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convenience leaders summitMichael Baker presentation to the aacs convenience leaders summit melbourne, AUSTRALIA November 29, 2012 © Baker Consulting 2012
Recognise the car? If the parents drove it, chances are good that the children will not want to © Baker Consulting 2012
How do traditional retail formats measure up to a modern standard of customer-centricity?© Baker Consulting 2012
Food retail market share in the USFormat Number of stores Market share 2006 2011 Traditional supermarket 27,267 26,345 44.1% 40.1% C-stores 144,130 154,373 16.2% 15.1% with gas 116,882 125,333 13.8% 12.9% without gas 27,249 29,041 2.4% 2.2% Warehouse clubs 1,240 1,331 7.4% 8.5% Supercenters 2,696 3,609 14.5% 17.2% Dollar stores 20,543 24,512 1.7% Drug stores 19,864 22,534 4.9% 5.5% Other 17,283 17,572 11.2% 13.4% Source: Willard Bishop © Baker Consulting 2012
Lessons for small food formatsIf there are a lot of unprofitable stores it doesn’t necessarily mean the model is broken – fleet may need downsizing Don’t run with the same formula everywhere Rarely can you win on one attribute – convenience – alone. Need one of either price or service Product mix is just as captive to local market as any other retail format - one size does not fit all Some degree of product mix localisation is possible particularly in suburban locations In Australia, weak motivation to innovate by supermarkets will help keep opportunities open for others © Baker Consulting 2012
The technology revolution© Baker Consulting 2012
E-commerce share of retail sales, 2011Source: CBA, Citi Research, Baker Consulting, US Census Bureau, UK Office for National Statistics; © Baker Consulting 2012
Retail floorspace per capita, selected countriesSource: Baker Consulting
Key technologies “Big” data - tracks, analyses and aggregates data from the consumer’s “digital footprint” enabling retailers to build sophisticated customer profiles and engage shoppers on a one-to-one basis analyse consumer behaviour to support operational decisions Cloud computing – outsources applications hosting and centralises data; e.g. inventory data across stores and warehouses that is accessible across channels Mobile commerce – configuring websites for mobile and facilitating location-based marketing to reward customers for coming into the store Optimisation technologies – pricing/markdown strategy, workforce management Supply chain integration – facilitates omnichannel retailing by integrating inventory and fulfillment across channels Mobile payment systems Mobile POS – enhances service, facilitates store redesign, improves shopping experience © Baker Consulting 2012
Key implications of the technology revolution for the role of the storeThe physical store is a key competitive advantage for omnichannel retailers, enabling them to interact with customers in a 360-degrees setting that is unavailable to online retailers facilitate the testing and visual inspection of merchandise by customers offer customers immediate gratification conduct e-commerce to capture higher in-store ticket act as a pick-up location for merchandise purchased online act as a fulfillment centre for merchandise purchased online Pure-play e-commerce retailers (e.g. Amazon) are seeking partnerships with companies such as convenience store chains that can provide them with an instant physical real estate footprint © Baker Consulting 2012
Key implications of the technology revolution for the role of the store, cont.Sales staff are liberated from fixed POS stations by mobile devices and use these devices for product information price information, including comparison with other retailers product availability throughout the retailer’s distribution system mobile checkout e-commerce Mobile marketing tools will be used to communicate with customers’ smart phones and tablets while in or near stores, rewarding them for entry into the store with special offers tailored to a shopper’s known preferences Mobile technology critical to retailers as household penetration rises – Smart phones – 68% of Australians aged own one Tablets – 15% of households owned one at the end of 2011 but this number is expected to triple by the end of 2012 © Baker Consulting 2012
The store will be more exciting – but we’ll need fewer of themAustralia’s e-commerce penetration currently estimated at 5.4% vs. 4.9% in the US and 8.8% in the UK Since Australian bricks & mortar retailers are late starters for technology adoption there is still substantial low-hanging fruit in terms of the ability to shift sales from stores to the internet If this is true, e-commerce penetration could plausibly catch up with that of the UK within 4 years (UK e-commerce penetration rose from 5.3% to 8.8% in the 4 years from ) E-commerce would reduce the need for additional retail space to about 1 million sq.m over this period This would equate to an annual growth rate in retail space of about 0.5% vs. historical average of 1.7% Despite slower growth, store closures by retail chains will create significant real estate opportunities at centres that are not “dominant” in their markets © Baker Consulting 2012
The outlook Australian retailers now have four lean years behind them but the structural transformation has a long way to run Consumers spending okay but preferring experiences to “stuff” Backlash against domestic mainstream retailers is real – people believe they have been ripped off E-commerce will continue to grow rapidly Internationalisation of the Australian marketplace will result in significant store portfolio rationalisation by domestic retailers, particularly in soft goods Real estate opportunities will gradually open up for retailers in sub-regional shopping centers Site acquisition will continue to be a limitation on retailers such as Costco, resulting in relative stability in the Australian food market for a longer period For c-stores slow growth can be expected without a significant breakthrough on regulatory hurdles © Baker Consulting 2012
Let’s open a channel Michael Baker email@example.com+61 (0) +61 (0) Follow on twitter © Baker Consulting 2012
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