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Global Retail Trends
Global Retail TrendsTom Rubel
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RFIS: A business intelligence resource focused on the road ahead
Premier provider of business intelligence on retailing:
information
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Syndicated program with 250 subscribers
Strategic perspectives on retailing
Reports, conferences, newsletters, and databases
Tracks/Sectors
Food, drug, mass
Softgoods
Homegoods
Global
Key account series
3
Leading Retail Insights Information Portal
4
TNS Retail Forward clients include leading US and global retailers and suppliers
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Lots of Changes in Store
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Big winners: China and India
Rising wages feed rising middle class
Big winners: Consumers
Better quality
More choice
Lower prices
- Deflation in many
categories
Asia Rises To Supply The World’s Goods
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Merchandise deflation: Running faster to stay in place
Operating expense inflation
People
Space
Advertising
Top line troubles, bottom line pressures
Persistent Deflation Pinches Retail Profits
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Where The Action IsFigure 2 - Global Retail Opportunity Map
LowRisk
HighRisk
High GrowthLow Growth
Vietnam
Poland
Taiwan
Nigeria
Thailand
South Africa
United States
United Kingdom
Turkey
Switzerland
Spain
South Korea
Russia
Italy
China
FranceCanada
Brazil
Belgium Australia
Argentina
Indonesia
India
Germany
Japan
Malaysia
Mexico
Netherlands
Philippines
Sweden
-75
-70
Western
Central & Eastern
North America
Latin America
Asia-Pacific
Best Opportunity
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Retail Outlook 2011
China surpasses the United Kingdom, Germany and France to become third-largest retail market
Russia’s retail market more than doubles
Retail Sales (excluding Automobiles) by Country,2006 and 2011F ($U.S. Billions)
2006
2011F
$0 $1,000 $2,000 $3,000 $4,000 $5,000
$3,428
$1,206
$629
$750
$800
$665
$597
$337
$440
$290
$288
$304
$4,375
$1,255
$965
$917
$890
$766
$693
$689
$589
$476
$407
$384
United States
Japan
China
United Kingdom
Germany
France
Italy
Russia
Spain
India
Mexico
Canada
Sources: National statistics offices, OECD and TNS Retail Forward
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Retail Outlook
Slow growth in most developed markets
Faster growth in most developing markets
China, India and Russia boom
Western European growth subdued
Uncertain if Japan can sustain renewed growth
0.8%
1.3%
2.2%
2.8%
2.9%
3.0%
3.6%
3.6%
4.0%
4.1%
4.6%
4.7%
5.1%
5.2%
5.7%
6.0%
6.6%
7.1%
7.2%
7.7%
7.9%
8.9%
9.6%
9.7%
10.4%
10.4%
10.6%
11.2%
12.8%
15.4%
Japan
Switzerland
Germany
Sweden
France
Italy
Taiwan
Netherlands
Belgium
United Kingdom
Poland
Canada
South Korea
United States
Australia
Spain
Brazil
Malaysia
Mexico
Thailand
South Africa
China
Argentina
Philippines
India
Vietnam
Indonesia
Turkey
Nigeria
Russia
Non-auto Retail Sales Growth, CAGR 2006-2011F
Sources: National statistics offices, OECD and TNS Retail Forward
Emerging markets
Developed markets
11
China: Opportunity or Threat?
Massive market
Wal-Mart redux?
Quickly-growing retail sector
Booming housing market
Past decade:100M farmers go urban
Equal to combined populations of the UK and Spain
By 2020, 300M-500M more
Reshaping global supply chain
12
China: Opportunity or Threat?
