Retail Technology Vision 2013

1 Retail Technology Vision 2013

Introduction

The Accenture Retail Technology Vision 2013 examines the technologies that will have the greatest impact on the retail industry over the next three to five years. We have simplified these trends into three categories:

• Customer experience – exploring the technologies that impact a customer’s experience in the store, online and across different channels.

• Data and analytics – identifying new forms of data and new opportunities to improve operations and better understand customer behaviors.

• Infrastructure and core IT – demonstrating how cloud and related technologies could streamline operations, lower costs and strengthen the business overall.

The Accenture Technology Vision 2013 highlights seven technologies that will have a transformative effect on businesses over the next three to five years.

Read about these trends at www.accenture.com/technologyvision.

In this retail industry overlay of the trends outlined in the Accenture Technology Vision 2013, we begin with a view of how technology – and the customer – is changing in retail.

We then illustrate the future retail landscape through five stories, each designed to highlight different aspects of technological change, along with the associated opportunities. These scenarios might seem optimistic to some, but in many cases, they are early examples of these technologies in action at small start-ups and more innovative retailers. Finally, we’ll outline a roadmap for retailers to prepare for – and succeed in – the seamless, technology-enabled future.

Retail Technology Vision 2013 2

Tomorrow’s high-performing businesses will use technology to strengthen their relationships with customers, leverage their data, optimize and secure their critical systems, and enable their workforces with leading tools.

Technology is also enabling customers to take more control of their shopping experiences, and new approaches to shopping and fulfillment are opening the doors to competition that would not have been viable just a few years ago – and it’s all changing at warp speed.

Look at Amazon. Less than 20 years ago, “eCommerce” created Amazon.com, which has transformed from a small, innovative bookstore earning $1 billion in 1999, to the world’s largest online retailer with net sales of $61.09 billion in 2012 – a 27.1 percent increase from the previous year.1

More and more retailers are digitizing categories and channels to deliver a seamless experience. The stakes continue to change, and the danger lies in not keeping up.

Ever-present technology for today’s non-stop customer• Smartphones. The majority of shoppers

will have mobile apps and connectivity anywhere they go. Of the 1.88 billion mobile phones to be sold in 2013, 1 billion units will be smartphones, compared with 675 million units in 2012.2

• Social media. Pinterest shoppers are spending significantly more per order, averaging between $140-$180 per order compared with consistent $80 and $60 orders for Facebook and Twitter shoppers, respectively.3

• Cloud computing. We expect the retail cloud market to triple from $4.2 billion in 2011 to an estimated $15.1 billion in 2015.4

• Wearable technology. Sales associates wearing Google Glass, for example, could be equipped with timely information about customers and products.

• In-memory databases and Big Data analytics. Retailers can construct offers in real time based on up-to-the-minute customer behaviors.

• 3-D printing. Shoppers can customize products through 3-D printers like MakerBot and Shapeways, and engineers can prototype products with greater speed and ease through this nascent technology.

These developments show that the technologies underpinning the retail experience are in the midst of a dramatic shift in terms of capability and ubiquity. The technology available to the customer, the sales associate and the back office will force many retailers to rethink their business at a fundamental level.

Technology Outlook – 2013 and Beyond

We believe that every retailer must be a digital retailer. The pace of technology is accelerating, and the barrier to entry is lowering. It’s no longer enough to be friendly with customers, have good industry connections or have a presence in the most desirable shopping area in town.

Retail Technology Vision 2013 2

3 Retail Technology Vision 2013

On an average day, smartphone users spend 132 minutes communicating and using social media on their phones and 79 percent have their phone on or near them for all but two hours of their waking day.6 This mobile growth is global. Brazil and India are forecast to be in the top four countries for smartphone shipments by 2018.7

Increasing numbers of customers are browsing and buying online and via mobile devices. For example, the amount of time consumers spent with online retail jumped 104 percent to 34.9 billion minutes in February 2013, compared with 17.1 billion minutes in February 2010.8 Mobile payments are expected to quadruple to $630 billion by 2014.9 And these digital consumers are of all ages.

A recent Accenture survey shows that all generations are catching up with “Millennials” in terms of technology adoption and usage. More people, regardless of age or background, are using smartphones, tablets and the Web. The same survey showed that customers are increasingly comfortable buying online when shopping outside of

normal store hours. The result is a new breed of 24/7 shoppers, with rising expectations about the quality and consistency of their digital shopping experience. This new type of shopper isn’t fickle; they are simply better at finding the best choices for themselves, using the best tools available.

