Retail revolution061215
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The retail industry is undergoing significant transformation driven by economic, sociological, and technological changes, necessitating a shift from traditional practices to more innovative strategies. Retailers must adapt to evolving consumer behaviors, driven by mobile technology and changing demographics, to remain competitive. The future of retail will rely on integrating digital and physical experiences while focusing on customer-centric services to enhance the shopping experience.
Retail revolution061215
- 1. “The Revolu�on at Retail” June 2015
- 2. What’s Happening? Who’s Winning? Jon Kramer, CMO, RockTenn How to Get in the Loop
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- 4. OVERVIEW The retailing world in which we do business is experiencing a tsunami of change There is hope: Elements of a Winning Strategy Upcoming In-Store Innovations that Might Help We are not in the driver’s seat
- 5. If you are doing business today the same way as you did business yesterday, CORE CONCLUSION Peter Drucker
- 6. 6 If you are doing business today the same way as you did business yesterday, If you are doing business today the same way as you did business yesterday, chances are that you won’t be doing business tomorrow. Peter Drucker CORE CONCLUSION
- 7. WARNING Be Careful What You Think You Hear 7 “More Mobile Phones in the World than People” International Telecommunication Union, 2014 “Amazon to Open its first Retail Store” Forbes, 2014 “Drones will Deliver Your Groceries” Credit Suisse Financialist, 2014 “QR codes are dead” Advertising Age, 2013 “Brick-and-Mortar Retailers are Dinosaurs” Rocket Internet, 2014 “72 % Use Phones for Shopping” Pew Research, 2014
- 8. DRIVERS OF CHANGE 8 ECONOMIC SOCIOLOGICAL TECHNOLOGICAL
- 9. DRIVERS OF CHANGE Economic 9 Median Household Incomes down 8% since 2007 $56.9 $51.9 2007 2013 $49.6 1993 § Majority of Americans make less than $20/hr Source: US Census Bureau US Department of Labor Inflation adjusted
- 10. DRIVERS OF CHANGE Economic 10 Source: Bureau of Labor Statistics Jan 1990 Sep 2014 # of Part-Time Workers at an All-time High § Approaching 25% of work force
- 11. DRIVERS OF CHANGE Economic 11 50 Distinct Economies Employed % of Total Population Source: Bureau of Labor Statistics 2013
- 12. DRIVERS OF CHANGE Sociological 12 Population Rapidly Aging >20 20-30 30-60 60+ 18% 20% 21% 23%
- 13. DRIVERS OF CHANGE Sociological 13 5 Different Generations Consume Very Differently Source: RetailNet Group The Silent Generation Baby BoomersGeneration XMillennialGen Z (1927-1945)(1946-1964)(1965-1979)(1980-2000)(2001-Present)
- 14. DRIVERS OF CHANGE 14 Impact of Aging: -$55+ Billion Annually Peak Spending Aging In Aging Out Source: US Census Bureau RNG Analysis <25 25-34 35-44 45-54 55-64 65-74 75+ -$55+ Billion Sociological
- 15. DRIVERS OF CHANGE Sociological 15 Millennials, besides being tech savvy, are: Source: RetailNet Group More Diverse Marriage Later Kids Later Earnings Polarized Educated Urban Growth, Rent
- 16. DRIVERS OF CHANGE Technological 16 Massive Shift in How Consumers Spend Time Online § Mobile Apps now dominate Source: Comscore Internet World Stats 225 Million Americans access Internet via Broadband § 71% of Population 173 Million Americans use a Smartphone § 54% of population, 74% of mobile subscribers Mobile Apps on Smartphones & Tablets 52% Web Browsers on Desktops & Laptops 40% Web Browsers on Smartphones & Tablets 8%
- 17. DRIVERS OF CHANGE Technological Action Code Usage is Growing § QR is 75% of the Market Blippar 17 QR Codes documobi Digimarc Microsoft Tag Kooaba
- 18. DRIVERS OF CHANGE Technological 18 Growth of Mobile Payment and Digital Wallet § ApplePay will drive the market Beacon-delivered messaging § Delivered to your wrist
