9th Annual Gartner Sunrise Breakfast January 14th , 2013 Presentation: 7:15-8:15AM This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2010 Gartner, Inc. and/or its affiliates. All rights reserved. NRF Welcome 1 Agenda Overview • NRF Introduction/Welcome • Gartner Overview • Moderator/Panel Introduction • Gartner Retail Research Observations • Panel Q & A 2 Gartner Overview Kevin Sterneckert VP Research Consumer Value Chain 3 Gartner delivers the technology-related and supply chain insight necessary for our clients to make the right decisions, every day. 4 Helping you achieve demonstrable business results 730 60,000 analysts clients across 80 10,800 enterprises countries 450 300,000 consultants Gartner is uniquely positioned to deliver a depth, breadth and quality of IT expertise you won’t find anywhere else client 1,500 interactions engagements 65% of In-depth retail industry Fortune 1000 80% of coverage Global 500 55 5,500 conferences benchmarks 3,800 CIOs 10,000 media inquiries 5 “Gartner acts as an extension of my staff and as an intelligent filter to the oceans of information I need to track and monitor. With Gartner, I get opinions that are objective, unbiased and candid.” JOSEPH D. “JODY” GILES CIO, Under Armour Format & Panel Introduction Kevin Sterneckert 6 Retail Trends 2013 • Jeff Roster • VP, Industry Market Strategies, Retail • Jeff.roster@gartner.com 7 A Day in the Life of an Analyst Source: Gartner Forecast Q2, 2011 TotalTotal U.S. U.S. IT Retail Software Services Spend Spend Total U.S. Retail IT Spend Millions of Dollars 80,000 Percent 9 70,000 8 60,000 50,000 7 40,000 6 30,000 20,000 5 10,000 0 4 2012 Total IT Spend 2013 Avg. Growth Rate A Nexus of Forces Extreme Behavior Global Class Delivery Pervasive Access "Big" Context Are Retailers Asking About the Nexus of Forces? Technology and Telecom 9% Media 3% 7% Education 3% 5% Services 3% 6% Banking, Finance & Ins 7% Government 7% Energy & Utilities Manufacturing 6% Healthcare 6% Total 2% 2% 0% 1% 6% 1% 7% 1% 7% 2% 1% 6% 2% 1% 6% 2% 8% 1% 7% 2% 7% 1% 6% 2% 8% Transportation 2% 9% 8% 6% 2% 5% 2% 9% 2% Retail 10% 1% 1% 7% 10% 1% 15% % of Inquiries Mentioned "mobile" % of Inquiries Mentioned "social" % of Inquiries Mentioned "cloud" % of Inquiries Mentioned "big data" 11 20% 25% Retail Marketing Becomes More Strategic Q: Would you describe Marketing in your organization as more tactical or more strategic in nature? Mean score 1 - 2 More Tactical 3 to 5 6 - 7 More Strategic Retail Industry (out of 7) (n=35) Marketing 2 years ago Marketing today Marketing 2 years from now 20% 69% 9% 11% 54% 6% 14% 3.8 4.9 37% 6.1 80% All Industries (n=512) 23% Marketing 2 years ago Marketing today Marketing 2 years from now 10% 8% 1=More Tactical Source: Gartner survey conducted May, 2012 Copyright 2012, Gartner, Inc. All rights reserved. 64% 13% 64% 32% 27% 60% 3.7 4.6 5.5 7=More Strategic The Year of Customer Innovation Robert Hetu Research Director Industry Research Retail 13 What Innovation Really Means in 2013 Key Issues • How will consumerization impact retail innovation? • What changes will your business need to make? • How should you involve the customer in innovation? 14 Consumerization is irreversible and is leading to the end of consumers as we know them Technology is accommodating customer behaviors •Communicate •Collaborate •Co-create •Customize Customers Are Increasingly in Control of Your Business Model • Consumers will become even more powerful and will change retail business models • These business models will be consumer-centric — that is, with the consumer controlling the way in which the models evolve The Evolving Customer-Centric Business Model for Retail Curator Aggregator Consumer Designer Builder Technology is Not the Answer! Socialize and Diffuse Define Scope Implement Champion Develop Evaluate and Select Capture Ideas Key Takeaways on Customer Innovation Open up the innovation process: 1. Understand that the customer is part of your business 2. Make the customer part of the decision making process 3. Know when and how to hand over to the customer Relevant Sessions to Consider 14th January • NRF Keynote by Kofi Annan 10.30 am Special Events Hall • Customer Centric Innovation at Brooks Brothers - 11.30 am, Special Events Hall • The Changing Rules of Fashion in the Digital Age - 2.00 pm Special Events Hall • Revenues Beyond Retail - 3.30 pm, Special Events Hall 15th January • Keynote A Job to Do: Retail’s Role in an American Renewal, Bill S. Simon Walmart CEO US - 8.30 am, North Hall • Keynote The Great Convergence, Thomas Belk Jr. Et all – 10.00 am, North Hall • Organizational Structure for the Future of Retail: The Digital Effect – 1.30 pm, Special Events Hall Relevant Sessions to Consider 16th January • Retail’s BIG Fast Track Presents: Retail Re-imagined – Conversations on Storytelling, the Customer Experience and What’s Next! – 8.30 am, North Hall • Keynote Doing Well by Doing Good -Fred Wacker, COO (The Home Depot Foundation) et al, 11.00 am, North Hall Key Initiatives for Demand-Driven Supply Chains Jeff Roster Mike Griswold Vice President Consumer Value Chain 23 Demand-Driven Value Network (DDVN) and Demand-Driven Retailing Strategies Fulfill CrossChannel Demand Demand Supply Understand and Respond to Demand Signals Build Value Networks Deliver Consumer-Centric Retailing Product Use the Supply Chain to Support Products and Services Innovation 24 Demand-Driven Retailing Strategies Fulfilling CrossChannel Demand Demand Supply Understanding and Responding to Demand Signals Building Value Networks Delivering Consumer-Centric Retailing Product Using the Supply Chain to Support Products and Services Innovation Strategy Description