Retail Insights Seminar Presentation - April 2011

Agenda
 Capitalising on the Smarter Consumer
 Ian Wong - IBM

 Smarter IT to drive business growth
 Chris Maclean - Maclean

IBM Institute for Business Value
Retail Industry Perspective

Capitalising on the Smarter Consumer
Understanding and Responding to the Consumers Wants and Needs

Who is this „Smarter Consumer‟?

Instrumented Interconnected Intelligent

They have instantaneous They use multiple They have clearly defined
access to information about technologies to interact with expectations of what they
retailers, products and other other consumers and with want from their retailer now
consumers‟ experiences retailers and in the future
through technology

7

Executive summary & research methodology

Today‟s consumers are fundamentally changing industries, brands,
interactions, and relationships

“Sales of

4,500,000
iPads in 3Q 2010”*

8 Source: :Fortune October 5, 2010 http://tech.fortune.cnn.com/2010/10/05/how-many-ipads-has-apple-really-sold/


This year we found the smarter consumer wants to be served, not sold to,
trusts their social network above retailers and is increasingly digital

Technology is a given Shopping process Serve me,
affected by more than don’t sell to me
technology

36 %
Increase in willingness
to use technology in
consumers are optimistic
about income, but are not
Listen to me
New consumer focus
going back to pre-
less than a year group is everybody
recessionary spending
behaviour

58 %
trust family & friends
first, while only
Know me
Personalisation remains
top priority
%
21 Customer reviews

%
18 trust retailers and
manufacturers
Empower me
Consumers leverage
mobility to control the
experience

9 Source: IBM Institute for Business Value Analysis, Retail 2010

Agenda

1. Research methodology

2. The future is digital: Smarter Consumers use of technology

3. What you see is not what you get: the Smarter Consumer
changes
 Profile
 Shopping process

4. Smarter Consumer demand smarter retailers: how smarter
retailers will respond


IBM’s Institute for Business Value (IBV) studied this new consumer taking
into account 13 countries in both the mature and emerging markets…

Total Surveyed Population = 30,624

Mature Emerging

Australia (2274) Italy (2200) France (2200) Brazil (2200) Argentina (2200)

Canada (2221) Germany (2200) Chile (2200) Colombia (2200)

United States (4121) UK (2200) Mexico (2200)
China (2200)

11


…and to understand what trends transcend income,
generations and product categories

Income brackets Ages surveyed Product categories

Upper Bracket n= 3,585 Generation (15-19) n=1,544 Adult Apparel n=4,350

Generation (20-29) n= 6,505 Kids Apparel n= 4,287
Upper Middle n= 10,080 Luxury Brands n= 1,344
Generation (30-39) n= 7,865
Shoe/Accessories n= 3,395
Lower Middle n= 7,878 Generation (40-49) n= 6,264 Grocery n= 4.961
Generation (50-59) n= 5,011 Personal Care n= 3,933
Lower Bracket n= 4,736
Generation (60+) n= 3,446 Electronics n= 2,828
Entertainment n= 2,805
Home Merchandise n= 2.721

12 Source: Institute for Business Value Retail 2011 Global = 30624

Smarter Consumer Profile > Technology

In 2010, ‘Instrumented consumers‟, those willing to use two or more
technologies for purchasing products, is 86%
Number of Australian instrumented consumers

100%

86%
80% INSTRUMENTED =
80%
2 or more technologies

1 technology
60% 36% 49%
No technology

40%

20%
20% 14% 44% 37%

0%
2009: No 2010: No 2009: One or 2010: One or
technology technology more more
technologies technologies

14


Instrumentation has increased year to year and mobility has
increased 92% globally

13% 17%

25% 24%
Mobile technologies has increased 92% and is Willingness to use TVs to make purchases is
still more widely accepted in the growth markets growing as a preferred technology like mobile.

68% 36%

75% 39%
Websites have increased 9 % Kiosks are popular across all counrties

Apr 2010 Oct 2010

15


The number of instrumented consumers has increased the most in 40+ age
group

Percentage of ‘instrumented consumers’ by age group

Generation 60+ 20% 32%

Generation 50 - 59 29% 45%

35% 49%
Generation 40 - 49
Age group

Generation 30 - 39 44% 53%

Generation 20 - 29 48% 55%

Generation 15 - 19 38% 52%

Percent of instrumented consumers

Instrumentation is not correlated to
April 2009 Instrument % higher income brackets, except for
Australia, Canada, China and
Colombia

16 Source: Institute for Business Value Retail 2011 Australia = 2274


Emerging market consumers continue to be the most instrumented

Percentage of ‘instrumented consumers’ by country
Brazil
68%
Chile 62%
China 62%
Mexico 60%
Colombia 59%
Argentina 53%
United Kingdom 48%
Australia 45% Emerging
United States 43%
Italy 40% Mature
Canada 38%
Germany 35%
France 30%

17

Smarter Consumer Profile > Summary

The smarter consumer is willing to use two or more technologies in the
shopping process…what are the implications for your business?

