now become a primary strategy for people looking to manage their household expenses.This is having a positive impact on the share of the private label category,both in the broader FMCG sector and within the pet food segment.Cost-of-living crisisAnother coping behavior to navigate the cost-of-living crisis is the increased willingness of consumers to shop at discounter stores.This is also benefiting the private label category,since the share of private labels is bigger in the discounter channel.This increased interest in private label has not yet triggered substantial volume growth in the European region.Nevertheless,the category has shown resilience amid the ongoing volume decline affecting both the FMCG and pet food sectors.Private labels have not been entirely immune to this downward trend,but their overall decline has been less steep compared to manufacturers brands(year-on-year volume change of-0.4%versus-2.5%),resulting in anincreased market share by volume(rising from 46.4%to 47.3%).Countries to watch Pet-food private labels have achieved volume growth in a number of European countries,specifically France(11.7%),Germany(4.4%)and Poland(3.7%).These growth figures are accompanied by notable increases in volume shares,with Poland witnessing a 5.1%increase,while Germany and France each saw a 4%increase.These gains surpass those achieved by private labels in the broader FMCG category.Interestingly,the United Kingdom deviates from this trend,with the nation experiencing relatively stagnant volume growth.This can be attributed to a significant reduction in the product assortment,which happened to a lesser extent in the other 3 major countries.Slightly less price-competitiveThe prices of pet-food private label products have been raised a little more aggressively than branded products:by 23%,compared to 19%for manufacturers brands.This equates to a 1.3 percentage points increase in the value share,from 29.6%to 30.9%.As a result,private labels in the European region have experienced a slight reduction in their price competitiveness.Based on the price index for the pet food category,private labels are 34.1%cheaper than the category baseline in 2023,whereas they were 35.9%cheaper last year.Upon closer examination of this trend,the United Kingdom stands out once again,with relative prices rising by 3.9 percentage points this year.Performance of pet-food private labels(volume change/price change vs.2022)Europe(33 countries)UK Germany France Poland Source:NielsenIQ strategic planner,52 weeks to 16 July 2023%Volume change%Value change%Price increase vs.last year22.6% 23% 26% 15% 19% 28%.5%-0.1%-0.4%4.4%3.7.7 .42.72.9%PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS 15Gaelle BallarinGlobal Insight LeadNielsenIQConversely,the index shows that the price competitiveness of pet-food private labels in the other 3 major countries has improved slightly.For instance,in Germany,where the relative price difference is the smallest at around 25%,private labels became 0.5 percentage points cheaper than the baseline this year.For comparative purposes,the relative price difference in North America has remained steady at26%.What will the future bring?So the next big question is:Will private labels in the pet food sector continue to do well in the future?The answer seems to be yes,for 2 main reasons.First,pressure on peoples wallets will persist for the foreseeable future.This will encourage them to stick with their money-saving strategies,which often involve choosing private labels.Secondly,as more shoppers trial the category,the acceptance is likely to increase further.35%of consumers already say that some store-brand products are just as good as or even better than manufacturers brands.Given the likely sustained interest and growth in private labels,it is key for branded manufacturers to pursue strategies that will enable them to either maintain or grow their market share.Obvious strategies include offering their own value-for-money products,implementing effective pack/price architecture or having a portfolio of brands that can play in different price tiers.Besides these strategies,some manufacturers have successfully managed to offer points of differentiation or added perceived benefits versus private label products.Examples include initiatives related to sustainably sourced ingredients or recyclable packaging.These are areas that the majority of mainstream retailers are unlikely to pursue with their private label ranges in the short term.Unleash success with NutriliqRapid deliveryUnwavering commitment to animal well-beingTailored supplements?High-quality custom-made animal supplements?Nutriliq excels in crafting unique feed supplements in various forms:Functional Snack POPULAR!Liquid Powder Paste?100%tailored for private label needs,we value personalized solutionsinfonutriliq.euwww.nutriliq.eu 2023-10991_Nutriliq_adv.indd 116 PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS Advanced Glycation End Products,or AGEs,are compounds made when proteins or lipids are exposed to sugar.They become attached via a covalent bond,or glycated.There are many pathways for the development of AGEs.They can form in situ over days to months,or can be taken in via dietary sources.AGEs in foodDietary AGE formation tends to happen during cooking at high temperatures,with levels often higher in animal-based foods.However,this is not a simple formula,as decreased cooking times,the presence of acidic ingredients and inhibitor compounds can decrease AGE formation.Moisture is necessary for some reactions,but conversely,higher levels can beinhibitory.Dietary retention is similarly complicated.Studies have shown varying levels of absorption and excretion,and factors such as the influence of ingredients,compound weight,anti-AGE factors,and interactions with other nutrients such as fiber are not yet thoroughlyunderstood.Compared against a human diet,the impact of a single foods AGE content is multiplied in our pets who tend to eat the same food day-to-day.The average canine daily intake of certain AGEs on a metabolic body weight basis has been estimated to be over 100-fold that of humans,according to the estimations of a study.What is the concern?AGE compounds can impart flavors and colors to food.However,they have been implicated in chronic diseases in people,especially inflammatory and oxidative processes,such as in cardiovascular disease,diabetes and Alzheimers.The reactions can also reduce bioavailability of the original nutrient a notable example is lysine,an essential amino acid.In addition,there is concern that these newly formed compounds can serve as a source of unexpected allergens.The potential ill-effects in pets are less well known,but the same concerns are also extrapolated to pet food.Next steps:improving knowledge and reducing dietary levelsThere are still many unanswered questions regarding AGE levels in pet foods.Filling these knowledge gaps may be simpler than addressing the overarching question:How do AGEs impact pet health?In vivo,the ability to study AGEs suffers from the same limitation as studying any single nutritional factor:the difficulty in assessing and controlling for all potentially Dietary AGEs and their impact on petsCompounds known as AGEs are found in varying amounts in pet foods.With these substances linked to some chronic diseases in people,should the focusbe on reduction?PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS 17confounding factors.However,it has been theorized that increased life span in mice with caloric restriction was related to reduced AGE consumption.Although endogenous production remains a significant source of AGEs,reducing the dietary component is associated with lowered overall levels.As pet food production methods vary greatly in ways known to affect AGE production,such as temperature and time,it is logical to consider how this may affect levels in pet foods.While AGE content of individual ingredients has been examined,studies looking at AGEs in pet food have only begun relatively recently,with few studies comparing different types of pet foods.More information neededIn one study from the University of Georgia,AGE levels were highest in a wet food,followed by an air-dried food,kibble and a gently cooked/raw diet.However,the wet diet was the only diet found to be statistically different.AGE type also varies between categories of pet food.For example,certain AGEs may be higher in kibble than wet and vice versa.Overall,higher AGE content in wet diets over extruded has been a relatively consistent finding,however,further studies are needed.In personal communications with a variety of pet food manufacturers,few companies reported testing for AGEs,and testing methods vary.In addition,examining AGE content on a caloric basis is needed to accurately estimate a pets overall intake.Further information regarding AGE formation and absorption,their role in disease,and the best ways to reduce dietary contribution as well as overall body stores in our pets is needed in order to best guide petdiets.As many pets suffer from obesity and overfeeding,ensuring pets are fed an appropriate amount would be a simple first step to reducing the AGE burden.Additionally,in the pursuit of healthier diets for our pets,considerations such as food safety,nutrient bioavailability,shelf stability,and patient-specific nutritional needs should not be overlooked.Emily LuisanaVeterinary Nutritionist and Industry Consultant18 PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS 19When looking to increase the worlds access to beneficial omega-3 fatty acids for cats and dogs,Veramaris found the solution in a potent natural source:microalgae.The resulting algal oil supports pet food manufacturers innovation and sourcing activities.Scientists agree that omega-3 fatty acids and in particular EPA and DHA offer proven metabolic and health benefits for dogs and cats.However,dogs can only generate limited amounts of EPA and DHA,and neither can be generated in cats.Therefore,dietary supplementation is recommended to ensure the pets baseline nutritional requirements are being met.The challengeTraditionally,fish oil and fishmeal from wild fish stocks have been the sole source of these essential fatty acids.