DIY and Household Congress Presentation

DIY – HOMING CHALLENGES CREATING FIRST CHOICE RETAILER BRANDS

Clive Woodger SCG London

DIY – Homing Challenges – Creating First Choice Retailer Brands

The presentation provides an overview of consumer mindset changes, the challenge of sector convergence and growth of multi-channel retail. These factors highlight the need for a clearly articulated brand strategy to differentiate offers in an increasingly competitive market place. Examples are given from the UK, Iceland and Russia to illustrate different approaches to brand profile development.

The UK market post recession has overcapacity and illustrates the vital requirement to clearly differentiate your offer from the competition. Multi-channel development gives the consumer immediate wide choice and ability to compare opinions and prices. The need for an inspiring brand and commercially stable strategy was emphasised and a checklist of components and issues to be addressed was presented.

Defining why your image and reputation would be positively differentiated from competitors through your vision, values and ethos and the tangible and emotional attributes of your company and offer is difficult. Does your vision inspire staff, management and investors? Can you ensure every potential interaction with your operation will effectively contribute to a positive perception of the organisation as a retailer brand you can trust and a first choice solutions provider?

The function and scope of a typical Brand Strategy should inspire, direct and engage vested interests and stakeholders, manage external audiences and reflect latest ethical and sustainability practices and policies. This is particularly tough in a converging market where food and fashion retailers are moving into home offers, specialist are widening their ranges and department together with furniture stores are developing their home and lifestyle offers. Issues of credibility and reputation then become key issues. “What are you known for?” is a classic differentiation test.

Presentation synopsis of enclosed talk given by Clive Woodger, Managing Director and Owner of SCG London at the fifth international DIY and Household Congress 2011, Russia’s leading forum for the DIY industry, produced in association with EDRA, the European DIY-Retail Association.

Surprisingly, despite these pressures, DIY chains still needing to address basic issues which have not changed in the last ten years – appealing to women, selling ‘soft‘ home décor convincingly as well as ‘hard’ diy, providing inspiration and information and making stores easy to navigate and a pleasure to visit. Ten years ago SCG London spent a year working with B&Q developing a new smaller flexible convenience format which would be rolled out as a conversion of the superstores which were starting to be cannibalised by the large format ‘warehouses’. It was specifically targeted at women as research had shown B&Q failing significantly to address this key group. Whilst successfully prototyped, management changes meant the project was discontinued. This was ironic as its layout concept, careful zoning, less intimidating merchandising and distinctive point of sale strategy was ahead of its time and highly relevant today.

Husasmidjan, Iceland’s largest DIY chain realised they needed a sophisticated semi-department store approach to their décor, living, kitchen and bathroom offer but combined with a traditional DIY offer for tradesmen. With careful zoning and merchandising and graphic treatments we were able to create a contemporary flexible environment and brand personality to meet these diverse audiences aspirations.

Two contrasting Russian companies are then reviewed to show how a city décor specialist Starik Hottabych and a massive hypermarket operation Tvoi Dom could achieve more relevant and effective brand experience. Starik is an example of creating a new contemporary offer but clearly based on the well know heritage brand equity. This now attracts a younger profile customer as intended but retained its existing customer base. Tvoi Dom’s biggest issue is breaking down a massive offer into easily navigated zones and clear point of sale with a new brand identity, graphic communication and marketing strategy.

The concluding viewpoint of the presentation is the opportunity of Russian DIY operations to use their local knowledge of customer needs and different more flexible format operations and opportunities to create concepts which are highly relevant to the local customer aspirations. The international operations currently are not so flexible in their offer and formats. Russian companies should therefore leverage their local credentials and advantages. The opportunity is to achieve positive community interaction and develop a distinctive brand profile and real differentiation, offering relevant accessible products and services which can be best tuned to meet local market needs. Maybe its time for less CRM and a bit more RRCC – Real Russian Customer Centricity!

Presentation synopsis continued …

  Consumers – Changing mindsets   Market place - Convergence/ Multichannel   Brand Strategy   Case studies - UK, Russia, Iceland

CREATING FIRST CHOICE RETAILER BRANDS

  International Strategic branding and design consultancy

  13 years … 60+ Russian clients

  We work in the retail, financial, real estate sectors by creating

We are:

SCG LONDON SERVICES AND EXPERIENCE | REAL ESTATE BRANDING | PAGE 6

Our Include Brand Consultancy

ENGLISHISH

!"#$%$&'(%$ )$ *!+,&" +,("-./'( ’04ENTUZIAST INTRODUCTORY BRAND GUIDELINES '04

$',$%,01 +2131,(0BASIC ELEMENTS2.01

2454678 «+96:;7<=6<»The Enthusiast identity

!"#"$%& '"()$ *"+&,"%-*".%$/+0 * ".1"' *2,%21$) .*34*)$1"5 6"'7%124%%. 8),*%91:5 *2,%21$ – ;)<$:5 12 ="1) >)'1" ?),"#" 4*)$2 .,)*)+1"#" 3#<0 %<% *$",%91:5 *2,%21$ >)'1" ?),:5 12 ="1) ;)<$"#".

