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I-Com EU Study SMART CONSUMERS The impact of digitalization on business-to-consumer relationship Brussels, EESC, 21 June 2017
I-Com EU Study
SMART CONSUMERS
The impact of digitalization
on business-to-consumer relationship
Brussels, EESC, 21 June 2017
Digital penetration in Europe
% of individuals not accessing the Internet in 2016
3
There were very differentiated rates in Europe in 2016 Northern Europe shows the best performance: in Finland, the United Kingdom, Sweden, Denmark and Luxembourg, only a tiny percentage of individuals were not using the Internet in 2016 The worst results are registered by Bulgaria, Romania and Greece, where the percentage of individuals not accessing the Internet was 33, 30 and 28, respectively
Source: Eurostat
33
30 28
26 25
23 23 22 22 22
21 19
17 17 15 15
14 13 13
11 10 10
8
5 4 4
3 2 2
0
5
10
15
20
25
30
35
Internet usage – age bracket in 2016 (% of individuals)
4
There is a reverse relationship between age and Internet usage Younger people are more inclined to use Internet (97% 16-24, 96% 25-34, 93%, 35-44) while older people - due to lack of skills and digital culture and given different habits - reveal more challenges (86% for 45-54, 72% for 55-64 and 51% for 65-74)
Source: Eurostat
100 100 94 100 100 97 100 98 100 98 99 97 97 98 100 98 97 99 98 97 100 99 99 98 99 92 97 90 90
100 100 95 100 100 97 99 98 100 96 100 95 96 97 97 96 96 97 96 98 97 97 98 95 95 87 94 88 84
100 98 99 100 100 97 99 96 99 95 95 96 93 93 94 93 93 94 93 93 89 94 90 91 90 84 86
78 81
98 98 97 97 99 95 95 90 92 88 84 91 86 82 83 83 88 86 84 80 76 75 73 72 75 75
76 65 64
97 95 96 93 93 94 86 78 77 79 73 71 72 65 67 70 65 66 56 54 55 56 49 52 45
58 43 44 43
87 91 89 78 75 82 64 63 53 62 52 46 51 49 38 39 40 35
38 31 27 19 29 27 29 29 17 20 15
16-24 25-34 35-44 45-54 55-64 65-74
Internet use and activities – 2016 (% of individuals)
5
Sending/receiving e-mails and information research for goods and services are the most frequent activities. In 2016, 97% of online individuals sent/received e-mails and 66% found information about goods and services
Source: Eurostat
93 93 88 83 90 85 79 77 73 83 71 77 68 53 69 62 77
58 71 76 64 58 66 57 52 58 43 54 42
58 53 48 46 37 32 38 41 42 28 46 33 35 54
41 37
27 52 32 29 25 33 32
28 32 28 48 24 27
74 67
70 69 62 62 69 57 66
50 57
45 58 60 57 63 49 50 52 40
54 50 38 52 47 44 45 42
44
86 86
83 80 85
85 72 77 70
82 61 74 68 62 60 64 70 62 66
65 67 66 65 59 57 57 38 35 35
sending/receiving e-mails telephoning or video calls participating in social networks finding information about goods and services
Active users of key global social platforms
6
In January 2017, more than 2.8 billion people use social channels at least once a month, and more than 91% of them using mobile devices Facebook is the most widely used platform with 1.871 billion
Source: Digital in 2017, WeAreSocial
1871
1000
632
550
500
317
300
297
150
122
106
90
1000
1000
877
846
300
300
220
100
100
100
49
0 200 400 600 800 1000 1200 1400 1600 1800 2000
FB Messenger
Youtube
Qzone
Tumblr*
Biadu Tieba*
Skype
Snapchat**
Sina Weibo
Line
YY
BBM*
Telegram
Viber*
Vkontakte
Kakaotalk
messenger/chat app/voip social network
E-commerce in Europe - % of individuals purchasing online
7
Online purchases increased from 30% in 2007 to 55% in 2016 The highest percentages were found for the 25-34 and 16-24 age groups (72% and 67%, respectively) Clothes and sport goods are the item most likely to be purchased online in the EU (34% of e-buyers), followed by travel and holiday accommodation (29%) and tickets for events (21%)
Source: Eurostat
67
72
65
55
41
27
0
10
20
30
40
50
60
70
80
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
