$325 billion goes begging in APAC through sales friction, says BCG

‘Friction’ could be costing APAC businesses $325 billion per year according to an analysis by Facebook IQ and management consultancy BCG.

Gaining traction in the world of business, ‘friction’ – which describes anything inhibiting a seamless sales and purchase lifecycle – is more than a buzz-word, potentially costing APAC enterprises a whopping $325 billion per annum. That’s the conclusion drawn from an analysis conducted by the digital insights and market research unit of Facebook and the global strategy and management firm Boston Consulting Group.

The ‘Zero Friction Future’ report opens with a clear reminder of our contemporary digital age: “In the current age of instant gratification, consumers expect seamless experiences.” This, the authors continue, includes among other things easy product discovery, stock availability, immediate payments, faultless delivery, timely customer service and personalised follow-ups – essentially each and every step of the consumer journey.

To arrive at its $325 billion estimate for missed opportunities, BCG analysed abandoned on-line shopping carts; “We looked at how many carts were filled up but never actually checked out,” explains Shiv Choudhury, BCG’s Head of Consumer and Retail Practice in Southeast Asia. “And we back-calculated from there to get a reasonable estimate of how many people would have continued their journey if it weren’t for the friction.”Citing various consumer reports, the firm notes that 55 percent of consumers in Asia Pacific will wait five seconds before navigating away from a website that is taking too long to load, while more than half will switch brands due to poor customer service of if a brand fails to remember a previous interaction. A further quarter of shoppers abandon online carts when hit with unexpected charges, and four out of five consider the experience a business provides to be as crucial as what it provides.

Here, the firms mapped out the full cycle of friction-points in the customer experience journey, grouped into the three distinct phases: discovery (when a consumer takes notice and become aware of a brand, product or service), purchase (from the moment a potential buyers has decided on what they want to the time payment is made), and post-purchase - covering all the touch-points after checkout, from delivery to repeat purchases.

The discovery phase for example, broken down again into three further categories – awareness, information gaps and technology optimisation – includes friction points such as too much time spent searching or a simple lack of awareness, too much or too little information (including on pricing), having to register and fill in forms, or seeing repeated or irrelevant ads – with nearly two thirds of respondents saying they willing to pay up to 15% more for the same item if assured of a smoother experience.

While poor discovery functions may be frustrating for consumers and a missed opportunity for businesses, consumer pain-points during the following purchase and post-purchase phases are more likely to anger and longer-term brand resentment – once a consumer has spent time researching a product or service and made the decision to purchase, but is then blocked or impeded from doing so.For the purchase phase – which is broken down into availability, buying and payment – this includes issues such as clunky and inefficient point-of-sale systems, items being out of stock, multiple forms, limited payment options and transaction failures, and misleading prices or hidden charges. Meanwhile, post-purchase frustrations impacting satisfaction cover fulfilment (e.g. slow delivery), support (a poor returns process or bad customer service), and repurchase limitations.

Neil Stewart, Facebook’s Head of Agency in APAC, shares an example: “After selecting a cinema and show, and even though you’ve made multiple previous purchases, you have to fill in the longest level of detail for the payment form. It’s like there’s no memory in the system. Compare that to something like Amazon, where you log in and they know who you are, what you’ve bought recently, what you like and what you don’t like.”

According to Choudhury, losses due to friction are prevalent throughout the entire Asia Pacific – with Japan topping the list at an estimated loss of between $80 and $90 billion worth of blown sales each year – followed closely by India, South Korea and Australia, with businesses in Indonesia and Thailand ($14 billion) coughing up the most in the ASEAN region. When taken together, Choudhury estimates that smoother transactions could add between 2-3 percent to Asia Pacific’s GDP.

Friction is not a new concept,” the authors conclude, “but digital connectivity in the mobile world has led to higher expectations about the shopping experience, both in terms of the time it takes and the effort required. This in turn has led to more friction points along a consumer journey as well as greater ease of switching – if companies do not provide a frictionless experience, consumers can easily find one that will.”

Related: Companies should focus on ROX, contends latest PwC consumer survey.