 Well good afternoon everyone. We'd like to welcome you to this press conference here at the 2018 annual meeting of the new champions in Tianjin. My name is Amanda Russo, I'm on the public engagement team here at the World Economic Forum and for those of us watching on our webcast thank you very much for joining us. If you'd like to engage in social media both in the room and online the hashtag is AMNC18. So we have a very exciting 30 minutes planned here for those in the room and those online. Thank you very much. We have two gentlemen here from BCG. We have Jeffrey Walters managing director and partner and we have Mr. David Hu, who's also managing director and partner. And the planned press conference here is on decoding digital consumers. So they're going to hopefully tell us a little bit more about what that means. And so to kick off with some key findings I'd like to turn it over to the gentleman on my left here. Jeff over to you. Thank you very much and thank you all for for coming today. Being the annual meeting of the new champions we wanted to talk about emerging market consumers. A few key messages for today and which I'll elaborate. I mean first your online your digital consumers more likely to be in an emerging market today than a developed one. I think it's a premise we all understand. Second their impact on consumer spending is in many cases underestimated by about 2x and we'll explain why today. And we find that many companies are not keeping pace with the differences of these consumers across markets or the rate at which they change. Now given those challenges and those opportunities and we've been helping our clients to capture the spend of digital consumers around the world. We teamed with our global partnership and our center for customer insight which has specialists around the world to do a new survey of 15,000 consumers all the way from Rio de Janeiro to Nairobi to Tianjin. In fact we had sample size here which led to our the report that we're launching today. Digital consumers emerging markets and the four trillion dollar future. So let me share you know I think some of the important findings. I mean first as I alluded to the majority of the world's online population is now in emerging markets and nearly all the growth in new online consumers will through 2022 will come from emerging markets. So if we look at emerging markets now the change in the past eight years has been dramatic right. So now about half of the population is in emerging markets is online versus less than a quarter in 2010. Now the emerging market internet user or digital consumer outnumbers the developed market one by two to one and if we look at growth over the next five years through 2022 emerging markets will add 900 million new consumers digital consumers versus just 80 million more in developed markets. Now those are large numbers you know we often care about their impact on spend and consumption right. That their impact on consumption is often underestimated by about two times. Typically what we think of the digital consumer we think about e-commerce and we measure their impact by how much they spend online. Yes it is true e-commerce spend has grown about 4x in emerging markets since 2012 and it will double again by 2022. To give you a sense that's about 800 billion dollars today about 1.7 trillion dollars in 2022 but if we look more broadly and say how much spend in emerging markets is digitally influenced and digitally influenced refers to purchases that consumers make where they may not actually make the final purchase online but what they choose to buy or how they choose to buy it was influenced by their online behavior. That's the portion of consumer spend that's often underestimated it's about a two times larger amount of spend than the e-commerce spend specifically and it certainly has grown as well to it has grown about 3x since 2012 and it will more than double again by 2022. So it will reach about 4 trillion dollars of consumer spend in emerging markets by 2022. Now many companies you know many organizations see those large numbers and they say okay yes exciting but you know those digital consumers are spread across a very heterogeneous set of markets with some very different circumstances very different levels of development. What we've tried to do is simplify the world into really three stages of digital development. Stage one right is what we call digitally aware these are countries like the Philippines, Morocco, Nigeria, Kenya right here in these places about only about 13 percent of your urban consumer shops online and if you look at why the consumer shops online they're really looking for low prices. So fundamentally the first reason is I want a low price I want a good discount that's the that's the hook that gets the consumer to buy online for the first time there. If you look at you know how consumers pay for what they buy online about three-fifths of the purchases are paid for by cash on delivery in this first stage right. So overall in this first stage these digitally aware markets right e-commerce represents about one percent of total retail sales and digital influence represents about five percent of total retail sales so the influence is five times larger than the e-commerce sales yet it is still a relatively small single digit number. As we move to the second phase we have three major markets that sit inside what we call the digitally advancing countries right these are Indonesia, India and Brazil. So here if we look at the simple metrics in these markets e-commerce represents around four percent of total retail spend and digital influence represents about 20 percent right so again we have that five x relationship right it's about five times larger in digital influence than in e-commerce. Once markets reach this stage we find typically about 50 percent of urban consumers are shopping online and then last and