Kpmg report issues monitor-retail-july-2011

KPMG INTERNATIONAL

Issues Monitor:

Sharing knowledge on topical issues in the Retail industry

July 2011, Volume Ten

kpmg.com:

© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

Mark Larson Global Head of Retail

Keeping up to date with the very latest and most pressing issues facing your organization can be a challenge, and while there is no shortage of information in the public domain, filtering and prioritizing the knowledge you need can be time consuming and unrewarding. I hope that you find Issues Monitor useful and I welcome the opportunity to further discuss the issues presented and their impact on your sector.

Welcome to the July edition of Issues Monitor – Retail. Each edition pulls together and shares industry knowledge to help you quickly and easily get briefed on the issues that affect your sector.

ISSUE 1: Evolving supply chain initiatives

Over the years, significant changes have been seen in the global retail sector. To have the right product at the right time and in the right place across multichannel touch points has become a challenge for retailers. Moreover, tough economic conditions and changing consumer tastes have forced retailers to make their supply chains more efficient. The various initiatives that retailers have started to optimize regarding their entire supply chain include workforce optimization, inventory planning and revamping of technological infrastructure.

ISSUE 2: Recovery in the global luxury retail market

Triggered by the worst financial crisis since the Great Depression, 2009 brought fear and uncertainty across all demographics. Luxury retail sales contracted significantly, highlighting that this sector too had been affected. But as the economy started to recover, luxury retail bounced back to prerecession levels. Although the luxury retail market recovered in most regions globally, growth was particularly strong in Asia. Their strong economies and the rising income of their middle class population have attracted many luxury companies to operate in these markets. Further, these retailers have also identified untapped emerging markets and started to target them strategically as part of their long-term growth plans.

ISSUE 3: Growing mobile commerce in retail

Since 2010, mobile commerce (m-Commerce) in retail, or mobile retailing, has shown phenomenal growth, while traditional retail stores have exhibited relatively flat growth. m-Commerce has quickly altered the retail landscape and is set to rapidly increase its share in the retail industry. It has blurred the distinction between websites and brick-and-mortar outlets by linking disparate operations and making the internet a pivotal sales engine for the first time for many retailers.


1.

Evolving supply chain initiatives.

Over the years, significant changes have been seen in the global retail sector. To have the right product at the right time and in the right place across multichannel touch points has become a challenge for retailers. Moreover, tough economic conditions and changing consumer tastes have forced retailers to make their supply chains more efficient. The various initiatives that retailers have started to optimize regarding their entire supply chain include workforce optimization, inventory planning and revamping of technological infrastructure.

4 | Issues Monitor: July 2011, Volume Ten


Retailers are increasingly finding it necessary to lower their service costs, while having to change their business models in response to the changing shopper preferences, the slow economic recovery and the rapid growth of online sales channels.1, 2 Moreover, industry consolidation — which has increased retailers’ operations and expanded their product portfolios — has increased the complexity of supply chain management (SCM).3

Consequently, retailers are required to consider new ways to improve efficiencies and optimize processes throughout their supply chain.4, 5 At the same time, blurring sales channels across retail segments require retailers to increase their focus on markets and customers.6

Blurring sales channels across retail segments require retailers to increase their focus on markets and customers.“

The need for supply chain initiatives .

Retailers are increasingly required to streamline their supply chains and become more responsive to changing customer needs.

“

While the global retail sales increased over nine percent annually in 2010, retailers need to improve their supply chain strategies in order to maintain the momentum in 2011 and beyond.7, 8 Supply chain initiatives offer tremendous value to retailers who rely on the smooth planning and execution of related operations to achieve long-term profitability with minimal cost and maintain a solid competitive edge in the market, despite reduced points-of-sale (POS).9, 10

• An efficient supply chain helps retailers improve inventory management. This can facilitate successful implementation of just-in-time stock models and eliminate strain on real estate and financial resources.11

• Well organized supply chain initiatives assist effective demand planning. Consequently, retailers can set their product procurement levels to most effectively address customer requirements — with little shortage or waste.12 Further, to meet urgent customer needs, retailers sometimes need to resort to rushed orders, express shipments and un-optimized transport. Therefore, retailers are increasingly required to streamline their supply chains and become more responsive to changing customer needs.13

• An efficient supply chain also helps retailers to enhance collaboration with their supply chain partners. Retailers, vendors and suppliers tend to share vital information — such

as demand trend reports, forecasts, inventory levels, order status and transportation plans — in real-time. This effective communication and data-sharing helps to identify numerous cost-cutting opportunities that can be beneficial to all parties involved in the supply chain.14

• By reducing their environmental impact, retailers can save overhead costs. By re-evaluating their supply chain in light of green policies, with regard to managing the use of materials and shipping and distributing final products, retailers can often identify huge savings.15 In October 2010, Wal-Mart announced its plans to double the amount of locally sourced products on its shelves. Through this move, it will reduce its environmental footprint by shortening the distance between the point of production and distribution. At the same time, this initiative will reduce the company’s logistics and supply chain costs.16, 17

“Thanks to cost reduction initiatives introduced by supply chain management executives, retailers were able to tap into existing opportunities to streamline their supply chains, lowering their bottom line costs and saving billions across the industry. Moving forward, these cost structure enhancements and efficiencies will enable retailers to thrive as the economy becomes healthy again.”

– Casey Chroust, Executive Vice President of Retail,

Retail Industry Leaders Association (RILA).18

Issues Monitor: July 2011, Volume Ten | 5


Supply chain initiatives .

Figure 1: Retailers’ supply chain initiatives

Adopting the leading best practices in retail SCM — related to sourcing, transportation, inventory policies and distribution — can have a huge impact on a retailer’s bottom line, provide significant value and increase competitive advantage.19 The following are some such initiatives:

Inventory optimization One integral part of retail SCM is optimizing the level of inventory. In order to attract customers and increase sales, retailers must have the right products, in the right place, at the right time.20 Optimizing inventory helps retailers not only set appropriate service levels and ensure customer satisfaction, but also reduce both out-of-stocks and overstocks, as well as protect margins. As a result, retailers can drive sales and free up cash for other investments.21 To assist retailers in reducing inventory at the stores and distribution centers, various software tools have been developed.22

In March 2011, British supermarket •Morrisons announced plans to save GBP100 million (US$163.4 million) annually by 2013, by abandoning indirect procurement of inventories.

Under this plan, Morrisons plans to save various indirect expenditures, including those for transport and warehousing services provided by third party logistics companies. It plans to reduce its procurement spend for building new stores by GBP2–3 million (US$3.7–4.9 million) annually.23

In March 2011, Family Express, a •US-based convenience store chain, announced plans to enhance its inventory optimization with Retalix, an Israel-based leading software solutions provider to retailers and distributors. Family Express plans to reduce out-of-stocks and optimize its fresh product inventory management using Retalix’s Demand-Driven Replenishment solution. Retalix is expected to integrate this solution with the retailer’s existing pricing,

merchandising and POS software solutions, to create a seamless and efficient demand-based replenishment system.24

In March 2011, US-based eBay •announced the first major integration of local inventory onto eBay.com. It is doing this through Milo, a local shopping engine that it acquired in 2010. With this integration, eBay offers shoppers a one-stop platform that provides access to both its online market and local stores. Moreover, eBay allows retailers to upload their inventory onto Milo or eBay with a new inventory management plug-in, enabling small online entrepreneurs to expose their inventory to eBay’s 94 million users.25

Supply chain initiatives taken by retailers

Inventory optimization

Transport spend optimization

Workforce optimization

Revamping IT systems


Q Will supply chain optimization provide the winning edge to retailers?


