NGA CASE COMPETITION:
BALANCING TRADITIONAL AND
DIGITAL MEDIA
AGENDA
Introduction
Overview of Industry
Business Challenge and Objective
Customer Demographics
Proposed Solution
Budget
Conclusion
INDUSTRY OVERVIEW: COMPETITION IS HIGH
Revenue Growth
Source: IBIS World Industry Report, Supermarkets
2.5%
2.0%
Revenue growth has been on
the decline since 2012.
1.5%
1.0%
0.5%
0.0%
-0.5%
-1.0%
-1.5%
2009
2010
2011
2012
2013
2014
2015
Advertising Costs
Source: NGA Report, 2014
Increasing advertising costs
make it difficult to do business.
Advertising as a Percent of Sales
Percent Revenue Growth
3.0%
1.6%
1.5%
1.4%
1.3%
1.2%
1.1%
1.0%
0.9%
0.8%
2009
2010
2011
2012
2013
2014
WHY DOES THIS MATTER?
Supermarket Stocks are Underperforming Indices
Source: NGA Survey 2014
Jul-13
Oct-13
Jan-14
Apr-14
Supermarkets continue to underperform, which makes them a less attractive investment.
Jul-14
PROBLEM
Circulars are expensive and it is difficult
to quantify their impact.
Our customer base is beginning to segment
into two groups with different demands.
The market is transitioning into a digital
area yet retailers are slower to adapt.
BUSINESS CHALLENGE AND OBJECTIVE
The challenge for retailers is managing the confluence
between traditional and digital media.
1
Maintaining current
customer base
2
3
Catering to future,
technologically savvy
customers
4
Decreased Costs
Minimizing print
circular costs
Engaging customers
before and during
shopping experiences
Increased Sales
DISPARITY BETWEEN WHAT CONSUMER WANTS AND WHAT RETAILER PROVIDES
Percentage of Advertising Budget
Source: NGA Report, 2014
Newspaper
58.9%
Mail
14.5%
Outdoor Signage
13.0%
Other
10.4%
Radio
6.6%
Social Media/mobile
3.6%
Email/Online
3.5%
TV
1.2%
Retail companies are budgeting mostly to newspapers.
Best Ways to Communicate Special Offers
Source: Wakefern Shopper Survey, October 2014
75.41%
48.16%
38.52%
28.07%
6.15%
7.79%
9.84%
3.69%
Social
Text
TV
Apps
Website
In-store
Mail
More ShopRite Shoppers prefer receiving emails.
Email
RETAILERS NEED TO MANAGE BALANCE BETWEEN PRINT AND DIGITAL
Maintaining Current
Customers
Ensuring your
store as a weekly
shopping
destination
A
Acquiring New
Customers
Growing revenue
now and building
loyalty in the
future
B
CURRENT AND FUTURE CUSTOMER DEMOGRAPHICS
Boomers and GenX, Aged 34 – 74
Millennials, Aged 18 – 33
On the go, busy
shoppers
Prefer traditional
methods
Not yet brand
loyal
Spending less
with age
Use a
shopping list
Largest Current
Spending
Rely on mobile
and digital
High
involvement
Rapidly Growing
Spending
Price and deal
conscious
While modern customers are high involvement, price conscious customers, retailers will
soon be faced with a large influx of millennial consumers with new preferences.
Sources: Appetite Journal, December 2010; Nielsen Consumer Insights , September 2014; Acosta Why Behind the Buy, 2013
HIGH INVOLVEMENT SHOPPERS PLAN THEIR TRIPS
Gathering and
combining product
and sale information
prior to trip1
Using a rising
number of touch
points before
entering the store2
Looking for
deals; shopper is
often a money
saving mom1
75% of all
consumers are
planning trips
and purchases
outside of the
store3
Consumers are planning their trips ahead of time.
1. Food Shopper Insights, 2013
2. Nielsen Consumer Insights, September 2014
3. Grocery Shopping Network, 2013
PRINT MEDIA ENABLES CUSTOMERS TO PLAN THEIR TRIPS
ShopRite Customers – Survey Data
US Customer Touch Points –1+ time per week
Source: Wakefern Shopper Survey, October 2014
Source: Nielsen Shopper Survey, April 2014
80%
Say circulars are very or
extremely important
41%
Rarely consult the
internet in planning
their shopping
25%
Don’t own a
smartphone
SHOPPER PREFERENCES
While we must be cautious in analyzing self-reported data due to response biases, it
seems that regardless of age, customers have a preference for US Mail and Email.
Customer Preference Towards Receiving Information
Source: Wakefern Shopper Survey, October 2014
100%
90%
80%
Advertising circular in newspaper
70%
In-store advertising sheet/circular
60%
In-store kiosk
In-store signage
50%
Mobile Apps / ShopRite Mobile App
Website / ShopRite.com
40%
Text/SMS
30%
Email
U.S. mail
20%
10%
0%
25-34
35+
WHY WE ARE KEEPING THE CIRCULAR
Improved Memory Recall
Higher Open Rate
Customers, including
younger ones, remember
the same information better
when read in print versus
online.