Voracious appetite will keep commodities prices rising
Conspicuous consumption
17% - and rising - of global oil production
21% of the world’s steel
a third of the coal
half the cement
Two-thirds of all building cranes
Higher Commodities Prices Will Drive inflation
13
Demographic Dichotomies – Developed Markets
Aging populations
Shrinking workforce
Shrinking spending
Somewhat mitigated in U.S. by immigration
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
17.5%
18.1%
18.4%
19.1%
21.8%
22.0%
22.3%
23.4%
24.3%
26.4%
22.8%
23.6%
22.7%
24.9%
26.2%
26.7%
24.7%
24.6%
26.7%
26.8%
31.7%
30.8%
26.8%
30.8%
28.5%
28.9%
29.3%
27.0%
27.5%
26.4%
28.0%
27.6%
32.0%
25.2%
23.6%
22.4%
23.7%
25.0%
21.6%
20.3%
Italy
Germany
Japan
Spain
United Kingdom
Canada
Netherlands
France
Australia
United States
0-19 20-39 40-59 60+
Age Distribution by Country:Top 10 Developed Countries, 2015
Source: U.S. Census Bureau International Database and Retail Forward, Inc.
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Demographic Dichotomies – Emerging Markets
Younger populations
Growing workforce
Building pool of university-educated talent
Rising standard of living
Growing middle class
Age Distribution by Country:Top 10 Emerging Countries, 2015
25.7%
30.1%
29.9%
33.0%
32.9%
29.5%
29.4%
25.1%
16.1%
13.0%
14.9%
11.8%
6.5%
5.1%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
20.7% 30.2% 28.7% 20.4%Russia
China
Brazil
34.5% 31.8% 23.6% 10.0%Indonesia
35.6% 31.7% 22.3% 10.4%Mexico
38.1% 31.7% 21.0% 9.3%India
41.0% 32.5% 18.8% 7.6%Philippines
42.1% 33.8% 17.6% 6.5%Bangladesh
Pakistan
Nigeria
0-19 20-39 40-59 60+
44.5%
52.3%
Source: U.S. Census Bureau International Database and Retail Forward, Inc.
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Economic Concentration Leads to Global Oligopoly
Patterns in the UK and US markets will play out across global stage
Except far faster
Top 10 US Market Share by Retail Segment/Product Category
50%
24%
43%
50%
56%
74%
99%
97%
100%
100%
100%Warehouse Clubs
Office SupplySuperstores
Supercenters
Department Stores
Discount Stores
Drug Stores
Consumer ElectronicsStores
Supermarkets
Home ImprovementStores
E-Retailers
Home FurnishingsStores
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Modernization of Retailing
1999/2000 – majority of stores in most Asian markets traditional outlets
Modern trade growing
4.13.529117259257312,7391,89125
HKSing.TaiwanKoreaPhilipp.ThailandMalaysiaChinaIndon.HCMC & Hanoi
1999/2000 Share of Trade by Store Type(based on all categories)
Drugstores
Hypermarkets
Supermarkets
Minimarkets
Convenience Stores
Traditional Grocery
Other
Source: ACNielsen 1999/2000 Retail Trade Establishment Country Surveys
100%
0%
25%
50%
75%
Total Grocery Store Numbers (000)
China 2004 – 46%
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Top 10 Retailers Own Nearly a Third of Top 200
Top 10 retailers account for 30% of Top 200 sales
Tesco overtakes Metro
Ahold and ITM Enterprises fall from Top 10
Target returns at #9
Schwarz Group debuts at #10
29.9%7.9%$904,700Top 10
1.7%12.5%$50,342GermanySchwarz Group10
1.7%12.2%$51,271United StatesTarget9
1.7%10.0%$51,862United StatesCostco8
2.0%7.3%$60,553United StatesKroger7
2.1%-5.1%$63,138JapanSeven & I Holdings6
2.3%-1.2%$69,262GermanyMetro AG5
2.4%16.5%$71,735UKTesco PLC42.7%11.5%$81,511United StatesThe Home Depot3
3.1%2.5%$92,600FranceCarrefour Group2
10.3%9.5%$312,427United StatesWal-Mart Stores1
Share Top 200
Sales2005
GrowthNet Sales
(Millions USD)Home CountryCompany2005 Rank
Global Economic Concentration of the Top Retail Companies
Sources: Company reports, published reports and Retail Forward Inc.
