• SERVICES
  • INDUSTRIES
  • PERSPECTIVES
  • ABOUT
  • ENGAGE

RETAIL

by EOS Intelligence EOS Intelligence No Comments

Beauty Tech Giving Beauty Industry a Facelift

In recent years, artificial intelligence and virtual reality have been adding an additional dimension to the beauty industry, quite literally. With consumers increasingly embracing and demanding personalized offerings and precise results, leading brands, such as L’Oréal and Shiseido are investing heavily in the space. Just as in many other industries, AI is revolutionizing beauty products and how they are conceptualized, created, and sold. However, it is a long road from being perceived as gimmicky promotions to improving customer engagement to becoming commercial go-to solutions.

Artificial intelligence (AI) has been greatly integrated in our lives through different sectors and now the beauty industry is no exception. The use of AI, augmented reality (AR), virtual reality (VR) as well as complex beauty devices has revolutionized the way consumers perceive, apply, and select beauty products. Moreover, in the age of online retail, it enables companies to maintain a similar personalized level of service that would otherwise require a physical interaction with a beauty consultant. Technology is creating new experiences for the consumer, both in terms of beauty products’ features as well as purchasing process.

Beauty industry is also one of the most competitive sectors, with consumers always being on the lookout for new products and having low brand loyalty. Beauty tech seems to address this issue as well, as it elevates consumer engagement through enhanced personalized offerings, which in turn is a trend that has been driving the beauty industry for several years now.

The three main aspects of beauty tech encompass personalization through AI, virtual makeup using AR and VR, and smart skincare tools/beauty gadgets.

Personalization through AI

Across the retail sector, the key to consumer’s heart and pockets for a long time has been personalization of products and sales experience. Beauty industry is no exception. Consumers have been looking for the perfect skincare product that work best for them or the lipstick shade that goes perfectly with their skin tone. Moreover, consumers want this all from the comfort of their home. This is where AI comes in.

Through retail kiosks and mobile apps, AI enables companies to offer personalized shade offerings that are especially curated for the individual user. A number of companies is investing and capitalizing on this technology to differentiate themselves in the eyes of the consumer. One of the leading market players in the beauty industry, L’Oréal, has been one of the first companies to invest in AI- and VR-based beauty tech and acquired Toronto-based, ModiFace, in 2018. There are several different ways companies, such as L’Oréal, have incorporated AI into their product offerings.

Beauty Tech Giving Beauty Industry a Facelift by EOS Intelligence

Beauty Tech Giving Beauty Industry a Facelift by EOS Intelligence

Lancôme (a subsidiary of L’Oréal) has placed an AI-powered machine, called Le Teint Particulier, at Harrods and Selfridges in the UK, which creates custom-made foundation for the customer. The machine first identifies ones facial color using a handheld scanner, post which it uses a proprietary algorithm to select a foundation shade from 20,000 combinations. Following this, the machine creates the personalized shade for the user, which can then be bottled and purchased.

In addition to physical store solutions, AI-powered apps and websites also offer consumers personalized recommendations. In 2019, L’Oréal applied ModiFace’s AI technology to introduce a new digital skin diagnostic tool, called SkinConsult, for its brand, Vichy. The AI-powered tool uses more than 6,000 clinical images in order to deliver accurate skin assessment for all skin types. It analyzes selfies uploaded by users to identify fine lines, dark spots, wrinkles, and other issues, and then provides tailored product and routine recommendations to the user to address the skin concerns.

My Beauty Matches, a UK-based company, offers AI-based personalized and impartial beauty product recommendations and price comparisons. The website asks consumers diagnostic-style questions about their skin and hair type, concerns, and preferences, and uses AI to analyze the data and recommend products from 400,000 products (from about 3,500 brands) listed on its website. Alongside, the company runs Beauty Matches Engine (BME), which is a solution for beauty retailers using consumer data and AI algorithms to identify consumer purchasing and browsing patterns as well as their preferred products by age and skin or hair concerns. This helps retailers predict and stock, which product the consumer is likely to purchase, improving sales, increasing upsells, and providing a personalized solution to customers.

On similar lines, another app, Reflexion, uses AI to measure the shininess of skin through pictures and offers personalized product recommendations. The app claims to provide much deeper analysis than regular image analysis apps and provides additional features such as testing if products such as foundation are evenly applied. The app works by measuring a face surface’s Bidirectional Scatter Distribution Function (BSDF), which is a measure of light reflected on the user’s face.

Nudemeter is another such product, which uses AI to personalize makeup choices and foundation shades for a full spectrum of skin tones, including darker skins. The app uses color analysis and digital image processing along with its AI algorithms that ensure accurate color measurement irrespective of background lighting, pixels, etc. The app is currently being used by Spktrm Beauty, a US-based niche beauty company targeting shoppers with dark skin.

Virtual makeup through AR and VR

In today’s world where consumers prefer to shop from the comfort of their homes, AR and VR are enabling beauty companies to provide experience similar to that of physical retail to their consumers. AR and VR technologies-based apps let users experiment virtually with a range of cosmetics by allowing them to try several different shades, all within minutes and through their smartphone. This elevates the users shopping experience and improves sales conversion.

Sephora’s Virtual Makeup Artist enables customers to try on thousands of shades of lipsticks and eyeshadows through their smartphones or at kiosks at Sephora stores. While many such apps and filters have been in use for some time now, they are increasingly becoming more sophisticated, providing accurate color match to the skin and ensuring the virtual makeup does not move when the user shakes their face, changes to a side angle, etc. In addition, such apps also provide digital makeup tutorials to engage customers.

On similar lines, L’Oréal uses ModiFace’s AR and AI technology to provide virtual makeup try-on on Amazon and Facebook. The technology enables customers using these two platforms to try on different shades of lipsticks and other make-up products through a live video or a selfie from an array of L’Oréal brands such as Maybelline, L’Oréal Paris, NYX Professional Makeup, Lancôme, Giorgio Armani, Yves Saint Laurent, Urban Decay, and Shu Uemura.

Moreover, AR-based try-on apps helped brands connect with their customers during the previous year when most customers were stuck home and could not physically try on make-up. LVMH-owned Benefit Cosmetics has been investing in AR tech, and launched Benefit’s Brow Try-On Experience program (along with Taiwanese beauty-tech company, Perfect Corporation), which helps online shoppers identify the right eyebrow shape and style for them and then choose products accordingly. The company uses facial point detector technology for the program. The app witnessed a 43% surge in its daily users during April and May of 2020 (as compared with January and March 2020), when people were confined to their homes owing to the COVID outbreak. This helped connect with consumers in a fresh manner and increased brand loyalty. Moreover, Benefit claims that brows products have been their strongest category post-COVID outbreak.

One of China’s leading e-commerce players, Alibaba, also partnered with Perfect Corporation to integrate the latter’s ‘YouCam Makeup’ (an AR-based virtual makeup try-on technology) into Alibaba’s Taobao and Tmall online shopping experience.

Smart devices

In addition to AI and AR based apps and solutions, smart devices is another category in the beauty tech space that is gaining momentum. A certain section of premium consumers are increasingly open to invest heavily into smart beauty gadgets that not only improve skin and hair quality but also help them quantitatively measure the results from using a certain product. While these products are currently expensive and for a niche audience, they have been gaining popularity, especially across the USA and China.

One such smart skincare device is L’Oréal’s Perso, which is based on ModiFace’s AI-powered skin diagnostics and analysis technology. Perso uses AI, location data, and consumer preferences to formulate personalized moisturizer for the consumer. The product is further expected to extend into foundations and lip shades. Perso is expected to be launched in 2021.

On similar lines, in July 2019, Japan-based Shiseido, launched its smart skincare device called Optune, which measures a user’s location-based weather and air pollution data, sleep data, stress levels, and menstrual cycles to create a custom moisturizer. Optune is available on a subscription basis and costs about US$92 per month.

In 2020, P&G also launched a premium skincare system, called Opte Precision. The skincare device uses blue LED light to scan one’s skin and applies a patented precision algorithm to detect problem areas and analyze complexion. Post this, the device releases an optimizing serum that is applied to spots to instantly cover age spots, pigmentation, etc., and to fade their appearance over time. The device has 120 nozzles and works on a technology similar to that of a thermal inkjet printer. The device targets a premium niche audience and costs US$599 with refill cartridge costing US$100.

In 2018, Johnson & Johnson’s drugstore skincare brand, Neutrogena, also launched a smart skincare device – a skin scanner, called Skin360 and SkinScanner, which uses technology from FitSkin (a US-based technology company). The scanner comes in the form of a magnifying camera that gets attached to a smartphone. The camera, which has a 30-time magnifying power helps scan the size and appearance of one’s pores, size and depth of fine lines and wrinkles, the skin’s moisture level, and also provides a score to the skin’s hydration level. The data is processed in a mobile app, which in turn provides a complete skin analysis and offers expert advice and product recommendations. While most smart skin devices are relatively expensive, this one retails at around US$50.

EOS Perspective

While AI and AR have been embraced by a lot of industries in the past, beauty tech is still in its infancy. That being said, there is a lot of potential in the space, especially with the consumer becoming increasingly comfortable with technology. While till recently, most technology-based products in the beauty sector were gimmicky and more for fun and consumer engagement, brands have started taking this space seriously, and started launching products that offer real sales growth opportunity.

Moreover, while AI and AR-based technologies have been accepted fairly easily by the consumers and industry players alike, smart devices is still a very niche category, with most products focused on a niche affluent clientele, who are willing to spend more than US$100 on products that may help improve their skin. There is a lot of potential for this segment to innovate, collaborate, and launch products at a more affordable price point in order to reach the masses.

