Ceo viewpoint 2017 the transformation of retail

CEO Viewpoint 2017:
The Transformation
Of Retail
JDA Executive Luncheon at NRF
January 17, 2017

Copyright © 2017 JDA Software Group, Inc. Confidential
Respondent profile
351 responses across a range of markets, retailer tiers and business types
Base:351
1
9
12
24
27
27
Other (Retail & Consumer)
CPG
eCommerce
Grocery
Soft Lines
Hard Goods
%
Breakdownof business type
Top 250 retailers = revenue $5 billion +
Top 251- 1000 retailers= revenue between $250 million- $5 billion
Outside the top 1000 retailers= revenue less than $250million
Retailertiers
32%
53%
15%
Top 250 retailers
Top 251 - 1000 retailers
Outside top 1000 retailers
Geographicalmarkets
United States28%
(100)
Mexico10%
(33)
United Kingdom17%
(60)
Germany15%
(51)
China
16%
(55)
Japan14%
(50)

Confidence in overall revenue & profit growth
Online is the biggest area of confidence both in terms of revenue and profit
Q32. How confident areyou about yourorganization’sprospects forprofit growth during thenext 12months in thefollowing channels:
Q27. How confident areyou about yourorganization’sprospects forrevenuegrowthduringthenext 12months?
41335124
16
5
812
11
6
10
16
36
4134
3734
3931
31
43
5151
44485254
47
Total business
2016
Total business
2017
OnlineStoresTotal business
2016
Total business
2017
OnlineStores
%
Very confident
Somewhat confident
Not very confident
Not at all confident
Revenue Profit
Base:351 Pleasenote:‘Don’tknow’and ‘Prefer notto say’responsesarenotincluded.
Mexico:74%
Japan:26%
US: 54%
Denotes sig.difference Denotes US for info only

Omni Channel competencies
Compared to 2014, there has been a marked deterioration in retailers ability to handle
omni channel execution
Base:351
Q10.Which ofthe followingbest describesyour organization in relation to omni-channelfulfilment?
2017 2014
We provide a seamless shopping experience andoffer completeomni-channel fulfillment.However,
the offeringis too complex/expensiveandwe are lookingto scale back ourdelivery options 12% 19%
We have the ability to offer ourcustomers a seamless shoppingexperience but we struggle to meet
customer’s omni-channel fulfillment demands 38% 31%
We have distinct channels operatingas silos to meet customer demand 37% 30%
We have refinedour omni-channel offeringto a point where we are now able to make a
profit while fulfilling our omni-channel demand 10% 16%
US: 26%
Don’t know: 4%

Investment Priorities

Digital transformation strategy
Digital Transformation becomes the highest investmentpriority
But more than half of retailers have
not startedimplementationof a
digital transformationstrategy
5%No plans to developa digital transformation strategy
We are struggling to define a digital transformation strategy 9%
Digital Transformation strategy is being developedbut implementation has not yet started 38%
Digital Transformation strategy is well definedand is being implemented 49%
40
20
60
80
100 48% increase
45% remain
the same
5% decrease
Core supply chain capabilities
China:73%
%
Mexico:86%
US: 60%
40
20
60
80
100
%
69% increase
28% remain the
same
1% decrease
Digital transformation
40
20
60
80
100 51% increase
42% remain
the same
3% decrease
Omni-channel fulfillment
%

26
28
31
39
40
46
36
44
53
53
55
31
31
30
37
36
33
40
37
32
33
30
43
40
39
24
25
21
24
19
15
14
16
In-store virtual changing rooms
Robotics and automation
In-store augmented reality
In-store clienteling
Personalizedmobile ‘pushoffers’instore
(Beacons)
Smart Mobile device for staff in stores
Integration of IOT devices and data
Collaboration across supply chain partners
Use of social media data
Big Data availability and analytics
Mobile enabled applications
Have implemented Plan to implement in next 12 months No plans to implement in next 12 months
Digital transformation strategy
Digital capabilities outside of the store feature in the top 3, ahead of all in-store capabilities,
with mobile applications in 1st
Base:351
Q18. Please indicate the level of implementation for each of the following digital capabilities:
Outside of store
In-store

27
32
33
33
34
38
42
38
41
40
38
37
19
20
16
17
20
17
9
8
6
6
5
5
3
1
3
3
3
2
Capturing unstructured data about your customer
(social, reviews)
Having a single view of the customer across all
channels and touchpoints
...in the personalization of the customer experience
in your physical channels (stores)
...in the personalization of the customer experience
in your digital channels
…to gain insight into customer preferences and
shopping behaviors via data science techniques
...in the planning and development of your customer
offers
Significantly Moderately Minimally Not at all Don't know
Leveraging customer data
Retailers say they are currently best at using their customer data for planning and
developing offers
Base:351
Q21. Thinking about customer data, please indicate the level to which your organization performs the following.
Using customer segmentation insight…

