National Retail Federation Competition

Mobile

RetailingNew Technology

&New Opportunities

All rights reserved by Clements Inhouse Consulting

Mobile Retailing – New Technology & New

Opportunities

2

Today„s Agenda

Marketing Strategy ProposalsIII.

Technological ImpactIV.

Financial ImpactV.

ConclusionVI.

Current StateI.

Trends favoring Mobile RetailingII.


Clements is a general merchandise retailer with a

focus on female customers

3

Clements Company Profile

Vision &

Values

Clements provides the best possible customer service,

products, and customer experience in the market

Clements gives back to the society, the community and the

environment

Core

Customer

Profile

20 – 45 year old suburban and ex-urban women with a

family income of $45k-80k

Buys branded, stylish, high quality products at reasonable

prices in a convenient shopping experience

Product

Groups

Clothing &

Jewelry

Personal Care

Electronics

Beauty

Products


Financial crisis had a significant impact on

Clements‟ expansion and growth

4

Financial Highlights

400

600

800

1000

1200

$ 10 bn

$ 12 bn

$ 14 bn

$ 16 bn

$ 18 bn

Revenues # of Stores

► Clements business model is based on strong expansion

► Financial crisis hit the company‟s growth hard

Sales and Store Development Financial Highlights in 2009

Net Sales $ 16,921 m

Net Income

# of Stores

Gross Square Footage

$ 892 m

1006

88 m

Average Store Size 8,125 m²


Customer service has been one of Clements major

differentiators and success factors

5

Current state Customer Service

Service

Proposition

“We aim to treat every customer fairly and equally with the respect they

deserve and make every attempt to provide them with a memorable

experience.”

Service

Policies

“No hassle” Return Policy

Continuous employee training on customer engagement, new initiatives,

and fashion trends

Clements Card – Loyalty Program

Clements in the Community

Customer

Satisfaction

Continuous measurement and evaluation of customer satisfaction based on

post purchase surveys, call center and CRM data


Although E-Commerce accounts only for 2% of

sales, its impact is constantly increasing

6

E-Commerce – Key Performance Indicators

Sales 2009 $ 360 m

Total Users 2009

Unique User 2009

Ø Basket Size

300 m

60 m

$ 80

Conversion Rate 1.5 %

Clements


Clements faces certain internal and external

developments favoring mobile retailing

7

Developments favoring Mobile Retailing

Mobile Retailing

Change in Customer

Focus

Trends in Customer

Behavior &

Preferences

Economic Downturn

and Impact of

Customer Loyalty


Changing environments supported a

reassessment of the customer focus

8

Change in Customer Focus

Source: Clements Visioning Proposal

The modern

Home Maker

The Business-

Mother

The Latina

The University

Student

Strong commitment to family & community

Increasing interest in fashion, lifestyle and technologies to leverage family

recognition and social contacts

Buying patterns influenced by family & friends

Chief breadwinner and decision-maker both at home and at work

High affluence to technology due to strong usage at work

Willing to spend the earned money in her spare time

Increasing wealth and desire for social recognition

Increasing interest in adapting American standards

Early influence on young customer groups as an essential factor to ensure

future business

Cu

rren

t

Cu

sto

me

r Fo

cu

s

Ad

ditio

na

l

Cu

sto

me

r Fo

cu

s


Latinas and college student will further

strenghten Clement‟s customer basis

9

Additional Customer Focus

Source: Selig Center for Economic Growth, University of Georgia; Expert Interviews

Backup

0% 50% 100%

2000-2008

2008-2013

Non-Hispanic Hispanic

The Latina The College Student

Hispanics currently account for 15.3% of the

population

Their purchasing power is the strongest

increasing of all groups in the US which

provides great opportunities for Clements

future

Purchasing Power Growth

Nationally, students spend more than $5

billion a year on clothes and shoes.

By the time they reach college, full-time

students represent over sixty billion dollars in

buying power

“Reaching college students is a

investment into the future.

If you don‟t win them

now, they are gone.”

