Are you prepared?
The COVID-19 pandemic has resulted in the rise of the contactless economy. Whilst the contactless economy continues to evolve, businesses need to urgently devise a response in order to capture new opportunities, mitigate risks and be prepared for the next normal.
The Contactless Economy makes the COVID-19 crisis different from the previous crises. Every crisis in the past led to lower consumer spending that had a knock-on negative effect on the demand for products and services, and caused severe business and economic contraction. However, as the world grapples with the uncertainties of the crisis, experts are convinced at least on two things – this crisis in itself is unprecedented and that the next normal is being created. There has been considerable discussion on why the crisis is unprecedented. This report deliberates on the emerging next normal. We believe that the single most important factor that differentiates this crisis from the previous ones is the rise of the contactless economy. The contactless economy has been driven by both supply-side (e.g. rise of the digital technologies such as 5G, cloud platforms, AI & Data analytics) and demand-side factors (e.g. need for convenience, heightened awareness for health and safety). Some of these existed previously but were accelerated due to the crisis.
Within the Contactless Economy, ‘at-home’ consumption alone has the potential to be a $3T market by 2025. The scope of the contactless economy is evolving as we speak. We think there are two broad branches to this scope. The #Rise of ‘At-home’ consumption and #Rise of ‘Contactless outside home’ consumption. Whilst the overall consumption levels may come back to pre-COVID levels, the ‘contactless economy’ will cause a shift in the way the customers will consume. We estimate that the ‘At-home consumption’ will increase by over two-fold amounting to $3 Trillion with almost 20% of this figure due to the uplift caused by the COVID-19 pandemic. The top 3 sectors with the largest market size in this economy will be consumer products, leisure/recreation and education, and the top 3 sectors with most growth will be financial services, health and consumer products.
Emerging Customer Segments will become mainstream. We believe the contactless economy will make certain customer segments that were emerging in the past more dominant. There are four customer segments to watch out for. These segments can be articulated on the back of two dimensions – (1) the choice the customer makes from now on where to consume – at home virtually, or outside the home through low or no person to person touch and (2) the behaviour of the customers towards the offerings i.e. due to the crisis, will the customers continue to look for experience/ value for money in the different offerings as before or will it change. The specific size of these customer segments is difficult to determine – customers behaviours, needs and expectations from a specific product or service are still evolving and are yet to stablise. Each customer segment will open up new value propositions that businesses can offer and a set of capabilities needed to deliver on the value proposition.
Choices will remain complicated but a structured review of customer strategy should come to rescue. The contactless economy is on its way pushing emerging customer segments into the mainstream. To make the most of this or to prevent from getting disrupted, organisations 1) need to critically assess how its customers' needs and behaviours are evolving within the contactless economy 2) determine how many of these segments it should target 3) develop new value propositions for the customer segments 4) unpack the new capabilities that the business needs to have to deliver on the value proposition and 5) decide its capability development model with a focus on leveraging its partnership ecosystems to ensure flexibility given the uncertainties ahead. The biggest enemies of effective decision-making in times of deep crisis are neither uncertainty nor ambiguity; they are, rather, over-confidence on sustainability of the current state and procrastination to drive change into the future state – this report is an attempt to change that status quo.
This is an independent report, and is first published at Singapore Summit 2020.