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The Retail and Shopper Specialists

The REconfigure REtail Mandate: REimagine Value

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REimagine Value

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The REconfigure REtail Mandate: REengage Shoppers

Leadership TeamSteve Pattinson Chief Executive Officer – Americas Phil Smiley Chief Executive Officer – EMEA and ASPAC John Barry Chief Executive Officer – Market Insights Bryan Gildenberg Chief Knowledge Officer Andrew Stockwell Chief Research Officer Donna Tobin Senior Vice President, Global Product Strategy and Marketing Scott Butterfield Senior Vice President, Client Development Steve Webb General Manager, EMEA

Joe Zuccola Senior Vice President, Client Development

Key Contributors Simon Elsby

Bryan Gildenberg

Steve Hildebrand

David Marcotte

Leon Nicholas

Tara Prabhakar

David Recaldin

Bryan Roberts

Phil Smiley

Andrew Stockwell

Mary Brett Whitfield

Oceanne Zhang

Anne Zybowski

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© 2015 Kantar Retail


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Retailers with distinctive business models are disrupting and reshaping the world of value. These retailers are better able than traditional retailers to deliver certain components of value – price, speed, simplicity, or personalisation, to name but a few. Retail models will increasingly make money in different and more complex ways, permitting a different relationship between item-level pricing and business sustainability. Consider the Costco model. Prices are lower because the profit stream comes from membership fees. In the future, retailers will have a multitude of profit levers to pull that will permit many different types of item-level pricing.

As the mechanics of value become more personal, dynamic, contextual, and volatile – and traditional sources of differentiation and price leadership become commoditised or disappear – retailers and suppliers need to REimagine Value. They also need to realise that there is much more to value than price. While price is clearly an important component to value, other value attributes are just as vital in determining the value perceptions retailers can offer shoppers. In the coming years, those retailers that master the artful science of REimagining Value will create shopper value by delivering not only on price, but also on quality and service throughout the shopper’s brand journey.

The First Step in REimagining Value: REdefinitionAs we said, price is only one component (albeit a very important component) of value – and, in fact, is only part of the story. Value calculations are always a combination of some sort of return/positive benefit and an investment. The definition of Real Value used by Asda, Walmart’s U.K. business, is a great example (Figure 1). The retailer has often remarked that it delivers Real Value to shoppers through a combination of price, quality, and service. Asda’s approach to this Real Value model has typically included:

• Offering the lowest prices across the basket through a combination of everyday low prices (EDLPs) plus promotions

• Communicating value through private brand and fresh

• Offering service through high product availability, a pleasant checkout experience, and multichannel capabilities

It can help to think of Real Value as a graphic equaliser: Shoppers are often happy to trade off the different Real Value cornerstones to reach an appropriate equilibrium. While a discounter might be a dismal underachiever in service, it will overindex on price and quality (through private brand) and succeed in offering Real Value. A top-end department

The REconfigure REtail Mandate: REimagine ValueBryan Roberts, SVP & Knowledge Officer, EMEA

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store, meanwhile, will be able to command premium prices by offering a combination of the latest fashions, a high level of service, universal credit across departments, and high perceived quality.

Building on this definition of value is the Time, Money, Angst framework (Figure 2). This framework was developed by Herb Sorensen, the preeminent authority on observing and measuring shopper behaviour and attitudes and the Global Scientific Advisor at TNS Global. Going beyond price as the shopper’s “investment” in shopping, this framework adds two

nonprice variables – time and angst (emotional investment or intellectual inputs). The general implication of this way of thinking is that retailers and suppliers should work together to manage these three investments: making shoppers more engaged with the use of their time, creating a better value for their spend, and providing a simpler and more informed shopping experience.

The time and money aspects come with some obvious caveats:

• Some retailers can better manage shoppers’ impressions of time through experiential stores, shopper engagement, and/or a strong service proposition.

• Some retailers make a virtue of being expensive, or selling expensive items, thanks to their premium positioning.

• Other retailers leverage time and money in support of one another by offering shoppers a way to spend now and pay later using the retailers’ own or co-branded credit and layaway plans.

REdefining Value: The Value Pyramid We at Kantar Retail believe that retail – and the role of value and all the components of value in retail – are at a genuine inflexion point. We are in a world where big retailers – with their legacy brick-and-mortar stores – are having a tough time in the face of economic headwinds, rapidly changing

Figure 1. Asda’s Real Value Equation

Source: Kantar Retail analysis


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shopper behaviour, stronger and more diverse competitors, and a resetting of retailer economics. The fact that shoppers in almost all countries can get product and service information on the Internet compromises retailers’ monopoly on knowledge and price and sets up a very different type of shopping trip.

