1. Design Trends. POPAI. 2010 Global Trends in Marketing at-Retail Presented by Robert Liljenwall The Liljenwall Group

2. Global Trends in Marketing at-Retail “If you’re not in chaos, you’re dead” Tom Peters

3. Avoiding Chaos…. An African proverb translated into Mandarin and posted on a bulletin board in China…. Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn’t matter whether you are a lion or a gazelle. When the sun comes up, you better start running. Source: Thomas J. Friedman, The World is Flat

4. The World is Flat,….And Smaller, and a Lot Faster By Thomas Freidman.. #1 Berlin Wall, Windows Wall down, Windows up #2 Netscape goes public WWW launched #3 Workflow software We’re all connected #4 Open sourcing Source codes open #5 Outsourcing Overseas is “in” #6 Offshoring Let’s move to China #7 Supply chaining W-M factor #8 Insourcing Vertical integration #9 In-forming Data mining, etc. #10 The steroids High tech explosion 10 Flatteners that have made our world smaller Is it all about the 35 hour work week?

5. Beyond the World is Flat Global recession Nation failure (The PIGS) – Portugal, Italy, Greece, Spain Financial meltdown Web 2.0 changes the playing field Social Networking -- like it or not Global resource management Going green Customer-driven design

6. 10 Retail Innovations….key to 2010 Catch a wave Retailers must apply creativity Solve my problem Consumer-centric approach…add services Do it for me Conversion from DIY to DIFM Help Me Choose Choice/info overload…opportunities to sample; online integration Come to Me Mobile retailing…go to customer Study: Retail Forward, 2009

7. Consumer-Driven Opportunities… Enhance My Experience Bringing brands to life Make it Easy Innovative process, service, design (USCAN) Do It My Way Getting customer involved -- deeper, design Help Me Connect Relationship building -- customers, retailer Speed it Up Immediate gratification…”now” is better Study: Retail Forward, 2009

8. Greatest Invention since printing press: The ‘Net Brazil -- 344 of 1000 China -- 224 of 1000 Syria -- 176 of 1000 Greece -- 460 of 1000 Germany -- 670 of 1000 Netherlands -- 829 of 1000 United States -- 732 of 1000 Sweden -- 820 of 1000 E-information; e-Education; e-commerce, e-connectivity….passionate believers…”can’t live without!” Source: Internet World Statistics, 2009

9. The Net Grows 1.6 billion online; 658 million in Asia; 251 million in NA $1 trillion spend online by 2012 m-commerce will reach 10% Broadband – highway to retail success? US – 98% with broadband; buy online Japan – 96%; UK – 95% Top 500 largest web retailers grew 8x faster than overall retailing market; up 11.7% over 2007 Top 500 Web-only merchants grew 20.7% in 2008 Consumer brand mfgs. grew 15.3% Retail chains online biz grew 12% Amazon grew 5x faster than rest of B2C, +30%; $20B Source: Internet Retailer Study, 2009

10. Digital, Digital, Digital

11. Social Media….getting personal in a big way You may not like it, but it’s not your choice anymore. Remember the 7-second Rule

12. Marketing at-Retail Decision Making

13. Shopper Unplanned Decision -- Updated Metro Group – 2009 consumer study Italy – 42%France – 76% Germany – 50%Denmark – 77% Belgium – 70%Holland – 80% UK – 75% Netherlands – 2007-09 POPAI Benelux study revealed: 50% in food retail vs. 70% previous finding Survey revealed wide variance with respondents entering the store vs. after shopping experience Drug store respondents measured 69% ISDR Consumer electronics – 69% ISDR UK Shopper Explained Ltd. – 70% ISDR, 2008 study

14. Shopper lists…who makes them? Spain – 34% UK – 33% Portugal – 37% Netherlands 43% France -- 45% Italy – 51% Germany – 57% US – 60% Greece – 70% Source: Metro Group 2009

15. Bottom line: POPAI’s original research valid Shopper behavioral studies confirm POPAI’s original research in 1995-96. Studies performed during the past two years (2007-2009) by POPAI Benelux, Shopper Explained Ltd., a UK consumer research firm, and by Metro Group demonstrate that the “in-store decision” remains in the range of 60-70%, depending on the venue, retail category, and country/culture patterns. There will always be studies that reflect variances with other research because of venue, time, methodology, country and culture.

