Brian Young

What are we going to talk about today?

The change in retail landscape and the consumer’s use of technology has created

a challenging environment for the retailer with new threats and channels blurring the

lines across segments as they reduce friction

Consumers desire a frictionless experience and retailers need to respond with

investment in technology

A step approach to front end evolution creates a path for innovating to meet

consumer desires

What are we going to talk about today?

The change in retail landscape and the consumer’s use of technology has created

a challenging environment for the retailer with new threats and channels blurring the

lines across segments as they reduce friction

Consumers desire a frictionless experience and retailers need to respond with

investment in technology

A step approach to front end evolution creates a path for innovating to meet

consumer desires

In the past, market pressures kept competition between stores and

occasionally between segments, but not between channels

Polarization in the Consumer Marketplace

Convenience

Mass Merchants

Warehouse

Grocery

HBA/Drug

Pet SuppliesBook

Office SuppliesElectronics

JewelryDepartment Stores

Apparel Luxury Jewelry

Luxury Retail

~25 years ago

Home GoodsDIY

Footwear

Commodity Competitive Spectrum Luxury

Lik

elih

oo

d o

f in

sto

re p

urc

hase

Min. Cost

Max

Immediacy

Max

Experience

To

uc

h-p

oin

ts

pe

r c

us

tom

er

1 to 100

100 to 1

1 to 1

Consumer-

furnished

mobile

Internet of things

time

Social

shopping

Sources: NPD Group; US Census Bureau, Toshiba analysis.

POS

POS +

self-

service

Inflection

Point: Emergence of

the Smart

Phone (~2007)

Control Retailer Consumers Consumer + Context

In-Store Mobile Shopping Behaviors

Today Tomorrow

• Showrooming

• Social shopping

• Coupons

• Cross touch point shopping

• Personalized pricing and

promotions

‘Information Age’ ‘Consumer Age’

A proliferation of touch points, combined with the market pressures, shifted power in the marketplace to consumers

Airport deliveryUK

• The store is the leading channel for instant

gratification

• Segments benefit out of “Necessity” Shopping

(Grocery, HBA/Drug, Gas/ convenience)

• The desire / want to touch, test, try on or feel a

product also gives certain segments advantages

(Jewelry, Automotive, Apparel)

Instant Gratification ‘Instant Enough’ Gratification

Roam DeliveryEurope

Source: PYMNTS.com, “Volvo’s Online Delivery Experiment” February 28, 2014

• Consumers can opt to have products delivered to their car

• Delivery companies use a one-time digital key to unlock the

Audi and place the package inside

• Plans to become the first airport in the world to offer a

personal shopping service.

• Order from 24 to 72 hours prior to arrival from all top shops

in Terminal 2.

Prime, Dash, Pantry, nowNorth America, UK, Germany

• Projected to have 50 million US subscribers and 60-80

million worldwide

• Prime Members spend twice as much

• Prime now in 27 markets that account for 50% of GDP

Generally, physical stores have the advantage of ‘instant gratification,’ however, emerging alternatives have caught up

The increasing market pressures push certain retail segments or

categories of merchandise to eCommerce

Polarization in the Consumer Marketplace

Commodity Competitive Spectrum Luxury

Lik

elih

oo

d o

f in

sto

re p

urc

hase

Convenience Store

Mass Merchants

Warehouse

Grocery

HBA/Drug

Pet Supplies

Book

Office Supplies

Electronics

Jewelry

Department Stores

Specialty Grocery

Apparel

Luxury Jewelry

Luxury Retail

Min. Cost

Max

Immediacy

Max

Experience

Market

Pressures

Home Goods

DIY

Footwear

Today

Hypermarket

Sporting Goods

High-end Specialty RetailDanger Zone Danger Zone

The challenge for the retailers is that too many store processes are

mired by friction

Shop

$ Pay

$ Pay

Shop

Taking the customer’s money should be as frictionless as possible for a shopper

• Groceries delivered within same

day of order

• Free delivery for orders over $50

with Prime Fresh membership

• Currently in 4 US markets and

signed a deal with USPS to

deliver in new markets

• Subscription based

replenishment of everyday

items

• Free delivery for orders over

$25

• Instacart service available in 4

US markets

Non-traditional fulfillment options are providing services that can

rival brick and mortar locations…And deliver frictionless solutions

• Online delivery service within

1-2 hours

• Employees shop in partner

stores as regular customers

with free delivery for orders

over $35

• Currently in 20 US markets

And technology advances are changing how retailers interact

with consumers…and bring the store experience to them…..