In general, shoppers are headed for a place that is less familiar, less profitable, and less predictable for retailers. A place where being the cheapest does not necessarily equal success and where having a highly advanced omnichannel

capability – complete with high-tech bells and whistles to enable personalised pricing – is by no means a prerequisite for winning.

Based on what we see around us in the industry, we have attempted to REimagine Value here with the Value Pyramid, a graphical depiction of how retailers and suppliers need to rethink value in this new era of retail and how best to work together to deliver it (Figure 3). As with any simplified set of rules, exceptions and caveats abound, but we believe the Value Pyramid is a good synthesis of where to start and where to aim on the path to offering total value for shoppers.

Simply put, retailers and suppliers need to start in the upper right of the Value Pyramid and work from there. Getting the basics (Price, Promos, Choice & Quality) allocated correctly is the only possible way retailers can progress, and suppliers can do plenty to assist their customers in optimising these basic foundations.

To clarify, getting those basics right – the hygiene factors of Price, Promos, Choice & Quality – can often be enough. Plenty of locally and globally successful retailers do absolutely nothing in terms of Contextualisation & Personalisation. Plenty more see Loyalty as an outcome rather than an objective, and others for whom Authority and Service are elusive.

The Value Pyramid extends the basic ‘item at a price’ to new realms of retailer value creation. REimagining Value, which

Figure 2. Time, Money, Angst Framework

Source: Herb Sorensen, Kantar Retail

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Figure 3. Value Pyramid


1. Price, Promos, Choice & Quality

2. Proximity, Speed, Simplicity & Availability

3. Authority, Service & Services

4. Loyalty & Values

5. Contextualisation & Personalisation


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takes place in five key layers, answers five core questions that create a much more holistic notion of value. It starts with questions that are very much about how value has historically been defined (what am I buying, at what price, and where and when?), then expands into two broader concepts that connect to shoppers in more complex ways (why do I shop there? who am I?):

1. How much? In matters of price, promotion, choice, and quality, retailers will be forced to embrace algorithmic pricing, tiered promotions, curated/intelligent choice, and well-defined notions of quality. Even the basics of how much a shopper will pay for an item won’t be so basic.

2. Where and when? One of the oldest nonprice value propositions in retail is where the product is – either in a convenient store or home-delivered. More complex operating and pricing models will force all retailers to rethink proximity, speed, simplicity, and availability as the economic advantage conferred by pure location becomes harder to maintain.

3. What? Helping shoppers find what they are looking for has always been a component of quality and a pillar of nonprice value. Increasingly, a family of retailers will create value by helping shoppers find what they want in new and engaging ways. Authority through expertise, technology-enabled service, and value-added services will help shoppers find the products and solutions they need.

4. Why? The loyalty of the future will not be a transaction-based card, but will be rooted in something deeper and more integrated into the shopper’s life. In particular, retailers that resonate with a shopper’s values will form a more permanent, interesting, and sustainable bond.

5. Who? As with any form of marketing communication, value needs to be delivered in far more specific ways. Retailers that win in a REimagined Value world will be experts in the contextualisation and personalisation of that value.

Price, Promos, Choice & Quality PriceIn most markets, product availability alone can trump price. But in most developing and many mature markets, the all-too-frequent misconception is that prices must be low. They don’t. Prices need to be appropriate – appropriate for the shopper and for the mission. A shopper in the lowest economic level will buy known brands at higher prices because he cannot afford to make a selection mistake on his limited income. A less-affluent shopper who usually shops at a low-price retailer is often more than happy to trade up to higher prices (and perceived better quality) for a family occasion; the same shopper might also pay a 10% premium for convenience.

For more affluent shoppers, comparable item pricing will become less relevant in the value equation as technologies

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such as price matching at checkout and algorithmic pricing level out historic price gaps on individually comparable SKUs. Shoppers will increasingly concern themselves with pricing at the aggregate basket level rather than obsessing about prices at the SKU level. (Obviously, this will not be the case for one-off, big-ticket items.) These shoppers have access to considerably more data than shoppers in the past, pushing the definition and framing of value outside the retailer’s control.

Upscale retailers in categories such as grocery, health & beauty, home furnishing, jewellery, and fashion can locate themselves in the justified-premium or ultra-premium segments (Figure 4). Thanks to superior assortments, in-store environments, or high service levels, justified-premium retailers, such as Whole Foods, can levy higher prices than some of their mainstream peers (Figure 5). Economic turbulence has forced some of these premium retailers to communicate value more strongly. Some have matched rivals on prices for branded items, while others have used private label to better convey a sense of affordability. A few have reinforced their singular value by moving even further upstream in services and product. In some cases, this has led them to spin off an alternative store format with the same branding. A good example is the very upscale Nordstrom in the U.S. and Canada, which has a bargain chain called Nordstrom Rack. Even Whole Foods plans to launch a format in the U.S. called 365 (named after its own-brand product line) aimed at more price-conscious shoppers.