certainly not least we have what we call the digitally evolved markets and I think it's exciting to be launching this report here in China because as we look at our metrics of e-commerce as a percent of retail sales and digital influence China is the largest in the world as many of you know right so but overall the the markets that are here are many developed markets and we China is really the first large emerging market to have moved into this digitally evolved stage here e-commerce on average represents around 15 percent of total retail sales and digital influence represents about 40 percent of total retail sales. Now China is literally off the charts when it comes to these types of metrics about 90 percent of urban consumers in China are online shoppers and I think most interestingly when you talk to a consumer in China when you talk to a consumer in the UK when you talk to a consumer in Korea you know markets that are inside this digitally evolved stage price is a reason consumer shop online price is not the dominant reason consumer shop online so what becomes equally important is convenience variety and shopping experience which I think when you see the the types of rich video content that now accompanies the e-commerce experience in China you you get a sense of what the consumer in a market at this phase is looking for now the speed through which countries move through these phases is not equal some countries move faster through the phases some countries move more slowly through these phases we've done a large statistical analysis across all these markets to really identify what are the key conditions or what are the key ingredients you know what is the cocktail that one makes in a market to really accelerate digital influence and and and then eventually e-commerce so these ingredients really fall into four types the first I call access so it's about smartphone penetration right and the cost of data plans right so can I access the internet on a mobile device and is it am I not worried about the cost of my data right second is the means do is there an adequate group of consumers in these markets that have the sufficient spending power to be shopping online so simply this can be measured by the size of the middle class across the markets the economic relative economics of of e-commerce versus offline retail we've also find quite important in explaining the growth and the size of e-commerce in these different markets so specifically we look at the relative costs of physical retail versus offline rate of versus online retail right so or is commercial real estate expensive or not right relative to what it costs to delivery and because delivery costs matter in e-commerce so significantly we also look at the the cost of shipping parcels right and small pulse parcel shipments in the market and then last but not least the fourth set of elements that matter right is really related to innovation and so we look at indexes of startup innovation and we also look at the level of startup funding in these markets that would be venture capital private equity angel and all the different types why is this important is because you know as well we've learned in china with the internet giants here you have to overcome the barriers consumers have for for shopping online you have to overcome the barriers that they have for moving their discovery process from offline to online and really it's innovation in product offering and consumer experience enabled by the right technology which makes that happen so you have to have the players in the market who are able and willing and funded to do so so you know I think for many of us sitting here in what what is now the most advanced digital market it may not be surprising that if we look across the whole span of emerging markets right we find some quite significant variation right and their levels of development in our point of view you know we find that there is a set of important calls to action for companies global companies and companies in these markets and we find an important call to action for policy makers as well too first we find few companies are responding to the differences in the emerging versus the developed market consumer digital consumer effectively right second we find few companies are adapting their approach to these markets as fast as the digital consumer in those markets is evolving and last we find that few companies have built the customized playbooks that are taken to account you know what these this simplified view of the world which helps one manage a very heterogeneous set of emerging markets more more directly and efficiently so a couple examples right I mean throughout the emerging markets so what's an example of the differences that consumers need to under that companies need to understand about the digital consumer and emerging markets well it's not surprising for us in China marketplaces are the top place to shop right marketplaces meaning it's a it's a you know a collection of third party sellers like you see with Aldi Baba's platforms in China represent about 79 percent of e-commerce in China and what's interesting is as if you look across many of the emerging markets and almost all the emerging markets across our study we find that marketplaces are in fact the dominant e-commerce channel second is that social media is very much a primary source of information relative and much more greater extent relative to say brands official websites are relative to search engines and other types of vehicles that have already been common and established in developed markets the second example speed right I alluded that countries and markets are moving quickly through these levels of development just to give you a sense we reran our analysis looking backwards five years right India Indonesia were one step in the in the first first group of markets and China was not leading by these metrics