16. Global Trends in Marketing at-Retail

17. 10 Global Trends in Marketing at-Retail 1.Survival and re-invention 2.Consumers’ increased power of choice 3.Retailers win the battle 4.Brand marketers become retailers 5.Technology explodes at all levels 6.Measuring marketing -- not optional 7.Right sourcing 8.Building brand equity 9.Global expansion 10.Partnering -- sucking up the food chain

18. #1 -- Survival and Re-Invention Economic chaos reigns across all borders Recession, global financial melt down Changing point of sale – social media is the Elephant in the room Loyal customers switching brands, Lost customers – via consolidation, shrinking base Diminished cash flows, reduced work force, downsizing is “in” Increased costs – production, distribution, operations, taxes Downward pressure on pricing, “How low can you go?” Dramatic shift in customer purchasing habits – hmmmm? What to do? Re-invent yourself & your company Think outside the box Innovate and re-think ‘business model’ Don’t give up -- stay positive Turn-around -- late 2009 or 2010 maybe?

19. Challenging times or just plain chaos? 50% shoppers spending less in all categories; 62% spending same or more in grocery Consumers spending less across all demographics 87% are switching to brands or going to private label 68% of shoppers staying home vs. going out 50% brought special occasions or nights back home 100K + wage earners more negative about economy than all other wage earnings Retailers/manufacturers have to monitor the economy – as it relates to their brands/category; overall impact Miller Zell 2009 Shopper Behavior Study

20. Store closings…retail shrinks General Motors -- 2,639 Chrysler – 789 Circuit City 567 KB Toys – 461 Ritz Cameras – 400 Starbucks – 300 Waldenbooks – 240 Jones Apparel – 225 Van Heusen – 175 Ann Taylor 163 Source: About.com. B. Farfan Popeye’s – 150 S&K Famous – 135 Advance America – 130 Boater’s World – 129 Pier One – 125 Eddie Bauer – 121 Office Depot – 118 Rite Aid – 117 Zale – 115 Gap -- 100

21. Who is next? Blockbuster in facing Chapter 11 Barnes & Noble closes stores, replaces CEO with tech-savvy head of their interactive Brick/motor stores are facing same fate as newspapers….real estate is getting too expensive.

22. #2 Consumers exert the ‘power of choice’ Consumers have many choices Point of sale shifts to wherever ‘they are’ Products, styles, prices Brands -- national or private Remember: Customer controls revenue stream Technologies create new distribution channels More discriminating, sophisticated Exercise power at Point of Sale Demand service, quality, price Matching price/value Immediacy and relevancy Entertain me….experiential Switch for a good reason -- like price; loyalty diminishes

23. Apple and Build-a-Bear….shopper engagement

24. The Shopper is Not Just a Consumer Your New Partner….. Customer Inc. is a Banker Makes judgments about price and value Customer Inc. is a Merchant Responds to goods and contemplates “home store” Is susceptible to sensory & rational persuasions Customer Inc. is Operations Management Convenience and efficiency highly important Customer Inc. is, still and also, a Consumer Assesses products based on familiarity Pantry purchases replenish planned/past consumption Curiosity evokes hunting behaviors

25. Demand Generation -- focused marketing New generation….Demand Generation

26. #3 Retailers winning battle Retailers push ahead of brand marketers 61% surveyed feel they hold the ‘upper hand’ Walmart is still the elephant in the room Drives vendor behavior -- everywhere Reduces POP from 700 to 300 displays Sales $409 billion; profits up to $99 billion Ending “Clean Aisle?” Retailers take control of their space Control the shopper’s market Seizing control of customer data Replacing traditional data mining vendors Brand marketers at increased disadvantage Pushing private label Control space; lower overhead, Increased profit margins

27. Retailers expand private label power Explosion of choice...trends changing fast Consumers “trust” major retail brands… Private labels profits lure retailers Under trained, under utilized, under motivated retail sales force…dumbing down retail Pressure between brand marketers, private labels Top brands will not suffer…consumers will demand top two or three…below that, gone Tesco, Wal-Mart, Loblaw, Sainsbury Trader Joe’s -- America’s favorite

28. Private Label Market Share UK – 42% Belgium – 41% Germany – 38% US… 20.8% Supermarkets 13% Mass merchandisers 12.6% Drug Total volume: $51 billion France – 31% Netherlands – 25% Canada – 22% Spain – 32% Poland -- 8% Denmark -- 25% More than $55 billion in sales is up for grabs by 2010 for private label growth according to PLMA.

