New Retail Day'14 - 6. maj 2014 - Bill Gillespie, IBM

© 2014 IBM Corporation 1 IBM Internal ©"Copyright"IBM"Corpora0on"2014"

IBM Point of View Driving Profitable Sales with the New Empowered Customer

© 2014 IBM Corporation 2 IBM Internal

Overview

1.  The New Empowered Customer

2.  The Disruptors

3.  The New Winning Themes in Retail


CEO Study CMO Study CIO Study

CEO Study “Technology will be the top driver of change in the next three years and it will be a disruptive factor”

IBM Thought Leadership

CFO Study


The “quickly” evolving customer

2010 Meeting the Demands of the Smarter Consumer

‘Use of technology’

2011 Capitalising on the Smarter Consumer

‘Personalisation’

2012 Winning Over the Empowered Consumer

‘Trust’

2013 From Transactions to Relationships

’Developing Relationships”

2014 Greater Expectations

‘Expectations and SoLoMo


27% made their last purchase online. 50% increase over 2012

67% have a smart phone

9 of 10 reasons to shop a retailer involve omnichannel capabilities

69% post a review once per month. 54% post 2-3 reviews per month

64% say reviews are the most important criteria in deciding where to shop

81% expect the same brand experience across all channels

The Age of the Empowered Customer IBV 2013 Study


People are willing to share more information….

19%

36%

2011 2013

Mobile # = 38%

2013 — Willingness to share

Social handle = 32%

Willing to share current location (GPS)

Source: IBM IBV 2013 survey, n= 30,554. Q31 and Q54 Year on year comparisons include 13 of 16 surveyed countries


The emergence and growth of SoLoMo

It is becoming all the more critical for retailers to connect with consumers one-on-one. IBM investigated three contact methods: Social handle, Location and Mobile number (SoLoMo) and found that shoppers’ SoLoMo adoption levels ultimately revealed four distinct consumer groups:

40% 29%

19% 12%

Traditional– Uses least amount of technology while shopping.

Transitioning – Uses technology mostly to gather research and other information.

Tech-intrigued – Uses SoLoMo from browsing to buying

Trailblazers – Uses SoLoMo extensively, including as a retailer evaluation tool.

* Study Population


Can be very complicated but two key areas to focus:

Active Listening !  If a customer called or complained in store

how quickly would your company react? !  You need to listen to social media on a

daily basis and react in real time

Social Media

Deeper Data Analysis for Personalization !  Mine the data form Facebook, Pinterest,

YouTube, blogs to: ‒ Better understand the trends of your

customers ‒ Personalize assortments and promotions ‒ New items or categories to sell


!  Identify customers presence as they enter or leave the store

!  Identify proximity to a retail store !  Identify what aisle or department the

customer is located !  Interact with customers in real time

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


Baby boomers no longer dominate the consumer story

Millennials take control !  Born 1982-2000, they will just be 38 years

old in 2020 !  80 million strong (roughly the same size as

the boomers) (1) !  Completely different values, social norms

and expectations –  Quality over quantity (owning less stuff) –  Completely connected and mobile –  Heavily influenced by peers (“we vs.

me”) –  Socially responsible attitude towards

companies and products

[1] Source: 2010 US Census Report

Aging baby boomers will mostly be in their 60’s and 70’s by 2020(1)

!  Still financially crippled from the great recession

!  Focusing on healthcare, aging parents, wealth preservation for retirement


!  Anticipate and service my shopping needs Use what you know about me to deliver a seamless and interconnected engagement regardless of where or how I am shopping with you.

!  Make it convenient and easy to interact with you Consistently capture my history and profile and deliver information and services to me through my preferred channel.

!  Be there when I need you, in real time Empower me with real-time updates, proactive communications and choices before, during and after I shop with you.

!  Remember all of my interactions Understand me and my preferences through our past interactions.

Customers expect a personalised approach


The Disruptors


The Disruptors cause the huge paradigm shift

The New Disruptors in Grocery


$70+ billion in

sales

Projected $185 billion by 2017 second only to

Wal-Mart

The “Earths Biggest

Selection” Customer

experience and personalization

Innovation

International Growth

63% sales from GM/ Electronic

The Wal-Mart, Ebay and Google reaction Logistics

The Amazon Effect


Place your order by 10am

have it by dinner

Free Same-Day & Early Morning Delivery on orders over $35.


