NAVIGATING THE TRANSFORMATION OF RETAIL, SHOPPERS & PL · Mark Wright and Donna Wydra. June 2018....

Mark Wright and Donna Wydra

June 2018

NAVIGATING THE TRANSFORMATION OF RETAIL, SHOPPERS & PL

Market Shift Trends

© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 2

Today’s Presenters

• Mark WrightPrincipal, Consumer & Shopper Marketing, IRI

• Donna WydraPrincipal, Consumer & Shopper Marketing, IRI


Fill Out the Survey at the End for Some Quick Insights from Our Top Studies


The Evolving Roles of Private Brands

Navigating Life in the Fast(er) Lane

What You Will LearnToday’s Discussion

BIG Shifts Underway in the Retail Marketplace


BIG SHIFTS ARE UNDERWAY IN THE RETAIL MARKETPLACE


Retail’s Greatest Change Since the Advent of the Automobile


Mergers, Acquisitions and Other Recent Events in the Retail Marketplace

Albertsons Companies announces a merger agreement with Rite Aid. Albertsons Release 2/20/18

Southeastern Grocers files for bankruptcy, announces closing of 94 stores SEG Release 03/15/2018

Sam’s Club announces closing of 63 warehouses across the US. Walmart Release 1/11/2018

The Kroger Co. agrees to sell its 700+ store c-store businessProgressive Grocer, 2/05/2018

Lidl plans to open as many as 600 stores in the US. Business Insider 5/17/17

ALDI announces plans to expand to 2,500 US stores by the end of 2022. ALDI release, 6/12/17

Amazon acquires Whole Foods Markets Amazon Release 6/16/2017

Dollar General plans to open 900 new stores, remodel 1,000 existing sites and relocate 100 stores Chain Store Age 12/7/2017

Bodega Latina Corp will acquire Fiesta Mart ‘s 63 Hispanic-themed stores. Progressive Grocer 3/26/2018


Continued Growth in Online Sales

- 2.0 4.0 6.0 8.0

10.0 12.0 14.0 16.0 18.0 20.0

IRI E-Market Insights ©2018

Quarterly Share of e-Commerce Sales of Total U.S. Retail Sales % Online to CPG All Outlet Sales


Albertsons announces new Digital Marketplace providing for consumer-direct ordering and shipping Albertsons Companies 03/20/2018

Albertsons Companies and Instacart to bring same-day grocery delivery to 1,800-plus stores Progressive Grocer 11/28/2017

Accelerating Innovation in Order and Delivery Options…

Kroger Announces 1,000th ClickList Store and Introduces Seamless Digital Shopping Experience Kroger Company Release 12/18/2017

Walmart plans to expand its popular Online Grocery Delivery option to more than 40% of U.S. households Walmart Release 3/14/2018

Amazon and Whole Foods Market announce the introduction of free two-hour delivery through Prime Now Amazon Company Release 2/8/2018

Prime Now delivery makes Whole Foods competitive on price with Kroger in CincinnatiFooddive.com 3/29/2018


…across the Industry


How Important is Online Ordering? 55% of Millennials and 45% of Gen X’ers Say They Intend to Purchase Groceries Online in the Coming Year

Likelihood of Purchasing Groceries Online in the Coming Year% of Respondents

21% 28% 18% 18% 22%

20%27%

27% 17% 12%

29%27%

35%31%

21%

31%18% 20%

34% 46%

Total U.S. Millennials Gen Xers Boomers Seniors

Very likely Somewhat likely Not very likely Not at all likely

Source: Consumer Connect™, Q4 2017


Online Shopping Value Perceptions by Generation (Top 2 Boxes)

Of those Shopping Online, Many, Especially Younger Shoppers, Feel Shopping Online Saves Money and Offers ConvenienceGen X’ers and Millennials also cited reduced impulse buying and ease of finding needed items.

