1. Urban Retailing: Density, Specialization, & Choreography Presented by: Amy Koo Senior Analyst

2. Copyright © 2013 Kantar Retail. All Rights Reserved. 501 Boylston Street, Suite 6101, Boston, MA 02116 (617) 912-2828 howard.zimmerman@kantarretail.com No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photography, recording, or any information storage and retrieval system now known or to be invented, without the express written permission of Kantar Retail. The printing of any copies for back up is also strictly prohibited. Disclaimers The analyses and conclusions presented in this seminar represent the opinions of Kantar Retail. The views expressed do not necessarily reflect the views of the management of the retailer(s) under discussion. This seminar is not endorsed or otherwise supported by the management of any of the companies covered during the course of the workshop or within the following slides.

3. What Do We Mean by Urban? ⁄Cities with populations of ½ million+ people ⁄Multi-story, mixed-use developments ⁄Housing includes apartments, not just standalone homes ⁄Availability of multiple transit options ⁄High pedestrian activity 3 Dense urban cores, typically central business districts (CBD) and immediate surrounding neighborhoods Source: Kantar Retail analysis, store visits

4. Urban Growth Is a Demographic Reality ⁄Boomers want services and access after they can’t drive ⁄Millennials want economic opportunities and active lifestyles 4 “Both young workers and retiring Boomers are actively seeking to live in densely packed, mixed-use communities that don't require cars, that is, cities or revitalized outskirts in which residences, shops, schools, parks, and other amenities exist close together.” - Harvard Business Review, May 2010 Source: Kantar Retail analysis, Harvard Business Review, US Census Bureau Metropolitan: core urban area of 50,000+ residents and the surrounding county/counties Micropolitan: core urban area of 10,000-50,000 residents and the surrounding county/counties Rural: all areas outside of Metropolitan or Micropolitan regions GROWTH CHANGE IN POP. SHARE SHARE OF 2010 POP. Total US9.7%-100.0% Metropolitan10.8%0.8%83.7 Micropolitan5.9%-0.4%10.0% Rural1.8%-0.5%6.3% Metros in the South and West Highest growth areas Inner cores of cities and their closest suburbs Where Boomers and Their Children Reunite

5. 5 Universal Marketplace Drivers Remain… Connectivity PolarizationVolatility Source: Kantar Retail analysis

6. 6 …But Three New Drivers Are Critical to Understanding Urban Market Dynamics DENSITY SPECIALIZATION CHOREOGRAPHY High concentration of people, services, and ideas Need for and sustainability of niche services and products Explicit and implicit coordination of services and people Source: Kantar Retail analysis

7. Density Forces Different Lifestyle and Operating Choices Living, working, and storage space is compressed, with an emphasis on maximizing its productivity Individuals transport only what they can carry by hand because of limited car use Urban messaging is more costly, but is influential to both market residents and distant trendsetters More competitors and higher costs demand clear positioning and greater innovation 7 Source: Kantar Retail analysis, store visits

8. Specialization Is Necessary in a Crowded and Competitive Environment Urban players must accentuate their differentiation to avoid commoditization Markets for niche interests are possible because of sufficient critical mass Local cultural cues are strongly promoted and are used elsewhere to signal solidarity Personal, authentic connections are highly valued because anonymity is the default 8 Source: Kantar Retail analysis, store visits

9. Choreography Creates Order and Encourages Cooperation The opportunity to rent, share, and borrow resources makes ownership a more considered decision Cities are fast paced and operate with expanded hours Visual and multilingual communication helps direct those with differing needs in public spaces Time is more highly regimented because wasted time is explicitly seen as opportunity cost 9 Source: Kantar Retail analysis, store visits

10. Successful Urban Retailing Tactics Merge Density, Specialization, & Choreography with the 4 P’s 10 PRODUCT PLACE PRICE PROMOTION Source: Kantar Retail analysis

11. Urban Retail Manifesto for the Next Decade 1.Commit shopper research resources to better understand urban trip missions and lifestyles 2.Understand how urban shoppers navigate the physical store and align adjacencies accordingly 3.Use punctuated and bold marketing to gain attention in competitive urban areas 4.Tailor messaging to target multiple shopper segments 5.Utilize multiple media outlets, including those that are non-English 6.Weigh assortment toward immediate and short-term consumption items 7.Balance convenience and operational considerations when weighing price decisions 8.Utilize mobile and digital technologies in the physical environment to reach and engage the urban shopper 9.Leverage the higher urban diversity to inform efforts across the US landscape 10.Retool your supply chain to support product flow to and within urban neighborhoods 11.Prepare for higher costs to serve due to more expensive labor and real estate 11 Source: Kantar Retail analysis

12. © Copyright 2013 Kantar Retail 501 Boylston Street Suite 6101 Boston, MA 02116 F +1 630 245 5647 www.KantarRetailiq.com Amy Koo Senior Analyst Amy.Koo@KantarRetail.com T +1 617 912 2872