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Uncomfortable Reality

Six eCommerce and Retail Trends

Reid Greenberg, Senior Vice President,

eCommerce & Digital

eCommerce and Omnichannel Conference

April 25-26 San Francisco, CA

Kantar Retail © 2017

An Uncomfortable Reality

Digital enables “everywhere commerce”

2


Agenda

Setting the Stage: Trends, Macro, Shopper

6 Digital Trends to Prepare For

Next Steps

4

1. Setting the Stage: Trends, Macro, Shopper

5


2016 Represented a Step-Change in Online Shopping

41%37%

24%

14%

9%6%

42%39%

26%

15%11%

8%

47%

40%

30%

20%

12%10%

Apparel (net) Leisure (net) HBC (net) Grocery Non-FoodItems (net)

Home Goods (net) Grocery Food Items(net)

2014 2015 2016

Source: Kantar Retail ShopperScape®, July 2014–2016 6

Online Shopping Incidence, by Broad Merchandise Categories(among all primary household shoppers)

Significant changes in online shopping frequency across all broad merchandise groups

Kantar Retail © 2017 Source: U.S. Department of Commerce, Kantar Retail analysis and forecasts 7

16%All-Category Average

Online Share of Sales by Category*, 2011-2021F



Toys & Sporting Goods

Furniture & Home Furnishings

Apparel & Footwear

Books & Magazines, Music & Videos

Food & Alcohol

Electronics & Appliances,

Computer & Office Products

Drugs, Health & Beauty Care

* Read as: In 2021, 5% of Food & Alcohol spending will be online and, conversely, 95% of Food & Alcohol spending will remain in stores.

16% Online Share Category Average Across All Goods by ’21

‒ Online share of food/alcohol will be three-times as high from 2016 to 2021, HBC/drug more than doubles


Underlying Shopper Demands: Stress-Free Continues to Rise in Importance

Along with the belief that the physical store is NOT the best way to reduce stress

55%

58%59%

53%

52%

57%

2014 2015 2016

Rank "Stress-Free Shopping" Among Most Important Factors When Shopping

Say Online* is Best Way to Have Stress-Free Shopping Experience

Source: Kantar Retail ShopperScape®, January–May 2014, 2015, and 2016 (first series); March 2014,

2015, and 2016 (second series)8

*online = via computer, tablet, or smartphone

How Shoppers Feel About Stress-Free Shopping


Stuff Loses Share to Not Stuff…

Leaving less money for goods

By 2020, every American household will spend…

$2 on services for $1 on goods

• Healthcare services

• Waste management

• Recreation

• Social services

Source: U.S. Department of Commerce and Kantar Retail 10

Household Spending on Goods

$3.9 $5.2

$4.1$3.0

18%

Retail Sales

Total Economy (i.e., GDP)

Total Household SpendingIncluding Services

$11.5 $15.6

$16.8 $22.8

USD (Trillions)

2013 2020


Even Within Stuff, Your Stuff Loses Share to Other Stuff

Source: Kantar Retail analysis 11

Therapeutic

equipment

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1996 2001 2006 2011 2016 2021

Food Away From Home

Alcohol Away From Home

Drugs Therapeutic Equipment

Misc. Durable & Nondurable GoodsSporting Equipment

Consumer ElectronicsPets & Supplies

Health and Wellness continues to rise.


Exploring the New and Premium Fresh: 90% of the Top 100 Brands in US CPG

Lost Share Last Year

Driving retail’s prioritization of health and wellness is a new premium: Shoppers are willing to pay

more for health and wellness clarity, convenience, and personalization

Source: Kantar Retail analysis 12

Health & Wellness

Better for you” attributes define quality

Sustainability & Local

Building a sense of “trust”

Authenticity

Sense of “real”

Preservation

Purpose

why

what

how

Transparency


Seventh Generation, Patagonia, Tom’s, Even Amazon are Great Examples.

Source: Seventh Generation company site, Kantar Retail analysis 13

Sustainability

Transparency

Purpose


The Fundamentals of Retail Remain the Same

It is all just shopping to consumers who still want easy, enjoyable, experiences

Source: Kantar Retail research and analysis 14

• Shoppers are redefining convenience:

• Seeking out stress-free shopping experiences

• Looking to streamline their shopping routines

• Carefully managing their time, making SPEED important

• Finding ways to make life easier and more enjoyable

• How YOU can Help:

Engage with your shoppers however, wherever and

whenever they want, on their terms. Stand for something.


