The Future of Retail
Mike Laurenti Executive Vice President Chief Information Officer
Our Customer
Our Community Involvement
Belk gives UNC Charlotte business school $5 million gift
Belk Inc. and UNC Charlotte announced Tuesday that the retail giant is giving the university $5 million over five years to boost the school’s teaching of marketing analytics and business innovation. The gift to the Belk College of Business will help establish an endowed professorship in business innovation and an endowed chair in marketing analytics, and also will groom business students for careers in those fields. The gift will support research in marketing, customer analytics, customer relationship management and strategic innovation.
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2.5
3.0
4.4
2.1
4.6
5.1
0.2
4.0
0.5
3.0
5.3
5.5
0.0
0.0
0.3
2.7
3.7
6.3
4th Quarter Financial Results / Confidential – Internal Use Only
6 * External Comps
Our Performance Three-Peat (2010, 2011, 2012)
Comparable Store Sales % Increase
Storm clouds on the horizon?
Department stores are losing share to alternative retail models
Department Store Sales as a % of Total Retail Sales1
Amazon’s projected growth in
apparel from FY11 to FY16 131%
1. US Census Bureau, retail sales exclude motor and food services; department store sales exclude discount department stores Additional sources: Store Ycharts (ycharts.com), eMarketer “US Retail Ecommerce Sales, by Product Category; http://money.cnn.com/2011/05/26/smallbusiness/flash_sales_ideeli_hautelook_gilt/index.htm;
Total department store sales have decreased 35% in the last 10 years,
while total retail sales increased 44%
Estimated growth of flash
sales from FY11 to FY16 500%
$ Power: Titans vs. Top U.S. Retailers
Total (TTM)
Market Cap 250B 92.7B 43.1B 32.6B 41.6B 12.5 B 472.5B
Sales 460.7B 71.7B 95.1B 71.6B 71.3B 92.3B 862.7B
Net Income 16.3B 4.3B 1.6B 2.1B 2.9B .6B 27.8B
Cash 8.1B 2.8 5.9B 1.3B 1.5B .24B 19.8B
$ (Billions)
Total (TTM)
Market Cap 626B 250B 115.1B 47.5B 62.7B 1,101.3B
Sales 148.8B 43.2B 54.3B 4.3B 13.0B 236.6B
Net Income 40.1B 15.5B .38B .72B 3.7B 60.4B
Cash 27.7B 42.0B 5.1B 10.2B 5.9B 91B
Sales & Net Income: Reported Earnings, Rolling 4 Qtrs; Updated 10/3/12
$ (Billions)
5 Yr. Cumulative % Growth 2007-2011
0%
50%
100%
150%
200%
250%
Titans Retailers
0% 0%
30%
6%
59%
10%
121%
13%
232%
20%
2007
2008
2009
2010
2011
Cumulative Growth % 2007-2011. Titans 5 Yr. Growth = 232% off 2007 baseline. Top Retailers 5 Yr. Cumulative Growth = 20% Apple: 353%
Amazon: 224% eBay: 53% Facebook: 2325% Google: 128% Total: 232%
Wal*mart : 22% Home Depot: -9% Costco : 38% Target: 11% Walgreens: 35% Kroger: 29% Total: 20%
“Showrooming” - The Threat is Real
Source: Citi Research, AlixPartners, comScore
• Over 1/3 of young smartphone owners using mobile payments
• Tablets reaching critical mass – 1/4 of smartphone owners use a tablet
• Amazon Price Check app
• Amazon Prices 8% Less than Walmart on Average
• Brick-and-mortar retailers fighting back
Amazon’s Price Check
app scans barcodes to
compare prices on
millions of products
“In 2012, we plan to spend over $140 million in e-commerce, representing approximately 30% of our capital expenditures, compared to spend of almost $100 million or approximately 20% last year”
-Mike Koppel, EVP and CFO, February 2011
“[Apparel] is a very important category…it is a very large market segment that [Amazon] can address.”
