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Finding Opportunities in Retail 2020magazines at retail | PBAA/MPA Conference
Baltimore 17June, 2015
Tim O’Connor | [email protected]
www.retailnetgroup.comKnow Tomorrow Today
What We Stand By
Traditional
planning process
RNG process
Today T + 5T - 5
We Bring the Future to the Present
Tracking Drivers Shaping the 2020 Retail Landscape
ocietal echnology conomic ndustry olitical
Wildcards
Trends Drivers of
Change
2
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Today’s Journey
Macro-Economic
Societal Technology Industry Wildcards
3
The Need for Change: A New Roadmap to the Consumer
Transformation: Retailer Strategic Initiatives
Drivers of Change
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Key Drivers Will Effect Who, When, Where, How and How Much!
4
• Consumer Liquidity &
Social Mobility• Employment ,wages,
credit
• Health care expenditures
• Community income
distribution
• Rising taxation
• Infrastructure
development
• Consumer confidence
� Birth rates.. Aging..
� Urbanization
� Household sizes
� Intergenerational Distinctions.. e.g. millennials
vs. boomers)
� Experiential vs Things
� Localism..
� Food Preferences- global, Fresh, Scratch to immediate
� Rental vs. Ownership
� Chronic Disease Prevalence
� Connectivity, Research, Transparency, Trace-ability
� Real time personalization
� Mobile Web – Tele everything
� Analytics / loyalty programs
� New Logistics Models -From Cases/Pallets �“Eaches”
� Automation
� Sensors
Macro-Economic
Societal Technology Industry
� Concentration – 60%-70% top chains
� Saturation – shoppers per building
� Segmentation – from 30 store types to 50+
� Substitution: on-going
� Store for Store
� DIGITAL for stores
� Merchandise Lifecycles – 25%-40%
� Sourcing
� Branding/Marketing
� Services
Drivers of Change
Political &
Wildcards
4
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Societal Drivers of Change
35%36%34%31%
28%26%26%26%26%25%24%23%22%
21%20%20%
9% 9% 10%10%11%12%12%13%12%12%13%15%17%
22% 22%24%
0%
10%
20%
30%
40%
19
60
19
65
19
70
19
75
19
80
19
85
19
90
19
95
20
00
20
05
20
10
20
15
20
20
20
40
20
50
20
60
US % of Population by Age<17 65+ Singles Living Alone: 28%
Married Couples w/ Kids: 18%
5+ Person HH: 10%
Avg. HH Spend on Food/ week: $151
Women Enrolled College: 56%
Drivers of Change
6
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Technological Drivers of ChangeRetailer and Consumer Toolkits Growing
OrganizationOrganization
Click to BuyClick to Buy
Recipe ManagementRecipe Management
Less Time at Checkout
Less Time at Checkout Anytime DeliveryAnytime Delivery
Coupons & DealsCoupons & Deals PersonalizationPersonalization
Source: RNG research & analysis
ValueValue
Drivers of Change
7
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Retail Industry Dynamics More Complexity / Faster Change
VIABLE Scale $4 billion
Drivers of Change
8
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Retailer CEO: Where to Position?
High
LowCost
High Low
% $ = 21%% Growth = 21%
Avg. ROIC = 30.1%
% $ = 10%% Growth = 14%
Avg. ROIC = 27.8%
Low Cost
Differentiated
Transition
Red
Ocean
LC Donor
Blue Ocean
% $ = 10%% Growth = 20%
Avg. ROIC = 18.3%
% $ = 19%% Growth = 16%
Avg. ROIC = 16.2%
% $ = 1%% Growth = -
0.2%
% $ = 40%% Growth = 29%
Avg ROIC = -2.0%
Red Ocean Blue Ocean Update
Source: RetailNet Group Database & Analysis; FactSet; Morningstar9
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Wild Cards
Commodity Prices
Interest Rates & Currency
Global Dependency &Instability
� Russia’ & EU – Currency appreciation vs exports
� China – decelerating economic growth
� Whither the US $� Interest Rate Hikes� Inflation or Deflation?
