Future of Retail Shopping

© 2012 IBM Corporation

Future of Retail Shopping Delivering a “Smarter Shopping Experience”

Piotr Pietrzak Chief Technologist, IBM PL 16 October 2012

T: @piotrpietrzak E: [email protected]


Topic

The Smarter Consumer is Redefining Shopping

Delivering a Smarter Shopping Experience

The Path Forward

AGENDA


Instrumented

Interconnected

Intelligent

Customer

Informed

Product Availability

Product Comparisons Reviews

Product Details

Deals

Pricing

Empowered

Engaged

Influencing

Brand Preference

Buying Decisions

The biggest challenge in Retail today is what’s happening on the other side of the counter. Consumers are becoming Smarter!


Shopping Becomes Collaborative

§ Retailers engage consumers in retail decisions (e.g. assortment, etc.) § Consumer-to-community interactions become commonplace 3

Shopping Becomes Contextual

§ Consumers demand relevancy and personalized service § Availability of consumer information combined with real-time analytics

enables superior experience 4

Shopping Becomes Deconstructed

§ Consumers can start/stop and switch channels seamlessly § New competitors arise; disintermediating consumers from retailers 2

Shopping Becomes Real-time Aware

§ Device and communication technology converge § Consumer interactions become timely and proactive 5

Shopping Becomes Experiential

§ Physical and digital worlds converge to provide an enhance experience § Shopping becomes all about the experience; availability and fulfillment

times are greatly reduced 6

Shopping Becomes Omnipresent

§ Shopping becomes engrained in all aspects of our lives due to persistent connectivity and ubiquitous access

§ Consumer touch points continue to proliferate increasing availability 1

Consumers are redefining the shopping experience to fit their unique needs and timeframes

Source: IBM Global Retail Industry


% of Consumers willing to use the following technologies to research and make purchases

Research In-Store

42% Proactively communicate promotions to me based on what I scan 41% Allow me to check prices from other physical and virtual locations

Service In-Store

32% Help me find the customer service desk or associate

31% Allow me to order out-of-stock items

29% identify myself in store or mobile for help

27% Provide the most efficient route through store

27% Allow me to take a picture/text to get product information

Mobile is quickly growing in importance During the in-store shopping process

The majority of consumers want to leverage an increasing number of technologies during their shopping process

29%

18%

24%

0%

5%

10%

15%

20%

25%

30%

35%

40%

1 Technology

2Technologies

3Technologies

§  TV (using a remote control)

§  Social videos (YouTube, YouKu)

§  Electronic games

§  Website §  Mobile technology §  Social Network §  Retailer website to

co-create products

Shopping Becomes Omnipresent 1


Service &

Support Receive Purchase

Browse &

Research Awareness

Shopping Continuum Consumer Customer

Consumers are obtaining different value from each touch point and consequently are deconstructing the shopping process

Shopping Becomes Deconstructed 2


Service &

Support Receive Purchase

Browse &

Research Awareness

Shopping Continuum Consumer Customer

33% of consumers who did not have enough information to purchase, the lacking information is within the retailer’s control

1.  Wanted to touch, see and experience the item

2.  Wanted to price compare to determine best price

3.  Product information was missing (quality and product attributes)

4. Missing independent product review information

5. Could not tell if the product was in stock

Source: IBM Institute for Business Value Analysis, Retail 2012, n = 28,527, PM05 If you can’t make a purchase after you researched in (research method) what information was missing?

Shopping Becomes Collaborative 3


Consumers now have the ability to influence others far beyond their own network, while their trust in information sources is constantly changing

Haul Video

83% of shoppers influenced by online

customer reviews

4% Retailer

Manufacturer 9%

16% Product Experts

17% Customer Reviews

53% Family/Friends

48% Family/Friends

12% Retailer

14% Manufacturer

12% Product Experts


Shopping Becomes Collaborative 3

Product Experts Manufacturer Retailer Family / Friends Customer Reviews

6% Retailer

11% Mfg

9% Product Experts


43% Family/Friends

Product Experts Manufacturer Retailer Family / Friends Customer Reviews

38% Family/Friends

7% Retailer

20% Manufacturer

10% Product Experts


Consumer Trust Ranking - China Consumer Trust Ranking - China 2010 2011


Consumer demand personalized interactions and timely service no matter if the interaction is self-service or assisted-service

Personalize Promotions (#1 influence of purchase decision)

