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Mark Wright and Donna Wydra
June 2018
NAVIGATING THE TRANSFORMATION OF RETAIL, SHOPPERS & PL
Market Shift Trends
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 2
Today’s Presenters
• Mark WrightPrincipal, Consumer & Shopper Marketing, IRI
• Donna WydraPrincipal, Consumer & Shopper Marketing, IRI
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 3
Fill Out the Survey at the End for Some Quick Insights from Our Top Studies
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 4
The Evolving Roles of Private Brands
Navigating Life in the Fast(er) Lane
What You Will LearnToday’s Discussion
BIG Shifts Underway in the Retail Marketplace
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 5
BIG SHIFTS ARE UNDERWAY IN THE RETAIL MARKETPLACE
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 6
Retail’s Greatest Change Since the Advent of the Automobile
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 7
Mergers, Acquisitions and Other Recent Events in the Retail Marketplace
Albertsons Companies announces a merger agreement with Rite Aid. Albertsons Release 2/20/18
Southeastern Grocers files for bankruptcy, announces closing of 94 stores SEG Release 03/15/2018
Sam’s Club announces closing of 63 warehouses across the US. Walmart Release 1/11/2018
The Kroger Co. agrees to sell its 700+ store c-store businessProgressive Grocer, 2/05/2018
Lidl plans to open as many as 600 stores in the US. Business Insider 5/17/17
ALDI announces plans to expand to 2,500 US stores by the end of 2022. ALDI release, 6/12/17
Amazon acquires Whole Foods Markets Amazon Release 6/16/2017
Dollar General plans to open 900 new stores, remodel 1,000 existing sites and relocate 100 stores Chain Store Age 12/7/2017
Bodega Latina Corp will acquire Fiesta Mart ‘s 63 Hispanic-themed stores. Progressive Grocer 3/26/2018
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 8
Continued Growth in Online Sales
- 2.0 4.0 6.0 8.0
10.0 12.0 14.0 16.0 18.0 20.0
IRI E-Market Insights ©2018
Quarterly Share of e-Commerce Sales of Total U.S. Retail Sales % Online to CPG All Outlet Sales
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 9
Albertsons announces new Digital Marketplace providing for consumer-direct ordering and shipping Albertsons Companies 03/20/2018
Albertsons Companies and Instacart to bring same-day grocery delivery to 1,800-plus stores Progressive Grocer 11/28/2017
Accelerating Innovation in Order and Delivery Options…
Kroger Announces 1,000th ClickList Store and Introduces Seamless Digital Shopping Experience Kroger Company Release 12/18/2017
Walmart plans to expand its popular Online Grocery Delivery option to more than 40% of U.S. households Walmart Release 3/14/2018
Amazon and Whole Foods Market announce the introduction of free two-hour delivery through Prime Now Amazon Company Release 2/8/2018
Prime Now delivery makes Whole Foods competitive on price with Kroger in CincinnatiFooddive.com 3/29/2018
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 10
…across the Industry
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 11
How Important is Online Ordering? 55% of Millennials and 45% of Gen X’ers Say They Intend to Purchase Groceries Online in the Coming Year
Likelihood of Purchasing Groceries Online in the Coming Year% of Respondents
21% 28% 18% 18% 22%
20%27%
27% 17% 12%
29%27%
35%31%
21%
31%18% 20%
34% 46%
Total U.S. Millennials Gen Xers Boomers Seniors
Very likely Somewhat likely Not very likely Not at all likely
Source: Consumer Connect™, Q4 2017
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 12
Online Shopping Value Perceptions by Generation (Top 2 Boxes)
Of those Shopping Online, Many, Especially Younger Shoppers, Feel Shopping Online Saves Money and Offers ConvenienceGen X’ers and Millennials also cited reduced impulse buying and ease of finding needed items.
