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CUSTOMER ENGAGEMENT AN OMNICHANNEL

PERSPECTIVE

Deborah Weinswig Executive Director – Head Global Retail & Technology Fung Business Intelligence Center Global

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DEBORAH WEINSWIG

•  Executive Director and Head of Global Retail & Technology for the Fung Business Intelligence Centre

•  Award-winning global retail analyst and a specialist in retail innovation and technology

•  12 Years at Citi Research where she served as Head of the Global Staples & Consumer Discretionary Team

•  #1 ranking analyst by Institutional Investor for nine years

•  Mentor to Silicon Valley accelerators including Alchemist Accelerator and Plug & Play

•  Certified Public Accountant, with a Masters of Business Administration degree from the University of Chicago

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FUNG BUSINESS

INTELLIGENCE CENTRE (FBIC)

•  Established in 2000 and headquartered in Hong Kong

•  FBIC (formerly known as the Li & Fung Research Centre) has served as the knowledge bank and think tank for the Fung Group

•  New York–based Global Retail & Technology research team follows broader retail and technology trends

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AGENDA •  Omnichannel Trends

•  Current Trends

•  Future Trends

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OMNICHANNEL TRENDS

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THE STATE OF SHOPPING

•  Internet shopping is about functionality, not fun

•  As more shoppers move online, in-store shopping will increasingly focus on leisure shopping and the quality of experience

•  Online/offline division is becoming artificial as consumers browse, compare and buy across channels

•  More complex than simply “showrooming”

•  Click & collect provides the functional transaction coupled with in-store experience

•  Stores must be set up to deliver a quality experience

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OPPORTUNITY COST OF

NON-OMNICHANNEL

10% Lost revenue

= $110+ mn

in lost revenue lost for 1 billion retailer

Source:  RIS-­‐EKN  Customer  Engagement  Study,  2014,  EKN-­‐Toshiba  Omni-­‐Channel  ExecuDon  Study  

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EVOLUTION OF CORE OMNICHANNEL

EXECUTION

Source:  RIS-­‐EKN  Customer  Engagement  Survey,  2014  (100+  retail  execuDves  surveyed  in  the  US)  Figures  are  %  of  total  respondents  

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OMNICHANNEL CUSTOMERS:

MORE PROFITABLE BUT UNKNOWN

76%

Don’t know how who their Omni channel customers are

Source:  RIS-­‐EKN  Customer  Engagement  Study,  2014,  

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RETAILERS STILL USING OLD KEY PERFORMANCE

INDICATORS

Top KPI’s that retailers measure

Sales/ channel 82%

Customer satisfaction

Average margin

57%

45%

Customer Lifetime Value

22%

Share of wallet

Customer engagement across channels

8%

Source: RIS-EKN Customer Engagement Study, 2014

KPI’s that they need to pay more attention to

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B&M STORE: THE OMNICHANNEL

H U B

1 in 2

have deployed digital coupon reading in-store

66%

of retailers have currently deployed store specific social

media initiatives

46%

have store specific websites

75%

will use their store as a delivery hub for online orders by 2015

Sources:  RIS-­‐EKN  Customer  Engagement  Study,  2014;  EKN  Future  of  Store  Study,  2013  

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AMAZON: GOLD STANDARD

OF EXECUTION

Mobile Commerce and Engagement

1 Amazon (56%)

2 Starbucks (9%)

3 Apple (7%)

Unified Commerce

1 Amazon (28%)

2 Macy’s (9%)

3 Nordstrom/Wal-Mart/Best Buy (7%)

Customer Engagement

1 Amazon (33%)

2 Nordstrom (8%)

3 Best Buy/ Starbucks (5%)

Source:  RIS-­‐EKN  Customer  Engagement  Study,  2014  

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CURRENT TRENDS

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UBIQUITY OF MOBILE DEVICES

•  Constant connectivity enables shoppers to find product details, compare prices and buy anything anywhere

•  Digital devices are essential part of any shopping journey

•  94% of global internet users go online to research purchases in at least one category

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UBIQUITY OF MOBILE DEVICES

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WEBROOMING BEATS

SHOWROOMING

•  Webrooming, or researching online and then buying in a store, has become the norm and more common than showrooming

•  69% to 46% respectively according to Harris Poll

•  Amazon remains top destination for both showrooming and webrooming

Millennials Prefer

Webrooming

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WEBROOMING BEATS

SHOWROOMING

Why Shoppers webroom?

•  Don’t want to pay for shipping

•  Don’t want to wait for delivery

•  Like to touch and feel a product before they buy

•  Like to ask store to match better prices found online

•  Like the option to return to store if needed

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BRICK-AND-MORTAR INVESTING IN

TECHNOLOGY

•  B&M retailers using tech for

–  Delivery & pickup

–  Personalization

–  Inventory tracking

–  Beacons

–  Wearable tech

•  More than 40% used a smartphone or tablet for Black Friday activities (NRF)

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RETAILER TECH SPENDING

•  Capex of selected retailers was approximately 3.3% of sales in 2014, flat with 2013

•  Technology capex:

–  CVSHealth: 37% of 2014 capex on technology and other corporate initiatives

–  Nordstrom: 35% of 2014 capex; plans to spend $4.3B (5% of sales) over next five years

–  Walmart: 29% of 2014 US capex; spending “$1.2-1.5 billion in e-commerce Web sites and mobile commerce applications”

–  Home Depot: “Tilting investments towards interconnected retail and technology”