“But the biggest roadblock with fish oil is that there simply isnt enough of it,”says Gertjan de Koning,CEO of Veramaris.“Its virtually impossible to source enough fish from oceans without unacceptable overfishing.The animal nutrition industry is in dire need of sustainable fish-oil alternatives.”Veramaris therefore embarked on a challenge:to sustainably increase the worlds access to EPA and DHA.To achieve this,scientists turned to one of the most potent sources of these long-chain omega-3 fatty acids:microalgae.ResearchMore than 35 years of research resulted in a unique algal oil that is both safe and sustainable.Veramaris Pets Algal Oil provides staggering amounts of EPA and DHA,allowing the animal nutrition industry to become independent of marine resources.Additionally,the algal oil is rich in arachidonic acid(ARA)an essential omega-6 fatty acid for cats making it one of the few rich vegetarian sources of ARA.Quality assuranceThe production process of Veramaris Pets Algal Oil is relatively simple,presenting few critical control points and allowing for superior quality and food safety standards.A closed-vessel fermentation process ensures that the algal oil is free from ocean-borne contaminants such as heavy metals,dioxins and polychlorinated biphenyls(PCBs).The fully controlled process also allows for minimal variation in the levels of EPA and DHA,giving pet food manufacturers the opportunity to confidently claim these omega-3 fatty acids in their products.“The regenerative nature of the algal oil brings supply assurance to a volatile market,meeting the needs of a global market hungry for fish-oil alternatives,”states George B.Josef,Global Head of Business Development at Veramaris.“We are pleased to be able to support pet food manufacturers innovation and strategic sourcing objectives in this way,”he concludes.Search for sustainable fish-oil alternative leads to microalgaeGeorge B.JosefGlobal Head of Business Development at Veramaris V20 PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS ExtensiveGourmet MenuSustainably Sourced&Halal CertifiedWe are looking for distributors.Scan the QR code to get in touch to bring your customers a new rainbow selection!7-10 May 2024,Nuremberg,GermanyMeet us there!PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS 21 see next pageZinc is an important trace element for the development of epithelialization in the skin:the process whereby new skin cells migrate to where they are needed,such as in wound healing.Additionally,it serves as a cofactor in numerous vital enzymes.Copper is also known to be a component of several enzymes,and it is involved in hemoglobin formation and immune function processes.It is one of the elements required for melanin production and keratin synthesis.However,you can have too much of a good thing,and copper toxicity due to excessive dietary intake is a rising concern for veterinarians.Copper and zinc:their importance for petsZinc carries a vital role in tissues that undergo cell renewal,such as the skin,where healing and reparations are needed.Interestingly,the skin contains approximately 20%of the total body zinc stores,where the highest concentrations are in the nasal planum,tongue and footpads.In fast-growing young dogs,a deficiency of zinc can be manifested as a condition called zinc-responsive dermatosis,which is characterized by hairless,hyperkeratotic lesions commonly found around the mouth and joints of the puppy.Although it can be quite a scare for the owner,it is a simple condition to treat:all that is needed is a growth-adjusted balanced diet that is highly digestible,and short-term zinc supplementation.Generally,zinc deficiency in both growing and adult cats and dogs is most visible in the skin causing a rough impression of the hair and dry,itchy skin.Interestingly,when it comes to copper deficiency,a study in the Journal of Nutrition found no signs reported in adult dogs.Nevertheless,in growing dogs and cats,loss of hair pigmentation and rough,dull hair coat were noted as the main clinical symptoms of copper deficiency in the diet.However,copper deficiency is considered to be unlikely in pets,as commercial diets contain adequate copper levels.The liver is the central organ for copper metabolism,and A balancing act:the nutritional seesaw of copper and zincWe all know that trace elements are important for various bodily functions,and we can assume that the same principles apply to pets.When it comes to copper and zinc,this is certainly the case.22 PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS hepatic concentration of copper is the most reliable reflection of pets copper intake and status.Maintaining the balance:Are we following safe requirements?The availability of copper and zinc from different foods and supplements can vary,so the requirement for these trace elements is difficult to define.The requirement will depend on the source in the diet(organic versus inorganic form)and the level of other nutrients that can have interactions with both copper and zinc.Copper and zinc are both known for their sensitive balance,that can be easily thrown off by poor digestibility of the diet,too high concentrations of calcium,or the presence of phytate,found in diets containing high levels of soy.This can ultimately lead to poor absorption and deficiency of zinc and copper in the body.However,an excess of these elements is also possible.It is hypothesized that the copper contents of many commercial dog foods are greater than the biologic requirement of dogs and can even exceed the tolerance limit.It has been noted that the mean hepatic copper concentration in dogs has progressively increased over the past decade and this can be correlated to high copper content in commercial dog foods.At the same time,there is a growing body of evidence suggesting an association between high hepatic copper concentrations and the presence of hepatic abnormalities on a microscopic level that could lead to the development of chronic hepatic disease.Recently,the current guidelines for copper content in commercial dog foods have been critically discussed,and an important question has been raised:Is there any correlation with the increased incidence of copper-associated hepatopathy in dogs that has been noted over the past decade?Clinicians are looking into the possible relationship between the change in the type of copper used in pre-mixes added to commercial dog foods,and increased use of novel protein meats with high organ inclusion rates,such as liver,that could significantly influence the final copper content in thediets.The dangers of excessCopper toxicity manifests as copper accumulation in liver tissue,causing damage and negatively affecting liver function.There are 3 causes of hepatic copper accumulations reported in the literature.Firstly,a hereditary defect,as seen in Bedlington terrier dogs.Secondly,the altered biliary excretion of copper due to hepatic inflammation and fibrosis.The third cause of hepatic copper accumulation is excessive intake through the diet.Excess copper levels lead to a high degree of oxidative damage to lipids and proteins in the liver tissue,resulting in chronic hepatitis.Veterinary diets are formulated to counteract excessive copper deposition in liver tissue,using high concentrations of zinc salts.These are effective in preventing copper accumulation in the liver,as zinc has properties that help with liver integrity.Additionally,zinc ions induce the synthesis of metallothionein,which binds copper making it unabsorbable from the intestine and possibly detoxifying it in the liver.Zinc acetate or zinc gluconate is recommended as the preferred source of zinc added to hepatic diets,since the sulfate form may be associated with gastric irritation and vomiting.Expert recommendationsEvaluating the copper content of pet food is considered challenging and it cannot be reliably done by reading the pet food label as the value on the label would represent added copper,and not the sum of supplements and native copper already found in feedstuffs in the diet.Another challenge lies in the fact that there is a wide bioavailability of copper from organic and inorganic sources,such as different salts(copper oxide versus copper sulfate).Some veterinary clinicians believe that the current recommendations for