finding opportunities in retail 2020 - ipda.org · · 2015-06-29finding opportunities in retail...

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Finding Opportunities in Retail 2020magazines at retail | PBAA/MPA Conference

Baltimore 17June, 2015

Tim O’Connor | [email protected]


What We Stand By

Traditional

planning process

RNG process

Today T + 5T - 5

We Bring the Future to the Present

Tracking Drivers Shaping the 2020 Retail Landscape

ocietal echnology conomic ndustry olitical

Wildcards

Trends Drivers of

Change

2


Today’s Journey

Macro-Economic

Societal Technology Industry Wildcards

3

The Need for Change: A New Roadmap to the Consumer

Transformation: Retailer Strategic Initiatives

Drivers of Change


Key Drivers Will Effect Who, When, Where, How and How Much!

4

• Consumer Liquidity &

Social Mobility• Employment ,wages,

credit

• Health care expenditures

• Community income

distribution

• Rising taxation

• Infrastructure

development

• Consumer confidence

� Birth rates.. Aging..

� Urbanization

� Household sizes

� Intergenerational Distinctions.. e.g. millennials

vs. boomers)

� Experiential vs Things

� Localism..

� Food Preferences- global, Fresh, Scratch to immediate

� Rental vs. Ownership

� Chronic Disease Prevalence

� Connectivity, Research, Transparency, Trace-ability

� Real time personalization

� Mobile Web – Tele everything

� Analytics / loyalty programs

� New Logistics Models -From Cases/Pallets �“Eaches”

� Automation

� Sensors

Macro-Economic

Societal Technology Industry

� Concentration – 60%-70% top chains

� Saturation – shoppers per building

� Segmentation – from 30 store types to 50+

� Substitution: on-going

� Store for Store

� DIGITAL for stores

� Merchandise Lifecycles – 25%-40%

� Sourcing

� Branding/Marketing

� Services

Drivers of Change

Political &

Wildcards

4


Economic Drivers of ChangeDrivers of Change

5


Societal Drivers of Change

35%36%34%31%

28%26%26%26%26%25%24%23%22%

21%20%20%

9% 9% 10%10%11%12%12%13%12%12%13%15%17%

22% 22%24%

0%

10%

20%

30%

40%

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

40

20

50

20

60

US % of Population by Age<17 65+ Singles Living Alone: 28%

Married Couples w/ Kids: 18%

5+ Person HH: 10%

Avg. HH Spend on Food/ week: $151

Women Enrolled College: 56%

Drivers of Change

6


Technological Drivers of ChangeRetailer and Consumer Toolkits Growing

OrganizationOrganization

Click to BuyClick to Buy

Recipe ManagementRecipe Management

Less Time at Checkout

Less Time at Checkout Anytime DeliveryAnytime Delivery

Coupons & DealsCoupons & Deals PersonalizationPersonalization

Source: RNG research & analysis

ValueValue

Drivers of Change

7


Retail Industry Dynamics More Complexity / Faster Change

VIABLE Scale $4 billion

Drivers of Change

8


Retailer CEO: Where to Position?

High

LowCost

High Low

% $ = 21%% Growth = 21%

Avg. ROIC = 30.1%

% $ = 10%% Growth = 14%

Avg. ROIC = 27.8%

Low Cost

Differentiated

Transition

Red

Ocean

LC Donor

Blue Ocean

% $ = 10%% Growth = 20%

Avg. ROIC = 18.3%

% $ = 19%% Growth = 16%

Avg. ROIC = 16.2%

% $ = 1%% Growth = -

0.2%

% $ = 40%% Growth = 29%

Avg ROIC = -2.0%

Red Ocean Blue Ocean Update

Source: RetailNet Group Database & Analysis; FactSet; Morningstar9


Wild Cards

Commodity Prices

Interest Rates & Currency

Global Dependency &Instability

� Russia’ & EU – Currency appreciation vs exports

� China – decelerating economic growth

� Whither the US $� Interest Rate Hikes� Inflation or Deflation?

� OIL� Gold� Ag

Source: Huffington Post Canada

Consolidation

Exits

Acquisitions

Entrants

10


Today’s Journey

Macro-Economic


11



Drivers of Change


2020/25 >55% of Transactions will Involve Digital

Traditional25-50%

Store Automation0-45%

Digital / Pick-up10-15%

OOS Digital10-15%

Consumer Digital In-Store25-30%

Manual Digitally Enabled Digitally Managed Digital Trip

The Need for Change

12


Future Store Exercise: Where are You?How Much Do You Need to Change?