PromosShoppers often cite promotions as an important way of gauging and achieving value with a retailer. We believe very few retailers are genuinely EDLP operators. Even retailers like Walmart, Jumbo (in the Netherlands), and Leclerc – famed in their respective markets as EDLP businesses – have a relatively healthy degree of promotion to drive traffic and

Figure 4. Price & Promotions Hierarchy



9prompt purchase. As a senior Walmart International figure told us: “Too many promotions, and you’re confusing. Too few promotions, and you’re boring.”

Some of the hard discounters (Aldi, 3B, Dos Mille, Eurospin, and BIM are good examples) have retained a pure approach to EDLP. Likewise, a number of pure-play eCommerce

businesses around the world use their relatively low overheads to offer an EDLP approach. They also do so via marketplaces where they sell directly from manufacturers into the market (like Tmall) or offer a range of used/refurbished products (like MercadoLibre). Most other EDLP retailers are better classified as EDLP+: generally aiming for EDLP across the basket or a big chunk of it, but supplementing this stance with a healthy slug of deals.

Pure EDLP players have very low prices as their raison d’être. Using their strengths (scale, efficiency, standardised store and labour formats, high private brand penetration), they strive to offer the lowest prices proactively. Others, whose operations are generally not as lean, strive to be the least expensive by undercutting competitors’ price actions reactively, and either taking a hit on margins or getting a better margin at the desk to invest in price.

The bulk of retailers sit in the high-low camp – by no means the cheapest in the market, but with deep enough and frequent enough discounts on a rotating number of SKUs to appeal to the budget-savvy shopper. Occupying this middle ground comes with some possible dangers, however. High-low retailers run the risk that shoppers will cherry-pick them for discounts then jump to an alternative retailer with lower prices to complete the remainder of their shopping. Kantar Retail’s ShopperScape® research shows that 60% of shoppers see low prices as important only when they relate to the items on their shopping list. High-low retailers, therefore,

Figure 5. Whole Foods: Justifying Premium Prices on Strengths in Assortment, Experience, and Service

Source: Kantar Retail store visit

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risk being seen as expensive if their promotions do not match the items or brands on a shopper’s list. The other downside to high-low retailing is the attendant level of unpredictability and turbulence within the supply chain and stores created by peaks and troughs in demand.

A well-executed loyalty programme can manage these expectations by shifting the shopper’s focus from replenishing from a list to selecting at the shelf. For example, a retailer may offer a section of mustards with multiple price points and promotions. The key is to get the shopper engaged in selecting based on perceived value with related items, not just the ‘listed’ item. When this works, the shopper genuinely becomes a ‘shopper’ and ideally starts to slow down and get involved with a greater part of the store.

Building further on these observations, combined with our ShopperScape® data, it is possible to break the concept of value into the ‘two sides of value’ – securing the lowest price versus getting a good deal, or put another way, ‘absolute’ versus ‘relative’ value. Shoppers who lean towards one or the other often have divergent ideas about what else is important. ‘Lowest price’ shoppers place a premium on shopping efficiency and functionality, picking stores with a relatively simple and uncluttered design. The ‘get a good deal’ shoppers are more likely to value the experiential and/or emotional aspects of shopping; to appeal to these shoppers, the retailer creates a different and more dynamic store. In the U.S., these two shopper types have often been shorthand for

‘Walmart’ shoppers (typically those with a lower household income who ‘need’ to save and seek the ‘lowest price’) and ‘Target’ shoppers (who are slightly more affluent and more motivated to ‘get a good deal’).

ChoiceGetting the correct level of choice in store (or online) is a delicate balance and creates something of a Goldilocks scenario for retailers: They must make sure that the level of choice is not too cold and not too hot, but just right. Of course, this level of variety is highly subjective: One shopper might find the single private brand ketchup available in Aldi extremely limiting, while another shopper might regard the 20 to 30 lines of ketchup on sale in a hypermarket or supercentre bewildering.

Given their experiences over the last decade, retailers have more than ample proof that too much assortment leads to slow turning inventory, which can easily thwart growth and reinvestment. Others have discovered that aggressively cutting item counts to create a best-value offer can easily lead to lost sales.

