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7/30/2019 Kantar Retail Strategy Next 5years
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KantarRetail.com
KantarRetailiQ.com
Kantar Retails Guide to Retailer/SupplierStrategy for the Next Five Years
Shares:The
Kantar Retails Guide to Retailer/SupplierStrategy for the Next Five Years
Shares:The
55Wallet
EngagementReal Growth
Decision
Solution
7/30/2019 Kantar Retail Strategy Next 5years
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Executive Summary 4
The Five Shares 10
Real Growth 14
Wallet 24
Decision 30Solution 38
Engagement 50
Concluding Thoughts 56
Author
Bryan Gildenberg
Editor
Mary Brett Whiteld
DesignJennifer Zipp
Contributing Thinkers
Frank Badillo
Katie Casavant
Jeremy Cohen
Mark Davies
Ray Gaul
Ken Harris
Lois Huff
Vadim Khetsuriani
Brendan Langan
Jim Leonard
Steve Mader
Dave Marcotte
Leon Nicholas
David Recaldin
Mike Paglia
John Patterson
Jonathan Phillips
John Rand
Bryan Roberts
Robin Sherk
Sandy Skrovan
Phil Smiley
Mike Urness
Ginny Valkenburgh
Vincent Verdier
Mary Brett Whiteld
Anne Zybowski
And Countless Others...
7/30/2019 Kantar Retail Strategy Next 5years
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Executive Summary
5
4
Looking to 2011 and beyond, there
continues to be ve core areas whereretailers (and concurrently suppliers)
are seeking to gain momentum and
share. Share immediately makes most
people think market share. However,
it is Kantar Retails rm belief that in
todays world market share is an
outcome, not an objectiveand thatthe enablers to gain that share are
fundamentally changing. In fact, those
enablers are shares themselves.
Executive Summary
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76
Share o real growth or where will I grow?
In a world where growth is harder to nd,
aligning resources against where the
growth is becomes even more important.
Share of real growth will force us to look at
the markets, channels, and customers thatare growing faster than the marketplace
overall, and understand whether our
organization is well positioned to capitalize
on this increasingly selective growth.
Share o wallet or how much will shoppers
spend? In markets where new square
footage is harder for retailers to nd,
retailers become obsessed with selling
more to shoppers they already have. In
markets where square footage expansion
opportunities continue, retailers still need
to understand how to capture share of foot-
steps most effectively to capture the wallet
spend that comes along on those trips.
Those shares can be derived from looking at the change
dynamic presented by three key factors:
1. The change in the retail/trading environment
2. Changed shoppers
3. The changing nature of information access and usage
These three variables intersect in a variety of ways, and
between them raise ve key issues we think will be
transformative for suppliers and retailers in the 2010s:
Executive Summary
The 5 Shares Map
Source: Kantar Retail
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98
Share o engagement or how will I cut
through the clutter and connect? Simply
being shopped today is insufcient to pre-
dict future growth. Retailers and suppliers
are continuing to nd the need to engage
with their shoppers more comprehensively.
We see this engagement needing to take
place in three core areas:
In aisle
Across the total store
Beyond the store
Maximizing each one of these shares requires arobust series of capabilities and approaches to
capitalize on the opportunities and mitigate the
threats presented by them.
One nal notethe primary focus of this paper
is on the brick-and-mortar retail world. This
may seem anachronistic in a digital age, but the
simple fact is that more than most of the trade inconsumer goods and services today is conducted
through traditional physical stores. The impact of
online retail competition (and more importantly,
online information) is discussed extensively, but
done so from a bricks-and-mortar perspective.
Share o decision or why will shoppers
choose certain outlets/brands? As shop-
pers continue to be exposed to marketing
and information from a variety of sources,
smart retailers are aggressively ensuring
they are part of the shoppers rapidly chang-
ing decision processes. Those decisions
drive three more questions retailers andsuppliers must be prepared to answer
successfully in order to win:
Who owns the decider?
What are they deciding?
Where are those decisions taking place?
Share o solution or what can I oer to
provide more value to my shopper?
Retailers continue to use their own brands,
bundled products, and service offerings to
expand their share of their shoppers lives.
Those solutions take three key forms:
Retailers replacing the value creationhistorically driven by suppliers
Retailers moving their solutions to
adjacent spaces
Retailers tackling non-traditional ser-
vices/initiatives to provide more holistic
solutions
Executive Summary
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11
Kantar Retails Guide to Retailer/SupplierStrategy for the Next Five YearsShares:
The
Kantar Retails Guide to Retailer/SupplierStrategy for the Next Five YearsShares:
The
55Wallet
EngagementReal Growth
Decision
Solution
In the back hal o 2010, Kantar
Retail saw a number of companies
concerned with two big shares as
they sought to build their strategies
for 20112015market share and
share price.
Global economic conditions remain
challenging, but the challenges are
different in different parts of the world.
In markets that can deliver robust growth,
the challenge is getting investment levels
right against a short-term prot
opportunity that is anything but certain.In many slower-growing, higher-prot
markets short-term volatility is up, but
there is limited likelihood of either rapid
recovery or deceleration. 1970s economists
might have called this stag-atility
the odd combination of relatively stable
overall conditions threatened by a
multitude of potential systemic shocks.
10
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SharesShares
55
These skills we believe reside in the ability to answer ve
key questions with ve key share-driving strategies:
Share o Real GrowthWhere Will We Grow?
