‘The Shape of Convenience® 2012:The Shape of Convenience® 2012:the winning strategies for the next 3 years’

Scott F Annansrcg

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Change is?

I d t i fit bilitIn order to improve my profitability,I will provide my customers with …?

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Are we ‘fit for purpose’?

• Is refuelling a ‘distressed purchase’ or a ‘destination purchase’?destination purchase ?

• Are we satisfying customers’ frequent & d d kl limmediate needs quickly & easily?

• Are our retail positioning and customer • Are our retail positioning and customer proposition clear?

• Are we balancing needs:

Strategy SuppliersStrategy Suppliers

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Store volume increases

20% with a new designdevelopmentdevelopment

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Store volume increases

< 150% with offer developmentdevelopment

20% with a newdesign development

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The Convenience market

UK size and growth USA size and growth +4% CAGR

+5% CAGR+6% YOY

+8% YOY

5% CAGR

Source: srcg Shape of Convenience, IGD, NACS, RNCOS India

© srcg 2009© srcg 2009

UK Convenience ‘the bigger market’

UK size and growthUK size and growth

+6% CAGR

+4% CAGR

Source: srcg Shape of Convenience, IGD, NACS, RNCOS India

© srcg 2009© srcg 2009

UK & I changed over 5 years … at speed!

Customer offerHigh

Fresh & ‘shopping missions’ lead

Tobacco, snacking, fuel, and top-up lead

Low

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1990 2008

Big box ‘use of data’ the catalyst

Convenience basketHigh

Low

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1990 2002 200820011995 2003

Driving change

1. Shopper Behaviour

2. Consumer Needs

3. Government4. Competitive 3. Government Legislation

4. Competitive Environment

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The last 12 months … pick your growth

High

Low

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2008 2009½

f. Source of profit 2012

nity

Store

port

un

Fuel Store

Store

Store profits

Op Fuel

Fuel

Franchise fees

Tobacco fees

2005 2012

Capex reduction

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2005 2012Source: Shape of Convenience® 2009

f. Source of profits 2012

Today’s assortment

Today’s assortmentni

ty

assortment assortment

Fresh & Healthyport

un

y

Op

Fresh & Healthy

2005 2012

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2005 2012

Source: Shape of Convenience® 2009

1. Winning strategies … a clear strategy!

Shoppers’ missions

High

Shoppers missions 2012

ct d

Multi route to market

Company owned & operatedPr

otec

Lead

operated

Products2005

© srcg 2009© srcg 2008 Low

Products

Global oil retail strategyGlobal oil retail strategy

Market sophistication/ h d Litres /site/ shopper needsHigh

Alliances

Insert

Franchise

Insert

Controlled backcourt

Disconnect Fuels tie-in

Fuels Total siteLow

© srcg 2009© srcg 2008Source: Shape of Convenience® 2009

Revenue opportunity

2. Satisfying customer needs: the big 4

Impact StoreImpact Store CategoryCategoryImpact StoreConcept

Impact StoreConcept

CategoryManagement

CategoryManagement

Efficient Efficient State-of-the Art State-of-the Art Efficient

DistributionEfficient

Distributionthe-Art

IT Systemthe-Art

IT System

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Project Impact Project Impact

Traditionalconvenience

stored t

FoodserviceOil products

MultiMulti--service offeringservice offeringproducts

p

FinancialOther products

IMPACTIMPACTConcepts Concepts

productsp

and services

Customerservice

Co-brandingservice

Proprietarybrands

g

Price Optimization strategies

Micro-marketmerchandising

product mix

Creativepromotionalcampaigns

Store designStore design

3. Data is the weapon of choice

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Copyright © 2009 Tesco.com

At heart of Tesco’s success

Products ServicesChannels

Rewarding loyalty

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Copyright © 2009 Tesco.com

4. Financial services

“Tesco Personal Finance could deliver £1 billion inprofits per annum, more than double the present levelof just under £400 million a year …services are a biggerand faster-growing markets than food … consumersand faster growing markets than food … consumerslook to make every pound work harder … it is a goodTime for Tesco to expand its presence”. Sir Terry Leahy, 2008