Not 2020 Ready

Not 2020 Ready

2020 Ready2020

Ready

The Need for Change

13


The Retail Ecosystem as Consumers See It

55% 2020

15% 202010% 2020

MarketplacesMarketplacesMarketplacesMarketplaces

10% 2020

BBBB

Digital ReceiptsDigital

Receipts

Payment SystemsPayment Systems

Social Other

Offer Engines

10% 2020


The Need for Change

14


Digital Marketplaces Are to 2020 What Hyper/Supercenters Were in 1990’s

Bubble Size = 2020 or 2013 SalesGrey Bubbles Represent 2013

15

The Need for Change


MOST Intermediaries Leveraging Data/Targeting to Create New Automated Marketing Networks

Enterprise

Amazon

Device Suppliers (Brands)

Kroger

Target

Walgreens / CVS

Syndicated

Meta-Sites

(MySupermarket.co.uk)

Meta-Sites

(MySupermarket.co.uk)

Digital Receipts

Payment Systems

Food Aggregators

(B2B, B2C)

Food Aggregators

(B2B, B2C)

Reservation Engines

Delivery Networks

Home Depot / Best Buy

Ulta / Sephora Offer Engines

Search / Review Engines

Social

The Need for Change

16


Offer Engines – Range from Syndicated to Captive

Buy Online

Redeem Later

Buy Online

Redeem LaterAggregatorsAggregators

Load to

Card/App

Load to

Card/App

Post Trip

Cashback

Post Trip

CashbackContextualContextual

Pre-Purchase

Shopping Portal

Pre-Purchase

Shopping Portal

Sy

nd

ica

ted

Sy

nd

ica

ted C

ap

tive

Ca

ptiv

e

Syndicated

onlySyndicated

only

Syndicated

& Captive Syndicated

& Captive

Syndicated

& Captive Captive Only


The Need for Change

17


Many Ways to Access Content and Offers

Hub

Bra

nd

s &

A

dv

ert

ise

rsB

ran

ds

&

Ad

ve

rtis

ers

Content Management

System

• RetailMeNot• Coupons.com • Catalina• Valassis

Digital Wallet

Analog (Store & Print)

Analog (Store & Print)

FSI’s

Load to Card

3P App

Retailer App

Location Based

Loyalty Card


The Need for Change

18


Today’s Journey

Macro-Economic


19



Drivers of Change


RNG Strategic Initiatives | Watch For Opportunities

Redefining Differentiation 2020

Capital Discipline

Store & Network Renewal

Data Narrowing – Merchant as Marketer

Digital & Physical Integration

Logistics / Supply Chain

Pricing & Promotion

The Future of Food

Customer Service

Services – Retail Health

Lean / TQM

Strategic Initiatives

20


Redefining Differentiation: Winning Segments

IntegratedSpecialty

BreakoutSegments

FoodProgressives

Fresh / Natural

EthnicCash & Carry

ConvenienceSuperstores /

Express

QSR / Casual Dining

Day Part

Local

Digital

Experience

Discount

Local


InitiativesDifferentiation

21


WMT International – Investing More in E-Commerce and Less in Physical World

Initiatives: Capital Discipline

22


Critical Elements of Store ReinventionMore Work / More Experience & Relevance

Food & Health ProgressiveHealth & Nutrition RatingNutricentre – Integrative

Fully Branded Grocerants

LocalismCurated assortment,

Signage, Supply Chain

Category RelevanceCenter Store, Expanded fresh & RTE, Wearables / Connected Merchandise

DepartmentalizationInnovated Merchandising Centers

Branded Exterior & Interior Experience

Store Reinvention

Customer ServiceSampling, Open

Questions

Space Reallocation / Partnerships

Store Within a StoreLeased Space

Front End InnovationReconfigured Checkouts,

Queueing Methods

ConvenienceReduce Friction, Checkout

Shopability

Navigation / Signage

ShopabilityNew fixtures & gondolas

In-store AmbianceNavigation / Signage

Digital IntegrationIntegrated Consumer Oriented

Social/Digital


Day PartMerchandising,

Moveable Checkout

ServicesClinics / FinancialCommunity Space

Pricing & PromotionIntegrated in/out of

store

Logistics / Delivery3rd Party Delivery, Click & Collect,

Promisable Inventory, Traceability

Initiatives: Store Reinvention

23


Best Buy Building Digital Mall of Future – Driving Customer Experience & Building Vendor Partnerships Through SWAS


24


Spectrum of Grocery Pick-Up Options

Location

Pick-up at Store Pick-Up at 3rd

Party Location

DriveDrive-Up

Inside Store & Lockers

3rd Party

Picking Models Pick from Store or DC

Pick from Store or DC

Pick from Store

Pick from DC Pick from Drive

Examples • Shoprite From Home

• Peapod• Walmart

(Denver)

• Harris Teeter• Peapod

• Instacart • Peapod • Walmart(AR)• Loblaw• Save On

Source: RNG Research & Analysis


2525


Instacart has resulted in digital

shopping carts 2.5X the size of in-store

baskets

Instacart has resulted in digital

shopping carts 2.5X the size of in-store

baskets


Leveraging 3rd Party Concierge Delivery Instead of Building Capabilities in House

26

Drive and Click & Collect Models: Convenience of Online with the Immediacy of Pick-up