The power shift: from retailer to customerToday’s customers hold the reins, choosing when, why and how they buy products. Their primary loyalty is to themselves, and they will happily switch allegiance to whomever provides the best service. They guide each other through sharing and reviews, exerting more influence than traditional advertising. The average customer mentions brands 90 times a week with family, friends and co-workers and 53 percent of people recommend companies and products on Twitter.10 They expect a retailer to serve them quickly, consistently and seamlessly across channels. If not, a better retailer is literally only a click away.

The opportunityThe technology changes of the last five years have changed customers and their expectations. Looking ahead, these changes will continue to influence the relationship between the customer and the set of retailers they choose to interact with. Some may view these changes in a negative light. We prefer to think of them as opportunities; opportunities for retailers to view technology as an enabler to providing richer experiences that appeal to discerning customers and that differentiate the business enough to stand out among a sea of online and offline competitors.

Customer Outlook – Every Customer is a Digital Customer

Today’s customers expect to be able to connect with the retailer digitally – because they live digitally connected. Global Internet usage will more than double by 2015, and most of these users will be mobile.5

3 Retail Technology Vision 2013

“The next five years will bring more change to retail than the last 100 years.”11

CEO of shopkick.

Retail Technology Vision 2013 4

Each of the five stories in this section illustrates what the retailer of the future will need to do to be successful. What can and should be done now to keep up with the expectations of the seamless customer? How can retailers outpace a growing number of tech-savvy competitors? What next steps can retailers take to capitalize on trends and define the innovative changes that will mark the next generation of commerce and customer service?

Retail Outlook – Five Stories of a Future Shaped by Technology

All Channels Lead to Annalisa

SNAP

Item in stock

Pin it!

Annalisa has simple needs, and today, she needs a t-shirt. Starting with her tablet, Annalisa opens the app for her favorite retailer.

The app remembers her prior purchases and personal information, and in just a couple of touches, Annalisa is looking at a selection of women’s t-shirts, in her size, sorted by her favorite styles and colors. Two touches later, a red scoop neck is in her cart and she’s ready to check out.

She wants to wear the shirt this coming weekend, but it will be three days before the shirt arrives. The app proactively searches for alternative delivery options (because the system knows that extended delivery can be frustrating for active customers like Annalisa). The app quickly finds the same shirt in stock at a nearby physical store. One last touch, and she has checked out. The shirt is hers. Grabbing her keys and her mobile phone, she’s out the door and on her way to the store.

Annalisa arrives at the store. She heads to the service counter, which uses the Wi-Fi signal from her phone to validate her identity. Moments later, bag in hand, she’s making her way to the door. That’s when she sees the shoes...

Using the retailer’s mobile app, she snaps a picture of the shoes. The app recognizes the shoes and automatically gives her the price and the availability of her size. She posts them on Pinterest and adds them to her wishlist, all in one action. Someday soon, she’ll be back to try on the shoes, and she’s confident that she’ll find them waiting for her.

Back for those shoes?Annalisa’s experience spanned four different channels, two different devices and two possible delivery methods. She was able to perform the

transaction on one device, validate it on another and pick up the merchandise at the store – seamlessly. Her experience was tailored to her history across all of these channels.

This retailer doesn’t see Annalisa as an “offline customer” or a “mobile customer.” She’s a customer. They don’t segment their inventory across channels – they have one distributed inventory across stores. Compared to other, less forward-looking retailers, Annalisa’s experience is seamless, convenient and the retailer met her needs in the best possible way. Chances are, she will return for those shoes.

5 Retail Technology Vision 2013

Empowered Employee Elizabeth

5 Retail Technology Vision 2013

BETH

10:38am

Display Instructions.Step 1.

Some clothing may require to adjust in the back for better results.

11:52am

Email Picture?

Elizabeth is enjoying her summer break from college, working for one of the more fashionable stores in her town. “Beth,” like many of her peers at work, has had minimal training. Instead, Beth has been given a small, wearable display that she dons like a pair of stylish glasses.

When Beth arrives at work, the glasses allow her to quickly clock in and see any immediate to-do items. Task #1: put a new display in the store window. As she wrestles with a pair of mannequins, her display provides hands-free access to images and instructions that show her the outfits that need to be displayed and the poses of the mannequins. When she’s done, she stands back to admire her work and uses the glasses to take a quick snapshot. She tells the glasses to send the image to her manager.

Next, Beth sets out to help a customer named Annalisa who is looking for a pair of shoes she saw on an earlier visit. After asking permission to access Annalisa’s wishlist, Beth quickly finds the shoes Annalisa wanted in stock. She brings them to her and as Annalisa is trying them on, Beth sees additional shoes that are suggested based on Annalisa’s past purchases and interests. Beth brings over a second pair and Annalisa tries them on. Minutes later, Annalisa leaves the store smiling, carrying two new pairs of shoes.

