#IBMRetail @SPLaughlin

What’s next? Retail 2025Steve LaughlinVice PresidentGlobal Consumer Industry Manager Retail and Consumer Products

#IBMRetail @SPLaughlin

There is lots of room for improvement

Source: 2016 IBM Customer Experience Index Survey (n=470 retailers)

0%

10%

20%

30%

40%

50%

60%

52%49% 49%

45% 44% 44% 44% 43% 43% 42% 42% 41% 40% 38% 38% 38% 36% 36% 34% 34% 32% 30% 29%41%Average

Performance

#IBMRetail @SPLaughlin

0%

10%

20%

30%

40%

50%

60%

51%49% 49%

45% 44% 44%42% 42% 41% 40% 40% 39% 39% 38%

36% 35% 34% 34% 34% 33%29% 29%

16%

3

UK Swed

enNo

rway

Fran

ceIre

land

US Aust

ralia

Switz

erla

ndAu

stria

Germ

any

Cana

da

The

Neth

erla

nds

Braz

il

Indi

a

Finla

ndIta

lyIb

eria

Chile

Sout

h Ko

rea

Japa

nTh

aila

nd

Chin

a

South Korea got an CEI average of 29%

41%

Denm

ark

South Korea is strong in Department Stores, but has need to catch up in other segments

Electronics

Department Stores

General Goods

Home & DIY

Other Specialty

Apparel & Accessories

Grocery & Food

Drugstore/ Personal Care

41%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

49%

46%

44%

42%

42%

40%

37%

35%

14%

17%

1%

9%

8%

9%

4%

8%

75%

71%

69%

66%

76%

77%

71%

70%

% Global % South Korea

47%

18%

22%

33%

43%

#IBMRetail @SPLaughlin

South Korea Performance in comparison to global

5

Less than 10%

10% to 20%

20% to 30%

30% to 40%

40% to 50%

50% to 60%

60% to 70%

70% to 80%

More than 80%

0 20 40 60 80 100 120

11

23

61

108

113

74

29

5

0

1

2

5

14

15

7

2

Lead

ers

Fast

Fo

llow

ers

Less than 10%

10% to 20%

20% to 30%

30% to 40%

40% to 50%

50% to 60%

60% to 70%

70% to 80%

More than 80%

0 1 2 3 4 5 6 7 8 9 10

3

4

4

4

5

2

0

1

1

2

2

3

Lagg

ards

= Pure Players= Bricks & Clicks

Global Performance South Korea Performance

9% 4%

70% 56%

21% 40%

#IBMRetail @SPLaughlin

Overall, we have significant room for aligning to how we engage with customers

6

0%

10%

20%

30%

40%

50%

60%

51%

42%

33% 30%

Consistency

Content Convenience Contextual

Convenience

Offer hassle free returns, maintenance and end of life options

Exploit digital payment and engagement methods

Provide immediacy through flexible fulfilment

Content

Improve transparency Provide pertinent information for

making informed decisions Convert associates to brand

advocates Employ rich media

Contextual

Recognize individuals and their shopping intent

Personalize interactions Provide relevant offers based on

customer preferences & history Foster customer as brand

advocates

Key Opportunity Areas

Consistency

Connect and harmonize engagement programs

Integrate into unified channel systems

Incorporate new consumer technologies (wearables)

Sell more than product

41%average

#IBMRetail @SPLaughlin

Consistency

Contextual

Content

Convenience

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

93%

94%

89%

81%

South Korea Performance in 4C’s

19%

31%

25%

39%

33%

42%

30%

51%

% %South Korea Average Global

0%

0%

0%

0%

#IBMRetail @SPLaughlin

These megatrends continue to drive change in major and emerging markets

. DataDevices Rule Data Science Rocks Destruction & Mayhem

#IBMRetail @SPLaughlin

Rethink operating models in the cognitive era

#IBMRetail @SPLaughlin

There are no channelsCustomers become even more insistent that they will be known and understood - no matter how, when or where they engage• Consistent, relevant and responsive• Data-driven• Enabled by cognitive computing

#IBMRetail @SPLaughlin

Stores become smart, social and connected … teeming with IoT devices

Stores will be a competitive differentiator in the battle for consumers • Smaller, flexible, modular designs • Entertaining and experiential• Rented, agile infrastructure• Multi-purpose• Showrooms • Distribution centers

#IBMRetail @SPLaughlin

Associates are elevated to concierge statusStore associates are secret weapon in delivering the brand promise• Engaged brand advocates• Enabled and educated• Empowered by cognitive insights

#IBMRetail @SPLaughlin

Transform supply chain design 70% customer direct fulfillment requirement from a low of 15% in 2015• Traditional relationships transformed• Supply chain is impacted by Uberization or local

on-demand delivery• Last mile is solved• Supply chains become (secure) ecosystems

#IBMRetail @SPLaughlin

Dynamically curate rangeNew ways to create differentiated assortment• Software companies and artists are the new product designers• Digital platforms power collaboration • Uber-personalization • Hyper-localization• Crowd-sourcing becomes common

#IBMRetail @SPLaughlin

Tell relevant stories Customer needs, wants and aspirations can be forecast with 80% accuracy• Social insights inform decisions in real-time• Local events automated, at scale• Promotions, offers and engagement delivered in context

#IBMRetail @SPLaughlin

Rethink investment models

#IBMRetail @SPLaughlin

Emerging markets invest in innovation …

China

Korea

Germany

Japan

USA

UK

Canada

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

Change in Business Expenditures on R&D 2009-2013

By 2007 just 6% of publically traded companies were publishing research in

scientific journals, down from two-thirds from 1980

#IBMRetail @SPLaughlin

And so do disruptors

Experiments and More ExperimentsWe have our own internal experimentation platform called “Weblab ”that we use to evaluate improvements to our websites and products. In 2013, we ran 1,976 Weblabs worldwide, up from 1,092 in 2012, and 546 in 2011.

#IBMRetail @SPLaughlin

Enter the cognitive era – start your journey by becoming more relevant and responsive

There is only one channel. The consumer is the channel.

Differentiation AgilityEngagement

Cognitive systems drive differentiated experience in stores, engagement, and throughout the value chain.

Retailers will be forced to radically optimize non-selling functions to fund innovation.

#IBMRetail @SPLaughlin

What’s next? Retail 2025Steve LaughlinVice PresidentGlobal Consumer Industry Manager Retail and Consumer Products