copper content in adult maintenance canine diets are too high,and may exceed the upper tolerability limit for some dogs,resulting in hepatic disease.They are calling for reconsideration of copper requirements for dogs set by regulatorybodies.Diana BroziAssistant ProfessorUniversity of ZagrebThe copper content of pet food cannot be reliably evaluated by reading the pet food label.PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS 23Despite a general consensus on the current rules,there is an ongoing debate inthesector.The Association of American Feed Control Officials(AAFCO)believes that existing guidelines for the copper concentration in foods for average dogs are,at present,properly and sufficiently regulated.However,it is open to monitoring the situation and eventually improving regulations after concerns were voiced in a study.How it all startedThe minimum inclusion levels recommended by the AAFCO,the organization that sets standards for pet foods in the US,are 7.3 parts per million(ppm)or milligrams per liter(total diet)for adult dogs,and 12.4ppm for growth,reproduction periods and all life stages.However,a scientific article published in the Journal of the American Veterinary Medical Association(JAVMA)raised doubts over the existing regulations and called for a maximum copper concentration in commercial dog food to be set.The article states that the copper level in dogs livers has risen in the past decades and warned that the copper contents of many commercial dog foods are greater than the biological requirement of dogs and exceed the tolerance limit for some of them”.The reactionThe suggestions made in the article were analyzed by an AAFCO expert panel.After analyzing the relevant veterinary literature,the panel determined that the data for setting a safe upper limit or maximum tolerance of copper in canine foods was insufficient”.The AAFCOs Executive Director,Austin Therrell,says the association remains reluctant to make regulatory recommendations based on implications or associations without definitive proof of cause and effect”.Voluntary languagePETS International learned that during the last AAFCO annual meeting,which took place in August,it was decided a new workgroup would be formed to explore the development of voluntary language for“low copper claims”.Theres still not enough data to support a maximum copper level,as evidenced by multiple experts who all had different opinions at this meeting,highlights Therrell.The AAFCO will be paying close attention to veterinary literature on this topic but highlighted that until science definitively shows additional controls or restrictions are needed,it believes that copper concentration in foods for average dogs is appropriately and sufficiently regulated at present.David Palacios RubioHead of Editorial GlobalPETSShould there be a limit on the concentration of copper in dog food?24 PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS Natural bioactive ingredientto soothe pets!Limagrain Ingredients franceNaturally innovating solutionsLimagrain Ingredients develops its ingredients with nutrition and functionality in mind.This winning recipe is applied to the entire pet food range,from functional flours to puffed grains produced through the unique PRESCO(for PRESsure-COoking)process.Whether youre looking for high digestible energy,texture enhancement or binding properties for your pet food products,the companys solutions meet the strictest requirements in terms of quality and nutrition,naturally!Limagrain I Eagle finlandWhy choose Golden Eagle?Golden Eagle Holistic Health pet food is formulated using only fresh,natural,wholesome pet food ingredients from each of the 5foodgroups.The food is suitable for different life stages of your dog or cat not only for healthy pets,but also for pets that suffer from allergic and especially hereditary diseases.Golden Eagle Petfoods Co.Ltd/Shetland O PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS 25Diets eliminating grains have attracted plenty of attention in recent years,but for all the wrong reasons.Pet foods marketed as grain-free primarily use pulses,protein-rich seeds such as peas,lentils,chickpeas,and various types of beans found in legume crops.While they began as a popular and healthy alternative to grain-based pet foods,pulses quickly fell under scrutiny following a 2018 FDA investigation on grain-free diets and their potential role in canine dilated cardiomyopathy(DCM).However,this 2022 investigation concluded no causal link exists between grain-free diets and DCM currently.New research sheds further light on safetyAmidst the controversy,a 2023 study conducted at the Ontario Veterinary College has brought fresh insights into the use of pulses in grain-free pet food formulations,helping re-establish a prospective future for pulses.To date,this is the longest controlled feeding study to assess the safety of pulse-based diets in healthy adult dogs.The main focus of the study was to monitor the effect of increasing dietary pulse concentrations(primarily peas)on cardiac function,plasma sulfur amino acid(SAA)concentrations,body condition,and blood values over a 20-week dietary trial.Test diets contained between 0%-45%pulse ingredients,reflecting concentrations in commercial diets that meet and/or exceed guidelines from The Association of American Feed Control Officials(AAFCO).Their data addresses 3 main concerns associated with grain-free diets.1.Cardiac functionThe study found no negative impact on cardiac function among the different dietary treatments after 20 weeks.Even at 45%pulse inclusion,there were no changes to cardiac function(assessed using echocardiography)or to concentrations of biomarkers commonly associated with cardiomyopathy (NT-proBNP and cTnI).2.Sulfur Amino Acid(SAA)statusTaurine is a non-essential amino acid required for cardiac function and is synthesized from sulfur-containing amino acids like methionine and cysteine.Despite pulses being generally low in SAA,pulse-containing diets did not cause deficiencies in plasma SAA concentrations when fed a complete and balanced diet with 45%pulse inclusion.This means that pulses did not interfere with the absorptive processes of the intestines,since adequate levels of SAA were maintained in the serum and available for taurinesynthesis.3.General safety and efficacyThe study concludes that balanced and completediets containing pulses,specifically peas,were safe for healthy adult dogs over a 20-week study Grain-free diets re-visited:an update on pulses in pet food see next page26 PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS Berj is a family-owned leader of the flavor and fragrance industry like no other.Founded in 1949 by two brothers in the aftermath of World War II,the company began life as little more than a tiny office in lower Manhattan.Since then,we have grown into a multinational organization with over 150 employees spanning more than 100 countries.The privatively-owned flavor and fragrance ingredient source since 1949. 1 973 748 8980 74YEARS 3GENERATIONS 1AMBITION PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS 27period.No adverse effects on body condition,blood values,and biochemical changes occurred among the different dietary treatments.Overall,the results of this study suggest that dog foods containing pulses are not a causative factor for DCM in non-genetically predisposed dogs.It should be noted though,that this study is relatively small,using only 28 dogs 7 in each dietary group and should be interpreted accordingly.The value of peasPeas are the second most valuable legume(after soybean),with a rich nutrient profile high in proteins and carbohydrates while remaining low in fats.They are particularly abundant in potassium,B vitamins,and essential amino acids.However,pea protein must be supplemented with SAAs to formulate a complete and balanced diet.As pet ownership continues to grow exponentially,the need for sustainable and high-quality ingredients has become a priority.Recent animal and grain production shortages have presented challenges,sparking the search for scalable solutions.Pea production emerges as a promising answer to sustainability.With high yields per acre,reduced water consumption,and nitrogen-fixing capabilities,peas are not only eco-conscious,but also a cost-effective option for pet food formulations.Future applicationsThe FDAs inconclusive findings on grain-free diets and the safety demonstrated by recent controlled food trials pave the way for innovative applications of pulses(and more specifically pea protein)in pet food.Some examples include:Diet sensitivitiesNearly 30%of veterinary visits result from vomiting and diarrhea.Dietary elimination trials are commonly used both in diagnosis and management of gastrointestinal disorders.Current hypoallergenic diets often rely on hydrolyzed or novel protein sources.Pea protein has the potential to be incorporated into hypoallergenic diets as an additional tool to help manage food sensitivities and avoid common dietary allergens.Encapsulation techniques for bioactive ingredients Bioactive compounds are secondary metabolites found in whole foods that are difficult to preserve due to pH sensitivity,UV exposure,and thermal processing used in extrusion.This limits their use in pet