Over the next couple of years, we can expect new niche players, exploring the benefits of beauty tech to enter the market in addition to greater number of partnerships between traditional beauty giants and technology companies. As personalization continues to be the mantra for consumers, beauty companies cannot look to ignore the space in the coming future.

by EOS Intelligence EOS Intelligence No Comments

Beyond the Low-cost Price Tags – the Real Price of Fast Fashion

2.5kviews

Gone are the days when consumer bought a pair of jeans and wore it for years. Fast fashion culture has conditioned consumers to expect a constant stream of new clothing that feeds their desire to buy more in order to keep up with the changing trends. Owing to fast fashion, affordable clothes are being manufactured at a warp speed, worn, and quickly discarded, making clothes disposable commodities rather than keepsakes. About 100 billion clothing items are manufactured globally each year and consumption has increased by 400% in the last two decades. Fast fashion has undeniably democratized high fashion by providing affordable apparel for everyday shoppers but it comes at an enormous cost, not reflected in its bargain-basement price tags.

Fast fashion is the fashion now

Selling large quantities of inexpensive clothing has made fast fashion a dominant business model in the garment industry. Another reason for its popularity is the taste of luxury clothing that it offers to shoppers without paying the full price. Fast fashion brands, such as Zara and H&M, are able to produce low-cost mimics of high-end fashion brands. The moment a model walks down the ramp wearing clothes of luxury brands such as Louis Vuitton, fast fashion brands mass produce replicas of a similar design and sell them at astonishingly low prices.

While established luxury clothing brands take months to design and distribute a clothing item, Zara is able to design, produce, market, and distribute a new piece of clothing to its stores located across 93 countries in mere two weeks. This enormous efficiency in producing mass clothing at an economical format provides an edge to fast fashion companies that traditional clothing brands will always struggle to replicate.

Fast fashion has transformed dynamics of the whole fashion industry, changing the traditional four-season fashion calendar to 52 micro-seasons. Fast fashion companies such as Missguided launch about 1,000 new products monthly, while Fashion Nova rolls out 600 to 900 new styles every week.

The blindingly fast pace at which clothes are being manufactured and discarded has its consequences. The manufacturing process is environmentally damaging and speedy supply chains depend on underpaid and overworked factory workers.

Environmental cost of fast fashion

The environmental menace linked to manufacturing and consuming fast fashion is hidden across the lifecycle of each piece of clothing. The production process is tremendously polluting to begin with, as factories indiscriminately dump toxic chemical-laden wastewater into rivers and tonnes of greenhouse gases are emitted while manufacturing – about 1.2 billion tonnes of CO2 is emitted annually by the global textile industry, which is more than aviation and shipping industries combined.

Even the choice of fabric for manufacturing fast fashion garments is posing environmental risks. Proportion of synthetic materials, such as polyester in our clothing has increased two-fold since 2000, rising to 60% in 2019. These fibers are oil-based and a single polyester shirt has 5.5 kg of carbon footprint, as compared to 2.1 kg from a cotton shirt. Moreover, polyester generates vast amounts of greenhouse gases, sheds microfibers that cause plastic pollution in oceans, and when disposed, it does not naturally decompose, compounding the waste problem.

A major ramification of fast fashion is that clothes move from consumer’s wardrobes to garbage as fast as they are manufactured. It is likely that within 7-8 uses, a jeans or shirt would be discarded for clothing that is newer and trending. The shorter lifespan of garments is not only generating enormous amount of waste but is also putting strain on production resources such as water that is extensively used in the manufacturing process.

Globally, about US$ 400 billion worth clothing is discarded prematurely and 21 billion tons of textile is sent to landfills annually. The ecological cost associated with these garments is tremendous – 3,000 liters of water is required to manufacture one cotton shirt and a pair of jeans needs about 8,000 liters of water, almost the amount of water an average person drinks over two years is utilized in production of garments that will be quickly discarded.

Social cost of fast fashion

With rise of globalization, supply chains have become international, which has led to increased outsourcing of textile production to countries that offer low-cost labor. Fast fashion’s low price tags largely depend on even lower production costs. Hence, countries such as USA produce only 3% of its garments, while the rest is outsourced to developing countries, such as Bangladesh, India, Vietnam, etc.

Low-cost production means factory owners need to cut down costs, which is usually done at the expense of safety and results in providing appalling working conditions for factory workers. Fast fashion production uses 8,000 synthetic chemicals, several of those chemicals are carcinogenic affecting health of factory workers. Moreover, workers are constantly exposed to fumes of toxic chemicals, which pose serious threat to their lives.

Fast fashion frenzy has led retailers to indulge in unfair labor practices in an attempt to keep production costs low and simultaneously increase production. About 85% of textile factory workers are women, who work overtime and are highly underpaid. Lack of regulation has given way to exploitation of labor in countries such as Bangladesh, where retailers pay as little as US$ 2-3 per day to garment workers, a larger portion of them are engaged by fast fashion brands. Even in developed economies such as the USA, companies such as Fashion Nova have been found to pay employees far below the minimum wage – the brand was reported to pay US$ 2.77 an hour to its workers in Los Angeles.

Additionally, cases of child labor have been registered in countries including Bangladesh, Brazil, China, India, Indonesia, Philippines, Turkey, and Vietnam.

A move towards sustainable production

In the past decade, changing consumer attitudes associated with sustainability and corporate transparency have propelled fast fashion retailers to rethink impact of their production processes.

Notable steps have been taken by some of the largest fast fashion brands such as Zara and H&M. Zara aims to use 100% organic, sustainable or recycled material in its clothing line by 2025. Also, it has plans for its facilities not to produce any landfill waste by 2025. Currently, Zara has a sustainable clothing collection, Join Life, which uses sustainable raw materials such as organic cotton, tencel (cellulose fiber), or recycled polyester.

H&M also has a similar vision of using 100% sustainably sourced or recycled materials in its garments. It also aims to reduce water consumption and CO2 emissions in production processes. The company already has a clothing line, Conscious, which uses sustainable materials for manufacturing garments.

Both companies also claim to be striving to provide better working conditions for workers and pay fair wages.

Beyond the Low-cost Price Tags – the Real Price of Fast Fashion by EOS Intelligence

EOS Perspective

Thanks to fast fashion, for many consumers, what used to be a thoughtful and occasional purchase, has turned into a series of impulse buys at shorter intervals. The rate at which garments are being produced is not environmentally sustainable and putting profits ahead of workers’ welfare has led to abuse and exploitation of laborers globally.

Fortunately, the number of eco-conscious consumers is on the rise, a fact that has pushed fast fashion retailers to reevaluate strategies and focus on sustainable production. However, a question still remains how much of those sustainability pledges and greener production goals actually hold true.

Can fast fashion really be sustainable?

The fundamental problem lies in the business model of fast fashion that is based on selling more products. The industry’s profitability hinges on luring consumers to fresh stream of new clothes and designs that are launched almost weekly. A business model that is based on over-production is far from being sustainable.

Fast fashion companies are often criticized for greenwashing and distracting consumers from their harmful practices. For instance, H&M’s recycle program encourages shoppers to donate their old clothes, which H&M claims to recycle to create new textile. However, only 0.1% of all collected clothing is believed to be actually recycled, while the rest is most likely dumped in landfills. H&M’s clever marketing tactics make shoppers believe that it is a green company, but in reality, H&M offers discount vouchers to shoppers in exchange of their donated clothes, which pushes consumers to buy even more clothes.

Claims made by fast fashion companies on using 100% sustainable fabric have been questioned by various experts and critics, as all fabrics utilize enormous amount of natural resources and energy in the production process. Fast fashion companies might be shifting to fabrics with lower environmental profile but it cannot be completely sustainable, as claimed.

Moreover, H&M and Zara’s sustainable clothing lines, Conscious and Join Life, have been called out for misleading consumers with vague sustainability claims. It is unclear to consumers why these companies are labelling their clothing lines as sustainable. The companies have never defined terms such as ‘sustainably sourced’ or ‘sustainable materials’, used to describe their clothing lines. Hence, it is ambiguous how they source the materials, what is meant by sustainable materials, and what portion of garments they actually constitute.

While making an effort to use environmentally-friendly materials is definitely a step towards better production practices, it is not enough to compensate for the overall damage that fast fashion companies impose on the environment, hence, consumers also need to do their part.

Time to slow the fast fashion

Fast fashion thrives because companies create demand for clothing. To curb this demand, consumers need to make changes in shopping behavior to reduce their own environmental footprint.

A conscious choice needs to be made to purchase less clothes and to use the existing ones for longer time period. Solely wearing a garment for nine months longer can reduce carbon footprint of that garment by 30%.

Buying used clothes is another way to reduce environmental impact. Wearing used garments is a sustainable way to recycle clothes which would otherwise be discarded in landfills. If every shopper purchased one used item in a year, it could save CO2 emission equivalent to pulling out half a million cars from roads for a year.

Nonetheless, if consumers make mindful choices and fast fashion brands commit to doing business differently, we would be able to produce and consume less.

by EOS Intelligence EOS Intelligence No Comments

Blockchain: a Frontline Warrior in Battling Coronavirus Pandemic

SARS-COV-2 has brought the world to a standstill. Technology and its creative uses have been playing a pivotal role in sustaining lives during the pandemic as well as combating the crisis. One such technology that has been in the forefront of the pandemic is blockchain. From mitigating supply chain issues with medicines and protection gear to facilitating transparency in donations to effectively tracking the spread of the virus and protecting patient privacy, blockchain technology is being applied across the spectrum to contain and manage the outbreak.

The current pandemic has brought to light many inefficiencies and limitations of the existing global healthcare systems, wherein governments across the globe are grappling to control the outbreak, challenged by the lack of a unified interconnected and trusted network to share data and track cases. Blockchain has several inherent properties, such as decentralized ledger, transparency, immutability, that make it suitable for handling and managing various aspects of containing the pandemic.

