1. 1. Winning the New Digital Consumer with Hyper-Relevance January 2015 In Retail, Insight Is Currency and Context Is King
2. 2. Study Reveals that Retailers Can Meet Rapidly Evolving Customer Expectations with Hyper-Relevant, Streamlined Experiences 1 Exponential Change Is Driving Unprecedented Complexity Exponential change = exponential complexity and disruption. 32 Hyper-Relevance Can Capture the New Digital Consumer Consumers want experiences that provide savings and efficiency, reflect precise context of each shopping journey. Hyper-Relevance Demands New Business Models Win the trust battle. Let context drive innovation. Deliver dynamic experiences, increase agility.
3. 3. Exponential Change Is Driving Unprecedented Complexity The Internet of Everything is creating sweeping changes in the shopping journey, disrupting business models and expanding customer expectations.
4. 4. Retail Disruption Social Apps Mobile Big Data Mobile commerce grew 47% in Q2 2014, far outpacing e-commerce (10%) and total retail (3%) [comScore, 2014] 64% of U.S. shoppers use a mobile retail app while shopping at least once a week [Cisco Consulting Services, 2015] 88% of retailers foresee significant growth of data captured by their networks [Cisco Consulting Services, 2014] Technology and Evolving Consumer Behaviors Are Reshaping the Retail Landscape 94% of U.S. omnichannel retailers had a company Facebook page as of Q1 2014 [the e-tailing group, 2014]
5. 5. Exponential Change Creates a Maze of Shopping Journeys Source: Cisco Consulting Services, January 2015
6. 6. To Help Retailers Navigate This Rapidly Changing Landscape, Cisco Conducted a Unique, Three-Pronged Study 1 Surveyed 1240 consumers in U.S. & U.K.* Blind survey / 627 U.S. + 613 U.K. 2 Conducted in-depth interviews with retail industry thought leaders Doug Stephens, Retail Prophet Consulting Leslie Hand, IDC Retail Insights Michael Olmstead, Plug and Play Retail 3 Drew upon lessons learned from Cisco Consulting Services customer engagements to develop economic model 42% 28% 21% 9% Gen Y Gen X Boomers Silvers 18-34 yrs old 35-54 yrs old 55-64 yrs old 65 and up 79% use smartphone 50% use tablet 51% 49% Female/ Male *Global findings from 6000 consumers in 10 countries to be released in March 2015
7. 7. Research Shows that Digital Shopping Is No Longer Just for Early Adopters Q Which types of shopping apps do you use weekly? Source: Cisco Consulting Services, January 2015 ber Digitals have become mainstream Retailer-specific apps (Amazon, Tesco, Walmart, etc.) Independent shopping apps (Groupon, LivingSocial, Zulily, etc.) 55% U.S. 53% U.K. 34% U.S. 24% U.K. U.K. U.S. 7% 11% 22% 29% 2014 2012 ber Digitals as Percentage of Respondents
8. 8. Mainstream Mobile Adoption Demands that Retailers Deliver New Shopping Journeys and Experiences Leslie Hand Vice President, IDC Retail Insights The consumers smartphone is one of the most valuable tools that the retailer has as an interaction point.
9. 9. The New Digital Consumer Wants Hyper- Relevance Consumers want a hyper-relevant shopping experienceconvenient and contextual. They are less interested in hyper-personalization, which may not address their needs in the moment.
10. 10. Consumers Expect Hyper-Relevant Shopping Experiences, Not Just Personalization Hyper-Relevance Defined What It Is A new paradigm that enables consumers to receive what they want, when and how they want it. How It Happens Hyper-relevance is made possible by IoE-enabled solutions and innovative business models that deliver valueefficiency, savings, or engagementin real time. How It Is Different Personalization is when the retailer knows your name. Relevance is when the retailer knows your needs in the moment.
11. 11. if you're prepared to share some information with us as a consumer, we're prepared to give you an experience that feels very connected, very customized, very contextualized... Context Is King: Above All, Interactions Must Be Relevant Doug Stephens Founder, Retail Prophet
12. 12. IoE-Enabled Retail Solutions Offer Rich, Context-Aware Shopping Experiences Illustrative Examples
13. 13. favor checkout optimization77% Efficiency There Is High Demand for Shopping Experiences that Deliver Efficiency, Savings, and Engagement interested in receiving product recommendations via augmented reality 57% interested in general in-store entertainment (not related to context or shopping) Engagement Source: Cisco Consulting Services, January 2015 favor in-store guidance through digital signage67% favor in-store guidance through augmented reality63% 38% would like to view digital signs with special deals or promotions available to everyone in the store 78% 73% favor receiving special offers via augmented reality on a smartphoneSavings
14. 14. SAVINGS $59M 19% of Value at Stake While Consumers Still Want Savings, Efficiency Promises Greatest Value for Retailers Reviews [augmented reality] 57% In-store advertising 54% Product recommender [augmented reality] 48% Top Ten rankings and displays 45% In-store entertainment 38% IoE Retail Concepts Willingness To Use* *Percentage responding somewhat or very likely to use General in-store offers [digital signage] 78% Special offers [augmented reality] 73% Targeted offers [digital signage] 67% Targeted offers [smartphones] 54% Scan QR codes 52% $312M Gross Benefits [based on retailer with $20B annual revenue] $45M 14% of Value at Stake ENGAGEMENT $208M 67% of Value at Stake Checkout optimization 77% In-store guidance [digital signage] 67% In-store guidance [augmented reality] 63% Scan-and-pay [smartphone] 60% Drive-thru pickup 57% Same-day delivery 53% Smart cart / automatic replenishment 50% Mobile payments 49% Secure locker 49% EFFICIENCY Source: Cisco Consulting Services, January 2015
15. 15. 39% 26% 22% 13% Process of selecting and purchasing goods Quality of interactions provided by their store associates Physical environment in stores Level of personalization of the shopping experience To Maximize Value at Stake, Retailers Should Focus on Improving Efficiency The area with the greatest Value at Stake is also the area most in need of improvement Q In which areas could retailers make the most improvement? Source: Cisco Consulting Services, January 2015
16. 16. The Path to Creating Hyper- Relevance Win consumers trust: Consumers may be willing to share personal information for the right experience. Turn customer data into actionable insights. Deliver dynamic experiences to deal with complexity, increase agility, transform business models.