Transport spend optimizationMany retailers have their inbound and outbound transportation managed by multiple organizations and systems. By integrating their transportation planning and execution, they can increase the utilization of their transport management. Further, this can reduce the number of errors and the administration time spent on freight audit and payment, reduce the number of carriers and enhance control over supplier deliveries.26

In April 2011, British supermarket •chain ASDA hired System Training, the UK’s largest logistics training provider, to provide the retailer’s 3,000 distribution drivers with the Driver Certificate of Professional Competence (CPC) training (a statutory requirement intended to improve driver performance). The training covers various modules that educate drivers and transport professionals in ASDA on better fuel efficiency, lower carbon emissions and a reduction in accident damage. This, in turn, is likely to help ASDA reduce numerous transportation-related costs.27

In March 2011, German-based Rewe •Group announced plans to take over the distribution of its non-food products from its suppliers’ distribution centers. This move is expected to improve the company’s control over its supply chain. Earlier, in February 2011, Rewe had announced the reorganization of its fresh-food supply chain. This helped Rewe reduce lead times to below

24 hours and ensure that in-store products are fresh.28

Workforce optimizationDelivering superior customer service, while managing a diverse and fluctuating workforce, continues to be a challenge for retailers.29 Apart from procuring the right people with the right skills doing the right jobs, they need to manage them effectively.30 Efficient retail workforce management focuses on optimizing the workforce by determining the right employee mix while minimizing budget variance.31 This not only improves performance but also reduces cost.32

In January 2011, Infor, a leading •US-based provider of business application software, announced that American Apparel (US-based, vertically integrated manufacturer, distributor and retailer) had implemented its Infor Workbrain solution to help manage the company’s global workforce with integrated time and attendance, and store labor scheduling.33 The solution is helping American Apparel find the “best fit” schedule, which ensures right employee mix are scheduled at the right time to meet customer demand.34

Revamping IT systemsAs technology tends to change constantly, retailers are witnessing a clear transformation in the retail IT landscape.35, 36 Innovation is increasing, smarter business decisions are being made and cross-functional implementation teams are being


formed. All of this is delivering greater business benefits with reduced cost of operation and increased profits for retailers.37

In January 2011, with the help of •UK-based in-store communications technology company Pierhouse, Waitrose revamped its in-store pricing system with a new digital signage solution called Netticket. With this solution, Waitrose was able to set up a pricing database that enables it to determine in-store shelf prices immediately. It can also send marketing and price information to customers’ mobile devices, in-store screens and social media platforms such as Twitter. The solution also collates detailed information on products, including package size, content and ingredients.38

In order to meet future challenges, •retailers also need to keep exploiting technology. Technology developments such as radio frequency identification (RFID) tags

will play an important role in future retail operations.39 In February 2011, US-based department store Macy’s started rolling out item-level RFID technology across seven stores in the US. It started tagging various product categories — including men’s jeans and women’s lingerie — that are typically high-margin items whose inventory is difficult to manage.40

Cloud computing is another •technology that is expected to change the retail landscape, owing to its high computing power and significantly lower cost. With this technology, information, software applications, operating systems and hardware infrastructure, as well as servers and storage units, are shared over the internet.41 For example, using Microsoft’s cloud computing solution, REEDS, a full-service jewelry retailer operating online and in 16 US states, reduced its infrastructure costs by 90 percent and e-mail support work by 80 percent.42

As technology tends to change constantly, retailers are witnessing a clear transformation in the retail IT landscape.“



Case study – Morrisons’ supply chain initiatives .

During the financial year ended January 30, 2011, Morrisons posted an annual increase of seven percent in its revenues, which reached GBP16.5 billion (US$26.9 billion), with like-for-like sales growing 0.9 percent (excluding fuel and value

added tax).43 Various supply chain initiatives the retailer had undertaken in 2010 contributed to the increase in revenues. Morrisons also plans to continue similar kind of initiatives in 2011. Some of these initiatives are outlined below in figure 2.

Figure 2: Morrisons’ supply chain initiatives44, 45, 46, 47, 48

2010 initiatives

Overhauling IT systemsIn 2010, Morrisons accelerated its six-year IT program, which was to end in 2013, to replace its core IT infrastructure entirely. The total investment for the program is GBP310 million (US$506.6 million). So far under this program, Morrisons has replaced the majority of its payroll, HR and financial systems, installed a new wide-area network and upgraded most of its store hardware and voice-picking technology in its distribution centers. It has also rolled out a new electronic POS system in more than 200 stores. In addition, a new pilot enterprise resource planning (ERP) system in one of its product manufacturing sites is expected to be fully rolled out over 2011.

Continued focus on food productionIn 2010, with the acquisition of Simply Fresh, a stir fry and prepared vegetable business, Morrisons renewed its focus on providing fresh food to shoppers by expanding its in-house manufacturing operations in the UK. This was followed by its acquisition of a cooked meat production plant in the UK, which expanded Morrisons’ capacity for in-house requirements in this product category.

2011 initiatives

Multichannel operationsIn February 2011, Morrisons acquired kiddicare.com, a fast-growing internet retailer for baby products, for GBP70 million (US$114.4million). This was followed by another acquisition in March 2011, when Morrisons bought a 10 percent stake in FreshDirect, a US-based online grocery retailer, for GBP32 million (US$52.3 million), as part of its efforts to expand into online retailing. Such acquisitions are expected to help Morrisons learn the basics of online retailing before developing its own transactional website, which is due to be launched in 2013. Morrisons also plans to begin convenience store retailing. By August 2011, Morrisons is likely to open three trial convenience stores — in Manchester, Yorkshire and Liverpool — under the 'M local' fascia, with the first to open in July 2011. The focus of these convenience stores will primarily be on fresh foods, and if the trial is successful, a convenient format will enable the retailer to extend its reach to more customers.

Distribution network developmentIn the fourth quarter of 2011, Morrisons plans to open a GBP95 million (US$155.2 million) distribution center in Bridgewater, UK. The 800,000 square-foot site, which is expected to become fully operational by early 2012, will serve 70 stores in the region and provide the retailer with greater opportunities for nationwide expansion. It has also secured plans to build a 375,000 square-foot food preparation and storage warehouse at the Bridgewater center. Such expansion drives in the past have helped Morrisons reduce its average journey times and reduce its logistics costs by around GBP0.10 (US$0.16) per case in 2009. This was achieved when Morrisons added the Sittingbourne, UK, center to its regional distribution network in 2009.



Outlook .

Retailers are expected to embrace real-time analytics to integrate planning and execution.“

The future of the retail supply chain is challenging.49 Retailers will have to continue to work on the myriad evolving issues regarding retail SCM. As retailers look to optimize their supply chain processes, their key focus will continue to be environmental sustainability, fluctuating input costs, new government regulations, evolving multichannel operations and utilization of the latest technological advancements.50

The traditional SCM model is expected to transform from a push to a pull channel, as the customer will be in control. This trend, which became prominent as the global economy gradually recovered after the 2008–09 downturn, is expected to continue beyond 2011.51 In addition, retailers are expected to embrace real-time analytics to integrate planning and execution, in order to respond to demand variability at the point of consumption. Also, the growth of e-Commerce and m-Commerce is expected to prompt retailers to embrace multilevel omni-channel inventory optimization in order to keep and expand the customer base.52

In 2011, transportation costs in the US are expected to increase 8–10 percent year-on-year (y-o-y), due to expected rate hikes by transportation companies and increases in fuel prices.53 The increasing transportation costs, coupled with retailers’ focus on a sustainable supply chain, are expected to promote initiatives to reduce carbon emissions.

Tesco, UK’s largest retailer, has been working to achieve a 50 percent reduction of its carbon emissions per case delivered by 2012–13, compared to 2006–07 carbon emission baseline. It has analyzed the carbon footprint of the entire life cycle of 1,000 products, in order to identify hot spots in the chain that generate the most emissions. As a result of this work, over 500 products offered online and in-store are now carbon labeled.54

Consequently, retailers need to focus on numerous organization-wide strategies to maximize their returns from SCM process improvement and technology investments.55



Further Information .