Share o WalletHow Much Will Shoppers Spend?
Share o DecisionWhy Will Shoppers Choose Cer-
tain Outlets and Brands?
Share o SolutionWhat Can I Offer to Provide MoreValue to My Shoppers?
Share o EngagementHow Do I Cut through the
Clutter and Connect?
Kantar Retails economic outlooks for the US and Europe
for 2011 both project an environment that is getting better
but that by itself will provide little forward momentum
any growth in this landscape will need to be earned.
Todays shifting headwinds seem to be coming from three
major directions:
1. The retail and economic landscape itself2. Shoppers changing attitudes
3. The changing nature of information as it continues to
become portable, personal, social, real-time and, in
many cases, free
These three forces create their own dynamics, and their
intersections create signicant challenges and opportu-
nities as well (Figure 1).
Figure 1: The 5 Shares Map
Source: Kantar Retail
Earning Growth
An interesting story came from the US economy in Oc-
tober 2010 when retail sales increased by a surprisingly
high amounta $4 billion increase from a median sales
rate of $56.3 billion per month from MarchSeptember to
$60.3 billion in October. Of that increase, about 20% of it
is attributable to one medium-sized companyChrysler
Corporation (with a 37% unit sales increase over October
2009) and over half of that comes from one item: the highly
successful re-launch of the Jeep Grand Cherokee. The key
to this little story is that growth will go to the highly skilled
operators, who understand how to reach consumers with
newly constructed value propositions. The Jeep story re-
veals that in light and shifting winds, the skilled and agile
crew often beats the large and strong one.
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Share o Real Growth
Or, where will we grow?
In a world where growth is harder to nd, aligning
resources against where the growth is becomes
even more important. Share of real growth will
force us to look at the markets, channels, and
customers that are growing faster than themarketplace overall, and understand whether
our organization is well positioned to capitalize
on this increasingly selective growth.
14
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1. Markets
Growth will continue to be geographically selective.
Ranked by retail sales growth, the top 25 growth markets
in the world will constitute 86% of global retail growth;
but signicantly, 67% of that growth will come from
beyond the US/Western Europe and Japan and from
markets historically referred to as emerging (Figure 2).
China on its own is projected to contribute more than 20%
of global retail growth for the next ve years, and mar-
kets such as Russia, Brazil, India, and South Africa gureprominently in growth projections.
This information is helpful but not sufcient for for-
mulating strategy because it ignores the importance
of understanding the retail landscape. Though Brazil,
Russia, India, and China often are lumped together to
demonstrate the scale of the emerging market opportu-
nity, their retail landscapes are in vastly different places.
India has a restrictive government and a marketplace
dominated by the traditional trade, while Brazils retail
landscape is dominated by three of the most sophisti-
cated global retail operatorsWalmart, Carrefour, and
Casino.
Real Growth
Figure 2: Share o Projected Retail Growth By Country 20102015
Source: Kantar Retail
Ranked by retail sales growth, the top 25
growth markets in the world will constitute86% of global retail growth; but signicantly,
67% of that growth will come from beyond
the US/Western Europe and Japan and from
markets historically referred to as emerging.
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To help explain the importance of understanding the state
of the retail landscape, Kantar Retail uses its ve-stage
Market Evolution ModelSM to assess marketplace devel-
opment and the retailer/supplier capabilities required to
succeed (Figure 3).
At each stage, the structure of the retail market and the
capabilities required differso that a market such as
Brazil (rmly in the penetration phase, where retailers
look to design multiple formats to penetrate previously
untapped segments/geographies) can be separated from
China (in concentration where retailers use price and
excitement to steal trafc) and India (in Exploration
where the modern trade continues to try to learn and
Real Growth
1918
adapt to the shopping/business environment). The skills
required for retailers and suppliers at each phase differ
greatly, and both money and energy can be wasted by try-
ing to apply inappropriate capabilities at any given stage
of market development.
2. Channels/retailers
In modern and post-modern markets identifying the chan-
nels and retailers growing faster than the market is criti-
cal. Nowhere is this more critical than in the US today,
where growth over the next ve years will come from far
different places than it did in the previous ve. Additional-
ly, in both the US and Europe, we expect to see a fragmen-
tation of growth to unconventional retailers/channels.
This will require retailers to become increasingly open-
minded and nimble in regards to assessing their true
competitive landscape and will almost certainly push
more and more retailers to become more multi-format intheir approach. For suppliers the challenges are coun-
ter-intuitively even more fundamental and make custom-
er segmentation an essential skill for growing faster than
the market.
Customer segmentation models have been in play for
most sophisticated suppliers for a long time, and many
have spent countless hours and dollars developing and
rening them. At their core, though, all segmentation
models essentially separate customers on three keycriteria: scale, growth potential, and strategic t for the
suppliers business (Figure 4).
If we simplify the chart a little and give these eight small
triangles within the squares names, we arrive at a simple
segmentation framework (Figure 5). The key to driving
real growth in todays environment will require suppliers
Figure 3: Kantar Retail Market Evolution ModelSM
Levels o Demand Creation/Fulfllment Work By Evolution Stage
Source: Kantar Retail Research
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to follow the three arrows Kantar Retail calls The Axes of
Braveryso called because movement in these directions
takes suppliers beyond their comfort zone. The most suc-
cessful suppliers will be good at routing resources away
from the top left quadrant (occupied by slow growth but
large customers with familiar business models and pro-
cesses) to the top right (occupied by fast-growing retailers
or channels that play by unfamiliar rule books) and the
bottom right (occupied by smaller emerging opportunitiescapable of delivering high growth).