The issue of choice has become increasingly pertinent for retailers. In recent years, a number of retailers, such as Tesco in the U.K., have increased their ranges by as much as 30%, driven by a desire for listing fees rather than a desire to drive relevancy for shoppers. Therefore, Tesco is one of many retailers around the world now reviewing and


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reducing assortment to make the shopping proposition clear for shoppers and to reduce operational complexity. At the same time, a number of discounters are increasing ranges to broaden their appeal, move into higher-margin categories, increase average basket size, or increase traffic. Aldi has significantly boosted its range in markets as far afield as the U.S., Ireland, and Australia. At the same time, general merchandise discounters and drugstores have been broadening their consumables assortment; examples include Dollar General in the U.S., Farmacity in Argentina, Game in South Africa, and Shoppers Drug Mart in Canada (Figure 6).

One theme that belongs alongside choice is segmentation. Effective range and category segmentation enables retailers with a large array of choice (such as hypermarkets or nonfood category specialists) to offer the best of both worlds: breadth and depth of range with ease of shopping experience.

While discounters have used their narrower assortments as a virtue (quicker trips, easier selection, and lower prices), supermarket retailers such as Jumbo have highlighted this narrower assortment as a competitive disadvantage, using in-store POS to point out the paucity of choice on offer in Lidl (Figure 7).

Online, meanwhile, is truly becoming the home of the long tail. Amazon, which prides itself on being ‘the everything store’, can offer a truly mind-boggling cereal assortment on its U.S. site (Figure 8). Walmart recently revealed that its U.S. eCommerce site now offers a staggering 7 million items. In China, Alibaba, Taobao, and Tencent sell through a marketplace representing hundreds of thousands of suppliers of every imaginable kind while offering cross-border sales and transaction management.

Figure 6. Shoppers Drug Mart: Bolstering Its Credentials in Fresh


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Figure 7. Jumbo: Taking a Swipe at Lidl’s Limited Range


Figure 8. Amazon’s U.S. Cereal Range

Source: Amazon.com

Figure 9. U.K. Discounter B&M: Asserting Stationery Credentials With Well-Known Brands



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QualityQuality can be communicated in many ways, but based on our store visits around the world, the three most common ways are through:

• Brands

• Private label

• Fresh

Brands: Across all retail segments – whether grocery, home improvement, health & beauty, sports, or toys – featuring well-known and trusted national or global brands is a fast-track route for retailers to establish credibility and assert quality credentials (Figure 9). In developing economies and among poorer shopper cohorts, brands represent a promise of predictable quality that is highly valued and worth the additional price. In these same markets, brands can draw shoppers from the informal economy to the chain-store experience.

Private label: Another effective way to communicate quality is through private label. The retailer’s ability to place an item at different value and price levels within a category is critical to offering shoppers choice and making the sale. Proprietary brands, often positioned at the premium end of the market, can be an effective statement of intent with regards to quality. Discounters Aldi and Lidl present a large number of these house brands to their shoppers with quality packaging, product, and communication. On a broader scale,

highly regarded private label ranges (such as premium supermarket lines around the world or flagship brands like Kirkland Signature at Costco, President’s Choice at Loblaw, or Selección at Walmart Lider), have become a remarkable way to convey quality, especially in categories like chilled and fresh.

Fresh: This brings us to the third main lever of quality credentials: fresh food. Across the world, shoppers often judge a store’s quality on its fresh proposition, such as produce, floral, meat, and fish. Therefore, it is no surprise to see retailers putting ‘best in fresh’ at the forefront of their strategies as they attempt to drive further growth or reenergise troubled big-box concepts.

Recommendations: Price, Promos, Choice & QualityShoppers’ and retailers’ attitudes to price are becoming more sophisticated, so your attitude to price must also evolve. One of your key tasks going forward is not to deliver lower and lower prices. Instead, you must use the right frameworks and technologies to help retailers give their target shoppers optimised prices.

Alongside this sophistication, we would urge you to consider creating new brands, new sub-brands, new formats, or new pack sizes that help deliver the appropriate price points. This is not a race to the bottom. This is a new era of collaboration to ensure ongoing mutual profitability in times of value reinvention.

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Likewise with promotions. Billions of dollars are spent globally on promotions every year. Some suppliers are allocating the equivalent of 20% of their net sales on trade spend with no great clarity on the return on this investment. On the flip side, retailers are subjecting themselves to an unhealthy degree of disruption, cost, and turbulence to achieve the front-margin and back-margin benefits of promotions. Greater collaboration is required here as well to establish promotional activities that are incremental rather than cannibalistic.

Listing fees, the quest for more facings and internal KPIs, has created an FMCG market typified by bulging assortments, futile and repetitive new product development, and shopper fatigue. Many retailers are realising that a shakeout is long overdue – they will need assistance in the form of data and insights to help them trim their assortments. For suppliers, perhaps the time is right to assess whether all launches will grow the category and whether there is sufficient innovation to create new consumption occasions.