Local Shops & Restaurants We bring your city to your doorstep - from bakery to ethnic foods to gourmet meals.

Order up fresh mahi-mahi from Santa Monica Seafood, a tasty rhubarb pie from

The Pie Hole, or a crisp salad from Steingarten LA.


Amazon Grocery Launched 2006: !  Vitamins and Supplements #1

gross profit dollar category !  Baby is the #4 category

–  Sells more diapers than Kroger !  Health and Beauty in top 20 !  Coffee #24 !  Specialty Grocery top 30

Amazon Fresh launched 2007 !  19,000 fresh items !  28,000 ambient !  Open in LA and SF !  28 DCs planed !  Drives the trip to Amazon !  Targeting Higher Income

Segments

Amazon Grocery and Fresh


!  Broadening its selection from its entertainment roots has been successful in bringing customers to Amazon’s site, making it one of the most visited websites globally.

!  Amazon typically adds 1-2 categories annually in each of its markets.

!  Categories that are expanding rapidly include grocery/fresh food, consumer electronics, toys and apparel.

!  Amazon’s third party Marketplace has enabled the company’s expansion, particularly in specialist categories. In Q4 2012, Amazon generated 39% of unit sales from its Marketplace operations.

Amazon has sacrificed profits to pursue its ambition to become the definitive online sales reference, giving customers everything in one place and undercutting rivals on price.

#1 ‘Earth’s Biggest Selection’

Source:"Planet"Retail"2013"Amazon"Insights"Report"""

Amazon’s Key Growth Strategies



!  Amazon’s Kindle devices are its bestselling items globally. !  In 2012 Amazon reported that Kindle e-book sales soared 70%, to

become a multi-billion dollar business. !  In the US and UK, Kindle e-books now outsell physical books, with

other markets set to follow. !  Kindle e-readers and tablets have been designed to maximise

content sales in the form of e-books, apps, music downloads and Amazon’s online streaming services.

!  Amazon has widened Kindle’s reach by partnering with bricks and mortar retailers.

!  Unlike competitors, Amazon looks to profit from content sales from devices rather than from hardware revenue.

Amazon has become known alongside Apple and Google as a technological innovator.

#2 Innovation, technology and content



!  Much of Amazon’s innovation comes from its insight into customer needs and wants.

!  Amazon leverages technology to analyse spending habits and to ‘know’ customers individually. This tailored customer experience is a differentiator.

!  Amazon’s ‘all you can eat’ Prime loyalty scheme is driving growth, offering free shipping alongside streaming services and Kindle e-books loans. Amazon said US membership increased “dramatically” in 2012.

!  Customer satisfaction is high. Planet Retail’s shopper insight study in Q4 2012 gave Amazon a net promoter score of 57 with 91% of visitors converting to buyers.

Amazon places customers at the heart of its strategy and enjoys strong loyalty.

#3 Customer centricity


Subscribe and save allows customers to preorder commonly used items or big bulk items

Same day delivery and 2 hour delivery for grocery and fresh items


© 2014 IBM Corporation 21 IBM Internal Source: Expert interviews; Internal Analysis; McKinsey & Company

Amazon Prime drives loyalty and supply chain predictability while allowing Amazon more control over the customer experience


The Merchant Mindset Creating the WOW in store feel

Develop Relationships with Your Customers The era of personalization versus paper ads for all

The New Health and Wellness Integrating Doctors, Insurance Companies and the Grocery Store

Product is the Hero Creating differentiation with product

The New Winning Formula for Retail

22

Play where She wants to Play Build world class omnichannel

From Gut Based to Fact Based decision making


Develop Relationships with Your Customers The era of personalization versus paper ads for all


Data Can Cripple an Organization


Current state: �I have an offer – let me find a customer to sell to” Sales and Gross Profit tracked by Category, Store and Segments

Our data is siloed, latent, and oriented

to products and channels

Our analytics are geared to

propensities not relationships and

behaviors

Every group, product and

channel for itself – no customer optimization

Our offers have little context and relevance – we

under utilize our e-channels

Staff are not confident in acting

on offers – our presentment rates

are too low

We don’t know what is working and

can’t diagnose under-performance

Plan Design Report Target Sell Serve

Target state: “I have a customer – what do they need today?” Sales and Gross Profit tracked by Customer