16 to 24 years old 25 to 34 years old 35 to 44 years old
45 to 54 years old 55 to 64 years old 65 to 74 years old
55
0
10
20
30
40
50
60
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Total enterprises turnover from e-commerce (%)
8
Large enterprises - which have more resources to invest in digital channels and are more aware of the importance of e-commerce - benefit more from e-commerce (22% on average at EU level) Ireland is the most advanced country with 45% of the turnover of large enterprises stemming from e-commerce
Source: Eurostat
23
12 11 10 7 8 6 5 8 9 6 6 6 8 3
8 8 5 5 8 3 0 4 3 3 2 2 3 0
21
27 24
20
13 13 12 12
16
31
12 13 9 10
8
13 8
8 8
15
10
0
13 6 9 11
1 0 0
45
38
27 27
24 22 25 26 18
0
22 21 25 20 27
16 19 22 20
9
12
22
4 11 5 2
8 0
0
Large enterprises Medium enterprises Small enterprises
Internet banking - % of individual users in 2016
9
The best performer is Denmark with 88% of users in 2016, followed by Finland (86%) and the Netherlands (85%) The lowest percentages were registered by Greece (19%), Romania (5%) and Bulgaria (4%) The most active groups by age are, in general, the 25 to 34 years old and 35 to 44 years old
Source: Eurostat
88 86 85 83 79
71
64 64 62 59
54 53 53 52 51 49 46 45 43
39 38 35 35
29 29 28
19
5 4
0
10
20
30
40
50
60
70
80
90
100
E-Government - % of individual users in 2016
10
In 2016, 48% of individuals in the EU used Internet to interact with public authorities The percentage varied considerably across Member States, ranging from 9% in Romania to 88% in Denmark The most popular activity is obtaining information (42% on average in the EU), followed by downloading official forms (29%)
Source: I-Com elaboration on Statista data
88
82 78 77 76 76
69 66
60 55 55 53 52 50 49 48 48 48
45 45 45 44
38 36 36
30
24 19
9
0
10
20
30
40
50
60
70
80
90
100
Internet of Things and Big Data
Global IoT market size
12
The global market value of IoT is projected to pass the one trillion dollars mark for the first time by 2017, a significant increase, considering the market was valued at around 600 billion dollars in 2014. This represents a 25.1% average yearly increase over the ten-year period
Source: I-Com elaboration on Statista data
182
601
1,710
0
300
600
900
1,200
1,500
1,800
2009 2010 2011 2012 2013 2014 2015* 2016* 2017* 2018* 2019*
in b
illio
n $
IoT market size in EU
13
Total EU market size amounted to 366 billion euros in 2014, with the UK, Germany and France accounting for the majority of the total (55%)
UK Germany France Italy SpainNetherla
ndsSweden Belgium Poland
Othercountries
2014 78,678 71,114 55,444 32,087 24,500 18,584 13,436 9,353 9,017 53,778
2020 269,283 243,642 185,086 97,927 65,570 57,922 50,199 28,328 26,494 157,152
0
50,000
100,000
150,000
200,000
250,000
300,000
in m
illio
n €
Source: I-Com elaboration on Statista data
Annual net contribution of 5G to global growth
14
The total GDP contribution of 5G, over the period 2020-2035, will amount to about 3 trillion dollars. An average annual GDP growth of 0,2% is associated with 5G deployment
Source: IHS (2017)
163 175
185 181 170 168 171
181 193
202 195 194
200 207
215 223
0
50
100
150
200
250
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
in b
illio
n $
Data market value in the EU
15
The data market value is expected to increase from current 59,5 billion euros to approximately 80 billion euros, with the UK, Germany, France and Italy accounting for 62% of the total
Fonte: I-Com elaboration on data European Data Market Monitoring Tool, IDC (2016) * Baseline scenario
47,420 50,888
54,351 59,539
79,637
0
30,000
60,000
90,000
2013 2014 2015 2016 2020*
in m
ln €
Data market value in the Big Five countries
16