11%
25%
18%
36%
26%
52%
30%
55%
Buying online allows me to find lower-priced food and beverage options
Online order/in-store pickup (click-and-collect) allows me convenience
without the added shipping fee
Millennials Gen Xers Boomers Seniors
Source: Consumer Connect™, Q4 2017
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 13
10%
11%
16%
27%
26%
84%
12%
14%
16%
17%
34%
84%
0% 50% 100%
Products not delivered fresh
Service not available where Ilive
Not home during the day toaccept shipments
Tried it and didn't like it
Products more expensiveonline than in-store
Prefer to physically see andchoose groceries
20162017
12.5%
17.0%
11.9%
7.0%
67.5%
10.6%
18.9%
11.5%
9.8%
63.3%
7.7%
17.2%
10.2%
7.6%
70.2%
6.7%
19.6%
10.4%
6.0%
84.7%
0% 20% 40% 60% 80% 100%
Order online, Same day homedelivery
Order online, Not same day homedelivery
Order online, Pick items up insidestore
Order online, Pick up in drive-thrulane
None of these
Age 55+
Age 45-54
Age 35-44
Age 21-34
But, Nearly 74% of Shoppers Have Not Tried any Online Ordering or Delivery Service Their Reasons Vary, as Does Their Usage
Reasons for Not Ordering Groceries Online to be Shipped
Source: AlphaWise, Morgan Stanley Research
Usage of Online Ordering and Delivery Varies by Age
Source: IRI AttitudeLink™ Survey March 2018
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 14
Marketers Must Stay in Lockstep With Evolving Consumer Needs and Wants to Encourage Engagement and Purchase ActivityCapabilities That Drive Channel Selection | % of Respondents
11%
17%
22%
25%
39%
20%
24%
30%
34%
49%
30%
34%
43%
43%
57%
31%
42%
44%
45%
58%
Subscription services for frequentlypurchased items
Online purchasing of freshly prepareditems
Online purchasing with in-store pickup
Online purchasing with fast delivery
Online purchasing with free delivery
Millennials Gen Xers Boomers SeniorsSource: Consumer Connect™, Q4 2017
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 15
Market Entries and Acquisitions
Value and Private Brands at the core of retail changesPolar ends of the value spectrum outperforming
middle-of-the-road peers*
*Source: Deloitte
Amazon-Whole Foods AldiLidl
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 16
Lidl Enters the U.S…
became aware DRIVING by the store40%
CURIOSITY69% drove them to the store
PRICE/INCENTIVES64%&69%
FRESH PRODUCEwas the top product purchased
liked the Private Brandassortment
said Lidl offered Good Value for the Money70%
59%
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 17
…Resonating with Some Customers, But Not with All
• Initially some good news…• 20% are shifting much more of their
shopping over to Lidl stores• Half said their experience was better
than expected • 58% said they definitely will visit Lidl
again in the future
• But sales are soft…• 16% said Lidl was worse than expected• Repurchase intent dropped by more
than half (from 44% to 21%) from fall opening to March, 2018
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 18
Lidl’s Market Entry has had Mixed Results
Walmart
Publix
All Outlets
Grocery Channel
Kroger
Food Lion
Aldi
-15.0% -10.0% -5.0% 0.0%
Pricing Impacts of Lidl Store Openings
Shoppers are the big winners…
The U.S. Market Continues to Challenge Lidl
Recommendations for Competitors
* IRI POS Price comparison**UNC Lidl Price Survey, stores within 1.7 miles of Lidl store
• Lidl’s entry sparked industry-wide activity, forcing competing retailers and manufacturers to up their merchandising games
• Lidl significantly impacted grocery prices -6.3% in Grocery channel, -6.6% in All-Outlets* and -2.5% to -13.9% declines at Walmart, Food Lion, Kroger, Publix and Aldi**
• Aggressive growth plans and sales expectations have not been met• Most shoppers liked Lidl stores, but haven’t transferred their loyalty to Lidl• In response, new stores will have smaller footprints and more-limited
