Session 3 the Changing Landscape of International Retail

WELCOME THE DISRUPTIVE FUTURE OF RETAIL Tony D’Onofrio The Coronavirus

For MORE Visit www.tonydonofrio.com

Source: Bain & Company, 2020

The $30 Trillion Opportunity

Retail Apocalypse or Renaissance ?

Where is the Retail Shrink ?

Digital Transformation Wake Up Call

The Disruptive Future of Retail

CHINA

Total Retail Sales Worldwide, 2017-2023 4% 2020 2021 Trillions and % change $29.763 $28.472 3% $27.243 $26.074 $25.038 $23.956 $22.974 2%

0% Asia and Middle Eastern North Latin Western 6.2% 4.3% 4.5% 4.5% Australasia East and Europe America America Europe 4.5% 4.1% 4.5% Sub-Saharan Africa

2017 2018 2019 2020 2021 2022 2023

Retail Sales % Change

Total Retail Sales in China -vs- US Global E-Commerce Growth Trillions

Source: Cushman & Wakefield, 2019 / E-marketer 2019

Russia Canada $30 Bn United $55 Bn Korea Kingdom CHINA $90 Bn USA $135 Bn $1.5 Tn $600 Bn Germany France $80 Bn $65 Bn Japan $115 Bn

India $40 Bn Online Retail Transaction Brazil Indonesia (B2B/B2C) Value 2019 $30 Bn $15 Bn

Argentina $7 Bn

Source: McKinsey 2019 / Totem 2020

Retail Continues to be Strong In last 2.5 years +8,575 net stores increased (in chains with 50+ stores)

Since 1/1/17, Total Retail Sales Increased $636b

Number of Chains adding stores increased 56% in 2019

Number of Chains closing stores decreased 68%

2016 Total Retail Square Footage per Capita

US 23.5

Canada 16.4

UK 4.6 Malls built at 4x population France 3.8 growth rate since 1975

Spain 3.4

Italy 2.8 USA retail 10x more space per capita than Germany and est. 20x for apparel / dept. stores Germany 2.4

NA Retail & Hospitality Spend by Fulfilment Channel 7.0

$6.13 $5.83 $5.98 6.0 $5.70 $0.45 $5.43 $0.44 $5.25 $0.42 $0.41 $4.99 $0.38 $0.85 $0.36 $0.78 5.0 $0.67 $0.72 $0.32 $0.54 $0.59 $0.38 $0.44 $0.51 $0.49 $0.31 $0.19 $0.25 4.0 $0.14

3.0

$4.31 $4.31 $4.32 $4.32 $4.21 $4.17

2.0 $4.04 Consumer Spend (Trillions USD) Consumer Spend (Trillions Store Revenue 1.0 Ecommerce Rev. Store Fulfillment Ecommerce Rev. WH Fulfillment

0.0 Ecommerce Rev. Fulfillment Center 2017 2018 2019 2020 2021 2022 2023 YEAR Source: IHL Group

Much more of Somewhat more Retail Last 5 Years a priority a priority Total Shrink Averages Organized Retail Crime 29% 37% 65%

FY 2018 1.38% Ecommerce Crime 18% 48% 65%

FY 2017 1.33% Cyber Crimes 30% 33% 63% Internal Theft 25% 35% 60% FY 2016 1.44% Return Fraud 13% 38% 51%

Where have you noticed the greatest FY18 $ Average Loss increase in fraud occurring?

Employees $1,264 IN-STORE ONLY SALES ONLINE ONLY SALES

Shoplifting $547 42.9% 30.2%

MULTICHANNEL SALES Robbery $2,885 (for example, buy online, pick up in store) 22.2% Source: NRF / University of Florida, 2019 15 © 2020 TD Insights 2020 . All Rights Reserved. USA Loss Prevention Budgets

39.7% LP Budgets

KEY Is your company allocating 4.8% Increasing significantly additional resources to Increasing somewhat 4.8% address risks this year? 31.8% Remaining flat Decreasing somewhat 19.1% Decreasing significantly Yes, technology resources 55.6% Yes, other budget resources 34.9% Yes, staff resources 28.6% No 31.8%

Top 5 Loss Prevention Systems In Use

Source: NRF / University of Florida, 2019

Emerging Technologies Fully Implemented Pilot / Limited Rollout Implement in 2019 Implement 2020 No Current Plans

