Global Retailers: Strategies in Payments, Banking, Insurance and Assistance

Global Retailers: Strategies of the World’s Top 120 Retail Groups in Payments, Banking, Insurance and Assistance Report prospectus

October 2015

Prospectus contents

Page

What is the research? 3 What is the rationale? 4 Which 120 retail groups have been researched? 5 Across which countries has research been conducted? 6 What is the report structure? 7 What are the key features of the research? 8 How can the research be used? 9 How can the interactive PartnerBASE™ be used? 10 Who can use the research? 11 What are some of the key findings? 12-15 What is the cost and format? 16 How can the research be purchased? 17

What is the research?

Global Retailers: Strategies of the World’s Top 120 Retail Groups in Payments, Banking, Insurance and Assistance is a report and accompanying PartnerBASE™ dataset that illustrates the involvement in financial services of 120 leading retailer groups. For these, the study documents in detail their involvement in the fields of payments, banking, insurance and assistance including (where the information is disclosed), the contribution that financial services have made to group profitability in recent years. Among the 120 groups analysed, only ten had no involvement in the areas in scope and for 55 (45.8%) financial services activity can be characterised as central to their wider business strategy by virtue of their ownership of one or more captive or joint venture companies active in one or more of these fields.

In addition, both for these and the other 55 groups, whose financial services operations are more operational or limited in nature, product partnerships are logged for each of their retail brands in the following areas: credit / other pay later cards; consumer finance; other banking products (i.e. mortgages, personal loans, savings accounts); insurance and assistance (i.e. accident, dental, health, household, life, motor, pet and other insurance policies plus assistance services); and online payments (including relationships for online accounts). In total, this research covers over 500 individual retail brands belonging to the 120 groups across 45 countries with consideration of almost 1,000 distinct retail operations in total, including those of brands that are present across multiple countries.

What is the rationale?

Finaccord has developed this study as a result of both the growing potential for major retail groups to generate revenues from financial services and the actual increasing activity that many have in this field. Indeed, for over 20 of the 120 leading retailer groups researched that disclose sufficient financial data about their operations in this arena, financial services generated an unweighted average 28.0% of their total group operating profits during the most recent three years and grew at an unweighted average of 7.6% over the same period (as opposed to an unweighted average of 2.8% for total group-wide operating profits).

Indeed, while the development of a private-label or co-branded credit card program has often been the first step taken by retailers into financial services, a number of factors are now encouraging broader involvement. These include the increasing willingness of consumers to utilise alternative distribution channels to acquire financial services, consolidation among conventional retail banks which has reduced consumer choice and provided a strong rationale for the creation of retailer- owned banks, and the rapid growth of online retail sales which has given impetus for the development of online payments and other internet-based financial services.

Which 120 retail groups have been researched?

ADEO Dansk Supermarked Home Retail Group Magnit Shoprite Holdings AEON Darty Hudson's Bay Company Marks & Spencer Sobeys Ahold Dashang Group ICA Meijer Sonae Aldi Decathlon IKEA Mercadona Spar Alibaba Delhaize Group Isetan Mitsukoshi Metro (Canada) Staples Amazon Dia J Front Retailing Metro Group Steinhoff International AS Watson Dixons Carphone JC Penney Migros Suning Commerce Group Auchan Dollar General Jerónimo Martins Morrisons SuperValu Bauhaus E. Leclerc John Lewis Partnership Nordstrom Systéme U Beisia EDEKA Katz Group NorgesGruppen Takashimaya Best Buy Edion Kering Office Depot Target Corporation BJ's Wholesale Club El Corte Inglés Kesko Otto Tengelmann Canadian Tire Empresas Ripley Kingfisher Pick n Pay Holdings Tesco Carrefour Eroski Kohl's Corporation Publix The SPAR Group Casino Falabella Kroger Rakuten TJX Cencosud Future Group K's Holding REWE Uny China Resources Holdings Galeries Lafayette L Brands Rite Aid Walgreens Boots Alliance Conad GameStop Les Mousquetaires Rossmann Walmart Coop (Schweiz) Gap Loblaw Companies Safeway Wesfarmers Coop Italia GOME Lojas Americanas Sainsbury's Whole Food Markets Costco Grupo Elektra Lotte Schwarz Gruppe Woolworths (Australia) Couche-Tard Grupo Inditex Louis Delhaize Sears Wu-Mart CVS Caremark H-E-B Lowe's Seven & I X5 Retail Group Dairy Farm International Home Depot Macy's S-Group Yamada Denki

Across which countries has research been conducted?

In order to gather a comprehensive view of the involvement in payments, banking, insurance and assistance of each of the 120 groups, over 500 individual brands belonging to these groups were investigated in the following 45 countries, meaning that the research covered 990 retail operations in total.