- 19. Source: RNG Analysis Last Big Retail Innovation Was the “Super Center” That was so ‘80’s … TRANSFORMATION OF THE RETAIL INDUSTRY Traditional Big Box Fewer Cars Saturation Demand for convenience Digital Small / Proximate Urbanization Smaller Households Aging Population § Big Box Operators facing pressure across the board 19
- 20. The Evolution of Shopping 20 SYMPTOMS OF CHANGE
- 21. The Evolution of Shopping 21 SYMPTOMS OF CHANGE By 2020-30 55% of Transactions Will Involve Digital Traditional 0-45% Store Automation 0-45% Digital / Pick-up 15-20% Digital 15-25% Shopper Digital In-Store 25-30% Manual Digitally Enabled Digitally Managed Digital Trip
- 22. TRANSFORMATION OF THE RETAIL INDUSTRY Retailers Rapidly Acquiring Digital Technology In the past 18 months alone: 22 Product Search Predictive Intelligence WALMART Online Front-end Optimization Online Community AdChemy Inkiru Torbit Luvocracy KROGER AMAZON Digital Offer Network Provider Ecommerce Company Video Broadcasting Game Site YOU Tech. Twitch VitaCost.com
- 23. STORE TRANSFORMATION OF THE RETAIL INDUSTRY Yesterday 23 STORE Today On-Call Omnipresent Personal Service
- 24. STORE TRANSFORMATION OF THE RETAIL INDUSTRY Yesterday 24 Tomorrow … the VIRTUAL shopping trip? STORE Today On-Call Omnipresent Personal Service
- 26. TRANSFORMATION OF THE RETAIL INDUSTRY Stores are NOT Dinosaurs US will add $800+ Billion in Total Retail through 2020 $3,099 $3,778 $4,250 $4,612+$834 § Store Based Retail Still Majority of Both $ and $ Added Informal Traditional Chain – Digital All Other Chain – Digital Marketplace Chain – Store Based Retail Source: RNG Database; USD constant 2013 26
- 27. TRANSFORMATION OF THE RETAIL INDUSTRY Stores are NOT Dinosaurs US will add $800+ Billion in Total Retail through 2020 § However, Non-Store Digital growth is 3-4X faster 27 CAGR 15.8% 3.5% 10.1% 2.9% $ Added -1.1% 3.5% $119 $574 $156 -$84 $69 Informal Traditional Chain – Digital All Other Chain – Digital Marketplace +$834 Chain – Store Based Retail Source: RNG Database; USD constant 2013
- 28. TRANSFORMATION OF THE RETAIL INDUSTRY Ecommerce contributing to growth for Especially for major players 28 * Tablet + Smartphone Source :Internet Retailer :RetailNet Group AMAZON WALMART TARGET Total Sales 90.0 B +20% 476.3 B + 2% 72.6 B -‐ 1% Ecommerce Sales 90.0 B +20% 7.9 B +15% 2.5 B +17% Mobile* Ecommerce Sales 16.8 B +110% 1.4 B +90% .4 B +100%
- 29. WHO WINS? The Shopper is the Clear Winner Her Toolkit is Expanding 29 Smart Shopping List Price Comparison Store Navigation Product Search & Availability Personalized Offers Mobile Checkout Instant Payment Anytime Delivery
- 30. WHO WINS? Retailers Who Master the Five “Ds” Data Differentiation Digital/Physical Integration Delivery Decentralization
- 31. 31 Data WINNING RETAIL STRATEGIES Content Management System RetailMeNot Coupons.com Catalina Valassis Digital Wallet Analog (Store & Print) FSI’s Load to Card 3Party App Retailer App Location Based Loyalty Card BRANDS& RETAILERS HUB Multiple Ways to Connect & Offer Coupons/ Promotions
- 32. 32 Data Building Online/Offline Targeting & Tracking Capabilities WINNING RETAIL STRATEGIES WINS (Web Influenced In-store Sales) Source: RNG research & analysis
- 33. 33 Data Layered Pricing: Fun for Shoppers / Limits Transparency WINNING RETAIL STRATEGIES Source: RNG research & analysis
- 34. 34 Data Layered Pricing: Fun for Shoppers / Limits Transparency WINNING RETAIL STRATEGIES Source: RNG research & analysis
- 35. 35 Differentiation WINNING RETAIL STRATEGIES Source: RNG research & analysis Three Core Positionings Lead to Superior ROIC: 9% of Dollars 16% of Growth ENGAGING3. 11% of Dollars 10% of Growth QUALITY1. 34% of Dollars 37% of Growth LOW PRICE2.
