October 17, 2012
Winston Ledet – COO
678-279-8252
www.premiumretailsolutions.com
Technology Trends in Home Improvement Retail
Presented at Fall 2012 HIRI Conference
www.premiumretailsolutions.com
Premium Business Model Winston Ledet
Premium Retail Solutions - Chief Operating Officer • Co-Founder of Retail’s Solutions
group focused on strategy, analytics and insight
• Worked with over 50 current and prospective suppliers
• Former Home Depot Merchandising Vice President -Merchandising Strategy and Innovation
• Led corporate strategy at Home Depot for three years prior.
• Strategic consulting background with McKinsey and Company
My Background
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Last Year at HIRI
Building a Consumer Brand.
Driving Bottom Line Profitability.
Current Playing Field • Traffic • Conversion • Share
Expand Into Adjacent Areas
What does the future look like?
A warning about the future- Across all of retail:
• Single formats are almost never
dominant for more than 30 years
• Almost all major retailers from 40 years ago are either out of business or in decline
• Real Estate location, once a strength becomes a burden
• The market goes to those who find a new way
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Technology in Home Improvement
Technology change is a wild card that could re-shift the balance of power…
Retailers have gained influence over the last 35 years
Home Improvement has been a slow follower in retail technology for most of its history
• While the consumer and retail trends are undeniable…
• …the approaches to deal with them presented may be very different than the ultimate solutions
• The challenge for industry participants is to keep working on the trends without locking in to just one solution
…however, it rarely moves in a straight predictable line
1978
Most categories in Home Improvement: 1 of the top 5 Brands is “I don’t remember” / “I don’t know”
2012
60% Consumer Share
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The New Way to shop
Source: Modified from McKinsey & Co and Coca-Cola Retailing Research Council & The Integer Group
Consumer actions / Moments of Truth
PRE-TAIL RETAIL
POST-TAIL
Shopping / Location
Purchase
Browsing & Evaluating
Use
Inspiration / Consideration
Repurchase / Bond Advocate
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Trends to Watch
• Pre-Tail and Post-Tail • Social Media • Search • Content
• Retail
• Utilizing online sales • On-demand data to shoppers • Showrooming • Video and Photo Insights • Tele-presence
Source: IBM Consumer Research
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Online Usage in Home Improvement
50%
42%
40%
35%
27%
18%
18%
14%
8%
18%
20%
18%
7%
9%
3%
2%
20%
3%
Retailer websites (e.g., www.homedepot.com, www.lowes.com)
I type the product or project into a search engine and go to the websites where it directs me
Product reviews
Product manufacturer websites
Social media sites (e.g., Facebook, Pinterest, YouTube, etc.)
Publications focused on Home Improvement or Home Decor
Blogs
I do not use any online resources to research Home Improvement products or projects
Other
Online resources used to research products or projects in Home Improvement
Select all sources Primary source
Retailer Website
Search
Product Reviews
Manufacturer Websites
Social Media
Home Improvement / Home Décor Publications
Blogs
None
Other
Source: Premium Retail Solutions Consumer Research, September 2012
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Social Media in Home Improvement
Yes, 38%
No, 62%
Ever used social media to learn about or research anything in HI?
80%
58%
40%
31%
28%
18%
17%
9%
YouTube
GooglePlus+
MySpace
Linked In
Other
Of those that used Social Media in HI - Where did they go?
68%
62%
60%
42%
40%
22%
Get inspired
Product reviews
Research a home improvement project
Know how (how to's)
Share my project ideas with friends
Other uses
Of those that used Social Media – How did they use it?
• 38% of respondents said they have used social media to learn about or research something in Home Improvement
• Facebook (80%) is the primary source used followed by YouTube (58%)
• Top uses are get inspired, product reviews, and research a project
Source: Premium Retail Solutions Consumer Research, September 2012
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Engaging & Delivering Content
1. Monitor 2. Respond 3. Amplify 4. Create
Inspire Brand Monitoring Addressing Issues and answering questions
Connect potential purchasers with advocates
Awareness campaigns / Deals How to (confidence)
Shop
Evaluate
Product Launches
Purchase
Deals / Offers
Use Customer Service How to
Foster communities Consumer Insights Customer Input
Advocate Encourage trial, rating and recommendation
Bond
Ho
w t
he
Co
nsu
me
r Sh
op
s
How Brands and Retailers Can Participate
Source: Modified from McKinsey & Co
A new lease on life – Brand Building
PRE-TAIL RETAIL
POST-TAIL
Shopping / Location
Purchase
Browsing & Evaluating
Use
Inspiration / Consideration
Repurchase / Bond Advocate
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Monitor and Respond
Monitor and Respond Don’t Abandon
Answer Questions
Watch for fake or derogatory entries
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Connecting – Building Trust
1 in 4 Consumers Already Engage in Advocacy (good or bad)
Building your post purchase interactions with clients can improve this
Yes, 41%
No, 59%
Have you ever posted a product review online?
