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Millennials Supertrend: Investing in digitalization

Millennials are disrupting the way business is done, with digitalization permeating all realms of life.

Millennials, true digital natives, have grown up with instant access to information and expect the same for consumer goods. There's still a lot of scope to monetize digitalization in market sectors such as advertising, retail and media.

Online retail trends

In retail, the online channel represents only 10% of global spending. Yet in 2017, 50% of holiday shopping in the US took place online. Categories such as books (which are easy to shop for, have low fulfillment costs, and were the first segment to develop online) are now showing penetration rates above 50% in the most advanced markets.

As online retailers find new ways to reduce fulfillment costs, more and more categories are being addressed. Groceries, for which the penetration rate currently hovers in the low single digits, are one of the latest categories to be targeted. Healthcare is likely to be next. There are also regional differences in the penetration of online retail sales: China and the UK are the most advanced markets (with penetration levels of around 20%), while other markets lag behind.

Data privacy under scrutiny

Recently, internet platforms have come under scrutiny for their lack of data protection. As a result, there is a risk of tighter regulation, particularly in Europe and the US. We acknowledge that the big internet firms might remain in the spotlight regarding regulation and taxation, but we do not believe that their business model is in danger in the longer term since the behavior of Millennials is unlikely to change.

Brought up in an era driven by technological advances, Millennials are tech savvy. Robotics and artificial intelligence (AI), areas that are developing rapidly, are among their top priorities. The expansion of internet to mobile and the internet of things, as well as advanced sensing and analytics, offers new opportunities for automation and robotics in consumer-facing applications. Over the last 12 months, for instance, we have seen voice-activated virtual assistants such as Amazon's Alexa and Google Home enter Millennials' homes. The AI market is set to grow significantly in the next five to ten years, turning the related companies into likely beneficiaries.