� OIL� Gold� Ag
Source: Huffington Post Canada
Consolidation
Exits
Acquisitions
Entrants
10
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Today’s Journey
Macro-Economic
Societal Technology Industry Wildcards
11
The Need for Change: A New Roadmap to the Consumer
Transformation: Retailer Strategic Initiatives
Drivers of Change
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2020/25 >55% of Transactions will Involve Digital
Traditional25-50%
Store Automation0-45%
Digital / Pick-up10-15%
OOS Digital10-15%
Consumer Digital In-Store25-30%
Manual Digitally Enabled Digitally Managed Digital Trip
The Need for Change
12
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Future Store Exercise: Where are You?How Much Do You Need to Change?
Not 2020 Ready
Not 2020 Ready
2020 Ready2020
Ready
The Need for Change
13
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The Retail Ecosystem as Consumers See It
55% 2020
15% 202010% 2020
MarketplacesMarketplacesMarketplacesMarketplaces
10% 2020
BBBB
Digital ReceiptsDigital
Receipts
Payment SystemsPayment Systems
Social Other
Offer Engines
10% 2020
Source: RNG research & analysis
The Need for Change
14
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Digital Marketplaces Are to 2020 What Hyper/Supercenters Were in 1990’s
Bubble Size = 2020 or 2013 SalesGrey Bubbles Represent 2013
15
The Need for Change
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MOST Intermediaries Leveraging Data/Targeting to Create New Automated Marketing Networks
Enterprise
Amazon
Device Suppliers (Brands)
Kroger
Target
Walgreens / CVS
Syndicated
Meta-Sites
(MySupermarket.co.uk)
Meta-Sites
(MySupermarket.co.uk)
Digital Receipts
Payment Systems
Food Aggregators
(B2B, B2C)
Food Aggregators
(B2B, B2C)
Reservation Engines
Delivery Networks
Home Depot / Best Buy
Ulta / Sephora Offer Engines
Search / Review Engines
Social
The Need for Change
16
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Offer Engines – Range from Syndicated to Captive
Buy Online
Redeem Later
Buy Online
Redeem LaterAggregatorsAggregators
Load to
Card/App
Load to
Card/App
Post Trip
Cashback
Post Trip
CashbackContextualContextual
Pre-Purchase
Shopping Portal
Pre-Purchase
Shopping Portal
Sy
nd
ica
ted
Sy
nd
ica
ted C
ap
tive
Ca
ptiv
e
Syndicated
onlySyndicated
only
Syndicated
& Captive Syndicated
& Captive
Syndicated
& Captive Captive Only
Source: RNG research & analysis
The Need for Change
17
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Many Ways to Access Content and Offers
Hub
Bra
nd
s &
A
dv
ert
ise
rsB
ran
ds
&
Ad
ve
rtis
ers
Content Management
System
• RetailMeNot• Coupons.com • Catalina• Valassis
Digital Wallet
Analog (Store & Print)
Analog (Store & Print)
FSI’s
Load to Card
3P App
Retailer App
Location Based
Loyalty Card
Source: RNG research & analysis
The Need for Change
18
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Today’s Journey
Macro-Economic
Societal Technology Industry Wildcards
19
The Need for Change: A New Roadmap to the Consumer
Transformation: Retailer Strategic Initiatives
Drivers of Change
www.retailnetgroup.comKnow Tomorrow Today
RNG Strategic Initiatives | Watch For Opportunities
Redefining Differentiation 2020
Capital Discipline
Store & Network Renewal
Data Narrowing – Merchant as Marketer
Digital & Physical Integration
Logistics / Supply Chain
Pricing & Promotion
The Future of Food
Customer Service
Services – Retail Health
Lean / TQM
Strategic Initiatives
20
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Redefining Differentiation: Winning Segments
IntegratedSpecialty
BreakoutSegments
FoodProgressives
Fresh / Natural
EthnicCash & Carry
ConvenienceSuperstores /
Express
QSR / Casual Dining
Day Part
Local
Digital
Experience
Discount
Local
Source: RNG research & analysis
InitiativesDifferentiation
21
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WMT International – Investing More in E-Commerce and Less in Physical World
Initiatives: Capital Discipline
22
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Critical Elements of Store ReinventionMore Work / More Experience & Relevance
