Changing Consumers: Demographics and Demand

Definitely don't go get your tea now, because this is going to be a great conversation. We get to talk, we get to take a brief breather from supply chains and data centers and talk about shopping and consumers and what young consumers and older consumers want in this environment. So, Melina, I'd love to start with you. I know you think a lot about changing consumer expectations. And you had one anecdote about, you know, when somebody takes a snapshot, a screenshot on their phone now, they come into one of your stores and they want that item right then. How are you training your people in this new environment? Thank you. I think sitting in all the sections just now. It feels like everything in this world now is about technology, AI factory, token, energy, data center. And finally, we can talk about consumers. Obviously, retail business is also powered by technology, but actually over the years in the industry, I can see that everyone is on digital transformation, and sometimes we are too focused on technology that we lose sight on the actual customer's experience that you need to create. You mentioned about customers walking in, I think everyone does that, walking in with a product on the phone, I found that or someone, a friend referred to me, do you have it? So basically within the three seconds if you don't answer, they can leave. So for us, the more technology we need to put in the business, the more focus we put in customer experience. We actually, we have a customer love score and every month we collect about over 300,000 around the world. 300,000 customer feedback around the world. So we asked them about shopping experiences. It's a very short questionnaire But then we continue to monitor what the customer actually experienced. So if you spend five minutes in my store, was it a good experience? Was it very quick for checkout? Because everyone is out of patience. So you know what? Actually, there's some open comments and I read that every month. All different countries, and now AI helps me to translate different languages much quicker as well. So we do have customers who may not be very satisfied with the experience, so usually it was said, not helpful. And then we have customers who said, I really enjoyed the experience, thank you very much. Your team in the store, very helpful. So I actually keep using that word, helpful. How do we be more helpful to the customers? How can we be more relevant? So if a customer needs to show us a product, so we need to be able to equip our store team to be able to find that product quickly or having a conversation with the customers, even if we don't have the product. So a lot of things are happening now for us in retail, for my company anyway, To focus and further elevate that human connection. Well, and you were telling me a little bit about some of your amazing malls, which really I think of a mall as a place to go shopping, but that's not what it is these days. So fill us in. What do you get at the mall? Well, I think of a mall as a place to go shopping, Well, actually for Siam Piwat malls in Thailand, but that's not what it is these days. So fill us in. What do you get at the mall? Well, I think of a mall as a place to go shopping, but that's not what it is these I think the scale for one mall is half a million square meters, right, days. So fill us in. What do you get at the mall? Well, I think of a mall as a place to go shopping, but that's not what it is these days. half a million square meters, and also retail is just part of it, So fill us in. What do you get at the mall? Well, I think of a mall as a place to go shopping, but that's not what it is these days. so we normally have in one mall 300 brands of retail ranging from luxury down to, you know, mass market brands, also we have 250 restaurants plus giant food courts, We have the conference center around 10,000 square meters with meeting rooms. We also have a wellness center in the shopping mall operated by a famous hospital. We have all the banks branches there. So in reality, shopping malls in Thailand and I think in Asia is like second home to customers. So besides shopping, we offer everything and for us, In average, we have visitors around 150,000 visitors per day. So it means we have variety of customers. I mean ranging from crème de la crème of Thais down to you know like mass market and also 30% of them are foreigner tourists. So in our mall, getting to know customers is very very important and nowadays we learn about them through different First membership, of course, we have our super app and that our customers, our members, they can collect coins in their digital wallets for spending and they can redeem the coin for certain experiences and the rest is that we also use AI to monitor the customer behavior, spending and also where they're going inside the mall. So for us, It's not about shopping, but it's about creating experiential destination and such experience has to be ever-changing and curated to match with that interest. Yeah. Well, and, Simon, you're putting money to work. You're looking for companies to invest in. What do you see about, let's start with the younger consumers. What do you see about this generation that is interesting and makes you want to invest? Yeah, I mean, if you look at, if you just look at Vietnam, for example, how essentially younger generations try to acquire trust in brands are fundamentally different from what we've experienced, you know, even five years ago. If you look at Vietnam, I think there's a GMV of about $45 billion on a yearly basis for e-commerce transactions. And almost 50% of that is actually attributable back to like a ByteDance commerce. So being able