29. #4 Brand marketers fight for control Brands fight defection: 33% of brand loyal customers depart; major concern Leveraging their own brand equity by going retail Still own the customer -- forces stores to carry brands Proctor & Gamble #1 or #2 in 28 of 36 categories “#3-5 brands in a category will lose out to private labels…” Bill Smith, Proctor & Gamble Former Chairman, POPAI P&G’s powerhouse brands

30. Apple personifies brand marketers’ response Apple is world’s highest grossing retail store at $4,000 sf. Apple sales up 8%; profit up 15% for 2008-09 Clean design, innovative products, experiential -- every product

31. #5 Technology -- the Digital Revolution Occurring in all market segments Brand marketers, retailers, vendors Technology heavily impacts consumer shopping patterns and packaging Faster, more robust computing technology Imaging technology (flat screen…obscenely so!) Display and presentation technology Data mining and better, focused research Staying competitive – lowering costs What’s the goal here? Meet customer needs/wants and extract more $$ from their wallets

32. Retail Darwinism Web-based collaboration Know the customer -- demos are not enough Build data infrastructure to collect/analyze data Global language XML – “lingua franca” Using the Internet as the data conduit – to/from Learn how to use the data -- Biggest Challenge Cycle compression (new product development) Product-life cycle shortens Value expectations force quicker development Shareholder demands vs. consumer demands

33. Presentation Technology “Clienteling”, experiential retailing Interactive consumer experience (Apple) “Grandualizing down” to the individual customer Loyalty program expansion, intensive marketing POP/POS blurring Self-check out up 47% (USCAN) Cash Wrap and security advances Getting humans less involved…self-serve Customer “adopting” new technology(ATM effect)

34. Presentation Technology Personal device integration iPad and Kindle -- POP/POS/POC Mobile Commerce Symbol – hand-held scanning devices Tells shopper where the discounts are Magellan – smart card displays V-POP -- “drive by” loyalty displays Target consumer buying habits by product Cross merchandising, cross promotions Social Networked Retailing -- viral marketing Staying connected: Facebook, My Space, Linkedin, XING, Twitter

35. Presentation Technology Digital printing Increased, faster use of large-format printers Strawberries on sale in Paris Pushing store brands – pre-set templates Digital signage E-ink – instant signage, Mag-Ink, I-Open DOW – electronic paper Signs Issue: Who pays for it? Vapor-ware

36. Interactive Digital Signage: control by gesture GestureTek’s display – costly replacement for touch-screens inside…but interesting potential for window- based displays LightSpace interactive flooring … Moving up the retail wall?

37. Distribution/Functionality Technology Marketing at-Retail Supply Chain Management Wal-Mart RFID program All vendors eventually will be required Focus shifting to at-Retail RFID Monitoring – 40% of Marketing at-Retail never “up”? WWWMD….What Would Wal-Mart Do factor Vendor – EID Passport/Pristine Marketing at-Retail tracking – Goliath Solutions Functionality Better technology – longer, stronger, thinner

38. Other technology trends Interactive kiosks Retailer and brand marketer sponsored Ad revenue and transaction-based kiosks Difficult to justify ROI In-store television/plasma displays Retailers use for environmental design…Wal-Mart TV…better Even Grand Bazaar has it! Booming Internet presence Up to 90% market share in major categories; Shifting sales from store to PC, PDAs, phones The iPhone ‘factor’ -- fad or trend?

39. #6 Marketing = investment; not an expense Goal -- to optimize marketing budgets through ROI analysis Recognize trend for increased intelligence before you spend the money (IMC) Research platform begins before you spend the money Parties get lost in process…focus on wrong outcome Avoid price negotiating traps Maintains alignment accuracy throughout process Methodology from proven ‘Stage Gate Process’ Collaborative framework Create customer value Optimize technology Improve reliability of cost/benefit forecast Source: Sandgren Consulting

40. Do your homework -- through ROI analysis Utilize proven ROI formula Integrated Marketing Communications points to increased use of retail promotions Measuring Outcomes…not just Outputs Marketing at-Retail plays a key role in IMC Cross-functional teams work to maximize retail sales, across all distribution channels As Marketing at-Retail becomes stronger, measured medium, it becomes more important to media planning and budget allocation Gaining customer insight to needs and wants -- that’s the goal IMC is a full-fledged business strategy…not just a marketing function!!!

