1© 2014 Virtusa Corporation. All rights reserved

Retail Industry Trends and Opportunities

- Raj Iranyan

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Table of Contents

Broad Segments of Retail Industry

Traditional Value Chain –Redefined

Global Technology Investments in Retail

Global Retail Market Share and Key Trends

Outsourcing Functions for Retailers

Opportunity Areas For Virtusa

Go To Market Strategy

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Broad Segments - Retail Industry

Broad Segments catered by Virtusa • Department Stores & Hypermarkets• Food, Wholesalers & Drug Retailers • Apparel , Home Improvement and Speciality Retailers

Top 10 Retailers to Focus

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Retail Industry- Traditional value Chain

The Traditional Value Chain has the following components

• Design – Product Prototyping • Sourcing – Purchasing or building Inventory • Inventory Management – Managing and Distribution of Products • Store Operation – Managing POS • Marketing – Promoting the Goods for Sale• Sales – Execution of the Purchase of transaction • Fulfilment – Delivering Products to Consumer • Support – Helping Customers maximize their value

Design

Sourcing

Inventory Management

Store OperationMarketing

Sales

Fulfilment

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Consolidation and Fragmentation of Value Chain

The Following table shows the Consolidation and Fragmentation within Retail Value Chain

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Global Technology Spend set to increase 2.1% to 164 billion

The analysis covers global trends in retail and how we can leverage the trend using our solutions

• Mature and emerging markets are expected to grow and consciously optimistic in spending on technology • Gartner projects global technology spend of ~ $ 164 billion on an average in next 3 years • A positive growth in technology spend is expected this year and next 3 years with CAGR of 2.1% Technology Consulting and IT Services are best areas of focus followed by IMS.

• Omni Channel Customer Experience is the buzzword in Retail • E-Commerce and M-commerce are widely discussed about retailers

• Digital transformations (SMAC) to support sales, marketing, customer engagement (product analysis, self service, tailored products & services

• Analytics, Robotic Process Automations & Process Improvements

• SaaS and IaaS models will be preferred among others

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Industry Forecast : Retail Sales Worldwide Will Top $22 Trillion This Year

• When it comes to retail products and services purchased on the internet, ecommerce will account for 5.9% of the total retail market worldwide in 2014, or $1.316 trillion.

• China and US are by far the world’s e-commerce markets . combining for more than 55% of global internet retail sales in 2014.

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Key Trends for Retail in FY17

• Retails will give Consumers more payment options

• Mobile will play a bigger role in Click and Collect initiatives

• Retailers will unify their online and offline Collection

• Retailers will continue to remove friction from shopping

• Merchants will adopt in store mobile devices

• Old School loyalty programs are their way out

• Retail pure plays will disappear

• More retailers will opt for Single view and Cloud based Solutions

• Retailers will invest in Omni channel fraud management

• Social will grow as part of the omni channel mix

• More Retailers will look into Internet of Things (IOT) to enhance the shopping experience

• Omni channel will be integrated into every aspect of Retail

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Retailers will invest more in digital Technology throughout FY17

• Retailers will be spending more on Technology over the coming year with websites and mobile and new IT Systems at the top of their agenda

• 60% of consumers used a digital device prior to their last store visit.• 23% used a digital device while in-store during their last store visit.• 6% of consumers used a digital device after their last shopping trip.

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Gartner Prediction on Retail Technology Trends for FY17

• IT spending in the retail sector is forecast to increase 1.5 percent in 2015. Technologies that help understand customers better, improve engagement through multichannel experience and facilitate the buying process are high-priority areas.

• We also see continuing infrastructure investments in new point of sale (POS) terminals, as merchants in many countries comply with the October 2015 deadline to convert to new systems, whereby, the liability will shift from credit card issuer (such as Europay, MasterCard and Visa [EMV]), to merchants for accepting nonchip, PIN-based cards.

• Data analytics key as global retail banking tech spend hits US$131 billion mark

• IT budgets in the global retail banking industry will reach US$131 billion in 2015, an increase of 4.3% over the previous year, according to recent findings from research analyst firm Ovum.

• Despite significant regional challenges, international retailers are taking the long-term view on investments in US and developing markets

• Technology Consulting and IT Services are best areas to focus followed by IMS.

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2016 Data • $4.48 T —aggregate revenue across Top 250 retailers • $17.91 B —avg. retail revenue of Top 250• 4.9% —composite year-over-year retail revenue

growth• 20.59 % — CAGR for 2016-2020 • 2.8 %—composite net profit margin ( North America ) • 4.3 % - Composite return on assets • 23.4 %—percent of Top 250 revenue via foreign operations• 10.4 —avg no of countries Top 250 retailers operate• 66 %—Top 250 retailers with foreign operations

Huge Positive signs for retailers Globally

2014 Data • $4.29 T —aggregate revenue across Top 250 retailers • $17.15 B —avg. retail revenue of Top 250• 4.9% —composite year-over-year retail revenue growth• 4.6%—Past 4 year composite CAGR• 3.1%—composite net profit margin• 24.3%—percent of Top 250 revenue via foreign operations• 10.0—avg # of countries Top 250 retailers operate• 63.2%—Top 250 retailers with foreign operations

Comparison of both data Suggest that the industry is moving in a positive direction

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Outsourcing Functions For Retailers

GSCP ( Global Commerce Service Providers ) are planning to invest more in Website and Mobile Sites

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• Omni Channel integration is a great opportunity for Virtusa

• Contactless payments using NFC will change the payment option among Retailers . Virtusa should leverage the opportunity by

investing in Tokenization

• Digital , E-Commerce and M-commerce is set to rise among users . Hence Customer experience is key for every retailers .

• Virtusa should invest more in Digital and CEM ( Customer Experience management )

• 3D printing , Biometrics , RFID , Cloud , IOT and Wireless transmission are the next wave of Disruption among retailers .

• Reacting to Customer’s Omni channel demands • Integrating disparate needs • Realigning Organizations and Business Process • Developing new deployment and Payment models • Serving multiple Channels and partner models

What Retailers expect from Partners

Technology Disruption is a massive opportunity for Virtusa

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Opportunity areas for Virtusa

Virtusa’s Consulting expertise to match and leverage the Key Technology trends

• Omni Channel Customer experience • Cross Channel Integration • E-commerce • M-commerce • International Commerce • Loyalty and CRM • Digital Marketing • POS Solutions • Mobile Payment ( Apple Pay , Android Pay ) • Contactless Payments ( Tokenization )• 3D Printing , QR Codes , Biometric Scanning • Cloud and IoT

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Go To Market Strategy

• The biggest obstacle for Virtusa is the limited number of Clients ( McDonalds , Micros ) . Hence we need to leverage the limited number of Case studies to acquire a new client . Hence Investment in cutting technologies is needed to build our Retail Expertise

• Investing in building a SME team and Knowledge center to educate the prospects on our expertise

• Build more brand awareness by attending industry related events and using Social Media Team to promote our Solutions

• Use Marketing Programs team to reach out to more prospects and understand their pain points

• Use Inside Sales help to reach out to prospects and build pipeline which would lead to a new logo

• Partnership with industry leaders to build our expertise

• Joint bidding with industry leaders in CEM ( Adobe )

• Leverage the acquisition of Apparatus and pursue more IMS ( Infrastructure Management Services ) Opportunities

• Participate in Awards and winning them would build our brand recognition

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