The technology touchFor Beth’s employer, the wearable technology is a game changer. With one simple device, they’ve seen a surge in customer satisfaction and sales. The average sale has gone up 15 percent, with equivalent gains in customer visits to their physical stores. At the same time, they no longer need to invest as much in up-front training. Sales people are empowered, staying longer, selling more and building lasting relationships with customers because of the high-caliber service. Technology has allowed them to deliver personalized, meaningful experiences for customers, while driving growth for the retailer.

Retail Technology Vision 2013 6

Renovating the Customer Experience with Pallav

HARDWARE STORE

????

HEYE’S

HEYE’SPallav Ahmed ProfileBusiness OwnerAge: 39Education: BA (Hons) EngineeringInterests: WoodworkBudget for Kitchen:£4500 (uninstalled)

Pallav is planning a large kitchen-remodeling project, using the best tools online to get great ideas. He’s looking at home improvement blogs and online magazines. He browses the Houzz app on his iPad and uses Flipboard to aggregate all the popular home design feeds into one magazine-like interface. He pins the things he likes and invites friends to comment and share ideas on his Pinterest boards.

All of Pallav’s research is happening outside of traditional marketing channels. He’s not watching commercials on HGTV, and he has yet to step into a home improvement store. Pallav’s “invisibility” should be worrisome to most retailers, but not to Heye’s, an innovative chain of home improvement stores.

Through online analytics, Heye’s is able to see that Pallav has been exploring options for roughly three months, and that his tastes have been consistently biased toward a modern design. He’s been watching many of the YouTube videos, fitting a strong do-it-yourself profile. They’ve offered Pallav the choice of allowing Heye’s to follow his Pinterest page or to sign in to their site with his Facebook profile. When he does, Heye’s begins to analyze his pins to better understand his interests. They analyze his profile, looking at employment history, age, education and interests, to gain a better understanding of what he can afford, which DIY projects he’s capable of, and how much of his free time he’ll actually be willing to spend doing the work himself.

Using the data they’ve gathered, Heye’s offers Pallav three potential starter packages, with product choices that fit his budget and skill level, along with instructional materials, and strong references for contractors who can do the more complex and time-consuming work.

Connecting with the digital customerLast year, Heye’s made a strategic decision to dedicate half of its marketing budget to non-traditional channels. Now, they post images on Pinterest, run a Twitter feed and YouTube channel of home improvement tips and tricks, and have even created strategic relationships with popular online tools. They can watch a potential customer’s journey from Pinterest ideas to their website. Their investment in a strong mobile app has allowed them to track that journey into the store and to the point of sale. In essence,

they have come to know the customer, and his or her intentions, in a way that was never possible before.

In Pallav’s case, this rich level of customer insight has taken place before he is even a customer. Based on their analysis of Pallav’s online behavior and patterns, Heye’s locked out the competition before they were even considered. Like a good contractor, Heye’s not only knows Pallav as a customer, but as a homeowner and active family member. Because of this, Pallav sees Heye’s as a trusted partner in his next big project.

7 Retail Technology Vision 2013

Online or Bust for Phoenix Electronics

PHOENIXe l e c t r o n i c s

PHOENIXe l e c t r o n i c s

In store now.

PC

PHOENIXe l e c t r o n i c s

PHOENIXe l e c t r o n i c s

Phoenix Electronics is a global electronics retailer with many physical stores. A few years ago, their business started to suffer as customers found better deals and better information online.

Their stock price started to crumble, and many investors walked away. A few continued to invest. Today, those investors are very wealthy.

Shortly after reaching rock bottom, Phoenix began investing heavily in their online presence, quickly reaching parity with other online retailers in terms of price, service and enhanced product information. They were now a viable online business, but they still had a large footprint of physical stores. Some analysts saw this as a liability, but Phoenix turned it into an asset.

A key differentiator was their mobile app. Phoenix’s app provides a seamless bridge between the customer’s online and in-store experience. When customers arrive in store, the app guides them to the products they are most interested in and it informs sales associates of the customer’s needs so that they can assist. The app also features videos and responsive interfaces.

Customers can use the app to scan products and see reviews from like-minded customers. In some cases, the app offers specialized pricing to specific customers. This mode of scanning provides Phoenix a view of what customers are doing as they browse, and

what their intents are. This allows Phoenix to better tune all aspects of the store, from inventory, to sales associate training, to promotions at both the store level and the individual level.

