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Presented by: Bryan Gildenberg, Chief Knowledge Officer May 1, 2014 Winning Productive Trips: Shoppers, Retailers and the Road Ahead
© Copyright 2014 Kantar Retail AGENDA The Trip Environment –“A Polarizing World” –“Outlet Consolidation” –“Share Of Samers” –“Transparent, Personal, Contextual” Some Thoughts On Responses –Clear –Digital –Fast –Effective 2
© Copyright 2014 Kantar Retail Yes, Weather Is Often to Blame … But only exacerbated underlying trends, as many turned online Source: 3 Weather forecast map for weekend before Christmas
© Copyright 2014 Kantar Retail Convenience Is King as Shoppers Aim to Simplify Source: Kantar Retail ShopperScape ®, January 2012, 2013, and Share of Shoppers Rating Ability to Get All/Most Shopping Done in One Place as One of Top Important Shopping Factors Ability to one-stop shop sees resurgence in importance
© Copyright 2014 Kantar Retail KEY MACRO/SHOPPER INSIGHT: Less “Polar” Vortex And More Polar… Source: Kantar Retail analysis 5
© Copyright 2014 Kantar Retail Average Number of Retailers Shopped in Past Four Weeks* (among all primary household shoppers) Average Number of Retailers Shopped in Past Four Weeks* (among all primary household shoppers) One Less Stop … Source: Kantar Retail ShopperScape ®, January 2007–October *Inclusive of visits to stores and websites; averages are for Q1–Q3 of each year. Average retailers shoppers/month (Jan–Sept) Store set contracts, again, in 2013
© Copyright 2014 Kantar Retail Trend Is Part of a Continuing Story… Amazon growth vs. shopper base contracts at key competitors Source: Kantar Retail ShopperScape ®, August 2007–December * Inclusive of visits to stores/websites and use of catalogs Past 4-Week Shoppers, by Retailers* (among all primary household shoppers) Past 4-Week Shoppers, by Retailers* (among all primary household shoppers)
© Copyright 2014 Kantar Retail Spending Intentions Signal Willingness to Spend Source: Kantar Retail ShopperScape ®. June 2008–December Spend Much/ Somewhat More Spend about the Same Spend Much/ Somewhat Less >50% = Same; fewer shoppers actively looking to curtail spending Retail Spending Intentions in Coming Month Compared with Same Period Last Year (three-month moving average)
© Copyright 2014 Kantar Retail Planned Changes in Shopping Behavior: 2014 vs Deal Seeking … Still at top of the list, but participation dips vs. last year 49%47% Growing participation vs. last year Limiting Behaviors –Buying fewer things 34%38% –Shopping less often 29%31% –Postponing more purchases 19%21% Shopping Online –Shop online more often 13%15% Shoppers Signaling More “Limiting” in Plus online shopping more likely to be in the mix Source: Kantar Retail ShopperScape ®, October 2012 and October 2013 Note: Shading indicates significant difference vs. October 2012 (95% confidence level)
© Copyright 2014 Kantar Retail Inflation Impact on U.S. Household Income * Nominal Compound Annual Growth Rate Long-Term Inflation Key to Polarized Outlook Inflation focus in food/fuel aggravates Have/Have Not split Source: U.S. Department of Commerce, and Kantar Retail analysis 10 * Yellow bars are average inflation rate Underlying bars are average income growth for households * High school education or only some college is indicator of “Have Not” households **4-year degree or more is indicator of “Have” households High School/Some College*All Households4-Year College Degree** Income Growth By: Food & Fuel Prices F
© Copyright 2014 Kantar Retail As a Result… Retailer’s are adapting & changing price position Source: Kantar Retail analysis; company reports 11 Of the top 70 supermarket retailers in the KR database, there are roughly as many characterized as Value (19), Premium (23), and Mainstream (27)* But projected dollar growth 2012E-2017E is: “Have-Nots” “Haves” Premium Mainstream Value 24.7% (CAGR 4.0%) 7.4% (CAGR 1.3%) 67.9% (CAGR 6.4%)
© Copyright 2014 Kantar Retail Think of Portable, Real-Time Information as Climate Change is one key symptom of that change — the ability for shoppers to know retail — a better product obviously reduces that comparability! the ability for retailers to know shoppers the ability for retailers to dynamically be the right retailer at the right time for the shopper Source: Kantar Retail analysis 12 So, what are the responses?
