Pure Play - Kantar Retail iQ

Global eCommerce Innovation and

The Ever-expanding Amazon Ecosystem

Presented by:

Anne Zybowski, Vice President

Steve Mader, Director – Digital Retail

Nicole Santosuosso, Junior Analyst

Digital Webinar Series

August 7, 2014

Agenda

Exploring Kantar Retail’s Latest Global eCommerce Forecasts

Optimizing Online Grocery

Amazon: Hardware Driving the Ecosystem

© Copyright 2014 Kantar Retail 3

Exploring Kantar Retail’s Latest

Global eCommerce Forecasts


A GLOBAL VIEW AND PLANNING

REQUIRES CONSISTENCY

In measurement; much lies in the fine print

© Copyright 2014 Kantar Retail

In the US, 2013 eCommerce Was $264 Billion Strong

With strong double-digit growth and forecasts

US: Annual b2c eCommerce Retail Sales

(excl. Autos, Fuel, and Foodservice)

CAGR

‘09-’14E ‘14-’19E

15.9% 14.3%

USD billions

Source: U.S. Department of Commerce and Kantar Retail analysis


Yet Even in the US, Headlines Can Deceive

Kantar Retail uses metric that focuses on goods bought/sold

Others often include:

US: Annual b2c eCommerce Retail Sales (excludes autos, fuel, and foodservice)

eCommmerce:

Any purchase of goods between a consumer and a retailer where the goods are either physical items for first-time use OR are virtual goods traditionally sold in retail stores (music, video, magazine, news). The financial transaction must take place on an electronic device. Collection can be made by pickup, download, or delivery. Excludes auto/motorized vehicles, foodservice, wholesale.


Source: Kantar Retail analysis

Lack of Clarity Compounded When Look Abroad

Media Headlines: True or False?



China’s $297 Billion Includes Marketplace

Activity…

$297 B 83%

=$248 B



Including C2C/Marketplace in the US Stats

$374billion in 2013 AND growing at low double-digit rates

US: Annual eCommerce Retail Sales including C2C

(excl. Autos, Fuel, and Foodservice)

CAGR

‘08-’13E ‘13-’18E

15.0% 11.8%

USD billions

Source: U.S. Department of Commerce and Kantar Retail analysis


Widening Horizons from B2C to Include C2C

Important for global consistency to look at both

What is B2C and C2C?

BUSINESS MODEL

DEFINITION

BRICKS &

MORTAR

EQUIVALENT

PRODUCT

LISTINGS

BUSINESS-TO-CONSUMER SITES

Retailers that sell goods to consumers

CONSUMER-TO-CONSUMER SITES

A marketplace business model that facilitates interaction between customers

Retail Stores that sell to consumers, from a small box Dollar General to big box

Walmart

Shopping mall operators

Managed carefully within the merchandising organization with strict rules

Recruits sellers and sets guidelines but does not manage carefully. Anyone can sell to consumer without a middleman

INVENTORY

Invests in acquiring the product as early as possible to guarantee in-stock rates and speed of delivery

Never owns the product. In some cases assists with delivery to the consumer

(procuring best delivery relationship with a 3 rd party or direct via the retailer’s own fulfillment network)



There are 4 Major Types of eCommerce Retail

That Kantar Retail tracks and forecasts

Marketplace: Sales of goods between two parties (usually a consumer and a retailer but can be between consumer and consumer or wholesaler and consumer) where the website only arranges the “storefront” listing and delivery may/may not be arranged through.

Bricks n Clicks: Sale of non-fresh items (see previous definition) via a retailer ordering application with pickup of items done by any method provided by the retailer.

The retailer must have stores and keep the merchandise displayed on the catalogue consistent with merchandise sold in-store. eGrocery: Sale of fresh items for home preparation with home delivery or point collection (Fresh includes fruits, vegetables, meats, fish, dairy, other short-shelf life items or items that require immediate refrigeration/freezing). The payment for delivery can happen via any retailer ordering application including telephone.