Findings Implications

 Consumer are instrumented: Allow the  Are you leveraging technology to reinforce
consumers to use preferred technology your brand strategy?
 Do you know which technologies your
customers prefer to use?
 What is your approach to evaluating new
technologies?
 What is your organisation‟s ability to rapidly
introduce the new capabilities relevant for
your customer?

18
18

Smarter Consumer Profile > Attitudes

Consumers attitudes are optimistic but they are not going back to pre-
recession spending levels
Attitude Toward Income Attitude Toward Shopping
• 70% of consumers are optimistic about
the future of their income Spending only on needs 20%
• 46% believe their income will stay
Searching out sale items 19%
the same
• 24% believe their income will Waiting longer to
increase by 20% in the next 5 years 16%
purchase
• Optimism was not limited to the higher
Buying more online 12%
income brackets
Purchasing items to
reward yourself 11%

Trading up/down in some
10%
categories
Spending more on 8%
travel/entertainment

Eating out more 5%

21

Smarter Consumer Profile > Influencers

Only 18% of consumers are influenced by retailers and manufacturers

Who do you trust to provide honest feedback on
product information and product reviews?

Trust Ranking
Product experts

16% 18%
21% Retail/Manufacturer
Customer Reviews

45%
Family/Friends

22

Smarter Consumer Profile > Influencers

While retailers and manufacturers have influence, consumers‟ opinions
are formed predominately by their social network

Grocery 48% 19% 15% 7% 11%

Apparel 47% 22% 13% 7% 11%

Personal Care Products 46% 19% 16% 6% 12%

Home Décor, appliances and
42% 24% 18% 5% 10%
products

Consumer Electronics 38% 25% 19% 7% 11%

Luxury Brands 33% 27% 17% 9% 15%

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

Family / Friends Customer Reviews Product Experts Manufacturer Retailer


Smarter Consumer Profile > Household Demographics

Purchasing decisions extend beyond the four walls of a
traditional household

• Globally, over 31% are buying in the following
categories for their parents:
– Adult Apparel (23%)
– Grocery (15%)
– Personal Care (13%)
– Consumer Electronics (13%)
– Entertainment (DVD, Games) (12%)
– Home Décor (10%)
– Other Categories (14%)

• 25% of the population are now living in multi-
generational households, which is a change that has
occurred within the last 2 years

• Services desired for 60+ year old individuals:
17% - groceries/prepared meals delivered
18 16% - home cleaning
13% - weekly calls/errands
12% - technical services

24
24 Source: Institute for Business Value Retail 2011 Global (US, UK, Australia, China, Mexico Germany only) = Cater Buying = 8680, household changes=2328, services - 949

Smarter Consumer Profile > Summary

Today‟s smarter consumer buys for a virtual household and trusts family,
friends and strangers first…is your organisation able to listen and respond?


 Family and friends rule: Consumers trust  Do you have a way to monitor what is being
family/friends and strangers before the retailer said about you?
or manufacturer
 Do you have a single view of your customers
 The household is “virtual”: Consumers are across channels?
buying for more than their traditional
 Can you tell how your customers are
household
influenced and do you know if your
advertising is effective?
 Does your organisation have a view of what
constitutes “customer data” and what can be
collected and analysed to make better/timely
decisions?