to actually visually engage with the brand and the influencers have become massively important. And the cycle of how quickly the sophistication of the users, the actual consumers, how quickly that cycle goes is incredible. If you were to actually build a relationship with a brand over the last five years, that cycle has been cut down to less than a couple of months now. Because people start to append to a brand identity, a brand equity very quickly, and they quickly try to find out. How do I actually get closer empathetically with a brand or with a company and so on and so forth? And this is where, for example, Rakuten as a group and ecosystem, we are super majority based online. So we don't have a lot of offline presence. We do have a telco that has offline mobile kind of places where you can get the cell phones. But our e-commerce platform, our fintech platform, All of that is basically built to capture and understand the user very very well from the credit card transactions because we have a credit card company as well as an online bank to the e-commerce platform that we have we're the number one in Japan so we build the the user DNA and try to provide the right sort of experience in Japan you call it omotenashi which is wholeheartedly serving the customer the best way possible and that's kind of a very strong kind of adherence that we try to always accomplish. We talk about how a mall has several hundred merchants. In Rakuten Ichiba itself, there's about 40,000 to 50,000 merchants that we have to keep happy. And those happy merchants have to keep the users happy. So it's a multi-tiered, very complicated ballet that we do on a daily basis. But definitely, it's a magical thing seeing, as you say, the viewpoints of younger demographics change in terms of how they interact with brands. Yeah. And would you say that they're more fickle? You know, it's a shorter time to love a brand, but then do they turn more quickly if something goes wrong? It's a great question. I think the distribution of being fickle or being loyal hasn't really changed per se. It's really about how quickly they will just find a specific kind of a, I would say a super ego that they can attach to. And then they try to start to build their identity as well as the brand closer to themselves. It's a very interesting kind of. Because even I see this in my daughter and my sons, they have specific brands, and their loyalty to them actually lasts quite a long time. And I'm very surprised that they actually build those subsets of those behaviors and maintain it. Yeah. Melina, I know you spend a lot of time visiting stores, talking to the employees. What do you see, what do you look for when you go into a store, and what are you talking to your employees about these days? Usually we have 17,000 stores around the world and obviously a lot of activities still happen in the physical store and then also we have online. But then for us in our company, the key trust. The brand trust that we build, actually the fundamental is in that physical experience. So normally I go to the store, I would thank the store team because they are standing there whole day trying to look after the customer, have a smile on their face, and their mission is to put a smile on their faces, which is our purpose. And then I usually like to ask them what the customer likes most or how do they talk to you or ask you. Because for us, every... I know we talk so much about technology and you know in retail people talk about market share. Market share usually is transaction, you win by transaction, but loyalty in my opinion you win moment by moment. So every moment that we connect with the customer is so crucial. So we need to understand the customers or how they shop in the store. So obviously the store team can tell me. We also have some live laboratories that we set up with cameras in selected stores around the world. Thank you very much. Obviously, we hide the face of the customer, but we really study how they shop in a supplement aisle versus an oral care aisle or hair care aisle. And then we know that, oh, actually, they spent about 56 seconds on this aisle, and they couldn't find the product they need. So then we would have to improve how we put the product or how we put the signage or how we work with our suppliers to make it easier for the customers to make decisions. So for us, it's about... I think more and more, you know, the retail game is about relevance. It's not so much about you have more products or you have more technology, but the customers are looking for a brand that they trust. They know that we can recommend the right products. We can help them to make the right decision, not just to sell them a product, but make the right decisions. So that, to win moment by moment, is something that we are focusing on, using human connection as well as using a lot of data science. Every day in our company, we have millions of transactions. So every one of these transactions actually, to me, is a customer feedback. A lot to listen. Sometimes we have a lot of data. But we don't listen closely enough. So we have to continue to listen closely and adjust accordingly so that we can become more relevant. We talked early on, you know, in the green room, and because these days obviously everyone talks about AI, I'm sure everyone in the audience also uses AI to make some suggestions. Or you have a problem or you have something to ask, you go into GenAI. AI is going to tell a lot about what products to shop for to all customers but for us our job is then to work on how we can make sure the customers still choose us when they make the purchase so this is the focus. And you mentioned that you know in addition to having a pharmacist that