IBM presentation on retail conference What´s Going on in retailing 2012 WGOIR at Nieuwegein on 19 April 2012. Includes trends and how to respond to this

1. Transform or Die
Survival in the Age of the Smarter Consumer
IBM Global Business Services

2. IBM major businesses worldwide
Global Provides outsourced IT Provides middleware that enables clients to
Technology infrastructure services and Software integrate systems, processes and applications,
Services business process services as well as computer operating systems
38%* 23 %
Global Provides professional Provides financing solutions that can be
Global
Business services and application customized to address specific IT needs,
Financing from competitive rates to flexible payment
Services outsourcing services
plans and loans
18% 2%
Systems Provides advanced Our Sales and Research, Development
S&D
and computing, storage and and Intellectual Property organizations
semiconductor technology
and provide a wide spectrum of client support
Technology Research and additional value
and products
18% 1%
*= External revenue / Source: Annual report 2011 / http://www.ibm.com/investor/4q11/press.phtml

3. Topics
• Trends
– Changes that impact retailers
– Social, mobile, eCommerce throughout the shopping process
• What to do
– Best practices to survive (and thrive)
– Influence and assist along the customers´ digital path-to-purchase
3

4. Topics
• Trends
– Changes that impact retailers
– Social, mobile, eCommerce throughout the shopping process
“Today’s consumers know so much more before they reach the
shelf. They find incredible detail online, from every possible
source, about the brands and products that matter to them. They
browse, dig, explore, dream and master, and then they’re ready
to buy with confidence. And what they learn, they share with
others”.
Source: ZMOT - Winning the zero moment of truth - Jim Lecinski
4

5. Changes that impact
retailers
Consumers use (more) information and technology throughout
the shopping process – of which a large part is out of your control
Aware Almost one quarter of shoppers use
three or more technologies to shop
& purchase
Research
Shopping Moment
By year’s end, worldwide media
Purchase tablet sales will approach 120 M
Apple to Sell 30 Million iPads in 2012
Take
Possession Of tablet-owning consumers 53%
shop for electronics, 39% for toys,
Service &
Support followed by clothing (37%) and
travel (26%).
5 Source: IBV Retail 2012 Winning Over the Empowered Consumer Study n= 28527 (global) C01 / http://bit.ly/IFWvHY / http://onforb.es/IsWHGX / http://bit.ly/yEVLaf

6. Changes that impact
retailers
Google, Amazon, Apple and Facebook are threatening your business
Nearly 50% of web shoppers start their research process on
Amazon or Google. Over 40% of the world’s Internet traffic
constitutes daily visits to Facebook and Google.
6 Source: Google, Amazon, Apple, And Facebook: What eBusiness Executives Need To Know For 2012 - Sucharita Mulpuru - February 07, 2012

7. Social
Facebook bought Instagram in a $1 billion deal on 9 April 2012
Facebook is currently the largest photo-
storage site in the world, with an average
of 250 million photos uploaded per day
On 13 April Facebook also bought TagTile,
a mobile-based customer loyalty business,
that lets stores run coupon programs and
offer loyalty rewards
BTW: TMG (incl. Hyves) has a public stock
value less than the younger-than-two-
year-old-startup Instagram with 13
employees (around EUR 472M)
7 Source: http://usat.ly/IiblRl / http://bit.ly/Iu2vzW / http://bit.ly/Hs6ig8

8. Social
Example: Extended reach through Slideshare & Facebook
Slideshare: IBM WGOIR presentations Facebook: NL retailer example
53% of internet users in the Netherlands in 2011 reported they
had been active on social networking sites
8 Source:IBM Research - http://bit.ly/ufjsqm

9. Mobile
Mobile phone: 2007- 2012
2007: Nokia phones 2012: Phones used most in NL to access websites
52% of Dutch consumers were using a smartphone in Q4 2011.
Smartphone usage passed normal phone usage for the first time
9 Source: http://bit.ly/HTS0II / http://gs.statcounter.com/#mobile_vendor-NL-monthly-201101-201201 / http://bit.ly/x78E2v

10. Mobile
NASA had less technology when they put Neil Armstrong on the
moon than the regular smartphone has today
Apollo Guidance Computer Iphone 4S
2.048 MHz, 16 bit processor. dual-core 1 GHz Cortex-A9
64 KB ROM / 8 KB RAM A5 chipset and 512 MB of RAM
10

11. eCommerce
eCommerce: 2007- 2012
Bol.com started in 1999
In 2007, Bol.com achieved a record turnover of
EUR 171 million, an increase of 60%. In total, the
company sold over 8 million products
In 2011, Bol.com grew its sales by 18 percent to
EUR 376 million. One in two Dutch who shopped
online, bought something from Bol.com in 2011
In 2012, Royal Ahold NV (AH) acquired Bol.com for
EUR 350 million in an effort to boost Internet sales.
Ahold wants to triple its online sales. Turnover 1999
NLG 4,5 - 5 million
11

