Industry trendswebex 033014vii

March, 2014

Critical Industry Trends And What To Do About Them

ON-SITE INSIGHTS

Collabora'on

ON-SITE INSIGHTS

Collabora'on

Crea'on

ON-SITE INSIGHTS

Collabora'on

Content Sharing

The Effect of Change on Retail Displays & Marketing

Webinar

Crea'on

ON-SITE INSIGHT

kmcgowan@rocktenn.com

WHAT WE’LL DISCUSS

Critical Trends Facing The Industry •  Retail •  Consumer •  Shopper

WHAT WE’LL DISCUSS

Critical Trends Facing The Industry •  Retail •  Consumer •  Shopper

Implications For The Business •  Logistics •  Technology •  Marketing

A Vision For Tomorrow •  What it will take •  What you can do right now

CRITICAL TRENDS FACING THE INDUSTRY

Multiculturalism

Millennials Seniors Big Data Mktg

Mobile Personalization

Digitization of Products

DRIVERS OF CHANGE

Retail Future 2020

DRIVERS OF CHANGE

Retail Future 2020 Political

Economic

Social

Technology Industry

DRIVERS OF CHANGE

•  Deferral of major life stage decisions – Marriage, kids, home ownership

•  Low population growth •  Multi-cultural àAcculturation

Social

DRIVERS OF CHANGE

•  Deferral of major life stage decisions – Marriage, kids, home ownership

•  Low population growth •  Multi-cultural àAcculturation •  Aging… absolute size of 55+ •  Ex-urbanization •  Health & Wellness – Active vs.

Inactive •  Home Ownership – Rental Society •  DIFM vs. DIY – More services

Social

IMPLICATIONS

•  Low Shopper base growth

•  Smaller Households

•  Decline of Mass Marketing

Social

IMPLICATIONS

•  Low Shopper base growth

•  Smaller Households

•  Decline of Mass Marketing

•  Increased services – esp. health, financial, digital

•  Proximate /local vs. Destination stores

•  Essential vs. Discretionary mix

•  Increased focus on diet/nutrition

Social

DRIVERS OF CHANGE

•  Significant Wildcards •  Low economic growth •  Improved full time workforce/Part

Time grows

Economic VISUAL

DRIVERS OF CHANGE

•  Significant Wildcards •  Low economic growth •  Improved full time workforce/Part

Time grows •  Declining Middle and Growing

Higher income •  “Real Inflation” outpacing wage

growth.. •  Inter-generational workforce

Economic VISUAL

IMPLICATIONS

•  Retail focus on customer retention vs. acquisition

•  Marketing depth vs. breadth?

Economic

IMPLICATIONS

•  Retail focus on customer retention vs. acquisition

•  Marketing depth vs. breadth?

•  Pricing & Mix vs. unit growth

•  Services critical

Economic

DRIVERS OF CHANGE

•  Addressable market size, engagement and spend

•  Availability

•  Speed

•  Devices

Technology

DRIVERS OF CHANGE

•  Addressable market size, engagement and spend

•  Availability

•  Speed

•  Devices

•  App integration

•  Analytics (big data/targeting)

•  Payment options

•  Economics, Assortment, Logistics

Technology

IMPLICATIONS

•  Digital engagement

•  New consumer behaviors

•  Retail Apps will emerge

Technology

IMPLICATIONS

•  Digital engagement

•  New consumer behaviors

•  Retail Apps will emerge

•  Keep best shoppers out of search

§  Personalization

•  New business models drive new revenue streams and competencies

Technology

IMPLICATIONS

Mobile & Digital List Management Will Drive Grocery Online

Source: Retail Net Group 2014

IMPLICATIONS

Price Comparison

Store Navigation

Mobile Checkout

Mobile Payments

“Check-in”

Product Search & Availability

List Management

Mobile Offers

IMPLICATIONS

Price Comparison

Store Navigation

Mobile Checkout

Mobile Payments

“Check-in”

Product Search & Availability

List Management

Mobile Offers

Walgreens 3rd party app Aisle411

item locations

Walmart List Management &

Navigation

Content + Commerce are Blurring

Mobile Apps Second Screens Where-to-Buy

Tweet to Buy

Shoppable Ads Buy from Video

Image-Base Discovery

Content + Commerce are Blurring

"In the future, app development is going to be just as important

as property development,"

