Small Format Retail

Getting here! The Changing Retail Landscape Jaideep Thyagarajan Senior Market Analyst – IDC Retail Insights April 2018 Agenda

Retail Is Technology Changing The What are the Differentiator winners Digitally doing? Transforming Experiences

Industry Trends Redefining Achieving Retail Business Models Omni-Channel Digital Excellence Transformation

2 Everything is Changing in Retail

Store The store is changing

64% Showroom/ experience center

53% Value-added fulfillment services

27% Fulfillment center for online orders

Source: IDC Omni-Channel Survey, 2017 (n = 707) 3 Everything is Changing in Retail

eCommerce

>$2.3 trillion Global ecommerce revenue by 2018 3rd generation of ecommerce

38% AP retailers investing in ecommerce platforms in 2017

4 Everything is Changing in Retail

AP Retailers

>50% investing in logistics and fulfillment management in 2017

Micro-merchandising 5% in revenue Omni-channel +20% in stock turns fulfillment and new merchandise planning

5 Everything is Changing in Retail

AP Consumers

51% want next-day delivery for online orders

Consumers are 39% increasingly search online and buy demanding in-store

6 Everything is Changing in Retail

DX Initiatives

Digital Transformation (DX) 34% IoT for supply chain & customer experience

36% Advanced analytics/ artificial intelligence

7 Top Business Priorities for A/P Small-Format-Retailers

Improving customer service 47% Introducing/improving products or services 43% Cost Cutting / Cost Containment 40% Selling more to existing customers 40% Increasing brand equity 33% Productivity improvement 23% Selling into new geographies 17% Moving operations to lower cost geographies 17% Attracting and retaining a skilled workforce 17% CanadaAll Industries (All Selling to new industry sectors 10% Industries) Working more closely with business partners 3% Resolving compliance issues RetailRetail 3% Other 0% 0% 10% 20% 30% 40% 50%

Sample Size: 347 (All Industries), 30 (Small-Format-Retail) Source: IDC Retail Insights 2017 8 Question: Which business or organizational issues will take priority for your organization over the next 12 months? Did you know: Amazon & Alibaba are betting big on brick and mortar?

Reinventing the in-store experience

Social media and rewards

Omni-channel retail strategy

Improve online delivery times

1. Patents 6. At Home Smaller store format 2. Fulfillment 7. Service

3. Transportation 8. Bots 9 4. Products 9. Replenishment 5. Physical Retail 10. Store Automation © IDC Visit us at IDC.com and9 follow us on 9 Twitter: @IDC What are the winners doing?

1 Digital-TechnologyLed Customer Focus

2 Bigger Dreams - Smaller Stores

3 Reimagining Brands

10 1. Digital Technology Led Customer Focus

Consumer Facing Innovation

Core Data Accuracy and Insights

Outside-In Process Integration

Everywhere Everywhere Everywhere Commerce Customers Employees 11 11 2. Converging Models | Bigger Dreams – Smaller Stores

• Simply no longer the need for large showroom floors where traditionally a wide range of products and brands were displayed.

• Small shops can be located in many more areas, offering customers convenience & accessibility for quick shopping trips.

• Higher sales per square metre, lower real-estate costs. Higher staff ratios and opportunity for hyper-personalization.

1212 3. Reimagining Brands

1313 How can YOU be a winner?

Customer Experiences in the Stream of Life

Omnichannel Platform

Business Customer-centric Side-car approach Innovation model approach

Isolated touchpoints Islands of innovation

Q. Could you please indicate, from the following list, the top 3 innovation models in terms of priority for your company? Top 3 Innovation Models Platform extension marketplaces

Startups / Emerging technology vendors

Co-innovation with large IT vendors

n = 400 Source: IDC’s 2017 Retail Innovation Survey © IDC 15 Biggest retail innovation challenges / opportunity: Piloting and scaling innovation programs at speed

Q. What are the top challenges that your organization is facing today to drive innovation?

Top 3 Innovation Challenges Discovery & Selection Pilot, Implement and Scale

Implementing at scale 9% 31%

Defining the right 9% 30% innovation model

• Innovation discovery and selection are Building a platform 11% 25% already at a more mature level. • Retailers' abilities to pilot, implement and 0% 10% 20% 30% 40% scale innovation are at a low level of maturity. Extremely challenging Very challenging

n = 400 Source: IDC’s 2017 Retail Innovation Survey © IDC 16 Don’t lose sight of what the customer wants!

Source: IDC Retail Insights Survey 2017, n=60

1717 Addressing Four Important Questions

WHO WHAT WHEN HOW

Intelligence Personalization Automation Channels

• Life-cycle • Personalized • Timely triggers • Email segmentation browsing • Analysis • Web • Predictive • Web • Content • Mobile/SMS analytics recommender optimization • Social • Performance • Email • insights recommender Loyalty app • Store recommender

18 Noise is real: Differentiating Technologies

mPayment system Mobility & Digital Apps

Digital Cloud Commerce

Marketing Analytics automation

• Inventory • Service • Processes • Interfaces • Customer • Responsiveness • Interactions • Processes • Products • Product Introductions • Execution • Interactions

Visible Fast Automated Intuitive

• Demand • Product development • Orders • Collective intelligence • Offers • Social networking

Anticipatory Participatory

20 Emerging Technologies Drive New IT Priorities

48% Differentiate

36%

13%

Static Dynamic Personas Real-time Segments Segments Contextual

N=400 Source: IDC Global Retail Innovation Survey 2017 © IDC 22 Competing on Experience Winning the «Passive» Customer / Buyer

Beyond “Traditional” Always Connected Self Educating Service Customers Customers

Social Networks “Trusted Source” “Things” as Massive Growth customers in Customer Data © IDC 23 What matters? – Doing it right!

Employee Performance Optimization Value

. Automated Decision Processes . Streamlined Communication Customer . Continuous Planning | Feedback Satisfaction . Self-Learning/Training Sweetspot

. Innovative Customer Experience Performance Disruption ValueWorkforce of

Management Mastery Management . Contextualized Personalized Interaction . Consumer/Product Life-Cycle Interaction . Engagement Transcends Place and Time Customer Experience Performance Optimization Value Value of Customer Intimacy

24 Executive Summary

Most retailers consider innovation as an opportunistic initiative (52%), 1 focusing innovation projects on delivering short-term results.

The biggest retail innovation challenge – and the largest opportunity – is driving effectiveness in piloting and scaling innovation programs at 2 speed.

The adoption of a platform is considered essential for innovation by the majority of retailers. 46% of retailers are planning to invest in a 3 retail omni-channel commerce platform over next 12 months.

Customer experience is the core of digital transformation, but the retail market is at low maturity, with only 3% of retailers adopting a 4 real-time hyper micro autonomic approach for personalization.

Observation Yes No

Physical-Digital Convergence

Need for Omni-Channel Strategy

Store Strategy in Place

Roadmap to Omni-channel established

Omni-channel Work Complete

26 Change is Not Optional

Jaideep Thyagarajan [email protected] +61-451788655

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