food products unless they are preserved and encapsulated.The main techniques include spray-drying,emulsion,and complex formation to stabilize lipophilic bioactive ingredients like-tocopherol,omega-3 fatty acids,and linolenic acid to incorporate them into pet food formulations.Encapsulation has also helped deliver water-soluble vitamins to the intestines for absorption.For example,pea protein microparticles cross-linked with transglutaminase have been used to encapsulate riboflavin(vitamin B2),with 74%to 84%successfully reaching the gastric and intestinal fluids.Food emulsificationPea protein can stabilize liquid emulsions and microencapsulate oils to enhance the texture and palatability of pet food.Under the right conditions,pea protein can reduce the surface tension between oil and water,helping form stable emulsions that enhance the overall sensory experience for pets.A recent Agriculture and Agri-Food Canada study shows that pea protein even outperforms soy as an emulsifying agent at a neutral pH.Moving forwardPea protein has emerged as a sought-after ingredient in the food industry,driven by its versatile applications,low cost,and nutritional benefits.As consumer demand for sustainable and allergen-free options continues to grow,pea protein offers a promising solution for the future of pet food formulations.With new studies addressing safety concerns,pulses show great potential to shape the pet food industry.Pea production emerges as a promising answer to sustainability.Ashkan SadriVeterinary ResearcherVetabroad.org28 PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS Let RBS take your pet treat operation to a new,healthier level with our fully automated system solutions.We offer a complete production system including continuous mixing,baking and drying equipment,and a variety of forming optionssheeted,rotary moulded,wirecut,extruded and co-extruded products.For details on how to automate and improve to your pet treat operation,visit or call(01)610-693-5816.Better is baked right in.LEARN MOREHEALTHIER PET TREATS&BAKED KIBBLE START WITH AUTOMATED SYSTEMS FROM RBS.Visit us at Velvet Packaging italyGreen retortable pouchesMany pet food companies are still clinging to traditional rigid packaging like cans or trays for wet food.However,in this ever-changing landscape,the shift to retortable pouches presents a golden opportunity for those looking to embrace the future.This shift promises economic benefits through space efficiency,reduced production costs and design flexibility.Retortable pouches are not only flat and space-saving,but also lighter and more material-efficient,helping to lower production and transportation expenses.They offer creative packaging customization options,allowing brands to attract consumer attention in a competitive market.In the coming months,recyclable retortable pouches will be available,reducing environmental impact and meeting the growing demand for sustainability.Adopting retortable pouches for wet pet food represents a leap forward in modernization,efficiency,and commitment to a greener future.Velvet S PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS 29The ongoing humanization of pets hasnt just changed what consumers buy.Its also changing the way pet food is made.Many manufacturers are discovering that their existing production machinery requires an upgrade if they want to remain competitive in todays pet food market.This is being driven by 2 main trends:the rising demand for human-grade pet food,and the growing importance of sustainability.We asked a few equipment manufacturers to share their insights into the marketdevelopments.Explosion of interestAs the name suggests,Pennsylvania-based Reading Bakery Systems started out as a bakery equipment supplier;the founders didnt initially intend to get into the pet food business.But when the company purchased a cookie/cracker equipment manufacturer in the early 2000s,the owners realized the equipment could also be used to make treats for pets.Over the past few years,the firm has seen an explosion of interest from pet food companies looking to make human-grade and human-like baked pet food.“The machinery is more expensive,but profitable in the longer term.People are willing to pay more for the end products,so you can make a lot more money even though production capacity of the line is lower,”says Dulcie Freymoyer,VP of Marketing.Equipment upgradesAnimal feed equipment firm KSE Process Technology attributes the trend to the ongoing humanization of pets.Consumers increasingly make decisions based on the perceived healthfulness and quality of pet food,just as they would for other members of the family,according to Martijn van Eijk,the companys North America Area Sales Manager for the pet food group.Meanwhile,Todd Olmstead from processing equipment manufacturer Marlen says that this shift and the demand for human-grade and fresh refrigerated products that has come with it has brought new companies into the pet food manufacturing equipment segment as well as prompting existing companies to innovate to keep up with the competition.Higher standards among consumers,the introduction of a wider array of ingredients including more vitamins and minerals and the greater diversity of recipes,have all increased the complexity of pet food manufacturing.This is driving manufacturers to upgrade their equipment and software.Inspiration from human food processing“With the increase in demand for human-grade pet food,weve seen companies looking Trends revolutionizing pet foodmanufacturing equipment see next page30 PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS Farm Company italyPi Buono functional snacksNew in Farm Companys green assortment:Pi Buono.A range of 12 functional snacks,biscuits and dental sticks,some with Organic certification.100%made in Italy with the best natural ingredients and herbs to support healthy skin,coat&bones,help the immune system&digestive process,and promote healthy teeth&gums.Rich in vitamins&minerals No preservatives,artificial colors,salt or sugar Presented in a resealable,recycled-paper bagFarm Company Srlinfofarmcompany.itfarmcompany.itYantai China Pet Foods chinaSpinning treats for cats Made with real chicken and catnip The spinning motion is fun for your catYantai China Pet Foods Co.,LtdA PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS 31Manufacturers are looking to the ready-to-eat sector to identify new technologies.at new equipment that they previously wouldnt have needed or even thought of when producing pet food,”Olmstead comments.The technology in general might not be new,he says,but its new to pet food manufacturers.Freymoyer has noticed interest in co-extrusion equipment that can create filled treats for pets.“Were seeing a lot of high meat content.But besides that,if youve walked through the pet treats aisle,youve probably seen Oreo-type cookies:filled pretzels without the salt,”she states.“Theyre not just human-grade;they actually look like human treats.”To identify technologies that can be applied to pet food production,manufacturers are not only looking to the baking sector for inspiration as Reading Bakery Systems has experienced but also to the ready-to-eat sector.According to Olmstead,a growing number of customers are looking at buying equipment like spiral ovens and dicers.Concern about environmental impact Its not just human-grade pet food that is affecting manufacturers equipment choices though.With consumers increasingly concerned about the environmental impact of the pet foods they buy,more manufacturers are asking about energy-efficient equipment and other sustainable options,including the use of alternative fuels.This has prompted Reading Bakery Systems to offer more energy-efficient ovens,says Freymoyer,and also to begin looking at the next generation of baking equipment.The company has recently added electric ovens with gas penthouses to its line of offerings.This should make it easier for pet food manufacturers to reduce their carbon emissions by switching from gas to all-electric operations.In response to customer inquiries,Reading Bakery Systems has also experimented with other alternatives to gas including hydrogen and has various tests in the pipeline.KSE is similarly working with manufacturers to help them proactively reduce greenhouse gas emissions.According to Van Eijk,upgrading equipment can reduce energy consumption.For example,movable mixers eliminate the need for energy-intensive machinery such as conveyors,chains and pneumaticsystems.The wave of the futureWhile the human-grade and sustainable pet food trends are already here,the biggest trend on the horizon for manufacturers is automation,believes Olmstead.Automation can help manufacturers cope with many of the challenges they face in todays market,such as high costs for materials and labor.