40% of HI shoppers said they often or always read reviews prior to product purchase
Advocacy
Source: Google – “Zero Moment of Truth” – ZMOT macro study Source: Premium Retail Solutions Consumer Research, September 2012
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Inspire
Understand the inspiration process for your category. Where will consumers go first? Don’t just rely on the endemic user base on these platforms Post links in twitter feeds, Facebook postings, review responses and product web pages
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Encouraging Trial
Create Awareness Make Offers
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Consumer Insights
Out of the Lab…
Customer interactions for sales were separate and distinct from research • Surveys • Focus Groups • Copy Tests
…and into the Wild
Customer interactions are often linked • Mining review data and social media
conversations for issues and latent needs • Creating user communities
(Comunispace) and interacting • Mining trends from social media postings • Crowd Sourcing • Mining POS transactions • Ethnography / Digital
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Search
Implications For Research and Marketing How and when do consumers research your category? What terms do they search for? Can you build those terms into organic search? Should you purchase terms through a search engine?
Example: The term “Paint Colors” is searched 2.4M times a month. Neither Behr nor Valspar make the first page
Search - the #2 source of information – are you managing it?
Source: Google Trends and Google Ad Words
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Content
What you need
• A team and/or agency focused on creating digital content
• A team or agency focused on linking content to user touchpoints
• A strategy on what platforms will best suit your needs
Building your content • Video is viewed about 1000
times more than text • Simplify the buying process • Simplify the installation process –
build confidence • Make it interactive
(configuration, comments, linkable…) leverage consumer stories
• Tell dynamic stories – to build your brand – you are a contributor and the editor
• Make it easily linkable Superior content allows you to expand your digital footprint
Retailers and aggregators are starved for content – package yours in a way that it can be easily shared and used
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Do’s and Don’ts
Do • Focus on interacting with people not just
technology • Monitor the traffic on your brand(s) and
answer bad reviews quickly • Understand where your target customer is
interacting. What touchpoints you can tap into
• Leverage the retailer’s traffic (they are hungry for content)
• Invest in content – especially video • Publish new, meaningful content regularly • Collaborate in your space with other
manufacturers to make your content more project rather than product based
• Focus on Know-How content • Collect reviews on your site and link to
retailers
Don’t • Focus on consumer networking sites
alone if your product is an infrequent purchase – who interacts with your product daily or weekly?
• Put up access points that you are not going to staff and monitor
• Assume most of your customers are actively engaged on all social media sites. Steer them to your content
• Focus on just one technology/platform
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Online Shopping and Buying
Huge variability by category
Percent of Sales Online Percent who shop online
Source: Internal Tracking Survey
0%
2%
1%
2%
1%
2%
3%
2%
4%
3%
4%
5%
5%
6%
4%
7%
6%
9%
0%
1%
2%
2%
2%
3%
3%
4%
4%
4%
6%
8%
8%
10%
10%
13%
14%
15%
Paint
Building Materials
Soft Flooring
Electrical
Kitchens
Millwork
Live Goods and …
Hard Flooring
Plumbing
Hardware
Hand Tools
Major Appliances
OPE
Faucets
Bath Fixtures
Storage
Lighting
Power Tools
2012 2007
5%
15%
13%
5%
22%
24%
11%
43%
26%
11%
11%
41%
36%
22%
25%
28%
25%
30%
7%
14%
13%
8%
22%
27%
11%
51%
27%
16%
15%
51%
41%
27%
31%
32%
34%
39%
Paint
Building Materials
Soft Flooring
Electrical
Kitchens
Millwork
Live Goods and …
Hard Flooring
Plumbing
Hardware
Hand Tools
Major Appliances
OPE
Faucets
Bath Fixtures
Storage
Lighting
Power Tools
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Online Share Can be Very Different
Amazon 31%
Home Depot 12% Sears
10% Lowe's
6%
Ebay.Com 6%
Harbor Freight 2%
Other 29%
Power tools 15% purchased Online Online Outlet Share ($)
Know where your category is purchased Source: Internal Tracking Survey
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What Sells Online
Open up your catalog to online – Rethink your product for online
• Easily comparable products with clear
specs and especially with known brands
• Large products that customer will struggle to get home from stores (e.g., grills, patio furniture, riding mowers)
• Products with customization or semi-customization
• “Long-tail” products – hard to find niche products
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Online Shopping and Buying- Takeaways
Implications for Research: • Understand the online behaviors
for your category (Where, When, What information, Purchase or Research)
• Understand where your customers shop online
• What are the barriers to purchase online
Marketing and Operations: • Handling the shipping yourself
reconnects you to the consumer
• Enhance your content with pictures, videos, accurate descriptions, tags to related items, Q&A and answered poor reviews
• Price shop your online offering (both for internal consistency and competitive purposes)
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On-Demand Product Information
18%
20%
22%
16%
20%
38%
Yes, I have used a Smartphone to look up pricing on a product
Yes, I have used a Smartphone to look up product reviews
Yes, I have used a Smartphone to scan a QR code
Yes, I have used a Smartphone for another use
No, I have a Smartphone but have never used it while shopping in Home
Improvement stores
No, I do not own a Smartphone
Have you ever used a Smartphone while shopping in a Home Improvement store?