© Copyright 2014 Kantar Retail Source: Kantar Retail store visits & analysis Using Loyalty Data to Offer Personalized Pricing 13 Language all centered around the user, showing the personalization Language all centered around the user, showing the personalization Recommended deals are designed to convert the shopper to purchase in other categories
© Copyright 2014 Kantar Retail Personalizers Kroger and CVS in brick and mortar world Amazon is the ultimate personalized targeter Kingfisher’s view of dynamic pricing Non-transaction based personalized targeting Will need to get more fluent at this type of communication to help these winning retailers continue to win (this is the practical example of how “Big data” comes to life in retail ) Data-driven individualized targeters Source: Kantar Retail analysis 14
© Copyright 2014 Kantar Retail Contextualizers Whole Foods, lululemon, fashion, Dollar General Who will play a broader role? Watching category players starting to step up –Blurring of media and retail – pronounced in entertainment and in online advertising –Interesting model – Netflix, which started as a “retailer” but has turned into much more than that (content provider and producer, data source – in essence have replaced a broadcast network with a personalized and contextualized alternative) Framers of a brand beyond shopping — targeting, but targeting a group based on affinity & lifestyle need rather than transactions Source: Kantar Retail analysis 15
© Copyright 2014 Kantar Retail APPAREL SPECIALTY = CONTEXT This changing context might be a bigger risk to apparel retailers than Amazon… 16
© Copyright 2014 Kantar Retail CONCLUSIONS A polarizing world means value proposition needs to get markedly better defined and articulated Outlet consolidation means I have to nail categories that shoppers buy most often, and leverage them effectively – Rx and HBA for Target are trip drivers, not basket builders Share of samer shoppers are less enticed by hot deals and premiumization – they are trying to responsibly manage their expense line Personalization and context are how we win the war against price transparency…how will Target use categories and partners here? 17
© Copyright 2014 Kantar Retail KEY WORDS Clear Digital Fast Effective 18
© Copyright 2014 Kantar Retail Response from the PBORs Better: “the aid” – a walking stick, GPS and emergency help system (“an iPhone on a stick” – J Rand) Personal: service (dieticians, pharmacists, etc) Context: access to healthcare and these better products What else gets demystified? –Technology (Best Buy) –Home Improvement (Home Depot) –Fashion (J. Crew) –Beauty (Ulta/Sephora) Demystification of high spend categories (what we sell) Source: Kantar Retail analysis 19 Focus: Healthcare
© Copyright 2014 Kantar Retail Health & Wellness Across the Box Source: Kantar Retail analysis 20 Assortment: Solutions USD 25K competition and chance to partner with Target to find the best ideas to 1) help people make positive lifestyle and prevention choices, and 2) help people live well with a chronic condition
© Copyright 2014 Kantar Retail ShopRite Dieticians a key part of “demystifying” good nutrition and healthy living – best in class food retailers will own food expertise Publix Aprons runs 10 cooking schools, a YouTube channel and in-store displays for meal solutions HEB has beauty advisors in over 170 stores! Giant Eagle among many to revamp ISV in Beauty.. DEMYSTIFYING FOOD AND BEAUTY 21
© Copyright 2014 Kantar Retail Personalized Interaction: Employees in aisle Live announcements Handwritten signage Personalized Interaction: Employees in aisle Live announcements Handwritten signage 22 Sq. Ft. per Employee Sales per Sq. Ft Data as of 5/24/13 Strong Service Complements the Presentation And facilitates sales growth Source: Kantar Retail analysis; Facebook
© Copyright 2014 Kantar Retail CLEAR: BEST PRACTICE Assortment management – science and discipline to help simplify an overcomplicated shelf –Has to be non-self directed and holistic economically Signage – creative skill required to develop something the shopper wants too! Digital –use digital touchpoints to help shopper navigation in and before the shopping moment 23
© Copyright 2014 Kantar Retail KEY WORDS Clear “Digital” Fast Effective 24
© Copyright 2014 Kantar Retail Source: Kantar Retail analysis Digital Impact: 100% Even if you don’t sell much online (today), the impact extends well beyond eCommerce 25
© Copyright 2014 Kantar Retail Shoppers Leverage Digital Along Path Regardless of product or source, multiple planning activities 26 Create Demand Navigate Store/Site Select & Buy Choose Channel User Satisfaction Advocate Community Source: Kantar Retail analysis Choose Trusted Source KEY: Shoppers Are In Charge!!