Germany has recently been surpassed by the UK that reached a market value of over 13 billion euros and is expected to grow further - at a compound annual rate of 7.5% - to approximately 18 billion euros in 2020
Source: I-Com elaboration on data “European Data Market SMART 2013/0063 (1st February 2017)”
0
4,000
8,000
12,000
16,000
20,000
2013 2014 2015 2016 2020*
in m
ln €
United Kingdom
Germany
France
Italy
Spain
Data economy impact on GDP, by Member State
17
The impact of data market on EU economies is still small but starts to be significant, ranging in 2016 from 0.59% in Luxembourg to 2.34% in the UK, with an EU average equal to 2%, expected to increase to 2,48% by 2020
Source: I-Com elaboration on data European Data Market Monitoring Tool, IDC (2016) * Baseline scenario
0% 1% 2% 3% 4% 5%
Luxembourg
Greece
Slovenia
Hungary
Romania
United Kingdom
Slovakia
Poland
Czech Republic
Latvia
Bulgaria
Lithuania
Portugal
Cyprus
France
Italy
Belgium
Sweden
Spain
Ireland
Malta
Finland
Austria
EU28
Estonia
Netherlands
Denmark
Germany
UK
2016
2020*
The new relationship
between companies & consumers
Expected services in exchange for personal information
19 Source: Osborne Clarke European connected consumer November 2016
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Europe Germany Spain Belgium Italy UK France Netherlands
Personalised offers based on your search and purchase history
Personalised pricing based on your search and purchase history
Staff to make product recommendations based on your online history
Personalised marketing emails
Personalised adverts when shopping online
Staff to greet you by name when shopping in store
Consumers are tired of the standard marketing approach and largely perceive them as spam. As they provide personal data, they are currently expecting brands to have solutions that use it intelligently and often reward those brands that do so
Companies using messaging achieve better financial results
20 Source: Customer Messaging, Aberdeen Group
24.5%
19.4%
15.0%
8.6%
5.7%
15.5%
9.8%
1.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
ROMI Annual company revenue Cross-sell and up-margin percustomer
Average profit margin percustomer
Companies using messaging All others
Top Social Care Industries
21 Source: https://www.socialbakers.com/free-social-tools/socially-devoted/q3-2015/
67.2%
67.9%
69.9%
70.8%
71.2%
73.3%
78.0%
82.7%
84.2%
88.6%
Household Goods
Beauty
E-commerce
Services
Conglomerate
Industrial
Retail
Finance
Airlines
Telecom
21.6%
23.7%
26.0%
30.7%
31.2%
37.9%
38.8%
42.8%
43.4%
51.8%
Electronics
Accommodation
Travel
Industrial
Retail
Gambling
Services
Airlines
Finance
Telecom
The benefits of Social Devotion are clear: socially devoted brands have 3.5 times more interactions than their less-responsive competitors. Telecommunications is by far the most open and reactive industry on Facebook and Twitter, answering to 88.6% and 51.8%, respectively, of their likers/followers
Perceived Benefits - Chat Bots vs Apps
22 Source: Chat Bots, a Consumer Research Study, My Clever 2016
68
64
50
37
28 18
18
18
14
9 20 19
17
17
10 8 11
9
4
6
24-hour service
Quick answers to simplequestions
Convenience
Easy communication
Easily register complaints
Quick answers to complexquestions
Friendliness
Detailed answers
Timely complaint resolution
Good customer serviceChat-Bot
Apps
In this super dynamic environment, chat-bots enter and promise a faster and more intelligent experience in line with consumer expectations. The chances for chat-bots are even greater, when compared directly with Apps, an area where businesses have invested heavily, as chat-bots have scored the highest in every regard
Focus on the energy sector
Digitalization impact on utility earnings (%)
24 Source: I-Com on McKinsey & Company data
6.6
2.5
4.3
8.5
1.3