25

Shopping experience > Moment

The shopping process has fundamentally changed as consumers use
technology anytime, anywhere

Aware Research Purchase Take Advocate
Possession

Consumers Moment

27

Shopping experience > Awareness and Research

From awareness to research, consumers are influenced by
numerous consumer media that they control
Greatest Influences During
Product Awareness and Research

Product Awareness Product Research
TV/Radio/Billboard Friends / Family
Top 5 Influences

Retailer Store TV/Radio/Billboard

Friends / Family Retailer Store
Mobile Apps Search Engine

Emails Retailer Website

Online Streaming Mobile Apps

Social Media Emails
Search Engine Social Media

Magazines Online Streaming
Retailer-Controlled
Retailer Website Magazines
Consumer-Controlled
Shopping Portal Shopping Portal


Shopping experience > Purchase

When they are ready to purchase, consumers are influenced
by a variety factors
• The item was in a smaller package size or unique packaging
• It was an item that you currently own and it is very comfortable or easy to use and you wanted
another one
Product • The item was unique and different from competitors‟ products
• You saw a new item and thought it might not be available later
• You wanted to try something different than what you regularly purchase (add some variety in
your life)
• It was a new item or flavor that you wanted to try
Awareness • You saw an item and it gave you an idea (e.g. dinner or how to match it with something you
own)
• Represented your lifestyle (either a clothing style or foods - healthy living; country cooking,
ethnic)
Style / Lifestyle • It was an item that you needed based on an upcoming event or occasion
• It was an item influenced by a celebrity, either designed, worn or advertised as the latest trend

Price / • It was an item that you regularly buy that was on discount
Promotion • Provides a gift with purchase (free installation, batteries, complimentary item)
• You purchased an item because your family/grandchildren/children/friends would like it
• The item made you feel better or happier
Fun • You purchased the item for a special occasion
• Your child/grandchildren/family member influenced you to buy it

Customer • A sales associate assisted or provided you great service in coordinating (e.g. dinner idea,
outfits that would go with the item you chose, showed you how to solve you home problem)
Service
Convenience • The item was located next to one that you considered purchasing


Shopping experience > Purchase

Consumers buy when regularly-purchased items are discounted,
a new product is introduced or there is a special event

Category Area Impact Score

Price / Promotion An item that I regular purchase is on discount 119.69

An item needed based on an upcoming
Style / Lifestyle 110.94
event/occasion

Awareness It was a new item/flavor that you wanted to try 109.27
Item currently owned was easy to use/comfortable
Product and wanted another 106.18

Price /
Provide a gift with purchase 105.24
Promotion
Product Try a new product (add variety to life) 104.02

Product Item is unique and different than competitors 103.82

Consumers are least influenced by
celebrities or a sales associate


Shopping experience > Abandon

Consumers abandon purchases primarily due to financial reservations
or not enough product information

Top Reasons Globally Why Consumers Abandon Items: Store

• Did not want to spend the money

• Just did not want it

Top Reasons Globally Why Consumers Abandon Items: Online

• Did not want to spend the money

• There was not enough product information and
decided to wait


Shopping experience > Take possession

Allowing the customer to specify how to take possession of the
product is important

Which of the following methods would you prefer to obtain the item?

60%
Purchase at store and leave store with item
13%
Purchase online and deliver on the date you specify

Purchase at store and deliver to home the same day 12%

Purchase online/in store and delivery next day 10%

Purchase online and pick up in the store 6%

Emerging markets differ in that delivery
to home the same day is ranked second


Shopping experience > Product pick-up

When its time to check out and obtain products, consumers were
specific on how they wanted to use mobile technologies

Mobile Device Check Out Preference

Scan while shopping and checkout at self service 34%

24%
Scan while shopping and checkout with mobile
23%
Scan sample and retrieve at pick up area
19%
Scan sample and deliver to home


Shopping experience > Summary

Consumers want an integrated retail experience across multiple
channels…can you deliver?


 The channels are integrated: The customer  Can I enable my customer to start a
sees you as one retailer not multiple transaction on one technology and continue
channels. all through the shopping process?

 Profit from the information explosion:  Can I understand my customers‟ behaviour
Customers are leaving a trail behind as they through the vast amount of data?
interact with you in multiple channels.
 Am I segmenting my customers based on
 Behavioural analytics: It‟s more than just behaviour?
recency, frequency, and monetary value.
Consumers are behaving differently than they  Can I optimise my marketing and media
have in the past. spend, my promotions and my assortment?

 Am I delivering relevant interactions to the
customer at the appropriate time in the
shopping process?