Matt Stautberg, Macy’s


Technology and the demand for value

added services changes the market

10

Trends in Customer Behaviour and Preferences

Technology Driven

Innovation

Evolution of

Social Media

Value Added

Customer Service

Spread of Mobile Phones

Mobile Social Media

Information as a Service

Self-Service is better Customer Service

Customer advice Customer

Geo-Tagging


Increase of loyal customer base as key

strategy to mitigate economic downturn

11

Economic Downturn and Impact of Customer Loyalty

Source: Euromonitor – Non-grocery retailing USA

-4,00%

-2,00%

0,00%

2,00%

4,00%

6,00%

2005-06 2006-07 2007-08 2008-09

Non-grocery retail sales development Basket Size

Loyal Customers New Customers

Illustrative

► Financial crisis hit the non-grocery retailing market hard

► Increasing competition makes differentiation a key success factor

► Value added services to increase loyal customer base allows turnaround


Clements needs to react on recent developments

by integrating mobile and C2C services

12

Adjusted Marketing Strategy

Store

Internet

Mobile

Co

ns

iste

nt

Str

ate

gy

B2C

C2C

Retail & Marketing Channels Marketing Methods

Clements must include the growing mobile channel in its portfolio

Customer 2 Customer contact is increasingly important and needs to be considered


Mobile retailing offers diverse

opportunities for value adding services

13

Mobile Retailing – The 4th Distribution Channel

Mobile Retailing

Mobile Marketing

I. Advertisement

II. Customer Service

III. Product

Information

IV. Loyalty Programs

V. Promotion &

Coupons

Mobile Commerce

& Payment

Mobile Operations

I. Mobile POS

II. Workforce

Management

III. Internal

Communications

IV. Mobile Approvals

Focus of this strategic evaluation


Development of a mobile application is a

key success factor

14

Clements Mobile App - Overview

Value added services to increase shopping experience

and thereby basket size and shopping frequency

Increased customer information and thus future CRM

Partnerships with GoogleMaps, FourSquare & Wildcard

Clements Home

Stores &

More

Clements

In-Store

C-CardCoupons

& More


Decreasing information asymmetries drives

more customers to Clements POS

15

Clements Mobile App – Stores & More

Home

Stores & More

Clements In-Store

C-Card

Coupons & More

Home StoresC

In-Store C-Card More

Shopping List Check availability and reserve products

Store inventory synchronization

Store Infos Locations and store hours

Directions Finds store nearby via address or geolocation

Opens directions via GoogleMaps

Drives more customers to POS

C

C


Diverse product information allow increase

in basket size and shopping experience

16

Clements Mobile App – Clements In-Store

Home

Stores & More

Clements In-Store

C-Card

Coupons & More

Home StoresC


QR Product Info

a) Check availability & order possibility

b) Product Matching

i. Outfit Idea incl. customized coupons

ii. Color Identification

c) Clements Runway & Closet

d) Additional Pictures, Runway videos & Infos

Spirit Shop

Locates items in the store regarding the

chosen/closest university

Includes Clothing & Accessories

Up-Selling

Increase of non-stock sales

Attracts university students

Customer experience

High-fashion branding


Clements Card

An integrated loyalty program is a key

measure to reach a turnaround

17

Clements Mobile App – Clements-Card

Home

Stores & More

Clements In-Store

Clements-Card

Coupons & More

Home StoresC


Loyalty Program

a) Mobile registration, identification, points

redemption and customer profile management

b) Wish Lists and Gift registries (social network

integration)

c) Wildcard app integration

Increased participation

Increased customer satisfaction

No wallet share

Customer decision data

Increased redemption

Anna Beautiful


Mobile coupons are cheaper, more

customized and highly successful

18

Clements Mobile App – Coupons & More

Home

Stores & More

Clements In-Store

Clements-Card

Coupons & More

Home StoresC


Coupons

Use data tracking and CRM to create customized

coupons depending on buying habits, time, weather

and other influence factors

Increased coupon redemption

Increased impulse buying


Social media allows the controlled leverage

of customer to customer marketing

19

Use of Social Media

Add Geolocation Tags for Clements

Encourage shoppers to check in through their Foursquare account

Rewards for the “mayor”

Shop-Alerts – Delivers SMS when customer reaches shop “geo-fence”

“Tweet” daily (gradually more often) about deals/items in stock

Hashtag (#) with Clements name to become a “trending topic”

Gain followers by advertising in store and including Twitter logo on all print/electronic

publications

Clements Fan Page with daily status about exclusive discounts and “what‟s hot”

Monitor customer feedback and respond to negative postings immediately

Gain fans by advertising in store and including Facebook logo on all print/electronic

publications


Research indicates increasing influence of

social media on buying habits

20

Recent research results

Source: North American Technographics; Lightspeed Research

Backup

“If you had to choose one information source

for a purchase decision, what would it be?Facebook and Twitter Addicts

Almost 40% of women aged 18 to 34 admit they

are “Facebook addicts”

Reasons for moms following business on Twitter:

