ceo viewpoint 2017 the transformation of retail
TRANSCRIPT
CEO Viewpoint 2017: The Transformation Of Retail
JDA Executive Luncheon at NRFJanuary 17, 2017
Copyright © 2017 JDA Software Group, Inc. Confidential
Respondent profile351 responses across a range of markets, retailer tiers and business types
Base: 351
1
9
12
24
27
27
Other (Retail & Consumer)
CPG
eCommerce
Grocery
Soft Lines
Hard Goods
%
Breakdown of business type
Top 250 retailers = revenue $5 billion + Top 251- 1000 retailers= revenue between $250 million- $5 billionOutside the top 1000 retailers= revenue less than $250million
Retailer tiers
32%
53%
15%
Top 250 retailers
Top 251 - 1000 retailers
Outside top 1000 retailers
Geographical markets
United States28%(100)
Mexico10%(33)
United Kingdom17%(60)
Germany15%(51)
China16%(55)
Japan14%(50)
Copyright © 2017 JDA Software Group, Inc. Confidential
Confidence in overall revenue & profit growthOnline is the biggest area of confidence both in terms of revenue and profit
Q32. How confident are you about your organization’s prospects for profit growth during the next 12 months in the following c hannels:
Q27. How confident are you about your organization’s prospects for revenue growth during the next 12 months?
41335124
16
5812
11
610
16
36
41343734
3931
31
435151
4448525447
Total business2016
Total business2017
OnlineStoresTotal business2016
Total business2017
OnlineStores
%
Very confident
Somewhat confident
Not very confident
Not at all confident
Revenue Profit
Base: 351 Please note: ‘Don’t know’ and ‘Prefer not to say’ responses are not included.
Mexico: 74%Japan: 26%
US: 54%
Denotes sig. difference Denotes US for info only
Copyright © 2017 JDA Software Group, Inc. Confidential
Omni Channel competencies Compared to 2014, there has been a marked deterioration in retailers ability to handle omni channel execution
Base: 351
Q10. Which of the following best describes your organization in relation to omni-channel fulfilment?
2017 2014
We provide a seamless shopping experience and offer complete omni-channel fulfillment. However, the offering is too complex/expensive and we are looking to scale back our delivery options 12% 19%
We have the ability to offer our customers a seamless shopping experience but we struggle to meet customer’s omni-channel fulfillment demands 38% 31%
We have distinct channels operating as silos to meet customer demand 37% 30%
We have refined our omni-channel offering to a point where we are now able to make a profit while fulfilling our omni-channel demand 10% 16%
US: 26%
Don’t know: 4%
Copyright © 2017 JDA Software Group, Inc. Confidential
Investment Priorities
Copyright © 2017 JDA Software Group, Inc. Confidential
Digital transformation strategyDigital Transformation becomes the highest investment priority
But more than half of retailers have not started implementation of a digital transformation strategy
5%No plans to develop a digital transformation strategy
We are struggling to define a digital transformation strategy 9%
Digital Transformation strategy is being developed but implementation has not yet started 38%
Digital Transformation strategy is well defined and is being implemented 49%
40
20
60
80
100 48% increase
45% remain the same
5% decrease
Core supply chain capabilities
China: 73%
%
Mexico: 86%
US: 60%
40
20
60
80
100
%
69% increase
28% remain the same
1% decrease
Digital transformation
40
20
60
80
100 51% increase
42% remain the same
3% decrease
Omni-channel fulfillment
%
Denotes sig. difference Denotes US for info only
Copyright © 2017 JDA Software Group, Inc. Confidential
26
28
31
39
40
46
36
44
53
53
55
31
31
30
37
36
33
40
37
32
33
30
43
40
39
24
25
21
24
19
15
14
16
In-store virtual changing rooms
Robotics and automation
In-store augmented reality
In-store clienteling
Personalized mobile ‘push offers’ in store
(Beacons)
Smart Mobile device for staff in stores
Integration of IOT devices and data
Collaboration across supply chain partners
Use of social media data
Big Data availability and analytics
Mobile enabled applications
Have implemented Plan to implement in next 12 months No plans to implement in next 12 months
Digital transformation strategyDigital capabilities outside of the store feature in the top 3, ahead of all in-store capabilities, with mobile applications in 1st
Base: 351
Q18. Please indicate the level of implementation for each of the following digital capabilities:
Outside of store
In-store
Copyright © 2017 JDA Software Group, Inc. Confidential
27
32
33
33
34
38
42
38
41
40
38
37
19
20
16
17
20
17
9
8
6
6
5
5
3
1
3
3
3
2
Capturing unstructured data about your customer(social, reviews)
Having a single view of the customer across allchannels and touchpoints
...in the personalization of the customer experiencein your physical channels (stores)
...in the personalization of the customer experiencein your digital channels
…to gain insight into customer preferences and
shopping behaviors via data science techniques
...in the planning and development of your customeroffers
Significantly Moderately Minimally Not at all Don't know
Leveraging customer dataRetailers say they are currently best at using their customer data for planning and developing offers
Base: 351Q21. Thinking about customer data, please indicate the level to which your organization performs the following.