“Manufacturers are embracing sustainable practices and addressing labor shortages through automation,”agrees Martijn van Eijk.Automation can also reduce human error,leading to enhanced product quality and reliability,while also increasing efficiency and reducingwaste.Moreover,automated equipment is increasingly intelligent,offering potentially innovative solutions such as fully automatic container transfer and flexible container weighers.This kind of smart equipment can allow manufacturers to take advantage of automation without losing the flexibility that is needed to shift between products and adapt to rapid changes in market expectations.Versatile and intelligentAccording to Van Eijk,equipment must be versatile,intelligent and capable of handling various products and recipes.Reporting tools associated with smart technology can also help manufacturers gain greater insight into their production processes to further lower costs,reduce errors,manage maintenance and energy use,and support compliance with supply chain traceability requirements.“Responsible pet owners are conscious of what they feed their furry companions and demand transparency in the ingredients used,”comments Van Eijk.“A traceable supply chain,which guarantees contamination-free equipment and comprehensive track and tracing throughout the manufacturing process,has become essential.Emma PenrodPETS International Contributor32 PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS No added preservatives!The varying water content in pet food affects the need for preservatives,and therefore the labeling and claims of pet food manufacturers.Microbial growth in food is affected by many factors,including moisture and storage conditions.Commonly used in human food and pet foods alike,preservatives adhere to their name:they aim to preserve food throughout its shelf-life.As pet food comes in many forms,including both wet and dry,levels and types of preservatives differ.This affects many labeling and branding claims used by pet food companies.Microbial growth formationLife on earth did not start until one key ingredient came around:water.When it comes to pet food,moisture,together with nutrients in the feed,provides the necessary ingredients for molds and bacteria to grow.Dry and semi-moist pet food is not sterilized,and microbial growth can be controlled within safe bounds by using preservatives,using nitrogen gas at the end of the production process,or keeping moisture levels at a minimum.Semi-moist feeds have higher moisture contents than dry food and are accordingly more prone to microbial formation if no preserving methods areemployed.Wet food(canned,sachets,trays,cartons)is retorted or sterilized after sealing the packaging,which can be sufficient to stop microbial formation.In contrast,fresh or raw formulations tend to have a shorter shelf-life than the other product categories,and are stored cooled or frozen as the main preservation method.Water activity as KPIA frequently used quality measure is water activity(aW),which indicates the percentage of moisture in the feed that is available for binding and thereby for microbial growth.For example,one grain may have integrated water as moisture within the grain itself,while another grain is internally drier but has water available as dew on the outside.The latter could be more susceptible to mold spoilage.Moisture content of the raw materials at intake therefore plays a role in how easily microbes form,but the storage conditions are also important.The temperature and humidity of the manufacturing environment are further factors,together with target moisture levels of the finished product.The manufacturing process and equipment also affect moisture absorption into the finished product and thereby aW.Preservatives,not antioxidantsSometimes confused,preservatives and antioxidants share a commonality in food because both reduce spoilage of food,maintain nutritional content,and decrease formation of toxic compounds but do so in different ways.Preservatives reduce the growth of microbes,whereas antioxidants prevent oxidation or rancidity of fat.In a rough summary,preservatives aim to prevent pet owners from opening a bag of food and seeing mold.Antioxidants aim to prevent them from opening a bag and encountering a stale smell.Preservatives in the EU are acids,such as propionic acid and sorbic acid,that lower the pH of products and thereby inhibit microbial growth.These acids can Pet food labeling and preservative usebe stabilized by binding them,as is the case with,for example,calcium propionate and potassium sorbate.Those are 2 examples of ionic chemical bonds,whereas other components might offer stronger covalent bonds.The type of bond determines the strength and stability of the acid and thereby how long it remains in the pet food and functions as a preservative.Branding and labelingCompanies offering branded preservatives have created mixtures of acids which may differ in concentration,and may also include other compounds to provide a synergistic functionality.A commonly added additive is a surfactant which reduces water tension and allows the acids to further enter into the finished product.Most preservatives used in pet food are feed additives,although there are some feed materials as well.In EU legislation,additives with a legal limit for the target species must be declared.Some preservatives now have a legal maximum where there wasnt one before.However,there is a derogation in place that allows preservatives to be declared as a collective preservatives,as opposed to the individual compounds being listed.In some cases,the pet food contains raw materials which have been preserved themselves.The addition of substances for preservation of the raw materials only,as opposed to preserving the finished product,does not require them to be declared.Their presence would still show in an analysis and the finished product cannot be claimed to be free from preservatives.However,if no preservatives are added other than through the raw materials,the claim no added preservatives could potentially be made.In EU legislation,additives with a legal limit for the target species must be declared.Alexandra WeskerPet food Nutritionist and FThe Online-Shop for the specialized trade is now onlinewww.shopschulze.deWE HAVE NEWS FOR OUR DEALERS!SAFE&EASY LOGINQUICK ORDER&PRIORITY SHIPMENTS MOBILITY&FLEXIBILITYDISCOUNTS&EXCLUSIVEPROMOTIONSwww.shopschulze.deWE HAVE NEWS FOR OUR DEALERS!SAFE&EASY LOGINQUICK ORDER&PRIORITY SHIPMENTS MOBILITY&FLEXIBILITYDISCOUNTS&EXCLUSIVEPROMOTIONS34 PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS 44(0)2890 755566 A patented moisture management technologySmartMoistureKey benefitsReduces water activityMaximises production outputReduces energy costs and enhances profit marginsIncreases food safety PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS 35There is a growing trend in consumer demand for natural and minimal-ingredient pet foods,in a desire to avoid preservatives.So how safe are these commonadditives?Pet owners often view preservatives in pet food negatively.However,the use of antioxidants in pet food is generally well tolerated,and even positively evaluated.While preservatives and antioxidants serve some similar functions,there are distinct differences between them.Preservatives versus antioxidantsPreservatives are substances added to food products to prevent spoilage,inhibit the growth of microorganisms,and extend the shelf life of the product.They work by stopping or slowing down the growth of bacteria,molds,yeasts and other microorganisms that can lead to foodborne illnesses or spoilage.Antioxidants,on the other hand,are substances that help inhibit or delay the oxidation process in food.Oxidation is a chemical reaction that can cause the deterioration and degradation of food components(primarily fats and oils).By preventing or slowing down oxidation,antioxidants help preserve the quality,flavor and nutritional integrity of food.Its worth noting that some antioxidants,such as vitamin E(tocopherols)and vitamin C(ascorbic acid),are commonly used as both preservatives and antioxidants in food products.They serve a dual purpose by protecting against both microbial growth and oxidation.Are preservatives in pet food necessary?Certain types of pet food do not require preservatives due to their formulation or processing methods.For example,canned pet food does not typically contain preservatives because the canning process,which involves sealing the cans tightly and autoclaving them afterward,ensures the destruction of harmful microorganisms.Product claims such as cold-filled and without preservatives are therefore advertisements with self-evident facts Preserving pet food safety and regulations see next page36 PETS INTERNATIONAL|OCTOBER 2023|FOOD AND INGREDIENTS (truisms)and should be avoided.Pet foods with very low moisture content,such as extruded or oven-baked food,or dried snacks,also often do not require preservatives.However,semi-moist products with higher moisture content usually cannot do without preservatives to prevent the growth of molds.The use or absence of preservatives does not guarantee the absence of other food safety measures or an extended shelf life.Each pet food formulation may have specific recommendations,and it is advisable to follow the manufacturers guidelines for proper storage andusage.Some preservatives used in pet food,such as sorbic acid,acetic acid,and citric acid,are also commonly found in human food.Sorbic acid is a naturally occurring compound found in some fruits and berries,and acetic acid is widely known as the main component of vinegar.However,consumer awareness of additives in pet foods tends to be higher,due