Future of Retail - CACDS Conference 2011

Patrick RodmellPresident + CEO Watt [email protected]

www.wattisretail.com

The Future of Retail:The World Beyond RecessionCACDS Canadian Drugstore Conference 2011


Integrated Retail Agency

+40 years; +40 countries

Watt International | Overview

We help retailers and brands find ways to sell MORE things, to MORE people, MORE often.

“Watt International is a unique group of talented people,

encouraged to think beyond their specialty…”


research

Trends + Innovation ReportsFinancial AnalysisStakeholder InterviewsConsumer + Shopper ResearchSWOT + Best Practice AnalysisNeed State + Path to Purchase

strategyBrand Positioning

Marketing StrategiesChannel Strategies

Product + Merchandise StrategiesPrivate Brand Architecture

Business + Strategic PlanningManagement Consulting

Retail DesignPackage DesignBrandvertisingTM

Brand Name, IdentityMerchandising + POP

Integrated CommunicationsWeb, Mobile + Social Media

Total Production ManagementValue Engineering

creative

What We DoWe work with our clients to uncover insights, define winning retail strategies,

then bring them to life through products, actions, people and physical expressions.

http://www2.coca-cola.com/index.html




What I hope you get out of the next hour:

1. See something you haven’t seen before

2. Think about something in a different way

3. At least one “Big Idea”

4. Moderately entertained


Moderate Entertainment: Realtime Polling

1. Read the question

2. Select your answer by pushing the corresponding number

3. Change your mind if you want to – you’ll have 10 seconds

4. We’ll see the results in real time!


Engaging through in-store technology

1. Energy expended through the course of our everyday lives will be captured and used as a major power supply

2. Authenticity will be a key brand attribute in the new world of skepticism

3. The potential to scan codes and obtain product information will soon be mainstream

4. In a world of “accelerated adaptation of technology”, companies that look for “competitive edge” vs. “bleeding edge” will be the winners.

Predictions from 2007


YOUR turn to make a prediction:Ten years from now, the Biggest Change We Will See At Retail Will Be:

0%

0%

0%

0% 1. Smaller stores with more streamlined product mix

2. More stores and brands that are aligned with environmental and wellness values

3. New technology playing a greater role in information and transactions

4. Reduced store traffic, as consumers buy more online and get home delivery

2007

16%

20%

47%

17%

10


Consumer/Shopper behaviour and the retail landscape are going to change dramatically in the post-recession era.

Conclusion:

But don’t blame the recession.

The recession is simply accelerating changes that were already underway due to other factors, for example;- Blurring channels

- Shrinking middle class

- Ethnic influences…


Shopper + Consumer Insights go mainstream

1Trend

Trends that will shape the Future of Retail:


The brands/products we buy

Who’s calling the shots now?

Who ‘Owns” the Consumer?

The game changer…

But this only told us “what”; NOT “who”

The places we buy them


Then came rewards programs and the data started flowing…


The brands/products we buy The places we buy them

Who’s calling the shots now?


Make no mistake – the Shopper is now in charge!

…and it’s only going to get worse…or better!


social media and mobile connectivity have changed the Path to Purchase and dramatically increased the importance of understanding the

“Perception” of your brand


Understanding shopper perceptions is key…


…and understanding how they shop is essential



1Trend

1. Women: Chief Purchasing Officers



1.Women make; - 93% of over-the-counter pharmaceutical purchases,- 93% of food purchases, - 92% of vacation buying decisions, - 66% of personal computer purchases... [Too Busy To Shop: Marketing to Multi-Minded Women]

2.Women influence 95% of all purchases and control 80% of all household spending [Marti Barletta, Marketing to Women]

1Trend

Women: Chief Purchasing Officers


1. 59% of women feel misunderstood by food marketers

2. 66% of women feel misunderstood by health care marketers

3. 74% of women feel misunderstood by automotive marketers

4. 84% of women feel misunderstood by investment marketers[Source; Too Busy to Shop: Kelley Skoloda]

1Trend

Marketers still aren’t getting it


The Dove ads celebrated “authenticity” and self-esteem…and drove up soap sales 600%! (Unilever)

Harley Davidson

Today, women riders constitute roughly 12% of Harley sales, up from 2% in 1995.


Women value authenticity, community, connectedness and quality of life.

For everyone, the more ‘virtual’ our life gets, the more we crave authentic experiences.

Does your brand and retail experience exhibit these qualities?