Data is highly integrated and

recent – provides holistic, detailed customer view

We have re-calibrated to the customer and

have new test and learn abilities

We optimize communication to maximize value to

the customer

We deliver the right information to the right channel –

we capture feedback

Staff and leaders understand our

goals – have the skill & motivation

to deliver

We understand the value levers and

have instrumented it to “know”

Inform Design Measure Target Present Engage

The Goal: Retailers align their marketing capabilities to meet customer needs for personalized communications and interactions


Focus on the loyalty levers and with your ”best customers” and your ”next best customer”

Beh

avio

r (sp

end)

Low

High Moderate Low

Moderate

High

Attitude

Very loyal in attitude and

behavior

Lars Spindler IBM DK


0

10

20

30

40

50

60

70

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Va

lue

of

Be

havi

or

Actions in each interaction over time

Known history

Add predicted future behavior based on all expected future data points in the lifecycle

Individual Nano Entity Lifecycles (INEL)

Forecasting by Customer


!  Customer First Strategy !  40 straight quarters of like store and

EBIT increases !  60 million card holders !  Focus on 15 million their best

customers !  Personalized incremental ads to best

customers –  70% redemption on Ecoupons

!  Personalized Pricing !  Best customer data used extensively in

assortment decisions

Best Practices


Strategy: Engage best customers more effectively and acquire new customers utilizing information, analytics and automation to deliver personalized recommendations and communications continuously based on individualized profiles, personas, purchases, preferences and networks / relationships Objectives: Increase share of wallet and share of interest / intent through !  Engagement – Frequency and Quality

of engagement across all channels !  Basket Size and Composition –

Breadth, Depth and Profitability of Baskets

!  Share of Wallet and Share of Interest

Initiatives to deliver capabilities: !  Single View of the Customer integrating store, digital, web, mobile, social

interactions !  Digital Personalization to improve visits and baskets particularly among key

segments !  Acquisition of new customers using advanced analytics and omni-channel

automation !  Store based micro-clusters to drive customer centric assortment tailoring !  Personalized Loyalty Programs tailored to customer preference and improvement !  Marketing Media Mix Optimization

Solutions Software Services to be Leveraged: !  Customer Master Data Management !  Enterprise Marketing Management !  Customer Centric Insights - CMO Dashboard (Marketing and Merchandising) !  Big Data / Cloud applications, infrastructure, operations !  Analytics – Rapid Development and Deployment !  CRM Expertise – Infrastructure, Integration, Analytics, Applications, Transformation

Benefits: References:

75#100&

Revenue

10#15&

EBITDA

Develop Relationships with your Customers

Basis points improvement


Play where She wants to Play Build world class omnichannel


Mobile is at the epicenter of change


Wegman’s offers shopper convenience and community functions, with web-to-store functions such as find/save/share recipes, shopping lists printed by aisle location, integrated Shoppers Club saving, and friendly iPhone application. Events and classes in the store, with extensive use of videos on YouTube to promote the brand and products.

Mobile Check Out Stop & Shop stores in the Boston area allow customers with iPhones to scan grocery items and add them to an electronic shopping cart. By aiming the phone’s camera at the bar code on a product package, the customer can see the price and add it to the electronic shopping cart. Once shopping is done, the app relays the information to a checkout register, where the customer can pay with cash or a credit card.

Get your Publix Deli favorites the easy way. Publix offers customers to build their own sandwich and order their favorite deli meats cheeses and other items on a PC, tablet or Smartphone and the order will be ready when they arrive. Publix’s shopping list feature is downloaded into a store specific planogram for ease of shopping

Technology is allowing grocers to offer a personalized and unique shopping experience, inside and outside the store


"El Corte Inglés has launched an online operation in the UK, Ireland and Netherlands. The Spanish retailer has introduced a marketplace where customers can purchase more than 50,000 products from 200 brands, particularly Spanish ones. El Corte Inglés is partnering with IBM, which has created an e-commerce platform using a Cloud-based system. The new website offers fashion, sports items, household goods and gourmet products. Customers will receive orders within 48 hours of purchase. These will be dispatched from the retailer’s logistics facilities in Madrid, with shipping provided by “leading international logistic groups”..""