Visit kpmg.com for the following related publications

CFO Insights: A global survey of •Consumer Markets executives

Consumer Currents 11: Issues •driving consumer organizations

Measuring Up - Improving •Sustainability in Consumer Markets

How KPMG firms can help

Supply Chain Optimization

KPMG’s Supply Chain Optimization services helps clients optimize the balance between cost and risk, align processes with the organization’s strategic goals and objectives, and drive competitive advantage and shareholder value. The key focus of this offering is on optimizing supply chain efficiency across the following operational impact areas: cost, cash, and working capital, tax, technology, operational, and financial risk, sustainability, and people issues.

IT strategy and performance

KPMG’s global network of member firms gives us the local experience to help companies align their IT operations and business objectives with often

repeatable and distributable solutions. Effective IT Strategy and Performance will help organizations ensure that business systems deliver value to the business and that the unique risks inherent in technology are monitored in an appropriate governance framework. This service includes governance, strategy, performance improvement, cost reduction, risk management benchmarking, risk framework and due diligence.

Climate change and sustainability services

Climate change and sustainability issues are rising to the top of corporate agendas. Business is engaged; global trends and stakeholder demands have seen to that. Energy pricing and security, natural resource pressures, population growth, lifestyle changes, and consumer preferences are compelling companies to act. Our professionals can help address climate change issues by supporting organizations develop corporate, investment and emissions trading strategies. We can also support the implementation of sustainability practices within the business model.

Key contacts:

Willy Kruh Global Chairman - Consumer Markets KPMG in Canada Tel.+1 416 777 8710 [email protected]

Mark Larson Global Head of Retail KPMG in the US Tel.+1 502 562 5680 [email protected]

Julian Thomas Global Advisory Lead – Consumer Markets KPMG in the UK Tel.+44 207 694 3401 [email protected]

http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/cfo-insights-global-surveyv2.pdf

http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/cfo-insights-global-surveyv2.pdf

https://portal.ema.kworld.kpmg.com/markets/TL/Thought%20Leadership/ConsumerCurrents%2011.pdf


https://portal.ema.kworld.kpmg.com/markets/TL/Thought%20Leadership/Measuring%20Up%20-%20Improving%20Sustainability%20in%20Consumer%20Markets.pdf

https://portal.ema.kworld.kpmg.com/markets/TL/Thought%20Leadership/Measuring%20Up%20-%20Improving%20Sustainability%20in%20Consumer%20Markets.pdf



2.

Recovery in the global luxury retail market .

Triggered by the worst financial crisis since the Great Depression, 2009 brought fear and uncertainty across all demographics. Luxury retail sales contracted significantly, highlighting that this sector too had been affected. But as the economy started to recover, luxury retail bounced back to prerecession levels. Although the luxury retail market recovered in most regions globally, growth was particularly strong in Asia. Their strong economies and the rising income of their middle class population have attracted many luxury companies to operate in these markets. Further, these retailers have also identified untapped emerging markets and started to target them strategically as part of their long-term growth plans.



During the recession, most shoppers went into hibernation. One of the first sectors to be hit was luxury retail, which went on to experience the worst slump.56, 57 The downturn caused even high-end shoppers to spend less, particularly on luxury goods.58 But since 2010, while most global middle-class shoppers have remained uncertain, high-end shoppers have started spending again, giving both luxury retailers and investors a reason for optimism.59

Since 2010, high-end shoppers have started spending again, giving both luxury retailers and investors a reason for optimism.

“The global luxury retail market was expected to increase 10 percent y-o-y in 2010.

Luxury retail recovers .

“0

50

100

150

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2008 2009 2010E

Europe America Asia Pacific excluding Japan Japan Others

221.6203

222.98% decline 10% increase

After a difficult 2009 — when global luxury retail sales declined eight percent annually — the global luxury retail market was expected to increase 10 percent y-o-y in 2010, to reach EUR168 billion (US$222.9 billion), according to Bain & Co.60 A sudden pickup in sales of expensive clothes, accessories and jewelry was seen, particularly in the key regions of Asia Pacific (excluding Japan), the Americas and Europe. In 2010, Asia Pacific (excluding Japan) accounted for 22 percent growth, followed by the Americas with 12 percent and Europe with 6 percent growth.61

Individual retailers also experienced a recovery in sales. In March 2011, US-based premium luxury retailer Saks reported a 5.9 percent y-o-y increase in its revenues in 2010, to US$2.8 billion. In 2009, the company’s revenues had declined 13.5 percent y-o-y to US$2.6 billion.62

Similarly, after a robust rebound in global demand for expensive watches and leather goods, LVMH Moët Hennessy Louis Vuitton’s 2010 revenue increased

19 percent y-o-y. On February 4, 2011, the Paris-based group reported revenues of EUR20.3 billion (US$26.9 billion) for the year ended December 31, 2010. Its net profit also increased 73 percent annually, to a record EUR3 billion (US$4 billion).63 This strong performance was backed by strong sales in Asia, Europe and the US.64 In 2009, LVMH’s revenue had declined eight percent y-o-y to reach EUR17 billion (US$22.6 billion).65

Figure 3: Global luxury retail market size (US$ billion)

Source: Bain & Company Global Luxury Report , October 2010

Note: The 2010 revenues are estimated values.


Figure 4 shows the revenue growth trends for the top luxury groups.

Figure 4: Revenues of top five global luxury groups (US$ billion)

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011

Polo Ralph Lauren Luxottica Group Richemont PPR LVMH

Source: Company websites and Capital IQ

Notes: The top five global luxury groups have been listed on the basis of their revenues. Q1 2011 revenues for Ralph Lauren and Richemont have not yet been announced. The dip in Q1 2011 revenues for LVMH and PPR was due to the high growth in sales during the festive season in the previous quarter.



Q How crucial will the emerging economies be for the growth of luxury brands?

Europe – Luxury markets recover from recessionIn 2010, Europe remained the largest market for luxury retail.66 Its share in luxury retail increased from 35 percent (US$60 billion) in 2004 to 37 percent (US$82.5 billion) in 2010, according to Italian luxury goods trade group Altagamma.67, 68

During 2010, Gucci Group, a division of French retail group PPR SA, bounced back with 13 percent growth in its sales in Europe from a 6.5 percent drop in 2009. In the first quarter of 2011, Gucci’s sales increased a further 16 percent y-o-y. Similarly, the European sales of Hermès International, maker of the Kelly bag and other luxury accessories, increased 18 percent in 2010, double its growth rate in 2009. In the first quarter of 2011, the group’s sales increased a further 20.7 percent y-o-y.69, 70, 71

The recovery witnessed in the European luxury retail market is partly due to Asian influences.72 Recently, there has been a significant rise in the number of high-spending tourists, increasingly Chinese, who tend to travel to France and Italy every year. Chinese visitors to France form the biggest foreign spenders on luxury goods. In 2010, Chinese visitors accounted for 29 percent of the total amount spent by foreigners on luxury retail in France, according to research firm Sanford Bernstein. Russians take the top spot in Italy, accounting for 27 percent of all tourist dollars spent on luxury goods, followed by Japan at 12 percent and China at 10 percent.73 Europe is expected to continue to be the global luxury capital. By 2015, the luxury retail market in Europe is expected

to reach US$175 billion, according to Verdict Research, a UK-based retail industry research company.74

Asia – China leads growthAsia is the main focus market for luxury retailers, with Hong Kong being the most popular destination, attracting 84 percent of all luxury brands. Japan and Singapore follow, each with a 69 percent presence of global luxury brands. China — with a 67 percent presence — ranks 10th among global luxury retail destinations, according to a 2011 survey, conducted by CB Richard Ellis (CBRE), that mapped the global store footprint of 323 of the world’s top retailers across 73 countries.75