1Trend


2. Perdido en la traducción




Perdido en la traducción

1. By 2015, Hispanic consumers will play a major role in contributing to the upsurge of retail spending

2. Hispanics are adopting the internet twice as fast as the general market - 14 percent growth vs. 7 percent (Ethnic Technologies, 10/06/09)

Papa John’s

http://espanol.papajohns.com

A greater proportion of Hispanic customers place orders using cellphones.


How Canadians are Different – Female Immigrants

NOTES: Data only includes individuals aged 25-54 and only new immigrants (no more than 5 years in the country) who were aged 25 or older at arrival. We’re only showing females, trends for males were for the most part similar.

In 2006, international migration accounted for two-thirds of Canadian population growth and immigration is soon to be Canada’s only source of population growth (due to low fertility and aging of the population).

She’s Somewhat Older She’s More Educated

She’s Arriving from South & East Asia – versus South & Central America



2. Perdido en la traducción

3. Generation M.

1Trend




• Born after 1990: The coming consumer generation• Don’t know life without the internet• Short attention spans• Don’t trust advertising – look to their social network• Mobile technology is a commodity• Sensitive to our environment

Generation M


Pick the Statement That Most Accurately Reflects Your Opinion: Generation M (16-21 years old) will:

0%

0%

0%

0% 1. Be more brand loyal than consumers are today

2. Demonstrate about the same loyalty as consumers do today

3. Be more likely to switch brands

4. Have few, if any, real brand relationships.

2007

20%

6%

40%

34%

10


1. It’s smart to save

Economic Instability changes the value equation

2Trend


IKEA: from cheap to savvy

Target

Saving can be fun!.

Source: AC Neilsen: Company press releases; latest monthly or quarterly report

Same Store Sales - 2010



2. The rationalization of retail


2Trend



The Rationalization of Retail – Changing Retail Formats

• Retailers are open to new options, such as becoming landlords to other retailers

• Retailers are opening smaller format stores

• Reigning in previously stand alone stores and nesting them in existing stores

Smaller Store Formats

Smaller Store Formats

• Walmart launches Express store format

• Best Buy Mobile, Office Depot and Staples are all coming out with small format models



2. Made in America

3. The rationalization of retail

4. The continued assent of private brands.


2Trend



Private Label Unit Share

2005 2006 2007 2008 2009

Economic Growth Recession

2010

Pre Recession Norm

Post Crisis Norm

Source; Nielsen


Conscious Consumption becoming a decision driver1. Environmental Distress

3Trend


Marks & Spencer

‘Sustainable Learning’ store

• Harvested rainwater will supply all the toilets

• Heated by expelled heat from its refrigeration units

• Electric car charging points will be available in the car park

• Goal – to be the world’s most sustainable major retailer by 2015

P&G Compacted Detergents

Could help save up to 22 million pounds of total packaging in North America each year

Wine Self-Service Kiosk… in France!

Charging Stations at Retail

What happens to gas stations?

Electric Cars


1. Environmental Distress

2. Social Concern

3Trend

Conscious Consumption becoming a decision driver



Social

1. Human Rights

2. Fair Trade

3. Philanthropy

4. Diversity

The Pepsi Refresh project awards up to $1.2 million in grants each month to fund community projects. Visitors to Pepsi’s website or facebook page vote for their favourite idea.

The website has received over 4 million “Likes” on Facebook

Check it out: www.refresheverything.com

Pepsi


Which of the following technologies do you think will deliver the most value to your business within the next five years

0%

0%

0%

0% 1. Connecting with customers through cellphones/smartphones

2. In-store media

3. Internet e-commerce

4. In-store interactive media

2007

18%

10%

37%

36%

10


Trend

4Adaptation of Technology: putting control in the hands of the shopper



Mobile Rules

1. Mobile usage up: In December 2010, nearly 47% of mobile subscribers in the US accessed mobile media

2. More than 64% of consumers want to receive information and notifications about shopper loyalty offers via email

3. Redemption rates for mobile coupons are 10x that of paper coupons


Walgreens iPhone and Android Apps

• Express refills by scan or by entering your prescription number• Locate a store• Order photos• Get weekly ad• Create a shopping list


Game-changers:

1. Location-based Marketing

2. Mobile Self-checkout POS- no price tags; personalized pricing- reduced in-store labor

11

6655

33

44

22

QR Codes and Barcodes

Levi’s

The Facebook “Like” button:when will it start showing up in stores?

Mobile Apps

Loopt and Neer’s location-triggered reminder apps

Loopt: limited-time perishable-inventory deals close to their real-time location.

