zybowskia the new retailers - plma · the winners (and new players) develop secondary formats that...

The New Retailers

Speaker: Anne ZybowskiDirector of Retail InsightKantar Retail

Presented by:

THE NEW RETAILERS

Anne ZybowskiDirector of Retail Insights

March 25, 2011

© Copyright 2011 Kantar Retail

AGENDA

• Setting the Context: The Path to 2011

• Online: Changing the Game

• Preparing for the Future: The New Retailers

3


•Personal relationship

•Customized/localized assortment

•Credit integral to business

•Served… not sold to

20th Century Retail Began as “Mom & Pop”

4


But Things Change…Businesses Evolve & Grow With Technology

Hypermarket

Brands/PriceDepartment

CatalogSuperstore

Supermarket

Discount StoreBig Box

SpecialistSmaller Box

Niche

1900-1940s1900-1940s 1940s-1960s1940s-1960s 1960s-1990s1960s-1990s 20002000

A&PA&P A&PA&P

Internet

Sears / A&PKmart / Woolworth’s

Wal-Mart / Kroger/Target

5


Modern Retail Began ~1962

6

Garden City, Michigan Rogers, Arkansas

Meijer (Thrifty Acres 1962) – Grand Rapids, MIRoseville, MN

1963

Saint-Genevieve-des-bois, France


ExplorationExploration

ConcentrationConcentration

PenetrationPenetration

MaturationMaturation

PostPost--ModernModern

Kantar Retail Market Evolution ModelApplied to Last Half Century of Retail Evolution

Modern retailers learning how to configure stores that satisfy shoppers and produce positive cash flow Modern retailers using similar formats compete with each other and clear winners begin to emerge

The winners (and new players) develop secondary formats that access new markets and opportunities

More efficient scaled competitors push smaller competitors to differentiate, perish or be acquired.

Square footage expansion restricted or impossible, and retailers forced to pursue branding, productivity optimization and format innovation to find growth

1960s

1970s

1980s

1990s

2000s

7


At the End of Maturation, It Was a Wal-Mart World

8

Rank in 2000 Company Name Sales in $

millions Stores #Countries

# Banners

1 Wal-Mart $ 183,602 3,991 10 13 2 Carrefour 69,985 8,681 35 29 3 Kroger 46,861 3,541 1 30 4 Home Depot 44,325 1,134 5 4 5 Ahold 43,717 7,764 19 44 6 Ito Yokado 43,034 15,386 11 9 7 Metro Group 42,478 1,921 22 13 8 Kmart Corp 37,030 2,105 4 3 9 Albertsons 36,762 2,512 1 8 10 Target 36,118 1,307 1 8 Top 10 Totals/Averages $ 583,911 48,342 12 16

• 6 of the top 10 US based, and Ahold predominantly US-centered• Geographic expansion fueled by Carrefour/Metro• 3 of the US retailers are US-only operators


Up Until the Great Recession, Square Footage Was the Way to Grow…

9

91

148

100

141119

159 157

69

22

59 73 72 75 76 74 74

020406080

100120140160180

Mill

ions

of N

et S

quar

e Fo

otag

e A

dded

by

Year

(Kan

tar R

etai

l Cha

ins)

2010–2016E Average: 71 MM SqFt

2008 - 2009:Square footage added by only

most well-grounded chains

2001–2007 Average: 131 MM SqFt

Source: Kantar Retail analysis, MVI-Insights.com


Post-Modern Market = Hypercompetition

?

10Source: Kantar Retail research and analysis


– Race to get small is heating up• Walmart’s push into (smaller)

space makes headlines, but real news is below the fold

– Small may be the new BIG, but small isn’t new – changing economic, shopper, and operating reality is…

• Step changes to the box, assortment and value proposition to enhance access and relevance in a no/slow growth environment

– Race to win share of relevance• Older, poorer, tech enabled,

urban, more diverse (Hispanic)

Fresh & Easy, Walmart Express is Coming to an Urban Market Near You!

11Source: Kantar Retail research and analysis


Have We Come Full Circle?

12

Smaller, personal,

right-sized

Bigger, faster,

more is better


AGENDA




13


Online Retailing: We’ve Come a Long Way Since the Dot.com Era

14

1994 1995 1996 1997 1998 1999 2000+1994 1995 1996 1997 1998 1999 2000+

Source: Kantar Retail research & analysis


A Quickly Growing Share of Retail SalesWhat Happens When > 10% of Total Retail Sales?