Proximity, Speed, Simplicity & AvailabilityProximityThese value criteria align with the time and angst considerations discussed earlier. One reason the hypermarket concept is running out of steam (and this is a global phenomenon – Carrefour has reported declining hypermarket transaction numbers across Europe, Asia, and

Latin America for many years, and Walmart’s Supercentres are slowing in every mature market in which they operate) is that shoppers increasingly prefer to shop at smaller stores closer to where they live, work, or commute. This rising demand for trip proximity, speed, and convenience has meant that many global retailers, such as Walmart, Tesco, and Carrefour, are prioritising convenience or smaller store concepts as a path to growth.

Figure 10. Decathlon: Smaller Urban Stores Catering for Cyclists and Runners in Major Cities

Source: Kantar Retail


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This isn’t happening just in developed markets. The Brazilian drugstore channel is growing far faster than Brazilian hypermarkets due to a combination of hypermarket pricing strategy in health and beauty care and proximity, because traffic in major Brazilian cities has made the hypermarket a much more onerous trip than it used to be.

Nor is it confined to grocery retailers – far from it. Global sports retailer Decathlon has started opening smaller, urban stores called Decat (Figure 10). IKEA is now opening smaller stores in cities. International electronics retailer Dixons Carphone has prioritised opening smaller units at airports. Big-name FMCG retailers, including Lego, Amazon, Media-Saturn, and Benefit, have all started deploying vending machines to reach busy, time-pressed shoppers.

SpeedFor many shoppers, saving time can be as important as saving money. With working hours and female participation in the labour force increasing in most countries, shopping quickly is becoming as important as shopping cheaply. This consideration has accelerated the appeal of eCommerce around the globe. Goods are now available at the click of a mouse or with a tap on a screen, and the continuous improvement of delivery times and the narrowing of fulfilment windows mean that multichannel retailing can save shoppers substantial time. The fact that Amazon has started rolling out its Prime Now one-hour delivery service around the world speaks to the immediacy that many shoppers want – and are willing to pay for.

For stores (and their suppliers), collaborating to decrease the amount of time shoppers need to navigate a category, select products, and, in particular, check out is becoming an important factor within value. Many global retail and food service providers are implementing new checkout technologies, including tunnel scanners and mobile wallets, to expedite the trip. However, checkout reflects a culture’s sense of trust; many developed countries continue to avoid automated solutions. In other cases, retailers have discarded self-checkout as a way to reinforce their service image. Going forward, the impact of culture on transaction will be more fine-tuned to a range of solutions.

Figure 11. Albert Heijn’s New Netherlands Prototype: Maximising Dwell Time


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An obvious caveat here is that retailers with a more engaging or experiential proposition are seeking to maximise dwell time. If an in-store experience contains enough theatricality and interactivity (along with a strong service or food service proposition), then shoppers seem more than content to maximise trip time (Figure 11). So, while the average hypermarket or supercentre trip might clock in at 20 to 30 minutes, Bass Pro Shops (the outdoor retailer often akin to a theme park) sees an average dwell time of 160 minutes. Convenience stores internationally continue to add prepared food in parallel to premade food not only to reinforce ‘fresh’ and ‘service’, but also to double a 3-minute trip.

SimplicityAn attribute that often neatly dovetails with speed is simplicity. Retailers that remove complexity from the shopping experience are often in a better position to succeed. Retailers can achieve simplicity in a number of different areas (in-store or online navigation, assortment, pricing, promotions, process, and checkout), and there is little doubt that facilitating – rather than disrupting – the shopping trip is the likely way forward. A retail executive in Canada summarised this well, stating: “I don’t care what size store it is. I want the shopper to be able to see the whole when they walk in through the door and know they can find what they want.”

AvailabilityThe final component to evaluate here is availability, so often the bane of otherwise successful retailers. A retailer can have the greatest range, the keenest pricing, compelling promos, and sufficient quality, but if the products are not on the shelf (or available for rapid shipping), then all of its best work can be undone. In developing markets, the uncertainty in supply chains and product availability means retailers must carry far more inventory than retailers in more developed markets. Sometimes, unavailability can be the result of a retailer being a victim of its own success, varying from a particularly successful deal in a supermarket to a must-have designer collaboration in a fashion store. Often, though, gaps on the shelf (real or virtual) are the result of poor forecasting, planning, systems, disciplines, measurement, or training. Nothing destroys value more than poor availability.

Recommendations: Proximity, Speed, Simplicity & AvailabilityRetailers’ drive for proximity has an obvious impact on suppliers: the need to do more with less. A supplier to a hypermarket might have an entire aisle to play with, whereas a supplier to a convenience store might get only one or two SKUs into a single bay or endcap. The scope for shopper marketing and promotional activity is similarly constrained, meaning that products require greater clarity and ‘identifiability’.