POS ANALYTICS 56% 6% 6% 19% 13%

VIDEO ANALYTICS 16% 18% 11% 11% 44%

FINGERPRINT POS 11% 6% 5% 78%

FACIAL RECOGNITION 6% 4% 6% 2% 81%

18 © 2020 TD Insights 2020 . All Rights Reserved. Store Systems Priorities 3.7% Top 10 Strategic Priorities for 2020 Average increase Store IT spending in 2020 Personalizing Customer Experience 63% vs. 6.2% last year Inventory Visibility 54%

Empowering Store Associates 53%

Support Store Pickup/Delivery of Digital Orders 42%

Upgrading CRM/Loyalty Programs 38%

Refresh POS infrastructure 37%

Customer Journey Design 37%

POS concept evolution (ie. Mobile POS, cloud POS) 36%

IT transformation to better compete 31%

WFM Software/Hardware 26%

Store communication (WAN/WIFI) Upgrade 25%

+450% +460%

+750% Source: IHL Group 2020

Operational Areas 29% 23% 10% +114%

BI/Analyitcs 21% 20% 10% +143%

Human Resources 21% 19% 10% +143%

Customer Facing 13% 20% 18% +285%

Employee Sales Assist 11% 19% 10% +355%

Deployed Now Will Deploy Within 12 Months Will Deploy Within 24 Hours

Nearly 70% of Amazon’s Total Operating Profit

87% - 237% Avg. IT spend increase required to effectively compete with Amazon

150 Million People Advertising 39.4% 12 Month Growth

PHILIPPINES

FUTUREFUTURE OF OF RETAIL RETAIL

MANUFACTURER RETAILER CONSUMER

Pre-1970s 1970s 2010s

CONSUMER IoT Connections 2018 3.6bn PENETRATION RATE 47% 61% (% of population) by type, bn 2025 5.0bn 4.8% CAGR SMARTPHONES % of connections* 2018 60% 79% 2025

MOBILE INTERNET Users

Sources: Economist 2019, GSMA Mobile Economy 2019, Interactive Schools 2018 26 © 2020 TD Insights 2020 . All Rights Reserved. CROWD STARTUP GYMS The “Millennials” Have Arrived HOUSES FUNDING CASUAL PROJ. USA POPULATION BY GENERATION RELATIONSHIPS DINING CABLE BREASTAURANTS TV

DESIGNER AMERICA COSTCO BAGS N CHEESE 70% of Millennials in NAPKINS GOLF CEREAL USA and 62% of Millennials in UK would appreciate a brand or retailer DIAMONDS YOGURT PANTS using AI tech to show more interesting products.

BEER FABRIC SOFTENER FOOTBALL BARS OF SOAP Source: Pew Research, 2018 DIY HOTELS STORES DEPT. 60% STORES of Millennials willing to actively MOTORCYCLES give away more data about themselves in return for better marketing experiences CANNED TUNA Source: Retail 2030 Future Report 27 © 2020 TD Insights 2020 . All Rights Reserved. 71% will allow The Digital Omnishopper 67% do location-based click-and-collect alerts while in stores

Today vs.

5 Years Ago 70% use a 90% who click-and- retailer’s app collect make an CONSUMERS SHOP LESS while in their additional purchase stores on pickup in store In Malls 54% In Stores 31%

CONSUMERS SHOP MORE ACTIVE SOCIAL Online 73% MEDIA USERS On Smartphones 61% PENETRATION Local 32% 3.8 BILLION 49%

Sources: RIS Shopper Megatrends 2019, NextWeb.com 2020 28 © 2020 TD Insights 2020 . All Rights Reserved. Stores Not Going AWAY Educate & empower in-store employees using technology E-commerce sales As % of total Opportunity for improving in-store experience*

CLICKS Getting Physical CLICKS Insights

• The Delivery Last Mile • Amazon > Bookstores > Amazon Go > Whole • INNOVATION Differentiation Foods ($13.7 Billion) • Expanding Loyalty Programs • Return Rate – Online nearly 33% / instore 9% • Alibaba $8 Billion in Physical Stores Last 2 Yrs • The Profit is in the Store > Fresh Hippo (Hema) Supermarkets

Where Do Apparel Retailers Make The Largest Profit ?