15

Share = Right ScaleAnnual E-Commerce Retail Sales

(USD Billions and Share)

Source: Kantar Retail analysis, U.S. Department of Commerce

Compound Annual Growth Rate2000-2005 27.2%2005-2010 11.6%2010-2015 11.5%


Channel CAGR'05-'10E

CAGR'10E-'15E

Apparel 0.7% 4.2%

Clubs 5.1% 5.1%

Category Specialist 0.4% 4.0%

Convenience 2.1% 2.4%

Department -3.0% 2.7%

Discounter 7.9% 7.9%

Drug 5.3% 4.8%

Supercenter 7.2% 4.2%

Mass Merch (no SC) -2.6% -1.7%

Non-Store Retail 9.5% 13.0%

Supermarket 2.4% 3.6%

KR Channel Totals 2.7% 4.4%

US Sales by FormatNon-Store Retail Driven by Online = 3x Market & SC Growth

Source: MVI-Insights.com

$1,477

$1,687

$2,092


Aligning for Growth: 2015E ForecastRanked by Sales $ Added

Source: MVI-Insights.com

* By sales added; USD billions

**Rank RetailerSales Added

('05-'10E)

Sales Added

('10E-'15E)

Sales CAGR

('10E-'15E)

% of KRTotal Added

('05-'10E)

% of KR Total Added ('10E-'15E)

% of All US Retailer Growth

('10E-'15E)1 Walmart 59.8$ 51.8$ 3.1% 18.7% 12.8% 7.3%2 Amazon.com 13.6 33.2 23.0% 4.3% 8.2% 4.7%3 Kroger 19.7 25.9 5.9% 6.2% 6.4% 3.6%4 Costco 16.4 20.9 6.3% 5.1% 5.2% 2.9%5 Walgreens 21.8 20.5 5.9% 6.8% 5.1% 2.9%6 CVS 24.2 20.2 6.1% 7.6% 5.0% 2.8%7 Target 14.3 15.0 4.2% 4.5% 3.7% 2.1%8 Lowes 5.5 14.4 5.3% 1.7% 3.6% 2.0%9 Apple 11.6 13.0 12.2% 3.6% 3.2% 1.8%10 Home Depot (11.5) 11.8 3.6% -3.6% 2.9% 1.7%

175.5$ 226.6$ 5.3% 55.0% 56.0% 31.8%143.5$ 178.1$ 3.6% 45.0% 44.0% 25.0%319.0$ 404.7$ 4.4% 100.0% 100.0% 56.8%

Total US ACV (Census Bureau) 327.9$ 712.5$ 4.1% n/a n/a 100.0%Note: CVS includes the acquisition of Longs

Top 10 Expansion RetailersAll Other KR Chains in USTotal KR Chains in US


Setting Standard for Online MerchandisingPersonalization, Recommendations, 1-Click, Sort Your Way

18

Source: Company website, Kantar Retail analysis


Frustration-Free Packaging: Reinventing More than Just the Delivery of Products

19

Source: Kantar Retail analysis, Company website & presentation


Changing Shopping Behavior – PermanentlySubscribe & Save Began in Grocery in 2007

• Launched “Subscribe & Save” grocery items in May 2007– 15% flat discount on all items– Most items in bulk/club-size package size

• Continue to expand program and categories

Source: Kantar Retail analysis, Company websites

20


Expanded to New “ Amazon Mom” ProgramTesting Began in June 2010, Launched September 2010

• Expansion of “Subscribe & Save” program– Diapers & wipes, receive 15%

subscribe & save discount on all items, plus additional 15% on diapers & wipes; 30% discount

• Complementary 3-months membership to Amazon Prime– For every $25 spent on baby items

in single order, earn additional months of Free 2-day shipping, up to 1 year

• Exclusive discounts & offers


21


Once It’s On a List, How Do You Break Thru and Change the Replenishment Purchase?

• Supplier challenge: – Today: how do I get on the list

NOW?– Tomorrow: Once shopper makes

the list, how do I break-in and stimulate trial?

• Retailer challenge: – What is the impact on the store if

my core trip drivers move online? – What is the new category role?

• As more categories move online, easily becomes replenishment purchase – driven by shopper convenience & retailers aggressively driving these new business models


22


Armed with Technology, Shoppers Have New (& Evolving) Expectations of Retailers

• Personalization• Convenience• 24/7 Access• Conversation• Price Transparency• Special Promotions

23

Source: Company websites/emails, Kantar Retail analysis

The store is no longer the sole point of contact


Retailers Used to Focus on Making their Website as Good as the Store…

Now the challenge is making the store as good as the online experience

24

Source: Kantar Retail analysis


Extended Assortment…+ or – Impact on Shopper ROI?

25

Source: Kantar Retail analysis, Company reports/photos


Target.com: 3-Pronged StrategyExtending Brand & Customizing Offering: MyTargetWeekly

• Merchandising: Trend– Online assortment is a testing ground for new concepts or products;

bring into stores with reduced risk

• Merchandising: Expanded product assortment– Particularly when shelf/floor space is limited

• Marketing: Extend visibility and reach of Marketing strategies

Source: Kantar Retail research26


Online Key to Winning with the New Customer

Source: Company presentation, May 201027


Would You Have Guessed These Would Be Top Search Items for Walgreens?