12. eCommerce
Facts & Figures, if you still need more ...
12

13. Changes that impact
retailers
Two-thirds of consumers are ready to buy after researching, with
the vast majority still transacting in stores but is it your store?
Research Channel Purchase Channel
Store 83 9 4 4
Mail/TV/Radio/Blbd 81 8 4 7 Retail Store
Family/ Friends 80 9 6 5 Retail Website
Magazines 76 10 6 8 Portal/ Auction
Retailer Website 68 20 8 4 Other
Email 67 17 8 8
Search Engine 61 17 8 8
Other = 5% mobile, 8% other
Social Media 56 17 14 13
Other = 7% mobile, 11% other
Online Streaming 47 19 16 18
Mobile Apps 47 19 13 21 Other = 11% mobile, 10% other
Shopping Portal 39 18 34 9
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
13 Source: IBM Institute for Business Value Analysis, Retail 2012 = 28527 PM04 After getting information at (research method), where do you usually purchase the item you researched]?

14. Changes that impact
retailers
For the 33% of consumers who did not have enough information
’
to purchase, the lacking information is within the retailer’s control
Aware Research Purchase Take Advocate
Possession
Shopping Moment
1. Wanted to touch, see and experience the item
2. Wanted to price compare to determine best price
3. Product information was missing
4. Missing independent product review information
5. Could not tell if the product was in stock
14 Source: IBM Institute for Business Value Analysis, Retail 2012, n = 28,527, PM05

15. Topics
• What to do
– Best practices to survive (and thrive)
– Influence and assist along the customers´ digital path-to-purchase
User
Satisfaction
Navigate
Store/Site
Select & Advocate
Choose Buy Community
Trusted
Source
Choose
Channel
Create
Demand
15 Source: Kantar Retail analysis

16. Best practices to survive
How to make that work?
Front-office
1.Make it easy to shop wherever, whenever
Front-office
2.Personalize offers to individual customers
3.Deliver more value and fun in store
4.Offer unique products and services
Back-office
Back-office
5.Enhance the added value of store associates
6.Move to smaller stores and more focused assortments
7.Low cost operations become “table stakes”
8.Improve the use of all available data
16 Source: IBM NYU Retail 2020 Reinventing Retail Whitepaper

17. Front-Office
1: Make it easy to shop (wherever, whenever)
“We're sort of more of a service for men's
life than just underwear. We find that
guys are historically kind of lazy for
shopping for these things so we make it
really easy for them."
17 Source: IBM NYU Retail 2020 Reinventing Retail Whitepaper / Source: http://bit.ly/HOzAVJ / http://bit.ly/HPwk1N

18. Front-Office
2: Personalize offers: More than just past purchases and profile
“Tesco is set to launch a wave of price promotions and range
reviews based on the affluence of areas.”
18 Source: IBM NYU Retail 2020 Reinventing Retail Whitepaper / http://tgr.ph/ACSCVl / http://bit.ly/peSwmu / / Global Technology Outlook 2012

19. Front-Office
3: Deliver more value and fun in store
“Maybe (the) most important is that the staff isn’t focused on
selling stuff, it’s focused on building relationships and trying to
make people’s lives better. That may sound hokey, but it’s true”.
Ron Johnson former senior vice president for retail at Apple
19 Source: IBM NYU Retail 2020 Reinventing Retail Whitepaper / http://bit.ly/HN5IvQ / / http://bit.ly/v3qMEL

20. Front-Office
4: Offer unique products & services (to prevent “showrooming”)
Store = Showroom Store = Experience
Ability to handle digitally: Ability to handle digitally:
Content × Content
Community Community
Commerce Commerce
× Social activity × Social activity
× Frequency × Frequency
"Offering people personalized prices through their mobile device
may be the most effective way to beat showrooming"
20 Source: IBM NYU Retail 2020 Reinventing Retail Whitepaper / Source: WSJ Updated April 11, 2012, 5:38 p.m. ET / pwc.com/multichannelsurvey

21. Front-Office
4: Add unique products & services
“Retailers realize that the competition isn't between stores and
websites, but between their websites and those of others”
21 Source: IBM NYU Retail 2020 Reinventing Retail Whitepaper / Source: WSJ Updated April 11, 2012, 5:38 p.m. ET / pwc.com/multichannelsurvey

22. Back-office
5: Enhance the added value of store associates
All 305 Sephora makeup stores are
equipped with iPod touches that provide a
mobile point-of-sale option for
customers, helping to mitigate the lines
that form in the store.
And 20 Sephora stores, will have two to
four iPads to help clients interact
with a menu of services offered at their
makeover studios.
“With the social, digital, mobile and website updates, we’re
giving our clients the most customizable experience in the beauty
industry, and connecting clients with our experts in the ways that
are most relevant to them”
Sephora senior vice president Julie Borntein
22 Source: IBM NYU Retail 2020 Reinventing Retail Whitepaper / http://bit.ly/HKCSgA / www.sephora.com