11%

25%

18%

36%

26%

52%

30%

55%

Buying online allows me to find lower-priced food and beverage options

Online order/in-store pickup (click-and-collect) allows me convenience

without the added shipping fee

Millennials Gen Xers Boomers Seniors

Source: Consumer Connect™, Q4 2017


10%

11%

16%

27%

26%

84%

12%

14%

16%

17%

34%

84%

0% 50% 100%

Products not delivered fresh

Service not available where Ilive

Not home during the day toaccept shipments

Tried it and didn't like it

Products more expensiveonline than in-store

Prefer to physically see andchoose groceries

20162017

12.5%

17.0%

11.9%

7.0%

67.5%

10.6%

18.9%

11.5%

9.8%

63.3%

7.7%

17.2%

10.2%

7.6%

70.2%

6.7%

19.6%

10.4%

6.0%

84.7%

0% 20% 40% 60% 80% 100%

Order online, Same day homedelivery

Order online, Not same day homedelivery

Order online, Pick items up insidestore

Order online, Pick up in drive-thrulane

None of these

Age 55+

Age 45-54

Age 35-44

Age 21-34

But, Nearly 74% of Shoppers Have Not Tried any Online Ordering or Delivery Service Their Reasons Vary, as Does Their Usage

Reasons for Not Ordering Groceries Online to be Shipped

Source: AlphaWise, Morgan Stanley Research

Usage of Online Ordering and Delivery Varies by Age

Source: IRI AttitudeLink™ Survey March 2018


Marketers Must Stay in Lockstep With Evolving Consumer Needs and Wants to Encourage Engagement and Purchase ActivityCapabilities That Drive Channel Selection | % of Respondents

11%

17%

22%

25%

39%

20%

24%

30%

34%

49%

30%

34%

43%

43%

57%

31%

42%

44%

45%

58%

Subscription services for frequentlypurchased items

Online purchasing of freshly prepareditems

Online purchasing with in-store pickup

Online purchasing with fast delivery

Online purchasing with free delivery

Millennials Gen Xers Boomers SeniorsSource: Consumer Connect™, Q4 2017


Market Entries and Acquisitions

Value and Private Brands at the core of retail changesPolar ends of the value spectrum outperforming

middle-of-the-road peers*

*Source: Deloitte

Amazon-Whole Foods AldiLidl


Lidl Enters the U.S…

became aware DRIVING by the store40%

CURIOSITY69% drove them to the store

PRICE/INCENTIVES64%&69%

FRESH PRODUCEwas the top product purchased

liked the Private Brandassortment

said Lidl offered Good Value for the Money70%

59%


…Resonating with Some Customers, But Not with All

• Initially some good news…• 20% are shifting much more of their

shopping over to Lidl stores• Half said their experience was better

than expected • 58% said they definitely will visit Lidl

again in the future

• But sales are soft…• 16% said Lidl was worse than expected• Repurchase intent dropped by more

than half (from 44% to 21%) from fall opening to March, 2018


Lidl’s Market Entry has had Mixed Results

Walmart

Publix

All Outlets

Grocery Channel

Kroger

Food Lion

Aldi

-15.0% -10.0% -5.0% 0.0%

Pricing Impacts of Lidl Store Openings

Shoppers are the big winners…

The U.S. Market Continues to Challenge Lidl

Recommendations for Competitors

* IRI POS Price comparison**UNC Lidl Price Survey, stores within 1.7 miles of Lidl store

• Lidl’s entry sparked industry-wide activity, forcing competing retailers and manufacturers to up their merchandising games

• Lidl significantly impacted grocery prices -6.3% in Grocery channel, -6.6% in All-Outlets* and -2.5% to -13.9% declines at Walmart, Food Lion, Kroger, Publix and Aldi**

• Aggressive growth plans and sales expectations have not been met• Most shoppers liked Lidl stores, but haven’t transferred their loyalty to Lidl• In response, new stores will have smaller footprints and more-limited

assortment, rolled out more slowly in more urban markets

• Know your customers and your markets – localized and personalized actions are essential to prevent Lidl triers from becoming Lidl loyals

• Key themes to blunt Lidl’s messaging: greater product variety, produce freshness & quality of your own private brand items