28

Source: Kantar Retail analysis


– Info on Products• Detailed product features• Pricing (at one or many

retailers)• Customer reviews• Compare vs. similar items• Photos/videos

– Where Time Spent Online

Instant Access to Much More Information than Possible at Shelf or on a Package

Top 5 SitesRanked by Monthly Attention

Rank Domain Aug-10

1 facebook.com 17.1%

2 yahoo.com 4.4%

3 google.com 4.3%

4 youtube.com 4.2%

5 myspace.com 2.3%

Monthly Attention

Monthly attention = the total time spent on a domain as a percentage of the total time spent online by all U.S. Internet users

Source: Compete, amazon.com, Kantar Retail analysis29


Bring the Digital Experience Into the Store Increased Interactivity at the “Shelf”

30

Source: Kantar Retail analysis, store visits


The New Store Experience: Balance Between Technology & Entertainment

31


Rethinking Accessibility to the BrandWalmart.com - Urban Areas

32

–Walmart.com is testing “Site to Store” orders to select FedEx locations:

• Free delivery • Arrives in 7-10 business days, held for up to 5 days

• Pilot = 18 sites in Boston, 26-LA• Expanded in October to: 55-New York City, 40-Chicago, 24-San Francisco, and 22-DC

Source: Company Presentation, Kantar Retail research and analysis

“we’ve seen a very, very positive uptake in that program as it’s launched.”

-Bill Simon, Sept. 2010


Auchan Drive: New “Bricks & Mortar” Format

33Source: Kantar Retail analysis, Company website


AGENDA




34


Online Grabbing Bigger Share of Categories• Store retailers facing stiffer online

competition across array of categories• Online now has significant and growing

share of new tier of categories from music & videos to clothing & furniture

• Online moved well beyond early, big presence in computers, office equipment and software

14.6%

3.1%

8.2%

2.7%

0.7%1.4%

0.3%

2.5%

0.3% 0.2% 0.1% 0.0%

22.8%

16.9%

12.4%

5.2%4.7% 4.2%

2.8%3.6%

2.2% 1.7%0.9%

0.2%

27.0%

22.3%

17.8%

12.5% 12.4%

8.6% 8.2%

6.5%5.4%

4.3%

1.4%0.4%

Computer hardware

Office equipment & supplies

Computer software

Music & videos

Electronics &

appliances

Toys, hobby goods, & games

Sporting goods

Books & magazines

Clothing & clothing

accessories

Furniture & home

furnishings

Drugs, health &

beauty aids

Food, beer, & wine

1999 2004 2009

35

Source: Kantar Retail analysis, U.S. Department of Commerce


Outside of Grocery, Online Has Disrupted and Bankrupted Many a Retailer

36


Food: Niche Players Seeing GrowthAnd Expanding…

37

2010E=$500M

2010E=$300M

Source: Compete, Kantar Retail analysis, Company websites


Grocery eCommerce – Signs that the Big Players are Getting into the Game

“You'll also see us enabled by learnings from our friends at ASDA, pilot online grocery in the coming year.”

– Bill Simon, Oct. 2010

“You'll also see us enabled by learnings from our friends at ASDA, pilot online grocery in the coming year.”

– Bill Simon, Oct. 2010

38


Changes Across the Digital Landscape Make This a Critical Time to Get Engaged

39

E-Commerce M-Commerce

Social Commerce


Imagine a World Where…Your Top 4 Customers Are:

40

?


Private Label Dynamics: Building Strong EquityMoving Towards Top-Right Quadrant

Source: MVI analysis

BrandFinance

Reflective

Incandescent

M o t i v a t i o n

P o w e r

Trade UpTrade Up

Trade DownTrade Down

Leverage PL ImageLeverage PL Image $$

Leverage National ImageLeverage National Image BannerBanner


Retailers Don’t Own Price…And Price Comping is Irrelevant

Source: Kantar Retail analysis, mysupermarket.co.uk

Loyalty, When Cheapest Basket is One Click AwayLoyalty, When Cheapest Basket is One Click Away

42


Preparing for the Digital Future:The New Retailers

• Good things come in small packages/boxes– Post-Modern market: organic growth vs. square footage– Reinvent the store: technology vs. experience– Multichannel: leverage all channels/assets to meet shopper

• New & disruptive business models will continue to change the landscape– Key is to experiment, follow, and innovate core

• Follow the shopper!

43


245 First StreetFloor 10Cambridge, MA02142

F +1 617 499 2723www.mvi-insights.com

Anne Zybowski

P +1 617 588 4195

Director of Retail Insights

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