Food & Health ProgressiveHealth & Nutrition RatingNutricentre – Integrative
Fully Branded Grocerants
LocalismCurated assortment,
Signage, Supply Chain
Category RelevanceCenter Store, Expanded fresh & RTE, Wearables / Connected Merchandise
DepartmentalizationInnovated Merchandising Centers
Branded Exterior & Interior Experience
Store Reinvention
Customer ServiceSampling, Open
Questions
Space Reallocation / Partnerships
Store Within a StoreLeased Space
Front End InnovationReconfigured Checkouts,
Queueing Methods
ConvenienceReduce Friction, Checkout
Shopability
Navigation / Signage
ShopabilityNew fixtures & gondolas
In-store AmbianceNavigation / Signage
Digital IntegrationIntegrated Consumer Oriented
Social/Digital
Source: RNG research & analysis
Day PartMerchandising,
Moveable Checkout
ServicesClinics / FinancialCommunity Space
Pricing & PromotionIntegrated in/out of
store
Logistics / Delivery3rd Party Delivery, Click & Collect,
Promisable Inventory, Traceability
Initiatives: Store Reinvention
23
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Best Buy Building Digital Mall of Future – Driving Customer Experience & Building Vendor Partnerships Through SWAS
Initiatives: Store Reinvention
24
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Spectrum of Grocery Pick-Up Options
Location
Pick-up at Store Pick-Up at 3rd
Party Location
DriveDrive-Up
Inside Store & Lockers
3rd Party
Picking Models Pick from Store or DC
Pick from Store or DC
Pick from Store
Pick from DC Pick from Drive
Examples • Shoprite From Home
• Peapod• Walmart
(Denver)
• Harris Teeter• Peapod
• Instacart • Peapod • Walmart(AR)• Loblaw• Save On
Source: RNG Research & Analysis
Initiatives: Store Reinvention
2525
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Instacart has resulted in digital
shopping carts 2.5X the size of in-store
baskets
Instacart has resulted in digital
shopping carts 2.5X the size of in-store
baskets
Initiatives: Store Reinvention
Leveraging 3rd Party Concierge Delivery Instead of Building Capabilities in House
26
Drive and Click & Collect Models: Convenience of Online with the Immediacy of Pick-up
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Internet of ThingsWill Have Measurable Impact on Retail
Home Replenishment
Wireless sensing and tracking
Home hubs
Health data mining
Source: Forbes, LuxCapital
Virtual reality
Initiatives: Digital Integration
27
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The Connected Home & Its Effects on the Retail Path-to-Purchase
Connected Family Room Connected BedroomConnected Kitchen
• List Management • Social Commerce • Second Screens
Connected Kid’s Room
• Brand Engagement
Connected Bathroom Connected Garden
Source: RNG research & analysis
Initiatives: Digital Integration
29
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IoT is Not Only About Connected Hardware But About the Data –Opening its “Walled Garden” to Create A Data Hub
Apple’s Partnerships by Platform
Launched in Apr 2015
Source: Apple, Morgan Stanley
Apple Watch’s sensor (located at the back) to detect user’s heart rate
Initiatives: Digital Integration
30
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Price Perception vs. Leadership Online
A recent study by Boomerang Commerce concluded:
• Amazon seeks to win on price on the
most popular items and categories, changing shopper price perception for Amazon as a whole while still maintaining margin in less top-of-mind categories
• 63% of products were priced exactly the same on Amazon as on Walmart.com
• Only 14% of SKUs were priced below Walmart.com
• Amazon’s pricing model is reactionary –they desire to match the market leaders on pricing—not beat them in 1P (although opportunistic merchants on Amazon’s 3P marketplace often drive prices lower)
Source: Boomerang Commerce
Initiatives: Pricing
31
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Price Transparency Will Intensify – EDLP Retailers Encouraging the Trend
Source: RNG research & analysis