ALDI Growing Quickly by Offering Value With 1600 Stores Today and Adding 900 More by 2022Aldi Could be the Third Largest Grocery Chain

61%good/affordable price is what they liked about ALDI

93%said that pricing/value drove them to ALDI

FRESH PRODUCE(77%) was the top product purchased

Selection of

Store Brand products &

Uniqueproducts offered are liked at ALDI over other retailers

Half said their experience was Better Than Expected1/3 shifting much more of their shopping to Aldi


Aldi

Walmart Total

Kroger

Publix

Albertsons

Food Lion

Meijer

Vons

Ralphs

-5% 0% 5% 10% 15% 20% 25%

Aldi’s Expansion Quietly Continues, and Shoppers are Very Aware

(Nancy Luna, Orange County Register/SCNG)

• Know your own customers—identify and meet their needs

• Clean up your own house before Aldi opens—eliminate any issue that would give a new competitor an opening with your shoppers

• Focus on strengths—broader assortment, private brand offerings and quality, produce and meat quality, etc.

• Monitor and respond to Aldi pricing as appropriate

Aldi’s prices are lower than many competitors’

Shoppers will be the big winners here as well!

What to do?

• 60% to 70% of markets experienced price declines when Aldi opened

• Pricing impacts are broad, but small—overall market prices declined by an average 1-3%, while category price impacts ranged from +2% to -15%

• Savings opportunities exist against specific competitors

Price per Volume Comparison, Edibles Categories, IRI Consumer Network


In February 2005, Amazon launched Amazon Prime,

an all-you-can-eat express shipping membership program for about a

million products.

Our vision was that fast delivery should be an everyday experience—

rather than an occasional indulgence, and many skeptics

thought we were crazy.— amazon.com website

Amazon Announces Its Purchase of Whole Foods in June 2017


Many Whole Foods Shoppers Use Amazon Prime, Either by Paying For It or Sharing

71% of Whole Foods Shoppers

have Prime access

IRI Whole Foods Amazon Study, March 2018

% Use Amazon Prime

Pay for PrimeMembership

Use SomeoneElse's Prime

Do Not Have PrimeAccess 16%

29%

55%

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwjb3KSq6Y_aAhWD3YMKHUkEBFsQjRx6BAgAEAU&url=http://wgno.com/2018/01/19/amazon-increases-its-monthly-prime-membership-rate-to-12-99/&psig=AOvVaw3F81VePCYLIAEhtu09w8ZJ&ust=1522354156038904


Shoppers are Aware of the Merger, and Some are Buying More Because of It

of Whole Foods (WF) shoppers

are aware of the merger

of WF Shoppers purchase groceries

on Amazon*

of WF shoppers are buying more at WF due to the merger

15%91% 28%

Whole Foods Amazon Study, March 2018

* Mostly non-food and bulky items


59%

38%

38%

32%

29%

29%

27%

26%

Better prices

Better sales/coupons

Amazon Prime discounts

Whole Foods' brands sold and shipped atAmazon.com

Amazon Prime delivery

More frequent sales/coupons

Whole Foods selling products onAmazon.com

More Amazon Prime-only offers

Whole Foods Shoppers Expect Better Price and Delivery OptionsExpected Shopping Benefits of Merger

Only 18% of WF shoppers are aware of Amazon/WF benefits

Whole Foods Amazon Study, March 2018Q4. In which of the following ways, if any, do you expect to benefit as a shopper to Amazon's purchase of Whole Foods?