23.2
0 5 10 15 20 25
Generation
Trading
Distribution
Retail
Group headquarters
Total impact
% EBIT
Digitalization can boost profitability by 23.2 percent. The main impact of digitalization is on the retail area (8.5%), through the creation of new (individual) products and a better price-customer segmentation
Global investments in IoT in 2016
25 Source: I-Com on IDC data
In 2016 the first three industries which invested in IoT were manufacturing ($178 billion), transportation ($78 billion) and utilities ($69 billion). Most of the spending of the top industries is for specific use: manufacturing operations (58%), freight monitoring (72%) and smart grids for electricity and gas (84%)
0
20
40
60
80
100
120
140
160
180
200
Manufacturing Transportation Utilities
$ b
illio
n
Main use case Total expediture
Percentage of 5G-enabled output on total sector production in 2035
26 Source: I-Com on IHS (2017) data
According to forecasts by IHS (2017), 5G will
result in $12,300 billion of global
economic activity in 2035, 4.6% of global
real output in that year. The percentage impact of 5G-enabled
output varies from 11.5% in the
information and communications
sector to 2.3% in the hospitality sector.
Potentially realizing $273 billion, and
utilities 5G-enabled output could
represent 4.5% of the total production in the
sector
4.50%
0% 2% 4% 6% 8% 10% 12% 14%
Info & communications
Public service
Ag. foresty & fishing
Transport & storage
Hospitality
Construction
Finacial & insurance
Utilities
Manufactoring
Mining & quarrying
Professional services
Education
Arts & entertainment
Wholesale & retail
Real estate actvities
Health & social work
App for energy customers and customer empowerment
27
Nest adjusts the temperature
according to actual needs and turns off
heating in the case of long absences
MY AGL IQTM website
enables residential and small business customers
to track their energy usage, set goals to help lower their energy bills
Elemize will promote energy
efficiency through cloud analysis and communication
in real time of a building’s energy consumption ,
resulting in an energy saving strategy
Watty app shows how much energy each appliance is using in
real time. This helps people to make smart decisions
about their energy consumption and gives
them the ability to choose what to switch off
Potential impact on the job market
28 Source: I-Com on Accenture (2016) data
-600
-400
-200
0
200
400
600
800
1000
1200
Ass
et P
erfo
rman
ceM
anag
emet
Dig
ital
Fie
ld W
ork
er
Sam
rt A
sset
Pla
nn
ing
Ener
gy A
ggre
gati
on
Pla
tfo
rm
Rea
l Tim
e Su
pp
ly a
nd
Dem
and
Pla
tfo
rm
Rea
l Tim
e N
etw
ork
Co
ntr
ols
Co
nn
ecte
d &
Inte
r-o
per
able
dev
ices
Ener
gy S
tora
ge In
tegr
atio
n
Dig
ital
Cu
sto
mer
Mo
del
Ener
gy S
olu
tio
n In
tegr
atio
n
Ener
gy M
anag
emen
t
Asset LifecyclesManagement
Network Optimization &Aggregation
Integrated Customers Services
Thousands of jobs created (2016-2025) Network optimization,
asset lifecycle management and aggregation and
integrated customer services could
respectively generate 649,000, 1.1 million and 1.3 million new jobs. Energy storage integration are the initiatives with the greatest potential (1.08 million new jobs), followed by
smart asset planning (925,000) and asset
performance management
(596,000)
Focus on the transport sector
IoT investments in the transport sector
30 Source: I-Com elaboration on IDC data
72%
28%
IoT applications for freight monitoring
Other IoT applications in transport sector
IoT spending in transportation accounted for $78 billion in 2016 Freight monitoring represented a large part of transportation expenditure (72% of the total investments)
The economic contribution of 5G in 2035
31 Source: I-Com elaboration on IHS data