17. 17. Real-Time Analytics Enable Actionable Insights and Better Decisions Michael Olmstead Director, Plug and Play Retail The only way you can predict inventory is if you predict demand. And the only way to predict demand is to predict the right purchase behavior .... Its all going to come back to predictive analytics.
18. 18. 8% 9% 11% 12% 16% 23% 25% 28% 41% 49% 51% None of the above Web history, social media activity My reviews online Family information Personal financial information Basic information (name, age, etc.) Purchase history, loyalty program info Likes/dislikes, interests, hobbies To Benefit from Analytics, Retailers Must First Win Customer Trust Information from connected products I am using Purchase history from other retailers My location NO MAYBE YES Win the battle for trust here Source: Cisco Consulting Services, January 2015 Repondents willing to share information to get a more personalized shopping experience:
19. 19. Retailers Understand the Importance of Real-Time, Edge Analytics to Maximize Value Source: Cisco IoT Global Study, 2014 Smart store operational analytics Targeted offers Checkout optimization Retailers lead in recognizing the onset of edge computing Respondents who believe that in the next three years, most data will be processed at the edge (mobile devices, appliances, routers) Source: Cisco Consulting Services, 2015 47% 40% 40% 38% 34% 33% 33% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Transportation Public Sector ManufacturingOil & Gas Utilities Metals & Mining Retail 9.4% 1.8% 0.8% Potential EBIT* profit contribution of illustrative analytics-based concepts *Earnings Before Interest and Taxes
20. 20. By Combining Analytics with Dynamic Processes, Retailers Will Create the Foundation for Hyper-Relevance Hyper-Aware Mobile devices, sensors, beacons, and RFID tags help retailers gain true visibility into what the customer is experiencing in the store Predictive Intelligence and analytics provide real-time anticipatory insight into what is happening and what to expect, enabling hyper-relevant customer connections Agile When retailers can change their business processes dynamically, they can manage human, technology, and product resources in real time with tremendous efficiency Three Key Attributes of IoE-Optimized Retailers
21. 21. Gross annual value opportunity Net annual EBIT opportunity $142M + $170M = $312M - $93M = $219M By Implementing Key IoE-Enabled Solutions, Retailers Can Generate Potential EBIT* Gains of ~15.6%** Revenue OpEx reduction For an illustrative omnichannel retailer $20 billion revenue 7% EBIT margin 900 stores 120,000+ employees 113 million square feet of retail selling space Annual enabling costs *Earnings Before Interest and Taxes **Based on 19 IoE concepts featured in IoE Retail Survey, January 2015
22. 22. Ingredients for Success in the IoE Era 1 Focus on innovations that deliver hyper-relevance for consumers 2 Forget everything you thought you knew about the digital consumertraditional customer segments are breaking down 3 Go to the edge for visibility into what customers are experiencing in the moment 4 Build a dynamic infrastructure and create agile processes that allow you to deliver hyper-relevant experiences 5 Develop new business models that drive innovation and enable hyper-relevance
23. 23. Appendix Cisco Retail Solutions
24. 24. Connected Retail Solution Roadmap CiscoValueCapture Innovation Impacting Shopping Experience Reduce operational costs Drive revenue growth through targeted/ dynamic promos Improved, personalized engagement via Omni- Channel Digital Media Store Experience Enhance customer satisfaction with flexible pickup schedules Increase foot traffic to store Drive cross/ upsell Prevent loss on customer premises Operational efficiencies Smart Locker On premise visibility into shopper behaviour and preferences Increase app and services adoption Improve marketing/ promo effectiveness CMX Digital Experience Enhanced shopper experience Connect with experts Increase avg basket / transaction size Employee productivity Remote Expert and Mobile Advisor Checkout optimization Staff optimization Loss prevention Store Operations Analytics App consolidation (i.e. POS, Loss prevention) Closet simplification Security & compliance iWAN Energy Management Store in a Box Shopper Insights & Personalization Behaviour analytics Checkout optimization Drive conversion rate and increase customer loyalty Increase average basket size Connected Analytics for Retail (FY15)