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The ‘so what’ around the need for speed is twofold: prioritising eCommerce and multichannel retailers that are expediting delivery and facilitating in-store purchase. All too often, shopper marketers will speak of ‘disruption’ or ‘interruption’; what shoppers generally desire in the age of REconfigured REtail are facilitation, guidance, and ways to save time and money.

Speed is often built on simplicity: simplicity of navigation, assortment, pricing, promotions, process, and checkout. Supplier inputs and partnerships clearly come into play for navigation, assortment, pricing, and promotions. Is the shopper at the heart of the decisions you make in these fields?

Authority, Service & ServicesAuthorityWhile perhaps less of a factor in the commoditised end of the FMCG spectrum, authority can be an important part of the value equation when it comes to more engaging, emotional, or high-ticket purchases. With some purchases, shoppers require guidance, reassurance, information, and a real sense of expertise. Often, this level of authority is the preserve of category specialists – retailers with in-depth strength in range and the requisite number of appropriately trained sales personnel to help guide the shopper towards purchase.

However, even generalist retailers can require a certain degree of authority in subcategories (think electronics,

cosmetics, meat, or wine). In-house staff can provide such authority, but suppliers can contribute as well, perhaps providing training, in-store staff, or POS to assist shoppers. Technology can also help provide authority. This is one area where a carefully thought-out touch screen, kiosk, or other deployment can be genuinely useful in providing the correct level of information and guidance.

Figure 12. Carrefour Market in France: Novel Way of Assessing Shoppers’ Views on Quality and Service


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ServiceService is inherently an abstract notion – a subjective component of value whose interpretation can vary enormously between two shoppers in the same store (Figure 12). Subjective criteria aside, basic hygiene factors, like having enough checkouts open and having staff trained in basic greeting and transaction skills, are more important than ever given the wealth of store choices available to most shoppers around the world. Again, expectations can vary hugely depending on the shopper mission and type of store, with more personalised and attentive service expected for a high-ticket purchase or for transactions at a high-end store.

ServicesServices are becoming a key adjunct to retail across a wide variety of categories. Banking, credit, and financial services have long been a priority for retailers in both mature and less developed markets, offering a complementary (and often high-margin) capability that pairs neatly with providing physical goods. As a ‘do it for me’ ethos prevails among shoppers, retailers in areas as diverse as furniture, home improvement, technology, and beauty are adding in-store or in-home services that can often seal a purchase.

Once again, the notion of services can vary significantly by region. For example, the Mexican drugstore chain Farmacias de Similares offers low-cost healthcare as an add-on service to its competitively priced medicines. In a country where healthcare is prohibitively expensive and access is

a challenge because of distances, this offering is a huge loyalty driver. In India, Big Bazaar offers to cut fruits and vegetables and grind flour onsite for free, which saves working women time and effort.

Recommendations: Authority, Service & Services We see suppliers exerting the most impact in authority. Plenty of examples around the world highlight how suppliers enhance the credibility, integrity, and authority of their retail customers:

• Sports suppliers running product academies at a major sports retailer’s headquarters so staff can advise shoppers in a more informed way

• Wine suppliers helping department managers in supermarkets secure Master of Wine status

• Cosmetics and electronics suppliers providing their own staff to man their branded counters in department stores

• A whole gamut of suppliers furnishing retailers with in-store POS to inform and guide shoppers

• Manufacturers providing eCommerce retailers with all the best visual and textual content to inform the online purchase

What can you do to make sure your retail customers, which are, after all, the gatekeepers to your shoppers and consumers, exhibit real authority in your category?


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Loyalty & ValuesLoyaltyThere is ample debate concerning the efficacy of loyalty schemes. Successful retailers often argue that their loyalty cards (and the data they generate) are a foundation of their ascent, but it is worth remembering that many of the world’s more successful retailers have never operated loyalty programmes. That said, it remains fairly uncontroversial to assert that a well-executed loyalty scheme can yield dividends for shoppers, retailers, and suppliers alike.

By offering appropriate rewards, a loyalty card can be a decisive factor in ensuring that a shopper will continue to patronise a certain retailer. Tesco has expanded its Clubcard scheme globally, while other businesses, such as Walgreens in the U.S. and Pick n Pay in South Africa, would testify that loyalty cards can quickly help underpin greater shopper affinity. An attractive side benefit of these cards is that they can enable contextualisation and personalisation, value components we will address in the next section.

ValuesValues – and by this we mean attributes such as corporate social responsibility (CSR), ethical sourcing, environmental concerns, and charitable endeavours – remain an important part of the value equation for many shoppers. Granted, for some shoppers they are something of a peripheral concern, but for others, CSR issues can be deal-breakers. Many major

retailers have a keen sense of values, with many pursuing far-reaching CSR programmes that seek to minimise their impact on the environment, treat their suppliers and employees with respect, and maximise their positive impact on the community (Figure 13). We see great potential for more retailer/supplier collaboration here, since many suppliers are pursuing CSR objectives that significantly overlap with those of their retail customers. The possibility for mutual benefit and added value for shoppers is significant.