Outbreak tracking

Global health authorities and governments across the globe are having a hard time gathering authentic data regarding tests and patient numbers, hospital beds, recoveries, etc. Currently, most of the data circulating is disparate, and comes from multiple sources, such as hospitals, labs, public, and media, instead of one authorized source. This is extremely damaging since this results in the creation of a great amount of inaccurate and duplicate data, which if trusted, makes the process of tracking and containment both time consuming and ineffective. This is counter-productive to the management of a disease that is as fast spreading as COVID-19.

Blockchain technology can come to play in effectively tackling this issue. Owing to its distributed and immutable nature, blockchain can provide a feasible solution for tracking the outbreak. Blockchain-based apps facilitate organizations across the globe to form a single connected network where data can be shared in real time and securely. Moreover, since data stored in blockchain is immutable, it is protected against unauthorized changes and its distributed nature ensures protection against fraudulent data (since each entry requires consensus algorithms and smart contracts). Lastly, blockchain efficiently manages high volumes of data (as in the cases of the COVID pandemic) in a real time basis, which cannot be managed using human resources.

However, in addition to these factors, the aspect that stands out the most and makes blockchain technology ideal for monitoring and managing outbreak-related information is the level of privacy it offers. People do not wish for their information to be shared publicly or be used for other purposes. Thus it is a challenge to get patients to collaborate with governments and healthcare institutions to share information regarding their condition and wellness. For instance, the Israel government recently permitted healthcare institutions to track citizens’ mobile phones to control the spread of coronavirus. This has raised concerns from human rights organizations as citizens are not comfortable with sharing their personal information.

Since blockchain uses a distributed ledger, which ensures accountability and transparency with regards to access to its stored data, the information shared through blockchain cannot be extracted or misused. Moreover, information stored in a blockchain cannot be hacked. This encourages patients to share information regarding their condition, symptoms, location, and underlying health conditions without fear of the information being misused or shared with any third-party.

Furthermore, information shared by patients in a blockchain network may not only be used for tracking the outbreak but also facilitate health centers study the disease characteristics and patterns to develop treatment and solutions.

For instance, WHO has been using a blockchain-based data streaming platform, called MiPasa, which facilitates the sharing of information amongst need-to-know organizations such as state authorities and health officials. The platform is built on top of Hyperledger Fabric and partners with IBM for blockchain and cloud platforms. The application cross-references siloed location data with health information to track and prevent the spread of the outbreak, all while protecting patient privacy.

In another example, Atlanta-based developer of blockchain-enabled healthcare applications, Acoer, developed an application called HashLog, which allows real time logging and data visualization of the spread of the infection. HashLog provides real-time updates on the spread of the disease by tracking movement of infected people to identify potential outbreaks and prevent further spread. The application uses the Hedera Hashgraph distributed ledger technology and each entry is recorded through a verified hash reference on the ledger, ensuring that the data is correct.

Donations

In addition to tracking and preventing outbreaks, blockchain also plays an important role in securing donations. From hospitals and state authorities with insufficient funds for medical supplies to economically-weaker sections of the populations losing source of income due to lockdown, the current pandemic has displaced a huge number of people across the globe. Thus in such times, donations play a critical role in sustaining livelihoods and providing healthcare supplies to the affected people. However, given fraud associated with donations in recent times, lack of trust is a common factor affecting success of donations. Several individuals want to help and donate, however, are discouraged due to fear of their money being misused.

For instance in India, the government and police warned citizens against several fake relief schemes that have been floating in the name of COVID-19 relief, some even mirroring the Prime Ministers Relief Fund. These kind of activities deter willing people from donating.

Blockchain technology can be used to effectively combat this issue. Since all transactions in blockchain are secure, transparent, and traceable, donors can track their funds and see where they are utilized. This gives confidence to donors that their funds are being used for the exact purpose that they intended.

One such example is Hangzhou-based blockchain startup Hyperchain, which built a blockchain-based donation tracking platform for supporting government and hospitals (such as Tangshan People’s Hospital, Jiayu People’s Hospital and Xiantao No. 1 People’s Hospital) in the donation process. The platform has attracted more than US$2 million in donations.

 

Blockchain a Frontline Warrior in Battling Coronavirus Pandemic by EOS Intelligence

Supply chain tracking

Blockchain technology has been deemed extremely useful in managing and tracing the supply chain in several sectors as retail (for more insights on this read our article Blockchain Paving Its Way into Retail Industry). However, given the current pandemic, the technology can also utilize similar functionalities and play a significant role in tracking of medical supplies.

Given the pace of spread of COVID-19, authorities and healthcare organizations across the globe have faced a shortage of medical supplies, such as masks, sanitizers, PPE kits, ventilators, testing equipment, as well as some medicines. This drastic increase in demand has resulted in distribution of large number of counterfeit and faulty products. Blockchain technology can play a significant role to combat this. Given the data provenance in blockchain and its immutable nature, it is possible to identify and trace back every touchpoint of the medical supplies to ensure its authenticity.

In addition to filtering counterfeit products, blockchain also helps streamline the supply chain process to ensure hospitals and doctors secure timely supplies to treat patients. Blockchain can provide real-time updates regarding demand so that medical manufacturers can adjust production levels accordingly. In addition, it can help fast-track supply chain contracts through the use of smart contracts, and facilitate faster payments, thereby improving the overall efficiency.

In February 2020, China-based AliPay, along with the Zhejiang Provincial Health Commission and the Economy and Information Technology Department, launched a blockchain-based platform to facilitate the tracking of medical supplies required for fighting SARS-COV-2. The platform has improved trust within the medical supply chain since it records and tracks the entire provenance of preventive supplies including masks, gloves, and PPE kits.

Apart from medical supply chain, blockchain can also help limit supply chain disruptions faced by several other industries due to lockdown in several parts of the world. However, companies that are using blockchain for managing their supply chain have an advantage as they have better visibility into their complete supply chain and thereby can identify points of disruption in a timely manner.

Avoiding future pandemics

Blockchain is on the front line for fighting the current pandemic, but it also has the potential to prevent future disease outbreaks. Most of current healthcare surveillance systems across the globe are outdated and lack the required timeliness and efficiency in sharing information with local as well as international health enforcement organizations. Moreover, sometimes there is a question of deliberate delay in sharing of critical information.

To this effect, blockchain-based health surveillance systems can help mitigate future outbreaks. Since they operate on a decentralized ledger, the surveillance data is transparently available to health organizations across the globe in a real-time manner, without the fear of any political disruptions. Timely knowledge of a potential outbreak is the first and most critical step in preventing a similar situation in the future.

In addition to the above mentioned applications, blockchain companies along with institutions are developing creative solutions that help reduce challenges faced by people due to COVID in their day to day living. For instance, Toronto-based blockchain company, Emerge, launched a public safety app called Civitas, which assists the citizens and local authorities across Latin America. This app matches one’s official ID to confidential medical records stored in the blockchain to identify whether the person is allowed to leave the house or not. Thus the app allows police to verify if the person has a travel permission just on the basis of their government ID and without gaining access to the person’s medical records. The app also determines the safest time and day for going out for essentials for people who are experiencing COVID-like symptoms.

Moreover, as discussed in our previous article (Blockchain Scores Well in the Education Sector) blockchain also is extremely useful in the virtual education scenario, which is now the new way of schooling for large part of students across the globe.

EOS Perspective

Blockchain technology has several inherent properties that make it ideal for helping to manage and combat the current pandemic. Its decentralized, traceable, and immutable properties make is especially desirable for managing contact tracing and outbreak tracking, which are critical in handling a pandemic efficiently. Moreover, the benefits of blockchain are further amplified when used alongside other technologies, such as artificial intelligence, cloud computing, and big data.

However, despite its several uses, the issue of scalability plagues blockchain adaption at a larger scale. Blockchain is still a nascent technology and lacks high-level scalability. With COVID affecting most of the world, the current blockchain companies do not have that level of scalability to provide all-encompassing global level solutions.

Furthermore, blockchain technology does not operate alone and it needs to be configured with the operating legacy system at companies and other stakeholders. However, most legacy systems are relatively old and therefore do not support blockchain technology. Updating or reconfiguring a legacy system is a tedious process (both in terms of time and money) and companies may not want to tie up resources for that at the current time.

Given these drawbacks, blockchain may not be deployed at a global-scale level during this pandemic, however, its inherent benefits have made companies, authorities, and global health organizations ponder, explore, and evaluate its potential in managing such situations in the future. While the COVID-19 pandemic has caught the world largely unprepared, organizations and companies across the globe are gearing up to ensure this history is not repeated and blockchain technology has emerged as a critical part of the solution.

by EOS Intelligence EOS Intelligence No Comments

Influencer Marketing Redefining the Fashion and Beauty Industry

682views

Social media users are increasingly reliant on and influenced by what they see online, particularly, when it comes to marketing done by fashion and beauty brands. Social media provides immense marketing opportunities to the fashion and beauty industry by allowing them to closely interact with customers and influence their buying decisions like never before. To tap such opportunities, about 78% of global fashion brands incorporated social influencers in their marketing strategy in 2017, according to a survey conducted by Launchmetrics. Influencers are slowly becoming an integral part of marketing campaigns for fashion and beauty brands – for high-end brands such as Becca Cosmetics and Yves Saint Laurent, as well as affordable brands such as Maybelline, for whom influencers have been pivotal in driving sales.

Why beauty and fashion brands are adopting influencer marketing?

In the past, to launch new collections or promote products, fashion/beauty brands invested heavily in celebrities and television models gracing magazine covers, billboard and television advertisements, among others. These efforts were effective but as technology progresses, fresh marketing tactics are born. While most of the traditional forms of advertising are still being used, brands have started to realize how laborious it is to employ traditional methods in promoting products, hence, majority of brands are going digital and starting to work with influencers.