Whole Foods Shoppers with Amazon Prime Access

Yes

No

61%

39%

Whole Foods Shoppers with Amazon Prime Access Motivated by Free Delivery

Effect of Free Whole Foods Delivery; Would Buy More at Whole Foods if Free Delivery Was Offered

Currently only 2% do all of their shopping at Whole Foods

88% of trips are Fill In, Single Item, Special Deal

Whole Foods Amazon Study, March 2018


The Amazon/Whole Foods Evolution is a Work in Progress

Shoppers just starting to see the effects• While awareness is high, new benefits are still mostly unknown• Some shoppers have noticed lower prices and Amazon lockers,

but out-of-stocks have increased• Free delivery partially offsets higher prices• “New news” still coming out about merger effects and benefits

What to do?Whole Foods still lags far behind on value and price• Competitors to push messaging of these benefitsWhole Foods doesn’t meet all its shoppers grocery needs nor does Amazon• Position competitors as a one-stop shopping… both in store or onlineKeep abreast of changing Amazon/WF benefits and messaging• Continue to develop and communicate strategies to defend


From Imitator to Disruptor

THE EVOLVING ROLE OF PRIVATE BRANDS


Value Is King• 45% of grocery shoppers

say they are visiting value-oriented stores more often

• 70% of consumers say technology has made it easier than ever to take their business elsewhere.

Changing Consumers are Driving Change

Transparent & Simple

• 94% of consumers say they would be loyal to a brand that offers complete transparency

• 54% of consumers look for food/beverages with a short list of recognizable ingredients

Always On• 77% of Americans own a

smart phone• Any time, any place -

convenience as the new loyalty.

• They research, explore compare and share.

• 70% of consumers trust online suggestions more than brand statements.

Personal • Want brands that align

with their belief systems• Only 49% of consumer

say their main grocery store connects with them in a relevant way.

• 69% of engaged U.S. shoppers want to be able to give feedback to help improve the experience.


“People around the world

wouldn’t care if 74%

of brands disappeared.”

-Havas Meaningful BrandsGlobal Study 2017

Less Brand Trust

42% of Americans find brands and companies less

truthful today than 20 years ago-McCann, Truth About

America 2017

Brand AgnosticConsumers

moving toward whatever meets

their needs

Less Retailer Loyalty

For most food categories,

less than 1/3 of shoppers are loyal to a specific chain

Changing Consumers are Driving Change

Daymon Worldwide, 2017–2018 Global TrendWheel

Less Channel Loyalty

Shopping more channels today than

3 years ago9.3

channelsin 2017

8.2in 2014

vs


Retailers Are RespondingRole of Retailer Private Brands Has Shifted from Margin to Loyalty Builder

68% 44%

Industry Role of Private Brands is as

Loyalty Builders

Industry Role of Private Brands is as

Margin Builders

strongly agree

strongly agree


Managing a multi-tier

Private Label brand strategy

in house

Focused on driving private

label penetration

from the current rate of 25 percent to

37%

Acquiring retailers with proven strength and success in store

brand

Benchmarking Private Label

with other retailers, while demanding price

concessions from National Brands

Decentralizing its corporate

structure to make local

customization easier

Traditional Retailers are Doubling Down on Their Private Label Strategy…Increasing Shopper Loyalty, Improving Margins and Creating Better Leverage with National Brands


Grocery DrugMass

Retail Is Hyper-Focused on Private Brand


Amazon



4.1%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2014 2015 2016 2017

Total CPG National Brands Private Label

3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

2014 2015 2016 2017

Total CPG National Brands Private Label

Dollar Sales Change Unit Sales Change

A Private Brand ResurgenceU.S. Private Brands Performance

IRI Market Advantage™, calendar years; Total US—MULOC.


Private Brands are Growing Across All Income LevelsPrivate Brands Sales % Chg. vs. YA by Household Income Level

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Apr-23-2017

May-21-2017

Jun-18-2017

Jul-16-2017

Aug-13-2017

Sep-10-2017

Oct-08-2017

Nov-05-2017

Dec-03-2017

Dec-31-2017

Income < $15K

Income $15-24.9K

Income $25-34.9K

Income $35-49.9K

Income $50-69.9K

Income $70-99.9K

Income > $100K

IRI Consumer Network™, Total US Multi-Outlet, rolling 13 week periods


Private Brands Sales Have Momentum Across Age Groups, Especially Younger MillennialsPrivate Brands Sales % Chg. vs. YA, by Generation