This simple concept takes real work, as often the sup-
pliers organization is wired to work most effectively
with its traditional customer base in the top left or bottom
left. The four key areas that need to be understood in this
re-wiring are the four core Kantar Retail enablersthe
connection point between strategy (We need to focus on
growth customers) and execution (We actually got our-
selves to focus away from our traditional comfort zone).
Kantar Retail Strategic Enablers
To put this in perspective, Kantar Retails initial 2020
China channel forecast foresees a future where Chinas
hypermarket and convenience channels could both be
bigger than those channels are today in the US, Japan,
and Europe combined! The challenge that presents to an
Real Growth
Figure 5: The Axes O Bravery Resource Allocation Redened
Source: Kantar Retail Research
Source: Kantar Retail Research
People Process Tools Measures
The skills required
to manage
customers the
organization is not
wired for are very
different than
managing big
established
businesses.
The difference
between doing
something well
once and doing it
well repeatedly is
almost invariably
process. Building
work routines to
align against these
customers iscritical.
Information,
insights, and data
requirements are
almost invariably
different for these
retailers and
require different
analytic capabilities.
Success metrics
need to be recast
for retailers that
may drive growth
but from a very
different economic
model than
established
customers.
7/30/2019 Kantar Retail Strategy Next 5years
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organization is one of exibility: how do we build an organi-
zation that can be ready for the different and markedly less
comfortable places growth will come from in the 2010s?
3. Consumers
The best way to think about the consumer landscape in
the real growth world is to understand that even though
fragmentation continues in every way (e.g., from demo-
graphics to income to media), the economics of fragmen-
tation are no more appealing to large entities than theyever wereprot still requires the focused deployment of
resources against potentially sizable opportunities.
In order to capture these opportunities, Kantar Retail
uses a framework called fragmented polarity that en-
courages linking attributes that highlight different as-
pects of consumer behavior. In the US, based on analysis
of our ShopperScape database, we have identied four
major buckets we believe will drive shopper behavior:
1. Age cohorts (Populations)
2. Differentiators: ethnicity, income, and technological
sophistication (Proles)
3. Things people care about: value sensitivity, global citi-
zenship, wellness, outsourcing, leading-edge technol-
ogy use, and life enhancement (Priorities)
4. Shopping approaches: informed, intuitive, involved,
interactive, and individualized (Process)
A useful way to see this fragmented polarity is by actu-ally matrixing these opportunities against each other into
a conceptually sensible but fairly detailed 256 box matrix
(Figure 6).
By crossing these attributes against each other, market-
ers can start to nd compelling segments or groups of
segments to target, and meaningful multi-dimensional
proles start to emerge.
Understanding share of real growth means committing
resources against organizational agilitywhich we dene
as exibility with purposeto maximize opportunities
regardless of the market, retailer/channel, or consumer
segment where they occur.
Figure 6: Fragmented Polarity Opportunity Matrix
Source: Kantar Retail Research
Real Growth
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Share o Wallet
Or, how much do shoppers spend
with a retailer compared with
what they could spend?
Retailers and suppliers around the
world today invest an enormous amount
of energy on shopper insights, and get-
ting a return on this investment will be
absolutely critical to driving competitive
superiority.
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Target expanding presence in ood: Through itsPfresh initiative, Target is seeking to capture ll-in
grocery trips from its most loyal shoppers.
The obvious expansion into online retail probably
would require its own whitepaper to explore; for now,
though, the issue around online in this context is re-
ally no different than any other retail formathow will
the shopper segment her shopping list amongst the
formats she has available to choose from?
At the same time, multiple format strategies are a hall-
mark of retail markets that are in the Penetration phase of
market development this is more of a share of national
wallet approach. Mexico, in particular, is the best repre-
sentation of this phenomenon today. Walmexs variations
on its Bodega Aurrera format are all about reaching small-
er communities that cant support a larger footprint Wal-
mex store. Single-format operators that run a distinctive
format also can capitalize on the Penetration phase. One
of the fastest growing retailers in the world is the Mexicanconvenience chain Oxxo, which is expanding into neighbor-
hoods that used to be dominated by the traditional trade.
2) Share o basket
In more consumer product-related arenas investment
continues to ow to shopper insights, but as Kantar Re-
tails survey of US retailers shows, retailers continue to be
dissatised with key attributes of what they receive from
suppliers in terms of shopper insightsespecially longer-
term foundational issues around who is buying and theunderlying shopper behavior driving that (Figure 7).
For retailers with loyalty cards and a suite of analytics be-
hind that, the temptation is to go answer these questions
themselves. However, the risk is that data in the absence
of context can be powerful, but often insufcientpartic-
ularly when trying to do anything truly innovative. Shop-
per insights today risks becoming an exercise in identi-
Share of Wallet encompasses three key concepts:
1) Share o total wallet-opening occasions
Retailers around the world continue to develop a variety of
footprints to capture wallet share, as they continue to de-
velop their understanding of the occasions that drive shop-
ping trips. In markets in the Concentration stage of retail
development, the old tactics of drive trafc and attention
in the marketplace are still vital and relevant. China in
particular will see a shakeout of modern-trade operators
over the next ve years as the winners separate from the
pack. Winners are the retailers in that environment that
can keep and hold shopper trips as shoppers begin to shift
to modern retail from the traditional trade.