0% 10% 20% 30% 40%

Recommendation from friends/family

Consumer review or rating

Print advertisement

TV commercial

Mail from a company

0% 20% 40% 60% 80%

To find out about the company's products or

services

Because they are already customers of the

business

To get deals for cheaper products


Redesigning its stores allows Clements to

leverage sales by customer experience

21

Store Layout Redesign

Create a personal,

exciting store

environment

New Colors

1In-Store Music

Use different styles and

speeds of music to leverage

shopping experience

2

Announcements

Use speaker system to

promote deals, social

networking events and other

initiatives

3

Window Displays

Use large windows at each

entrance filled with mixed

media and art to inspire

customers and create

excitement

4

Boutique Design

Use dividing walls and low

ceilings to create different

boutiques

Design boutiques

individually reflecting the

products for sale

5


22


Limited significance of mobile commerce

due to high cannibalization rate

23

M-Commerce

Non-store & catalogue retail sales

100% 92%

1% 8%

0%

20%

40%

60%

80%

100%

2009 2015f

M-Commerce

E-Commerce

“Establishing mobile commerce

creates high upfront and maintenance

costs, however, sales are mainly a

cannibalization of the

retailers own E-Commerce

Matt Stautberg, Macy’s

Mobile commerce with

increasing influence on

retailers

However market growth

currently mainly caused by

cannibalization of E-

Commerce offers

Later reassessment

recommended


Mobile payment is a significant future trend

Clements has to be aware of

24

Mobile Payment

Source: Juniper Research; Marconi Pacific

Benefits Costs

The mobile payments market for physical goods

is forecasted to be worth $100 billion by 2014

50% of the smartphone owners have strong

interest in having mobile phones replace the

functionality of their credit cards

Mobile payment significantly decreases check-

out time and might reduce check-out personnel

Higher security for customer as she does not

need to carry credit cards anymore

Upgrade of current systems will cost at least

$200 per check-out

High functionality only with NFC phones given –

however by 2014 only 1/6 of the smartphones in

use will have NFC technology

► Mobile payment will offer more convenience to the customers

► Technology still improving

► Considering a first-mover advantage Clements should reassess mobile

payment with its next technology upgrade


Cross-channel advertisement supports spread of

new value added customer services

25

Advertisement

Television Advertisement

Nationwide TV commercials to introduce

Clements new value added service approach

Adapt change in customer base to commercial

design

Internet & Mobile Advertisement

Announcements and advertisements for new

mobile application on the Clements website

Direct mobile customer advertisement to

increase spread of new mobile service platform

Place target group customized ads on social

networks

Consistent cross-channel advertisement to increase penetration and to

spread innovativeness and customer service approach of Clements

Test the new

Clements Mobile App


A strong and consistent cross channel approach

enables broad customer penetration

26

Cross Channel Integration

Store

E-Commerce

Mobile

QR Code

Stands

Stands with info about promotions and “QR

codes” or other new ventures located

strategically throughout the store

Dressing Room Posters within the dressing rooms

announcing mobile and social media

initiatives and provide QR codes

Special Check-

Outs

Buying or reserving products on the internet

or mobile allows customer to pick up their

products at special check-outs in the store

E-Commerce

Adjustment

All mobile features have to be adopted on

the website and social media entries have to

be linked


Mobile application should be based on

technological circumstances in the market

27

Customer Technology and mobile IT strategy

Source: comScore, Tech Crunchies

Customer Technology Special purpose

mobile software

Thin-Client

Architecture with

adapted Apps for

Apple OS and

Android

Use of ARTS XML

and OpenID

standard

Integration of QR

Code Reader

Smartphone OS in the US

RIM OS

Apple OS

Windows Mobile

Android

Other

US Smartphone Spread

21%

79%

Smartphones

Non-Smartphones


High IT integration allows a maximal leverage of

the benefits of new services

28

IT-System Map Backup

Enterprise Service Bus

ERP

CRM

Management

Information

System

E-Commerce

Infrastructure

Supply Chain

Management

Mobile

Infrastructure

► Mobile Infrastructure becomes the 6th IT area in the organization

► IT systems throughout the organization have to be increasingly

integrated to fully leverage the benefits of the technology


Despite significant upfront investments the project

already has a one year NPV of $4 million

29

Financial Impact

Benefits Costs

Added value services and an

increase in Clements loyal

customer base lead to an

estimated store sales increase

of 0.9%

$ 56.6 m

Increase in non-store service

and penetration increases

online conversion rate by 0.2%

$ 15.5 m

Total Benefits $ 72.1 m

Programming and design of the

mobile app$ 5.0 m

Store Layout Redesign $ 40.2 m

Total Costs $ 63.2 m

Estimate

Technology $ 8.0 m

Advertisement and other costs $ 10.0 m

The one-year NPV of this project is $ 1.18 m (WACC = 12%)


Associated risks can be mitigated by several

measures across the development

30

Risk Assessment and Mitigation Strategies

Risks Mitigation Strategies

Lack of customer technology

Lack of customer understanding of

new services

Keep it simple

Employee training and workshops

Hotlines, help-pages & In-store

explanation posters

Rental of smartphones in-store to

enable customer experience


Mobile retailing offers great opportunities for

Clements

31

The Big Picture

Marketing Measures Technology

Financials

$ m

$20 m

$40 m

$60 m

$80 m

Benefits Costs

NPV

$ 1.18 m

Clements

Mobile App

Social Media

Initiative

Store Layout

Redesign


Thank you all for providing this amazing

opportunity to compete!

32

Acknowledgement

T

H

A

N

K

Y

O

U

Jerry O‟Brien, University of Wisconsin-Madison

Sarah Conrad, NRF Foundation

Matt Stautberg, Macy‟s

John Kubo, Wetseal

Kristen Malavolta, Toys R Us

Angie Badura, University of Wisconsin-Madison

Amy Parker, Sears


Clements Inhouse Consulting employs experts

across all functions

33

Consulting Team

Lisa DuckrowIT Expert

Caitlin ClementsStore Operations Expert

Michael StallsmithCustomer Service Expert

Sara Beth SullivanMarketing & Sales Expert

Timo TrumppFinance Expert

Trevor HinskeE-Commerce Expert

Documents

National Retail Federation Competition