Appliances
Paint
Lights, light fixtures
Work Clothes
Lumber / Wood
Flooring
Lawn mowers, weed eaters
Faucets
Toilets
Grills
Tools
Plants, care needed for plants
Electronics
Furniture
Doors and windows
Tool box
Bath fixtures
Countertops
Bathroom
Weed eaters
Cabinets
Vents
Railing
Columns
Fertilizer
Cement
Categories that customers look up in store: (Mentions - in order of # of mentions)
Source: Premium Retail Solutions Consumer Research, September 2012
42% Have Used Smart Phone While shopping
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On-Demand Product Information
Digital Signage and Interactive displays
In addition to user initiated search, other ways that retailers can deliver information
QR Codes
• Fairly ubiquitous • Retailers have largely taken
control • Lightly used so far (22%
consumers report having used them in HI*)
• Decentralize the technology investment
• Making a comeback in HI retail
• Getting to be very big in Best Buy and other CE retailers
• Very hard to maintain and keep operational
• Very expensive • Digital kiosks making a
reappearance for wayfinding and “endless” aisle shopping
Innovation End Caps at Lowes
Customer Kiosks at Home Depot
Interactive displays exploding in CE Channel
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Showrooming
18% of Home Owners
report checking prices online in HI retail stores
Dealing with Showrooming
It is the wave of the future. Find ways to embrace it and guide it to your advantage rather than resist it.
Manufacturer: Make sure your brands are on the relevant places customers will search. Integrate your online and in-store pricing
Retailer: Insist on your own codes to keep customers in your system When possible get exclusives for the store, even if in name only Try to limit the premium for in-store over online to 5% or less Deliver superior service in store that justifies any premium
Collaboration: Romance the product with live demos, customer interactions, give your customers a chance to interact with the product
However, customers who interact with an
associate are 12.5%
more likely to purchase in-store Sources: PRS Research, September 2012; GroupM Next study – “Showrooming & The Price of Keeping Buyers in Store, August 2012
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Hi-tech cameras
Passively collect data
Quantify behavior
Report insights
Passive = silent, unnoticed, anonymous
Capture natural customer behavior
24/7 recording for days, weeks, ongoing
“Open-ended” quantitative
Recorded behavior is quantified using automated
and semi-automated techniques
Measure pre-determined metrics and new, unexpected
behaviors
Collaborate with clients throughout
Multimedia PowerPoint report with key insights, charts, graphs, tabular data, highlight footage,
summary and recommendations
Key insights have vivid visual proof
QuantiView Process: Video Capture to Data Analytics
Set up in store or wherever behavior must
be understood
Motion-triggered
High-resolution, >“Full HD”
Bringing Ethnographic studies to the digital age
Usually combine:
wide contextual views
&
zoom views of key
products
STATIONARY CAMERAS
27 Camera View: Freestyle drive-thru (medium)
Example: 3 seconds of fill (0:08, no sound)
Click to Play Video
29 Often video captured will lead to shopper insights that may be unexpected
EXAMPLES OF FULLY-AUTOMATED MEASURES
State of the art video analytics identify every human, record their path as a function
of time, and log the info to a database for analysis.
Heat Mapping
Video analytics
hardware/software can detect
and track people, even a crowd of
people at once.