The retailer of the post-modern retail market that is
primarily bricks and mortar will either have to be a re-
lentlessly focused model targeting one occasion only,
accepting the tradeoffs of that (Costco comes to mind)
or be willing to meet shoppers wherever they want to go.This has led virtually all of the Top 10 global retailers into
some sort of format diversication trend:
Walmart and smaller stores: Through the acquisi-
tion of Netto in the UK, the building from ground-up
of radically smaller concepts in China and Central
America, and its quasi-public concept development for
much smaller footprints in the US, Walmart will push
itself and its best supplier partners to understand
small footprint retailing far better than it does today. Tesco and hypermarket/discount expansion: Virtual-
ly all of Tescos square footage expansion (particularly
outside the UK) is in formats that are much different
than its core UK grocery platforme.g., hypermarkets
in Asia and compact hypermarkets/discount opera-
tions in Central Europe. Even its UK growth is being
driven as much by hypermarket expansion as super-
market growth.
Wallet
2726
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fying and addressing correlationif A happens, then B
happens, so do more of A and hope B happens more. A
number of retailers have done very good work improvingtheir results with this type of analysis. The dunnhumby-
inuenced family of retailers (including Kroger in the
US, Tesco in the UK, and Casino in France) has all seen
strong results with this type of optimization work, as has
Metro with its Real chain in Germany.
Suppliers today have been stepping up their efforts to
bring shopper insights to their now more knowledgeable
retailers, but the dissatisfaction gap on the retailer side
is real. There appears to be two major issues here. Therst is that suppliers today are still answering the ques-
tions most relevant to them, not the questions of greatest
importance to their retail customers.
The second gap is actionability. There are few retailers
in the world that prefer a great idea without an execution
plan to a mediocre idea they can see a way to activate.
The integration between insight and best-in-class execu-
Figure 7: Kantar Retail Trade Promotion Survey 2010:Retailers Rate Suppliers On Insights
Source: Kantar Retail Trade Promotion Study 2010
Wallet
tion will be critical to suppliers driving shopper insights
into tangible results (Figure 8).
Strategic category management is the connection point
between why-driven insights and actionswhere truly
transformational category blueprints can step-change
the shopper experience and business results.
3) Share o wallet over time
Even though thinking about share of wallet over time
may be more difcult to conceptualize than share of oc-
casions or share of basket, it is no less important. The
relationships that retailers continue to develop over time
are changing the nature of shopping decisions, as they
are able to deliver relationship-based value rather than
transaction-based value. Retailers with loyalty programs
continue to have the greatest ability to leverage this. The
Atlantic drug chains with established loyalty programs
CVS in the US, Shoppers Drug Mart in Canada, and Boots
in the UKhave begun changing the very nature of valueas something that is maximized over time, and maximized
the more the shopper spends with the retailer.
Figure 8: Insights + Action Programs Redened
Source: Kantar Retail Research
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Share o DecisionOr, why
shoppers choose certain outletsand brands?
Under this particular why are three
focused questions that center this
discussion around how inuencing
shopper decisions is changing:
1. What is the nature of this inuence?
2. Where and when is this inuence
taking place?
3. Who is inuencing them?
30
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1) What is the nature o this infuence?
Here we build on the relationship theme from Share of
Wallet to unpack how retailers are creating a different
type of relationship that alters the nature of core deci-
sions a shopper makes. The really interesting issue
today is around pricing and what is happening as price
becomes an increasingly personal and private conver-
sation between the shopper and the retailer. Though
in many cases it is easy to become fascinated with thebells and whistles of technology without understanding
the business implications, the ability to personalize and
privatize a pricing conversation has the chance to be the
most transformative capability retailers can harness in
the 2010s.
Even today retailers such as Kroger and CVS in the US are
using their loyalty cards as a way to build a pricing rela-
tionship with shoppers that is very difcult for retailers
like Walmart to compete against. This sounds strange tothose of you familiar with the CVS business model, as low
prices are not necessarily part of the strategy. But the
companys high value-off promotions that reward item
and basket purchases over time create the best possible
answer when a competitor asks a CVS shopper what
CVSs prices are: I dont know. What Walmart histori-
cally has been good at is rigorous price-comping of its
local competitors to achieve store-level competitive price
advantage. How does this work when the shelf price is
only a guide for what it will actually cost shoppers?
The other key point around pricing is that mobile technol-
ogy represents the most democratic means ever cre-
ated for getting non-shelf based price reductions into
the hands of shoppers that need them (i.e., low-income
shoppers). Particularly in the US, where newspaper-
based couponing has been a much bigger piece of theretail landscape than in most markets, this could lead
to a marked increase in promotional shopping as lower
income shoppers start to aggressively use their phones
for price-oriented shopping.
2) Where and when is this infuence taking place?