How influential is influencer marketing?

Undoubtedly, influencer marketing is one of the fastest growing digital marketing tools, providing unparalleled access to real-time word-of-mouth targeting. For marketers, today’s social media influencers are yesterday’s celebrities and socialites, only with a more persuasive voice and greater power to reach audiences.

Beauty and fashion industry has understood the power of influencer marketing quite well. Cosmetics brands such as Smashbox have completely abandoned the use of traditional print media for advertising while luxury cosmetics companies such as Estee Lauder have significantly reduced spending on traditional media to focus on digital.

Fashion and cosmetics brands are using various types of influencer campaigns to promote products, foster brand awareness, and boost sales. For example, Maybelline (an American cosmetics company) in China used the influence of beauty bloggers and 50 celebrity influencers to do a 20-minute livestream video for a newly launched lipstick in 2016, which led to sales of 10,000 lipsticks in two hours.

On the other hand, Olay (an American skincare company) introduced a skincare campaign, Olay 28-day Challenge, which urged influencers to document their four-week experience of using company’s products while updating their followers simultaneously across various social media platforms. Influencers also gave away free samples and offered discounts to followers to encourage them to buy the products to join the skincare challenge. In 2018, the campaign was able to increase engagement rate by 20% and there was a significant increase in Google searches for the brand name.

There is no end to innovative social media campaigns that brands are launching. For example, in 2018, H&M (A Swedish clothing retail company) engaged in conversation with consumers on Instagram to come up with new designs for its brand Nyden, which is targeted at millennials. H&M worked with nine influencers, who used Instagram stories’ polling feature to understand followers’ preferences for certain designs, such as using zippers versus buttons, among others. Over a period of two weeks, the polls attracted more than 425,000 viewers and generated 35,000 votes.

For brands such as Fashion Nova (an American fast fashion retail company), with 14 million Instagram followers and ranked as the most Googled fashion brand of 2018, marketing through Instagram has been pivotal in its rapid ascent in the fashion industry. Fashion Nova is known for betting big on Instagram and use of celebrity influencers – as of December 2018, the company had worked with 3,000 influencers on Instagram. Using celebrity influencers, it claims to have generated sales up to US$ 50,000 per post and selling out a whole collection of clothing line within 82 minutes. With about 20 to 30 posts per day on Instagram, Fashion Nova knows how to keep its audience engaged and generate brand awareness.

What challenges are obstructing growth?

Influencer fatigue

Influencer marketing is not as impeccable as it sounds to be. With more and more businesses adopting influencer marketing, threat of influencer fatigue increases, which could result in disengaged audiences and reduced impact. According to a study conducted by Bazaarvoice in 2018, about 47% respondents claimed to be fatigued with repetitive influencer posts on Instagram.

Promotional content is already beginning to clutter consumer’s news feeds. With beauty and fashion influencers recommending every other product that enters the market, audiences will eventually lose trust in them, feel disengaged and overwhelmed. Consumers, after some time, are bound to get tired of having their buying behavior manipulated. Just like people started using ad-blockers when websites became loaded with advertisements, there’s a probability that they may also turn away from beauty/fashion influencers.

Absence of standard metrics/parameters to determine success of campaigns

There is uncertainty regarding what constitutes a successful influencer marketing campaign and how to calculate ROI on marketing spend. Beauty and fashion companies are unable to accurately calculate profitability of influencer campaigns. According to a study published by Celebrity Intelligence in 2018, 46% of respondents (from the beauty industry) faced challenge in evaluating ROI of an influencer collaboration.

Driving purchases is not always the key objective of influencer marketing, rather it focuses on softer goals like growing brand awareness or boosting engagement, which makes ROI far more complex to determine.

Influencer marketing does not guarantee results in terms of sales, brand reach, or number of clicks. No standard metrics have been set for the industry to measure success, instead brands end up speculating whether the campaign was successful or not. Some beauty and fashion companies monitor the comments or number of likes on the posts, while others determine views on videos or track campaign hashtags, all of which are not very effective methodologies.

Fraudulent practices

Much like other industries, beauty and fashion market has also fallen prey to influencer frauds. According a report published Points North Group in 2018, cosmetics/skincare companies suffered losses due to fraudulent engagement – 46% of Raw Sugar Living’s influencer marketing budget was squandered on fake followers, Clarins lost 45% of its budget on influencer frauds, while L’occitane blew 24% of its budget, among various others. Such deceitful practices have taken a toll on marketers, who invest in influencers to drive brand awareness and sales, but their campaigns fail to reach the actual target audience.

Another inauthentic social media activity plaguing the beauty and fashion industry is staging fake promotional posts by aspiring influencers. Companies want to see promotional abilities and references of past campaigns of influencers before hiring them to do paid sponsored posts. Hence, aspiring influencers, particularly from the beauty and fashion industry, have started to publish posts with brand hashtags and captioning it in a manner such that it seems to be a promotional or sponsored content. While this leads to free publicity for brands but most of them complain that this also results in inferior quality sponsored content posted without approval, which could harm brand’s reputation.

Influencer Marketing Redefining the Fashion and Beauty Industry by EOS Intelligence

EOS Perspective

If there is any market that qualifies to be an early adopter of influencer marketing, it is the beauty and fashion industry. It is an extremely dynamic industry and to stand out from competitors, brands need to constantly evolve, be creative, and promote products extensively – all of which is easily achieved through influencer marketing.

Equipped with social media savviness, influencers have the power to eloquently persuade consumers to make purchases. There is no limit to the creativity that they bring to the table – fashion/beauty influencers design compelling marketing campaigns for the brands by reviewing products, conducting polls and contests, offering huge giveaways, sharing their experiences of using products through videos or photographs, attending events organized by brands and promoting such events, among various other tactics.

Is influencer marketing here to stay?

There is no doubt that influencer marketing is becoming the mainstay of beauty and fashion industry, far from a passing fad. The personal nature of influencer campaigns is one of the reasons why it is proving to be effective for the beauty and fashion industry. According to a survey conducted by Celebrity Intelligence in 2018, 98% of beauty companies believed that influencer marketing is effective for the industry while 68% thought beauty segment has a natural affinity with influencers. Even though difficult to calculate, surveys have determined that influencer campaigns could also provide high ROIs – for every US$1 spent on influencer marketing, brands received average ROI of US$10.7 in 2017. Fashion and beauty brands have gauged the power of social media and know that with the right influencer endorsing to the right community/audience, it can translate into clicks, conversions, and actual sales.


Find out more about drivers and challenges in influencer marketing adoption here


For fashion and beauty brands, influencer marketing has become a multi-million-dollar investment, with considerable portions of their budgets dedicated to influencers. For example, Estee Lauder (a US-based cosmetics company), in 2019, revealed that 75% of its marketing budget will be spent on digital marketing, particularly on influencers, while Shiseido (Japanese multinational personal care company) increased its influencer marketing budget by 50% in 2019. On the other hand, in February 2019, Benefit Cosmetics (a US-based cosmetics company) formed an in-house dedicated influencer agency in the UK to streamline influencer marketing operations and manage influencer relationships. In the future, it plans to expand the in-house influencer agency to other locations as well.

Undoubtedly, influencer marketing has dramatically changed the fashion and beauty industry, by allowing real people to narrate a brand story, demonstrate product, and provide honest and credible product reviews. In order to make it a sustainable marketing strategy, measures are being taken to overcome some of the existing challenges. In pursuit to engage with authentic influencers, beauty brands are adopting more sophisticated, data-led approach to selection process. According to Celebrity Intelligence survey, in 2018, about 67% of beauty brands identified social media analytics (including audience insights and engagement metrics) useful to choose authentic and suitable content creators.

Another ongoing challenge is to accurately determine success of campaigns, which some companies (including lifestyle and cosmetics brands such as Daniel Wellington, L’Oréal, and Olay) are tackling by providing influencers with a unique URL or a discount code, which followers can use and brands can easily track conversions. If the campaign does not entail discounts, various metrics can be used to evaluate ROI such as traffic driven, social reach, social media impressions, engagement rate, cost per impression, and cost per engagement, among others.

Nonetheless, opportunities that influencer marketing provides for the beauty and fashion industry outweigh all downsides. While brands have achieved success with sponsored posts and brand hashtags on social media, there is still a lot more for them to explore and innovate through influencer marketing.

by EOS Intelligence EOS Intelligence No Comments

Influencer Marketing: A Powerful Marketing Tool on the Rise

Influencer marketing, until fairly recently a new marketing tool, is now on the frontier of becoming a mainstream marketing channel. The real, relatable, and reaction-stimulating content created by influencers, distinguishes this form of marketing from traditional marketing channels. Influencer marketing offers effective means for brands to communicate and engage with customers on social media, a fact that is driving its popularity. Laden with potential to drive sales and grow brand awareness, the influencer marketing market is likely to reach US$22.3 billion by 2024. However, certain challenges do exist in the market, and if not addressed, they can potentially hinder market growth.

Influencer marketing started shaping up around 2005 with mere video blogs on YouTube, but quickly grew in prominence as marketers took notice of its potential. Growing at a CAGR of 28% between 2019 and 2024, the industry is becoming a marketing mainstay for brands across various markets. This is driven by the fact that influencers generate a sense of proximity with their audiences, which helps in molding their shopping behavior under discrete suggestions and recommendations.

What is driving adoption of influencer marketing?

Consumers, especially millennials, are embracing a different approach to making purchasing decisions. Consumers are relying on Instagram models, Twitter personalities, and YouTube influencers to seek recommendations or to understand which brand or product is trending in the market. This has resulted in brands endorsing products through various social media channels using influencers.

Moreover, it is a proven fact that word-of-mouth marketing leads to twice as high sales as paid advertising, and influencer marketing is nothing but a form of word-of-mouth marketing. Studies also suggest that shoppers purchasing product through word-of-mouth have a 37% higher retention rate, another reason why brands want to reach their consumers through influencer marketing.