A curved path line is recorded for
each person, and as the lines
overlap, the software makes the
colors “hotter”.
In: 1
Out: 0
0:15
0:04
People Count Across Lines
Boundary lines are drawn on screen
during configuration.
As motion (i.e., pixel change) from
identified people cross the lines, the
“in” or “out” count is incremented
depending on the direction of travel.
Region Dwell Times
Rectangles and parallelograms
are drawn on screen during
configuration.
The time that each identified
person spends in each defined
region is logged.
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Semi-Automated Measures
• Every person entering a defined threshold becomes a record (or row if you prefer).
• A screen snip of the person is databased to keep that person’s behavior organized across time and multiple analysts.
• Sample measures:
– Gender
– Age range
– Alone or with others
– With, without kids
– Display has salesperson or not when arrive
– Time points
• Time enter/exit general area
• Time enter/exit sub-regions
– Ingress and Egress
– Sign interaction
• Which signs
• Level of attention
• Total count of signs noticed
– Product interaction
• Before or after sales assistance
• Which products
• Look, touch, both
• Time begin/end look, touch products
• Total products looked at, touched
• Specific actions
– Finger brush overs
– Turn overs (or attempts)
– Point out something to companion
– Push buttons, turn dials, press keys
Anything viewed can be measured by QuantiView human analysts using QuantiView software.
Same wide &
zoom principle:
Full shelf view
plus close-ups
of key products
STILL IMAGES
EXAMPLES OF SEMI-AUTOMATED MEASURES
Anything viewed can be measured by QuantiView human analysts using QuantiView software.
Status of Merchandising Displays
(e.g., lit, unlit; obstruction,
general condition)
# Product
Facings
Out of
Stocks
Products
on
hangars
• General condition of shelf
• Deviation from planogram
• Presence/absence of products
• Presence/absence of signage
• Presence/absence of price tags
• Accuracy of price tags
• Aisle obstructions
• Shelf dimensions
ANYTHING SEEN CAN BE
QUANTIFIED... INCLUDING THE
UNKNOWN.
CAN COORDINATE MULTIPLE
PHOTOS OF SAME STORE.
SOME REAL DATA FROM REAL STORES
• Snapshots of the LED shelf were gathered in over 100 stores as part of a
recent stack-out service.
54%
15%
31%
Socket into
Savings
Compare Color
Temperature
Neither
POP Displays Present
Missing Display Bulbs - 0
SOME REAL DATA FROM REAL STORES
• Snapshots of the LED shelf were gathered in over 100 stores as part of a
recent stack-out service.
24% 25% 28%
6%
3% 1% 1% 0% 1%
0 1 2 3 4 5 6 7 8
Empty Facings
0 15 30 45
Empty Horizontal Inches
Mean = 1.49 Mean = 13.4”
Max = 52.4”
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Tele-Presence
Where it makes sense What is it
• When you are not staffed you are “out of stock”
• When you are staffed and traffic is light you are
wasting payroll
• 30-40% turnover means that you struggle to keep
qualified people in-store and low volume stores do not
allow for apprenticeship
Large Specialty Departments: • Kitchens and countertops • Carpeting • Doors and Windows • Outdoor Power Equipment • Appliances
0
100
200
300
400
500
600
700
800
900
-1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Nu
mb
er
of
Sto
res
Weekly Countertop Sales - Transactions
Significant staffing issues in over 1300 stores
Countertop Sales by Store
Source: Premium Retail Solutions Consumer Research, September 2012
What is source?
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Tele-Presence
Combating the “Ghost Town Effect”
9 – store test with Cisco at Home Depot • Limited functionality • Requires a lot of initiative by the customer to engage
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Traiting and Clustered Assortments
• While this is by no means a new technology for retail, Home Improvement has been slow to adopt
• It appears that the major players are now serious about implementing this approach and we will likely see movement
• Creating clustered assortments based on the store trade area demographics
• Used to drive sales and minimize dead inventory
• Requires a way to manage a large number of assortments
What is it? Will it happen? How do you prepare?
• Must be doing weekly tracking of sales by store by SKU
• Analytics to look at productivity of SKUs by planogram type
• Need store trade area consumer data – who shops there
• An understanding on how to add value – not sell in but sell through
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Wrap up
• What technology is relevant for you depends on how your customer shops
• Change is inevitable and seems to be coming faster now in the HI industry than ever before
• Technology will not move in a straight line. Instead of big bets in one area, make a few bets in the most promising areas