Further, luxury brands are increasingly investing in the Asian markets. L Capital Asia fund — a US$650 million private equity fund backed by LVMH — is looking to invest in emerging Asian brands and transform them into global names. By May 2011, the fund had already spent US$90 million on minority stakes in two Singapore-based fashion companies and a Hong Kong-listed watch and jewelry company. The fund is also in the process of investing in two fashion firms in China and India.76 In January 2011, Prada announced that it plans to list on the Hong Kong Stock Exchange rather than in Milan, Italy, signifying the importance of the Asian luxury goods market.77

China – Consumer trends point to continued growthChina is a significant luxury market, as it offers huge revenue potential for European and US luxury brands.78, 79 Even during the recession, luxury retail



in China increased 16 percent y-o-y to reach CNY64 billion (US$9.4 billion). This was down from the 20 percent annual growth in 2008, but far better than the performance of many key developed luxury markets.80 In 2010, China’s luxury retail market was estimated to have increased another 23 percent y-o-y.81

In light of the stagnant growth in developed countries, Chinese consumers are becoming the key source of revenue for luxury retailers. With rising incomes, China’s growing middle class is adopting a previously unattainable high-end lifestyle, with the traditional savings-oriented culture giving way to more spending.82 “There are now more than 960,000 people with wealth of over CNY10 million (US$1.4 million) and 60,000 people with wealth exceeding CNY100 million (US$14.7 million),” explained Rupert Hoogewerf, Founder of the Hurun Report (China’s annual rich list).83

More than 50 percent of the consumers in China have made or are planning to make a luxury purchase, according to a 2010 survey of 340 consumers and 31 luxury store managers in China’s tier 1, 2 and 3 cities, by CLSA Asia-Pacific Markets, Asia’s leading independent brokerage and investment group. The survey indicated that those consumers who purchased luxury goods in the past 12 months spent an average of 10–12 percent of their total household income on luxury items, demonstrating that they have a high propensity to spend.84 Also, as the market grows in sophistication, Chinese consumers are showing a clear trend of moving from pure ownership of a product to being

able to appreciate the meanings and history of a luxury brand, according to a 2011 KPMG and TNS joint survey of 1,200 middle class consumers in China.

Moreover, as companies expand their retail presence with additional marketing resources, brand recognition among Chinese consumers continues to rise. According to the KPMG and TNS joint survey, the middle income respondents have now started recognizing 57 luxury brands, a figure that has increased steadily over successive surveys. Respondents in tier 1 cities recognized 61 brands on average, while those in tier 2 cities recognized 53.85

Another significant aspect of the Chinese consumers is their ability to not only recognize various luxury brands, but distinguish them from each other based on their countries of origin and associate certain countries more strongly with certain products. For instance, they associate Switzerland with luxury watches, Italy with footwear and France with clothes, accessories and cosmetics. And there continues to be a particularly strong inclination toward European brands at the expense of brands from other parts of the world. However, Chinese brands for alcohol, arts and crafts, and jewelry products have the strongest potential to compete with international brands in the future.86

After three tough years, most international retailers have started to see a recovery in their global sales, and China continues to be the leading market — as well as the one with the brightest growth prospects.87

“For luxury brands trying to enter the market, it is harder than ever. The rise in the number of brands recognized is indicative of how crowded the market is becoming. All luxury brands now know the importance of the China opportunity, but ironically, it has probably become harder than ever for a new brand to gain market share. Most new entrants need to invest heavily and would not expect profits for some time. Careful planning and brand positioning is needed to avoid losing your shirt.”

– Nick Debnam, Head of Consumer Markets, Asia Pacific, KPMG in China



Luxury retailers expand operations as demand improves .

As well-off shoppers have again started spending more, and with stores stocking more affordable luxury goods, luxury retailers are expected to rebound, particularly with their new expansion initiatives.88 Some of these initiatives are listed in Table 1.

Table 1: Strategic initiatives by retailers

*Shop-in-shops refers to a retail concept where a company or brand operates a small store within a big retail store.

Initiative Company Description

Geographical expansion in developed markets

Burberry In April 2011, British luxury group Burberry opened a new 820 square-meter flagship store in Sydney, Australia. The store is expected to stock apparels, accessories, non-apparel items, fragrances, watches, eyewear and the entire range of Burberry’s collections. Burberry already operates six stores in Australia — two in Sydney, three in Melbourne and one in Perth.89

Thomas Sabo In February 2011, German luxury jewelry brand Thomas Sabo announced plans to expand its retail operations in the UK, by increasing the number of its outlets from 400 to 500 stores. The retailer also plans to increase its shop-in-shops* in the UK from the current 22 to 45.90

Geographical expansion in emerging markets

Luxottica In March 2011, Italy-based Luxottica Group announced plans to increase its revenue in emerging markets by 20 percent in 2011, and increase sales volume in China and India by 120 percent by 2014. It also plans to open 15 Sunglass Hut stores in Brazil, 40 in India and 50 in China.91, 92

Ted Baker In March 2011, following in the footsteps of Burberry and Mulberry, Ted Baker — the British luxury fashion house — announced its plans to expand in mainland China, by opening its first 3,000 square-foot store in Beijing during the second half of 2011.93

Hermès In January 2011, as part of its expansion strategy in the growing Asian markets for luxury products, Hermès opened its first luxury outlet in Pune, India. Its Pune store stocks the entire range of its luxury accessories, as well as Hermès’ permanent collections. The retailer plans to open another store in Mumbai by May 2011.94

Industry consolidation

LVMH In March 2011, leading luxury group LVMH acquired a controlling stake in Italian luxury group Bulgari for EUR3.7 billion (US$5.2 billion) to expand its watches and jewelry unit. LVMH purchased the Bulgari family’s 50.4 percent stake for EUR1.9 billion (US$2.6 billion) in stock and the rest in tender offer. Earlier, in 2010, LVMH had bought a stake in Hermès International SCA.95



Q

Online retailing can play an important role in enhancing the exclusivity provided at the physical stores by luxury brands.

Luxury shoppers go online .

Are luxury retailers effectively leveraging online channel to expand reach and increase sales?

Many affluent consumers are turning to the internet to research luxury brands, form connections and make purchases.96 In fact, growth in the global luxury retail segment is expected to be fueled by investments in online channels, according to Verdict Research.

Traditionally, luxury retailers used the internet to provide information, not to sell. But with retailers realizing the potential of selling online, a shift is now underway. In 2010, Gucci launched its first e-store, which delivers to 12 countries, mostly in Western Europe. Ralph Lauren also launched a transactional site in 2010 in the UK. In doing so, it has made luxury goods more accessible, as consumers do not have to wait until they visit major cities, where luxury retail stores are located, to purchase such goods.97

Online retailing can play an important role in enhancing the exclusivity provided at the physical stores by luxury brands. Interactive websites also serve as a platform for consumers to personally

connect with a brand. For example, consumers are now able to create a personalized Ralph Lauren polo shirt, for which they are able to choose a country flag and colors, and even have their names printed on the back. Ralph Lauren’s Rugby iPhone application allows users to create customized rugby shirts.98

In the US, affluent individuals aged 35 years and under are avidly consuming a wide range of new media on smartphones and tablet computers, and quickly losing the habit of consumption based on television, radio and print media advertising, according to New York City-based market research company Luxury Institute.99 And although an online presence has become crucial for success, the presence of a physical store helps promote the brand and provides a destination where customers can ‘try out’ a product before purchasing it. Consequently, more retailers are now using their online operations to enter and test new markets before committing to a physical store presence.100

“

Outlook .

By 2015, China is expected to account for about 20 percent of global luxury retail sales.“

Over 2010, the global luxury retail market grew strongly, and it is expected to continue expanding.101 In 2011, it is forecast to increase 3–5 percent annually, to reach EUR173–176 billion (US$229.6–233.6 billion), according to Bain & Co.102 This growth is likely to be driven primarily by the growing demand for luxury products in the emerging markets — particularly in China.