Using customer segmentation insight…
Copyright © 2017 JDA Software Group, Inc. Confidential
Customer Order Fulfilment InvestmentCollecting orders in-store is the top collection offering but more challenging options are being scaled back
26
26
48
25
43
44
47
21
23
27
28
33
43
44
48
51
Click & collect as a drive through in your car park
Same day click & collect
Specific delivery time slots
Use third party retailers as collection points for online orders
Same day delivery
Next day delivery
Buy online, return to store
Buy online, ship to store
Click & collect in-store
%
2017 2016
Soft l ines: 64%
Base: 351Q11. Do you offer, or plan to offer any of the following customer collection or delivery options in the next 12 months?
Don’t know: 1%
Copyright © 2017 JDA Software Group, Inc. Confidential
20%
22%
Store Expansion InvestmentThe majority of retailers don’t plan to reduce store investment, regardless of online growth
Accelerate
No change
Reduce
58%
28
42
24
Complimentary (some Haloeffect across the channels)
Online are net additionalsales (no cannibalisation)
Cannibalising store sales
%
China: 45%
Mexico: 34%
US: 18%
US: 60%
US: 22%
Denotes sig. difference Denotes US for info only
Base: 351
Q9. Do you plan to reduce your store investment due to online growth?
Not sure: 1%
Base: 351
Q25. How are online sales impacting store sales?
Don’t know: 7% Denotes sig. difference Denotes US for info only
Copyright © 2017 JDA Software Group, Inc. Confidential
Profitability
Copyright © 2017 JDA Software Group, Inc. Confidential
Growth of online operating costsThree quarters of retailers believe that their online operating costs have increased as a percentage to sales in the last 12 months
23%
Cost reduction No change Some increase (0-9%) Significant increase (10% or more)
4%
19%
52%
Distinct channels: 35%
Base: 351Q28. How have your organization’s online operating costs changed as a percentage to sales in the last 12 months?
Denotes sig. difference Denotes US for info only
US: 18%
Don’t know: 3%
US: 50%
Copyright © 2017 JDA Software Group, Inc. Confidential
1
10
12
15
17
20
25
Other
Capacity to support online growth
Store inventory accuracy
Failing customer service in order fulfillment (e.g. deliveringincorrect orders, delivering orders outside of the agreed…
Rising supply chain costs
Rising inventory levels
Rising out of stock levels
Supply chain issues impacting profitabilityRising inventory levels, rising out of stock levels and rising supply chain costs constituted 62% of the responses
Ranked number 1
Mexico – 26%
Ranked #1 for Grocery & US
$10B+ (23%) vs $5-$10B (9%)
$10B+ (14%) vs $5-$10B (24%)
Base: 351Q15. Please rank the following issues within your supply chain in order of concern where #1 is the most important to your organization:
Ranked #1 for Softlines, Hard Goods, China & UK
Most frequently ranked in the top 3
Copyright © 2017 JDA Software Group, Inc. Confidential
3
4
32
25
46
48
14
19
for your customer order fulfillment
for your in-store customer experience
%
Cost reduction No increase Some increase Significant increase
Impact of omni-channel on cost of labor…Labor costs are increasing, particularly in enabling omni-channel capabilities for the in-store customer experience
4%
4%
Mexico: 40%
Mexico: 31%China: 27%
US: 7%
Base: 351Q13. To what extent is the cost of labor affected by enabling omni-channel capabilities…
Denotes sig. difference Denotes US for info only
Don’t know
Copyright © 2017 JDA Software Group, Inc. Confidential
Changes in order fulfilment While increased customer charges for online orders is currently the most implemented change, the next 12 months will see a rise in the minimum order value for free standard home delivery
22
25
27
27
29
35
28
27
28
31
33
22
50
48
45
42
38
43
Charge for customer returns
Apply limits on returns (e.g. max items in a time period)
Raise the minimum order value for free buy online pick up instore
Decrease customer charges for online orders
Raise the minimum order value for free standard home delivery
Increase customer charges for online orders
%
Have implemented Plan to implement within next 12 months No plans to implement within next 12 months
China: 56%
Mexico: 54% US: 56%
US: 66%Hard goods: 33%
Base: 351Q12. Have you implemented or do you plan to implement any of the following changes in relation to fulfilling orders across ch annels?
Copyright © 2017 JDA Software Group, Inc. Confidential
15 59 23To what extent is the cost
of customer returns eroding profit
%
To a great extent To some extent Not at all
The cost of customer returns is eroding profitsAlmost three quarters of retailers believe that the cost of customer returns is eroding profits to at least some extent
US: 36%Profitable omni-channel operation: 41%
Base: 351Q29. Please indicate to what extent the cost of customer returns is eroding profit:
3%
Don’t know
Copyright © 2017 JDA Software Group, Inc. Confidential
Key performance indicators62% of retailers stated their online business is making a profit – up 7% on last year
(10)
26
62%
Breaking even
Making a profit
Making a loss
Mexico: 40%
ProfitabilityThose who have a higher percentage of online revenues are more confident about their prospects for total business profit growth over the next 12 months.
US: 68%
Base: 351Q26. Is your total online business:
Don’t know: 3% Denotes sig. difference Denotes US for info only