Household Product Replenishment

• A built-in barcode scanner and microphone allow one to quickly add

items to a shopping list

• Makes ordering for products convenient

• Only in pilot program and only connects with Amazon orders

Voice Recognition Interactive Device

• A voice enabled “always on” device that has access to information

on the internet and to amazon shopping

• Makes ordering for products convenient

• Only connects with Amazon orders

Amazon understands the power of making it easier for the consumer to shop

Branded Ordering Buttons

• Buttons that when pressed automatically place the item in an

Amazon order

• Makes ordering for products convenient…albeit kid dangerous

• Only in pilot program and only connects with Amazon orders

……Frictionless

But…..Consumers have many reasons for why they still choose

the store

0% 10% 20% 30% 40% 50% 60% 70%

Able To See, Touch, And Try Merchandise

Get Product Immediately

More Certain About Fit/Suitability of Product

Able to Return Items Easily

To Support Local Retailers

Enjoy The Physical Store Atmosphere

Get The Lowest Price

Reasons That Shoppers Buy In-Store Instead of Online

Exclusive to In-Store Shopping Omnichannel

Consumers are blurring the lines across segments as they evolve

on why they buy and their expectations

Convenience Consumer Product Specialty

Necessity

• Personal Items

• Baby Formula

• Phone Charger

Replenishment

• Groceries

• Paper Products

• School supplies

Special Event

• Dinner Party

• Holiday

• Hockey Game

Browsing/Leisure

• Apparel

• Electronics

• Appliances

Specialty Product

• Ring

• Dress

• Caviar

Price

Availability

Speed

Attributes/Brand

Experience

Substitutes

Multiple Vendors

Price

Availability

Speed

Attributes/Brand

Experience

Substitutes

Multiple Vendors

Price

Availability

Speed

Attributes/Brand

Experience

Substitutes

Multiple Vendors

Price

Availability

Speed

Attributes/Brand

Experience

Substitutes

Multiple Vendors

Price

Availability

Speed

Attributes/Brand

Experience

Substitutes

Multiple Vendors

Buying Event

Influence

buying

decision

Commodity Competitive Spectrum Luxury

Convenience

Mass Merchants

Warehouse

Grocery

HBA/Drug Pet SuppliesBook

Office Supplies Electronics

Jewelry Department Stores

Apparel Luxury Jewelry

Luxury Retail

Home GoodsDIY

Footwear

Understanding the buying event and why consumers shop a brand

allows the retailer to focus on solutions that drive behavior

• Inventory Mgmt.

• Fast Checkout

• Self Service,

mobile

• Fast Checkout

• Central Pricing

• Targeted

Promotion

• Self Service,

mobile

• Product Info

• Omni Channel

• Mobile Associate,

lookup and pay

• Self Service,

mobile

• Product Info

• Mobile Associate,

lookup and pay

• Central Pricing

• Clienteling

• Self Service,

mobile

• Product Info

• Omni Channel

• Mobile Associate,

lookup and pay

• Clienteling

• Omni Channel

Necessity

• Personal Items

• Baby Formula

• Phone Charger

Replenishment

• Groceries

• Paper Products

• School supplies

Special Event

• Dinner Party

• Holiday

• Hockey Game

Browsing/Leisure

• Apparel

• Electronics

• Appliances

Specialty Product

• Ring

• Dress

• Caviar

Buying Event

Solution Required

Despite channel hopping and brand touchpoint explosion, stores

remain the lynchpin of the shopping experience…

#1: Store#2: Traditional Media

#3: Friends and Family

#1: Store#2: Search Engine

#3: Retailer Website

#1: Store#2: Web

#3: Mobile

68% who research via retailer websites

61% who research via search engines

47% who research via mobile apps

AwarenessBrowse &

ResearchPurchase

Consumers want store AND digital, not store OR digital

Source: Toshiba + IBM Institute for Business Value, 2012; all numbers global

Who purchases in store?

56% who research via social media

83% who research in store

…and consumers aren’t the only ones seeing the value

Retailers want store AND digital, too

Source: L2 Digital

What are we going to talk about today?