>26") ,)@)1%) &,%.2)$ <"#"$%&3 #%76"+$/ &,%')1)1%0 * ,2-1""7,2-1:A =",'2$2A % '2$),%2<2A. ?<).3BC%) +$,21%4: &,).<2#2B$ ,36"*".+$*" &" ,2+&"<"()1%B .)$2<)5, ,2-'),2' % 4*)$3 .<0 "+1"*1:A D<)')1$"*, 6"$",:' +<).3)$ +$,"#" &,%.),(%*2$/+0.

)!.31>/,.1: -<8?@A<@6=B 7=84CD;4E<97@ F?:57G H49I75:?<J7K. &CB E48?4=4E E4=8?47;E4F=6E< ?@H4L@9F:@6=B 4M?<A<6D=B H L<=6@? H4877.

The Enthusiast identity The identity may appear in one of two colour configurations. The primary colourway of Yellow out of Charcoal Grey or, the secondary colourway of Charcoal Grey out of Yellow.

This gives the identity a flexibility to operate over a range of different applications and materials. The following pages provide layout, dimensional and colour use guidelines for the basic elements and should be rigorously adhered to.

NOTE: No other configuration is permitted for application. Refer to master artwork for all reproduction purposes.

)@?E7N9OK E<?7<96 C454678<Primary colourway

%64?7N9OK E<?7<96 C454678<Secondary colourway

!"##$%&$%&

CONSUMERS CHANGING MINDSETS

Consumers - Changing mindsets

  New realities   More for less   Cautious…want to be in control   Purchases are more considered

The new attitude is “what do I really need?” and “what can I do without?” rather than “what do I want?” and “what can I have right now?”

Consumers - Changing mindsets

  Simplicity is back. Complexity is out.   People are fed up with things that they can’t

understand.   Clarity and transparency   Speed and convenience   Local accessibility, local provenance   Old fashioned values as well as “back to basics”.

  From DIY to ‘Do it for me’ back to DIY

  Small scale maintenance jobs increasingly undertaken by DIYers

  Women more ac=ve than ever before

Consumers - Changing behaviour UK perspective post crisis

  Stay at home holidays   Focus on cosmetic

‘facelift’ and comfort   Growth of gardening   Garden as important

social venue   Grow your own

Back to Basics Home as Hub

“negative equity?” …

MARKETPLACE CONVERGENCE MULTICHANNEL

  Blurring of sectors and industries   Bookshops selling coffee, coffee shops selling music,

supermarkets selling loans, Ralph Lauren selling white paint, water companies selling gas

  Just how far can you stretch a brand these days before it snaps?

Marketplace - Convergence, UK perspective

Marketplace - Convergence, UK perspective

Marketplace – Convergence …home … lifestyle ... fashion … DIY

  Grocers predicted to increase share to 5.3% from 4.3% over the next 5 years

  Long term threat to specialists – geographic spread, price promotions

  Specialists becoming generalists – range diversification   Going soft/inspirational … going hard/functional

Marketplace - Convergence

  Merchants – stagnation   DIY/Household - overcapacity, failures (Focus May 2011),

predicted contraction (UK)   Less is more - inventory reduction, cost containment,

supply chain optimization   Making infrastructure work harder

Marketplace - Saturation, UK perspective

  Specialists reluctant to expand costly space   Investment in driving growth and expanding customer

base through online channels   Increase sales opportunities without opening new

stores

Marketplace - Saturation, UK perspective

  Delivering cross channel shopping experiences   Focus on customers’ specific preferences and goals   E-commerce, call centres, reserve & collect   Project selling, product ratings and reviews   Inspiration and education - sharing   Extension into social media arena   Online communities of likeminded consumer types   Blogs, tweets, interactive Q&A sessions

Marketplace - Multichannel development

Marketplace Multi Channel Development

BRAND STRATEGY FIRST CHOICE RETAILER BRANDS DIFFERENTIATION CHALLENGE

Brand Strategy: Competitive Differentiation

Differen=ated image and reputa=on development Branding

Define organisa=on management principles and aims

Brand Strategy   Vision   Values   Ethos   AGributes   Behaviour

Create a posi=ve consistent brand experience

Brand PlaKorms   Place   Physical   Digital Communica=on   People   Processes & Products

Credibility and Relevance

Create commercially aGrac=ve and inspira=onal vision and aims.