Customers are more likely
to open marketing material
received in print versus
online.
Source: Journal of Marketing Letters, March 2013
Source: Journal of Marketing Letters, March 2013
More Impactful Purchase Influence
Strong Customer Preference
Customers indicated that
print circulars have the
highest influence over
where they will shop in a
given week.
Customers indicated that
they have a strong
preference for paper
circulars.
Source: Wakefern Shopper Survey, October 2014
Source: Wakefern Shopper Survey, October 2014
“The Circular Is Still Very Much Alive.”
Source: Nielsen Consumer Insights, September 2014
ONLINE COUPONING IS ON THE RISE
Shoppers Who Download Food or Beverage App For Coupons
Source: NGA Survey, 2014
36.9%
19.6%
21.0%
11.0%
2010
2011
2012
Mobile
couponing
influence
increased
by 235% in
2013.
2013
Digital shoppers make purchases at a rate 40 % higher than those without a device.
84% of store
visitors use their
digital devices
before and during
a shopping trip.
22% of consumers
spend more than
they intended as a
result of digital.
Source: Deloitte Publications, 2013
THE FUTURE OF RETAIL IS DIGITAL
In 2020, more than 80 % of U.S. retail sales will still happen within the four walls of a store.
NEW FEATURE FOR SCAN-ABLE LOYALTY CARD ON CURRENT APP
• Customers use loyalty card through app
• Can accumulate points for purchases and be rewarded with
more offers
• Increases in-store experience by utilizing digital in a fun,
affordable way that adds value to customer
CAPABILITIES
• Location based technology that can send relevant coupons
depending on where customer is in the store
PROMOTION
• In-store signage
• Information on newsletter and website
• Cashier interaction at check out
IMPROVED, INTEGRATED WEBSITE
Shopping List Feature
•
•
•
•
Prepare a shopping list online
Add entire recipes to list
Saves past shopping lists
Email, SMS, or print the completed
list
Web-Optimized
Circular
Web Optimized Circular
• Showcase “featured” items
• Items sorted by category
• Click on items to add directly to
the shopping list
Grocers can drive sales by enticing customers to visit and interact with
unique and relevant content prior to visiting the store.
DRIVING SHOPPER TRAFFIC THROUGH WEEKLY NEWSLETTER
GAINING RELEVANCY AND REINFORCING THE STORE BRAND
Weekly Newsletter Content
Consumers are increasingly looking for digital solutions to their everyday tasks
“Create a
Shopping
List” Tool
Seasonally
Relevant
Recipes
Party
Planning
Tips
DIY and
Lifestyle
Ideas
Health &
Wellness
Articles
Weekly
Coupons
Worthy content will excite consumers to visit the website while promoting brand recall.
SOLUTION
The Path To Purchase Starts Before the Customer Enters The Store
Our solution is to target customers at home, before their shopping,
and in the store, during their shopping.
Cornell Supermarket
Friendly
Local
Fresh
TARGETING UNIQUE DEMOGRAPHICS AT HOME AND IN STORE
Future
Customer
Current
Customer
At Home
In Store
TARGETED PROMOTIONS
A dynamic
online circular
will allow
retailers to
place a larger
emphasis on
high-margin
items
Source: 2014 Independent Grocers Financial Survey
IMPLEMENTATION TIMELINE
BUDGET
Savings
Total Revenue
Source: Wakefern Press Release
Revenue Per Store
Based on 359 Stores
Net Profit Margin
Expenses
$14.7
billion
$40.9
million
4%
Estimated Profit Margin Based on Industry
Profit Per Store
$1.64
million
Circular Cost Per Store (.6% of sales)
$245,400
Year One Circular Cost: Expected Circular
Scale-back of 25%
$184,000
Year Two Circular Cost: Expected Circular
Scale-back of 20%
$147,000
Year Three Circular Cost: Expected
Circular Scale-back of 15%
$125,000
Three Year Savings, Per Store
$280,000
*we expect savings to increase as printing
costs rise due to new technology
Online Circular Development
$10,000
App Development
$15,000
Source: Sixty Five Design Co.
Maintenance Per Year
Newsletter Annual
Maintenance
Targeted Coupon Costs
Three Year Expenses
$10,000
No change
Marginal
$55,000
For all stores
Over three years, circular volume will be
reduced by 49%. New touch points will
surpass the sales once generated by these
circulars, thus increasing net profit.
CONCLUSION
• Cost of circulars will only increase in the
future
• Savings on circular printing costs will
allow retailers to begin investing in new
technologies affordably
• While innovation is costly, doing so
gradually and beginning today, spreads
costs over time and ensures relevancy
and brand loyalty in the future
• Newsletters and e-mails cement
retailers into consumers’ minds,
subconsciously creating repeat
customers
Questions?