23. Back-office
6: Move to smaller stores and more focused assortments
Non-food offer limited Proximity and
to daily needs convenience
"Hyperlocal will be our true point of differentiation.
This is a major cultural shift for our company, but one that
store teams have genuinely embraced."
Craig Herkert, Supervalu president and CEO
23 Source: IBM NYU Retail 2020 Reinventing Retail Whitepaper / Planet retail - Is there a future for hypermarkets? / http://bit.ly/HWVRnM

24. Back-office
7: Low cost operations become “table stakes”
“Macy's plans to have 292 of its more
than 800 stores double as distribution
centers for online orders by the end of
the year in a bid to get products to
customers more quickly as the retailer
competes with Amazon.com Inc”.
"It's clear to me that the consumer likes shopping online.
I am focused on how do we make them feel as comfortable and
ready to buy in our stores as they do online“
Macy's Chief Executive Terry Lundgren
24 Source: IBM NYU Retail 2020 Reinventing Retail Whitepaper / http://bit.ly/HdJO2l / http://reut.rs/HCfLTc

25. Back-office
8: Improve the use of all available data
“If we wanted to figure out if a customer is pregnant, even
if she didn’t want us to know, can you do that? ”
25
Source: IBM NYU Retail 2020 Reinventing Retail Whitepaper / http://bit.ly/zljGR5 / http://onforb.es/xahmzo

26. What to do?
The Smarter Consumer is redefining shopping, changing the
manner they interact, obtain information, and purchase items
Shopping Shopping Shopping
Becomes Becomes Becomes
Omnipresent Deconstructed Collaborative
Shopping Shopping Shopping
Becomes Becomes Real- Becomes
Contextual time Aware Experiential
Sell & Serve:
Excellent, harmonized and personalized value proposition X-channels
Buy & Market:
Shared processes & systems supporting use of data, flexibility, low-costs
26

27. Why this is important
The Smarter Consumer is redefining shopping, changing the
manner they interact, obtain information, and purchase items
Shopping becomes engrained in all aspects of our lives due to
1 Shopping Becomes
Omnipresent
persistent connectivity and ubiquitous access
Consumer touch points continue to proliferate increasing availability
2 Shopping Becomes
Deconstructed
Consumers can start/stop and switch channels seamlessly
New competitors arise; disintermediating consumers from retailers
3 Shopping Becomes
Collaborative
Retailers engage consumers in retail decisions (e.g. assortment, etc.)
Consumer-to-community interactions become commonplace
Consumers demand relevancy and personalized service
4 Shopping Becomes
Contextual Availability of consumer information combined with real-time analytics
enables superior experience
5 Shopping Becomes
Real-time Aware
Device and communication technology converge
Consumer interactions become timely and proactive
Physical and digital worlds converge to provide an enhance experience
6 Shopping Becomes
Experiential Shopping becomes all about the experience; availability and fulfillment
times are greatly reduced
27 © 2011 IBM Corporation

28. How IBM can help
We help bringing it all together Good marketing is Service
Service feedback drives better
marketing
Excess Inventory influences Marketing displays relevant ads
marketing campaigns ecommerce provides marketing
Campaign results impact with real-time shopping behavior
inventory plans
Buy Market Sell Service
• Supplier Integration & • Customer Awareness & • Cross-channel Selling • Delivery, Service, & Support
Management Analytics • Order Management & • Customer Self-Service
• Supply Chain Management • Social Media Marketing Fulfillment • Case Management
• Payments and Settlements • Cross-channel Campaign • Customer Integration &
• Strategic Supply Management Collaboration
Management* • Digital Marketing Optimization • Store Solutions
• Pricing, Promotion and • Payments & Settlements
Assortment Optimization*
Consumer demand shapes Good service drives cross/up-sell
decisions on the supply side, & repeat sales
e.g. supplier sourcing, inventory Service options offered to
Inventory & Logistics drive customers during the selling
fulfillment options process
28 * IBM announced intent to acquire Emptoris and DemandTec

29. How IBM can help
Smarter Commerce focuses on the customer
Customer Value Strategy
Customer Insight
In turn, you must re-think
In today’s world of instant how your customers define
value, and the changes you
business, you need deep
must make to your value
insights, in real-time that you
chain so you can deliver
can turn into immediate action
exactly what your customers
want - profitably
Customer
Customer & Partner Engagement
You need an approach that
allows you to more effectively
connect, collaborate, conduct …increasing the value companies generate
commerce and create a for their customers and partners in a
differentiated customer rapidly changing digital world
experience
29

30. Jerry.stam@nl.ibm.com
+31651285639
Thank You!
ibm_retail_nl
30

31. Competing based on “price” as the primary value driver
is a “race to the bottom”.
The compelling opportunity for retailers is in blending the
best of what the digital realm has to offer with the best
that the physical realm delivers
Enabling cross channel capabilities, exposing inventory
across the entire enterprise, empowering associates to
meet customer needs, and proactively managing the
relationship with consumers, will enable retailers to build
loyalty with their customers that is more valuable than
merely delivering a low price.
http://bit.ly/HKCSgA
31