maybe helps you with your medicines there's a wellness advisor or someone else in some of Some of your stores can direct you towards the right supplements, the right supplements. So that's like the human connection. Yeah, because if you think about like this morning when you wake up, you wouldn't be thinking about, I need a supplement. You think about, oh, today I want more energy. I want to, or you want a skincare product. You actually need a skincare product. You want the skin to look more energy, brighter, et cetera. So customers need solutions. So the way now we have to train our store team also, it's about being able to understand. a problem either is a skin or hair and to provide a solution to the customer. Yeah and Chadwick I imagine you have a lot of technology going on in your malls that you're also paying attention to making you sort of a data scientist too. What have you learned that's kind of surprising from all this data you've collected? Well actually our customers are very broad spectrum you know so in age in its you know spending and everything so AI for us we use it to observe and analyze customer behavior and also remember that we are mall operator so we need to work closely with our retail stores yeah to share analysis we cannot share data but we can share analysis what's going on in the mall and together we create We have curated experience, curated program for promotions and activities to match with each customer segment. So it's very detailed, but just to let you know that in our malls, we have more than 400 marketing events per year, which means more than one event per day. So these are well curated by and personalized by interest so we do the fashion show we do Concerts, local, Korean boys band, you know, whatsoever, that is a customer's dream. So when we create this experience, it has to link with conversion, right? Because we cannot do 400 events with less conversions. It has to be enormous too. So we link this together and matchmaking. So our customers and members, when they collect the coin in their digital wallets, they can redeem. the coins to participate especially in the program that they like so by doing this then it's what we call money cannot buy experience because if they have to buy the concert ticket it's a lot it's expensive but even so there's no ticket available to meet this actor or actress you know So for us, we use technology, we use AI for analysis. more understanding, but at the end of the day, it's human to human. Because no matter what we're creating, but you know, it's the service. Mall is all for service. So I mean, from my security guard in the parking lot, if customer come and meet him, and if he doesn't talk properly, politely, then the customer go away. So for us, seamless connection between the technology and human touch is the most important. Continue to emphasize on that. Yeah, yeah. Well, obviously we're all obsessed with what young people are doing, but Simon, I know you've done a lot of work on Japan's aging population and what some of those trends are later in life. Tell us about what the rest of Southeast Asia might be able to learn from. Thank you very much, Adam. Yeah, I mean, one thing that Japan is going through right now is it has a massively aging population. There's a lot of tertiary effects on how that affects real estate and also how that affects commercial consumption. I think one thing that we can glean from there is, especially on the older demographics, we're surprised at how in-depth their research is before their consumption event happens. And this is also accelerated by AI, in the perspective that a lot of the middle ticket, higher ticket items, when they go actually and to ask like a store clerk or whatnot, they most likely know more than the store clerk themselves. or they're especially for items that they want and that it's not a daily consumption habit if they want to buy a TV or if they want to buy a nice bag for themselves. So when we think about the overall interactions and we talk about the experience being good it actually has to be buttressed by a non-insignificant investment into the education of who's talking Talking to those customers. For our end, it's actually quite easy because we simply empower our chatbots and our AIs to be smarter and much more learned in terms of what they're looking for. So and where does where does this trend become very relevant? It's where people look for as we talk about supplements. You'd be surprised at how how in-depth they understand, right? If they're trying to buy an omega three fish oil, they know if this is a krill oil, it's it's more cleaner than that of generally wild caught Thank you very much. what is a processed salmon, right? And we're like very surprised that they're asking this on the AI side of things. So, quality of life really drives education and that makes the push towards how we interact with them, it has to be higher. In higher quality, there's actually no exception towards that. And I think that's going to become much more prevalent in Southeast Asia, especially as we drive towards not necessarily an aging demographic, but higher earning, right, higher earning. Vietnam right now is going to do a GDP of 9.2%, 9.5% this year alone. Inflation is 4.5%, which means increased income now comes with more scrutiny in terms of how people consume. So I think that education to consumption habits will be a very sought-after metric that people will start to monitor. Yeah. Well, we're here in Vietnam. Let's talk about Vietnam. I believe you guys came here in 2019, so you've had some years of experience. Tell us about the Vietnamese consumer, and did you have any false starts or any initial kind of things that went wrong when you