Convenience Is Compelling

Thoughts on the Market vor 2 Jahren

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4:01

Our US Thematic Strategist explains the premium that consumers
will pay for convenience, and what that means for sectors
including online retail, dining and package delivery.

----- Transcript -----

Welcome to Thoughts on the Market. I’m Michelle Weaver, Morgan
Stanley’s US Thematic Strategist. Along with my colleagues
bringing you a variety of perspectives, today I’ll talk about
convenience and why it’s such an important factor for a number of
industries.

It’s Wednesday, June 12, at 11am in New York.

The consumer has been weakening around the edges, and this is
flowing through to companies' bottom line. Our Consumer Economist
thinks that consumption is likely to continue to slow this year
and even into 2025 as the labor market cools and that weighs on
real disposable income, elevated rates continue to pressure debt
service costs, and tighter lending standards limit credit
availability.

And given this setup, companies have been focusing on their value
offerings, and we saw a lot of commentary around this during
first quarter earnings calls. Mentions of just the word
value itself were elevated. But value isn't the whole story, and
consumers aren’t always just choosing the cheapest
option.

You and I are consumers. We are all consumers. Think about the
last time you bought something. Did you pick one retailer over
another because buying the item was easier? Did the company have
a better website or a better mobile app? Did they offer faster
shipping options or free shipping? Would the product itself save
you time? And how much more were you willing to pay to make the
more convenient choice?

Convenience is a valuable product and a key factor in consumer
choice. In fact, our survey shows that 77 percent of US consumers
rate it as important and base purchasing decisions on it.

Our work suggests three key conclusions. On average, consumers
would be willing to pay about a 5 percent price premium for
convenience. And there are two groups that place a particular
emphasis on it - those who are younger and those who are
more affluent.

Second, consumers are willing to choose one company's product or
service over another's because of convenience. Staples products
and food away from home are the industries where consumers are
especially likely to pick one option over another.

And third, shipping features like free shipping or fast shipping
are the most important convenience-related criteria when shopping
online.

Several industries stand to benefit from providing convenience.
And convenience has been a long-term, persistent driver of
eCommerce. Consumers love the combination of an ever-expanding
assortment of goods and services and shrinking delivery times –
and this is convenience really at its best. Convenience is easier
to deliver for categories with standardized, durable products
with lower purchase frequency that are easier to deliver like
electronics or travel. But even within an already winning
industry there is still a lot of opportunity, especially within
the least penetrated categories, grocery and household and
personal care.

In Restaurants, fast casual is likely to continue to take share
given the combination of quality and convenience. Restaurants
that have led digital access -- like mobile and online orders as
well as online reservations – have posted impressive growth over
time. Some fast-food chains have also invested in a digital
approach and will likely to continue to build on this in the
future.

Now unlike internet and restaurants, the parcels industry is
facing a large threat from convenience, specifically fast and
free shipping and easy returns. Their networks were not built to
handle the quick delivery required of ecommerce volumes today,
and the business-to-consumer shipping that is offered by the
largest online vendors.

We think convenience is an important factor for companies and one
they can use to differentiate themselves in customers
minds.

Thanks for listening. If you enjoy the show, please leave us a
review wherever you listen and share Thoughts on the Market with
a friend or colleague today.