In particular, we like to focus this conversation on the
new moments of truth being created in a multi-channel
communication world. The First Moment of Truth was
a useful crystallizing framework but it runs the risk ofbeing more limiting than helpful today. Why? The rst
moment of truth concept (that the shoppers rst major
decision about a brand is at the shelf) was always a dif-
cult one for the retailer to swallow. Retailers appreciated
the insights into decision making at the shelf brought to
Decision
3332
The rst moment of truth concept (that the
shoppers rst major decision about a brand
is at the shelf) was always a difcult one
for the retailer to swallow... [Retailers]
always knew that their rst moment of truth
is somewhere signicantly differentusuallywhen a shopper is leaving the house, in the
car, or making a shopping list and trying to
gure out which outlet to shop.
7/30/2019 Kantar Retail Strategy Next 5years
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and any other virtual community) have a powerful ad-
vantage vs. retailers and suppliersthey dont own the
assets involved in the distribution of goods to shoppers.
The best example of this is mysupermarket.co.uka
business with no retail assets that operates primarily
outside the UK (much of their development and technol-
ogy is in Israel) but is a user-friendly interface between
UK shoppers and the four major online grocery retailers.
Shoppers on the site enter a list of categories, and the
site recommends specic items and allows for easy price
comparison and basket switching back and forth among
the four major retailers as the shopping trip continues.
The site keeps a running tally of the total basket cost atall four outlets simultaneously (Figure 9), and in one click
the shopper can change the store where the purchase
will be made.
them rst by P&G and then by others, but always knew
that their rst moment of truth was somewhere signi-
cantly differentusually when a shopper is leaving the
house, in the car, or making a shopping list and trying to
gure out which outlet to shop.
Today, entities such as Google (as well as many suppli-
ers) have started embracing this notion of Zero Mo-
ment of Truth to try and capture shoppers wherever
their points of decision are. Increasingly these points of
decision are being digitally inuenced. This inuence
puts increasing pressure on the conventional supplier-
oriented path to purchase, which views the work of
reaching people pre-outlet as brand work, and
the work of converting people in outlet as trade or
shopper work. But with shoppers able to enter a store
outlet from their sofa and able to access digital content
seamlessly through their mobile devices in store, today
its simply all marketing now.
3) Who is infuencing them?
Historically retailers and brands have fought for control of
the shopper. Indeed, it became common in Mature/Post-
Modern retail markets to assert that retail concentration led
to a power shift between manufacturers and suppliers.
Today Kantar Retail would assess this as the wrong way
for these trading partners to frame this particular issue.
Instead, the paradigm made famous by the US TV showLost seems most appropriate here: Live Together. Die
Alone. There are any number of sophisticated entities
today looking to position themselves as a go-to resource
for consumers/shoppers on virtually anything they need,
and these entities (such as Google, Facebook, Twitter,
Figure 9: Mysupermarket.co.uk Shopping Screenshot
Source: mysupermarket.co.uk
Decision
3534
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3736
Obviously, the other side of this activity is aggregating the
information generated by this type of interface and offer-ing it for sale to interested partieshttp://www.mysuper-
market-insights.co.uk/ does exactly this (Figure 10).
So today retailers and suppliers risk being mutually
disintermediated by other entities looking to own the
information that feeds peoples decisions; if they own
the information, they own the decision. With information
becoming more portable, personalized, accurate, social,
real-time, and free, we expect this trend to create po-
tentially the most signicant threat today to the historicretailer-supplier value chainthis information owned
outside of the chain hurts the value creation potential of
the chain itself.
In the future, suppliers and retailers will nd their inter-ests more tightly aligned than they have been in the past,
as disintermediated asset owners in a process have a very
common name in business: distributors. Distribution is a
noble profession, but one with historically far lower mar-
gins than either retail or branded manufacturing.
The need in this new Share of Decision world is for sup-
pliers and retailers to begin to think about organic inu-
encehistorically, brand marketing capabilities have
been strong closer to the bottom left-hand side of thematrix (Figure 11). Marketingdigital, shopper, and
conventionalwill all see the world evolve up and to the
right, with emphasis spread across the three triangles
within each square, instead of dominated by the triangle
in the middle (home).
Figure 11: Organic InfuenceCommunication Redened
Source: Kantar Retail Research
Decision
Figure 10: Mysupermarket-insights.co.uk Homepage
Source: mysupermarket.co.uk
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39
Share o SolutionOr, what
products and services can I
oer to broaden/deepen my
relationship with the shopper?
Retailers continue to use their own
brands, bundled products, and service
offerings to expand their share of their
shoppers lives. Those solutions take
three key forms:
Retailers replacing the value creation
historically driven by suppliers
Retailers moving their solutions to
adjacent spaces
Retailers tackling non-traditional
services/initiatives to provide more
holistic solutions
38
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40 41
Share of Solution takes us in two separate directions as
far as retailers go:
First and foremost is the idea that retailers can replace
solutions that were heretofore the provenance of their
suppliers. Own label, private brands, house brands
whatever the term, it is clear that retailers are continuing
to accelerate their private label programs in most devel-
oped retail markets around the world.
But, Kantar Retail also encourages retailers and sup-
pliers to think carefully about what this replacement
strategy means. Industry commentators will often
talk about own brand or private label as if it is
one strategy, but at Kantar Retail we like to think of it
as four strategies as illustrated in our Private Brand
Strategy Matrix (Figure 12):
Figure 12: Kantar Retail Private Brand Strategy Matrix
Source: Kantar Retail Research
This matrix is dened by the two major drivers of retailer
private brand strategies:
1. Retailer motivation for offering private brands: is the
intent simply to increase gross margin or is there a
goal of trying to build a more sophisticated brand?