- 36. 36 Differentiation WINNING RETAIL STRATEGIES Source: RNG research & analysis Compressing and Pushing Back the Center Store § To expand differentiated offerings
- 37. WINNING RETAIL STRATEGIES 37 Differentiation Not your Father’s private label Good Better Even Better Very Best “We’re not offering knock-offs … we want to be Knock Out.” Gil Phipps, VP
- 38. WINNING RETAIL STRATEGIES 38 Differentiation Not your Father’s private label
- 39. 39 WINNING RETAIL STRATEGIES Differentiation Bottom Line: It’s all about the Shopper Experience
- 40. WINNING RETAIL STRATEGIES Decentralization 40 Getting Closer to the Customer § Smaller Store Formats
- 41. WINNING RETAIL STRATEGIES Decentralization 41 Getting Closer to the Customer § Smaller Store Formats
- 42. WINNING RETAIL STRATEGIES Decentralization 42 Getting Closer to the Customer § Order Online, Pick Up in Store
- 43. WINNING RETAIL STRATEGIES Decentralization 43 Getting Closer to the Customer § Digital Storefront
- 44. WINNING RETAIL STRATEGIES Decentralization 44 Store-Within-A-Store § Credited with the BestBuy turnaround
- 45. WINNING RETAIL STRATEGIES Decentralization Store-Within-A-Store § Now being emulated across the industry JCPenny meijer MACY’S
- 46. WINNING RETAIL STRATEGIES Decentralization 46 Store-Within-A-Store § Now being emulated across the industry KOHL’S OFFICEMAXTARGET LOWE”S
- 47. WINNING RETAIL STRATEGIES Digital / Physical Integration 47 “Our investments in e-commerce and mobile are very important, as the lines between digital and physical retail continue to blur… our customers expect a seamless experience….” Doug McMillon President/CEO “Our investments in e-commerce and mobile are very important, as the lines between digital and physical retail continue to blur… our customers expect a seamless experience….”
- 48. WINNING RETAIL STRATEGIES Digital / Physical Integration 48 List Management Fulfillment List Management Drives Digital Engagement Pre-Shop
- 49. WINNING RETAIL STRATEGIES 49 Delivery Ahold: the early Innovator
- 50. WINNING RETAIL STRATEGIES Delivery 50 Walmart: pushing the envelope
- 51. WINNING RETAIL STRATEGIES Delivery 51 As is Amazon
- 52. WINNING RETAIL STRATEGIES Delivery 52 The USPS is getting into the act
- 53. WINNING RETAIL STRATEGIES Delivery 53 What’s Next? “We’re in the business, today, of delivering cars in five minutes. But once you’re delivering cars in five minutes, there’s a lot of things you can deliver in five minutes.” Travis Kalanick, CEO
- 54. WHO ARE THE RETAIL WINNERS? Amazon+Walmart: 21% of US Chain Sales by 2020 54 Source: RNG Database Analysis Includes Digital Marketplaces 2015E 2020E 2015E 2020E 09-14 15E-20E 09-14 15E-20E 09-14 15E-20E 1 Walmart $352 $400 14% 12% 2.1% 2.6% $41 $57 9% 7% 2 Amazon $122 $290 5% 9% 38.2% 19.6% $85 $191 18% 25% 3 Kroger $111 $132 4% 4% 6.6% 3.6% $34 $25 7% 3% 4 Costco $82 $108 3% 3% 5.8% 5.6% $23 $30 5% 4% 5 Walgreens $79 $94 3% 3% 4.4% 3.7% $17 $19 4% 2% 6 Home Depot $77 $93 3% 3% 2.4% 4.0% $10 $19 2% 3% 7 Target $74 $82 3% 3% 2.4% 2.0% $9 $9 2% 1.2% 8 CVS Health $68 $83 3% 3% 5.3% 3.7% $18 $16 4% 2% 9 Albertsons $57 $61 2% 2% 52.6% 1.1% $52 $4 11% 0.5% 10 Lowe's $57 $67 2% 2% 2.1% 3.5% $7 $12 1.4% 2% 11 McDonald's $38 $44 1.5% 1.3% 3.5% 2.8% $7 $7 1.5% 0.9% 12 eBay $36 $50 1.4% 1.5% 10.6% 7.5% $15 $18 3% 2% 13 Best Buy $36 $38 1.4% 1.2% 0.2% 1.3% $0 $3 0.1% 0.4% 14 Publix $31 $37 1.2% 1.1% 3.9% 3.5% $6 $7 1.3% 0.9% 15 Sears Holdings $30 $29 1.2% 0.9% -4.9% -0.7% -$11 -$1 -2% -0.2% Top 15 Total $1,251 $1,608 48% 50% 5.2% 5.1% $313 $416 66% 54% 16-30 $304 $368 12% 11% 3.7% 3.9% $58 $76 12% 10% All Other Total $1,028 $1,259 40% 39% 1.8% 4.3% $100 $279 21% 36% RNG US Chain Total $2,583 $3,235 100% 100% 3.6% 4.6% $471 $771 100% 100% Rank by 2015E Sales Sales (USD bil) Sales CAGR Sales Added (USD bil) Share of Sales Share of Sales AddedRetailer 2015-‐2020 EST SHARE OF SALES SHARE OF GROWTH WALMART 12% 7% AMAZON 9% 25% TOTAL 21% 32%