In Store Online Online In Store Online Ship Pick Up From Store

32% 30% 23% 12%

Profit Margin Profit Margin Profit Margin Profit Margin

Forbes 19 April 2017, Forbes 27 August 2017), Economist 2017 / Bloomberg Business Week November 3, 2017 30 © 2020 TD Insights 2020 . All Rights Reserved. What Shoppers Want…..Value to Privacy WHAT DO CUSTOMERS WANT TO SEE? MORE LESS 34% 58% Product Customization Shopper Tracking Without Permission 31% Sales of Previously 56% Owned Products Facial Recognition 30% 55% Special Events In-Store AI Taking Over the Shopping Experience

Source: RIS Shopper Megatrends 2019 WILL ALLOW DIGITAL ID IN STORES Very Likely WILLING TO PROVIDE NOT WILLING TO PROVIDE Extremely Somewhat Likely Likely 12% 6% Birthday 39% Income 35% 37% PERSONAL Favorite Social Media 38% Contact Info 29% 21% INFORMATION 24% Favorite Drinks 35% Favorite Social Media 27% Never Favorite Entertainment 31% Household Composition 24% Not At All Likely 31 © 2020 TD Insights 2020 . All Rights Reserved. What Shoppers Want…Will Keep Changing

Have not tried, but Have tried, and are Percent aware Would like to Interested in trying again

Voice assistant TOP 5 TECH-DRIVEN RETAIL 43% 36% 64% EXPERIENCES SHOPPERS WANT

Social shopping 1. Order-only stores (products shipped to homes) 73% 34% 29% 78% 2. Grad-and-go stores (self-checkout from own phone) 69% In-app store navigation 33% 56% 89% 3. Interactive shoppable screens 58%

Visual search 4. Digital order buttons for specific products 49% 27% 60% 86% 5. Virtual try-on for glasses, clothing, etc. 47% Virtual reality 21% 54% 82%

Augmented reality TOP 3 TECH-DRIVEN RETAIL 21% 54% 86% SERVICES SHOPPERS WANT

Virtual fit 1. Curbside pickup 69% 19% 54% 83% 2. Pickup lockers or kiosks 69% Smart dressing room 15% 57% 88% 3. Subscription orders regularly delivered 58%

Five-year revenue growth Premier USA - +81% 1.2 billion hours/week driving to mall, finding parking, wondering around aisles, checking out & driving home Priced-based +37%

Balanced +2%

STORE DATA EXPLOSION INTELLIGENT FILTERS

Seamless • Video Analytics • POS Bricks & Clicks • Artificial Intelligence • Labor Scheduling • Machine Learning • Planograms • Big Data • Store Traffic • Facial Recognition • Loyalty Programs • Video • RFID Consumers Associates • HVAC as Brand as Brand • Internet of Things Ambassadors Ambassadors J • Beacons • Wearables C • Robots CONSUMER Unassisted Covert Intelligent LP (deterrence) Self Checkout IMMERSIVE EXPERIENCES

Visual Intelligence AI / Machine Learning

Data Intelligence

Data Analytics GPS Physical Security Shopper Engagement Green & Red

EAS Video RFID Face Recognition

Autonomous Vehicles Autonomous Stores

Contextual Sentiment / Product Demographics Information Computer Vision Facial Theft Installed base of security cameras, in billions Recognition Prevention

2018 2021* *Projection Source: HIS Markit Retail Loss Prevention Disrupted

DIGITALLY EMPOWERED RETAIL THEFT CONSUMER Shrink OPPORTUNITIES

Brand Value Differentiation Brand Integrated Security / Video Analytics / Machine Learning Real-Time Consumer Loyalty Friction Data / Visual Zone Deterrence Immersive Unified Customer Prescriptive Data Analytics Experiences Smart Supply Chains 37 © 2020 TD Insights 2020 . All Rights Reserved. Single’s Day (Alibaba) Thanksgiving Day Weekend 38.4

28.4 30.8

24.3 4.2 25.3 19.6 3.7 7.4 Thanksgiving 2.9 6.2 Black Friday 5 3.6 3.1 Saturday 2.4 3.8 3.4 Sunday 2.7 9.4 7.9 Cyber Monday 6.6

2017 2018 2019 2017 2018 2019

Source: Economist, Statista Digital Economic Compass, Adobe Digital Insights 38 © 2020 TD Insights 2020 . All Rights Reserved. A TECH BOOM AHEAD THANK YOU $98.4b annual global artificial intelligence revenue by 2023 – CAGR of 28.5% (2019-2023)

Electric vehicles sold annually Smartphones 10m with a 5G mobile subscription 2020 28m 1.1% 30.1% 2030 2020 2025

IoT: Number of devices connected to the internet 22b 38.6b 50b You are the Leaders 2018 2025 2030