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The Efficient Value Chain
Lower costs enable lower prices
Lower prices attract more customers and share
Greater share drives growth of margin dollars
Which enables investments in technology and efficiency …
Which enables lower costs …
Invest in Efficiency
LowerCosts
LowerPrices
ExpandUnit Sales
IncreaseMargin
$
The
Productivity
Loop
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Wal-Mart
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It Will Reach a Half Trillion Dollars in Sales…
Wal-Mart Stores, Inc. Sales($ Billions)
$89 $100 $112$131
$156$181
$204$230
$256$285
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
$500+
2010F
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Wal-Mart Keeps Smiling
Superior beings from another planet?
Wal-Mart makes mistakes
But they learn
Innovators who think big and disrupt traditional models
Processes
Products
Formats
Geographies
Focused on their brand promise
Figured out food, soon foreign
By 2010, bigger and more successful
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By 2010, WM Will Have 3,100+ Supercenters…
Wal-Mart Supercenter vs. Conventional StoreUnit Growth and Projection
239344
441564
721888
1,713
1,995 1,960 1,921 1,869 1,801 1,7361,647
1,568
1,066
1,2581,471 1,353
1,478
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
1,931
2,171
2,411
2,651
2,891
3,131
908788
668
1,0281,148
1,268
2005F 2006F 2007F 2008F 2009F 2010F
Wal-Mart SupercentersConventional Wal-Mart stores
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Conventional Trade Loses to Supermarkets; Supermarkets Lose to Hypermarkets/Supercenters
* Reflects weighted average of publicly held supermarket companies.
Sources: Company annual reports and Retail Forward, Inc.
Supermarket value-add model
Higher costs
Higher margin service depts
Higher costs, labor-related
Wal-Mart low-price, low-cost model
Efficiency-minded
Dist/logistics
IT/Retail Link
Non-union labor
Price parity essential on key “like” items
Result: price battle, and supermarkets lose
Supermarket Industry * Wal-Mart Stores, Inc.
Gross Margin
SG&A Expenses
0%
5%
10%
15%
20%
25%
30%
2000 2001 2002 2003 2004 2005
Gross Margin
SG&A Expenses
0%
5%
10%
15%
20%
25%
30%
2000 2001 2002 2003 2004 2005
24
Conventional Supermarkets: Long Slow Slide
Forecast
‘90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06F ’08F’93 ’95 ’97 ’99 ’01 ’03 ’05 ’07F ’09F’91
22.0 21.9 21.220.4 19.7 19.1 18.6 18.1 17.6 17.0
16.2 16.3 15.9 15.514.8 14.5 14.2 13.8 13.4 13.0
12.4
10F
Supermarket Share of Non-Auto Retail SalesSupermarkets lose share
Prices
Shopping experience
Caught in the middle
Mass channel
Specialists
Eating & drinking places
Supermarkets losing out
Value perceptions
Ease of use
Time crunch
25
Low/Growing
Negative to B/E
Concept Innovators
None
Declining
Low to B/E
Special Need/Niche
Intensive/Consolidated
High, Leveling off
High/Declining
Broad Market
Extensive/Saturation
Rapid Acceleration
High Yield
Special Need
Limited
Sales
Profitability
Positioning
Competition
Development
Growth(Accelerated
Development)Maturity DeclineIntroduction
(Early Growth)
Sales
Profits
SupercentersSupermarkets
Small Format Value Retailers
Regional Discount Dept. Stores
Warehouse Clubs
Drug Stores
Convenience Stores
TIME
Home Solutions Megastores
Online Retailing
Big 3 Discount Dept. Stores
Kohl’s
Home Furnishings Superstores
Home Improvement Centers
Department StoresHardlines Category Killers
CatalogsSears/JCPenney
Hardware Stores
Home Furnishings Specialty Stores
Most Retail Concepts Are Mature
26
Out of Runway
27
Reinventing Aging Offers
Struggling for relevance:
Department stores
Discount stores
Supermarkets
Apparel specialists
Big box?