41. #7 “Right Sourcing” Not “in-”, “out-” or “near-sourcing”…but “right source”! Pressure on everyone to lower costs Monitoring is becoming evolutionary process… Capabilities, quality expanding in Asia Data management, design integration, logistics improve Sophisticated vendors-supply chain established Challenge – delivering the benefit of reduced cost within lead time and transportation logistics Local production at “offshore price” (It’s possible….) Developing strategic alliances in different countries Strategic alliances, joint ventures, consolidations

42. #8 Building Brand Equity Everyone has a brand to build and protect Getting lost in the clutter – Retailers becoming brand marketers Brand marketers becoming retailers Marketing at-Retail vendors/suppliers struggle to create unique brand and differentiation Pushing retail brand – long-term strategy Differentiate or Die! Please!!!! Remember the 7-second Rule

43. The Explosion Of Choice (US example) Vehicle Styles Frito-Lay Chips Breakfast Cereals Web Sites/Domains Radio Stations Amusement Parks Source: Jack Trout, 2001 1970 654 10 160 0 7038 362 2001 1,212 123 340 40mm 12,358 1,174 The point is……segmentation and differentiation

44. Top 10 Global Brands #1 Google #2 General Electric #3 Coca Cola #4 China Mobile #5 IBM Source: WPP/Interbrand 2009 #6 Apple #7 McDonald’s #8 Nokia #9 Marlboro #10 Vodafone

45. Scramble for brands Magnetism of brands… Brands build nation/states…3rd world to 1st world Abu Dhabi $500 million for Louvre…$200 million/year $150 million for Guggenheim Museum $80 million for San Diego Zoo Dubai $150 million for Harvard Medical School $45 million for ‘Tiger Woods’ China…relies on outside brands…not building their own The best brand-building opportunity in the world today

46. #9 Challenges of Global expansion Building an Integrated Marketing Communications (IMC) across borders Efficient, effective marcom program Brand convergence -- synergistic/fusion Securing trademarks in foreign countries Assuring global “presence” 40% of Marketing at-Retail never arrives on the “floor” New technology to overcome this… Goliath

47. Global Retail Development Index -- 2008

48. Global Expansion -- 2009

49. Global expansion – some peaking, some not

50. Global Expansion Marketing at-Retail producers, vendors consolidate…example Respond or else Beachhead marketing Producers create their strategic alliances in many lands ‘Whatever’ it takes to win the account Closing down, moving on, moving out Retailers establishing their “own” network of local suppliers/vendors to meet their local needs. Adapting to local cultures by acquiring local companies

51. #10 -- Partnering – getting, keeping customers Partnering is ‘not just a nice phrase’ Becoming part of your client’s Business Model Must be a ‘member of the family’ You must become a valued member of the food chain Provide research, know the customer Work from inception through post research Know the “brand” – and know your brand… “What am I getting for my ‘spend’?” ANSWER THAT. Impact your client’s business model…create a permanent bond…they don’t move without you! Relationship marketing is about building a relationship! Remember the 7-second Rule

52. In conclusion…. Global financial crisis will not be resolved any time soon Pressure on pricing, keeping customers Technology will continue to have major impact, but who pays? Wal-Mart factor at all levels Super markets will have a tough time surviving Private labels will not supplant major brands -- but remain a serious threat to level 3-5 brands Retailers will squeeze POP space, permanent on rise “Right” sourcing is the best answer ‘Drilling down’ to customer insights; customer wants/needs Being a ‘member of the family’ will always have its rewards… Remember. the important Brand is “YOU”!!!!!!!!!!!!

53. “If you’re not confused, you haven’t been listening. ” Tom Peters

54. Thank you! Robert Liljenwall The Liljenwall Group Mobile: 949-422-7213 Email: robertliljenwall@mac.com