An Uncomfortable Reality

Digital enables “everywhere commerce”

15

eCommerce = MeCommerce

2. Six Digital Trends to Prepare For

16


Six Key eCommerce and Retail Trends Emerging

Source: Kantar Retail research and analysis 17


1. Mobile and Social Commerce

Shopping is quickly moving to the small screen

Source: Kantar Retail ShopperScape®, March 2015 and 2016 18

24%

20%

18%

16%

15%

Having access to information aboutproducts or brands

Discovering new products or brands

Having stress-free shoppingexperience

Completing my shopping as quickly aspossible

Having fun/enjoying myself

Percent of Gen Y Parents Who Think Smartphone is

Best Venue for Accomplishing Shopping Goal

PPT Change

vs. Year Ago

All Shoppers

All Gen Y

Gen Y Parents95%

92%

72%

Percent of Shoppers Who Own a Smartphone(among primary household shoppers)


Desktop Is Rapidly Becoming Less Relevant

Share of U.S. Digital Media Time Spent by Platform

Source: comScore 19


Social Media Platforms Increasingly Shoppable

Introducing commerce capabilities to capitalize on massive, mobile-first audience

Source: Kantar Retail research and analysis, social media website 20

45% 34%

45%

68%


2. Subscription Economy

Meal kit innovation, new competitors, partnerships, and strategic acquisitions accelerate

Source: Kantar Retail research and analysis, Kantar Retail ShopperScape®, August 2016, Company

website21

6%

Surprise Subscription

5%

Regular Subscription

3%

Meal Kit Delivery

Penetration of eCommerce Delivery Models(share of primary household shoppers who have used service)


Embarking on a Journey to Predictive-Replenishment

Shoppers are willing to give up non-experience products in favor of auto-replenishment

Source: Kantar Retail research and analysis, Company website 22

To

day

To

mo

rro

w

Subscription

management

1-touch

ordering

No-touch

ordering

Integrated

replenishment

Predictive

replenishment

“If you don’t have an AI strategy, you

will die in just a few years.” - Devin Wenig, CEO, eBay

By 2025, 5% of all U.S. eCommerce

transactions will likely consist of some type

of auto-replenish or subscription process.

This is equivalent to the annual sales of

approximately 800 Walmart Supercenters!


3. “Instalivery”: Instant Delivery

On-demand culture, elevated expectations for immediacy

Source: Kantar Retail research and analysis, WSJ 23

“We can eliminate that [extra] trip in your

life. Customers really like it. It’s something

that really helps them accomplish a task. - Stephenie Landry, VP of Prime Now


The Rise of Third Party Partnerships

Requires minimal upfront investment, allows retailers to test and learn quickly

Source: Kantar Retail research and analysis, company website 24


3. Voice Commerce

What a difference one holiday season (and a new device coming to market) makes

5%

7%

October 2016: currently use voice-controlled home assistant

January 2017: currently own voice-enabled assistant/speaker

Source: Kantar Retail ShopperScape®, October 2016 and January 2017 26

Voice-Enabled Smart Home Assistant Ownership:

October 2016 vs. January 2017

*Data for October 2016 and January 2017 come from non-identical questions, and note slight differences in description of technology

Note: Arrows indicate significant difference between time periods (95% confidence level)

That’s a 40% jump in ownership in 3 months!


Conversational Commerce the Next Retail Frontier

Augmenting and easing daily interactions; creative opportunities abound

Source: Kantar Retail research and analysis, Fast Company 27

"Imagine what happens with Hot Wheels and

Thomas the Train when you have this connected

hub. Do you hear sound effects? Can you have

greater interactions?” - Robb Fujioka, senior vice president, chief products officer at

Mattel


5. Amazon Logistics

Controlling fulfillment costs by creating an independent delivery system

Source: Kantar Retail research and analysis, company reports 28

“Creating an air transportation network is

expanding our capacity to ensure great delivery

speeds for our Prime members for years to come.” – Dave Clark, Amazon’s Senior Vice President of Worldwide Operations, August

2016

$4.5

$6.5

$9.0

$8.7

$11.5

$16.2

4.7%

4.7%

5.3%

4.4%

4.5%

4.6%

4.7%

4.8%

4.9%

5.0%

5.1%

5.2%

5.3%

5.4%

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

$18.0

FY 2014 FY 2015 FY 2016

Shipping Revenue Outbound Shipping Costs

Net Shipping Costs as % of Sales

US

D B

illio

ns

Shipping Costs(1) vs. Shipping

Revenue(2), FY 2014-FY 2016

Net S

hip

pin

g C

osts

% o

f S

ale

s(1) Shipping costs includes sortation and delivery centers and transportation costs.