Initiatives: Pricing
32
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Retailers Shifting Profit Drivers from Margin to Marketing/Media
WINS (Web Influenced In-store Sales
Source: Walmart, Target
Initiatives: Pricing
33
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3 Very Separate Types of Marketing Spend on AmazonMore Options for Placement
AMGAmazon Media Group
AMSAmazon Media
Services
Buyer MerchBuy Directly from
Buyer
Initiatives: Pricing
Add to Cart adsCustomer Review ads
Add to Wish List ads
Spotlight ads
Coupon ads 34
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In-Store Digital Increasing Convenience, Shoppability and Overall Experience for Shopper – also Improves Retailer Backend
BackendBackend• Wi-fi• Order management
systems • Promise-able
inventory• Labor scheduling• Associate Training • KPIs and incentives
POS Terminal Upgrades – Chip & Pin, NFC
Location/Targeting at the Entrance
In-Store Mode –Mobile App
Digital Coupons –Redemption
Digital Receipts
Messaging/offers in-aisle
Digital Signage
In-Aisle Research / List Management
Tools (App) Order Kiosks
Associate Devices
Initiatives: Digital Integration
35
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Fast Scan Technology to Replace Traditional Front End to Reduce Friction/Improve Productivity
Tesco High Tech Checkout • Scans 60 items per minute• Staff does not handle
product
ASDA Rapid Scan Till • Increases speed by
300%• Two bagging areas
H-E-B Plus • Employees bag
items only• Shoppers rate
experience after with icons
Whole Foods Queuing
Innovation• Increases
speed & shoppability
Initiatives: Digital Integration
36
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In-Store Modes & Passive Prompts Will Enhance Technology Offerings
Neiman Marcus – App recognized when a consumer entered the store
& triggered an associate to greet you with recommendations based
on purchase history
Neiman Marcus – App recognized when a consumer entered the store
& triggered an associate to greet you with recommendations based
on purchase history
Walmart – In-store mode allowed consumers to manage their list (and scan & shop) while they
shop & reduce surprises at the checkout
Walmart – In-store mode allowed consumers to manage their list (and scan & shop) while they
shop & reduce surprises at the checkout
Passive Prompts through Beacon Technology
Passive Prompts through Beacon Technology
Initiatives: Digital Integration
37
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Shopper Focus and Simplicity are Key – Easy Navigation, Clear Instructions, Time Efficient for Shopper
Features of a Best in Class Experience
• Clear instructions / where to go • Flexible payment (pay online, pay in-store)• Low wait time for package to be ready• Package ready/ waiting for you • Employee available to exchange merchandise
Initiatives: Digital Integration
38
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Service Credentials
• Retailer’s 1st chef in residence
• Full-time position to guide & improve private label
• News promoted through TV ads and Twitter campaign #LidlSurprises
• Chef Kevin Love was former Lidl store manager
Source: Lidl
Initiatives: Services
39
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Home Depot Customer Focused Reinvention of Labor and Customer Service
• Investing in Employeeso Success sharingo Assistant store manger equityo Rewards & recognition
• Helping Pros build businesso Product authorityo Recognizing needsSource: Home Depot Investor Relations
Initiatives: Services
40
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Share Insights
& Learnings
Modeling Corporate Organization to Innovate Faster –Collaboration to Quickly Move Great Ideas
Corporate
Regional
Store
Balanced by Commitment to Values � Guides Actions & Investments
Presidents Meet 2x Year, Brainstorm Future Innovation
Assess ConsumerEmpowered to Change
Follow PassionLocalize
Initiatives:
41
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Thank You! Q&A?
Tim O’Connor
@RetailTimOC
@Tim_RNG42
Opportunities for Print Media?