Argentina Denmark Malaysia Singapore Australia Finland Mexico Slovakia Austria France Netherlands South Africa Belgium Germany New Zealand South Korea Brazil Hong Kong Norway Spain Canada Hungary Peru Sweden Chile India Philippines Switzerland China Indonesia Poland Taiwan Colombia Ireland Portugal Thailand Costa Rica Italy Romania Turkey Czech Republic Japan Russia UK USA

What is the report structure?

0. Executive Summary: providing a concise evaluation of the principal findings of the report.

1. Introduction: offering rationale, description of methodology, definitions and other related notes.

2. Group Strategy Overview: this chapter begins by presenting data for the total revenues and growth in total revenues of the retail groups in scope before then providing an overview of their involvement in each of credit / other pay later cards, consumer finance, other banking products, insurance / assistance and online payments, simultaneously illustrating the proportion that have established captive or joint venture subsidiaries in each of these fields and the proportion for which involvement in financial services is a core element of group strategy. These elements are then followed by an analysis of the operating profit generated from financial services over three years (typically 2012 to 2014) of the 22 groups reporting this data plus the average contribution made by operating profit from financial services to total group operating profit over the same period for the same groups.

3. Group Strategy Profiles: for each of the 120 retail groups, this chapter is composed of profiles that summarise not only their involvement in financial services, including whether they own captive or joint venture subsidiaries in this field, but also the countries (of the 45 researched) in which they are active, the brands that they operate and the retail categories in which those brands are present.

What are the key features of the research?

Key features of this research include:

• concise information summarising the strategic commitment to financial services of 120 of the world’s leading retail groups with coverage of pioneers in this field such as AEON, Carrefour, Cencosud, Falabella, Grupo Elektra, Lotte, Migros, Otto, Rakuten, Ripley, Seven & i Holdings and Tesco;

• availability of comprehensive information across 45 countries concerning the involvement in and partnerships for credit / other pay later cards, consumer finance, other banking products, insurance / assistance and online payments of over 500 brands belonging to these groups;

• provision of an accompanying interactive PartnerBASE™ dataset that details over 1,700 distinct product initiatives and that is fully customisable, searchable and filterable, enabling patterns to be explored across multiple groups, brands and countries;

• analysis of the contribution to group operating profit made by financial services activity over a three-year period for retail organisations that have made financial services a core element of group strategic development – the evidence of this research is that for a number of these organisations, financial services offer an effective way of boosting growth in group-wide profitability.

How can the research be used?

You may be able to use this report and the PartnerBASE™ dataset that accompanies it in one or more of the following ways:

• gain access to a thorough analysis of the involvement in and partnerships for payment, banking, insurance and assistance products of 120 of the world’s leading retail groups – how does your organisation seem to be positioned relative to its rivals?

• understand which product providers have been successful in establishing partnerships with leading retail brands and groups for credit / other pay later cards, consumer finance, other banking products, insurance / assistance and online payments, and the degree to which these partnerships exist across multiple countries;

• use the PartnerBASE™ dataset to drill down to the full details – see which payment, banking, insurance and assistance products are offered by which retail groups and brands in which countries and with which product providers they co-operate in this context;

• appreciate the contribution made to total group profitability of operating profit from financial services for retail groups that have made involvement in financial services a strategic imperative.

How can the PartnerBASE™ be used?

Filter by brand and group Identify partners

Product Brand Group Country Product type Operating model Partner(s) Network offered?

Mitsukoshi Isetan Mitsukoshi Japan Credit card Yes Captive partner MI Card American Express, Visa Queen's Isetan Isetan Mitsukoshi Japan Credit card Yes Captive partner MI Card American Express, Visa Shin Kong Mitsukoshi Isetan Mitsukoshi Taiwan Credit card Yes External partner Taishin International Bank Visa Daimaru J Front Retailing Japan Credit card Yes Captive partner JFR Card MasterCard, Visa Matsuzakaya J Front Retailing Japan Credit card Yes Captive partner JFR Card MasterCard, Visa JC Penney JC Penney US Credit card Yes External partner Synchrony Financial Private

View results across Choose product multiple countries type See operating model

Who can use the research?

1. Retail groups: leading retail groups can utilise the research to get a comprehensive understanding of the payment, banking, insurance and assistance services offered and partnerships set up by their global comparators, thereby obtaining a near-worldwide view of this activity through a single source;

2. Banks, other lending institutions and payment firms: opportunities exist for these types of organisation both to create partnerships with retailers, either at the level of individual products or for formal joint ventures, and to acquire equity stakes in the captive or joint venture banking or payment service subsidiaries of retail groups;

3. Insurance and assistance companies: the published study and PartnerBASE™ dataset can be used to obtain an immediate understanding of the involvement of both leading retail groups and your competitors in retailer ‘brandassurance’ across a diverse range of countries;

4. Management consultancies: if you are helping a company involved in retailer financial services with its product or partner strategy, then this research will explain the international activity in this field of major retail groups and brands, saving time and effort on researching the subject yourself.