Additionally, the way that we consume media has changed. Social media boom is slowly driving consumers away from traditional forms of advertising and marketing. More than ever, social channels are becoming means to start a conversation with consumers and build direct relationships with them. With traditional advertising being sidelined by consumers (about 65% of people skip ads posted during or before online videos), influencer marketing has become an integral channel to connect with them.

How have influencers assisted companies to increase sales and grow brand awareness?

Engaging with influencers is proving to be an effective way of getting a sale, hence, brands are investing considerable budgets in influencer marketing. Brands are partnering with influencers to launch various types of innovative campaigns, with primary focus on increasing brand awareness (84%), reaching new audience (71%), and generating sales (64%), according to a survey conducted by Mediakix in 2019.

For example, YouFoodz, an Australian food chain, used Instagram to promote the launch of its 2017 winter menu. It collaborated with 81 influencers, who posted 162 Instagram stories and 176 pieces of content, which reached 1.5 million Instagram users. The campaign was a huge success, generating 70,000 direct engagements and over 500,000 impressions (number of times particular content is displayed, regardless of if it was clicked or not).

Relying on influencer marketing, Bigelow Tea (an America tea manufacturer) was able to showcase healthy aspects of drinking tea and promote its product to a large audience. Influencers incorporated Bigelow tea into their content in various ways. Culinary influencers developed different recipes to use tea in innovative ways, while craft bloggers turned packaging into DIY arts, for example, creating flower pots from the tea packaging. The campaign led to more than 44 million impressions and increased sales by 18.5%.

Further, M&M (a product of US-based confectionary and food company, Mar Incorporated) launched an innovative campaign in 2016 to let audience decide its new peanut flavor (a choice between Honey Nut, Chili Nut, and Coffee Nut) by running a mini-election. It partnered with a television personality and a team of influencers to encourage people to try the flavors and cast their votes. Finally, coffee nut flavor was selected, and the campaign generated 269 million impressions, 216 influencer posts, 14.4 million social engagements, and more than 1 million votes.

Is influencer marketing cost effective?

Influencer marketing has proven to be quite budget friendly, allowing large brands and small start-ups to launch compelling marketing campaigns. Traditional forms of advertising campaigns, through television commercials, magazines and newspaper ads, etc., require substantial investment.

On the other hand, influencer marketing is cost effective and simpler to execute. Companies with limited budget can engage with micro (comprising 1,000-5,000 followers) or nano (comprising less than 1,000 followers) influencers and still achieve remarkable results without spending a fortune.

In fact, according to a study conducted by Takumi, micro and nano influencers can generate high engagement rates – influencer with up to 1,000 followers could generate about 9.7% engagement rate, while influencers with 1,000-4,000 followers could provide 4.5% engagement rate. Micro and nano influencers tend to build strong trust and authenticity, and are relatable to their audience, which enhances their ability to engage an audience. According to a study conducted by Experticity, 82% of consumers have higher probability of listening to suggestions provided by micro influencers than those provided by influencers with large number of followers.

Moreover, surveys have determined that influencer marketing could yield a decent average ROI of US$ 5.20 for every dollar spent, which makes it an appealing option for marketers.

What challenges are hindering growth?

Lack of stringent regulations leading to poor compliance with guidelines

Current regulations and guidelines pertaining to influencer endorsements are not stringent or comprehensive, leading to malpractices. In the USA, the FTC (Federal Trade Commission) requires influencers to provide disclosure in case of sponsored content, however, no fines are applied for violations. As a result, most influencers do not adhere to the endorsement regulations, either due to lack of knowledge or in fear of losing followers. In 2018, out of 800 Instagram accounts from UK, USA, and Canada, only 25% fully complied with local regulations pertaining to sponsored content, according to a study released by Inkifi.

Such misleading conduct on influencer’s part could raise questions on their authenticity and lead to mistrust among their followers, who demand transparency. Moreover, large corporations such as Unilever (a consumer goods company) have strictly refused to work with influencers who indulge in fraudulent activities. Influencers are at risk of losing trust of their followers as well as of companies if they continue to indulge in misleading activities.

Fraudulent engagement

Typically, brands use the number of followers on an influencer’s account to estimate campaign results in terms of ROI, engagement rate, brand awareness, earned media value, among others. To seem more appropriate or popular, some influencers purchase their followers using bots – software designed to automatically like, comment, and share posts, increase views on videos, and inflate number of followers on accounts. Influencers have also started to fake their engagements by joining a community of real users to trade likes and comments. Despite these followers being real people, they are not likely to be interested in influencer’s content. Consequently, brands fail to meet the desired campaign result or reach the target audience.

In 2019, fraudulent activities were estimated to cost brands US$1.3 billion, about 23% of allocated budget for influencer marketing. Fraudulent practices are inhibiting market growth, as brands are increasingly becoming cautious of investing in influencer marketing – as of January 2019, about 53% of brands stated that fraudulent impressions were obstacles to increasing digital advertisement budgets.

Influencer Marketing A Powerful Marketing Tool on the Rise by EOS Intelligence

EOS Perspective

Influencers are no longer an extra asset to marketing campaigns instead they have become a critical element of storytelling and building direct relationship between brands and customers. Influencers have positioned themselves as authentic gurus rather than simple advertisers, with 92% of consumers making purchasing decision based on influencers’ posts in 2018. Their relentless savviness to promote brands is what keeps audiences engaged and brands coming back for more.

Nonetheless, challenges do persist but the industry is continuously evolving and coming up with solutions. Measures are being taken against inauthentic engagements. Platforms such as Instagram have started to strictly regulate fraudulent activity and began to threaten offenders with fraud penalties, account suspension, and brand reputation damage. Companies have also become mindful and vigilant while engaging with influencers and started to thoroughly vet them to check for fake followers or use of bot to increase followers. On the legal side, a New York Attorney General has stated that selling fake followers on social media will be considered as an illegal activity in the state.

Further, in November 2019, FTC launched guidelines for sponsored content under ‘Disclosures 101 for Social Media Influencers’ that encompasses when and how influencers should disclose their engagement with brands, regardless of whether or not it includes payment. FTC has not made any major changes in the guidelines but the new guide is more user-friendly with abridged language, and photos and videos illustrating the correct way to endorse products on social media.


Find out how influencer marketing is reshaping fashion and beauty industry here


According to the guidelines, when partnering with brands, disclosure is mandatory when there’s a financial, employment, personal, or family relationship with a brand. Disclosure language should be simple and clear, and the disclosure should be hard to miss (for example, disclosures on Instagram are required to be placed at the beginning of the post’s description and before the ‘more’ button). FTC’s aim is to foster transparency in sponsored content by placing more liability on brands and influencers to explicitly reveal their relationship while recommending products.

Influencer marketing has well-established itself in the advertising industry and is moving towards becoming a mainstream marketing channel, and such measures taken by regulatory authorities, social media platforms such as Instagram, as well as the brands will further strengthen its position as a marketing channel. In future, not only will influencer marketing continue to grow in popularity, but is also likely to become a more purposeful and effective way to communicate and engage with audiences. Allured by endless opportunities, brands will continue to collaborate with influencers and the industry is poised to grow.

by EOS Intelligence EOS Intelligence No Comments

Social Commerce Reshaping How Brands Sell and Customers Buy

Today, social media is at the core of many brands’ marketing strategies. The growing value that customers (especially the younger demographic) place on social media content and the increasing use of social media to gain information about a product or brand have made social media an essential part of a customer’s purchase decision and experience. However, till recently, the use of social media was limited to being an advertising tool or referral channel for retailers, who used these channels to drive traffic to their e-commerce sites. This is expected to change in the future. With social media giants, such as Facebook, Instagram, and Pinterest offering direct sales options, it is quite likely that these apps will move from being mere marketing tools to becoming the final destination for sales, creating a new retail category – social commerce.

It is no secret that visual content social media apps, such as Instagram and Pinterest, offer a more engaging shopping experience for customers, who now look at these apps as an integral part of their purchase experience. Visual content on social media is known to significantly improve discoverability for brands, deepen brand trust and value, and increase sales conversion.

Retailers, both large and small, have been using social media extensively as a part of their marketing campaigns and are investing huge dollars in the platforms. Retailers are increasingly offering quick access to their e-commerce websites via social media apps, through which they aim to drive traffic to their sites and in turn convert it into sales.

Visual content on social media is known to significantly improve discoverability for brands, deepen brand trust and value, and increase sales conversion. Retailers, both large and small, have been using social media extensively as a part of their marketing campaigns and are investing huge dollars in the platforms.

This has paid off well for retailers, with reports stating that in 2017, the top 500 retailers globally earned about US$6.5 billion through sales that were a direct result of social media presence/marketing. This has increased by about 24% when compared with sales resulting from social media for the same set of retailers in 2016. This clearly demonstrates social media’s increasing influence in a shopper’s purchasing decision.

While it has become critical for retailers to have presence on social media, it is expected that social media will play an even bigger role in the consumer shopping experience in the future. Several social media platforms have been experimenting with direct selling options, wherein users do not have to leave the social media platform to make a purchase. While platforms such as Facebook and Pinterest have been offering direct selling options for a few years now, Instagram has recently joined the bandwagon.

As per a study by Bazaarvoice in 2019, the number of users who wish to discover and purchase directly through social media platforms has risen by 38% in 2018 over the previous year. Due to this, several social media platforms are forging their way into the e-commerce space, creating a new category, known as social commerce.

Facebook

Facebook was one of the first social media pages to move to direct selling, having introduced in December 2015. Facebook has a huge active user base (about 1.6 billion daily users) who visit the platform to engage with friends as well as brands.