Several large retailers won’t survive the coming decade
All strategies eventually fail
28
Online Retailing: Fast Growth, Growing Importance
Rapid growth
Big impact in some categories
little impact in others
Big impact for some consumer segments
but not for all
Still only accounts for small percentage of retail sales
$28$35 $45
$57$71
$88
$110
$140
$180
$228
$285
$0
$50
$100
$150
$200
$250
$300
2000 2002 2004 2006F 2008F 2010F
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%ForecastBillions $
Share of Retail Sales
Annual E-Commerce Retail Sales
67%
53%
65%
75% 73%81%
All Shoppers
<$25K $25K–$49.9K
$50K–$ 74.9K
$75K–$99.9K
$100K+
Online Shopping Penetration By Household Income(Percentage shopped online in past 6 months)
Sources: U.S. Department of Commerce and Retail Forward Inc.
Sources: Retail Forward ShopperScapeTM, Apr 06.
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Access is Growing Worldwide
2006: 1.08 billion Internet users – 16.6% penetration –worldwide
U.S. is largest Internet market in terms of users, but...
Internet Users and Penetration
by Country, 2006
181.9
133.5
87.2
39.435.1
34.428.7
28.625.5
21.2
21.0 20.016.5
13.17.9
63.6%
10.2%
68.4%
47.8%
57.9%
70.5%
47.1%
49.2%
2.3%
11.3%
63.4%
18.6%
40.8%
64.5%
19.8%
0
20
40
60
80
100
120
140
160
180
200
Un
ite
d S
tate
s
Ch
ina
Ja
pa
n
Ge
rma
ny
Un
ite
d K
ing
do
m
So
uth
Ko
rea
Fra
nce
Ita
ly
Ind
ia
Bra
zil
Ca
na
da
Me
xic
o
Sp
ain
Au
str
ali
a
Arg
en
tin
a
Inte
rne
t U
se
rs (
mil
lio
ns
)
0%
10%
20%
30%
40%
50%
60%
70%
80%
% o
f P
op
ula
tio
n
Source: eMarketer, January 2007
30
China Will Soon Have Largest Internet Population
China is likely to take the lead in user count by 2011
Still at low penetration levels
Internet Users and Penetration by Country, 2006, 2011F
181.9
133.5
87.2
34.425.5
211.3
245.5
95.4
38.4
71.6
United
States
China Japan South
Korea
India
2006 Internet Users (millions)
2011F Internet Users (millions)
% Penetration 63.6% 70.6% 10.2% 18.1% 68.4% 75.1% 70.5% 77.3% 2.3% 6.0%
Source: eMarketer, January 2007
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Retailers Act Like Suppliers
Global retailers get access to global sources of supply
Impact of deflation and inflation on profits
Sales
Opex
COGS – the last frontier
The need for differentiation
FMCG – Biggest customers will be biggest competitors
And they own the shelves
PL: World class
Product
Packaging
Positioning
CARREFOUR Quality Line:Packaged fresh foods
CARREFOUR Brand:900 food/non-food items
FRENCH TOUCH BrandTop quality at discount
BANG Products:
FIRSTLINE BrandElectrical items
Carrefour’s PL Product Range CN
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How Big Are Private Brands?
Private brands and exclusive products are a key component of leading retailers’ strategies
Generate between ¼ to almost ½ of sales for some leading retailers
Growing more than 2x as fast as all food sales in recent years
Estimated Share of Sales from Private Label
Sources: Company reports, PLMA, Private Label magazine, and other trade press research.