What are some of the key findings?

1. At the time of the research, 55 of the 120 retail groups had involvement in financial services that could be described as being of central importance to their broader strategy while for 55 their activity was purely operational and the remaining 10 had no involvement whatsoever

No financial services activity, 10

Strategic commitment to financial services, 55

Operational involvement in financial services, 55

Source: Finaccord analysis

What are some of the key findings? (cont.) 2. The 120 retail groups in scope are most likely to have established captive or joint venture subsidiaries in the field of credit and other pay later cards

Credit / other pay later cards

Consumer finance Captive only

Other banking products JV only

Captive and JV Insurance / assistance

Online payments

0% 10% 20% 30% 40% 50% % of 120 retail groups with financial services captives and / or JVs

Source: Finaccord PartnerBASE™ for Global Retailers

What are some of the key findings? (cont.)

3. For a number of retail groups, profits generated from financial services are either substantial or make a significant contribution to overall profitability or both

Average annual profit generated from financial services as a percentage of average annual total profit, 2012 to 2014 75%

Grupo Elektra 60% ICA

45% Rakuten

Canadian Tire 30% AEON Migros 15% Cencosud Loblaw Lotte Seven & i Holdings Carrefour Auchan 0% 0 100 200 300 400 500 Average annual profit generated from financial services, 2012 to 2014 (USD million) Source: Finaccord analysis

What are some of the key findings? (cont.)

4. Key findings from the executive summary include:

• ultimately, it may be said that the involvement of retailers in payments, banking, insurance and assistance is not new as a number of the groups have been active in one or more financial services fields for several decades;

• however, the evidence of this study is that a number of retail groups that have made the development of financial services a central part of their strategy are now reaping the rewards of that commitment through the contribution made by financial services to their overall profitability;

• thus, a recurring question for retail groups whose involvement in payments, banking, insurance and assistance is either purely operational or non-existent is whether they should seek to draw inspiration from these competitors by building more substantial financial services of their own;

• indeed, there may be a rationale for this given that the evidence of Finaccord’s research is that there is often greater potential to achieve growth in revenues and profits from financial services than there is from core retail activity, which is a mature environment in many countries.

What is the cost and format?

Global Retailers: Strategies of the World’s Top 120 Retail Groups in Payments, Banking, Insurance and Assistance is available as a standard PDF document. The PartnerBASE™ that accompanies it at no further charge is in Excel format. Costs for this research set and other titles with a global perspective available at the time of publication are as follows:

REPORT PRICE *

Global Retailers: Strategies of the World’s Top 120 Retailing Groups in Payments, Banking, Insurance and Assistance USD 3,495

Global Automotive Manufacturers: Strategies in Finance, Insurance, Warranties and Assistance USD 4,195 Global Bancassurance: Product and Partnership Strategies of the World’s Leading 150 Retail Banking Groups USD 5,595 Global Bancassurance: Product and Partnership Strategies of the World’s Leading 500 Retail Banking Groups USD 11,195 Global Coalition Loyalty Programs USD 3,495 Global Emerging Payment Means: A Worldwide Review USD 2,795 Global Expatriates: Size, Segmentation and Forecast for the Worldwide Market USD 4,195 Global Mobile Operators: Strategies in Payments, Banking, Insurance and Assistance USD 4,195

For Singapore-based clients, GST at the prevailing rate will be added to the basic price. Costs quoted are for a single site user licence only. For a corporate user licence, please see the final slide for further details. Invoices can be paid in EUR or GBP, at the prevailing exchange rate, if preferred.

How can the research be purchased?

Simple. Just go to the relevant area of the Finaccord website, create your account (if you do not have one already) and place your order online. Products paid for online by card will be delivered immediately by e-mail but please allow up to one working day for delivery by e-mail if you choose to pay on receipt of invoice.

With regards to the corporate user licence, you will be asked to choose one of the following options: 1. One office, one country: no supplement over and above basic cost of reports ordered 2. Multiple offices, one country: additional 20% over and above basic cost of reports ordered 3. Multiple offices, two to ten countries: additional 50% over and above basic cost of reports ordered 4. Global (unlimited offices in unlimited countries): additional 100% over and above basic cost of reports ordered

Alternatively, you can place an order by sending your request to [email protected], clearly stating the product(s) required, associated price(s) and billing details for eventual invoice or card payment receipt.