Define posi=ve differen=ated values and aGributes – team ethos.

Achieve effec=ve engagement of management, employees, tenants, users, stakeholders …

Understand and manage external audiences and expecta=ons – communi=es of interest, poli=cians, the media, vested interests …

Integrate latest ethical, environmental and sustainability prac=ces and policies.

Brand Strategy Vision … Values … Attributes

CASE STUDIES CREATING FIRST CHOICE RETAILER BRANDS UK, ICELAND, RUSSIA

Case Studies - The DIY Store, UK

CASE STUDY | TVOI DOM

  Flexible smaller format   Complementary offer to

Warehouse   Female friendly   Convenient

ZENIT ST.PETERSBURG | CASE STUDY | PAGE 15TVOI DOM | CASE STUDY

The Diy Store Case study





Ahead of its time ?

Case Studies - The DIY Store, UK

Case Studies - Husasmidjan, Iceland

Local market leader

Focus on home décor

Female friendly

Lifestyle product offer

Complete solutions

Graphic led approach

Cost effective and flexible

  Limited market but sophisticated consumers - affluent, demand high quality, latest design

  Husasmidjan - needed to create a softer, women friendly, décor and home centre offer, building on their established DIY trade and retail offer.

  New values, new style, new store experience …

Soft, hard, relevant

soft design ideas solutions value human inspirational



Starik Hottabych   city décor store   1500 - 3000 sq. m offer   Market Leader   20 Stores Moscow   22 Stores Regions   largest chain specialising in

home décor in Russia   express design service,

delivery…

Tvoi Dom   2 stores in Moscow - 66 000 sq m - 112 000 sq m (including

furniture and garden centre built in 2009)

  First regional project in Voronezh

  24 hour operation

Specialist ....... Generalist

Case Studies - Russia

•  Everything for the home and living - DIY, décor, furnishings, garden, electricals, cars, luxury goods, fashion, supermarket, food court …

•  Category killer for lighting, bathrooms, furniture … •  A contemporary bazaar of own product and concessions •  An ultimate range policy

The challenge – creating a personality

CREATING A DIFFERENCE – CATEGORY GIANT

Case Studies - Tvoi Dom, Russia

Where do I find …? Case Studies - Tvoi Dom, Russia

Tvoi DomBrand identity and store design

Tvoi Dom is a mega shopping retail centre operation

in Moscow with a massive o!er for ‘home’ and ‘living’.

They have regional expansion plans based on their

two existing centres in Moscow.

SCG London have developed a new brand identity to

create a memorable and distinctive umbrella ownership

for the diverse range of individual tenant concessions

and Tvoi Dom’s own retail o!ers. This modern-day

bazaar format creates a powerful retail value atmosphere

and shopping destination with centres of 50,000 m2

trading area. Category ‘killer’ departments for decor,

DIY, fashion, furniture, luxury gifts, cars and garden o!er

are combined with leisure and food court facilities.

The aim was to retain the energy and excitement of the

centres and achieve a contemporary personality and

ambience. A key task was to provide a robust graphic

communication system which can e!ectively zone the

o!er and provide easy orientation for the customer.

Design guidelines for marketing, future centre formats,

architecture, layout and circulation models, signage and

point of sale were developed to provide a corporate

template for expansion.



Case Studies - Tvoi Dom, Russia Furniture and Garden Centre Extension




  Well known city brand   A developed brand culture and

known for personal services   Aim to be local, friendly décor

destination - latest products in stock

  In transition - developing their brand profile, customer communication and store formats

Case Studies - Starik Hottabych, Russia Creating a difference – Décor Specialist


ZENIT ST.PETERSBURG | CASE STUDY | PAGE 6

Case studyStarik Hottabych - Retail, Brand Identity and store concept

STARIK HOTTABYCH | CASE STUDY


ZENIT ST.PETERSBURG | CASE STUDY | PAGE 7

Case studyStarik Hottabych - Retail, Brand Identity and store concept

STARIK HOTTABYCH | CASE STUDY


 Foreign investment dominated by big box development  Format cloning  Fight for anchors – limited availability  Opportunity to develop smaller, more flexible and local format types  Urban concept stores  Break the category management rules!  Respond to local needs – broad and shallow product assortment?  Community stores – hard and soft goods  Local sourcing  Cost effective in relation to the regional opportunity and size of local catchment area

Russian market future challenge

Future challenge - Opportunity

“The more globalisation takes hold, the more powerful local players can become…. The stronger the forces of globalisation, the more important provenance and personalisation become.”

Russian DIY retailer opportunity is to develop:

•  Differentiated brand profile and culture

•  Leverage local reputation and community interaction

•  Relevant accessible offers

THANK YOU

Business

DIY and Household Congress Presentation