Buoyed by the favorable consumer attitude toward brands (particularly those of Western origin), China will continue its march toward becoming the largest luxury market in the world.103 By 2015, it is expected to account for

about 20 percent or CNY180 billion (US$27 billion) of global luxury retail sales, according to McKinsey.104 Increasing levels of wealth in tier 1 and tier 2 cities, and continued confidence in the positive economic prospects, are likely to support the Chinese luxury retail market.105

Online luxury retail sales have emerged as one of the promising trends in luxury retail. In 2010, global online luxury retail sales recorded massive growth of 20 percent y-o-y, well beyond the 8 percent growth of overall online sales.106 In China, nearly 70 percent of respondents stated that they searched online for

information on luxury brands at least once a month, and 30 percent stated that they did so more than once a week, according to the 2011 survey conducted by KPMG and TNS.107 Such consumer trends will help boost the recovery of the luxury retail market.





Luxury Experiences in Chin • a

Consumer Currents 10: Issues that •are driving consumer organizations worldwide


Global Location & Expansion Services

KPMG’s Global Location & Expansion Services (GLES) group was created to help companies to locate and establish new operations around the world. From manufacturing to distribution, R&D to shared services, our member firms have experience across all types of operations and sectors. GLES professionals are based around the world, and can provide the necessary local knowledge. Through our experience, we have developed a systematic process for evaluating and selecting locations and sites.

Margin Enhancement Services

Working alongside clients, our firms’ professionals help to streamline processes, to enhance controls and to contain costs and business risks. We look at systems, supply chains, capital structures and contracts with third parties to see how they can best be utilized. We examines the entire revenue process and helps to effectively integrate the critical business processes and systems that process, provision, deliver, and bill services to a client’s customers.

Key contacts




Hélène Béguin Head of Luxury Goods KPMG in Switzerland Tel.+41 21 345 0356 [email protected]

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3.

Growing mobile commerce in retail .

Since 2010, mobile commerce (m-Commerce) in retail, or mobile retailing, has shown phenomenal growth, while traditional retail stores have exhibited relatively flat growth. m-Commerce has quickly altered the retail landscape and is set to rapidly increase its share in the retail industry. It has blurred the distinction between websites and brick-and-mortar outlets by linking disparate operations and making the internet a pivotal sales engine for the first time for many retailers.



Q

In 2010, global m-Commerce revenues increased 38 percent over 2009 to reach US$25.2 billion.

m-Commerce – Next big thing in retail .

Are you effectively exploring m-Commerce options to expand your operations?

m-Commerce is a special form of electronic commerce (e-Commerce) that uses wireless communication and mobile devices — such as cell phones, personal digital assistants (PDAs) and tablet PCs.108 Although a relatively new phenomenon, m-Commerce is already making its mark along with the growing demand for smartphones* — first the iPhone, and more recently Android-based mobile devices.

In 2010, global m-Commerce revenues increased 38 percent over 2009 to reach US$25.2 billion, according to ABI Research, a US-based research and analytics firm.109 In Japan, m-Commerce accounts for about 20 percent of e-Commerce, and 50 percent of mobile users regularly make purchases on their phones, according to Nomura, a Tokyo-based investment banking company. In the US, 15 percent of consumers use their cell phones and 20 percent use their PDAs for price discovery and product comparison. In 2011, 10–15 percent of the revenues from retail across France, Germany, the UK and the US are expected to be influenced by mobile applications.110, 111

Figure 5 highlights the fact that m-Commerce is increasingly affecting the retail market. “

Figure 5: Key facts

m-Commerce is five times as big as e-Commerce was at a similar stage in its development in early 2000. •In terms of revenue, Japan is the biggest m-Commerce market in the world. •

1.8

15

1.9

3.4

0

5

10

15

20

China Japan UK US

m-Commerce revenue, 2010 (US$ billion)

The mobile payments industry is proliferating in Latin America, South Asia and Africa, where typically more people have •cell phones than bank accounts.In emerging economies, especially in Southeast Asia, there are 10 mobile phones for every desktop / laptop. In these •markets, mobile phone is the primary means of accessing the internet and engaging in commerce

Developing a Scalable mCommerce Model Nice 2010, tmforum, 2010; Mobile payments: Who will regulate?, Politico, April 14, 2011; Mobile Phones becoming a transaction medium

*A category of mobile phones that includes Apple’s iPhone, Google’s Android, Research In Motion’s BlackBerry, and other phones using similar operating systems.



Increasing popularity of m-Commerce .

Consumers use mobile devices more frequently for comparative shopping purposes.“

The mobile channel continues to expand its role as a connector between traditional, online and other sales channels. Consumers have started using their mobile devices to compare products and offers across multiple stores, find product ratings and reviews, and search for coupons or discounts. In fact, consumers are using their mobile devices more frequently for comparative shopping purposes while standing in a physical store, primarily to check if competitors have better deals to offer. Figure 6 presents the key factors driving the increasing popularity of m-Commerce.112

Figure 6: Factors leading to increase in m-Commerce

Increasing penetration of smartphones

Availability of necessary

technology, such as near-field

communication (NFC)**

Convenience for consumers Most customers carry their mobile phones all the time.

Profitability for retailers Retailers will be able to circumvent the hefty cut of transactions taken by credit card companies.

Popularity of social shopping* It satisfies the innate human tendency to share shopping information with family and friends.

AisleBuyer Debuts Card Capture Technology, marketwire, April 13, 2011; Creating a More Social Shopping Experience, demandware blog, March 21, 2011; NFC: Under-hyped, ready to over-deliver, VentureBeat, April 11, 2011; Swipers, No Swiping: Mobile Commerce Battle Heats Up, brandchannel. March 28, 2011

Note: *Social shopping is the concept of utilizing a mobile device’s capabilities such as creating videos, sharing experiences to Twitter and Facebook, while shopping with the device. **NFC is a short-range exchange of wireless data between a chip in the phone that acts as a ‘reader’ and other chips embedded in, for example, a payment kiosk or a subway turnstile.



Great potential of m-Commerce .

Discounts on shopping through smartphones are the most common loyalty program used by retailers.

By combining the location-finding power of the global positioning system (GPS), the ubiquity of the cell phone and the creativity of online marketing, m-Commerce has been altering the consumer landscape. m-Commerce offers several benefits to both retailers and consumers.113 Some of them are as follows:

First-mover advantage – The early adopters of m-Commerce tend to have greater opportunities to influence shoppers in real time, as they build ‘in the moment’ customer analytics capabilities. Lagging merchants run the increasing risk of customers browsing their aisles while tuning in to their smartphones to check reviews, compare prices and make on-the-spot deals with competitors.114 In fact, major retailers believe that by being the first to implement mobile engagement, they earn a better chance of establishing intimacy with and loyalty of their customers, according to a 2010 Forbes survey of 300 executives at top US retailers.115

Effective advertising – Location-based social applications such as foursquare, Shopkick or Gowalla help retailers deliver deals and offer promotions, incentives and other services to encourage nearby shoppers to enter a store.116 Such applications also allow retailers to direct custom-made advertisements and offers to individual customers, based on purchases, preferences, products viewed and reviews, which can be stored as a digital log either with the application

provider or the telecommunication provider.117

“Clients are telling us that location-based marketing could become the single biggest development in marketing of the last 10 years,” says Jennie Cull, Advisory Managing Director, KPMG in the US. According to Jennie, “Companies need to decide what their goal is when they start location-based marketing. Is it to get people into a store? To increase sales? To drive particular product lines?” Companies, she says, know mobile channels represent a huge opportunity. The key is unlocking it.