at the time China was actually in the middle bucket right so the pace of change to go from a just if we take China as an example going from digitally advancing to digitally evolved in in just five years is faster than many companies are finding that they're able to move and adopt their approaches markets so you know last but not least we say there is a really a new digital imperative right for the successful business model for companies that are in these emerging markets or wanting to serve the digital consumers across these emerging markets right first is that now we have such significant digital influence it means consumers are there talking about brands talking about products learning about products online this is also a learning opportunity for companies so the age of the traditional focus group where I go out and you know over a period of weeks talk to some consumers and I come back and I think about well what's the consumer really thinking that's the old way of doing things the new way of doing things is the online connection to my consumers how am I testing rapidly new ideas and products with them the second you know important imperative is really building socially activated brands right media is expensive everywhere in the world right the in some ways the best endorsement a consumer brand can find is when a consumer shares their experience with that brand or that product with their friends on social media and as I explained earlier we find this is one of the most powerful sources of information right in the digitally aware and the digitally advancing markets so few companies today have fully tackled and captured you know all the opportunities to build social social media campaigns and social media effective approaches for their brands right and you know last we find you know there is obviously implications for how consumers experience brands and products both offline and online and what is so critical and so rarely executed well is a seamless experience online and offline we talk about some companies right in like lens cart in India for example which is primarily an online glasses prescription eyeglasses company right but at the same time provides both online and offline experiences where you can test you know try things online see them in the store and the company always knows you always knows how to contact you and reach you as a consumer so you can understand you might say why would you know online be so important for a glasses company in India when e-commerce penetration isn't that high yet well that's why the digital influence is so important because it's actually digital influence that matters so with that those are the the the main findings of our of our new initiative and report and I can turn over to David not to share some more of our our findings as they relate to China great thank you everybody got all that a lot of we have time for questions we will have time for some questions um David please tell us about the the impacts and the the repercussions on on China and and worldwide so Jeff just talked about our comparison for the developed countries everyone I've heard about it must be very proud of what China is doing that it's leading the world all the numbers either it's about the digitalization or the total number of our consumers or e-commerce scale all these we should be proud of as Chinese of course in the last two years almost every month we have to take the developed countries customers to come to the china internet companies to learn and they look at the adipay and all these payment models and they bring it back to their countries they're very surprised at what China is doing and they're happy to bring these experiences back to their home country China is really leading and the top the 10 technology companies China and the US account for half both and what we need to think about the reasons they're about eight reasons and indeed there are eight factors that made this generation of Chinese confused humans coming up emerging and made China become the pioneer of the world well I would like to specify specifically talk about four factors the first it's thanks to the huge market with more than one billion people that is why once once you invest in digital science digital economy the cost is reducing and the investment return return of investment comes back more and more whereas for a smaller market it's difficult and the second factor is that in traditional industries there were some areas that were really left behind e-commerce doesn't work as well as in china in the US and in japan why because china had never experienced a sort of 7-eleven or family mart this kind of convenience store in a developed country this has never happened that's why china went directly into this e-commerce digital economy the second the third point is the our high level of design of manufacturing with a very low cost and a fourth factor is the surveillance system and the government have been for the low over the past four years quite mild in canton upon the uber problem in america uber said the surveillance administration system is still top two maybe california is top one on the tolerance of government over private businesses so china is number two according to uber that's my four factors so we talk about tensant alibaba those startups and big big groups and next step i think it's about digital transformation of traditional industries chinese consumers are so used to using digital economies such as taobao or alibaba if you want or baidu they search for everything and they use extensively we chat for everything so the behavior is already there all we need to do is to transform the traditional logistic financial ways of doing business how to adapt ourselves into this very high level of economic and sorry digital experience so it's like there's a gap between the very high level of the chinese consumers on the digital concept and the