-Jeff Bezos (CEO), 2010 Annual Stakeholder Conference
“…it’s definitely one of the priorities of our new team to have a higher investment in technology…” -Karen Katz, CEO, May 2011
“We are going to reallocate our capital expense spending within our overall capital allocation plans. For 2012 we will fund online, as well as our technology investments, at an accelerated pace from last year”
-Kevin Mansell, Chairman and CEO, February 2012
“…our customers increasingly cross-shop between our online business, our specialty business and our value expression of the brand. So recognizing that, we're going to make sure we are not disconnected…”
- Glenn Murphy, CEO, November 2011
Retailers are changing how they deploy capital
Despite making up only a small part of overall retail sales, online digital sales are driving nearly HALF of
all growth for retailers
Sources: Forrester and Internet Retailer Estimates; adjusted for non-Ecommerce sectors (Fuel, Food, Grocery, Beverage, Automotive)
$31 B Stores Contribution
$27 B Online Contribution
Online
Stores
Sales INFLUENCED by the digital experience represent 41% of all purchases
Sources: Forrester and Internet Retailer Estimates; adjusted for non-Ecommerce sectors (Fuel, Food, Grocery, Beverage, Automotive)
Digitally Influenced Sales
Store Only Sales
Phase 1: Grow eCommerce
Phase 2: Project SMART
Phase 3: Omnichannel
Our Digital Journey
Grow eCommerce Our eCommerce growth is outpacing the industry, but creating challenges
• New D2C Fulfillment Center to fulfill demand
• IT Infrastructure scalability challenges
• Business demand insatiable • Team capability and capacity Gaps
0
50
100
150
200
250
2010 2011 2012 2013P
eCommerce Sales (in millions)
Online Only
In-Store Only
In-Store & Online
$100/yr
$352/yr
$1064/yr
Customer Spend
5.1%
2010 2012
Stores
eCommerce
6.3%
Comp Sales Increases
Project SMART Digital Journey Phase 2
• Repair Team & Infrastructure
• Core Systems of Record
• Merchandise & Optimization Systems
• Foundation for Omni-Channel
20
ERP & Merchandising
Systems
Optimization
Solutions
Analytic Solutions
Project SMART Scope
IBM (MDM, ESB/ETL & Consulting)
Infrastructure / Data Centers
27 Months, $93M in Capital
IT Organizational Impact
0
50
100
150
200
250
300
2010 2013
Belk FTE's
Third PartyFTE's
70% of the IT team has less than 2 years tenure at Belk
• New Leadership Team • New functions • New Processes • Recruiting and relocation
challenges
Cost Center Impact
20 Months into a 27 Month Journey
Q3FY14 Q2FY14 Q1 FY14 Q4 FY14 Q3FY14 Q2FY14 Q1 FY14 Q4 FY14
LIVE IN-PROCESS Demand
Forecasting Merchandise
Planning Master
Data
Data
Warehouse ESB/ ETL
Replenishment)
Size
Optimization
Allocation
Stock Ledger
& Purchase
Order
Where do we go from here?
Retail 2017 Predictions
2017
1. Digitally-driven sales will account for the majority of overall retail sales
2. The role of the physical store and associate will fundamentally change, engaging with an always-connected customer
3. With respect to inventory, the concept of channel goes away
4. Digital commerce becomes pervasive at every point of inspiration (buy anywhere, from any device)
5. Every major retailer will personally identify the majority of their customers, when those individual customers engage
6. Physical payment will go the way of the personal check
Source: Deloitte
Investing $600 Million
• Branding $42M
• Service Excellence $14M
• Store Remodels & Expansions $270M
• Omni Channel Technology $263M
“The customers
will come to us”
The Past:
Physical
Store
“We need to sell
online”
The Recent
Past:
eCommerce
“Many
customers shop
across
channels”
The Present:
Multi-
Channel
What is Omni Channel?