The output enabled by 5G in the transport and storage sector could reach $ 659 billion, almost 5% of the overall value sales of 5G ($12,300 billion) across all industry sectors and it would contribute 5.6% to the total production of the transport and storage sector
0%2%4%6%8%10%12%14%
02,0004,0006,0008,000
10,00012,00014,000
Bill
ion
$
5G-enabled output (Billion $) 5G-enabled output (% of total sector production)
Connected car revenue potential
32 Source: PwC (2016)
Connected car revenue potential should reach $ 52.5 billion by the end of 2017 and then to grow to $156 billion in 2022, with a CAGR of 23.4%
12.4
42.6 3.0
9.6
19.3
50.8
17.9
52.8
0
20
40
60
80
100
120
140
160
180
2017 2022
Bill
ion
$ Western E.U.
USA
Japan
BRIC
52.5
155.9
Electric cars registered in Europe
33 Source: I-Com elaboration on ANFIA data
In the first trimester of 2017, the European market of electric cars amounted to 62,300 registrations, an increase of 27.8% compared to the first quarter of 2016 The leading market in Europe is Norway with about 13,500 electric cars registered in the first trimester of 2017, followed by the United Kingdom, Germany and France
-150%-100%-50%0%50%100%150%200%250%300%350%400%
-6,000-4,000-2,000
02,0004,0006,0008,000
10,00012,00014,00016,000
I Q 2016 I Q 2017 % Change
Car sharing in the world (2015)
34 Source: I-Com elaboration on BCG data (2016)
The largest market was the Asia Pacific region with 2.3 million users and 33,000 vehicles, followed by Europe with 2.1 million users and 31,000 vehicles and North America with 1.5 million users and 22,000 vehicles Although Asia Pacific was the largest market, Europe boasted the largest car sharing service per capita Germany – especially Berlin – was the European champion in car sharing in 2015
0
0.5
1
1.5
2
2.5
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Asia Pacific Europe North America
Mill
ion
Un
its
Vehicles (Units)
Users (million)
A case study: the benefits of dynamic pricing
35
The end of the concert of a pop superstar at Madison Square Garden on March 21, 2015 caused a large spike in demand for Uber: the number of riders that opened the app after the concert spiked up to 4 times the normal number of app openings. Because of this increase of demand relative to the number of available Uber cars in the area, surge kicked in, fluctuating between 1 and 1.8 for over an hour after the concert ended (surge period shown in the figure). WHY WAS DYNAMIC PRICING BENEFICIAL TO BOTH DRIVERS AND CONSUMERS? • It increased the number of drivers in the area: surge signaled that this was a valuable time
to be on the road and driver supply increased over pre-surge baseline. • It allocated rides to those that value them most.
Conclusions
36
Internet is revolutioning the relationship between businesses and consumers allowing tailor made commercial offers and more efficiency for enterprises. The most important mission for EU institutions and national governments is ensuring that no country or group is left behind by the digitalization process
Institutions should encourage adequate investments in connectivity but also in
digital services (with a direct role to play in e-government) reducing barriers to the digital transformation
The presence of competing providers and/or services maximizes efficiency so public institutions should refrain from interfering in market mechanisms
Privacy and security as well as unfair business practices are areas which deserve a tight oversight and, in case of breaches, severe sanctions
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Thank you! Silvia Compagnucci
Stefano da Empoli
Maria Rosaria Della Porta
Giacomo Leone
Gloria Marcotullio
Giusy Massaro
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