2. The source of the private brands power: is it reec-
tive, drawing power by replicating the national brands
equity at a lower price point? Or is it incandescent,
which Kantar Retail denes as an item which is thephysical manifestation of how the shopper would ar-
ticulate the retailers brand, in product form.
The key for a retailer is that without a differentiated
brand position the shopper can consistently, accurately,
and passionately articulate, the retailer does not have
permission from the shopper to build incandescent
product brands. Most of the failed retailer private brand
initiatives around the world can be classied as trying
to take an incandescent position without the requisite
retail brand architecture in place to support it, leading
to shopper confusion. For retailers, be humblethere
is absolutely nothing wrong with a nancially motivated,
reectively powered private brand strategy. Kroger in
the US (a retailer with a fragmented brand proposition)
has turned this into a 30%+ private label unit share in
many categories. For suppliers, understand that the
bottom left and top right on the matrix present very dif-
ferent challenges to their core brands, and competitivestrategy should be adapted accordingly.
The retailers that have had success in that top right
quadrant are a mixed collection, but no one today has
a simpler private brand strategy globally than Costco,
whose Kirkland Signature brand across multiple catego-
ries represents one of the largest premium brands in the
world, with well over USD 13 billion in sales (Figure 13).
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4342
Figure 13: Kirkland Signature Single Malt Whiskey
Figure 14: Carreour le bio Organic Set
Figure 15: Target Up and Up onPromotion
Figure 16: Mercadona ExtraPasteurized Milk
Source: Kantar Retail store visit
Source: Kantar Retail store visit
Source: Target circular Source: Kantar Retail store v isit
In a more niched way, Carrefours Bio line of organics has
leveraged the companys brand expertise in foods to move
across a variety of categories with a brand presence in
emerging categories (Figure 14).
Retailers such as Target in the US with its Up and Up
brand have raised the design standard of their reective
private label to bring it more in line with their brand ob-
jectives, but the value proposition is still distinctly reec-
tive (Figure 15).
The top left quadrant of the Private Brand Strategy Matrix
is occupied by retailers where private label is an integral
part of the business model. The obvious answers here
would be primarily private brand houses such as Aldi
and Trader Joes. A more interesting model continues to
evolve in what is loosely characterized as the soft dis-
count trade. Lidl in Europe has been increasing the role
of brands in its historically private label oriented offer.
Perhaps the most interesting example of this type of re-
tailer is Spains Mercadona, who maintains about a 50/50
balance between national brand and own brand, but who
also sees itself in the business of developing brands. In
many cases, Mercadonas primary research (they inter-
view 135,000 Spanish consumers/year) allows them to
identify trends in the marketplace. It was one of the lead-
ers in the development of 550 gluten-free food products
in Europe and has pioneered some unique processing
techniques such as extra pasteurized milk (Figure 16).
Suppliers have historically viewed a retailers move to-
ward private brands as solely a zero sum game: as the
retailers brand improves, mine commoditizes. We would
encourage suppliers to think about this problem a little
differently in the futurein particular as it relates to
differentiated retailers. The only alternative to differenti-
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44
ated retailers are undifferentiated, conventional retail-
ers, and markets where the largest conventional custom-
ers struggle for resonance (Germany, for instance) are
not particularly attractive markets for either retailers or
suppliers from a pure prot perspective. To paraphrase
Winston Churchills perspective on democracy as a form
of government, differentiated retailers are the worst
customers you can have, apart from every other kind.
Churchill would not have approved of appeasement as
a strategy for these customers, and neither does Kan-
tar Retail, but a robust engagement with these retailers
around areas of mutual brand development will be es-
sential for protable supplier growth going forward.
2) Multi-channel
Though our primary focus here is on how the bricks and
mortar world is changing, no discussion around how
retailers are seeking to provide solutions for shoppers
would be complete without an understanding of howretailers continue to use the digital world as an extension
of their in-store ability to provide solutions in both incre-
mental and transformative ways:
Small ways accretive to the total shopping experi-
enceThrough safeway.com, Safeway US shoppers
can track their food purchases made through their
loyalty card and receive suggestions on how to eat
cheaper/healthier.
Transormational ones core to the shopping experi-enceThe dismantling of the purchase and delivery
process today represents one of the most interest-
ing opportunities associated with the multi-channel
world. Many retailers have integrated their inventory
systems with online shopping sites so online orders
can be picked up in-store:
- Walmart USA has expanded its Site to Store pro-
gram to include hundreds of FedEx ofces across
the US as sitesparticularly in urban areas
where Walmart stores are inconveniently situated.
- Auchan in France continues to experiment with its
Chronodrive format, which allows online orders to
be picked up in t-for-purpose small convenient
locations instead of a hypermarket.
Relatively transormational ones that are ancillary
but integrated with the core retail propositione.g.,
Loblaws building with Presidents Choice Financial
Services a largely online bank with the highest cus-
tomer satisfaction rates of any bank in Canada from
20072010, according to J.D. Power and Associates.
3) Non-traditional
Financial services have been a part of retailing for almost
as long as the buying and selling of goods. Today, non-
traditional services include myriad offers where retailerscan insert their brand into a void where there is a gap
between consumer need and a trusted solution. The most
compelling of these today are in three areas:
HealthcareBoots in the UK has been a pioneer of
the integration between health and large scale retail
Solutions
...robust engagement with [differentiated]
retailers around areas of mutual brand
development will be essential for protable
supplier growth going forward.