very low level of traditional industries so what do we do i propose three things to create recreate a consumer experience be it the banks the logistics manufacturing you have to catch up with the high experience the second to the second point is about the huge amount of data that we have other countries don't this reduces the cost of risk management sorry this will make risk management very challenging and number three is to be very responsive to new things and to break all the barriers among those factors among those sectors if you can do these three factors your company will be the winner in the next battlefield because consumers are all trained to embrace the new economy and we need to work really much very much on supply on those traditional sectors and of course you can't be complacent that's well my feedback after hearing back jeff i'd like to open it up to questions now yes we have a question right okay i have a question so i heard that china is a pioneer in digital economy and in the next few years do you think this gap will be reduced or much bigger between china and the rest of the world yeah because david please okay um so i'll start um i think the advantage will be even bigger and the reason i say that is because let's talk about the um strategy i mean when you have one person 10 people 20 people then you have a multiplying effect you have one point three billion people imagine that then it will have a rippling effect and starts from of course retail and the media and then finance all that are working together and that's why you can feel that um there is a multiplication effect when you create or design um digital products so i think in the next few years china will even be more uh much quicker accelerating the second factor the reason is that 1.3 billion of people plus the um production capacity and the inclusion and tolerance of authorities these are huge advantages whereas you see in the EU you have syndicates that have to approve if there is a law to be proposed so syndicates have to agree with the bills and it may take years before anything be done whereas in china you can get many things done in many years so several years so these advantages factors are not present in all other markets that's why i think the gap will even be bigger um one thing we are lack of is the AI technology or a platform or an algorithm or sim card but these are not very um mortal problems we can catch up i thank you i'm from china economic daily to mr her david um what do you think about international e-commerce have you done much uh any research i mean chinese consumers using international or foreign e-commerce and why especially on the protection of consumer rights using what we often consider cross-border e-commerce is growing very rapidly right i think this is an indication of the maturity and the i would say the the cosmopolitan nature of the chinese consumer today you know she can see television from any country in the world right she travels abroad right she goes to hong kong first and then she goes to europe right so really she wants to find the world's worth of products right the world hasn't brought all their products to china as fast as the consumers in china want the world's worth of products on this underlies you know a lot of the drive towards cross-border e-commerce and then second you know as we know in some categories there are certain countries that are perceived to have advantages in those categories dairy you know from australia new zealand right certain food products you know from from other parts of the world and so your consumer is very savvy today right here she wants to say if i'm going to buy right that that milk if i'm going to buy that lobster i want to come straight from the country where it came from and the most effective and efficient way for them to do that today is often cross-border e-commerce we'll take another question this gentleman here in the front your presentations i feel very excited i feel very excited about the next few years so i have two questions for you the first is what do we call it is it um internet economy i didn't catch but what i mean is what kind of impact over the the traditional economy because you know as you mentioned the china has a huge population this impact may affect job market as jack mar will make many small retail stores disappear these are jobs that are lost the second question is that um most people especially young people use alibaba to shop online then in the e-commerce there are fake products then isn't that a bad thing for our line service i think the retail world is going to change offline retail is not going away if i'm thirsty all right i want to walk into a store across the street and in five minutes get a bottle of water or something to drink at least in the foreseeable future e-commerce is not going to substitute that purchase we can get 30 minute delivery in china we can't get one minute delivery in china so to be fair e-commerce retailers transforming very large stores are challenged some small stores and small formats are actually doing quite well and retailers have to fundamentally rethink one of the reasons that i convince a consumer to walk into my store so it's going to change but it's not going to disappear we will still have stores in the future they'll look different but we'll still have stores um you know the issue of of trusting the product i buy online has been something which was originally if i go back you know 10 years ago one of the things that you could say limited e-commerce growth in china um but if you think about it today right if uh i'm going to buy a product online i have many reviewers of that seller right i have many reviewers of that product i have so much data and information that helps me build confidence that says i think if i buy this from there i'm going to trust that it's a it's a true one based on the thousands of reviews that are