(2) Shipping revenue includes a portion of amounts earned from Prime membership and amounts earned from FBA programs related to shipping services.


Logistics as a New Revenue Stream

2015 10-K listed as a “transportation service provider”

Source: Kantar Retail research and analysis, company website, company reports 29


6. The Power of Partnerships

Unconventional adjacencies to drive traffic in-store

Source: Kantar Retail research and analysis, Kantar Retail store visits, Houston Business Journal 30

Burt’s Bees Display at Barnes & Noble

Nutella Café at Loblaw, Toronto

Birchbox at Gap Chobani Café at Walmart


Store of the Future

Source: Accenture, Kantar Retail analysis 31

Smart mirrors allow

customers to “virtually”

try on different

clothing.

Shoppers can call

for assistance, check

inventory, and use

touch screens on

robots or shopbots.

Beacons serve

up information, such as

purchase histories and

personal preferences, on

frequent store visitors to

help sales associates

deliver high-touch service

to their most valuable

customers.

IoT-connected digital

signage pushes content

to stores in real time,

customized for specific

stores, cities, or regions.

Personalized, digital coupons are

pushed to a top shopper when she

enters, based on past purchases.

RFID solutions track

inventory as it moves

across the supply chain.

Customers can use a

smartphone or wearable

device to quickly scan an

item and call up product

information, reviews, or

social media opinions.

Dude! FOUND IT!

Smart shopping

carts can help

shoppers navigate

store aisles based on

their digital shopping

lists.

Smart shelves

in store detect

when inventory

is low.

Source: Insider Trends, David Dalziel 32

3. Next Steps

“Future digital will be less

visible, less of an add on

and more of an integrated

story.”


What Now?

Source: Kantar Retail Analysis 33

Key Learnings Planning Implications

Uncomfortable is the new norm. Get used to it.- Continue to build out internal capabilities, seeking ways to

educate and then inform. Know that you’ll always feel behind.

Health & Wellness is bigger than ‘other stuff’

- Growth isn’t coming from FMCG. Think about creating solutions

for our over-worked, over-stressed, limited-time shopper’s lives.

Where can you really partner with your retailers?

C&C baskets are bigger than in store. $125 vs $60. This

shipping format will EXPLODE!

- Partner with retailers to optimize for curbside. Use digital do drive

this. 90% of Americans live within 15 mins of a WMT. Partner with

Kroger!

Ecommerce is only part of the digital picture. An entirely

‘Everywhere Commerce” needs to be developed. Mobile is

key.

- A complete digital strategy includes interaction at every point

along the path to purchase, including locating stores, creating lists,

checking prices, product research, sharing content and

purchasing. These touch points occur both in and out of stores,

and shoppers are increasingly using technology to simplify and

improve the process. Help ensure this content is readily found,

optimize for mobile and partner with your retailers.

Future-Stuff is coming here.

- AI, auto replenish, AR, Voice are all here and rapidly picking up

speed as well as the remainder of the ‘6 trends’. Invest in

technology enablers that can help you leap ahead of competitors.

Be bold.


Establishing a Digital Innovation Think Tank

Development of technological capabilities and a digital culture is critical

Source: Kantar Retail research and analysis, company website, Fast Company 34

Store No. 8- Tech startup incubator

- Headed by Seth Beal and Katie

Finnegan

- Based in Silicon Valley

- Recruit and build startups that

specialize in emerging

technologies (i.e., robotics, virtual

and augmented reality, machine

learning and artificial intelligence)


For further information please refer to

www.kantarretailiq.com

Contact:

Reid Greenberg

SVP, eCommerce and Digital Retail Insights

T: +1 (802) 255 4474

[email protected]

@reid_greenberg

@kantarretail

www.kantarretail.com

35

http://www.kantarretailiq.com/

mailto:[email protected]

http://www.kantarretail.com/

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