to the emotional attachment people have to their pets.Pets limited ability to communicate their discomfort or adverse reactions to certain foods places the responsibility on pet owners to understand the ingredients and additives in their pets food.Ensuring safety with preservative useIts important to note that while there are preservatives used in both pet and human food,the permitted usage levels and regulations may differ between the 2 categories.Preservatives and their permitted concentrations can vary depending on regional regulations and specific product formulations.The legal status of preservatives in pet food may also vary depending on the country or region.Regulations governing the use of preservatives in pet food are typically set by government agencies responsible for food safety and animal feed regulations.These regulations can change over time as new scientific evidence emerges,and as authorities update theirguidelines.For accurate and up-to-date information on the legal status of preservatives in pet food,it is best to look into the information given by regulatory bodies,such as the Food and Drug Administration(FDA)in the US,or the European Food Safety Authority(EFSA)in the European Union.These organizations provide guidelines and regulations for the proper use of preservatives(and other additives)in pet food.Upcoming developments Regulatory bodies often conduct ongoing research and reassessments to ensure the safety and efficacy of additives in pet food.They may review scientific studies,collect data,and consult with experts in the field to make informed decisions about the use of preservatives.These developments can lead to changes in regulations,such as updates to permitted preservatives,maximum usage levels,or labelingrequirements.An example of this is the reauthorization of potassium sorbate in the EU under the identification number 1k202,which now has a maximum quantity limit for all animal species and thus becomes subject to declaration.The same applies to citric acid(1a330),sorbic acid(1a200)and other re-evaluated additives,which are currently only to be named voluntarily.Consumers are therefore mostly unaware of the use of these preservatives,and could be unsettled as the substances are declared in the future.Compound feed and feed materials containing the relevant additives that are manufactured and labeled before 3 April 2024,may continue to be placed on the market and used until stocks are exhausted if they are intended for pets.Pet food mythsAlthough approved preservatives are safe additives,they are not perceived positively by consumers and there are a lot of pet food myths about them.It is therefore now imperative for the pet food industry to develop a communication strategy to improve public perception,or to consider the use of alternative,non-declarable preservatives to maintain consumers trust and still offer safe pet foods.Oven-baked food and dried snacks often do not require preservatives.Julia KlischiesPet Nutritionist,Petfood Expert Petfood-Global pet industryHows the hot category of CBD for pets doing?What are the latest trends in beds and cushions?How important is social media for pet brands?Can a lower VAT rate help combat rising prices?Find all the answers.Plus,more details on the GlobalPETS Forum and supermarkets entering the petspace.Pet parents&CBD:consumer survey results 38CBD pet products:the state of play 41Controlling anxiety and stress in pets 44Are you coming to the pet industrys leading networkingevent?48GlobalPETS Forum Award 2024 50Plaek Group czech republic 51The power of social media for pet brands 53Whats trending in beds and cushions?56Interzoo:Market developments under the magnifying glass 59A lower VAT rate to tackle price spikes?60Retail sector has pet supplies in its sights 6338 PETS INTERNATIONAL|OCTOBER 2023|GLOBAL PET INDUSTRY Discover how pet parents feel about CBD,why some wouldnt want to use it,howoften others use it for their pets and more.In collaboration with Yummypets,we asked 944dog and cat owners about their thoughts on CBD(cannabidiol,a cannabis ingredient with certain health benefits)and their purchasing habits.Pet parents from the US(33%),Canada(31%),France(20%)and the UK(17%)participated in the survey.How interested are they?Most pet owners(72%)are familiar with CBD,but nearly half of those surveyed(49%)indicate that theyd never bought a CBD product for themselves or theirpets.About 16%of pet parents have bought a CBD-based product for their pets,41%of pet parents would be interested in trying one and 13%arent really interested.As US consumers are most familiar with CBD and the strongest proponents for it its no surprise that theyre also more likely to have bought these products for their pets.On the other hand,French consumers are least likely to have purchased CBD products.Theyre also the least acquainted with it and are most likely to strongly disapprove of CBD.How often do they buy?Of those respondents who have bought a CBD pet product before,the majority indicate that they have only tried it once(18%)or rarely give it to their pets(33%).A small group of CBD buyers(13%)regularly give these products to their pets.Interestingly,while more US pet parents have tried CBD for their pets,they dont use it more often.So,even though CBD is more widespread in the US,this popularity doesnt necessarily equate to more frequent use.UK pet parents are most likely to have just tried itonce.This could have something to do with the fact that a large portion of CBD consumers(47%)tried it for the first time in the last 6 months so they might not have had enough time for repeat usage.In fact,82%of people indicated they would buy a CBD pet product again.Only 8%think they wont.Pet parents&CBD:consumer survey resultsWhich of the following describes your CBD pet products experience/attitude?I have used them160 =I have heard of them and would be interested inusingthem41A0 =I have heard of them and would not be interested inusing them130 =I have not heard of them3000 =PETS INTERNATIONAL|OCTOBER 2023|GLOBAL PET INDUSTRY 39Product popularityThe most popular types of CBD pet products are the most readily available:oils(63%have used it)and chews(59%).Biscuits(22%),sticks(12%)and paste(9%)are bought much less.US consumers prefer chews over oil.Canadian pet parents,on the other hand,prefer oil over chews.Effect&satisfactionMost owners who have tried CBD pet products(71%)indicate that theyre satisfied with the effect the product had on their pet.78%indicate that they noticed positive changes in their pet after consumption.The experience of a small group of pet parents was less positive:14%indicate that they noticed some negative changes in their pets after consumption.The motivations behind(not)buyingThe most common reasons people buy CBD-based pet products are for stress relief(65%)and relaxation(54%).Others include pain relief(41%),joint care(27%),general health improvement(31%)and mood enhancement(30%).Of those who havent bought any CBD pet products,41%indicate that their pet doesnt need it.Uncertainty or limited understanding about these products also plays a role:35%are concerned about product safety,its legality(22%),whether their pet would become addicted(21%)or high(21%),or that the benefits havent been proven(29%).If non-buyers were to start buying CBD products,the main reasons would be stress relief(62%),pain relief(57%),relaxation(50%),joint care(46%)and general health improvement(43%).Special thanks to Philippe VanderhoydonckManaging Director GlobalPETS40 PETS INTERNATIONAL|OCTOBER 2023|GLOBAL PET INDUSTRY STIMUDERMULTRACompletely innovative range of products based on unique solutions.Unique formula based on scientificaly proven*ACTIVE NTMTM molecule stimulating hair regrowth.The only integral dermoprogram on the market supporting alopecia treatment in dogs.Specialized premium veterinary dermocosmetics.*Confirmed in clinical trial:Popik M.1-metylonikotynamid jako modulator fizjologicznego i dystroficznego cyklu wosowego myszy C57B1/6.”(1-methylnicotinamide as a modulator of physiologic and dystrophic hair cycle of mice C57BL/6.”)PhD thesis,The Faculty of Biochemistry,Biophysics and Biotechnology UJ,2008.INNOVATIVE SUPPORTIN ALOPECIA TREATMENTIN DOGSINNOVATIVE SUPPORTIN ALOPECIA TREATMENTIN DOGSINNOVATIVE SUPPORTIN ALOPECIA TREATMENTIN DOGSDOGSWWW.VETEXPERT.WORLD PETS INTERNATIONAL|OCTOBER 2023|GLOBAL PET INDUSTRY 41Pet-specific CBD products are on the rise,but some regulatory challenges are halting developments in the sector.It might seem that CBD hasnt thoroughly infiltrated the pet market,but a lot of evidence suggests the contrary.Valued at$196 million(180M)in 2022 by Grand View Research,the pet-focused CBD sector is set to witness 31.8%year-on-year growth to reach$1.71 billion(1.57B)in 2030.And while these figures are global,the US is the epicenter of this industry.CBD products for pets are so popular that theres a National Pet CBD Day in the US,celebrated on 21 April.Regional differencesThe presence of key players,and a greater understanding of the benefits of CBD products,are driving the sector forward in the US.