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5. Clear customer positioning

+

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Clear retail proposition

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Clear retail proposition

ResultsSales + 150%Sa es 50%Basket size + 70%Transactions + 50%Transactions + 50%Brands ‘halo’ growth + 22% F l l + 5%Fuel volumes + 5%

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6. Doing the basics ‘A little better’

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Tobacco … invest in behaviour change

© srcg 2009© srcg 2008Source: Shape of Convenience® 2009, client programs

Retailer incursions

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Integrated enablers

They rebalance efficiency, investment and effective market responsemarket response

I t t d S l Ch i

Insight

Integrated Supply Chain Formats

Suppliers Buying Logistics RetailNetwork

Category Management

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The retail engine

DriversTotal # of Shopping

Trips

% transactionscontaining

the Category

TransactionSize (# items x

$ value per item)

Store SalesValue

%Gross Margin

ActualProfitX X = X =

Total StoreStrategies

TrafficBuild

Basket Size

Basket Profit

T ti C tN TransactionBuildCategory

Strategies

Conversion%

CategoryProfit

New products &

services

• Hi Penetration• Hi Frequency• Hi impact –

reset• Day-part

• Larger sizes• Product affinity• Complementary

add-ons

ProductTactics

Low volumeLow frequency

products

• Convenience• Loyalty

• Low price sensitivity

Space rentalSupplier fees

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Business value

Key Focus Areas Value LeversCUSTOMERS

Convenience

• Macro range & space• Price optimization• On-shelf availability• Basket size

SalesCustomer loyalty

• Customer insight• Customer retention• Up-selling

• Promotions

Operating

Customer traffic • Customer retention• Up-selling• Advertising

• Cost of Goods SoldBusiness Operating Cost

Lean Retailing Cost of Goods Sold• Site operating costs• Markdowns• Wastage

Business value

Customer

Better associates

Tailored offering

• Customer Service• Micro range & space • Store Clustering• Store layout/adjacencies

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CustomerExperience Optimized in-stocks

• Store layout/adjacencies

One store 0% to 150%es

Delivery Offer Communication

% s

ale

Sitesignage

Famous For

A%

Disciplines Tailored solutions

Pricing Area Marketing

Macro space

Offer

StoreA t

Adjacencies

p

StoreDesign

Assets

In-Storetraining

Enforcer

© srcg 2009 Components

Enforcer

The winning strategy

‘Develop a distinctive & shopper-centric solution/s that drivesDevelop a distinctive & shopper centric solution/s that drives a competitive advantage within your market and provides a

blueprint for the future’

Market Shopper/Consumer Brand

s

An offer that is distinctivein the local market and provides clear points of

Exceed the needs of target consumers and

change shopping

A distinctive look and feel that is aligned to the brand and which gi

c Pi

llars

difference over key competitors

behaviour resonates with shoppers

Stra

teg

Financial vision

The rollout of winning concepts to drive increased sales, profit M² & customer loyalty to all stores

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p o t & custo e oya ty to a sto es

srcg Small stores & fuels’20 years’ heritage

Global knowledgeof best in class retailingProducts of best in class retailing

Retail strategy Category managementFormat developmentFresh development

Retailer expertise

Fresh developmentConversion

Data marketingVisioning

Retailer expertise

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Scott F Annan+ 44 7774 696142+ 44 7774 696142www.srcg.com

© srcg 2005

Important Copyright Notice

This presentation has been developed for

C-store Connections UK & I 2009

June 17, 2009 and is the property of srcg Ltd

Duplication, distribution or use of this material in any form is strictly prohibited without prior written consent of srcg Ltd.

This information contained herein is confidential and must not be used without prior written consent. Data used within this presentation is

indicative and should not be used in any business literature.

© srcg 2005