The change in retail landscape and the consumer’s use of technology has created

a challenging environment for the retailer with new threats and channels blurring the

lines across segments as they reduce friction

Consumers desire a frictionless experience and retailers need to respond with

investment in technology

A step approach to front end evolution creates a path for innovating to meet

consumer desires

In order to battle emerging threats, retailers have to understand

consumer desires

Minimizing friction will drive higher adoption of technology as well as

loyalty and advocacy

• One size fits all does not meet

the spectrum of consumer

desires

• Consumers want to choose

the best shopping and

checkout solution for them

• Empower the consumer to

build loyalty and advocacy

• The value of time influences

consumers more than ever

before

• Desire to minimize time in the

shopping process

• Considering alternative forms

of shopping

• Consumers desire a positive

experience while shopping

• Want the store to “know” them

and treat them accordingly

• Desire targeted interaction

that appeals to them

Consumers value their time Consumers want options Consumers want an

experience

Make it Fast Make it Easy Make it Relevant

Consumers are wanting to checkout on their terms in the most

frictionless manner possible

Consumers want checkout options

•49% of consumers want more self service options in mass merchandiser warehouses and stores**

•20% desire to pay via mobile phone or smart watch at self service kiosks**

Consumers value their time

•88% of consumers want a faster checkout experience*

•50% of consumers cite slow checkout speeds and long lines as the top shopping complaints*

** http://www.retale.com/corporate/survey-20-of-millennials-dont-like-interacting-with-cashiers-during-checkout/

* http://www.ift.org/Food-Technology/Daily-News/2015/July/21/Shoppers-want-faster-checkout-interactive-packaging.aspx/

Consumers – particularly young – want visibility and satisfaction

Age 5

0-5

9

Age 6

0+

40%

30% Age 1

8-1

9

Age 2

0-2

4

Age 2

5-2

9

Age 3

0-3

9

Age 4

0-4

950%

60%

70%

80%

60%

2015 Study

Global Average

% of respondents indicating the ability to see if

an item is in-stock before going to the store is

important in the selection of a retailer, by age

41%

Employees use Mobile

to fix an out of stock

issue

46%

34%

I use my own Mobile

to fix an out of stock

issue

39%

% of respondents

indicating this capability

is important in the

selection of a retailer

Study Year

2014 2015

Consumers – also want personalization

Source: Toshiba + IBM Institute for Business Value, 2015

2014 2015

Study Year

Has store associates who can offer personalized promotions

based on my purchase history/preferences

While some consumers definitely prefer a cashier, 63% of

consumers are open to using self-checkout

* MSNBC Poll : http://business.newswire.com/news/2011/07/08/7043552-what-do-you-think-of-self-checkout-lanes

36%

37%

27%

Shopper Attitude of SCO I love them I hate them I use them when I have to

Removing the friction within the self checkout process drives adoption

Responding to consumer desires, self checkout growth has been

consistent, but with different drivers across geographies

0

50

100

150

200

250

300

350

2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017* 2018* 2019*

Global Self Checkout Installed BaseUnits K

North America Western Europe Other

Growth in Asia and Latin America as

large stores spread and consumers

seek choice.

Europe rapidly expanding self-

checkout as labor costs rise, shoppers

adopt, and smaller footprints become

more the norm in high-street stores.

North America steady, some large

users growing, a few de-installing,

configurations shifting away from large,

belted lanes to basket-appropriate form

factor.

Source: RBR Retail data and projections, combined with Toshiba analysis and industry experience.

Even the “growth” in a mature NA market are higher than shown as several of the largest

retailers are in the process of replacing older lanes (WalMart, Kroger, etc.)

Millennials have a greater affinity for self service and are

expected to represent 30% of retail sales by 2020 ($1.4 Trillion)*

* Accenture Report: “Who are the Millennial Shoppers? And what do they really want?, 2013

• 57% of Millennials and 55% of Gen X

shoppers prefer self checkout, globally**

• 20% of Millennials use self service devices

to avoid interaction with cashiers***

• 26% want to be able to pay via

smartphone***

** Cisco Study: Customer Experience Research, Retail Shopping Results, 2013

** http://www.retale.com/corporate/survey-20-of-millennials-dont-like-interacting-with-cashiers-during-checkout/

Retailers need to deploy solutions such that they minimize

friction…

• Scanning items (35%)

• Entering coupons (24%)

• Understanding the service screen (16%)

• Paying with cash (15%)

• Entering product codes (14%)

* http://www.retale.com/corporate/survey-20-of-millennials-dont-like-interacting-with-cashiers-during-checkout/

Key areas of frustration for customers using SCO*

The first iterations of SCO were not frictionless, customer

adoption suffered as a result and some of these issues continue

to exist

Many options are in play to meet the two trends for front-end

restructuring… and they differ importantly

Cu

sto

mer A

uto

no

my

Retailer Automation

Traditional/Conv

SCO

Scan Portals

ITAB

Easyflow

Consumer

Mobile

Traditional

Checkout

Making the existing

checkout process faster

ITAB Easyflow

– Manned

ITAB

TwinFlow -

Manned

Toshiba No

Touch Checkout

(Concept)