–  Most likely to increase my spend –  Key consideration when determining

where to shop –  The area retailers need to improve most

Personalize Shopping (Most important factors)

–  Recognize me in the store or online –  Remember preferred payment method –  Provide preferred receipt type

Personalize Assortments (Most important loyalty drivers)

–  High quality/low price private label products

–  New and unique products –  Broad range of products regardless of

store/online

“Serve me”

Customer Service: Top area for retailer innovation

Customer Service: Most important loyalty drivers

–  Allow me to return products without hassle or questions asked

–  Make it feel like a pleasure to help me –  Have knowledgeable employees about

products/services –  Easy way to order items not in stock

Convenience: Top Priorities –  Prior in-stock knowledge before going to

store –  Providing the right products and

appropriate variety of brands –  Education on additional items to purchase

with primary item

Shopping Becomes Contextual 4


§  Identify shoppers presence as they enter or leave the store

§  Identify proximity to a retail store

§  Identify what aisle or department the shopper is located

§ Ability to interact with store personnel, systems and devices

Identifying presence and location will become essential in enabling timely and relevant consumer interactions

Shopping Becomes Real-time Aware 5



The convergence of the physical and digital worlds will enable shopping to become more experiential

Shopping Becomes Experiential 6


Topic



The Path Forward

AGENDA

© 2012 IBM Corporation maturity

valu

e

Deliver a Smarter

Shopping Experience

Achieve differentiated lifetime customer relationships by consistently delivering on the brand promise

Continuous dialogue

Provide timely, tailored and seamless shopping experiences that can span multiple interactions within and across touch points

Relevant experience

Optimize marketing by channel and medium to deliver targeted consumer messages and offers

Precision marketing

Understand consumer and customer preferences, interaction history and motivations to determine the next best action

Prescriptive insight

Capture and consolidate product, inventory, order, market, and interaction data to provide a trusted view of consumer-relevant information

Integrated information

Source: “Smarter Shopping Value Quantification.” IBM Center for Applied Insights, and IBM Global Retail Industry, October 2011

Delivering a Smarter Shopping Experience will enable retailers to achieve differentiated customer relationships.


21%

40%

21% Increase in profit from incremental revenue

Improved margins

Reduced inventory

Increased SG&A efficiency

Reduced marketing expense

9%

9% Integrated Information

Potential Economic Return

Prescriptive Insight

Precision Marketing

Relevant Experience

Continuous Dialogue

$388M $80M

$131M $51M

$27M

$99M

$388M in annual benefits by financial benefit type

Annual economic benefits by competency Illustrative $25B soft-line Retailer*

7% improvement in customer satisfaction

5% improvement in brand image

1% improvement in employee satisfaction

*Source: IBM Center For Applied Insights. October 2011. The potential benefits above are modeled using publically and privately available data. These potential benefits reflect a relative result based on a specific set of data and assumptions. Therefore, potential benefits will vary by enterprise and are not guaranteed.

Investment in capabilities to fully develop each Smarter Shopping competency will drive economic value and benefit.


Retailers must allow consumers the choice to shop any touch-point while providing a seamless, consistent and relevant experience

Customers have the freedom to achieve their goals throughout the shopping process…

…using whichever channels and touch

points they prefer.

Advertising

Signage

Kiosks

Checkouts

Employees

Catalogs

Direct mail

Retailer sites

Email

Mobile apps

Mobile browse

SMS/MMS

Call centers

Texting

Social media


1. AWARENESS 2. RESEARCH 3. PURCHASE 4. RETRIEVAL / DELIVERY 5. SERVICE / SUPPORT


Customer Interaction Platform

AnalyticsGlobalizationPersonalizationRelationships & Agreements

Business Context Engine

Configurable Business ProcessesBusiness Processes

Order ManagementCollaborationCatalog &

ContentMerchandize

& SellMarketing

IBM Middleware PlatformDeveloper

Tools

Admin

Business

Customer Interaction Platform

AnalyticsGlobalizationPersonalizationRelationships & Agreements

Business Context Engine

Configurable Business ProcessesBusiness Processes

Order ManagementCollaborationCatalog &

ContentMerchandize

& SellMarketing

IBM Middleware PlatformDeveloper

Tools

Admin

Business

Order Taking X-Sell / Up-Sell

Registration Offers / Promo Customer Profile

User Interface



User Interface



User Interface



User Interface



User Interface

X-Sell / Up-Sell

Order Capture Product Info

Registration

Customer Profile

Web Site Contact Center Kiosk Point-of-Sale Mobile

Mobile Interface Web Interface Kiosk Interface POS Interface CSR Interface

An enterprise “Customer Interaction Platform” provides a common set of services and business processes across all touch points