0%  

1%  

2%  

3%  

4%  

5%  

6%  

7%  

Nordstrom

 

Macy's  

Kohl's  

TJX  

Walmart  

Target  

JCPe

nney  

Home  De

pot  

CVS  

Sears  

Capex/Sales   Average  

2014 Capex/Sales for Selected Retailers

Average = 3.3%

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GAMIFICATION STIMULATES

NEW CUSTOMER BEHAVIORS

•  Gamification is the use of elements from computer and video games in real-world or other activities

•  These elements stimulate our psychological needs for desire, incentive, challenge, achievement and rewards, feedback, and mastery

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SOCIAL MEDIA AS NEW MARKETING

PLATFORM

•  Internet now ruled by pictures and videos

•  Consistent but slowing growth in social media usage expected worldwide over the next 5 years

•  Most of the growth in Asia

•  Growth in the number of users is decelerating

•  Many social media experiences now on a mobile phone

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MOBILE APPS BURY THE BROWSER IN

SHOPPING

The browser is dead …

BROWSER        

1999-­‐2014  

… long live app nation!

Source:  Flurry  AnalyDcs  

88% 82%

12% 18%

Smartphone Tablet

Mobile App vs. Browser Split

App Browser

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FUTURE TRENDS

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DIGITAL ADVERTISING

TO DOMINATE

•  Digital receiving new money because marketers can prove that digital works (Forrester)

Sources:    Forrester,  PWC,  and  eMarketer.com  

40  

60  

80  

100  

120  

2012   2013   2014   2015   2016   2017   2018   2019  

Radio   Digital   TV  

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CLICK & COLLECT IS COMING

•  Digital receiving new money because marketers can prove that digital works (Forrester)

5  

13  

35  

0   5   10   15   20   25   30   35  

Germany  

US  

UK  

%  of  shoppers  saying  they  "currently  use  click  &  collect"  

Source:  Planet  Retail,  2014  

Survey  Base:  15,000  respondents  across  10  countries  

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THE LINE WITH CLICK & COLLECT

IS BLURRING

•  More than two-thirds of UK shoppers used click & collect services in 2014

•  76% of UK shoppers will click & collect by 2017

•  Amazon launched its lockers in Sept. 2011

•  Only 17% of US consumers used click & collect in 2013

•  Walmart started testing a drive-through grocery pick-up service in Oct. 2014

Walmart    Drive-­‐Through  

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Brick-and-Mortar vs. Click & Collect

A shopping facility where consumers can buy or order goods from the store’s website and then collect them from a store location convenient to them

Brick-and-mortar refers to businesses that have physical

stores that offer face-o-face customer experiences.

Consumer can visit and enter physically to see touch and

purchase merchandise

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E-COMMERCE OPENING

BRICK-AND-MORTAR STORES

•  Excluding Amazon, most online pure-plays hit a $1 billion revenue ceiling

•  Establishing a brick-and-mortar presence aids in brand building and growing consumer awareness

•  Easier to get VC funding with technology connection in the apparel/retail business model

•  eBay UK offers collection through Argos general merchandise stores

•  ASOS offers collection through Collect+, a network of 5,800 local shops such as newsagents and convenience stores serving as collection points

•  Amazon signed up to Doddle, a new network of collection-only stores concentrated on railway stations

•  More in 2015

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SUBSCRIPTIONS NIBBLING AWAY AT

BRICK-AND-MORTAR

•  Consumers love the convenience and dependability of the services

•  Retailers love subscription models as a source of recurring revenue

•  Consumers find value in avoiding the drudgery of shopping for everyday commodity items

•  They appreciate the benefits of curation

•  Many consumers use subscriptions to treat themselves to a monthly gift

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SUBSCRIPTIONS NIBBLING AWAY AT

BRICK-AND-MORTAR

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ONLINE GROCERY IS A NEW GROWTH AREA

•  Global Grocery Market: $4 Trillion

•  U.S. Grocery Market: $600B

•  Percent Online: 1.2%

•  Approx. 12% of Internet users have bought grocery items online

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TAP & PAY POISED FOR

HUGE GROWTH

$3,737

$6,815

$10,451

$16,240

$23,472

$34,160

2014   2015   2016   2017   2018   2019  

CAGR  =  50%  

US  Contactless  Mobile  Payment  Market  ($  Millions)  

%    of  All  Mobile  Payments  

7%                      10%                      13%                      16%                  20%                    24%  

Source: Forrester Research, October 2014

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Beacons and Location-Based

Marketing

•  What is a beacon?

•  The best solution for improving the in-store retail experience

•  2016 is expected to be the year of the Beacon

•  US installed base expands rapidly, but consumer response is key to further penetration

$41.0

$444.0

2015 2016

Beacon-Influenced In-Store Retail Sales ($ Billion)

Source: Bi Intelligence, Feb. 9, 2015

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MICRO-LOCATIONS IMPROVE IN-STORE

EXPERIENCE

They know where you are!

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UBERFICATION ENBODYS THE

SHARING ECONOMY

MODEL

•  Uber is the most visible player (and driver) of the “sharing economy”

•  Changing consumer mindsets will challenge retailers

•  Opportunities for retailers: How much is convenience worth?

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CYBERSECURITY DEMANDS

SMARTER INVESTMENT

•  Important decisions will have to be made regarding how to address privacy and security

•  Retailers need to spend smarter, not necessarily more on cybersecurity

•  Holistic, enterprise-wide cyber-risk detection and prevention are critical first steps

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THANK YOU