Pure Play: Sale of goods between a consumer and a retailer using total e-retail definition where the retailer does not have a physical store AND arranges delivery of the goods via their own distribution network and product listing standards.



The Pure Play Business Model Continues to

Dominate eCommerce in the US

Breakdown of USA eCommerce Sales by Type of Business Model, 2014E – 2019E

(Billions of Dollars)

$431B

$486B

$547B

$646B

$693B

$772B

*Total eCommerce dollars here include all four types of eCommerce that Kantar Retail tracks: Bricks n Clicks, eGrocery, Marketplace and Pure Play.

Source: U.S. Department of Commerce, Kantar Retail analysis


eCommerce in China Dominated by Marketplace

Though pure play and b&m gaining strength and momentum



$628B

$557B

$489B

$429B

$372B

$323B




UK eCommerce is Developing Across All Models

Relatively even split across 4 models, yet Pure Play dominant



$107B

$116B

$98B

$89B

$80B

$71B




Customer Capabilities and First-to-Market Matter

Sets pace for how market develops & shopper habits

Item Basket Marketplace

• General merchandise-led

• 1 (few) item at a time

• National ship

• Grocery/consumables-led

• Full basket

• Home delivery

• General merchandise-led

• 1 (few) item at a time

• Fragmented supply chain



For More Detail, And To Dig Deeper…

Leverage Kantar Retail’s Digital Insight Centre

Source: Kantar Retail analysis, KantarretailiQ.com


Optimizing Online Grocery


Three Distinct Phases of eGrocery Capabilities

Crawl –Walk–Run = Fix–Build-Impact

Phase One:

• Retailers focused on the physical -> Website Suffers

• Taking in-store product and simply listing online

• eGrocery often an attachment/port of existing GM Website

• Vertical Merchandising

• Limited cross promotions

1. Digital Assets

2. Simple Search

3. Minimise Barriers


Source: Kantar Retail

Vertical Merchandising Hinders Navigation

Source: Kantar Retail analysis


Horizontal Merchandising Mimics the Shelf

Source: Kantar Retail analysis


Optimize Within the confines of the Platform

How do you convey Size and Value?

Source: Kantar Retail analysis , company website


Perfect Store Transcends Web Platforms

2013 2014





Phase Two:

• Migrate to Horizontal Merchandising

• Retailers begin to become more sophisticated – CatMan techniques

• Brute force CatMan techniques as Web Platform Less Dynamic

• Wake up to Media Opportunities – Often Short Term Cash Grab

• Build Mechanisms for getting found – Search, Favourites List

1. Navigation/Taxonomy

2. Visibility (Media options)

3. Sophisticated Search



Monetization Of Traffic Can Lead To Bad Retailer

Behavior



Brute Forcing around Merchandising Limitations

Source: Kantar Retail analysis, Company websites


Potential Light At The End Of The Tunnel

Data Analytics Still Poor

Source: Kantar Retail analysis, Company websites


Huge Opportunity When Promotions are Tied to the Favorites List “I know what you like”

Bringing in-store data into the online shop



Driving Trial to Get on The List

List Drives Habit – Removes Friction from Purchase





Phase Three:

• Strong Differentiation now between Good and Bad retailers

• Dynamic Shelf – Search, Favorites List

• Strong cross-vendor category management

• Media opportunities can be tracked

• Data tying the store to online – Though supplier still needs to manage

1. Digital Shopper

Marketing

2. Omni-Channel

Activations

3. Store-In-Store



Cross-Supplier Initiatives Can Help Inspire

Drive Recruitment into More Premium Segments



Robust Platforms -> Proper Shopper Marketing

Narrative Never Would Have Been Possible In-store



Building the Basket with Intelligent SEO/SEM

Dynamic Merchandising via Keywords

Source: Kantar Retail analysis , company website


Building Global Capabilities

Focus at the Global/Regional level should be on building the organisation’s capabilities and platforms to ensure the local markets can quickly serve their retail customers

• Marketing/Insight functions test & learn new technology platforms to understand the potential ROI of new activations.