Leading retailers also believe that an enterprise “Customer Interaction Platform” will provide the path to success

Source: “ e-Commerce 2012: Back to the Future”, RSR Research, Jan 2012

© 2012 IBM Corporation 18

Retailers usually deploy a Customer Interaction Platform on the Web first, and then leverage it as the foundation to power other channels

The Customer Interac0on Pla3orm allows you to extend your brand seamlessly and consistently in the

most cost-‐effec0ve manner

Social

POS and Mobile POS

Web Site Mobile Devices

In-‐Store Kiosks

Please change images to your client’s web site and logos


Delivering a consistent brand promise has become more difficult as consumers demand similar services across all touch-points

Apparel ……… 65% Health/Beauty.. 69%

Grocery …….... 64% Décor/DIY….... 51%

Luxury….......... 47% Electronics....... 45%

û Manual or point-to-point processes û  Brand, Channel, Product Proliferation û  Information & Inventory Silos û  Limited fulfillment options for customers û  No single ownership of order processes

Banks

SuppliersDistributors

Carriers/3PL

Customs

DCs

Retailer

Store 3

Store 2

Store 1

Call Center

Web

Catalog

Customers

Warehouses

Banks

SuppliersDistributors

Carriers/3PL

Customs

DCs

Retailer

Store 3

Store 2

Store 1

Call Center

Web

Catalog

Customers

Warehouses

Which of the following methods would you prefer to obtain the item?

60%

13%

12%

10%

Purchase at Store and Leave Store with Item

Purchase at store and deliver to home the same day

Purchase online or in-store and delivery next day

Purchase Online and deliver on the date you specify

6%Purchase online and pick up in the store


Cross-Channel Order Management streamlines order and fulfillment processes across all channels and the extended supplier network

Special Order

Call Center

Web Sales

Catalog Sales

DCs

Stores Kiosk

Cross-Channel Order Management

Customers

Customers

þ  Order configuration – substitutions, pre-order, split shipments, drop shipments

þ  Order aggregation, optimized source of supply, prioritization

þ  Order visibility, monitoring, status, and exception alerts þ  Global inventory visibility and available-to-promise

þ  Management of supply locations with demand locations

þ  Schedule, sequence, and execute service requests þ  Fulfillment cost analysis, recommendation, and

orchestration þ  Product returns management


Cross-Channel Delivery & Service Scheduling

Service Partners

Delivery

Installation

Service

Support

Credit

Stores

þ  Event scheduling, monitoring, and reporting

þ  Exception-based rescheduling and re-sequencing

þ  Cross-partner coordination/ management


Holistic Inventory Visibility

DCs Suppliers Stores

Distributors

C  Sourcing customer orders from in-transit inventory can save 3 or more days’ inventory for those item involved

C  Sourcing customer orders from slow turning store stock can reduce markdowns and improve margins

þ  In-Store

þ  In DC

þ  At Distributors

þ  At Suppliers

þ  In Transit

Track Inventory Anywhere


Cross-Channel Returns Management

Customers

Customer Service Returns

Return To Stock Return To Supplier, Auth. Center, etc.

Return To Sales Floor

Catalog Sales

Records

Web Sales

Records

Destroy Returns

Destroy

Sales Floor

Returns Staging

Stage Returns Shipping

Store Stock Room

þ  Global visibility into purchase transactions þ  Routing rules for returned items (per item, per supplier,

per item condition) þ  Historical records þ  Cross-channel / cross-enterprise status visibility


RELEVANT OFFERS REAL-TIME COMMUNICATIONS PERSONALIZED SERVICE

COLLECT MANAGE

EXECUTE ANALYZE

Data Insights

Retailers also need to make sure consumer interactions are timely and relevant with real-time offers and personalized communications


Using data generated by customer interactions across channels, the retailer can produce insights about particular consumers and segments. Based on these insights, the retailer can tailor the shopping experience to the consumers and segments identified.