In pursuit of enhanced customer service, Waitrose is exploring the use of mobile devices on the shop floor. According to The Grocer, the John Lewis-owned UK retailer is to equip support managers with tablet computers, thereby freeing them from having to use a desktop computer, allowing them to spend more time with shoppers.

Technology is allowing grocers to offer a personalized and unique shopping experience, inside and outside the store

ARISTO is an IBM Research First-of-a-Kind augmented reality mobile solution. Tesco is using ARISTO to validate planogram integrity and in stock position. Associates or a third party simply scan the planogram with a smart phone. ARISTO’s picture recognition technology captrues planogram and in stock position on the shelf and bounces it off of TESCO’s authorized planogram. Any differences in items, space and in stock levels is immediately noted and fixed.


Locker shipping option

Integration in the eCommerce shopping path

The Next Growth Area


InPost Locker Infrastructure in the UK ready for market testing !  512 lockers placed in cities most

usable for key clients !  Courier contracts established and

ready for work !  A staff of 28 UK based InPost

employees ready to support the market tests

There are over 500 lockers deployed and ready for use in the UK as of Nov. 2013


The time window available for one or two dominating forces to capture and control the market is short


Transforming the Organization for Omni-Channel

Requires a significant shift in mindset from top down in the organization in order to embrace the view of the empowered, omni-channel consumer

Stores

CEO

CFO

CIO

CMO

COO

Customer View

Deliver good products to our customers

Deliver good products to our customers in different channels

Deliver good products through a superior customer experience

CEO Business unit P&L, divisional P&L, channel P&L

Customer P&L, shadow P&L, matrix P&L, attributed P&L CFO Balance sheet, income statement,

statement of cash flows, P&L

Technology to enable business channels

Technology that enables personalized customer experiences

Technology to support company business processes

Build my brand in multiple channels

Build my brand one customer at a time Build my brand

Processes that optimize buying & selling in separate channels

Processes to optimize buy/sell when and where customer wants

Processes that support buying and selling products

Channel View Company View + +

Stores CHRO Incentives that drive each

channel’s sales Incentives/rewards that drive omni-channel behavior Incentives that drive store sales


Merchandising

Inventory Management

Marketing

Design

Stores

Supply Chain

Designing for stores Designing for the brand/customer

Telling the product story in stores Telling the product story across multiple channels/technologies

Buying product for the store Buying to support customer demand (regardless of channel)

Broadcasting “Personalization in the right channel”

Fulfillment/systems optimized by store demand

Fulfillment/systems optimized around customer demand

Retail store policies and procedures Customer/Brand experience center

eCommerce Driving online traffic and sales Powering/enabling cross-channel shopping behavior

From functional expertise and efficiency to optimization around the customer

Traditional Multi-channel

Success in Omni-Channel requires a radical shift in core Retail business processes


Best in Class for Grocery

10% of sales online

Large investment to fight Amazon

Click n Collect and Delivery models

Price Match

Diversification and Disruption

Best Practices


Strategy: Engage with the customer and businesses where they are – at each stage of the shopping cycle, creating a seamless shopping experience across stores, online, mobile, kisoks, call centers and all other customer touch points Objectives: Focus on enhancing both store and non-store revenue ultimately driving higher customer wallet share !  Online and mobile revenues (in non-

food and food both) !  Digital channel and marketing driven

store traffic and basket size increases.

Initiatives to deliver capabilities: !  Best in class B2B and B2C !  Cross channel single view of customer and inventory

–  Integrated view of channels – from a customer information and inventory perspective

–  Be able to track customers across channels !  Cross channel process execution

–  Marketing – online marketing creating store traffic, online and mobile for in-store promotions

–  Cross sell / up sell, Save the sale at store –  Mobility, Mobility and Mobility –  Location based services

Solutions Software Services to be Leveraged: !  IBM Retail SMEs !  Web analytics !  Mobile Platform and development

Benefits: References:

10%&of&sales&

Revenue

(15#25)&

EBITDA

Build world class omnichannel

Basis points impact


From “Gut Based to Fact Based” decision making


Thank You

New Retail Day'14 - 6. maj 2014 - Bill Gillespie, IBM

Marketing

Transcript of New Retail Day'14 - 6. maj 2014 - Bill Gillespie, IBM