1. Growth Channels & The Impact On Checkout Categories November 2012 Bryan.roberts@kantarretail.com Twitter: BryanRoberts72 www.kantarretailiq.eu

2. © Copyright 2012 Kantar Retail Shoppers Driving Discounter & Online Growth Discounters and online to drive growth Source: KantarRetailIQ.eu €1,951 €1,548 €1,357 *Chains: Data represents the over 500 European retail chains that Kantar Retail tracks and forecasts, generally these are chains with annual turnover exceeding EUR 1 billion 2

3. © Copyright 2012 Kantar Retail The Impact of ‘Where’ 3 Within global grocery, smaller stores are winning

4. © Copyright 2012 Kantar Retail Big Boxes Not a Great Deal of Fun in Mature Markets 4 Source: Carrefour

5. © Copyright 2012 Kantar Retail Reasons for the Big Box Decline 5  Non-food lines available through price-competitive online channels  Better service-led offer from specialist retailers  Some categories (music, DVD, gaming) are transitioning to non-physical delivery/consumption  Economic pressures are impacting discretionary spending/non-food demand  Shoppers are less willing to devote time travelling to out-of- town stores or navigating a 10,000 square metre store

6. © Copyright 2012 Kantar Retail Reasons for the Big Box Decline 6  Rising numbers of grocery trips are transitioning to online/Drive  Aging populations less amenable to big box experience  Petrol prices making out-of-town travel more expensive  Decline in meal planning/large basket trips  Reluctance from shoppers to invest in household inventory

7. © Copyright 2012 Kantar Retail 7 This Trend is Bad News for the Hotzone

8. © Copyright 2012 Kantar Retail 8 Other Checkout Trends are Equally Dispiriting  64% of self-checkout grocery shoppers said retailers who offer self-checkout options provide better customer service  78% of self-checkout users prefer them because they are faster  Certain impulse items can be found in 5% of baskets processed through regular checkouts, but in only 2% of self- checkout baskets Source: NCR; Kantar Retail

9. © Copyright 2012 Kantar Retail The Lure of Proximity – the Shopper 9  Urbanization  Longer working hours – little & often trips  Rising petrol prices  Growth in out-of-home food & drink  Decline in home meal planning  Decline in pantry/trolley shopping -e.g. average of nine grocery shopping trips per household per week in the UK

10. © Copyright 2012 Kantar Retail 10 This Trend is Also Bad News for the Hotzone

11. © Copyright 2012 Kantar Retail Rapid Discount Growth Creates Issues  Fewer checkouts than supers & hypermarkets  Skew towards PL at checkout  Historically poor at impulse / checkout shopper marketing 11 –Aldi has installed branded confectionery / gum Some Signs of Progress …

12. © Copyright 2012 Kantar Retail Explosive Growth of Online is a Worry  Shopper marketing less advanced online  Lack of impulse / adjacency  Compete: 32% of shoppers prefer online, as it removes temptation  Few retailers successfully recommend linked items  Trip disruption! -Example: Ocado theoretically removes six million shopping trips per year from the UK market 12

13. © Copyright 2012 Kantar Retail 13 Some Positives Though  Non-food click & collect will drive traffic  Smaller stores increasingly part of the multichannel solution  Pick-up points often at impulse- heavy check-outs  70% of pick-up shoppers make in- store purchase  Increasing use of pick-up lockers by the likes of Amazon  Likely to drive footfall into impulse- rich c-stores, CTNs & drugstores

14. © Copyright 2012 Kantar Retail Now What?  Acknowledge that hypermarket traffic will be stagnant or declining in many markets: perhaps consider devoting more shopper marketing resource to other channels  Develop counter-top merchandising solutions for smaller stores  Improve abilities to develop FSDUs for use in proximity stores  Clip-strips—when executed correctly—are excellent for creating impulse in the small store environment 14

15. © Copyright 2012 Kantar Retail  Create merchandising solutions for queuing areas for both regular and self-checkouts  Implement an impulse strategy for the discount channel— FSDUs and checkout displays are options here  Collaborate with retailers to create impulse/adjacency in the online environment  Development of merchandising solutions for Click & Collect pick-up points? 15 Now What?

16. © Copyright 2012 Kantar Retail  Monitor the implementation of Amazon Lockers – will there be greater impulse opportunities at Amazon’s retailer partners?  Consider on-screen impulse merchandising for self- checkouts  Work with retailers and/or self-checkout vendors to develop merchandising solutions for self-checkout units  Create smartphone marketing strategies to anticipate the adoption of smartphone self-scanning by more retailers/shoppers 16 Now What?