Customer Order Fulfilment Investment
Collecting orders in-store is the top collection offering but more challenging options are
being scaled back
26
26
48
25
43
44
47
21
23
27
28
33
43
44
48
51
Click & collect as a drive through in your car park
Same day click & collect
Specific delivery time slots
Use third party retailers as collection points for online orders
Same day delivery
Next day delivery
Buy online, return to store
Buy online, ship to store
Click & collect in-store
%
2017 2016
Softlines:64%
Base:351
Q11. Do you offer, or plan to offer any of the following customer collection or delivery options in the next 12 months?
Don’t know: 1%

20%
22%
Store Expansion Investment
The majority of retailers don’t plan to reduce store investment, regardless of online growth
Accelerate
No change
Reduce
58%
28
42
24
Complimentary (some Halo
effect across the channels)
Online are net additional
sales (no cannibalisation)
Cannibalising store sales
%
China:45%
Mexico:34%
US: 18%
US: 60%
US: 22%
Base:351
Q9.Do you plan to reduce your store investmentdue to onlinegrowth?
Not sure: 1%
Base:351
Q25.How are online salesimpactingstoresales?
Don’t know: 7% Denotes sig.difference Denotes US for info only

Profitability

Growth of online operating costs
Three quarters of retailers believe that their online operating costs have increased as a percentage
to sales in the last 12 months
23%
Cost reduction No change Some increase (0-9%) Significantincrease
(10% or more)
4%
19%
52%
Distinct
channels:35%
Base:351
Q28. How have your organization’s online operating costs changed as a percentage to sales in the last 12 months?
US: 18%
Don’t know: 3%
US: 50%

1
10
12
15
17
20
25
Other
Capacity to support online growth
Store inventory accuracy
Failing customer service in order fulfillment (e.g. delivering
incorrect orders, delivering orders outside of the agreed…
Rising supply chain costs
Rising inventory levels
Rising out of stock levels
Supply chain issues impacting profitability
Rising inventory levels, rising out of stock levels and rising supply chain costs constituted
62% of the responses
Ranked number 1
Mexico – 26%
Ranked#1 for Grocery & US
$10B+ (23%) vs $5-$10B (9%)
$10B+ (14%) vs $5-$10B (24%)
Base:351
Q15. Please rank the following issues within your supply chain in order of concern where #1 is the most important to your organization:
Ranked#1 for Softlines,HardGoods, China & UK
Most frequently
ranked in the top 3

3
4
32
25
46
48
14
19
for your customer order fulfillment
for your in-store customer experience
%
Cost reduction No increase Some increase Significant increase
Impact of omni-channel on cost of labor…
Labor costs are increasing, particularly in enabling omni-channel capabilities for the
in-store customer experience
4%
4%
Mexico:40%
Mexico:31%
China:27%
US: 7%
Base:351
Q13. To what extent is the cost of labor affected by enabling omni-channel capabilities…
Don’t know

Changes in order fulfilment
While increased customer charges for online orders is currently the most implemented change,
the next 12 months will see a rise in the minimum order value for free standard home delivery
22
25
27
27
29
35
28
27
28
31
33
22
50
48
45
42
38
43
Charge for customer returns
Apply limits on returns (e.g. max items in a time period)
Raise the minimum order value for free buy online pick up in
store
Decrease customer charges for online orders
Raise the minimum order value for free standard home delivery
Increase customer charges for online orders
%
Have implemented Plan to implement within next 12 months No plans to implement within next 12 months
China: 56%
Mexico: 54% US: 56%
US: 66%Hard goods: 33%
Base:351
Q12. Have you implemented or do you plan to implement any of the following changes in relation to fulfilling ordersacross channels?

15 59 23
To what extent is the cost
of customer returns eroding profit
%
To a great extent To some extent Not at all
The cost of customer returns is eroding profits
Almost three quarters of retailers believe that the cost of customer returns is eroding
profits to at least some extent
US: 36%
Profitable omni-channel
operation:41%
Base:351
Q29. Please indicate to what extent the cost of customer returns is eroding profit:
3%
Don’t know

Key performance indicators
62% of retailers stated their online business is making a profit – up 7% on last year
(10)
26
62%
Breakingeven
Making a profit
Making a loss
Mexico:40%
Profitability
Those who have a higher percentage of
online revenues are more confident about
their prospects for total business profit
growth over the next 12 months.
US: 68%
Base:351
Q26. Isyour total online business:
Don’t know: 3% Denotes sig.difference Denotes US for info only

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