there if i take my analogy and i walk into my corner store unless it's the corner store i go to every day i don't know where that product came from right so that the issue of of product quality the issue of of what it is you know is it really what it says it is it exists offline markets and in some ways leading companies have found ways to build that trust even better online that is even possible to do offline would you like it to add anything yes i would like to um speak about the job market we did a research at the beginning of 2018 on AI it's it's impact on the job market and our conclusion is that there is there will be a reduction of 25 percent of manpower and the reason is hence those jobs that cannot be replaced by AI sophisticated jobs and the second is about human feelings but simple repetitive jobs will be and can be replaced so that's why the need will be shrink will be shrinking but it won't disappear so the second type of job for example with human feelings sentiments won't disappear but those jobs that are concerned with simple repetitive technological things yes they might disappear but um it makes an imbalance which is not a bad thing because people might have a better income and a better live quality quality of life and second thing is that the structure of our society will be transformed people who work for those simplistic simple repetitive jobs they don't necessarily feel good we should release their energy their quality by training to um to make them feel happier so this question in the in the white yes thank you good morning good afternoon i'm from china news agency so i've got two questions for david the first question is about the supply reform we have met some challenges some difficulties what's your point of view on this and the second is the blockchain is a hit word what do you think about it and its impact on finance once on the supply side reform how what's what's it will become we studied four countries market one it's uh us under reagan and germany in 1993 and argentina two times the failures on the supply side the reform and on the japan and the failures as well and number one it's uh aiming at the developing the one we tried to reform on the supply side it's not about reduce about the all the consuming side so it's about to make sure we're aiming at growth it's not about reducing the the overstocking and overproduction only and the there's several one it's about giving more power to the market number two reducing the taxes and to have the incentives for the people to work and the companies to invest and the number three try to curb the inflation and try to number four it's about human capital reeducation and number five it's about the breaking the financial barriers and to have a more transparent uh market and either come countries succeeded or it failed the all about these five of them and the reagan's reform on the fourth year it started to show effects at the end if you look at these major principles if a china supply side the reform in the past years has made big advancements but we've seen problems one there should be a balance between short term and the long term the short term uh stimulation of economy and the long term development the number one are we able to control the hands of the government once there is uh challenges and the government has to invest or should it be the private sector should who is more effecting number two should we control the total uh volume of the currencies is issuing to the market number three do we have these uh consistencies in terms of strategy either we're stepping on the gas or the brakes too hard it should be a three to five years long term uh strategy do we have this consistency and the number four there are many places that we have not started like the cutting the taxes and the burdens and the us and the trump since they're doing so well in this time it has a lot to do with the tax cutting and increasing the human capital's uh capability for job reassignments reeducation etc now we have done not done all of our things and we have the strategy we have to set the ground and the set the stage and we have a long way to go we need some more time the road is correct we need to do it and we need to have a rate balancing this is the right approach right route to take but all these short term problems we need to try to solve them and the blockchains it's about the talk about the chain the chain what is the background of this technology this technology itself it's because of the huge reduction of the storage cost if we look at the past uh internet technology because of the communication costs hugely reduced and then you do things through TCP IP and because of this reason same token I can save the data in 5000 nodes in long chain transaction and multiple authentication and all these reasons you will not need to use blockchains you can just use centralized computing to solve the problems it you only have to find the right scenario to take advantage of blockchains like of the security so clearing and clearing houses and the very complex transactions and the long chains for example spotlight chain finances international trades and once you found the right scenario and then there you will find the right application for the blockchains and the blockchain itself is very mature but it will take three to five years to get it to become adopted we'll see what happens I'd like to conclude this press conference by asking each of the gentlemen here to end on a sound bite yeah Jeff what would your sound bite be yes well thank you to the forum and thank you for the attendees right I would say first don't forget the emerging market digital consumer don't underestimate their spend four trillion dollars David okay four trillion dollars well join me in thanking these two speakers thank you Jeff thank you David and thank you for everyone for joining that concludes this press conference