“Pet parents across the world are,for the first time,acknowledging that the pet is a member of the family,and nowhere is this more apparent than in North America,”explains Charles Lozow,a US Lawyer and co-founder of the Veterinary Cannabis Society(VCS).Combine this with“a national and state regulatory system that was initially very open”,he adds,and it has paved the way for the rapid adoption of CBD pet products by pet parents“seeking natural alternatives to harmful pharmaceuticals and invasive procedures”.But theres a flip side to the story across the Pacific.While Asia is predicted to be the fastest-growing region in this sector,its riddled with regulatory challenges an obstacle affecting this industry internationally.Blanket ban In February,the Hong Kong government introduced a blanket ban on CBD,classing it and other cannabis-derived compounds like tetrahydrocannabinol(THC)a dangerous drug.CBD pet products:the state of play see next pageCBD pet products:the state of play42 PETS INTERNATIONAL|OCTOBER 2023|GLOBAL PET INDUSTRY The ruling wiped out CBD pet companies on the island,and Lozow explains that the ban appears to be founded on concerns about the presence of THC in hemp-derived CBD products.“Unfortunately,the unintended result of the very severe penalties is that it is fueling the grey and black markets for CBD,including CBD pet products,”he says.European approachIn the UK,the Veterinary Medicines Directorate has classed CBD as a drug that can only be prescribed by vets,meaning that human-centric CBD products require marketing authorization to be sold for pets.No company so far has the approval to do so.Across the EU,CBD for pets is regulated as a novel food,so it must be safely evaluated before being marketed as a food supplement.The VCS co-founder says that while the European Food Safety Authority the body responsible for such assessments has published a scientific opinion deeming CBD safe for pets when used according to the proposed conditions,the EU hasnt approved any CBD products for vet use yet.Researching specific formulationsOne organization hoping to get marketing approval is UK-based Pet Pharmaceuticals.Heidi Whitman,an advisor to the company,says regulatory challenges in Europe are more about proving the consistency of formulations,a quality that whole-plant CBD lacks.The company has also proposed research evaluating“very specific formulations of cannabinoids and terpenes with regards to safety and efficacy for a variety of conditions commonly affecting pets”.Whitman explains that“Dosage is key to getting the maximum effect from cannabinoids,and our research will determine what these should be.”Boom or bust?In the US,the Food&Drug Administration(FDA)has denied 3 citizen petitions calling for CBD products to be marketed as dietary supplements.Despite that,there are signs of progress.“CBD supplements are already being widely marketed in the US for both humans and animals,”Whitman points out.“Producers have to be cautious not to make any claims in their marketing that the FDA would consider to be drug claims,but other than that,it largely steers clear of the supplements market when it comes to hemp-based CBD products.”Charles Lozow says that Congress is finally forcing the FDA to act,after reintroducing legislation including the Hemp Access and Consumer Safety Act providing regulatory pathways for CBD as a food and beverage additive and allowing hemp-based CBD(and other ingredients)to be marketed as dietary supplements.“Itslikely that the FDAs action will,at least,not allow the treatment of CBD to be like most other supplements in the US,and that the FDA will craft another regulatory regimen to apply to this and other prevalent molecules from hemp.”Heidi Whitman adds that most regulatory issues around CBD exist due to the confusion separating hemp-based products from those with higher THC content:“Theres a lot of misinformation and a lack of understanding in the legislative and regulatory community.”The way forward for CBDHave these regulations compared with the various ill-effects cited by governments imposing them punctured the pet CBD boom?Not according to Lozow,who says the sector will keep growing,as the scientific and veterinary community continues to grasp CBDs safety and medical potential.Neither expert believes that there are serious health detriments associated with CBD use.Whitman says animal-specific studies have shown only mild negative effects of CBD when given at very high doses:“At most therapeutic doses,there are no demonstrable negative effects.Clearly,theres a much narrower margin of safety for THC.This is a good example of the kind of confusion thats out there.”And despite a notable rise in use,Lozow says“the number of reported adverse events continues to be remarkably low”.CBD products for pets are so popular that theres a National Pet CBD Day in the US.PETS INTERNATIONAL|OCTOBER 2023|GLOBAL PET INDUSTRY 43VCS believes that“wrong-headed”CBD regulations can be overcome through science-driven data,education and effective advocacy.“Thesetools must be directed to the regulators and lawmakers at local,state,federal and international levels to demonstrate that CBD is a safe compound,”says the VCS co-founder.Promising signsThe US National Animal Supplement Council(NASC)recently announced a successful study showing the tolerability of CBD products in healthy dogs.Results showed that cannabinoids were well tolerated when healthy male and female dogs were dosed for 90consecutive days.“Based on the data available,it was the conclusion of the authors that these substances do not pose significant risk to dogs in long-term use,”the NASC says.And in July,delegates at the European Association ofVeterinary Pharmacology and Toxicology congress saw Innocan Pharma present insightful CBD research results on pharmacokinetics and pharmacodynamics.Education is crucialWhitman and Lozow both pinpoint education as the key to increased acceptance among consumers and vets a crucial goal given that the latter are the formers“primary influencers”,as Lozow puts it.Pet Pharmaceuticals is working with organizations,including the VCS,to provide reliable safety information to pet owners,medical professionals and regulators for CBD use in pets.More research and positive regulations will allow for the safe production,sale and use of CBD within the medical community.As vets grow more comfortable with using CBD for pets,Whitman predicts increased interest due to the efficacy and more favorable side effects than many other similar pharmaceuticals.Education is the key to increased acceptance among consumers and vets.Anay MridulPETS International Contributor 44 PETS INTERNATIONAL|OCTOBER 2023|GLOBAL PET INDUSTRY According to the American Pet Products Association(APPA),the use of calming products has recently grown considerably.Estimates show that 11%of dog owners and 6%of cat owners regularly give their pets calmingmedicines.The use of shirts/suits,treats,music and toys as calming products for dogs also increased in the US between 2020 and 2022.For cats,calming toys are the most popular(27%),followed by treats(15%),collars(13%),sprays(12%)and music(11%).Looking at product launches,and innovative product designs,there is significant consumer demand for pet beds and condos,vests,shampoos and gels.Treats in the leadTreats and supplements create the greatest demand for calming products.They are the preferred category for ease of use and a combination of health benefits.Some of the latest launches in treat-type supplements for stress and anxiety management include US-based Snuggle Puppys Puppy Bites,formulated as night-time supplements,and Badlands Ranchs Super20,the brands entry into the pet supplements market.Both products focus on the so-called hypothalamic-pituitary-adrenal(HPA)axis,regulating stress levels in dogs in addition to promoting joint,muscle and tendonhealth.The US fresh pet food company PetPlate also recently launched calming supplements.These use the medicinal herb ashwagandha and amino acid L-theanine to help pets relax.Other product innovationsProduct design innovations promoting calmness are particularly interesting for pet mood management.US-based Hiddin Products makes functional home accessories like cages and crates with clear acrylic.Its products aim to manage separation anxiety and promote pet relaxation.The transparent build eliminates the obtrusive fencing and gates often used in pet crates.Thundershirts anxiety vests and BuddyRests weighted blankets are still preferred items among pet parents.Puzzle,automated laser and Kong toys are also increasingly popular,with more products now on the market offering innovative ways to promote mental stimulation,targeting pet restlessness and boredom.For pain relief,the latest innovations are light therapy pads,such as one manufactured by Chinas TheyPet Medical,and far infrared technology(FIR)vests,like the South Africa-based Steed and Styles Protechmastarange.CBD It is estimated that 37%of US dog owners purchased a CBD product for their pet last year,with 34%keen to continue doing so this year,according to APPA.CBD(cannabidiol)is a key category of products used to manage anxiety,stress and joint pain in dogs,as Controlling anxiety and stress in pets We analyze what the market has to offer for mood and pain management.well as anxiety and arthritic pain in cats.About 16%of cat owners and 15%of dog parents use them to managepain.In the