first opened up here? Well, I think maybe I actually want to share some views on Southeast Asia. Of course, Vietnam is a very important growth market because we have a portfolio also in Europe. And a lot of times we talk to people, suppliers and our business partners. Asia, to a lot of countries, to a lot of companies, Asia is the greatest growth market. But I think going forward, we really should think that Asia is an innovation laboratory. Now, for what sense do we inhale beauty? In the beauty, for example, let's start with beauty. The quality of the consumption is increasingly important versus the scale of the assumption. Meaning the customers in Asia, for example, in Thailand, on average, their regime of skin care would be five to six. You go to UK, maybe three to four. With this five to six products? Yeah. Okay. But of course, if you go to Korea, it's like over 20. No, I know. But then they continue to want to discover more new ingredients, new regime, and they For sun care products, they use like two and a half a day, different types of sun care products. So the quality of the consumption is something that's really worth noting. And in the past, I worked with a lot of international brands as well. A lot of them are in the Western world. So usually then they invent in the West, and then when they come to Asia, we adapt in Asia. But usually they just change a bit of the marketing, not the actual product. But then more and more I think Asia should be where the innovation happens and here is where we also have the scale. So we should change that perception. Asia should be the innovation laboratories. Well I can tell you in the US I'm getting a lot of Korean skincare kind of marketed towards me so that's it's already happening. We are bringing a lot of Asian beauty products to Europe. Because the demand is growing and because we operate in two continents, so the people are really looking into Asia for innovations. So I think the ambition for us going forward is not so much just to make in Asia, it's invent in Asia. Yeah, are you finding the same thing? Where is the innovation coming from? Is it... I think for consumers, actually, Asia is still a very interesting place. Thank you very much. For many countries in Asia, I think we are very good in creativity and also innovations, right? So for us, especially in Thailand, I think we can innovate the product or also experience out of our authenticity. I think that is very important because in one country, we always have a lot to offer. You know, like cosmetics in Thailand, we are very, very good at organic cosmetics, unlike Korea, it's different ways, but it's like all of this is up to how we can make the product and the experience out of what we're having. So for us in our malls, we believe that malls is the gateway to the city or even to the country. So what we're trying to do is to bring as much as many as we can the SME business that they are so creative they created their own brands and they create good story behind their brand yeah how they invent this product and what's the benefit goes to the small community so we offer the space and even created the special zone for them for example like in Icon Siam one of our more We have the indoor floating market that combines all the little mums and pops based food from around 70 cities around Thailand and also their local handicraft. So visitors when they come, they don't have to go around Thailand, they can go around this place and eat and experience the Thai handicraft or even we have recently created a new zone called Nextopia, so it represents sustainability. So we have the recycle and upcycling products and also retailers, food operators that they operate. on the sustainability and 360 degree waste treatment. So all of this is about creativity and innovation that we can create to match the new consumer's behavior, which is they spend for something meaningful to their life, their health, and their happiness. Yes. We're nearing the end here, but Samantha, I want to come back to you and just ask, you know, you're placing bets now about the future. Give us some predictions. In 10 years, how are we going to be shopping? What's going to be different? What's going to blow us I'm going to have trouble thinking about what I'm going to have for lunch tomorrow. Tomorrow's going to look tough. But if you look at generally consumption as a whole, it's going to require a lot of modality in terms of how merchants interact with consumers. Because even right now, an average Gen Zer potentially has... Two or three different fiat currencies or stable coins that they're actually utilizing. So fintech will be immensely important in terms of how you either transact or compress the cost of transaction itself. I think at the same time, for a lot of the businesses that potentially own real estate, you're going to have to think very deeply about how you want to monetize and further add value to the real estate that you have. One of the things that I see coming up very, very quickly right now is because the GPUs and the AI kind of hardware that we're talking about, how powerful they're becoming is becoming very quick. They're becoming very powerful very quickly to the point where you put a container-sized server farm inside, for example, something that looks like a parking structure. And that could generate IRRs north of 20% to 30%, right? So when we think about mixed development real estate, we're going to now think about really out-of-the-box regions that maybe five years later, it'll become the bread and butter for consumption and development. And we're out of time, but thank you guys so much. That was a great panel. Please give a round of applause for our panelists. I'm speechless.