REconfigure REtail
Strategies to Drive Competitive Advantage
© Kantar Retail 2015
REconfigure REtail
Strategies to Drive Competitive Advantage
‒ Disruption abounds. Adapting to and
capitalizing on these disruptions is a
formidable challenge for both
manufacturers and retailers.
‒ Previous competitive advantage was
achieved by investing billions in factories,
distribution centers, and stores to achieve
scale and efficiencies.
‒ As digital disintermediates retail, you must
reconfigure your retail strategies to
adapt to 21st century retailing.
‒ Only those retailers and suppliers who
REengage shoppers, REimagine value,
REinvent formats, and REtool
commerce will thrive.
© Kantar Retail 2015
2
Pillar I: REengage Shoppers
‒ Disruptive technologies are fragmenting
shoppers’ relationships with retailers and
brands.
‒ Competition for shopper mindshare is
chaotic and intensifying— messaging and
content must cut through the clutter of
communication driven by constant
connectivity.
‒ REengaging shoppers means driving
personalization without sacrificing scalable
operations.
‒ Retailers and suppliers must develop a
robust understanding of their targeted
shoppers across all touch points to drive
distinctive offers, curated shopper
experiences, and contextual engagement.
© Kantar Retail 2015
3
The Major Polarizers
Polarized by:
Geography:
Countries and
Cities…
Income:
Haves vs.
Have Nots
Ethnicity:
Non-majority
populations
Generations:
Diversity &
Technology
Interests
© Kantar Retail 2015
Source: Kantar Retail analysis
4
Already Have a Different Store Choice Profile
Gen Y more likely to choose Walmart and
specialty supermarkets
Where Spend the Most on Groceries/HH Essentials: Gen Y vs. Boomers
© Kantar Retail 2015
Source: Kantar Retail ShopperScape®, January–September 2014
5
Gen Y Getting Serious about Buying Online
Average Conversion Rate*
(across 30 categories)
17% Growth
36% Growth
• Gen Y cohort had
historically lagged all
shoppers—especially
Boomers, who have been
most active buyers—in
terms of conversion
• Seniors also increasingly
converting to buyers
* Conversion calculated as % have purchased category online/% have shopped for category online
© Kantar Retail 2015
Source: Kantar Retail ShopperScape®, July 2013 and July 2014
6
Case Study: Save-A-Lot vs. ALDI
Habit vs. Whole Package
Save-A-Lot
ALDI
vs.
© Kantar Retail 2015
Source: Kantar Retail analysis, retailer web sites
7
Hispanic Shopper Population Set to Grow
Nearly half of Hispanic population currently younger than 25
Projections of the U.S. Population
by Hispanic Origin: 2015 to 2030
Age of U.S. Population
by Hispanic Origin: 2013
© Kantar Retail 2015
Source: U.S. Census Bureau, Current Population Survey, 2013 and Population Projections report NP2012-
8
Where Do Hispanics Shop?
Hispanics More Likely to Shop
Many Top Consumables Retailers
Mass/Dollar/Club/Drug
Supermarket
63%
22%
42%
17%
35%
14%
34%
13%
29%
12%
51%
51% of Hispanic shoppers shop
Amazon—about on-par with the
average U.S. primary HH shopper
Arrows indicate that Hispanic shoppers are significantly more likely to shop retailers than the average shopper (95% confidence level)
© Kantar Retail 2015
Source: Kantar Retail ShopperScape®, May 2013–July 2014
9
Engagement Can Mean
Partners…
© Kantar Retail 2015
Sometimes You Just Gotta
Dance…Lowe’s Foods
© Kantar Retail 2015
Defining The Elusive Notion of Omnichannel Retailing
A consumer experience of perfect retailing execution
OMINICHANNEL RETAILING
ADDRESSABLE
HOW WE MARKET
High
TRADITIONAL
Low
MULTI
Bricks & Mortar
Multi
HOW WE SELL
Source: Kantar Retail analysis
© Kantar Retail 2015
12
RE-ENGAGE SHOPPERS:
3 KEY POINTS
• More Specific – “Addressable Marketing”
– The facilities should be the heart of the base, and a “mirror” of the
culture of that environment – use the “Address” you’ve got
• More Personal
– Digital communication platforms allow a more personal relationship
in terms of shopping aids and value
• More Fun!