US,treats and shampoos are the most common products containing CBD,but food toppers,oils and supplements are much sought after too.UK-based pet supplements brand Snoops Store has introduced a daily Hemp Seed Oil supplement.This improves sleep and benefits relaxation by easing inflammation and helping digestion.Colorado-based Pet Releaf recently added 2 CBD shampoos and conditioners to its portfolio.When the company launched its first CBD products in fall 2022,everything sold out on the first day.The products were quickly picked up by many distribution partners,including Southeast Pet,Newco and Supreme PetSupply.Launches in AsiaInnovations are appearing on Asian markets too.Californian med-tech company Ainos recently launched its VELDONA supplements line in Taiwan.Formulated for emotional health and stress relief for cats and dogs,it aims to generate a whopping$20 million(18M)in sales by 2024.After a successful introduction in the United Arab Emirates,Indian company Soul Strips is looking forward to bringing its oral supplement strips for pet anxiety and joint mobility onto the home market.Malaysian premium food brand OzPro has announced plans to expand into the pet supplements market with products targeting musculoskeletal health and joint mobility as a preventive measure for pain management.Muskaan GuptaAssociate News EditorGlobalPETSProduct innovations in the pet calming category are led by the humanization Dinnissen celebrates its 75 year anniverary.Continuity is the basis for successful innovation.Thanks to the unique combination of decades of cross-industry experience and process knowledge,in-house production and testing facilities,Dinnissen has succeeded for 75 years in creating the best solutions and innovating and optimising entire production processes.Want to know more about what we do to be and stay trusted by the best?Visit 46 PETS INTERNATIONAL|OCTOBER 2023|GLOBAL PET INDUSTRY Join us for the networking event of the yearAnd meet 239 other pet industry executivesWhat to expect from this networking event?240 executives from the worlds leading pet companies together in one room Meet and make deals with new international business partners through facilitated networking Get inspired by the latest trends and developments to stay ahead of your competition Hear from leading retailers and other key industry players All at a 5-star locationSponsored by:PETS INTERNATIONAL|OCTOBER 2023|GLOBAL PET INDUSTRY 47Join us for the networking event of the year24-26 January 2024Venice italyMore info&tickets? a great place to meet all the leaders in the pet business in one place.And I always get many great ideas.Thats why Im happy tocome back every year.Duan Plaek,CEO of Plaek GroupThe GlobalPETS Forum is the TOP event in the pet industry.Its the best place for qualified discussions with the absolute leaders in our pet world simply a must!Torsten Toeller,Chairman of Fressnapf48 PETS INTERNATIONAL|OCTOBER 2023|GLOBAL PET INDUSTRY In January 2024,around 250 executives from leading pet companies will gather at the GlobalPETS Forum in Venice for 3 days of networking and inspiring presentations.Will you join them?Since 1999,the GlobalPETS Forum has been a popular meeting place for the industry.Its an opportunity to reconnect with old friends or acquaintances and make new business connections.Its also a chance to learn more about where the industry is going,which consumer trends to keep an eye on,and how to prepare your company for continued success in thefuture.The programThe upcoming edition of the GlobalPETS Forum spans 3 days,from 24 to 26 January 2024,at the 5-star Hilton Hotel in Venice(Italy).The program is as follows:Day 1.The event kicks off with an optional tour of pet retail stores around Venice.Afterward,an informal evening dinner gives you the opportunity to socialize with other attendees.Day 2.From the morning until the evening,the program is jam-packed with high-quality presentations and networking moments.At the end of the day,its time to relax and network in a more informal setting as you enjoy a delicious walking dinner during the renowned Social Evening.Day 3.On the last morning,youll get your final dose of inspiration from top speakers,followed by a networking lunch before heading home.Who youll meetThe attendees are a diverse group of senior-level executives(C-suite or VPs/directors)from a cross-section of the worldwide pet industry.For example,you might bump into one of the major European pet retailers while grabbing an extra scoop of delicious pasta at the buffet,or you could find yourself sitting next to the CEO of a pet food company,a distributor from the Middle East,a branded pet toy manufacturer from the US or a packaging supplier.With a high repeat-visit rate,the GlobalPETS Forum has proven to be a cant-miss event,and this is largely due to the quality of the interactions and the diversity of the attendees.Every year,were proud to hand out loyalty awards to people whove attended for 10,15 or 20 years.What youll learnThe industry has endured a rocky ride in the last few years:from a booming pet population and increased consumer demand,to shipping issues,rising container costs,higher prices and more recently inflationary pressure and a decreasing pet population in some countries.What does this mean for our industry going forward?Which new trends are starting to emerge?How will consumer preferences continue to evolve?And how does your company need to switch gears to deal with these changes?The event will provide answers to these and other questions.How to registerDont miss this opportunity to join fellow pet industry professionals for 3 days of insights and networking!For the full program and to register,go to the event website: you coming to the pet industrys leading networking event?PETS INTERNATIONAL|OCTOBER 2023|GLOBAL PET INDUSTRY 49 SponsorsThe speakersWeve put together an impressive lineup of top speakers,including:Nicol Galante,CEO of Arcaplanet,will provide insights into the performance of Italys largest pet retailer and its plans for the future.Industry veteran Jeffrey David,Chairman of Musti Group&Independent Pet Partners USA and founder of Petbarn,will talk about his global pet industry observations,lessons learned and future industry predictions.Liseth Galvis,Senior Research Analyst at Euromonitor,will share her predictions for emerging trends and pet consumer developments in 2024 and beyond.Eli Hasson,Investor and Director of Pet Health Innovation Labs(the venture arm of Australian pet retailer Petstock),will discuss innovation in the petindustry.Matthieu Glayrouse,co-founder of Yummypets,will present consumer insights gathered from the online community of pet parents.Marta Sukiewicz,VP Global Research Solution at Similarweb,will use online search and marketplace data to analyze trending pet categories in different countries and regions.APC united states/spainAPC offers high-quality and sustainable spray-dried plasma and hydrolyzed plasma for wet and dry formulas,treats and supplements.Plasma can be used for traditional wet functional benefits,providing superior gelling,emulsification and water-holding capacity.In dry foods,treats and supplements,plasma offers the opportunity for a different kind of functionality supporting immune health.M-PETS belgiumM-PETS is a key player in the manufacturing and distribution of pet products.The company provides a wide range of innovative and exclusive products for dogs and cats,with over 350 patents,and is available in 50 countries worldwide.M-PETS products feature stylish designs,engaging functions and certified ecofriendly materials(FSC,TV Rheinland,GRS).Pet Food Competence NetworkThe Pet Food Competence Network comprises 11 like-minded companies,with decades of combined experience,giving you simple and streamlined access to the very latest the industry has to offer.The domain expertise of each company is merged into a complete,tightly integrated production solution that can be scaled and fully connected to match your requirements.50 PETS INTERNATIONAL|OCTOBER 2023|GLOBAL PET INDUSTRY Who will follow in Snellman Petfoods footsteps the winner in 2023 and winnext years prestigious GlobalPETS Forum Award?The GPF Award is presented annually to a company in the pet industry that has demonstrated exceptional performance.After 2 decades,it has become one of the most important awards in the industry.Curious about who will win in January 2024?Join us in Venice to findout!KormotechKormotech,a second-generation family business,is the largest Ukrainian producer ranked 55th in the worlds top pet food producers list.Their mission is to change cultural patterns toward pets in Eastern Europe.3production plants in Ukraine and Lithuania produce premium and super premium brands of pet food and private labels,exported to 40 countries.Earth RatedEarth Rated is a B Corp-certified company that creates thoughtfully designed dog products.With a focus on innovation and responsibility,Earth Rated is dedicated to making everyday moments for people and their dogs simpler and better.Their products are used by over 4.5 million people daily and can be found in over 20,000 stores worldwide.LaroyThis Belgian pet supplies company,based in Ghent,
2023-12-22
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