- 55. WHO ARE THE RETAIL WINNERS? In Grocery, the Premium Operators Win 55 Source: RNG Database Analysis Includes Digital Marketplaces 2014E 2020E 2014E 2020E 10-14E 15E-20E 10-14E 15E-20E 10-14E 15E-20E 1 Walmart Neighborhood Market $9 $33 2% 6% 25.2% 23.1% $6 $23 10% 22% 2 Whole Foods Market $14 $26 3% 5% 12.0% 11.0% $6 $12 10% 11% 3 Kroger $45 $56 11% 11% 7.3% 3.7% $13 $11 22% 10% 4 Publix $30 $36 7% 7% 4.3% 3.4% $6 $7 9% 6% 5 H-E-B $17 $21 4% 4% 5.7% 3.7% $4 $4 7% 4% 6 Wegmans $7 $11 2% 2% 7.5% 5.9% $2 $3 4% 3% 7 Sprouts Farmers Market $3 $6 1% 1% 43.1% 12.1% $2 $3 4% 3% 8 ShopRite $13 $15 3% 3% 4.4% 2.9% $3 $2 4% 2% 9 Food Lion $14 $16 3% 3% 2.2% 2.3% $1 $2 2% 2% 10 Safeway $23 $25 6% 5% - 1.3% $23 $2 39% 2% 11 Hy-Vee $8 $10 2% 2% 5.3% 3.3% $2 $2 3% 2% 12 Harris Teeter $5 $7 1% 1% - 5.0% $5 $2 8% 2% 13 Winn Dixie $9 $11 2% 2% - 2.7% $9 $2 15% 1% 14 Market Basket $4 $6 1% 1% 8.2% 5.1% $1 $2 2% 1% 15 The Fresh Market $2 $3 0% 1% 14.9% 10.3% $1 $1 1% 1% $203 $280 50% 55% 11.5% 5.5% $85 $77 141% 72% $73 $85 18% 17% 5.9% 2.7% $18 $12 30% 12% $128 $146 32% 28% -5.6% 2.2% ($43) $18 -71% 17% $404 $511 100% 100% 3.3% 4.0% $61 $108 100% 100% Share of Sales Added Top 15 Total 16-30 Total All Other Total RNG USA Grocery Total Rank Banner Sales (USD bil) Share of Sales Sales CAGR Sales Added (USD bil) $ BILLIONS 2014 EST 2020 EST WHOLE FOODS 14 26 H-‐E-‐B 17 21 WEGMANS 7 11 SPROUTS 3 6 HY-‐VEE 8 10 HARRIS TEETER 5 7 MARKET BASKET 4 6 FRESH MARKET 2 3 TOTAL 53 90 8 Differentiated Leaders: 70% Growth vs 26% Market
- 56. WHO ARE THE RETAIL WINNERS? 56
- 57. WHO ARE THE RETAIL WINNERS? 57 -‐2.3% 4Q 2014 RESULTS -2.3% -3.1% +1.0% +10% +25% +70% +245% Blinkbox Rentals Online Clothing Online Gen’l Merchandise Online Grocery Express Stores Large Stores 57 Source: Tesco Analysts Meeting
- 58. Building a Collaborative Organization Adding value to the retailer’s data-driven initiatives Creating Custom Retailer Programming § Shopper Centric Retailer Solutions Building Direct Relationships with Consumers Omnipresent Brand Availability Meaningful Engagement Bringing Innovation to the Table Shopper Insights Technology P-O-P WOW HOW DO WE GET IN THE LOOP? 58
- 59. THE COLLABORATIVE ORGANIZATION Organizational Framework Must Change Traditional Relationship Mfg. Marketing Mfg. Sales/Trade Retailer Marketing Shopper Consumer Retailer Merchandising 59
- 60. Traditional Relationship Mfg. Marketing Mfg. Sales/Trade Retailer Marketing Shopper Consumer Retailer Merchandising New Collaborative Relationship Mfg. Marketing Retailer Marketing Mfg. Sales/Trade Retailer Merchandising Shopper Insights Retail Store Experience Shopper Consumer 60 THE COLLABORATIVE ORGANIZATION Supplier/Retailer Collaboration is Critical
- 61. DIRECT CONSUMER ENGAGEMENT 61 National Brands are Becoming Retailers From retailer reliant to self-reliant
- 62. DIRECT CONSUMER ENGAGEMENT 62 National Brands are Becoming Retailers From retailer reliant to self-reliant
- 63. DIRECT CONSUMER ENGAGEMENT 63 National Brands are Becoming Retailers From retailer reliant to self-reliant
- 64. DIRECT CONSUMER ENGAGEMENT 64 National Brands are Becoming Retailers From retailer reliant to self-reliant
- 65. BRINGING INNOVATION TO THE TABLE Technology is Creating Opportunity The Secret Weapon of Mobile Technology is INSIGHT 65 We know how many went in the door We know who checked out and what they spent THE GAP
- 66. TRENDS IMPACTING OUR BUSINESS Technology is Creating Opportunity The Secret Weapon of Mobile Technology is INSIGHT 66 BUT… did they: 66 Visit Your Category? Stop There? Engage? How? Buy? Why? From Display or Shelf? From You or Your Competition? What was the R.O.I.I.?