“Relevant
products and
services
anywhere”
The Future:
Omnichannel
“Enter and exit
the experience
from anywhere”
Omnichannel Customer Vision
Know and Inspire Her. Inspire broadly, but personally, at every touchpoint and help her celebrate occasions big and small; Focus on what she wants and needs, not what we have
Never Make Her Wait. Make her shopping experience easy and simple across channels and differentiate on service when issues arise
Bring the Whole Enterprise to Her. Provide her access to everything Belk from rich content to the entire assortment within the comfort of her own store, wherever that is
Connect Her to Our Values. Remind her Belk is a family with family values and involved in her community
Be Her Authority on Modern, Southern, Style. Continue to highlight our strong southern voice from the trend-right assortment we carry to the content we produce; And remember southern hospitality
One consistent, compelling customer
experience
Our Omnichannel Vision
Roadmap to Omnichannel Digital Journey Phase 3
Transform the eCommerce experience
Transform the In-Store
experience
Expand Mobile at every
touch point
Integrate Customer
Data
Establish Enterprise Inventory
© 2012 Forrester Research, Inc. Reproduction Prohibited
Image source: Xdadevelopers.com (http://www.xdadevelopers.com) and Memgen Corporation
(http://www.memgen.com)
Tech enablers drive disruption
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ENABLERS WERE CRITICAL TO DISRUPTIVE CHANGE OVER LAST SIX YEARS
Multitouch displays
Motion and gesture sensors
High-speed radio modems
Low-power microprocessors
e-paper displays
Smartphones vs. Tablet usage
Source: Monetate – Cyber Monday 2012
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Time (hrs)
Tablet
Smartphone
Smartphone sessions peak as users reach work
Tablet sessions overtake handsets as users get home
1.5% 3.2%
Tablet/mobile sales as percentage of web sales in 2011
Tablets are the story in “m-commerce”
Base: 43 online retailers
Source: “The State of Retailing Online 2012”, a Shop.org study conducted by Forrester Research
61MM consumers with tablets in the US in
2012
137MM consumers with smartphones in the US in 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
Meet the new disruptors
33
A NEW WAVE OF DISRUPTIVE TECHNOLOGIES IS EMERGING
Creation Survival Growth
Low
H
igh
Dis
rup
tive
po
ten
tial
Developmental phase
Equilibrium Decline
In-cell displays
Ultra high-speed broadband Multitouch
displays
3G wireless data
4G/LTE wireless data
Motion and gesture sensors
e-paper displays
Transparent displays
Augmented reality
Wearable displays Touch-less
UIs
Wearable sensors
Current generation
Emerging generation
USB
Wi-Fi WiGig Miracast
Low-power microprocessors
SSD Retina displays
GPS
Low -energy Bluetooth NFC
In-location positioning
© 2012 Forrester Research, Inc. Reproduction Prohibited
What is in-location positioning?
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EXTENDING WAYFINDING TO YOUR ACTUAL DESTINATION
Traditional GPS In-location positioning
© 2012 Forrester Research, Inc. Reproduction Prohibited
Image source: Point Inside (http://www.pointinside.com/) and aisle411 (http://www.http://aisle411.com/)
In-location positioning will . . .
35
PROVIDE A NEW PLATFORM FOR NEW SHOPPER ENGAGEMENT
Promote specials based on shopping-list items.
Deliver seasonally relevant product recommendations.
Drive traffic to other departments based on shopping list.
Shopping-list management
In-store routing and searching
Contextual ads and promotion
What does Omni Channel Look like?
5 Key Lessons Learned
Lessons Learned #1 Assess the organization’s
maturity – it’s not a clear path
Can your culture accept the many unknowns and lack of a clear path?
Is there a consensus around the need for
change?
Is the business (and board) with you?
Lessons Learned #2
Are you prepared for the costs?
Is your organization prepared for the “unexpected”?
Have you planned enough contingency?
Lessons Learned #3 Do you have the IT team in
place to deliver it? (be honest)
Are there enough (and the right) people to accomplish the task?
Do you have proper disciplines in place? (e.g. enterprise standards, procurement
practices, etc.)
Lessons Learned #4 Do your partners have skin
in the game too?
Partnerships with technology firms is more important than ever – we can
learn from them
Have you created a relationship model to ensure success?
Change Management
(everything is changing fast – it is scary)
Lessons Learned #5
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Thank You to our Partners! • IBM Unix, P7, including advanced virtualization • Cisco switching and routing, including Cisco
Reference Architecture (multiple physical locations in one data center)
• Available anytime for advanced technical help, crisis or not
• Top notch talent
• Business Consulting
• Systems Integration Partner
• Technology Partner (ESB, ETL, MDM, PIM)
• Top notch talent
Thank You!
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