assortment, rolled out more slowly in more urban markets
• Know your customers and your markets – localized and personalized actions are essential to prevent Lidl triers from becoming Lidl loyals
• Key themes to blunt Lidl’s messaging: greater product variety, produce freshness & quality of your own private brand items
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 19
ALDI Growing Quickly by Offering Value With 1600 Stores Today and Adding 900 More by 2022Aldi Could be the Third Largest Grocery Chain
61%good/affordable price is what they liked about ALDI
93%said that pricing/value drove them to ALDI
FRESH PRODUCE(77%) was the top product purchased
Selection of
Store Brand products &
Uniqueproducts offered are liked at ALDI over other retailers
Half said their experience was Better Than Expected1/3 shifting much more of their shopping to Aldi
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 20
Aldi
Walmart Total
Kroger
Publix
Albertsons
Food Lion
Meijer
Vons
Ralphs
-5% 0% 5% 10% 15% 20% 25%
Aldi’s Expansion Quietly Continues, and Shoppers are Very Aware
(Nancy Luna, Orange County Register/SCNG)
• Know your own customers—identify and meet their needs
• Clean up your own house before Aldi opens—eliminate any issue that would give a new competitor an opening with your shoppers
• Focus on strengths—broader assortment, private brand offerings and quality, produce and meat quality, etc.
• Monitor and respond to Aldi pricing as appropriate
Aldi’s prices are lower than many competitors’
Shoppers will be the big winners here as well!
What to do?
• 60% to 70% of markets experienced price declines when Aldi opened
• Pricing impacts are broad, but small—overall market prices declined by an average 1-3%, while category price impacts ranged from +2% to -15%
• Savings opportunities exist against specific competitors
Price per Volume Comparison, Edibles Categories, IRI Consumer Network
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 21
In February 2005, Amazon launched Amazon Prime,
an all-you-can-eat express shipping membership program for about a
million products.
Our vision was that fast delivery should be an everyday experience—
rather than an occasional indulgence, and many skeptics
thought we were crazy.— amazon.com website
Amazon Announces Its Purchase of Whole Foods in June 2017
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 22
Many Whole Foods Shoppers Use Amazon Prime, Either by Paying For It or Sharing
71% of Whole Foods Shoppers
have Prime access
IRI Whole Foods Amazon Study, March 2018
% Use Amazon Prime
Pay for PrimeMembership
Use SomeoneElse's Prime
Do Not Have PrimeAccess 16%
29%
55%
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 23
Shoppers are Aware of the Merger, and Some are Buying More Because of It
of Whole Foods (WF) shoppers
are aware of the merger
of WF Shoppers purchase groceries
on Amazon*
of WF shoppers are buying more at WF due to the merger
15%91% 28%
Whole Foods Amazon Study, March 2018
* Mostly non-food and bulky items
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 24
59%
38%
38%
32%
29%
29%
27%
26%
Better prices
Better sales/coupons
Amazon Prime discounts
Whole Foods' brands sold and shipped atAmazon.com
Amazon Prime delivery
More frequent sales/coupons
Whole Foods selling products onAmazon.com
More Amazon Prime-only offers
Whole Foods Shoppers Expect Better Price and Delivery OptionsExpected Shopping Benefits of Merger
Only 18% of WF shoppers are aware of Amazon/WF benefits
Whole Foods Amazon Study, March 2018Q4. In which of the following ways, if any, do you expect to benefit as a shopper to Amazon's purchase of Whole Foods?