34

Responding > Serve me

A personalised interaction remains the top demand

“Serve me”

Serve me Convenience: (Most Important loyalty drivers)
• Providing the right products and appropriate variety of
brands
• Allows you to determine if the item is in stock prior to
going to the store

Service: (Most important loyalty drivers)
• Make it feel like a pleasure to help me
• Allow me to return products without hassle or questions
asked
• Have knowledgeable employees about
products/services
• Easy way to order items not in stock

36

Responding > Listen to me

Executives have it backwards when it comes to consumers reasons for
interacting

Listen to me
Which social networking sites do you have an
account? (select all that apply)
• 45% of consumers have media sharing sites
• 33% of consumers belong to a social network

How often do you frequent social media sites?
• 5% frequent social media daily / weekly to post
comments
• 75% of respondents casually participate monthly by
responding to posts or writing reviews
• 37% of consumers are influenced by external reviews

More than half of “connected” consumers
state social media interactions influence
spend

37

Responding > Know me

A personalised interaction remains the top demand

Personalise Promotions (#1 purchase influencer)
Know me • Most likely to increase my spend
• Top consideration when determining where to shop
• The area retailers need to improve most

Personalise Shopping (Most important factors)
• Provide preferred receipt type
• Recognize me in the store or online
• Remember preferred payment method

Personalise Assortments (Most important loyalty
drivers)
• Manufactured or grown in my country
• High quality/low price private label products
• Environmentally friendly or sustainable products
• New and unique products

38

Responding > Empower me

Retailers have a vested interested in enabling mobile commerce

“Empower me”

I control the Promotions in the Service In The Store
Store
identification
32% Help me find the
42% Proactively closest customer
communicate service desk/associate
promotions to me based
on what I scan 31% Allow me to order
out-of-stock items
41% Allow me to check
prices from other 29% use mobile to
physical and virtual identify they need help
locations
27% Provide the most
efficient route through
store

27% Allow me to take
a picture/text to get
product information

39

Conclusion

Responding as a smarter retailer involves listening to the customer,
making changes to the organisation and improving the shopping experience

Empowering the
1
Listening and Learning 1
Enabling and Executing 1 Consumer

Single View of
Analytics to listen to Consumer self
Consumer across
consumers select interaction
channels

Actionable analytics Consumers choice of
Learn from consumer the interaction
controlled content around merchandising
and marketing channel

Key factors of influence Make the interaction Consumers providing
and motivation personalised across feedback
channels

Change sales to
service associates

40

SMARTER IT
Chris Maclean - CEO

Question 1
A 1MB email comes into your organisation.
What is the eventual size of its digital
footprint?

 A : 2MB

 B : 5MB

 C : 10MB

 D : 50MB

Question 2
Typically, servers are busy what percent of
the time?

 A : 8%

 B : 16%

 C : 48%

 D : 96%

Question 3
For every dollar you spend on hardware,
how much is typically spent powering it
per year?

 A : 1c

 B : 10c

 C : 25c

 D : 50c

Question 4
In what year was the first bar code
scanned commercially?

 A : 1952

 B : 1963

 C : 1974

 D : 1982

All about the experience

It’s not about the Rugby!

Technologies Importance
Role of Technology

Customer experience
1950 1970 Today

Retail Store Reality
 Bottleneck syndrome
 Point solutions deployed
individually
 Expensive to run and maintain
 IHL Group reports that most
retail stores have become mini
data centres.

78% budget on support and maintenance

Smarter Retail IT
1. Virtualisation

2. Cloud – Data Centre

3. Unified Platform

4. Managed IT Support

1. Virtualise

CRM Finance File Print ERP Backup Shared

Tangible Outcomes
Reduction in Capex Reduction in Opex Reduction in Risk

Before After Before After Before After
Infrastructure Cost per App Sys Admin per App Business Downtime

Market Forecast
Grow from $6B in 2008 to $18.9B in 2015

 Russian Architecture firm, St Petersberg

Question 4
What is the rate of annual data growth in
most organisations?

 A : 15%

 B : 25%

 C : 60%

 D : 75%

 First UPC bar code scan in Ohio,1974

Extreme Barcodes

 Bar codes on bees to track behaviour

Barcode Evolution

 QR or 2D bar codes

Amplify Experience

1. Personalised

2. Empowering

3. Extend

4. Intelligent

5. Integrated

Today’s IT Challenge

Finding the balance between customer demands
and business requirements

Additional challenges
 Stretch the time it
takes to launch new
functionality
 Makes it more
difficult to make
strategic decisions..
 At a time when it is
critical for retailers
to respond, most
simply cannot

Responsiveness

“Since outsourcing our infrastructure to Maclean we no longer have to worry
about the day to day demands IT made on our time, this has allowed us to
improve our service to the franchises.”

Warrick Kemeys, Ops Manager

Is technology leading your thinking
or an afterthought?

Retail Insights Seminar Presentation - April 2011

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