The main premise behind introducing direct selling by Facebook was to streamline the purchase journey by reducing the number of clicks/page redirects a user needs to do to purchase a product. It helps facilitate impulse buys, which sometimes are abandoned in cases where multiple page redirects are required. Moreover, it provides an overall integrated shopping experience for users, who can rate, review, and comment on the products that they have purchased. This in turn increases overall engagement for the retailer, which in response may facilitate better visibility and credibility for them.

The main premise behind introducing direct selling by Facebook was to streamline the purchase journey by reducing the number of clicks/page redirects a user needs to do to purchase a product. It helps facilitate impulse buys, which sometimes are abandoned in cases where multiple page redirects are required.

Facebook store (its direct selling feature) is free to set up for retailers, however, most retailers setup their Facebook store with e-commerce website builders such as Shopify, Ecwid, and BigCommerce for ease of checkout and payment options.

While Facebook has been undertaking direct selling for a couple of years now, the response has been slightly underwhelming. This is due to several shortcomings. Firstly, the ticket size of products sold on Facebook is on the lower end, primarily due to encompassing mostly impulse or low consideration products. The average order value of referrals by Facebook is US$55, suggesting that the value of products ordered directly through Facebook would not be much higher than that. Moreover, the interface for a Facebook store is standard for all retailers, with no room for customization at their end. This also limits their opportunity to upsell/cross-sell other products. Lastly, the rights for ads shown on a retailer’s Facebook store remains with Facebook. Thus it is very likely that a competitor is advertising its products on the retailer’s page.

Thus, while Facebook store may be ideal for small and medium businesses with limited presence and scale, it may not be used by large retailers who sell high-value products and wish to provide an engaging and enriching shopping experience to their customers.

To further strengthen its hold on the social commerce aspect, Facebook launched Facebook Marketplace in 2018, which provides a destination for users to discover, buy, and sell items. However, the Marketplace differs from the Facebook Store and is more similar to eBay and Craigslist, wherein users can list products and conduct transactions through the platform. While it started as a peer to peer shopping marketplace, it has expanded to include merchant selling. As of October 2018, about 800 million people globally used Marketplace monthly to browse, buy, and sell items. This presents a unique opportunity to retailers who can drive sales of products at a platform where customers are already shopping.

While Facebook may not be the one-point solution for retail sales, it is definitely not to be ignored, especially for small to medium businesses. As per Ecwid, one of the largest e-commerce platforms, merchants who sell through this platform drive 15% of their sales from Facebook (as of 2017). Moreover, with people becoming more open to shopping through social media apps (as per a 2016 survey by BigCommerce, one of the largest e-commerce platforms in the USA, about 30% consumers are willing to make purchases directly from social media pages) and an increase in mobile shoppers, direct selling through Facebook presents a great number of benefits to retailers.

However, in 2018, Facebook announced a big change to its News Feed algorithm, which will now prioritize content shared by one’s friends and family instead of content shared by businesses and media outlets. This may further impact direct sales on Facebook, since going forward, business-related posts will feature less on the News Feed.

Social Commerce Reshaping How Brands Sell and Customers Buy

Pinterest

In June 2015, Pinterest also entered the social commerce space by introducing ‘Buyable Pins’, which are Pins that allow customers to buy products without leaving Pinterest. Since Pinterest is widely used by close to 250 million users, who visit the platform to discover new products, designs, and ideas, an option to buy pinned products seems like a natural extension for the social media player.

Buyable Pins help retailers streamline the e-commerce experience and improve conversion rates. As per a research by Shopify (another leading e-commerce platform) in 2014, Pins with prices get 36% more engagement compared with those without. Moreover, according to a 2016 survey by BigCommerce along with research firm, Kelton Global, 26% of the GenXers and Millennials surveyed claimed that they are more likely to purchase a product directly from Pinterest if given an option.

While Pinterest does not take any commission from retailers for sales through their platform, it makes money through advertisements as retailers promote their ‘Buyable Pins’ to users. Moreover, Pinterest lets the retailers handle the order processing, which includes processing payments, shipping, and customer service. This further helps retailers obtain and retain the customer’s information, which can be used in the future for sending follow-up mails, sharing promotions, and making future sales to the customer (unlike on Amazon and eBay).

‘Buyable Pins’ are currently only available in the USA and to few selected merchants. They are also available to merchants who use a listed range of e-commerce platforms, which include (but are not limited to) Shopify, BigCommerce, and Salesforce Commerce Cloud. However, the platform has been expanding, and over time will include a greater number of merchants.

Post the introduction of ‘Buyable Pins’, Pinterest also introduced a shopping cart option which is integrated across the mobile and desktop platforms, and which helps users to purchase multiple ‘Buyable Pins’ at a time.

Several retailers, especially small and medium size enterprises, have achieved significant success with ‘Buyable Pins’. FlyAway BlueJay, an online retailer selling artisanal products such as beauty products and small jewelry, attained tremendous success by using ‘Buyable Pins’ during the holiday season in 2015. All of their ‘Buyable Pins’ sales came from new customers, with ‘Buyable Pins’ driving 20% of their overall sales in the last quarter of 2015. In the beginning of 2016, Pinterest drove about 28% of their overall website traffic. Thus, it helped the company reach new customers and reduce their customer acquisition rate. Another small-scale retailer, Modern Citizen (a San-Francisco based women’s fashion and home goods retailer), introduced Buyable Pins shortly after they were launched by Pinterest and witnessed a 73% increase in their sales from Pinterest by using ‘Buyable Pins’.

Direct selling on Pinterest appears to be a must consideration for small to medium businesses that are selling unique and new products. With women making up 85% of Pinterest’s user base, brands selling to female audiences are expected to achieve higher success rate when compared with male-centric products sellers.

Instagram

Owing to its visual and interactive content, Instagram is one of the most widely used social media apps for discovering new products and inspiring purchase decisions. As per statistics shared by Instagram in June 2018, it had 500 million daily users. Moreover, as per an Instagram user survey (November 2015), 60% of its users claim that they leverage Instagram as a product discovery platform and 75% of these users have taken an action based on the products they discovered via Instagram (such as visit the website, purchase the products, or tell a friend). This puts the platform in a strong position to leverage its role (in the purchase process) and further extend brands’ offerings to include direct shopping from Instagram’s app.

While Instagram had not entered the direct selling market up till very recently, in 2017, it launched ‘shoppable posts’ (in a testing phase), wherein brands tagged their products on their organic posts. When a user clicked on a tagged product, they could see the pricing and a streamlined path to purchase it.

‘Shoppable posts’ received significant success on Instagram and the company launched them across the platform in 2018. In addition, it also launched ‘shoppable stories’ (stories offering the same tagging features as shoppable posts) and ‘shoppable collection’ (which allowed users to bookmark ‘shoppable posts’ to in turn create a shopping folder for the user).

Several companies that were part of the testing phase of ‘shoppable posts’ achieved significant increase in sales and Instagram-driven traffic to their websites. During the beta testing phase, participating brand, Natori (a US-based upscale woman’s fashion brand) posted 61 ‘shoppable posts’ and achieved a 1,416% week-over-week increase in traffic from Instagram and a 100% week-over-week increase in revenue from Instagram. After the testing phase, BigCommerce merchants using shopping features on Instagram witnessed a 50% increase in their Instagram referral traffic to their website.

In March 2019, Instagram launched a testing phase for a checkout option on the platform to tap on the potential of direct selling. Under this feature, Instagram allows users to buy directly (without leaving the app). Instagram aims to monetize this by charging a small fee from the retailers who look to offer this service to their Instagram followers/customers. Instagram will process the payment and store payment information for future purchases, enabling a more streamlined and frictionless purchasing experience for the user.

Instagram will share a small fee from the retailers looking to sell directly on Instagram and in turn offer an option to the user to purchase and checkout through Instagram without leaving the app. Instagram will process the payment for the user and store payment information for all future purchases, enabling a more streamlined and frictionless purchasing experience for the user.

This is likely to facilitate impulse buys and convert abandoned shopping carts into actual sales, since customers will not need to fill in their details again and again (as is case of shopping directly at different retailers with shoppable posts and signing in/logging in separately for each retailer/purchase).

This is expected to provide the perfect blend of social media experience and frictionless e-commerce experience (such as Amazon). However, unlike Pinterest, where social media platform is only the facilitator and the transaction in terms of payment and service is completed by the retailer, Instagram will be handling the payments itself and only sharing the basic details necessary to fulfill the order with the retailer (i.e., contact information and shipping address). This is expected to be a slight downside of selling on Instagram vis-à-vis on one’s own website as the retailer will receive less data and may not be able to build a relation with the customer.

Instagram is currently running a testing phase of this feature with a few brands across the USA, including Adidas, Anastasia Beverly Hills, Balmain, Burberry, ColourPop, Dior, Huda Beauty, H&M, KKW Beauty, Kylie Cosmetics, MAC Cosmetics, Michael Kors, NARS, Nike, NYX Cosmetics, Oscar de la Renta, Outdoor Voices, Ouai Hair, Prada, Revolve, Uniqlo, Warby Parker, and Zara. Payments will be processed through PayPal and customers can pay through PayPal, Visa, MasterCard, American Express, and Discover. The retail merchants can also integrate their e-commerce tools and partners, such as Shopify and BigCommerce, with the checkout feature.

While it is currently in its testing phase, the company is bullish on the success of this new feature. Although checkout option is currently only available for organic posts, Instagram will look to roll it out for ad-based posts as well in the future. It is expected that Instagram is likely to make US$10 billion in shopping revenues by 2021.

Instagram has been one of the most successful social media platforms with regards to consumer purchase decisions and unlike other social media apps that are apt for small to medium businesses, it also has a huge market for high-end and upscale products.