Enhanced buying experience – m-Commerce has the potential to combine the best of both online retail and traditional shopping. For example, in-store shoppers can research products and prices on their smartphones, using bar code scanners and other mobile applications. Retailers can provide immediate incentives based on these searches.118

Enhanced customer loyalty – Discounts on shopping through smartphones are the most common loyalty program used by retailers. However, a well-integrated loyalty

program that spans all sales channels has a wider scope and greater potential. This is evident from the finding that 54 percent of consumers wanted to have a mobile loyalty account that provides credit, points and promotions across a variety of physical and virtual outlets, according to a 2010 mobile commerce survey by Booz & Company conducted in the US.119

Cost-effective advertising – Advertising via Facebook applications, foursquare and other mobile social networks is not only cost effective, but also has a wider reach and higher potential. While still new, these mobile social networks are growing and are relatively inexpensive. In 2010, McDonald’s launched an advertising campaign with foursquare to get the

“



Q Are you using the right strategy to implement m-Commerce?

application users to visit a nearby McDonald’s outlet. The campaign cost McDonald’s US$1,000 to reach three million people — an average of 33 cents per thousand consumers. A similar television campaign would have cost McDonald’s US$10.67 per thousand consumers.120

Cross-channel marketing – m-Commerce provides retailers the opportunity for cross-channel marketing through options such as ‘reserve and collect’ or ‘research and collect’ activities. These options encourage consumers to visit the physical stores to collect their goods — where additional up-sell and cross-sell opportunities exist.121

Security and technology challenges .

Although m-Commerce has immense potential and is the fastest growing retail channel, it has a few drawbacks. Most problems in m-Commerce pertain to technical and perception-based issues. The common problems faced by consumers are error messages, an inability to complete transactions, log-in issues or getting caught in an ‘endless loop.’ In 2010, 83 percent of users faced technical problems with mobile shopping, according to a Tealeaf and Harris Interactive (a US-based research and analytics company) survey of 2,228 individuals in the UK.122 But with improvement in mobile devices and wireless technology, the glitches in m-Commerce are expected to gradually minimize.

However, a more serious concern for consumers is the issue of security. Consumers are sometimes asked to divulge personal details such as address and date-of-birth in return for a discount or free gift. While privacy continues to be an important issue, consumers are willing to share personal information in return for something of value. In fact, the very success of the mobile retail channel is likely to depend on consumers’ perception of security and privacy in the medium. Encryption software and other technological security measures represent one half of the solution, while regulations make up the other half. In order to formulate regulations that will make m-Commerce safe,

competing business sectors — from telecom companies to financial institutions to internet companies — are required to cooperate and agree upon regulations to ensure the success of m-Commerce.123, 124

“It all comes down to who gets paid and who makes money. You have banks competing with carriers competing with Apple and Google, and it’s pretty much a goat rodeo until someone sorts it out.”

– Drew Sievers, Chief Executive Officer (CEO), mFoundry, maker

of mobile payment software for banks and retail125


Type of m-Commerce initiatives used by retailers .

Large retailers without an m-Commerce initiative are a minority. In fact, all major retailers now have some form of m-Commerce strategy in place — ranging from a sophisticated electronic wallet* to the basic short messaging service (SMS) outbound advertising program. Figure 7 gives a snapshot of the penetration of m-Commerce in the US.

Figure 7: Spread of m-Commerce in US

39%

20%7%

10%

24%

Widely implemented a strategy Rapidly expanding strategy Initiated pilot programsEvaluating strategies No strategy

Forbes Insight

Note: The findings are based on a 2010 Forbes survey of 300 US retailers with multiple locations and annual revenues of US$100 million or more.

*Mobile devices linked to debit or credit cards with the ability to purchase items and pay bills.



Currently, most retailers start by leveraging their existing e-Commerce capabilities onto mobile channels with little customization — the easiest way to achieve some parity in the market. In the next phase, retailers are expected to develop advanced m-Commerce capabilities, by targeting key categories,

Example Type of initiative Description

Boots Mobile site, mobile web content and downloadable applications

In April 2011, Boots announced plans to launch an m-Commerce platform to boost its digital operations and trial pharmacy-specific smartphone applications for its prescription services, to complement its existing online prescription service.127

H&M Mobile advertising, mobile site, mobile web content, downloadable applications and downloadable brand-related content

In April 2011, Sweden-based apparel retailer Hennes & Mauritz (H&M) launched an Android-based mobile shopping application. The application offers a ‘social shopping’ experience, and provides consumers with the chance to make their own wish lists, check news and videos, and share their favorite items through Facebook, Twitter and other social networks.128

M-enabled commerce

Mobile advertising, mobile site, mobile web content, downloadable applications, downloadable brand-related content and mobile coupon

In January 2011, Jo-Ann Fabric and Crafts launched an iPhone application focusing on 'm-enabled commerce' — using a mobile device to support and reinforce existing consumer shopping behavior. The application aims to create a seamless experience between the company’s email, print and direct mail marketing programs on the one hand, and physical visits to their stores on the other, by putting offers generated through any channel onto consumers' mobile phones.129

Shopkick Mobile advertising, mobile site, mobile web content, downloadable applications, downloadable brand-related content and mobile coupon

Shopkick is an iPhone application that gives consumers reward coupons just for checking in, when they enter Best Buy, American Eagle, Macy’s or other participating retailers. Coupons are also available for performing specific actions — for example, scanning a poster on a store’s dressing room wall into the iPhone camera. Shoppers at Best Buy get instant discounts when they show their iPhones running Shopkick to the cashier.130

Wal-Mart Mobile site, mobile web content, mobile advertising and downloadable brand-related content

Wal-Mart allows customers to search for ratings and reviews by scanning the barcode of in-store products into a mobile phone. With consumers viewing ratings and reviews while shopping, conversion rates — turning browsing into sales — for orders under US$200 increased by as much as 240 percent, according to a mobile commerce survey by Booz & Company, conducted in the US in 2010.131

influencing shopper decision-making, and shifting purchases away from competitors.126

Table 2 provides some examples of initiatives undertaken by retailers to enter or enhance their m-Commerce capabilities.

Table 2: m-Commerce applications and services used by retailers



On the other hand, telecommunication, electronics and software, and financial companies are also working together to introduce efficient and affordable m-Commerce technology to the market.

Example Type of initiative Description

AT&T Mobile payment technology, proximity marketing, downloadable applications, mobile advertising, outbound text messaging and downloadable brand-related content

In April 2011, AT&T released the Digby Mobile Commerce service, specifically aimed at retailers to help them design, deploy and manage m–Commerce websites and rich applications optimized for smartphones. Retailers using Digby can also offer applications to their customers that encourage loyal shoppers to connect regularly with their favorite brands and conveniently shop and make purchases from anywhere. Companies can automatically send exclusive promotions and new product information to application users when they walk into connected stores.132

Facebook Mobile advertising, outbound text messaging, proximity marketing, and downloadable brand-related content

In August 2010, Facebook launched its ‘Places’ service, which allows the site’s users to disclose their current location. Retailers are using this feature to offer products, make sales and give buying ideas. Consumers can carefully examine pending purchases with their online network of friends, compare web-based reviews and ratings, and see prices from a competing store. This Facebook feature is currently used by American Apparel, Best Buy, Dell, Macy’s, Sears and Wal-Mart.133

Google Mobile payment technology, proximity marketing, downloadable applications, mobile advertising, outbound text messaging and downloadable brand-related content

Google, MasterCard and Citigroup plan to embed a technology in Android-based mobile devices that is likely to allow consumers to use their phone as an electronic wallet. Through this technology, Google is expected to offer retailers more data about their customers globally and help them target advertisements and discount offers to mobile-device users near their stores. Consumers will be able to manage credit card accounts and track spending through an application on their smartphones. The application will use NFC mobile payment technology, which is already in place at a large number of stores in the US, in the form of credit-card readers.134

Isis Mobile payment technology, downloadable applications and mobile coupon

In April 2011, Isis — an m–Commerce venture of AT&T, T-Mobile, Verizon Wireless and Discover Financial Services — announced that it will deploy its services in California, US by mid-2012, enabling subscribers to use mobile phones to pay for public transportation, shop at stores and redeem coupons.135

Table 3 provides examples of few initiatives taken by financial and technical companies to encourage m-Commerce.