• Global brand team builds a style guide backed by data that shows which assets (images/text/keywords) convert the best. The global team then sends this style guide to the local markets to ensure consistency and optimal brand representation.

• Creating a toolkit to upskill the local markets on new trends and capabilities.


Source: Kantar Retail

Partnership between Global & Local Teams

There will be some action items that the local teams must look after themselves, but can look to the global team for assistance and guidance to save time and money

• The global team will help the local team build capability in-market proactively to ensure they stay ahead of competition, and potentially educate local retailers.

• The global team will build the framework and processes around shopper research and category management. The local teams can then determine how they would like to work within those frameworks.

This is to ensure consistency and comparability across markets.

• The global team will help establish global best practice, and work with the local teams to ensure local relevance. The local teams can then do a self assessment to determine if there is a gap.



Local Capabilities Required

Once the global processes, technology platforms, and capability toolkits are rolled out by the global team, the local teams are responsible for executing

• Localization of keywords and search terms is essential of successfully showing up online when a shopper searched for our product. Use your market knowledge to build a keyword list that can be executed online.

• Joint Business Plans can be created in collaboration with the global team, but ongoing maintenance and monitoring will be done by the local teams.

• New product launches, and how that comes to life across digital channels can be guided by the global team, but will be executed by the local teams.

• Social platforms and community engagement are best handled at the local level. Global teams can give guidance on best practice.



Amazon: Hardware Driving the

Ecosystem


2014: Amazon Aggressive Move into Hardware

New devices will make Amazon an omnipresent force in shoppers’ lives, inextricably tied to Prime

Source: Kantar Retail analysis, Company website, Company reports


Hardware at Intersection of Content & Usage

Started with Prime free shipping to remove barriers to purchase

(Feb ’05) (Sept ’08) (Feb ’11)

(Nov ’11)

2005

2007

(Nov ’07)

2008 2011

(Sept ’11)

(Dec ’12)

2012

(June ’14)

(July ’14)

2014

(April ’14) (July ’14)


Source: Kantar Retail analysis; Company website

Digital Important Piece of Prime Value Proposition

Evolves from shipping/retail to entertainment/“share of life”

Reason for Signing Up for Amazon Prime vs. Renewing Prime Membership

(among all primary household shoppers)

Primary Reason for Signing Up Reasons for Renewing*

70%

78%

32%

22%

19%

14%

12%

10%

6% 7%

2%

3%

Free two-day Free instant Exclusive video Kindle lending Amazon Mom Amazon student shipping streaming of video content content library discounts on baby supplies discounts/referral credits

*Among Prime members who plan to renew, % who say factor is “very important” in their decision to renew

Source: Kantar Retail ShopperScape®, December 2013


Kindle Suite of Products

Where it all began… accelerating the physical to digital shift and eliminating barriers to purchase

"We've been working on Kindle for more than three years.

Our top design objective was for Kindle to disappear in your hands -- to get out of the way -- so you can enjoy your reading …Kindle is wireless, so whether you're lying in bed or riding a train, you can think of a book, and have it in less than 60 seconds. No computer is needed -- you do your shopping directly from the device. We're excited to make

Kindle available today."

-Jeff Bezos, CEO 11/19/2007



Amazon Ecosystem Not About Purchase-1 st

Its more aligned to what people are doing when connected

Entertainment/social is majority of connected time

Source: Kantar Retail analysis; TNS Mobile Life 2013


First Foray Into Subscription Access = Video

Prime Instant Video success leads into Music & Books



Kindle Expands to Appeal to Mom & Family

Follows 2010 expansion of Prime into Amazon Mom program


Kindle FreeTime provides a solution for Amazon families-giving parents control of their child’s viewing and time in front of the screen.