Internet of ThingsWill Have Measurable Impact on Retail

Home Replenishment

Wireless sensing and tracking

Home hubs

Health data mining

Source: Forbes, LuxCapital

Virtual reality

Initiatives: Digital Integration

27


Click-to-Buy & PayInitiatives: Digital Integration

28


The Connected Home & Its Effects on the Retail Path-to-Purchase

Connected Family Room Connected BedroomConnected Kitchen

• List Management • Social Commerce • Second Screens

Connected Kid’s Room

• Brand Engagement

Connected Bathroom Connected Garden



29


IoT is Not Only About Connected Hardware But About the Data –Opening its “Walled Garden” to Create A Data Hub

Apple’s Partnerships by Platform

Launched in Apr 2015

Source: Apple, Morgan Stanley

Apple Watch’s sensor (located at the back) to detect user’s heart rate


30


Price Perception vs. Leadership Online

A recent study by Boomerang Commerce concluded:

• Amazon seeks to win on price on the

most popular items and categories, changing shopper price perception for Amazon as a whole while still maintaining margin in less top-of-mind categories

• 63% of products were priced exactly the same on Amazon as on Walmart.com

• Only 14% of SKUs were priced below Walmart.com

• Amazon’s pricing model is reactionary –they desire to match the market leaders on pricing—not beat them in 1P (although opportunistic merchants on Amazon’s 3P marketplace often drive prices lower)

Source: Boomerang Commerce

Initiatives: Pricing

31


Price Transparency Will Intensify – EDLP Retailers Encouraging the Trend



32


Retailers Shifting Profit Drivers from Margin to Marketing/Media

WINS (Web Influenced In-store Sales

Source: Walmart, Target


33


3 Very Separate Types of Marketing Spend on AmazonMore Options for Placement

AMGAmazon Media Group

AMSAmazon Media

Services

Buyer MerchBuy Directly from

Buyer


Add to Cart adsCustomer Review ads

Add to Wish List ads

Spotlight ads

Coupon ads 34


In-Store Digital Increasing Convenience, Shoppability and Overall Experience for Shopper – also Improves Retailer Backend

BackendBackend• Wi-fi• Order management

systems • Promise-able

inventory• Labor scheduling• Associate Training • KPIs and incentives

POS Terminal Upgrades – Chip & Pin, NFC

Location/Targeting at the Entrance

In-Store Mode –Mobile App

Digital Coupons –Redemption

Digital Receipts

Messaging/offers in-aisle

Digital Signage

In-Aisle Research / List Management

Tools (App) Order Kiosks

Associate Devices


35


Fast Scan Technology to Replace Traditional Front End to Reduce Friction/Improve Productivity

Tesco High Tech Checkout • Scans 60 items per minute• Staff does not handle

product

ASDA Rapid Scan Till • Increases speed by

300%• Two bagging areas

H-E-B Plus • Employees bag

items only• Shoppers rate

experience after with icons

Whole Foods Queuing

Innovation• Increases

speed & shoppability


36


In-Store Modes & Passive Prompts Will Enhance Technology Offerings

Neiman Marcus – App recognized when a consumer entered the store

& triggered an associate to greet you with recommendations based

on purchase history

Neiman Marcus – App recognized when a consumer entered the store

& triggered an associate to greet you with recommendations based

on purchase history

Walmart – In-store mode allowed consumers to manage their list (and scan & shop) while they

shop & reduce surprises at the checkout

Walmart – In-store mode allowed consumers to manage their list (and scan & shop) while they

shop & reduce surprises at the checkout

Passive Prompts through Beacon Technology

Passive Prompts through Beacon Technology


37


Shopper Focus and Simplicity are Key – Easy Navigation, Clear Instructions, Time Efficient for Shopper

Features of a Best in Class Experience

• Clear instructions / where to go • Flexible payment (pay online, pay in-store)• Low wait time for package to be ready• Package ready/ waiting for you • Employee available to exchange merchandise


38


Service Credentials

• Retailer’s 1st chef in residence

• Full-time position to guide & improve private label

• News promoted through TV ads and Twitter campaign #LidlSurprises

• Chef Kevin Love was former Lidl store manager

Source: Lidl

Initiatives: Services

39


Home Depot Customer Focused Reinvention of Labor and Customer Service

• Investing in Employeeso Success sharingo Assistant store manger equityo Rewards & recognition

• Helping Pros build businesso Product authorityo Recognizing needsSource: Home Depot Investor Relations

Initiatives: Services

40


Share Insights

& Learnings

Modeling Corporate Organization to Innovate Faster –Collaboration to Quickly Move Great Ideas

Corporate

Regional

Store

Balanced by Commitment to Values � Guides Actions & Investments

Presidents Meet 2x Year, Brainstorm Future Innovation

Assess ConsumerEmpowered to Change

Follow PassionLocalize

Initiatives:

41


Thank You! Q&A?

Tim O’Connor

[email protected]

@RetailTimOC

@Tim_RNG42

Opportunities for Print Media?

finding opportunities in retail 2020 - ipda.org · · 2015-06-29finding opportunities in retail...

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