– Millennial Shoppers don’t view it as a chore yet
© Kantar Retail 2015
Pillar II: REimagine Value
‒ As the mechanics of value become
more personal, dynamic, contextual, and
volatile, retailers and suppliers need to
reimagine value as previous sources of
differentiation are increasingly
commoditized.
‒ Rather than a definition based almost
solely on price, shopper value in the
future will be defined by those who
master the artful science of
REimagining value by also delivering
quality and service throughout the
shopper’s brand journey.
© Kantar Retail 2015
14
Generally Positive, Generally Improving Spending Intentions
15
Fewer than three in 10 shoppers consciously planning to spend less
Spending Intentions in Coming Month Compared with Same Period Last Year
(three-month moving average among all primary household shoppers)
Spend about
the Same
Spend
Somewhat/
Much Less
Spend
Somewhat/
Much More
Source: Kantar Retail ShopperScape®, December 2009–December 2014
© Kantar Retail 2015
More Shoppers Considering More than Price
16
Gen Y, Seniors lead the shift; True for both Haves and Have Nots
Now More Willing to Consider Factors Other than Price When Deciding Where to Shop
(share of shoppers who say this statement describes them “perfectly”/”quiet well” or “somewhat”)
Oct-13
75%
70%
63%
59%
Oct-14
65%67%
55%
57%
60%
55% 56%
70%
67%
64%
64%
46%
All Shoppers Gen Y
Gen X
Arrows indicate significant difference vs. 2013 (95% confidence level)
Source: Kantar Retail ShopperScape®, October 2013 and 2014
© Kantar Retail 2015
Boomers
Seniors
Have Nots
Haves
Hispanic
Shopper Buzzword for 2015: “Stress Free”
17
Motivation likely differs by cohort, but all increasingly interested
Share of Shoppers Who Rate “Having a Stress-Free Shopping Experience” Among
Top Four Most Important Aspects of Shopping
Jan-14
Jan-15
63%
58%
53%
All Shoppers
55%
57%
Gen Y
Arrows indicate significant difference vs. 2014 (95% confidence level)
Source: Kantar Retail ShopperScape®, January 2014 and January 2015
© Kantar Retail 2015
56%
52%
Gen X
59%
54%
Boomers
53%
Seniors
The Adaption of Pricing Strategies has Created
an New Industry View: “The Hourglass”
Of the top 69
supermarket retailers in
the KR database, there
are roughly as many
characterized as:
“Haves”
Projected dollar growth 2014E-2019E is:
26.8% (CAGR 4.2%)
12.0% (CAGR 1.9%)
• Premium (21)
• Mainstream (26)*
“Have-Nots”
• Value (22)
60.7% (CAGR 5.6%)
*Data as of 12/01/2014
© Kantar Retail 2015
Source: Kantar Retail analysis; company reports
Walmart’s Savings Catcher tool is well positioned to address both sides
of the value equation: spending as little as possible, and giving the
feeling of getting a good deal.
Spending as Little as Possible
Feeling Like I Got a Good Deal
“Our customers didn't ask for
Savings Catcher but they are
loving it ... And customers now
have a real incentive to become
digitally engaged”
—Neil Ashe, Walmart’s Global.com CEO, Oct 2014
Source: Kantar Retail analysis; company Web site
© Kantar Retail 2015
19
REIMAGINE VALUE:
3 KEY POINTS
• More Specific
– Mid-tier positioning confuses shoppers more than helps them –
make ic clear what we stand for
• More Personal
– More and more retailers will be delivering more and more
promotions and price to individuals out of the public domain
• More Fun
– Shoppers willing to consider other factors than price, in particular
things that make shopping more stress-free!
© Kantar Retail 2015
Pillar III: REinvent Format
‒ The physical and virtual space in which
the retailer engages the shopper is in flux.
‒ We are witness to a tremendous
reallocation of capital deployment, a
revenge of physical retail space, and a
complete reboot of how store formats
serve a more convenience-oriented,
efficiency-motivated, and experiencecraving shopper.
‒ Categories that were once bought in stores
are now often not, and the nature of sales
and service in-store has been permanently
altered.
‒ The confluence of these changes demands
a baseline REinvention of store formats
and their purpose.