Challenges ahead

While social commerce seems to have a major role to play in the retail landscape in the future, it still has a long way to go. Social media pages have already showcased their worth as product discovery platforms, but exhibiting their potential of converting discovery into sales is a different ball game altogether and may also require a different strategy. Users will need to be organically cajoled to complete sales on these platforms and social media platforms must constantly work towards improving their buy-button experience, otherwise success is not guaranteed for them.

Twitter introduced a direct selling option in 2014 but retracted it by 2017 due to poor reception. Facebook’s initiative has also been met with moderate success with regards to direct selling, which lead the platform to change the direct selling features and strategies over the years to engage both retailers and customers.

Moreover, retailers who focus on selling on Instagram and other social media apps run the risk of alienating followers/users with constant promotions of their retail and shoppable posts, instead of their current subtle engagement posts that are working and preferred by users.

EOS Perspective

Social commerce is often being pegged as the future of online sales. While this may be true, there is a long road ahead for this to happen. Currently, the social media giants are applying different strategies to enter the space of direct selling, however, for most of them the focus is not on revenues from commerce but from ads. Therefore, till the time direct sales do not become a key revenue stream for social media apps, their focus on the apps will also remain limited.

That being said, the emergence of social commerce cannot be ignored by retailers, both large and small. Customers have taken to social media apps and use them extensively to learn about new products. Retailers are in a unique position to leverage this space and work towards reaching a new customer base, converting impulse sales that are otherwise being missed.

However, the social commerce experience needs a lot of shaping. Today, customers greatly rely on user-created content on social media (which includes content by influencers as well as other users’ reviews and product ratings) for their purchase decisions. Social media features must include direct selling not just from a retail’s social media page but also from influencers’ and bloggers’ pages. Till the time direct selling on social media apps is not a fully integrated solution, it will not reap results for users, retailers, nor for the social media platforms.

In the end, it is safe to say that social commerce is currently in a very nascent stage of development but nonetheless, it is here to stay. With the consumer’s attention span constantly reducing and people spending great amount of time on social media, social commerce undoubtedly offers great potential.

by EOS Intelligence EOS Intelligence No Comments

Luxury Brands Become Collateral Damage of Hong Kong-China Conflict

Talk to any top executive at Gucci, Prada, Tiffany (or any luxury brand for that matter) and they will tell you the importance of Hong Kong as a market in their business. For years, Hong Kong has ranked among the top five luxury hubs and accounted for about 5-10% of the estimated US$285 billion luxury goods market. However, the recent pro-democratic protests in Hong Kong against China have left luxury brands grappling, with many undergoing store closures. With the situation seeming to worsen by the minute, luxury brands must act fast and with prudence to limit their losses, formulate strategies, and identify other regions that may help them offset loss of revenues from Hong Kong.

Hong Kong has been one of the top destinations for luxury brands with several leading brands operating multiple stores in this small area encompassing 427 square miles and housing a population of 7.5 million. Hong Kong achieved this cult status due to a large number of visitors from mainland China (as well as other Asian countries) who travel to Hong Kong to shop. This is due to Hong Kong’s tax-free policy and an assurance that the products purchased are genuine (unlike in China where stores are distrusted).

Most of the leading luxury retailers derive a significant portion of their sales from Hong Kong. Richemont Group (which owns brands such as Cartier, Chloe, Dunhill, Jaeger-LeCoultre, Montblanc, Panerai, Piaget, and Roger Dubuis, among many other) derives about 11% of its global sales from Hong Kong, while Burberry derives about 8-9% of its global sales from the territory. Brands such as LVMH and Prada attain about 6% of their global sales from Hong Kong. Despite having one of the highest real estate costs, brands have always been bullish about Hong Kong, opening multiple stores and stocking their best and most recent collections.

Recent protests impact luxury retail sales

However, since mid-2019, Hong Kong’s retail market has taken a big hit. What started as a protest over an extradition law has translated into a full-fledged pro-democracy movement challenging China’s grip over Hong Kong and has brought the latter to a standstill.

Along with a large fall in visitors from China, several other countries have issued travel warnings against Hong Kong. Visitor numbers declined by 39% in August 2019 (compared with August 2018), with visitors from China falling more than 42% during the same period. In addition to fewer tourists, the local population is also avoiding malls and other public places owing to the ongoing protects. In fact, about 30 shopping malls shut down across Hong Kong in October due to violent protests. These closures have come around the peak festive time (the Golden Week holiday) and have continued to remain closed during the otherwise well-performing Thanksgiving week.

This has converted one of retail’s best performing markets into one of the poorest. Brands such as Burberry, Hermes, Prada, and Tiffany have been forced to shut down few of their stores in Hong Kong. The sales of premium goods, such as jewelry, watches, and other high-value items plunged by nearly 50% in August 2019, when compared year-on-year.

This has converted one of retail’s best performing markets into one of the poorest. Brands such as Burberry, Hermes, Prada, and Tiffany have been forced to shut down few of their stores in Hong Kong. The sales of premium goods, such as jewelry, watches, and other high-value items plunged by nearly 50% in August 2019, when compared year-on-year.

Brands are estimated to suffer a 30-60% quarterly drop in sales in Q3 2019 and considering how the protests are widening and worsening, the sales are expected to drop further in Q4. For instance, as per UK-based financial services firm, Jefferies, Burberry’s sales from Hong Kong are expected to fall by about GBP100 million (US$131.6 million) in 2019. While the brand is expected to offset half of the loss from growing sales in other regions, the remaining loss will be incurred by the luxury retailer.

Given the steep fall in sales and high real estate cost, brands are now revaluating their presence in Hong Kong. In October 2019, Prada announced its plan to shut down one of its flagship stores in Causeway Bay. The company used to pay HK$9 million (US$1.2 million) monthly rent for the 15,000 square feet store and could not justify the high costs anymore. While a few brands are shutting down stores, few others, such as Burberry, are talking to their landlords about rent reduction to cope with the gloomy sales in the short run.

The impact on luxury sales may not be just short term in Hong Kong. Several brands are re-strategizing their approach towards Hong Kong, especially with regards to the Chinese customer. Chinese customers are increasingly going for shopping trips to Japan and South Korea instead of Hong Kong.

Moreover, the Chinese government is also encouraging customers to shop in mainland China by reducing taxes and thereby narrowing the price gap between China and overseas. In 2018, the Chinese government reduced import taxes on luxury goods and followed it with a cut in value-added tax in April 2019. Post this, several brands such as Gucci and Hermes reduced their prices by about 3% in China. This might show that several brands are trying to offset their losses in Hong Kong by targeting the Chinese consumer in their home country.

Brands are also shifting their marketing investments from Hong Kong towards the mainland. Hermes and LV have been extremely bullish about the Chinese market and have opened new stores in the region. Hermes opened its 26th store in China in 2019 and has been expanding its e-commerce presence in China since launching it in 2018.

Luxury Brands Become Collateral Damage of Hong Kong-China Conflict by EOS Intelligence

Brands are extra careful about their design and communication

In addition to focusing on reaching the Chinese customers (in their home market as well as new travel destinations), brands are also being extra cautious about not supporting Hong Kong in the conflict. China has been prompt at bringing brands to task if and when they identified Hong Kong as an independent country in any of their designs or brand communication.

Brands such as Givenchy, LVMH, Versace, and Coach have publically apologized to the Chinese nationals for their clothing designs that labeled Hong Kong as a separate country (from China). Moreover, they removed all such designs from their collections, globally, to ensure they remain in good books of the Chinese customers.

The Chinese have also been very sensitive about any support or sympathy shown to Hong Kong with regards to the conflict. For instance, Tiffany received significant backlash for one of its print ads, which showed a female model covering her right eye with her hand. The Chinese saw this as a sympathetic shout out to the Hong Kong protester who was shot in the eye in August 2019. While Tiffany clarified that the campaign was not a political statement and was conceptualized and shot much before the incident, they eventually removed the image from all digital and social media platforms.

Although not directly related to luxury brands, in October 2019, the Chinese government sanctioned the NBA for a pro-Hong Kong tweet by Daryl Morey, who is the GM of Houston Rockets team. The NBA and Tiffany cases show China’s lack of tolerance towards any pro-Hong Kong message by any brand or organization and thereby brands must ensure that they distance themselves from any pro-Hong Kong sentiment (real or perceived).

Thus it is quite possible that Hong Kong market may lose its luster for luxury goods for good, especially if the Chinese customers stray elsewhere for their shopping. In that case Hong Kong market will only remain relevant for its own residents, which may not justify more than 2-3 stores for a brand in the city.

Thus it is quite possible that Hong Kong market may lose its luster for luxury goods for good, especially if the Chinese customers stray elsewhere for their shopping. In that case Hong Kong market will only remain relevant for its own residents, which may not justify more than 2-3 stores for a brand in the city.

Most brands are currently following a wait and watch strategy, where they are not sending large amounts of their inventory to Hong Kong as has always been the case. They have temporarily shut down shops and given unpaid leaves to their employees. They will wait and gauge if the Chinese consumers do return to Hong Kong when the situation settles and decide the future course accordingly. In case the Chinese customer takes a fancy to other shopping destinations (such as Japan) or start shopping domestically, Hong Kong may lose its position as the luxury hub of Asia.

Opportunities that may arise

In case the Hong Kong conflict has any permanent impact on luxury sales in the region, brands will have to go back to the drawing board to ensure a strong position in Asia. In addition to identifying and developing new shopping hubs for the Chinese customers, brands will also have to alter their strategy and approach to retain Hong Kong’s resident customers. Hong Kong’s resident customers are also avid shoppers but they are more price sensitive in comparison with their Chinese counterparts.

Targeting solely the local residents may also widen the scope of e-commerce in luxury retail sales. Unlike most other markets, e-commerce has not been a major driver of sales in Hong Kong. This is due to the fact that a large number of shoppers are travelers and therefore prefer to make their purchases from retail stores. Moreover, the presence of multiple stores within a small area further reduced the need for e-commerce.