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 25
Whole Foods Shoppers with Amazon Prime Access
Yes
No
61%
39%
Whole Foods Shoppers with Amazon Prime Access Motivated by Free Delivery
Effect of Free Whole Foods Delivery; Would Buy More at Whole Foods if Free Delivery Was Offered
Currently only 2% do all of their shopping at Whole Foods
88% of trips are Fill In, Single Item, Special Deal
Whole Foods Amazon Study, March 2018
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 26
The Amazon/Whole Foods Evolution is a Work in Progress
Shoppers just starting to see the effects• While awareness is high, new benefits are still mostly unknown• Some shoppers have noticed lower prices and Amazon lockers,
but out-of-stocks have increased• Free delivery partially offsets higher prices• “New news” still coming out about merger effects and benefits
What to do?Whole Foods still lags far behind on value and price• Competitors to push messaging of these benefitsWhole Foods doesn’t meet all its shoppers grocery needs nor does Amazon• Position competitors as a one-stop shopping… both in store or onlineKeep abreast of changing Amazon/WF benefits and messaging• Continue to develop and communicate strategies to defend
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 27
From Imitator to Disruptor
THE EVOLVING ROLE OF PRIVATE BRANDS
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 28
Value Is King• 45% of grocery shoppers
say they are visiting value-oriented stores more often
• 70% of consumers say technology has made it easier than ever to take their business elsewhere.
Changing Consumers are Driving Change
Transparent & Simple
• 94% of consumers say they would be loyal to a brand that offers complete transparency
• 54% of consumers look for food/beverages with a short list of recognizable ingredients
Always On• 77% of Americans own a
smart phone• Any time, any place -
convenience as the new loyalty.
• They research, explore compare and share.
• 70% of consumers trust online suggestions more than brand statements.
Personal • Want brands that align
with their belief systems• Only 49% of consumer
say their main grocery store connects with them in a relevant way.
• 69% of engaged U.S. shoppers want to be able to give feedback to help improve the experience.
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 29
“People around the world
wouldn’t care if 74%
of brands disappeared.”
-Havas Meaningful BrandsGlobal Study 2017
Less Brand Trust
42% of Americans find brands and companies less
truthful today than 20 years ago-McCann, Truth About
America 2017
Brand AgnosticConsumers
moving toward whatever meets
their needs
Less Retailer Loyalty
For most food categories,
less than 1/3 of shoppers are loyal to a specific chain
Changing Consumers are Driving Change
Daymon Worldwide, 2017–2018 Global TrendWheel
Less Channel Loyalty
Shopping more channels today than
3 years ago9.3
channelsin 2017
8.2in 2014
vs
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 30
Retailers Are RespondingRole of Retailer Private Brands Has Shifted from Margin to Loyalty Builder
68% 44%
Industry Role of Private Brands is as
Loyalty Builders
Industry Role of Private Brands is as
Margin Builders
strongly agree
strongly agree
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 31
Managing a multi-tier
Private Label brand strategy
in house
Focused on driving private
label penetration
from the current rate of 25 percent to
37%
Acquiring retailers with proven strength and success in store
brand
Benchmarking Private Label
with other retailers, while demanding price
concessions from National Brands
Decentralizing its corporate
structure to make local
customization easier
Traditional Retailers are Doubling Down on Their Private Label Strategy…Increasing Shopper Loyalty, Improving Margins and Creating Better Leverage with National Brands
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 32
Grocery DrugMass
Retail Is Hyper-Focused on Private Brand
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 33
Amazon
Retail Is Hyper-Focused on Private Brand
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 34
Retail Is Hyper-Focused on Private Brand
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 35
4.1%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2014 2015 2016 2017
Total CPG National Brands Private Label
3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
2014 2015 2016 2017
Total CPG National Brands Private Label
Dollar Sales Change Unit Sales Change
A Private Brand ResurgenceU.S. Private Brands Performance
IRI Market Advantage™, calendar years; Total US—MULOC.