© Kantar Retail 2015
21
Small Format Strategy Is Long-Term Growth
Meeting diverse and changing customer needs
Testing:
“12K”
Neighborhood
Market
Testing:
“5K”
Convenience
© Kantar Retail 2015
Source: Kantar Retail research and analysis
Optimizing:
“43K,”
Neighborhood
Market
Neighborhood Market Growth Holds Steady
Half of Walmart’s sales added in 2015 will be from small format
“I want us to be judicious about how many we grow next year because I’d like to
give this team a chance to put their fingerprints on it.”
–Doug McMillon, October 2014
Store Count
© Kantar Retail 2015
Source: Company reports, KRIQ, Kantar Retail analysis
Sales (USD Millions)
The Top 10 “Grocers”
Top 3 all have fundamentally different business models
Edible Grocery Sales (ranked by 2013E edible grocery sales)
(Ranked by 2014E Edible Grocery Sales)
Rank
2019E
Rank
2014E
Edible Grocery Sales (USD Millions)
Expected
Movement
Retailer
2014E
2009
2019E
% of US Total
('14E)
CAGR
'09-'14E
CAGR
'14E-'19E
2
1
2
Walmart
Kroger
$
$
118,334 $
56,292 $
148,784 $ 183,504
76,446 $ 91,702
23.5%
12.1%
4.7%
6.3%
4.3%
3.7%
3
3
Costco
$
22,424 $
32,434 $ 45,510
5.1%
7.7%
7.0%
5
4
Down
Safeway
$
27,848 $
27,015 $ 27,541
4.3%
-0.6%
0.4%
4
5
Up
Publix
$
20,069 $
24,944 $ 31,648
3.9%
4.4%
4.9%
6
6
Ahold
2.2%
Down
Up
Albertsons Market (LLC)
21,673 $ 24,142
15,865 $ 15,009
3.3%
7
8
18,450 $
3,643 $
3.4%
11
7
$
$
H-E-B
$
10,679 $
15,049 $ 20,080
2.5%
2.4%
34.2%
7.1%
-1.1%
5.9%
mass 10
9
Down
Target
$
15,523 $
14,507 $ 15,542
2.3%
-1.3%
1.4%
9
10
Up
Delhaize USA
$
7,977 $
14,429 $ 16,150
2.3%
12.6%
2.3%
470,827
391,146
12,725 $ 14,905
11,158 $ 16,880
61.9%
5.4%
3.8%
$
$
301,240
10,040 $
6,323 $
2.0%
1.8%
4.9%
12.0%
3.2%
8.6%
mass 1
club
Top 10 (Edible Grocery Only)
Down Wakefern
11
12
Whole Foods
Up
12
8
How long until Amazon falls on this list?
*Data as of 12/01/2014
© Kantar Retail 2015
Source: Kantar Retail analysis; company reports
Food Service Trend Has Limits:
Expect meal planning initiatives to increase
Source: Kantar Retail ShopperScape®, November 2013
© Copyright 2014 Kantar Retail
25
Perimeter: Fresh
Quality & Fresh Come After Price
Top 5 Important Factors When Shopping for Food/Groceries
Spend Most on Food/Groceries at Retailer
All
Ahold
Delhaize
shoppers (all banners) (all banners)
Publix
Wegmans Meijer
327
224
259
449
116
288
Price
74%
66%
77%
75%
68%
60%
72%
High-quality fresh foods
45%
50%
36%
54%
55%
61%
47%
Items I need are in-stock
38%
35%
42%
38%
38%
40%
37%
Convenience
28%
34%
29%
27%
31%
26%
27%
Broad selection of foods I like to cook/eat
27%
27%
24%
31%
31%
37%
23%
Better
Marketing
11617
Better
Merchandising
Sample size
HEB
Food Lion’s “Garden Cooler”
Winn-Dixie Produce Hunt
Shading indicates significantly greater percentage vs. all shoppers; border indicates significantly lower percentage (95% confidence level)
Source: Kantar Retail ShopperScape®, February/May/August 2014
© Copyright 2014 Kantar Retail
26
How Conventional Retailers Play in This Space
Execution in this category
Curved shelves and signage to
call out organic/natural products.
Designated refrigeration unit for nat/org frozen foods.
SWAS
Bulk Items: Typically natural/organic snack items (serve yourself).