However, if brands plan to reduce their footprint in Hong Kong (only to cater to local residents), they may look at shutting down few stores and promoting e-commerce sales. Hong Kong residents are also more likely to purchase from online multi-brand aggregators (such as Farfetch and Net-a-Porter) that offer deals and discounts. Thus working with such aggregators to promote their brands may also be a good avenue for luxury retailers.

A growing focus and investment towards developing the e-commerce part of the business may also result in growing demand and thereby investments in the mobile payment technologies (which are used for easy payments for purchases) in Hong Kong. While this technology never really took off in Hong Kong as it did in China, this may help in providing the push that it needed.

EOS Perspective

While it is yet to be determined if the ongoing conflict will have a permanent effect on Hong Kong’s position as a prime shopping destination, it is safe to say that the situation will remain unfavorable for the next few months. While some brands such as Prada are already shutting down stores permanently and limiting their exposure in Hong Kong, others such as Burberry are a little more optimistic and want to wait before taking any such decision. This is due to the fact that Hong Kong previously faced a similar situation in 2014, when the umbrella revolution disrupted sales. However, sales bounced back shortly after and Hong Kong continued to be one of the most important luxury markets.

That being said, current protests have become much more intense than anything Hong Kong has endured before and do hold the ability to permanently contract Hong Kong’s role as a leading travel and shopping destination. This may force brands to rethink their strategy for the region with increased focus on e-commerce. This in turn could create opportunities for Hong Kong’s e-commerce and its ancillary markets.

by EOS Intelligence EOS Intelligence No Comments

Coworking Shakes Up Traditional Office Space Rental

437views

Touted as the future of real estate rental, the coworking model is rapidly taking over the traditional office space rental. In less than a decade, there has been a sudden rise in the number of operators offering space-as-a-service. Driven by more and more people looking to work flexible hours, while still having access to space and services offered in a traditional office setting, coworking space market has experienced a steady growth. Coworking space operators have come up with new ideas to explore secondary sources of revenue generation rather than just relying on offering memberships. While the ideas are successful and earn profits for the business operators, the road ahead is not all rosy.

Coworking space is growing

Globally, the number of coworking spaces are forecast to cross the 30,000 mark by 2022, more than double from a little more above 14,000 spaces in 2017. It is expected that in 2019 alone, approximately 1,700 new spaces will open worldwide with more than 40% of these sites coming up in the USA. In terms of members who use coworking spaces, between 2017 and 2022, the number is expected to increase nearly three times, from 1.74 million to 5.1 million.

A decade ago, when the concept of coworking space was still new to many, the demand for such spaces was limited, as it came mainly from freelancers. However, with the upsurge in entrepreneurial excursions, growing instances of corporate employees working from remote locations, and proliferation of other independent professionals, coworking spaces started to offer not only a place to work but also a platform for the users to grow and exchange ideas.

Enhanced work flexibility, emphasis on work-life balance, and better networking opportunities are some of the key factors that drive the coworking market growth. Easy availability of these spaces at cost-effective prices also contributes to the soaring demand.

Future of coworking spaces is promising

According to the 2018 Global Coworking Survey* conducted by coworking magazine Deskmag, 42% of all coworking spaces reported being profitable. Larger coworking spaces occupied by more than 200 tenants are reported to be nearly twice more profitable than coworking spaces used by 50 or fewer occupants.

Between 2014 and 2018, the number of coworking spaces housing more than 200 members increased 2.5 times, while spaces that rent out more than 200 desks have increased six times.

Coworking spaces operators have robust expansion plans. One out of four is planning to expand their current location by adding more desks. Every third player plans to expand operations by opening new spaces. In comparison to the existing size, operators plan to expand their area by an average of 70% in the future.

Coworking space operators are capitalizing on members’ needs

Memberships and space rentals

The primary revenue stream for any coworking space is providing services at a fee. This includes, but is not limited to, renting out desks (open or flexible), renting out space (conference halls and meeting rooms), virtual offices, private cabins, etc.

Coworking space operators are currently offering fixed and tier-based (one day pass or monthly pass) memberships to tenants. Apart from these, the operators’ revenue stream comes from membership packages for using particular spaces such as conference halls and meeting rooms for fixed duration charged per head and from virtual memberships granting the users access to a virtual address and mailbox.

Promotional events and pop-up set ups

Coworking space operators are using common working areas for promotional activities, marketing campaigns, or other pop-up shops over the weekend when tenants are not utilizing the space for their work.

They rent out space to exhibition organizers who set up booths for showcasing and marketing their products or utilize the space for arranging pop-up retail for small-scale entrepreneurs such as artists, jewelry suppliers, toy sellers, and others. For instance, WeWork often organizes external events where it invites non-member hosts (not having a WeWork space membership) to conduct events in their premises, for which it signs an external event agreement.

Coworking space operators charge the hosts (both member or non-member) for such events in multiple ways – fixed price a day or price per square meter of the area occupied in addition to charging a percentage of commission for the sales made by the stall or pop-up shop.

Ancillary services

Rather than just offering a place to work, coworking spaces are also offering additional amenities to members such as nursery, gym, or pet daycare facility. Cuckooz Nest, a based in London 36-desk coworking space, offers onsite childcare service for children up to two years of age at a chargeable fee while employing certified nannies. In October 2018, The Wing, a women-focused coworking space, announced that it would start offering on-site childcare across all its current and upcoming locations – the service will be staffed by certified babysitters at an extra cost.

Similarly, Work & Woof, a coworking space based in Austin, Texas, offers free pet daycare with each membership starting from US$30 a day. WeWork also has a pet friendly policy wherein members can bring their pets to work, though they are permitted only in private offices or be leashed in common areas. These add-on services act as diversified revenue streams for the space operators.

Coworking Shakes Up Traditional Office Space Rental by EOS Intelligence

Challenging times ahead

Even though the future of coworking space looks positive, the players operating in the coworking space market do face some challenges and threats.

Pure-play coworking space operators face competition from hotels doubling as coworking spaces while offering a place to stay. For instance, Dubai-based Hotel Tryp by Wyndham offers hotel guests and walk-ins easy access to its coworking space called ‘Nest’ at a fee charged hourly, daily, or monthly, depending on the length of the guest’s stay.

Another hotel, Hotel Schani Wien in Austria, has transformed its lobby into a small space of 12 desks for coworking purposes; while in-house guests can utilize the space for free, others can choose a coworking pass (priced at € 90 for 10 days or € 150 for 30 days) or rent a coworking desk for €190 a month.

Another mixed-use infrastructure development that could hurt the coworking space players are unused or empty shops in shopping malls. According to a survey conducted in 2018 by Jones Lang LaSalle IP, a Chicago-based commercial real estate services firm, it is estimated that coworking space in retail properties will grow at a rate of 25% annually by 2023. The need to generate revenue from vacant spaces has forced retail landlords to find new ways to fill the space with alternative tenants; offering this space for coworking purposes seems to be a feasible option.

The concepts of hotel or retail coworking are unlikely to become the next big thing in the near future. However, with individuals exploring easily accessible work spaces, it would be interesting to see how these ideas unfold and how they affect the players in the coworking space.

EOS Perspective

Since its inception over a decade ago, coworking space has grown from an idea to a full-fledged industry reshaping the entire work landscape. Coworking space has had a striking and multi-dimensional impact on the commercial real estate industry.

Coworking space has reformed the commercial real estate industry for good. Players are remodeling and utilizing old abandoned buildings, warehouses, and factories to set up new premises. In 2013, Amity Packing Co., a 40-year-old meatpacking facility (with an area of 83,000 square feet) based in Chicago, was acquired by WeWork (along with other partners) and was renovated into a mixed-use commercial building with 77% of the space being used as office space.

The impact of coworking has not been all positive for the real estate developers (who play in the traditional office space development) since they are losing out to developers inclined to the concept of coworking. Such players should modify their real estate portfolio to fit both traditional and coworking users, since the demand for traditional office space is not extinct, but only diminished.

For real estate agents, the increasing number of coworking spaces does not paint a rosy picture either. As tenant and space provider deal with each other directly, the role of middlemen will gradually cease to exist. However, not all is bad as agents can sign commission deals with coworking spaces for recommending new members. Brokers also see advantage in making connections with start-ups or businesses in their incubation stage at these places, hoping to benefit while they expand and search for new premises or coworking space.

Nonetheless, unlike developers and agents, real estate landlords seem to benefit from the coworking space. Their flow of revenue is constant – when the premises are occupied by multiple independent tenants in a coworking space, steady income is guaranteed. Coworking also eliminates issues such as losing money during phases of vacant property (in case the tenant moves or closes operations) and pulling out money from own pocket (such as agent fee to look for new tenants or operational costs of the facility while it lies vacant, which in traditional rentals can stretch over longer periods of time).

Banks and financial institutions also seem to be optimistic about the coworking concept. Banks consider coworking spaces to be a low risk investment because of multiple and diversified income coming from many tenants. Single-occupant office spaces are dependent on the success of the business – in case the business fails, the banks are stuck with limited options to recover the investment. In case of coworking spaces, the premises will never go empty all at once.

Coworking spaces are agile and are likely to prosper as they adapt to the changing needs of the users, who demand flexibility at work. Other than offering flexible office space, unrestricted work hours, and a place to connect with like-minded people, coworking spaces have transformed the way many people work. It is clear that the future belongs to coworking spaces provided the space keeps evolving and upgrading to meet the ever-changing demands of the occupants.

*All results indicated for 2018 represent year ending 31st Dec, 2017. (n=1980, including coworking spaces (operators or staff members), coworking members, planned/future coworking spaces, former coworking members, and people who have never worked in a coworking space).

Top