Phil Clarke, CEO Tesco

DRIVERS OF CHANGE

•  Low Organic Growth

•  Small Box and Digital growth

•  Productivity Drain on SBR= store based retail by Digital

Industry

DRIVERS OF CHANGE

•  Low Organic Growth

•  Small Box and Digital growth

•  Productivity Drain on SBR= store based retail by Digital

•  “Channel” Re- Balancing

§  Proximity/Store Size more relevant than products carried

•  Consolidation/competitive intensity

•  Segmentation to find & Scale Opportunities

Industry

IMPLICATIONS

•  Shopper Retention Focus

•  Smaller Boxes

•  Regeneration of Big Boxes – services, new models

Industry

IMPLICATIONS

•  Shopper Retention Focus

•  Smaller Boxes

•  Regeneration of Big Boxes – services, new models

•  Fewer Sell To Points with more varieties to plan for

•  No net new stores

•  Segmentation

Industry

DRIVERS OF CHANGE

•  Trust

•  Policy

•  The Fed

Political

DRIVERS OF CHANGE

•  Trust

•  Policy

•  The Fed

•  Record revenue, spending & debt

•  Entitlements (over 70 income related programs)

•  Municipal and state regulation and taxation

Political

IMPLICATIONS

•  Progress tempered

•  Complexity increased

•  Tax rates to increase to and through 2020

Political

IMPLICATIONS

•  Progress tempered

•  Complexity increased

•  Tax rates to increase to and through 2020

•  Changes in government support spend directly impacts

•  State/local governments require more bailouts..

Political

SUMMARY

Social & Demographic Change

Retail Industry Consolidation

More “Savvy” Shopper

SUMMARY

Social & Demographic Change

Retail Industry Consolidation

More “Savvy” Shopper

Need For Customization

Downsizing Of Stores

The “Game” Has Changed

IMPLICATIONS FOR OUR BUSINESS

Logistics

25-40% will change

Technology

Apps & Analytics Investment

Marketing

Massive Re-Mix

Merchandising

40% at Risk

Services

Grow to 30% of revenue

25% current store

base @ risk

Logistics

25-40% will change

Technology

Apps & Analytics Investment

Marketing

Massive Re-Mix

Merchandising

40% at Risk

LOGISTICS •  Customization by retailer vs.

COT •  Customization SKU sort/region

LOGISTICS •  Customization by retailer vs.

COT •  Customization SKU sort/region •  Smaller runs •  Custom Packaging •  “Immediacy” (Amazon Effect) •  Increased complexity

TECHNOLOGY •  App Integration accelerating •  Shopper requirements

increasing

TECHNOLOGY •  App Integration accelerating •  Shopper requirements

increasing •  Multiple touch points •  Speed bumps on the road to

retail •  Increased complexity

MERCHANDISING •  Increased customization •  Smaller runs •  Variety of structures

MERCHANDISING •  Increased customization •  Smaller runs •  Variety of structures •  Move to permanent •  Increased complexity •  Pressure on impulse

MERCHANDISING •  Personalization Drives Activation and Reduces

Mass Media

MERCHANDISING •  Personalization Drives Activation and Reduces

Mass Media

Evolving Manufacturer/Retailer Relationship

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

Evolving Manufacturer/Retailer Relationship

MARKETING •  Local vs. National •  Individual vs. Mass •  Customer specific

MARKETING •  Local vs. National •  Individual vs. Mass •  Customer specific •  Shopper focused •  Technology enabled •  Increased complexity

WHAT YOU CAN DO RIGHT NOW

BREAK PAGE WITH VISUAL

BRING THE FUTURE TO THE

PRESENT

Organizational Imperatives

Customer Collaboration and Insights

Organizational Imperatives

Customer Collaboration and Insights

Fail Fast, Fail Cheap

INNOVATION DRIVERS

Shopper Insights

INNOVATION DRIVERS

Shopper Engagement

Shopper Insights

INNOVATION DRIVERS

Brand Equity Enhancement

Shopper Engagement

Shopper Insights

INNOVATION DRIVERS

Shopper Insights

• Understanding Shopper Behavior

in-store learning lab

§ Not what they SAY they will do

… but what they really DO do.

•  Quantitative Analytics

Shopper Insights

INNOVATION DRIVERS

Shopper Engagement

INNOVATION DRIVERS

Shopper Engagement

INNOVATION DRIVERS

Shopper Engagement

INNOVATION DRIVERS

Shopper Engagement Personalization

INNOVATION DRIVERS

Brand Equity Enhancement Visual

CONCLUSIONS

Trends are happening faster than ever

Change is a constant

CONCLUSIONS

Trends are happening faster than ever

Change is a constant

Store of the future is here today

Shopper behavior changing dramatically

Technology as an enabler impacting shopping

Requiring change in all business disciplines

ON-SITE INSIGHTS

KMCGOWAN@ROCKTENN.COM

QR Code Email To Kathy

March, 2014

Critical Industry Trends And What To Do About Them

Industry trendswebex 033014vii

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