Loblaws(Canada)
Safeway Albert-sons
Kroger Meijer A&P FoodLion
35%
29%
17%
25% 25%23%
17%
Target Tesco
46% 45%
37%
Wal-Mart
33
Retailers As Brand Managers
Accelerated growth of private brands
Growth of powerhouses
Search for competitive differentiation
Retailers as brand managers
Innovate new products
Image and identity
Brand marketing
Brand editing
Brand positioning
Renewal
Retailers: Build Your Brand, or Be Gone
34
Suppliers Act Like Retailers
Supplier challenges
Shrinking brand equity
Customers as competitors
Fewer, bigger unique customers
Competitors for space from other categories
Responses
Superbrands/ Pillar brands
Private label, exclusives, co-brands
Account specific programs
Category consultants
Focus on Shopper Insights
Direct to consumer
- Store within a store
- Showcase stores
- Web sites and catalogs
35
Retailing 2010: New World Assets For Retailers
Old world assets
Inventory
Factories
Real Estate
Equipment
2010 assets
Brands
People
Differentiation
Customer Experience Management
Customer Information
36
What’s it Mean for Retailers and Suppliers?
Dominant issue:
Where's’ the growth?
Retailers
Re-invention
New markets
Sell more to existing customers
Suppliers
Deal with PL
Account specific strategies
Shopper insights
Retail strategies
How does TNS RF help?
37
How Should We Grow?
Geography
Channel/FormatCustomer
Intensify
Extend
Diversify
Product/
Service
38
Retail Market Positioning Strategy
POSITIONING
VARIABLES
RETAIL MIX
VARIABLES
Market Positioning
Strategy
Market Positioning
Strategy
CoreCompetition
CoreCompetition
CoreMerchandise
CoreMerchandise
CoreCustomers
CoreCustomers
KeyAppeals
KeyAppeals
Physical FacilitiesPhysical Facilities
Merchandise and Merchandising
Merchandise and Merchandising
PricingPricing
Advertising andPromotion
Advertising andPromotion
Customer ServiceCustomer Service
Organization, Systems, Processes
Organization, Systems, Processes
39
Customer Intensification Process tm (CIP)
Retailers know in great detail what they sell
But they don’t know what their customers are not buying from them
CIP focuses on share of wallet, not share of market
40
ExistingCustomers
Attract NewCustomers
Sell Existing Types of Merchandise
Introduce New Types of Merchandise
Easiest
More Difficult
Why CIP?
41
Management and Buyer Input:
• On-Site Interviews
• Phone Interviews• Existing
Research
Quantified, Prioritized Opportunity:
• Customers• Competitors• Categories• Style
Perspectives
CategoryFinancial
Data12 Months
TransactionData
85 categories
CustomerData
21 days20,000 store exits
700 questions All stores
Project Approach
42
Investment Matrix: Top 20 Category Opportunities
PotentialMarket
Opportunity
Market Share
$0
$XXX
0% % % % % % %
Grow Leverage
Focus Maintain
Average Opportunity = $44M
Average Share = 24%
Data points removed to protect confidentiality
Category Size and Share
43
Project Results: Bloomingdale’s
Michael Gould, CEO, Bloomingdale’s
CIP Impact on Bloomingdale’s Growth
NRF Big Show Presentation, Jan 05
“When our own customers went through an interview process and a whole program via Retail Forward….it clarified that we are all about affordable and approachable luxury.
What sold our own people was when they heard 21,000 of our customers interviewed in every location, saying these things about us…
…you do not have price congruity in these businesses
…you have a ladies shoe business that is inferior to your sportswear business
…you don’t have this, you do not have that
…this is what we think about your service
…this is what we think about your return policies
…this is what we think about your fitting rooms and stock rooms.”
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Collaborative Category DevelopmentCollaborative Category Development
ShopperShopper
RetailerRetailer Category/Brand
Category/Brand
CollaborativeCategory
Development
CollaborativeCategory
Development
ShopperShopper
RetailerRetailer Category/Brand
Category/Brand
CollaborativeCategory
Development
CollaborativeCategory
Development
Drive category growth
Build better relationships with shoppers
Understand and improve the shopping experience
Generate customer and category-specific shopper insights
Improve shopper/category needs and retail activation
Create category strategies for the “Department of the Future”
Demonstrate loyalty to Brand owners’ brands can also create loyalty to the customer
Global Retail Trends
Global Retail TrendsThank you!