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Apr-23-2017

May-21-2017

Jun-18-2017

Jul-16-2017

Aug-13-2017

Sep-10-2017

Oct-08-2017

Nov-05-2017

Dec-03-2017

Dec-31-2017

Millennials

Generation X

Boomers

Retirees & Seniors

IRI Consumer Network™, Total US Multi-Outlet, rolling 13 week periods


Changing Consumer Attitudes Are Driving Change7 out of 10 Millennials Prefer Stores That Have a Wide Selection of Private Brands Products and Expect to Increase Their Purchases This Year

54%

59%

60%

63%

61%

67%

70%

74%

I prefer stores that have alarge variety of private label

products to choose from

Expect to Purchase MorePrivate Brands During the

Next Six Months

Millennials Gen Xers Boomers Seniors

IRI Consumer Connect™, Q3 2017 Top 2 Box Responses


Younger Consumers are Embracing Private BrandsPrivate Brand Usage by Generation

41%29%

40% 45%

49%57%

50% 45%

10% 14% 10% 9%

TOTAL Millennial Gen-X Boomer

Light

Medium

Heavy

IRI Private Brands Consumer survey, Total US, November 2016, N=622


Partially Driven By Higher Awareness and Better Understandingof Private Label and What it Offers

“Private label products are just as good in quality as national brands”

76%83%

79%72%

71%

TOTALMILLENNIALS

GEN XBOOMERS

SENIORS

68%75%

71%65%

64%

TOTALMILLENNIALS

GEN XBOOMERS

SENIORS

Source: IRI Consumer Connect Survey, Q3 2017

“Private Label products are a better value than national brands”


From Imitator to Disruptor - We’ve Come A Long Way

• 1980 2018


Key Takeaways

NAVIGATING LIFE IN THE FAST(ER) LANE


Takeaway #1: Private Brand Disruption Continues

6

Digital Connection to Shoppers

4 52 31

Private Label to Private Brands

Brands, Tiers and

Scale

New Attitudes Driving

Preferences

Role Evolution to Loyalty

Innovation and Quality

Leader


Key Takeaway #2: Online Activity Will Only Increase: Are You IN or OUT?Information is the Currency of Success in This Rapidly Evolving Marketplace

For the Largest eCommerce Categories, eCommerce will Represent 33% of Total CPG Sales by 2025

$799 $840 $865

$52

$91

$146

$13

$28

$54

$600

$700

$800

$900

$1,000

$1,100

2017 2022 2025

CPG Growth 2017–2025U.S. CPG Sales ($B)

Edible eCommerce SalesNon-Edible eCommerce SalesTotal Store MULO + C Sales

• One size does not fit all—retailers and manufacturers need to know their customers almost individually…

– Who they are– What they think– How they feel– What they purchase– How to communicate with them

across channels, markets and media outlets

…and both need to be willing to experiment to find the highest degree of success

Source: eCommerce COE Secondary Research; IRI eMarket Insights; IRI Market Advantage, Total US Multi Outlet + Convenience

$65B

$119B

$200B


Key Takeaway #3: Turmoil in the Retail Industry Will Continue“Disruption” is Just Another Word for Retail

• Mergers, acquisitions, openings, and closings are a normal part of retail, now exacerbated by the omnichannel shift

• Customers are looking for a seamless online/store experience, adding more fuel to the fire

• The retailers who adapt the quickest and the best to the ongoing omnichannel shift are the ones that will thrive


Key Takeaway #4: Change is Everywhere, and it is Accelerating

Enjoy the Ride!


QUESTIONS


Thank You!

Mark WrightPrincipalConsumer & Shopper Marketing, [email protected]

Donna WydraPrincipalConsumer & Shopper Marketing, [email protected]

mailto:[email protected]

mailto:[email protected]

NAVIGATING THE TRANSFORMATION OF RETAIL, SHOPPERS & PL · Mark Wright and Donna Wydra. June 2018....

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Transcript of NAVIGATING THE TRANSFORMATION OF RETAIL, SHOPPERS & PL · Mark Wright and Donna Wydra. June 2018....