An Enterprise Consumer Dialogue Engine enables the ability to create a multichannel, multi-stage process workflow that understands where the customer is at in the customer lifecycle and/or buying process

Enterprise Consumer Dialogue Engine

Customer DialogueAbility to develop a two-

way, one-to-one communication flow in an

automated manner

Relies on an event-based engine to identify,

monitor, and execute actions based on

customer events that are relevant to the retailer-to-

customer relationship.

Consumer Interaction Management

StateModels

EventTriggers

InteractionRules

Consumer Dialogues & Workflows

Consumer Insight & Action SegmentsPreferred Product

Categories Preferred Channel

Participation in Loyalty Program

Use of In-House

Credit Card

Use of Service

ProgramsReturn /

Exchange Behavior

Breadth of Categories Shopped

Length of Time as

Customer

Recency + Frequency +

Value

Response to Media

Time until Repurchase in Key Categories

Preferred Product

Categories Preferred Channel

Participation in Loyalty Program

Use of In-House

Credit Card

Use of Service

ProgramsReturn /

Exchange Behavior

Breadth of Categories Shopped

Length of Time as

Customer

Recency + Frequency +

Value

Response to Media

Time until Repurchase in Key Categories

Action

Segments

123456789101112

123456789101112

Product Categories

$Unique view of

individual consumers

§ Identifies current and changes in state of consumer

§ Triggers actions based on consumer activity/inactivity

§ Arbitration rules engine

Enables interactions to be put into context within an end-to-end process


q Store promotion • Mother’s Day Offer: - 30% on Eau De Toilette • Sunshine Offer: 1 sunshine lipstick offered for

any solar cream purchase • 1 loyalty point for $1 spent

q Offer « all boxes » •  A surprise gift for any purchase ≥ $50

q Offer Happy Hours •  +5 loyalty points from 2:00PM to 4:00PM

q Offer « radio » • Say the “magic word” and get 5% discount

q Offers « Direct Marketing » • 1 moisturizer offer for any day care &

night care product purchase • 1 necklace for any purchase ≥ $35 • +3 loyalty point on any YRIA lipstick purchase

Yves Rocher provides real-time promotions, loyalty points and product recommendations at the POS

20M customers 85% identification rate

Real-time offer arbitration and recommendations


A customer enter into the shop

The shop detects the customer The customer is

recognized as a VIP

The shop asks customer if he/she wishes to interact

Customer agrees to interact with shop

The shop informs the shop assistant that a

VIP has arrived

The shop associate is informed of

customer’s needs or decisions

All devices in shop are alerted that a specific

customer is willing to interact

A high-end luxury retail plans to offer shoppers an interactive store experience by leveraging real-time “Presence” and “Identification”


Topic



The Path Forward

AGENDA


Inte

grat

ed

Info

rmat

ion Potential

Economic Return

Pre

scrip

tive

Insi

ght

Pre

cisi

on

Mar

ketin

g

Rel

evan

t E

xper

ienc

e

Con

tinuo

us

Dia

logu

e

$388M $80M

$131M $51M

$27M

$99M

21%

40%

21% Increase in profit from incremental revenue

Improved margins

Reduced inventory

Increased SG&A efficiency

Reduced marketing expense

9%

9%

$388M in annual benefits by financial benefit type

Annual economic benefits by competency Illustrative $25B soft-line Retailer*

*Source: IBM Center For Applied Insights. October 2011. The potential benefits above are modeled using publically and privately available data. These potential benefits reflect a relative result based on a specific set of data and assumptions. Therefore, potential benefits will vary by enterprise and are not guaranteed.

7% improvement in customer satisfaction

5% improvement in brand image

1% improvement in employee satisfaction

Investment in capabilities to fully develop Smarter Shopping competencies will drive economic value and benefit.


Final Thoughts

v  The ‘consumerization’ of technology is changing the way consumers interact, obtain information, and purchase items

v  The proliferation of consumer touch-points will continue and increasingly allow consumers to deconstruct the shopping process

v  Consumers are obtaining different value from each touch point they interact; providing a huge opportunity for retailers to engage shoppers across channels

v  This requires retailers to provide a consistent, continuous, and relevant shopping experience as consumers shop across multiple touch-points

v  When developing the optimal shopping experience, retailers should always consider cross-channel customer interactions

v  The path to success will vary from retailer to retailer based on their target customer’s expectations and how they’d like to execute their brand promise

v  Creating a Smarter Shopping Experience is a transformational journey


Thank YouMerciGrazie

GraciasObrigado

Danke

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