Solution Minimize Space

Increase Throughput

Larger Basket Size

Drive Adoption

Rate

OptimizeLabor

TraditionalSCO

Mobile

HybridScan/Bag

Hybrid Belted

Automated

The portfolio of solutions in conjunction with conventional lanes

solve different operational requirements

The overall front end strategy should be evaluated at the portfolio level

The store and its interaction with consumers is not declining,

just evolving

1. Store Without Walls

• Stores expand with seamless omni-channel

capabilities to meet the needs of consumers as

they shop before and while they are in the store

• Mobile and Self Service options deliver checkout

experiences that coincide with a shopper’s desire

to optimize their store time

• Personalization begins before the consumer is in

the store and continues while at the store

2. Store Without Cashiers

• Checkout labor disappears as mobile and

automation matures, and in-aisle touchless

checkout becomes a possibility

• The traditional front-end becomes a customer

service center for omni-channel shoppers

• Personal Shopping becomes a differentiator as

labor is redistributed to create an experience that

drives shopper loyalty and more conversions on

sales

Today Not too distant future

What are we going to talk about today?

The change in retail landscape and the consumer’s use of technology has created

a challenging environment for the retailer with new threats and channels blurring the

lines across segments as they reduce friction

Consumers desire a frictionless experience and retailers need to respond with

investment in technology

A step approach to front end evolution creates a path for innovating to meet

consumer desires

The step approach will convert the front end from frustrated

shopping to frictionless shopping

• Conventional Checkout with lines

• Pay Stations and lags

• Lookup of items

• Annoying System Guidance

• Handling items more than once

(place in cart and bagging)

Frictionless ShoppingFrustrated Shopping

• Walk Through Checkout

Front End Commerce in the store simply becomes Checkout

Step 1: Engagement• Implement consumer mobile and/or automated scanning to improved the self service functionality

• Analytics recommend deals to consumers

• Omni Channel solutions are developed

Step 2: Automation• Improve functionality of self service options while bringing beacon technology into the store

• Analytics begin to predict “next best option” for how to appeal to consumers

• Omni Channel solutions become viable options

Step 3: Transformation• RFID and/or optical technology is incorporated into checkout process

• The store knows the consumer with the use of analytics and location

• Omni Channel solutions are full offerings

The future trends for store checkout will respond to meet

consumer expectations…some retailers are farther down the path

Most retailers are not ready to take a leap of faith and invest in the end

state, an improvement over time is usually needed

Multiple solutions are required to deliver the future state

Frictionless self service and

enhanced mobility/payment while

delivering next best option

recommendations

Step 2

Automation

Frictionless checkout with

personalization while providing a

dedicated omni-channel function

Step 3

Transformation

Step 1

Engagement

Improved self service while

providing base omni channel

function

Mobile

Shopping

Automated

Checkout

Promotions /

Analytics

Store Based

Click/Collect

BeaconsPersonalization

Solution

Dedicated

Omni-Channel

RFID and/or

Image

Technology

No Touch

Checkout

Engagement

• Consumer mobile and automated scanning start to streamline self-service

• Analytics are utilized for loss prevention and insight for loyalty and promotions

• Omni-channel services of click and collect and home delivery are available but not heavily adopted

Mobile Pay

Stations

Automated

Scanning

Mobile Customer Service

and Attendant Docking Area

Step 1

• Scan automation matures while No Touch checkout reduces friction for small baskets

• Mobile incorporates interactive shopping lists that ease the shopping experience

• Analytic engines with beacon technologies create in-depth personalized interactions with consumers

• Checkout labor re-focused on handling exceptions and complex transactions not suited to automation

• Omni Channel solutions of partial pre-order fulfillment, click/collect, and home delivery are viable options

No Touch

checkout

AutomationStep 2

Drone-assisted Image

shoppingNo Touch checkout

pushes into the aisle

Dynamic, location-aware

mobile-interactive shelf-edge

Future opportunities will be driven by disruption that combines

touchpoints, channels, and the need for insights

Across segments and geos, sharing information and being

reached via phone is on the rise

24%

Location

28%32%

Social Handle

38% 38%

Mobile for

Text

42%

64%

Email

64%

2014 2015

% of respondents indicating they would share

contact information with a trusted retailer

Flow control / exit area

(walk-through

pedestals)

Payment pedestals

For non mobile

payments

RFID Cart

Readers

Automated

Scanning

No Touch

Checkout

Beacons

Image Readers

TransformationStep 3