Table 3: m-Commerce applications and services developed by technical and financial companies



Outlook

“Clients are telling us that location based marketing could become the single biggest development in marketing of the last 10 years,”

– Jennie Cull, Advisory

Managing Director, KPMG in

the US purposes.

“Global revenues from m-Commerce are expected to grow significantly over the next several years, reaching US$119 billion by 2015, according to market research firm ABI Research.136 By 2015, the US alone is expected to contribute US$23.8 billion in revenues from m-Commerce, accounting for 8.5 percent of all US e-Commerce revenues, according to Coda Research Consultancy.137

Not only m-Commerce, but retail as a whole is likely to become a seamless and integrated concept — merging traditional, online and mobile retail channels. Retailers are expected to increasingly design fully integrated shopping experiences to cater to well-informed, digitally enabled consumers — creating, in effect, a new electronic retail ecosystem.139

However, in the case of m-Commerce, increasing flexibility offered by mobile phones may also bring increasing complexity, making security a primary concern for both retailers and independent regulatory authorities. Banking laws and policies governing private data and consumer protection may need to be extended to cover

mobile payments, according to Suzanne Martindale, Associate Policy Analyst at Consumers Union in San Francisco, US. Mobile payments provide an alternative payment mechanism to consumers outside the scope of the traditional banking framework. However, the regulators face the challenge of modifying the current regulatory environment to facilitate mobile network operators to introduce mobile payment systems successfully. At the same time, regulators need to contain the risks associated with the provision of banking services by entities that are not currently subject to prudential regulation and supervision. Formulating regulations to ensure that the mobile payment system is not abused will involve a host of government, financial and industrial bodies. For example, in the US, mobile payments regulations may involve regulatory domains covered by many different federal agencies, such as the Federal Reserve Board, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency.140, 141

“The mobile payments industry is nascent, but this is something that consumers are interested in and want to learn a lot more about, and we see our industry moving in that direction.”

– John Taylor, Spokesman for Sprint Nextel138





Consumer Currents 09: Issues that •are driving consumer organizations worldwide

Consumer Currents 11: Issues •driving consumer organizations


IT Strategy and Governance

Effective IT Strategy and Performance will help organizations ensure that business systems deliver value to the business and that the unique risks inherent in technology are monitored in an appropriate governance framework. KPMG’s global network of member firms gives us the local experience to help companies align their IT operations and business objectives with often repeatable and distributable solutions. We can help them to use technology to drive growth, improve business performance and to safeguard operational integrity, security and continuity.

Efficiency and cost optimization

Working alongside clients, our firms’ professionals help to streamline processes, to enhance controls and to contain costs and business risks. We look at systems, supply chains, capital structures and contracts with third parties to see how they can best be utilized. We identify areas of weakness that might jeopardize achievement against objectives, as well as, advising on the development and execution of management systems to create sustainable business performance.

Governance, Risk and Compliance

The GRC Service is an integrated framework that unifies governance, risk, compliance and assurance functions to achieve a consistent and holistic vision across the organization.

Key contacts




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Companies Mentioned in this Issue .

Altagamma 14

American Apparel 6, 26

American Eagle 25

Apple 20, 23

ASDA 6

AT&T 26

Best Buy 25, 26

Boots 25

Burberry 16

Citigroup 26

Dell 26

Discover Financial Services 26

eBay 5

Facebook 21, 22, 25, 26

Family Express 5

FreshDirect 8

Google 20, 23, 26

Gucci Group 14, 17

Hennes & Mauritz 25

Hermès 14, 16

Infor 6

Isis 26

Jo-Ann Fabric and Crafts 25

Kelly 14

kiddicare.com 8

Luxottica 13, 16

LVMH 12, 13, 14, 16

Macy’s 7, 25, 26

MasterCard 26

McDonald’s 22, 23

Microsoft 7

Milo 5

Morrisons 5, 8

Pierhouse 7

PPR SA 13, 14

Prada 14

Ralph Lauren 13, 17

REEDS 7

Retalix 5

Rewe Group 6

Richemont 13

Saks 12

Sears 26

Simply Fresh 8

System Training 6

Ted Baker 16

Tesco 9

T-Mobile 26

Thomas Sabo 16

Verizon 26

Waitrose 7

Wal-Mart 4, 25, 26



Sources .

1 2011 Global Retail Supply Chain Predictions, IDG, February 3, 2011

2 Key Issues for Retail Supply Chain Leaders, 2011: Aligning Planning and Execution, Gartner, February 25, 2011


4 New supply chain paradigms: apparel and textile sector, Image Fashion, September 21, 2010

5 2011 Global Retail Supply Chain Predictions, IDG, February 3, 2011


7 Economist Intelligence Unit, Website accessed on April 25, 2011

8 Retail Industry Renews Focus on Its Supply Chain Priorities for Balance of 2011, Supply Chain Brain, March 4, 2011

9 Supply Chain Analytics: Challenges and Solutions, Accelerated Analytics, March 11, 2010

10 Benefits of Supply Chain Management, Business Software, Website accessed on April 14, 2011



13 Global sourcing: A source of concern, Retail Week, 23 February 2009


15 Introduction to the Green Supply Chain, About.com, Website accessed on April 14, 2011

16 Sustainable Sourcing: How does Walmart measure up? Procurement Blog, May 5, 2011

17 Wal-Mart Plays with Our Food, Harvard Business Review, January 25, 2011

1 8 Supply Chain Management Key For Retailers Battling the Recession, RILA, December 19, 2010

19 Retail Industry Renews Focus on Its Supply Chain Priorities for Balance of 2011, Supply Chain Brain, March 4, 2011

2 0 Boost Sales through Inventory Optimization, Retail ERP, Website accessed on April 15, 2011

2 1 Boost Sales through Inventory Optimization, Retail ERP, Website accessed on April 15, 2011

2 2 Retail Industry Renews Focus on Its Supply Chain Priorities for Balance of 2011, Supply Chain Brain, March 4, 2011

2 3 Morrisons to tackle indirect procurement, ISN Mag, March 23, 2011

2 4 Family Express Selects Retalix to Optimize Fresh Product Inventory Management, Reduce Out-of-Stocks, Retalix, March 29, 2011

2 5 EBay Brings Local Inventory Online, The Street, March 31, 2011

2 6 Retail Industry Renews Focus on Its Supply Chain Priorities for Balance of 2011, Supply Chain Brain, March 4, 2011

2 7 System Training To Help ASDA Cut Costs With Driver Training, System Training, April 14, 2011

2 8 Rewe takes control of supplier deliveries, IGD Supply Chain Analysis, March 25, 2011

2 9 CyberShift Gives Retailers the Competitive Edge With Automated Workforce Management, Contact Professional, February 2, 2011

3 0 Strategic Workforce & Expense Management, CyberShift, Website accessed on April 15, 2011

3 1 CyberShift Gives Retailers the Competitive Edge With Automated Workforce Management, Contact Professional, February 2, 2011

3 2 Strategic Workforce & Expense Management, CyberShift, Website accessed on April 15, 2011



3 3 American Apparel Implements Infor Workbrain To Better Manage Its Global Workforce, Retail Touch Points, January 19, 2011

3 4 American Apparel Now Live on Infor WFM Workbrain, Infor, January 10, 2011

3 5 The Ever Changing Face Of EPOS Retail Systems, Best Management Article, June 30, 2010

3 6 The Changing Landscape of Retail Implementations, Supply Chain Brain, June 22, 2010

3 7 The Changing Landscape of Retail Implementations, Supply Chain Brain, June 22, 2010

3 8 Waitrose overhauls its in-store pricing system, Computing, January 31, 2011

3 9 The state of the retail supply chain, Fortna, August 2010

4 0 Macy’s will deploy item-level RFID tagging at seven stores next month, RFID 24-7, January 9, 2011

4 1 The Future of Retail Industry is in Cloud Computing, fibre2fashion, August 20, 2010

4 2 Cloud Computing is a Perfect Fit for Retailers, Microsoft blog, June 25, 2010