Other improvements were made to in-store technology. When customers could find everything they needed on their PCs and tablets, they had little reason to visit a Phoenix store. To counter this, Phoenix added technology that was better than what most consumers had. Holographic displays allow customers to view products in different virtual rooms and in different configurations. Interactive technologies allow couples to manipulate and discuss different options, with skilled designers contributing to the conversation. The stores have become destinations for collaboration and experiences that extend far beyond what is available online.

Toward seamless successBefore this transformation, Phoenix shareholders were concerned that the stores would face challenges from customers using mobile apps to compare prices with other competitors. Phoenix solved this problem by making their mobile app better, easier to use and more seamless across channels. Many customers choose to purchase from Phoenix because they value this level of relationship, experience and continuity across their purchases. In some cases, Phoenix still needs to compete on price, but it does so intelligently, based on inventory levels, current traffic or customer value.

Today, Phoenix is a strong online retailer and a very strong brick-and-mortar retailer, in large part because they don’t think of the two separately. By enriching digital shopping with neighborhood stores, and maintaining a continuing relationship, Phoenix is differentiated as a seamless retailer.

Retail Technology Vision 2013 8

Behind the Scenes, Ahead of the Curve for Val’s

VAL’SSINCE 1908

TWEET!TWEET!TWEET!

NEW!

VAL’SVAL’S

VAL’S

SOLD OUT SOLD OUT SOLD OUT

SOLD OUT SOLD OUT SOLD OUT

SOLD OUT SOLD OUT SOLD OUT

Val’s is a large, upscale department store, serving the cutting edge of fashion for over 100 years. Val’s merchants have a long history of working with suppliers to understand fashion trends, forecast sales and stock the products that their customers want most.

However, in the past few years, trends have accelerated and markets have become more segmented and specialized. A couple of years ago, Val’s predicted this change, and set up a digital capability that allows their merchants to better understand trends in real time, and make more intelligent buying decisions based on that insight.

At first, they relied on “social listening,” scouring Twitter feeds to see what their customers were saying about Val’s. Today, their tools are much more sophisticated. Val’s still monitors social channels, analyzing magazine articles to better understand what consumers are interested in. They also monitor the fan pages of clothing designers, watching for surges in popularity of certain brands or products. They have tools that help their merchants see the most popular “looks” on Pinterest and similar sites. This information influences the merchants and also the team that designs the in-store displays.

With a better understanding of the trends, merchants are in a better position to work with suppliers. They reach out to their Facebook fans and ask them which products they’d be likely to buy. By analyzing the data associated with each response, they are able to see which demographics and geographies are likely to buy which products. In short, they can make smarter decisions about which products to buy, which stores should hold the most inventory and how each product should be marketed. Last year, Val’s credited this system with substantially lowering their overall inventory costs by 13 percent, reducing the number of clearance items (because they are making wiser choices up front) and increasing their Net Promoter Score by 25 percent.

The digital differenceWhile their competitors are still focusing on the digital customer experience, Val’s has transformed themselves into a fully digital business. They are making the best use of digital channels and analytics to be as nimble and dynamic as their customers, thereby redefining the customer experience.

9 Retail Technology Vision 2013

Paths to Innovation - Actions to Stay Ahead of the Curve

Every retailer is at a different point in the journey to realizing the vision of being truly seamless – maximizing the power and promise of technology across channels, and across the enterprise. But how can a retailer quickly move from what’s now to what’s next, capturing some of the differentiating capabilities outlined in the retail stories?

Accenture has created a roadmap that outlines the journey, and the steps along the way. These paths to innovation illustrate – at a high level – where retailers should focus efforts to build a competitive edge for the future. Progression along each path will be dependent on the specific business needs of each retailer, but we believe each retailer will travel through three distinct waves, ideally as quickly as possible.

Streamline digital experiences

with enhanced personalization and real-time business

optimization

Today

Develop insight strategy based on digital metrics

Define metrics for success

Understand and evaluate current data capture

Define comprehensive digital experience roadmap

Develop store strategy

Develop sales force enablement roadmap

Inventory and cull current digital efforts

Reformat core data for new analytics

Develop cloud roadmap

Establish private cloud for core enterprise systems

Determine whether organization is structured for digital business

Harmonize store experience with digital channels

Provide employees with digital enablement technologies

Implement “ubiquitous PoS”

Ensure real-time store data (inventory, etc.) is shared across channels

(Re)develop online and mobile experiences to provide seamless experience

Create integrated social channels

Augment digital experiences with deeper personalization

Develop real-time, responsive experiences

Build real-time analytics infrastructure to allow for real-time insight and offers

Develop and test personalization and optimization algorithms

Develop “fire and forget” analytical engines for offers and experiences

Build scalable data store for core data

Populate data store with current and new data

Reorganize to ensure there are no organizational barriers to innovation and cross-channel cooperation

