1. July 2011 Insights Driven Merchandising Martin Cregg Innovation and Marketing Summit Store Brands Decisions

2. Key Trends in Retail 2 Shoppers do not have the money to spend Categories are not growing like they were four years ago. Retailers are creating new formats to react to the market New Formats and the web are likely to dominate the growth landscape Trends are flat category growth

3. Incremental Revenue & Profit Brand Category Growth Shopper Insights Research Strategy Concept Insights Validation Merchandising Strategy Retail Channel / Retailer In Store Execution Thought leaders are leveraging Shopper Insights… to drive incremental sales for categories, brands and private brands.

4. Shopper insights drive solutions with Category Segmentation, information and shopper merchandising. 4 From sets that drive commodity behavior to shelf sets that force the shopper to consider other choices and buy differently.

5. Enhancing and aiding new shoppers and engaging current shoppers 5 Engaging the shopper, Aiding shopping, Providing information the packages can’t or creating a destination with authority presence and more apparent choice.

6. In some cases shoppers are strongly influenced by brands as the category authority… 6 Expecting that the entire category is defined by a key brand and all its components

7. New department merchandising concepts come directly from listening to the shopper’ insights 7 Small business owners said BestBuy was not a small business retailer…if they were they would have small business departments! So we designed one and anchored it with the only brand that was for sure for business in the store: QuickBooks

8. Others are reassessments of Current Aisle Experiences 8 Shoppers told us the existing aisles do not appeal to a beauty shopper at all. Target is not any different than other stores…which is not what Target expected as their equity.

9. 9 New Beauty Merchandising Concept based on how the shopper looks for the beauty aisle…

10. 10 Now in 350 stores after 2 years…..

11. Credentialing Consumer Trends Innovation Technology Competition Store Design ResearchMarketing Web shopping Web strategy Pricing Private Label Sustainability New influences on retailer’s categories and department sales…. Equity.ComPackagingPurePlayContent New Formats How will shoppers choose where to shop? Auto replenishment Guarantees Augmented reality Relevant Assortment

12. Technology is changing the game as well…. Smartphones are a store in your hand! 3 Billion apps sold 49% of US in 2011 300,000 apps available 28,000 developers 1 st app - July 6, 2008 !!!

13. Shoppers want to shop more stores They get bored They don’t believe all retailers are the same New stores can be exciting They may find an item or product that makes them a hero The cost of shopping took them out of play The time it takes also slowed shopping in more stores 13

14. She’s shopping at home, when she wants… 14 And she’s shopping for national brands. How do store brands play on the web?

15. Bringing new questions for retailers as formats, the web and technology grow… What’s the effect of mobile on your category? Who’s winning in this category today and why? What’s your company doing that’s innovative? How will you use technology in merchandising? Should I have the same strategy for store brands on the web? What are the trends with shoppers that shape the future? What’s going on with new formats? What new skills do we need in merchandising?

16. And new issues…Online shopping drives the total basket down Average number of items in online basket is less than 3 Average number of items in retail shopping trip is more than 15 When items go down, retailers lose revenue

17. The biggest driver…..is the shift to the shopper that’s changed the game

18. The shopper owns the power because…with a phone…is carrying a store! 18 CONFIDENTIAL AND PROPRIETARY. NOT TO BE USED OR DISTRIBUTED WITHOUT THE WRITTEN CONSENT OF CHASEDESIGN, LLC. Check prices Find a store(s) Order on line Direct to Store Direct to home Expand assortment Check stock Find alternatives Navigate the store Find deals

19. And they don’t have to come to a store. Consider our shopper: She works, raises two kids under 12, takes the kids to activities, and solves her schedule by shopping late at night. She has Amazon Prime, every order comes with free shipping, she gets auto replenishment on many of the bulky items at home, bought all her Christmas gifts without going to a store, and gets recommends from her favorite websites that she really enjoys, from books to recipes to clothes. This is the new reality, when the economy shifts, she’s not going back to her old ways of shopping. Where does private label fit here?

20. So…. The Past is not a predictor of the future For the first time in 20 years we can’t model using data from the past…there is no norm

21. We look for clues telling us how the shopper makes decisions and what will drive incremental growth If it’s not incremental, the retailer has no reason to expand it!

22. What’s happening now… Store layouts evolving now… –New formats and store footprints –Rethink of center store –Rethink the route through the store –Trip drivers and convenience will shape store layout –Retailers will make choices on shoppers to win with and still be opportunistic For the next five years the largest growing format size will be mid size stores: – 20,000 to 90,000 sq. ft. –End of 200,000 sq. ft expansions –No new space for categories –Category choices will be critical for new formats –Product and brand choices will be part of that decision

23. What’s happening now… Retail as a marketing medium is changing –The role and execution of promotion is evolving, and stealing space from categories –In-store media is less effective as retailers drive their equity Shoppers are more empowered –More ways to shop –More at-home browsing and purchasing –They can choose the brand they want at a better price than their core store –The web will enable/drive price shopping –Loyalty will need to be achieved differently –Phone apps give a total view of pricing and availability Technology –Changes the game totally –Much heavier emphasis on price than traditional retail values (convenience) –Technology is convenience

24. What can Retailers do to drive category sales? Use Shopper Research…..real research, by category Find the opportunities for national brands and store brands Talk to operations about how to be the destination for key departments Explore your new formats for what categories should be there and what the assortment should be Look for Innovation opportunities with private brands 24

25. What will be true? There will still be shoppers and shopping….and… There will still be someone selling the goods…and… There will still be brands to enable the choice 25 CONFIDENTIAL AND PROPRIETARY. NOT TO BE USED OR DISTRIBUTED WITHOUT THE WRITTEN CONSENT OF CHASEDESIGN, LLC.

26. We need new techniques for shopper orchestration What we’ll need to do tomorrow will build on what we know today, but be executed in more complex environments

27. Retailers need new merchandising skills: Shopper Insights Merchandising Innovation Clear Role for Private brands 27

28. Know what drives incremental volume in each category 28 ‘Less than 20 % of our buyers know what drives incremental revenue in their categories ’ Senior VP grocery

29. What’s the shopper doing in your category now?

30. Thank You