4 3 Morrisons' supply chain efficiency helps bolster earnings, IGD Supply Chain Analysis, March 14, 2011

4 4 Morrisons' supply chain efficiency helps bolster earnings, IGD Supply Chain Analysis, March 14, 2011

4 5 Morrisons buys Kiddicare for £70m, Guardian News, February 15, 2011

4 6 British Grocer Buys Stake in FreshDirect, Deal Book, March 10, 2011

4 7 Morrisons to open convenience stores at three locations by August, RBR, March 21, 2011

4 8 Morrisons' farm gets royal seal of approval, The Telegraph, October 24, 2010


5 0 Cost Containment by Supply Chain Executives Greatly Helped Retail Survive Downturn, Supply Chain Brain, February 14, 2011

5 1 Technology adapts to deliver for retail supply chain networks, retailtechnology, December 21, 2010

5 2 2011 Global Retail Supply Chain Predictions, M-Commerce Trends, February 25, 2011

5 3 Supply Chain Guru Predictions for 2011 - Full Text Comments, SupplyChainDigest, January 24, 2011

5 4 Step-change projects save £550m for Tesco, IGD Supply Chain Analysis, April 19, 2011


5 6 Luxe Retailers in Luck, Fox Business, December 16, 2010

5 7 Luxury Sales Rising, and Many Retail Stocks Reflect It, CNBC, February 4, 2011

5 8 Luxury Sales Rising, and Many Retail Stocks Reflect It, CNBC, February 4, 2011

5 9 Luxe Retailers in Luck, Fox Business, December 16, 2010

6 0 Luxury goods: Solid outlook for luxury sector in 2011, Fashion NetAsia, December 16, 2010

6 1 Bain & Company Global Luxury Report , October 2010

6 2 Saks Incorporation – Investor Relations, Website accessed on April 27, 2011

6 3 LVMH profit rises 73% but misses forecasts, Market Watch, February 4, 2011

6 4 Global luxury retailer LVMH said Monday its first quarter sales, 2 Space, April 18, 2011

6 5 LVMH – Investor Relations, Website accessed on April 27, 2011

6 6 Bain and Company Global Luxury Report , October 2010

6 7 Spenders Splurge on Luxury in Europe, The Wall Street Journal, March 23, 2011


6 9 Spenders Splurge on Luxury in Europe, Market Watch, March 23, 2011

7 0 PPR Q1 2011 Sales, April 27, 2011

7 1 Financial information, Hermès International website, accessed on May 11, 2011

Sources .



Sources .



74 Europe to Remain Global Luxury Capital, EWN Business, February 15, 2011

7 5 Global Retail Expansion Continues Despite Tough Trading Conditions, CBRE, April 20, 2011

76 Luxury retailer hunts for Asian brands. The China Post, May 9, 2011

7 7 Prada — Hong Kong Is Enough, WSJ, February 1, 2011

7 8 2011 Luxury PR Trends: Tailoring Luxury Products For Emerging Markets, Mosnar Communications, January 8, 2011

7 9 Luxury experiences in China, KPMG Study, 2011

8 0 Tapping China’s luxury-goods market – Study April 2011, Sacha Orloff, April 5, 2011

8 1 China’s Developing Wealth Continues to Drive Global Luxury Goods Market Growth, ARC, Website accessed on April 28, 2011







8 8 Luxury retailers feeling hopeful as wealthy shoppers start spending again, Sun Sentinel, July 19, 2010

8 9 Burberry Flagship Store Opens In Sydney, 2 Threads, April 7, 2011

9 0 Thomas Sabo to expand in UK, Retail Business Review, February 2, 2011

9 1 Luxottica (LUX) Looks Forward to Emerging Markets, Investor Guide, March 7, 2011

9 2 Luxottica Targets Growth in Emerging Markets, Raises Dividend, Bloomberg, February 28, 2011

9 3 Brit fashion house Ted Baker to open 1st store in mainland China, Red Luxury, March 30, 2011

9 4 Pune gets Luxury Brand Hermes first store in India, Consumerism, January 19, 2011

9 5 LVMH to Acquire Bulgari After Agreeing to Buy Family Stake, Bloomberg Businessweek, March 7, 2011

9 6 Affluent Consumers and How They Use the Internet, Social Media and Mobile Devices, Unity Marketing, January 26, 2011

9 7 Europe will remain home of luxury retail, bizcommunity.com, February 9, 2011

9 8 More luxury consumers want to live the brand online, The Luxury Project, March 30, 2011

9 9 Modern HNWIs focused on financial success and digital lifestyles, The Luxury Project, April 6, 2011

10 0 Multi-channel retailing essential for luxury sector growth, The Luxury Project, April 28, 2011

101 Global Luxury Retailing: Market Size, Retailer Strategies and Competitor Performance, Verdict Research, December 2010

10 2 Luxury goods: Solid outlook for luxury sector in 2011, Fashion NetAsia, December 16, 2010


10 4 Tapping China’s luxury-goods market – Study April 2011, Sacha Orloff, April 5, 2011





Sources .

10 8 What Is Mobile Commerce?, eukhost.com, accessed on April 15, 2011

10 9 As Mobile Shopping Takes Off, eBay Is an Early Winner, Bloomberg Businessweek, June 23, 2010

110 Enterprise Mashup Solutions for m-Commerce, convertigo, September 16, 2010

111 The M-Commerce Challenge to Retail, Strategy+Business, February 22, 2011

112 Mobile Trends: Consumer Views of Mobile Shopping and Mobile Service Providers, Oracle, April 2011



115 Retail’s Mobility Imperative: A Measured Approach to the Emerging Channel, Forbes Insight, July 2010

116 Why social and mobile could represent a potent advertising combo, Internet Retailer, October 13, 2010


11 8 3 out of 4 retailers have a mobile strategy in place, study finds, Internet Retailer, July 23, 2010


12 0 Why social and mobile could represent a potent advertising combo, Internet Retailer, October 13, 2010

12 1 Retail Industry Is Ripe for Mobile, E-Commerce Times, February 12, 2011

12 2 M-commerce grows in UK, warc.com, April 11, 2011

12 3 Mobile payments: Who will regulate?, Politico, April 14, 2011

12 4 Consumers & Convergence IV, KPMG, August 2010

12 5 Swipers, No Swiping: Mobile Commerce Battle Heats Up, brandchannel. March 28, 2011

12 6 The M-Commerce Challenge to Retail, Strategy+Business, February 22, 2011

12 7 Boots plots move into m-commerce, MarketingWeek, April 13, 2011

12 8 Consumers “excited” by mobile commerce, but technical and availability issues mire launch, wavemetrix.com, April 13, 2011

12 9 5th Finger's RedShop Mobile Platform Pilot With Jo-Ann Fabrics and Crafts Breaks New Ground in "M-Enabled Commerce," PR Newswire, April 12, 2011



13 2 AT&T Empowers Retailers With Mobile Commerce Platform, PR Newswire, April 11, 2011


13 4 Google Sets Role in Mobile Payment, WSJ, March 28, 2011


13 6 As Mobile Shopping Takes Off, eBay Is an Early Winner, Bloomberg Businessweek, June 23, 2010

13 7 3 out of 4 retailers have a mobile strategy in place, study finds, Internet Retailer, July 23, 2010




14 1 Enabling mobile payments & E-money: Navigating the regulatory labyrinth, Jamaica Observer, March 11, 2011


Contact us

Willy KruhGlobal Chairman – Consumer MarketsKPMG in CanadaT: +1 416 777 8710 E: [email protected]

Mark LarsonGlobal Head of RetailKPMG in the UST: +1 502 562 5680 E: [email protected]

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Contact: Vipin Kumar Head of Global Markets Research KPMG in India Tel.+91 124 612 9321

Publication name: Issues MonitorPublication number: 15 - 010Publication date: July 2011

Kpmg report issues monitor-retail-july-2011

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