45
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4746
for a long time and continues to drive innovative
thinking around how these two areas can/will merge.
The marketplace to continue to watch this develop will
be the US, as healthcare reform (or the lack thereof)
continues to change the cost and accessibility of
primary healthcare in the worlds largest healthcare
marketplace.
Food saetyCarrefour and Metro have both been
working extensively in Asia to brand themselves as the
food supply chain experts; in particular working with
small farmers to help them modernize their process-
es and improve quality (Figure 17). Carrefours Filire
Qualit program has promoted closer partnerships
between Carrefour and its key agricultural suppliers
for years, and Metro exhibited a bar-coded apple at
the Shanghai Global Expo in 2010.
Environmental sustainabilityWalmart has taken a
leadership position in terms of trying to optimize its
supply chain and operations to reduce its environmen-tal footprint.
Supplier reactions to retailers initiatives around solutions,
social responsibility, and sustainability have been mixed.
Figure 17: Carreour Filiere Qualite/Metro Bar-Coded Apple
Source: Carrefour.com/metro.com
In some cases, there is a sense that retailers are not com-
mitted to these strategies and are using them for public
relationsor that they are a distraction from the core
business at hand. Sometimes that is a fair assessment. It
is interesting to note how many conversations US retailers
were having with key suppliers around broader environ-
mental issues when trading conditions were not as robust
as they needed to be. Suppliers skepticism also may be a
failure to recognize their own shortcomings in terms of the
types of innovations they are bringing to the table.
The fear from a supplier perspective has to be the re-
tailers breadth and ability to bring a solution together
well beyond the suppliers competitive boundaries. For
those suppliers without limitless scale/breadth on their
own, a return to depth of innovation seems wise, and a
world of fewer bigger innovations is almost certainly part
of the solution. Innovation is on most companys 2011
agendas. After the aggressive trading conditions in mostparts of the world in 2009 and 2010 and the risk of rising
commodity costs in 2011, there is a shared, industry-wide
assumption that margin expansion will only be possible
through whats next.
However, most innovations being brought to the mar-
ketplace today do not command the hoped-for margin
improvement/premium from customers or consum-
ers. Usually this is due to an excess of incrementalism.
Incremental investment poses two obvious challenges tothe retailer:
1. Invariably they can replicate it themselves and sell it
at higher margins.
2. It does not help the economics of the shelf, in that the
economics on the incremental innovation generally
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4948
Figure 18: Kantar Retails New Premium
Source: Kantar Retail research
are not markedly different than whatever item in the
category it is replacing.
This is why Kantar Retail proposes suppliers think hard
about a resurgence in mission-driven innovation. Our
shopper research in most markets today indicates that
shoppers are willing to pay a premium for the attributes
they valueit is just that those attributes are better
dened in the shoppers mind than they used to be. One
way Kantar Retail thinks about this type of innovation isvia our New Premium framework (Figure 18).
Some of the best innovations are those that combine the
why, what, and how to drive transparency and au-
thenticity, preservation either of self or of the planet, and
a sense of purpose. Generally trying to emphasize one of
these attributes on its own (particularly without authen-
ticity as a key pillar) is rejected by the shopper/consumer,
but an integrated approach that conveys an authentic and
real solution stands a far better chance of consumer up-take. One possible roadmap for the future of innovation
is where product innovation is paired with broader think-
ing around bundling and services to generate a mission-
driven solution (Figure 19).
The other critical piece for suppliers as they innovate is
to incorporate shelf-level economics into their innovative
thinking. In particular, its imperative to understand one
key fact: how any innovation a supplier brings to a cus-
tomer improves their overall shelf economics better than
replacing a SKU with private label. The pathway to this is
almost invariably in better understanding of GMROI, or
Gross Margin Return on Inventory, which assesses sales,
turn rates, out of stocks, and margin rates in an inte-
grated returns framework that focuses on the cash ow
productivity of the shelf. If P&L driven innovation has a
role, it must enhance the retailers P&L as well as the
suppliers or there will be no place for it on the shelf.
Figure 19: Mission-Driven SolutionsInnovation Redened
Source: Kantar Retail research
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51
Simply being shopped today is insufcient
to predict future growth. Retailers andsuppliers are continuing to nd the
need to engage with their shoppers
more comprehensively. We see this
engagement needing to take place in
three core areas:
In aisle
Across the total store
Beyond the store
50
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If differentiated retailers are the only players that will
be able to grow in brick and mortar buildings, how will
this differentiation take place? Great retail brands arecreated in-store; our favorite example of this is always
the Costco ideaa 90% renewal rate on a pay-to-use
proposition with no formal marketing at all. Engage-
ment through TV, social media, and online for retailers is
terric, but if the stores do not live up to the idea (i.e., if
they are not the physical manifestation of that image), the
retailers brand falls apart. That is why a very sensible
answer to what is the best shopper marketing program
I can have? might be, clean up your stores! Especiallyin a digital world, a negative experience can move around
the globe at terrifying speed. United Airlines found this
out when they broke a songwriters guitar and his song
(United Breaks Guitars) has as of today gathered more
than 9.5 million YouTube views.