Figure 13. PepsiCo’s Tailored Packaging in Support of Asda’s Annual Breast Cancer Fundraising Drive

Source: Kantar Retail store visitRecommendations: Loyalty & Values

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Recommendations: Loyalty & Values During times of economic turbulence, it might be tempting to let ‘values’ take a back seat in favour of focusing on more price-driven aspects of value. However, CSR remains vitally important to retailers (and shoppers), so pursuing your own CSR objectives – or supporting those of your major retail customers – are extremely worthwhile efforts.

Contextualisation & Personalisation ContextualisationContextualisation is increasingly key in retailing. Even global players that might seem to operate standardised formats or sites around the world (Amazon, H&M, Costco, and Aldi, for example,) have learned that, to some extent, they need to localise assortments, websites, store formats, and cultural norms to succeed. Very few (if any) international retailers can get away with a pure cookie-cutter approach to cross-border retailing.

Walmart is an excellent example of the difficulty in scaling this learning curve. Some instances of the need for contextualisation can be amusing. In the retailer’s first foray into international retailing in Mexico, its U.S.-sourced tennis balls did not bounce right in the high altitude. Other instances can be more grave. Walmart’s failure to contextualise format, assortment, and culture in Germany

proved to be an expensive misadventure.

National players need a more contextualised approach as well. National contextualisation becomes vital as both brands and retailers try to crack the emerging market opportunity. A big contextual factor here is the emergent shopper class in many developing markets such as Brazil, Chile, China, Indonesia, and Vietnam. In these markets, value is not just the store price shoppers pay – it’s also the cost of transportation, storage, time, etc. In these locations, shoppers may buy smaller packs, even though the per-unit cost is higher, simply because they are easier to carry home or because the average dwelling does not have enough room for storing larger pack sizes. Traditional trade can service this need, but how well-adapted are modern retailers to this context?

Beyond national contextualisation is regionalisation. It is notable that several major retailers (again, we can cite Carrefour and Tesco), have moved from format- or channel-based management to a regionalised approach. Similar contextualisation has even devolved to the city level, with Carrefour, Amazon, and Tesco just a few of the retailers adopting specific strategies to win in major urban areas.

Even within the same city, successful retailers are further contextualising their offer to resonate with shoppers in a more meaningful way. Tesco has done a fantastic job of this in London, where two stores in the same chain (Tesco Metro)


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can vary enormously. The Metro in the Tooley Street office area is very upmarket, with ranges and prices to match. The store in Upton Park, just 5 miles away, features an entirely different design and assortment skewed towards a lower-income and more international audience. Data and research enables Tesco to tailor and contextualise its proposition to better cater for the local catchment area. More retailers are learning how to segment and execute at the store level, realising the commercial value of merchandising against different shopper types and missions.

Other contextual factors can enable a retailer to better tailor its commercial activities. U.K. general merchandiser Argos, for example, tailors the promotional messages on the digital

screens in each store to account for local weather patterns (Figure 14). Stores in sunny regions can push outdoor toys, whereas stores in inclement regions can promote board games or video games.

PersonalisationThe ultimate level of contextualisation is by household or individual – also known as personalisation. While many

Figure 14. Argos: Contextualised In-Store Messaging Based on Local Weather


Figure 15. Carrefour Italy: Personalised Nutella Jars


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column inches regarding personalisation in retail focus on high-tech bells and whistles, it is worth noting that personalisation can be an extremely low-tech endeavour within reach of the humblest of independent retailers.Due to their scale and small catchment, independent retailers can flourish by offering personal service, tweaking their assortment, and catering to individual requests. For retailers of scale, this is clearly impossible, which is where CRM-powered technology can come to the fore.

Even for multinationals, though, personalisation does not need to be high tech. Personalisation can be as simple as name labels to stick on jars of Nutella (Figure 15) or a free gold pen with each bottle of cava (Figure 16). Technology is now playing an increasingly important role in personalising the shopping trip, marketing, products, services, pricing, and promotions. One example is the Bouton Noir 3-D body-scanning service at Auchan in France, which enables shoppers to order made-to-measure clothing (Figure 17). Another is Waitrose’s beacon technology that provides personalised special offers (Figure 18).