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 36
Private Brands are Growing Across All Income LevelsPrivate Brands Sales % Chg. vs. YA by Household Income Level
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
Apr-23-2017
May-21-2017
Jun-18-2017
Jul-16-2017
Aug-13-2017
Sep-10-2017
Oct-08-2017
Nov-05-2017
Dec-03-2017
Dec-31-2017
Income < $15K
Income $15-24.9K
Income $25-34.9K
Income $35-49.9K
Income $50-69.9K
Income $70-99.9K
Income > $100K
IRI Consumer Network™, Total US Multi-Outlet, rolling 13 week periods
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 37
Private Brands Sales Have Momentum Across Age Groups, Especially Younger MillennialsPrivate Brands Sales % Chg. vs. YA, by Generation
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Apr-23-2017
May-21-2017
Jun-18-2017
Jul-16-2017
Aug-13-2017
Sep-10-2017
Oct-08-2017
Nov-05-2017
Dec-03-2017
Dec-31-2017
Millennials
Generation X
Boomers
Retirees & Seniors
IRI Consumer Network™, Total US Multi-Outlet, rolling 13 week periods
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 38
Changing Consumer Attitudes Are Driving Change7 out of 10 Millennials Prefer Stores That Have a Wide Selection of Private Brands Products and Expect to Increase Their Purchases This Year
54%
59%
60%
63%
61%
67%
70%
74%
I prefer stores that have alarge variety of private label
products to choose from
Expect to Purchase MorePrivate Brands During the
Next Six Months
Millennials Gen Xers Boomers Seniors
IRI Consumer Connect™, Q3 2017 Top 2 Box Responses
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 39
Younger Consumers are Embracing Private BrandsPrivate Brand Usage by Generation
41%29%
40% 45%
49%57%
50% 45%
10% 14% 10% 9%
TOTAL Millennial Gen-X Boomer
Light
Medium
Heavy
IRI Private Brands Consumer survey, Total US, November 2016, N=622
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 40
Partially Driven By Higher Awareness and Better Understandingof Private Label and What it Offers
“Private label products are just as good in quality as national brands”
76%83%
79%72%
71%
TOTALMILLENNIALS
GEN XBOOMERS
SENIORS
68%75%
71%65%
64%
TOTALMILLENNIALS
GEN XBOOMERS
SENIORS
Source: IRI Consumer Connect Survey, Q3 2017
“Private Label products are a better value than national brands”
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 41
From Imitator to Disruptor - We’ve Come A Long Way
• 1980 2018
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 42
Key Takeaways
NAVIGATING LIFE IN THE FAST(ER) LANE
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 43
Takeaway #1: Private Brand Disruption Continues
6
Digital Connection to Shoppers
4 52 31
Private Label to Private Brands
Brands, Tiers and
Scale
New Attitudes Driving
Preferences
Role Evolution to Loyalty
Innovation and Quality
Leader
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 44
Key Takeaway #2: Online Activity Will Only Increase: Are You IN or OUT?Information is the Currency of Success in This Rapidly Evolving Marketplace
For the Largest eCommerce Categories, eCommerce will Represent 33% of Total CPG Sales by 2025
$799 $840 $865
$52
$91
$146
$13
$28
$54
$600
$700
$800
$900
$1,000
$1,100
2017 2022 2025
CPG Growth 2017–2025U.S. CPG Sales ($B)
Edible eCommerce SalesNon-Edible eCommerce SalesTotal Store MULO + C Sales
• One size does not fit all—retailers and manufacturers need to know their customers almost individually…
– Who they are– What they think– How they feel– What they purchase– How to communicate with them
across channels, markets and media outlets
…and both need to be willing to experiment to find the highest degree of success
Source: eCommerce COE Secondary Research; IRI eMarket Insights; IRI Market Advantage, Total US Multi Outlet + Convenience
$65B
$119B
$200B
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 45
Key Takeaway #3: Turmoil in the Retail Industry Will Continue“Disruption” is Just Another Word for Retail
• Mergers, acquisitions, openings, and closings are a normal part of retail, now exacerbated by the omnichannel shift
• Customers are looking for a seamless online/store experience, adding more fuel to the fire
• The retailers who adapt the quickest and the best to the ongoing omnichannel shift are the ones that will thrive
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 46
Key Takeaway #4: Change is Everywhere, and it is Accelerating
Enjoy the Ride!
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 47
QUESTIONS
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 48
Thank You!
Mark WrightPrincipalConsumer & Shopper Marketing, [email protected]
Donna WydraPrincipalConsumer & Shopper Marketing, [email protected]