Though engagement and YouTube anecdotes invariably
bring focus to the digital/social/mobile arena from mar-
keters, it is important not to lose sight of two things:
1. There may be far bigger and easier-to-leverage op-
portunities to communicate in-store, and the worlds
largest retailers are all desperately trying to under-
stand how to reinvigorate parts of stores or entire
formats that are ghting to remain relevant in a digitalworld.
2. The need to integrate these platforms more carefully
will be critical to creating organized communication
campaigns.
Share o Engagement will be won at three levels:
Engagement
5352
Retailers and suppliers, to retain shopper en-
gagement, will be working hard on solutions
that are operationally efcient, nancially re-
warding, and engaging to the shopper. Getting
this combination right will take both hard workand a far more integrated approach among
marketing, creative, nance, and retail than
most suppliers have had in the past.
In-aisle
This is where the strategic category management concept that is part ofwinning Share of Wallet needs to come to life. Retailers and suppliers, to retain
shopper engagement, will be working hard on solutions that are operationallyefficient, financially rewarding, and engaging to the shopper. Getting thiscombination right will take both hard work and a far more integrated approachamong marketing, creative, finance, and retail than most suppliers have had inthe past.
In-store
A number of retailers are seeking to revitalize core formats that used to drivetheir business but whose performance today is languishing. The worlds twolargest retailers are deep in this process. Walmarts Project Impact initiativesand subsequent rollback of many Project Impact tenets in the US have receivedenormous publicity, but what Carrefour is trying to do with its Carrefour Planetformatbreaking the hypermarket into core departments (i.e., market,organics, frozen food, beauty, fashion, baby, house, leisure and multimedia, and
discovery) with a very different look and feel than typically experienced in ahypermarket is no less revolutionary.
Beyond the store
Here it is illustrative to look at a simple but revealing metric: the number offans the top 25 CPG retail/CPG brands have garnered on Facebook (as rankedby the website All Facebook in October 2010) (Figure 20).
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The key is to look at the brands that engage, and then
study how they do that. Among the capabilities used by
brands that succeed in engagement in this new world are
humor and the ability to capture the imagination and im-
part a sense of fun. These are the things that simply get
repurposed virally more than anything else. For example,
brands such as Skittles and Red Bull (nos. 28 and 35, re-
spectively, on the list of most liked brands) punch way
above their relative size because of the fun and engage-
ment they bring to their brands and their marketing.
As retailers and suppliers seek to create and enhance en-
gagement, the following framework is helpful for dissect-
ing what to do next from a marketing perspective (Figure
21). In particular, the need for orchestrated campaigns
that stretch across media and touchpoints becomes criti-
cal, along with great insights, great creative and relent-
less execution.
Figure 21: Orchestrated DelightCommunication Redened
Source: Kantar Retail research
Engagement
5554
Figure 20: Most Liked CPG/Retail Brands on Facebook: Oct. 2010
Source: All Facebook
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56 57
The ve-shares analysis is designed to do
one thing: to help the reader simplify all
of the shifts that are taking place in this
incredibly dynamic but moderate growth
environment. Hopefully this simplication
helps frame todays changes in terms of
business decisions that need to be made
and specic outcomes to achieveand then
every organization can use an understand-
ing of those two things as a starting place
to chart a course of action. The Executive
Summary chart include in this report has
some suggested indicated actions:
Strategic: Multi-year or multi-functional
initiatives Planning: Things that need to be baked
into next years plan to be resourced
Tactical: Quick things that can probably
be started within the context of an exist-
ing operating plan
This three-level platform can be a helpful
way to sift through exactly where to focus
next and to keep your organization from
being overwhelmed by the variety ofchallenges and opportunities the changing
world presents. Kantar Retail has a wide
range of product, people, and skills to help
you through this transition. For more
information on our offer, ask anyone you
know here or simply reach out to me.
Thanks for reading and have a terric and
successful year!
Bryan Gildenberg
Concluding Thoughts
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Contacts
Leadership TeamWayne Levings
Chief Executive Ofcer
Mayer Danzig
Chief Digital Ofcer
Bryan Gildenberg
Chief Knowledge Ofcer
Steve Pattinson
Chief Executive Ofcer - Market Insights
Bryan Roberts
Director, EMEA Retail Insights
Phil Smiley
Chief Executive Ofcer - Asia Pacic
Global Sales and ServicesScott Buttereld, Chief Customer Ofcer
Michael Pickord, Director, Strategic Global Accounts
MediaKatherine Clarke, Vice President
About Kantar RetailKantar Retail (www.KantarRetail.com) is the
worlds leading retail insights and consulting
business. Kantar Retail offers a suite of retail and
shopper insights, strategy, analytics and organiza-
tional capabilities that help retailers and suppliers
transform challenges into opportunities for growth.
Kantar Retail has ofces in 15 markets around the
globe. The company is headquartered in London
and is part of the Kantar Group of WPP.
Kantar Retail iQKantar Retail iQ (www.KantarRetailiQ.com)
provides fact-based, forward looking insight on
key global retailers, channels, markets and
shoppers to help you understand the trends of
today and prepare for the realities of tomorrow.A broad range of data, written insights, webinars,
photos, eLearning courses and interactive tools
help you build strategic business plans and
maximize growth opportunities.
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2011 Kantar Retail, LLC. All Rights Reserved.
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