Understanding and responding to the demand signals Sensing, shaping and responding to the consumer demand signal across sales channels Delivering a consumer-centric supply chain Creating a supply chain that supports and responds to the key merchandising planning and execution activities Fulfilling cross-channel demand Creating effective and efficient fulfillment strategies that support cross-channel and multichannel demands of the shopper Building value networks Aligning the people, processes and technology that drive pull-based replenishment models and joint value creation Using the supply chain to support products and services innovation Creating an agile and responsive supply chain that enables and supports innovation across an organization 25 Demand-Driven Leaders Performance Demand-driven Leaders Compared to Peers Metric Difference (2009) Difference (2010) Difference (2011) Difference (2012) Return on Assets (ROA) 73.8% 2X 27.3% 2X Inventory Turns 19.1% 4% 23.7% 1.7X Revenue Growth 55.0% 3X 26.7% 1.5X 26 Initiative 1: Demand Management "Weather forecast for tonight - Dark" "Forecasting is very difficult, especially if its about the future" • Key considerations - Making the distinction between demand management and demand forecasting. - Determining ownership of demand management processes. - Migrating to a unified demand management platform. - Incorporate considerations for multichannel. - Focus areas trending toward promotions and new item forecasting. Initiative 2: Merchandising, Inventory and Operations Execution • Key considerations - Linking merchandise plans with inventory execution a key capability lacking for retailers. - Processes are happening today, they are just siloed and fragmented, and metrics are functionally focused. - Understanding the role of planning horizons in an MIOE process. - MIOE process enhances new product launch capabilities. - It really is what everyone else calls S&OP. Initiative 3: Supply Chain Segmentation • Key considerations - A seven-step process has emerged to help segment supply chains and tailor a profitable response. - Supply chain segmentation requires aligning metrics and incentives that enable trade-off decisions. - Advance supply chain maturity a precursor to success. - Segmentation enables a company to provide unique value to customers, while balancing cost with service. Initiative 4: Network Design • Key considerations - Omni-channel driving many network design initiatives - Ideally, network design is integrated with inventory optimization, but most organizations lack maturity. - Key considerations include business objective optimization, inventory and service-level improvements, risk pooling, and capacity planning. - Identify a "power user." - Pilots are a must. "The line between disorder and order lies in logistics…" "My logisticians are a humorless lot ... they know if my campaign fails, they are the first ones I will slay." "Behind every great leader there was an even greater logistician." - M. Cox Initiative 5: Inventory Optimization • Key considerations - Understanding the connection to demand management - Understanding the changing role of inventory within your organization - Determining how to align inventory tactics with the underlying causes of inventory pooling - Increasing visibility capabilities to support multi-channel - Identify the "owner" of inventory, ideally from an endto-end perspective Supply Chain Hype Cycle - 2012 32 Priority Matrix 2012 – Supply Chain New way of doing business Enabling new process, significant value opportunities Incremental improvement on existing processes 33 Key Supply Chain Technology Areas • Demand & Supply Planning - Common demand platform for all channels - End-to-end replenishment capabilities • Multi-channel Execution - Visibility - Optimization • Supply Chain Optimization - Network design - Inventory • WMS/TMS - Multi-channel execution support • SaaS 34 Demand-Driven Business Value End-toEnd Oriented Metrics Growth Service Demand Management Gross Margin Improvement 3%-5% Reduction in Out-of-Stocks 20%-30% Inventory ▼15%-30% Obsolescence 10%-15% less Productivity Increase 5%-10% MIOE Revenue Improvement 2%-5% Better Customer Choice Inventory ▼15% Cash-2-Cash ▼35% Working Capital ▲15% Time-to-Market Lead Time Reduction Growth Potential Identification Value to Customers Cost/Service Choices Cost of Complexity Unneeded Variability Unique Value and Agility per Segment Gross Margin Improvement 3%-5% Better Service Asset Utilization ▲5%-10% Improved Productivity 3%-5% No Negative Service Impact Asset Utilization 3x Faster Runs 2x Supply Chain Segmentation Network Design Inventory Optimization Profit Growth 2x Proactive supply chain talent strategy Cost Agility Supply chain organization design (span of control) 35 Relevant Sessions to Consider 14th January • The Role of Predictive Analytics in Retail, 10:15 Exhibitor Big Ideas • The Importance of the CEO/CIO Partnership in the Retail and Cultural Transformation of A&P, 1:00 EXPO Hall Room 3D05 • Lost in a Turbulent Sea of Data: Solving the Consumer “Search and Discovery” Dilemma, 2:00 Breakout Session Hall A , 1A 06-08 • Renovate, Communicate, Invigorate – The Coordinates for Merchandising Success, 2:00 Room Hall E 1E 12-13 Relevant Sessions to Consider 15th January • Consumer Buying Behavior is Changing. How are You Responding? 9:15 EXPO Hall Room 3D08 • Learning from Leaders: Gartner’s Top 25 Global Supply Chains, 2:00 Room Hall E 1E 12-13 • Assortment Variety: Is It Too Much of a Good Thing, 3:15 Room Hall A 1A 06-08 • How Metro Personalized Its Way to Growth, 3:15 Room Hall A 1A 10-14 • RFID – What’s Next, 4:00 EXPO Hall Room 3 D05 Wrap Up & Q/A 38