Adapted from MyTotalRetail.com
There’s an evolution occurring in a crucial segment of e-commerce: digital goods and services. Companies like Netflix, Airbnb, and FanDuel have built digital empires that have reshaped the media, travel and gaming industries. In doing so, these businesses (and their peers) are not only driving digital commerce forward, they’re reshaping the purchasing expectations of a new wave of consumer.
Many merchants across industries and regions are now adopting digital strategies, and are looking for insight into the nuances of their newly “digitized” customer base.
To provide those insights, Fiserv partnered with Forrester Consulting to develop a new study, “The Global Rise of Digital Goods and Services,” which examines the growth of this increasingly popular segment and the purchasing behavior of consumers across the globe.
As the title suggests, consumers were asked about their spending habits and preferences when purchasing digital goods, which encompasses all of the nonphysical items we purchase online. Therefore, forget the Amazon Prime order that’s waiting on your doorstep, and think about categories like:
- on-demand services, like ride-sharing;
- digital media (e.g., songs, movies, e-books);
- computer software and mobile apps;
- online gaming; and
- travel and entertainment services.
For the study, 6,115 consumers were surveyed in 15 countries: Australia, Argentina, Brazil, India, Mexico, Malaysia, North America (U.S. and Canada), the Philippines, Scandinavia (Denmark, Norway, and Sweden), and the United Kingdom; and in four different age groups: Linksters (ages 18 to 23), Socializers (ages 24 to 37), the MTV Generation (ages 38 to 53), and Maturists (ages 54 plus).
Market Size and Potential
Digital goods and services represent a large and growing portion of consumer spend. Our data shows that 74 percent of online purchases made in the last year were for a digital good or service. Recent success stories in the digital space suggest that this share will continue to grow. Uber is now providing nearly 15 million rides to customers each day, and when Electronic Arts (EA) released the latest version of its Madden NFL game earlier this year, half of revenue in the first week was attributed to digital download sales.
Top of Mind for Consumers
With the market growing rapidly, research shows that retailers wanting to capture the digital commerce opportunity should keep three key things in mind:
- Security is the most important component to a digital purchase, across all ages and geographies.
- Linksters have the second highest spend for digital goods and services. That being said, they prefer cash over any other payment method and are the least tolerant of having their personal information stored online.
- While the rise of digital goods and services creates great opportunity for merchants, it also creates increased competition. Consumers have options and they know it, and those options can reduce loyalty and increase the pressure on merchants to have stellar online checkout experiences. Case in point: one bad experience can cost you a customer for life. According to our study, 57 percent of consumers will stop shopping at your business after just one negative purchasing experience.
Opportunity to Grow
Merchants that are executing against their digital business strategies still have ample opportunities to grow share, especially in the on-demand services arena. Our study found that 31 percent of consumers had made a purchase of a digital good or service. However, that means 69 percent of consumers made zero purchases, leaving significant opportunity for retailers to capitalize.
Retailers will be best positioned for growth if they understand and deliver on the unique nuances in consumer behavior globally — many of which can be surprising:
- Payment preferences are not homogenous: Fifty-eight percent of consumers in the Philippines like to have cash as a payment option for digital goods, compared to 18 percent in North America. Meanwhile, only 3 percent of North American consumers used net banking; however, it’s the third-most popular payment type in India, with 49 percent usage.
- Digital goods and service purchase rates differ substantially between regions and demographics: For example, Malaysians used ride sharing services more than five times more often than Germans in the past 12 months, and consumers in India download by far the most music of any country we studied … but stream it the least.
- Growth in digital spans generations: In fact, 54 percent of the MTV Generation prefer online/mobile payment methods, which is the highest among all demographics. Popular purchases for the MTV Generation include mobile gaming, ride sharing, and restaurant delivery.
- The payments experience has significant room for improvement: Eighty-four percent of consumers had negative experiences with payments over the last 12 months, and as noted earlier, 57 percent of consumers will stop shopping at a business after just one negative purchasing experience.
In closing, acknowledging the importance of local market and demographic nuances is easy, but truly understanding how you need to deliver on each isn’t. To capitalize on the rise of digital goods and services globally, retailers can develop a strategy that caters to each new digital consumer encountered — whether it is a ride sharer in Malaysia, the gamer in Brazil, or the 21-year-old in India hoping to spend hard-earned cash on a digital download.
Read the original article at MyTotalRetail.com