Continuing to Innovate for Family/Kids

Beyond Amazon Mom… Original Content

FreeTime parental controls also available for ‘Fire TV’



April 2014: Hardware Amazon Fire TV

Accelerates value of subscription model with device that takes clicks out of the experience with features like voice search

Source: Kantar Retail analysis, Amazon.com

With its own device/hardware at core, Amazon applied

1-click thinking to an all-inclusive platform for content viewing. Fire TV is aimed at the various barriers to usage, taking an “all-in” approach so users can access content from Netflix, Hulu, Showtime, HBO & more- all in one place. The Fire TV also includes a number of exclusive Amazon features such as personalized recommendations, voice search technology, and second screen capabilities with Kindle Fire.


April 2014: Drive Consumables Without the Click

Handheld device removes friction from path to purchase

To add to their grocery list, shoppers can scan barcodes from everyday items in their home, or simply speak an item into the Dash microphone.

Source: Kantar Retail analysis, Amazon.com, YouTube

The handheld device, currently in beta, syncs with a shopper’s Amazon Prime Fresh account. The tool will help remove friction from the shopping experience― especially in the grocery channel, which still has many barriers to purchase in place.


July 2014: Introducing the “Fire” Phone

3D smartphone revolutionizes “one-click” retail

“In terms of the Fire Phone, we’re very excited about it….it can exist on its own and whether it’s part of our family, if you will, to help drive other usage…It’s very integrated into our various digital services including video and games and our app store, and ebooks and certainly Prime music. So those are all very interesting things on behalf of customers. It’s also a great way to do physical shopping as well.”

-Thomas J. Szkutak, CFO 7/24/14

Fire Phone has the following features:

• Dynamic Perspective

• Unlimited Cloud drive storage for photos

• Mayday on-device tech support

• Firefly Technology



“Firefly Technology” Embodies the One-Click

Mentality: Underlies all Hardware



Testing Hardware Placement on the Home Page

Leveraging the store to market & drive awareness of devices


New navigation tab just for devices


“Get it Today”: Continued Innovation on Immediacy

August expansion to 6 more cities



2014/2015 A Pivotal Year For Amazon

Will it be successful?

• “Share of Life” = focus on shoppers’ connected activity

– Continued focus on innovating to remove barriers, from entertainment to purchase

– New hardware is about facilitating path to purchase, and enabling quicker access to Amazon’s product database

• Moving from ”Ownership models” to “Access models”

– Subscription models evolved with companies like Netflix and the Apple music ecosystem

– Amazon is learning to extend and profit from both of these models, the question is which industries or products might be next?

• Will shoppers give Amazon permission?

– Amazon has clearly established a reputation with books, and has now moved on to video & other content including music

– Time will tell how deep shoppers allow the relationship to extend…



© Copyright 2014 Kantar Retail

Anne Zybowski

Vice President, Retail Insights anne.zybowski@kantarretail.com

501 Boylston Street

Suite 6101

Boston, MA

02116

T +1 617 912 2856 www.KantarRetailiq.com

Nicole Santosuosso

Junior Analyst nicole.santosuosso@kantarretail.com

501 Boylston Street

Suite 6101

Boston, MA

02116

T +1 617 912 2857 www.KantarRetailiq.com

Stephen Mader

Director of Digital Retail stephen.mader@kantarretail.com

501 Boylston Street

Suite 6101

Boston, MA

02116

T +44(0)207 031 0272 www.KantarRetailiq.com


Pure Play - Kantar Retail iQ

Agenda

Exploring Kantar Retail’s Latest

Global eCommerce Forecasts

A GLOBAL VIEW AND PLANNING

REQUIRES CONSISTENCY

eCommmerce:

Optimizing Online Grocery

Amazon: Hardware Driving the

Ecosystem

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Pure Play - Kantar Retail iQ

Agenda

Exploring Kantar Retail’s Latest

Global eCommerce Forecasts

A GLOBAL VIEW AND PLANNING

REQUIRES CONSISTENCY

eCommmerce:

Optimizing Online Grocery

Amazon: Hardware Driving the

Ecosystem

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