Neer: links tasks to retailers and sends a reminder message when the user is close by.

Virtual Coupons

Virtual butterflies appear on consumers phones as they approach one of the participating shopping centers. Shoppers must “catch” the butterflies in order to activate the coupons.


What people love about the virtual world;

1. Limitless Horizons2. Personalization3. Connectedness4. Engagement5. Entertaining

How can you deliver this through physical retail?


Since it’s inception, the digital world has tried to emulate the positive features of the real world.

It’s time to turn the tables.


PRXPRXPersonal Retail eXperience

social

rewards

access

entertaining


If you asked your customers, they would tell you that it’s exciting to shop your store

0%

0%

0%

0%

2007

22%

33%

35%

10%

10

1. Absolutely

2. Somewhat

3. Not really

4. Not at all


Engaging through in-store technology

In a recent survey in the UK, 40% of respondents said they recommended retailers to friends as a direct result of a positive technology-enhanced experience at the store

Personal Retail Experience (PRX)

JCPenney

Self-Service Kiosk

• View product availability

• E-mail images and information

• 360-degree views and zoom features

• Scan the bar code of an in-store item to learn more about the

product’s features

• Provide product recommendations for complementary items

• Online “dressing room – with directions

• Print out a receipt and purchase an online item at an in-store

register, with the rest of their in-store purchases.

Walgreens

Virtual makeover booth at Walgreens features a built-in camera for customers to take their picture and experiment with various looks while in store.


Step 1: It’s NOT about a retail experience;

it’s about experience retail.

What kind of retail is this?


Arche Shoe Store, Las Vegas

Hollister (Toronto)



What makes this an “amazing retail experience”?

Products, People and energy!


As virtual experiences and the physical world collide, the need for

integration of all brand touchpoints becomes even more critical

“…a price reserved exclusively for you”

“These exclusive savings… are not available to everyone”

“We appreciate your business”

“Valued Rogers Customer”

Rogers

Rogers

“Exclusive” deal is $30 more than the standard offer on their website

Trader Joe’s


The Future of Retail is being shaped by:

1

2

3

4

Shopper + Consumer Insights going mainstream- Rewarding Shoppers will be price of entry- Women and Ethnic sensitivity – Authenticity and character- The M-Powered Generation

Economic Instability changes the value equation- Redefined value equation – it’s fun and smart to save- More private brands

Conscious Consumption becoming a decision driver- Cause Marketing - Packaging innovation- Game change at gas/convenience

Adaptation of Technology putting control in the hands of the shopper- Smaller stores; pop-up stores- Personal Retail Experiences (customization, flexibility)- Flexible retail – including vending/Kiosks- Experience Retail – connected and engaged- Integration of all brand touchpoints – online and off



Knowing all this, what does your future look like?



Thanks for your time!


DUANEreade – Largest DUANEreade in NYC


DUANEreade



All Retail Shoppers vs. Drug Store Shoppers

Survey Conducted on behalf of PLMA by Buxton Consumer Research Survey of shopping behaviour - 2011

Brands are often not specified on shopper’s lists.Q. Thinking of what you plan to buy, how often would you say you specify a particular brand name, such as Dove soap or

Lipton tea bags?Occasionally on the list 38%Frequently on the list 30%Rarely on the list 18%Always or almost always on the list 9%Never on the list 5%

Most drug store shoppers don’t put brands on their lists.Q. In general, when making out your list for the drug store, would you say that you most often write down brand names or list

products only by type?List products mostly by type 78%Mostly list products by brand name 22%


Drug store shoppers don’t rely on lists.Q. Thinking about other types of stores where you shop, do you also make a shopping list before going to the drug store?

No 62%Yes 27%Don’t shop at a drug store 12%

In drug stores, shoppers compare prices and read labels.Q. When you shop in a drug store would you say you are more or less likely, as compared to shopping in the supermarket, to do the following? (Percent of those saying “more likely”)

Compare prices 60%Read labels 42%Buy the retailer’s store brand 32%Buy the national brand 19%Never 3%

Most shoppers continue to buy health and beauty items at mass merchandisers.Q. Thinking of health and beauty products, at which of the following types of stores would you say you are most likely to buy them?

Mass merchandiser 52%Drug store 18%Supermarket 12%Dollar store 7%Beauty specialty 4%Club store 3%Other 2%Don’t know 2%

All Retail Shoppers vs. Drug Store Shoppers

Survey Conducted on behalf of PLMA by Buxton Consumer Research Survey of shopping behaviour - 2011

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