Integrate external data sources to augment data

Develop API system to allow data access

Reorganize internal reporting mechanisms

Report “Seamless Metrics” to shareholders and partners

Analytics

Core IT

Business

DigitalStore

Continue to refine seamless digital shopping

experience

Seamlessly leverage data,

in real time, across multiple channels

and touch points

Optimize IT to continually adapt to the needs of a “Digital Business”

Vision

B U I L D I N G T H E F O U N D A T I O N

I N N O V A T E & A D A P T

L E A D A S A S E A M L E S S D I G I T A L B U S I N E S S

11 Retail Technology Vision 2013

Fit for the future

Each “wave” of the journey outlined in the diagram presents a critical milestone and point in time where the retailer can pause, measure progress and plan next steps. Below are some key considerations for each of those waves:

Building the foundation. Rather than focusing on the same efforts as the last 10 years – building a better online infrastructure, M&A activity, and entering into mobile apps and social engagement – plan for the future by building a scalable technical infrastructure and an organization that is aligned to tomorrow’s business realities.

Innovate and adapt. This wave should be dedicated to building an analytical base to support new modes of customer engagement and personalized service, along with a build-up of the different channels that deliver those seamless experiences.

Lead as a seamless digital business. Going forward, the future will be characterized by a truly seamless set of systems, the business and IT will support continual adaptation, the digital experience will be supported by analytics and scalable IT, and the in-store experience will be integrated with digital channels.

The future may seem uncertain at times, but we do know that every retailer must be a digital retailer to outpace competitors and appeal to the unique wants and needs of today’s customer. The task may seem insurmountable, but new tools and technologies can ease the journey.

The five stories in this paper illustrate some of these tools and technologies and offer a view into retail of the future. Some retailers have embraced these disruptive technologies, others are just getting started. No matter where you are on the journey, the finish line is always changing. By getting started today and following the paths to innovation, you can take a bold step into the future.

Accenture has invested time, resources and thought capital into helping retailers plot their own unique course into the technology-fueled future.

Learn more about actionable steps to seamless in our point of view titled: “Seamless Technology: Unleashing an Integrated Shopping Experience” available at www.accenture.com/seamlessretail.

Seizing the Opportunities 12

Take the next stepFor more information please contact:

GlobalChris Donnellychristopher.donnelly@accenture.com

Asia PacificTakaaki Haraguchi takaaki.haraguchi@accenture.com

EuropeAdrian Bertschingeradrian.bertschinger@accenture.com

North AmericaDave Richards david.t.richards@accenture.com

References1 Internet Retailer, Amazon sales top $61 billion in 2012 January 29, 2013

2 Gartner; Forecast: Devices by Operating System and User Type, Worldwide, 2010-2017, 1Q13 Update March 28, 2013

3 Direct Marketing News; Infographic: The Rising King of Social Sales; Retrieved April 2013 online at http://www.dmnews.com/infographic-the-rising-king-of- social-sales/article/290699/

4 Accenture; A New Era for Retail: Cloud Computing Changes the Game; Retrieved May 2013 online at http://www.accenture.com/us-en/Pages/insight-retail-cloud-computing.aspx

5 Bloget, Henry; The Business Insider, The Future of Mobile; Retrieved March 2012 online at http://www.businessinsider.com/the-future-of-mobile- deck-2012-3#-11

6 IDC report, Always Connected: How Smartphones and Social Keep us Engaged, sponsored by Facebook; March 2013

7 Social Media Today, How Emerging Markets Transform the Mobile Internet; July 11, 2013

8 comScore Inc., State of the U.S. Online Retail Economy, Q1 2013; Retrieved May 2013 online at http://www.comscore.com/Insights/Presentations_and_Whitepapers/2013/State_of_the_US_Online_Retail_Economy_Q1_2013

9 Juniper Research

10 Richards-Kunkel, Erin; Business2Community; 15 Social Media Statistics That Every Business Needs to Know; Retrieved February 26, 2013 online at http://www.business2community.com/social-media/15-social-media-statistics-that-every-business-needs-to-know-0418173#SwDWT6GMU857ZHQx.99

11 Mobile Commerce Daily; Retrieved February 2013 online at http://www.mobilecommercedaily.com/shopkick-leads-other-shopping- apps-for-frequency-length-of-use

About Accenture Accenture is a global management consulting, technology services and outsourcing company, with approximately 275,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, 2013. Its home page is www.accenture.com.

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Please note that the case studies and accompanying illustrations referred to on pages 4-8 are hypothetical, and any similarity they bare to existing companies is coincidental only.

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