- 67. BRINGING INNOVATION TO THE TABLE 67 Live In-Store Learning Lab Technology is Creating Opportunity The Secret Weapon of Mobile Technology is INSIGHT Not what they SAY they do … but what they really DO do. Tracks Real Shopper Behavior
- 68. BRINGING INNOVATION TO THE TABLE 68 Powered by C.A.R.T Smartphone GPS tracking linked to P-O-S system Technology is Creating Opportunity The Secret Weapon of Mobile Technology is INSIGHT Live In-Store Learning Lab
- 69. BRINGING INNOVATION TO THE TABLE 69 Powered by C.A.R.T Smartphone GPS tracking linked to P-O-S system Powered by C.A.R.T iBeacons push promotional offerings Technology is Creating Opportunity The Secret Weapon of Mobile Technology is INSIGHT Live In-Store Learning Lab
- 70. BRINGING INNOVATION TO THE TABLE 70 Powered by C.A.R.T Deep Data & Analytics In-store Tracking & Conversion FSC data 80+% of Transactions Quantitative Analysis of Shopper Behavior Technology is Creating Opportunity The Secret Weapon of Mobile Technology is INSIGHT Live In-Store Learning Lab
- 71. BRINGING INNOVATION TO THE TABLE 71 Traffic to Store Traffic to Aisle / Department Fixture/Product Dwell Events Dwell Times Purchase Dwell-Point Conversion Defining Metric: Technology is Creating Opportunity The Secret Weapon of Mobile Technology is INSIGHT
- 72. BRINGING INNOVATION TO THE TABLE 72 % Store Category % of Category Dwell % of Dwells Conversion Opportunity TOTAL HBA 67.4% Hair Care 22.0% 49.0% 32.6% 67.4% 25.8% 44.9% 14.6% 85.4% 28.0% 40.6% 36.8% 63.2% 24.1% 29.4% 42.9% 57.1% Oral Care 18.6% 40.1% 36.3% 63.7% Pain/GI 27.0% 36.3% 38.9% 61.1% 15.2% 29.0% 43.8% 56.2% Cold/Allergy 32.0% 39.9% 30.9% 69.1% First Aid 13.1% 38.7% 31.4% 68.6% 17.9% 37.0% 28.5% 71.5% Nail Care 29.0% 20.7% 48.2% 51.8% Skin Care / Lotions 9.2% 45.1% 28.1% 71.9% Hand Soap 24.8% 30.9% 26.0% 74.0% Vitamins 18.4% 27.4% 9.0% 91.0% Foot Care 16.6% 27.7% 6.5% 93.5% 25.8% 44.9% 14.6% 85.4% Skin Care / Lotions 9.2% 45.1% 28.1% 71.9% Technology is Creating Opportunity The Secret Weapon of Mobile Technology is INSIGHT
- 73. SUMMARY The Retail World Is Changing There is no one answer § Flexibility is required Shopper Activation Is Critical Across multiple touch points § Test & Learn Store Based Retail Still Key However evolving/changing § Less will need to be more Retailer Collaboration is Critical Leveraging THEIR Insights § Will take organizational change
- 74. “The Revolu�on at Retail” To view a video log on to h�p://www.rocktenndisplays.com/rr-‐webinar