© Copyright 2014 Kantar Retail Use of Retailer Apps on Mobile Growing : 7% % Have Accessed Retailer Apps in Past Six Months (among all shoppers) Have Accessed Retailer Apps in Past Six Months (among all shoppers) Source: Kantar Retail ShopperScape ®, January 2013 and 2014
© Copyright 2014 Kantar Retail Prime Penetration Now Nearly 1 in 5 Households Trial to habit to loyalty – significant impact on overall shopping Source: Kantar Retail ShopperScape®, December 2011, 2012, 2013, Kantar Retail estimates 28 Penetration of Amazon Prime Membership (among all U.S, primary household shoppers) Penetration of Amazon Prime Membership (among all U.S, primary household shoppers) 21.5M 15.6M 11.2M
© Copyright 2014 Kantar Retail Source: Company reports 29 © Kantar Retail
© Copyright 2014 Kantar Retail Advising Decisions via Social Feedback Source: Kantar Retail analysis, store visits (Canada, Germany, USA) 30 Featuring top-selling accessories on center display, aiding back-to- school item selection through popular vote Staff offer hand-written recommendations of items, helping the store feel more personable and aiding selection Calling out top-pinned items on the shelf, highlighting for shoppers what’s trendy through shopper feedback
© Copyright 2014 Kantar Retail Making the Revolutionary, Routine Digital removes friction, disrupts habit, and creates more “chutes” Source: Kantar Retail analysis, photos 31 Personalized Pricing Digital Shelf (content, images, reviews, etc.) Must build more ladders & flexibility into our processes
© Copyright 2014 Kantar Retail KEY WORDS Clear “Digital” Fast Effectiveness 32
© Copyright 2014 Kantar Retail Food is Laggard; Online Arrived in Other Categories Already over 10% of retail sales, headed to 20% Source: U.S. Department of Commerce, Kantar Retail analysis 33 Food, Drugs/HBC Combined Goods Categories (Ex-Auto, Food & Drug) vs. Food, Drug & HBC Online Impact of Food, Drugs, & HBC Combined Goods Categories (Ex-Auto, Food & Drug) vs. Food, Drug & HBC Online Impact of Food, Drugs, & HBC
© Copyright 2014 Kantar Retail Amazon Fresh Drives Overall Online Grocery Competitive dynamics will accelerate response Source: US Dept. of Commerce, Kantar Retail analysis, photo cred: splendidmarket 34 36% CAGR Online Share of Food, Drugs, HBA
© Copyright 2014 Kantar Retail THIS IS FUN… https://www.youtube.com/watch?v=aFYs9zqYpdM 35 It’s Like Sharper Image Built An “End Of The World” Stick
© Copyright 2014 Kantar Retail Express Is Breaking Out Walmart Express details: 10,000sq ft -15,000 sq ft, 11,000 – 13,000 SKUs Designed for urban & rural locations, net 20 open to date, with expansion plans ramping up in FY Source: Company presentations, Kantar Retail analysis “We are very, very pleased with the topline.” – Bill Simon, April 2014 “We are very, very pleased with the topline.” – Bill Simon, April 2014
© Copyright 2014 Kantar Retail In Rural Locations, Strong Results Source: Company presentation, Kantar Retail store visits, analysis 37 “We have the best results in rural and the likes of suburban with pharmacy and with gas, and that’s exciting for us, a very nice model there.” –Bill Simon, March 2014 Gentry, Ark. Richfield, NC Dunn, NC
© Copyright 2014 Kantar Retail The Store in the Larger Context Manufacturer Warehouse Stores Home Source: Kantar Retail analysis, store visits 38
© Copyright 2014 Kantar Retail FAST: BEST PRACTICE Small store expertise - developing skills in limited assortment, small case pack and pack and logistics required to win Home delivery – leaning in with Amazon on deciphering its next phase of logistics development Store navigation – thinking hard on helping shoppers find the category/store – proximity-based marketing 39
© Copyright 2014 Kantar Retail KEY WORDS Demystify Rotate “Speed Is Life” = “Life Is Speed” Effectiveness 40
© Copyright 2014 Kantar Retail EFFICIENCY: Is Contextual, Not Absolute Lowest unit cost is a nice outcome where the world wants one thing When it doesn’t, it’s a hindrance Analogy here is digital marketing – today we are all finding the efficiencies in something that seemed fragmented and unfamiliar Online selling will be critical to your existing customers not just “new” ones When retail and media collide we’ll all be back here again! 41
© Copyright 2014 Kantar Retail 10 COMMANDMENTS: 1 The USA is a, polarized, old and young, increasingly urban, mobile enabled multicultural, omnichannel place – are we ready? 2 Keyword 1: “SPECIFIC” – fact-based trading area level understanding critical to winning in a complex, polarized world 3 Keyword 2: “MOBILE” Think 10:50:100 Digital Impact in small screens 4 Keyword 3: “SHOPPER” - Shopper Marketing = “Point of Decision Marketing” – Conventional Brand Marketing Becomes More Shopper-Centric 5 Keyword 4: “POST-MASS” - Context and Personalization Win
© Copyright 2014 Kantar Retail 10 COMMANDMENTS PART 2: GET CLEVER 6 Keyword 5: “CONVENIENCE” – in retail, speed is life no matter what format you run 7 Keyword 6: “LOYALTY” – transaction cards + attitudinal understanding 8 Keyword 7: “EXPERIENCE” - great stores do something, not just look great 9 Keyword 8: “VALUE” – pricing’s going to get weird 10 Keyword 9/10: “EXECUTION/ROI” – getting things done is the difference between a business plan and a daydream
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