Figure 16. Asda: Personalising Bubbly With Free Gold Pens

Source: Kantar Retail store visit Figure 17. Auchan’s Bespoke Clothing Service



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In July 2015, Waitrose made further progress in what it calls mass customisation – launching a scheme called ‘Pick Your Own Offers’ that empowers myWaitrose loyalty programme members to choose the products they would like to save 20% on every time they buy them. From nearly 1,000 of the retailer’s bestselling SKUs, shoppers select 10 items to receive the discount on for the remainder of summer 2015 (and possibly beyond if the retailer deems the programme successful). As Waitrose MD Mark Price noted: “Different forms of personalised marketing have been around since the 1990s, but we’re introducing mass customisation in

grocery. Customers can choose what’s valuable to them when they shop for groceries. We really are giving power to the consumer.”

Online retailers have become masters of personalisation. Amazon is the epitome, with its ability to make (generally) successful recommendations based on previous purchases and to recommend products that complement items shoppers have put in their baskets.

Recommendations: Contextualisation & PersonalisationContextualisation presents an opportunity for great retailer/supplier collaboration. As retailers look to move their stores from a one-size-fits-all approach to be more locally resonant, supplier support in the form of data, insights, products, and promotional activity will be more welcome.

As we have seen from some of the examples, personalisation is no longer the preserve of the fashion, auto, or leisure industries. There is plenty of scope (both of the low-tech and high-tech variety) to personalise products, while huge potential exists to personalise communications with shoppers and consumers. The shopper of the future will expect meaningful and tailored dialogue with brands in addition to more mainstream broadcast communications. As retailers seek to personalise the shopping trip, there is potential for suppliers to participate in personalised promotions and communications to build brand affinity (and market share).

Figure 18. Personalised Special Offers from Waitrose Beacons


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Overall Recommendations As part of the broader REconfiguration of REtail, the mechanics by which suppliers and retailers can deliver value to shoppers are being reshaped, becoming more personal, dynamic, contextual, and volatile.

Retailers and suppliers – as part of their mutual imperative to REimagine Value – need to realise that there is so much more to value than price. Going forward, collaboration and partnership need to focus on the following key areas:

• Both retailers and suppliers need to move away from predominantly price-based value discussions into strategic dialogue on larger, more transparent notions of shopper value.

• Brands and retailers must bear in mind the mechanics of a more algorithmic and dynamic pricing environment and understand that economic outcomes in this environment will be less certain and harder to forecast.

• Retailers should invest in capabilities that deliver more personalised pricing, packaging, and optimised assortments that support different shopper needs and service levels while avoiding unnecessary complexity.

• Suppliers need to leverage more holistic notions of value (origin, product formulation, brand personality, complementary services, etc.) to create the marketplace distinction critical to maintaining margin.

• Brands should reconfigure internal value – particularly in trade promotions – to release funds for investments in innovation and consumer/shopper engagement.

• Suppliers and retailers need to embrace the ‘science of the shelf’, investing in analytics capabilities around assortment, pricing, and promotions.

• Suppliers and retailers need to think of the connected shopper journey, not just the shopper. Value is created through a deeper understanding of the consumer and shopper journey – and eroded or destroyed if the connection points do not link to where the consumer and shopper most meaningfully connect to the category or brand in an omnichannel environment.


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The Kantar Retail NarrativeWe areThe Retail and Shopper Specialists

Our PurposeWe help our clients sell more – effectively and profitably

Our Belief and PhilosophyWe connect a world-class set of retail and shopper assets with pragmatic, solution-oriented people to grow client businesses.

Our Brand storyEvery business challenge requires a unique solution.

We bring together a collection of retail and shopper assets – insights, tools, analytics, and experienced consultants who think pragmatically while building and delivering integrated solutions. Our passion is using the right combination of these assets to grow your business.

Our teams create real-world solutions to deliver faster growth, and we plug in seamlessly as part of your extended team. We connect these solutions to your core work, embedding them so your organisation benefits systemically and continuously.

These solutions are aimed at your critical business decisions – how to best drive future growth, where to play, how to win, and how to optimally allocate resources. In turn, our solutions help you win the critical decisions made by shoppers and buyers along their purchase journey. Our specialised knowledge and expertise can be targeted towards specific business issues, while our integrated solutions transform businesses and generate breakthrough performance improvement.

Market Insights, Americas

501 Boylston St., Suite 6101 Boston, MA 02116 United States +1.617.912.2828

Market Insights, EMEA

24-28 Bloomsbury Way London, WC1A 2PXY United Kingdom +44.207.450.2643

Asia Headquarters

11F, Henderson Metropolitan 155 Tian Jin Road Shanghai 200001, China +86.21.2321.3230

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Rua Olimpiadas 205 – 13o Andar Vila Olimpia - Sao Paulo SP - 04551 - 000 Brasil +55.3066.64.54


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REinvent Format

REtool Comm

erce

REengage Shoppers

REimagine Value

REconfigureREtail

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