Source: Kantar Retail analysis; store visits
© Copyright 2014 Kantar Retail
27
Space Evolving to Drive More Experiences
Extends to online…
Costco’s Organic “Event” Roll-Out
…And
Coupons
© Copyright 2014 Kantar Retail
Source: Kantar Retail research and analysis (Costco organic images courtesy of a client); Costco.com (Sept. 2013)
28
THERE IS ALWAYS A PLACE FOR GREAT MERCHANDISING!
© Copyright 2014 Kantar Retail
29
Two Key Types of Online Grocery Shoppers
Casual Online Grocery Shopper
Dedicated Online Grocery Shopper
•
Shops Amazon (and often only Amazon)
•
•
Favors online for “long tail” purchases and
browsing
Shops “true” online grocers (Amazon
Fresh, Fresh Direct, and/or Peapod)
•
Favors online for “core” grocery trips
(stock-up, fill-in)
•
Overall, grocery shops more often
•
Shops online b/c it’s convenient
•
Spends less on online orders
•
Shops online to save money
© Kantar Retail 2015
Source: Millward Brown Digital Online Intelligence Survey, Spring 2012 and Summer 2013
For Brick and Mortar Retailers, Online Grocery Baskets are
Big and the Ring is High
The Average Online
Basket Value is
$147.25
55 Items on
Average
© MWG 2014. CONFIDENTIAL
Source: MWG ecommerce sales Jan to August 2014
© Kantar Retail 2015
OUR EXPECTATION IS THAT RETAIL WILL BE A
COMPONENT OF WHEREVER “GATHERING”
TAKES PLACE
• Entertainment
• Education
• Healthcare
• Travel
• Worship
• Work
© Kantar Retail 2015
REINVENT FORMAT:
3 KEY POINTS
• More Specific
– Stores need to reflect specific shopper insights and specific trips –
more formats will meet more specific needs
• More Personal
– Great in-store service (fueled by technology) will be a critical
differentiator
• More Fun
– Shoppers willing to consider other factors than price, in particular
things that make shopping more stress-free!
© Kantar Retail 2015
Pillar IV: REtool Commerce
‒ Shoppers demand a seamless omnichannel experience, and most retailers
and suppliers are underprepared to
deliver truly multichannel commerce.
‒ There is enormous pressure at the
intersection of retailer and supplier
commerce models that is based on
item at a price margins.
‒ Suppliers must fight to maintain
mindshare in this more holistic profit
equation.
‒ Only those retailers and suppliers who
REtool their commerce models will
thrive
© Kantar Retail 2015
34
Prime Penetration Now Nearly One in Four Households
35
More than 26 million households
Penetration of Amazon Prime Membership
(among all U.S, primary household shoppers)
26.2M
21.5M
15.6M
11.2M
Source: Kantar Retail ShopperScape®, December 2011–2014, Kantar Retail estimates
© Kantar Retail 2015
Estimated
number of
households
TODAY, ASSESSING “SHELF LEVEL” INNOVATION REQUIRES 3
UNDERSTANDING THAT INNOVATION’S ECONOMIC ROLE AT 6
RETAIL
‒ If the plan is to gain store distribution need
clear visibility on how this product will
change the economics of the shelf
‒ Primarily brick and mortar retailers
desperately need help with two things
• Avoiding the speed to price compression of
frequently comped items
• Building better definitions of omni-channel
profitability
‒ GMROI seems like a good place to start!
But physical assortments will need “return
on capital” style measures in order for
complex asset bases to survive
© Kantar Retail 2015
RETOOL COMMERCE:
3 KEY POINTS
• More Specific
– I have to make the most of every square foot and linear inch –
unleash the power of category management and the partnership of
suppliers to get there!
• More Personal
– Shoppers will configure their own relationship to pricing –
remember for Amazon price is an outcome, not a strategy…
• More Fun
– What else do shoppers buy that makes them happy?
© Kantar Retail 2015
REconfigure REtail
Strategies to Drive Competitive Advantage
‒ Disruption abounds. Adapting to and
capitalizing on these disruptions is a
formidable challenge for both
manufacturers and retailers.
‒ Previous competitive advantage was
achieved by investing billions in factories,
distribution centers, and stores to achieve
scale and efficiencies.
‒ As digital disintermediates retail, you must
reconfigure your retail strategies to
adapt to 21st century retailing.
‒ Only those retailers and suppliers who
REengage shoppers, REimagine value,
REinvent formats, and REtool
commerce will thrive.
© Kantar Retail 2015
38