SPRINGBOARD Executive Summary 4th MARCH 2021 JOIN THE FIFTH GENERATION Retail on the Cusp of a New Era

SPRINGBOARD RETAIL ON THE CUSP OF A NEW ERA | EXECUTIVE SUMMARY

Agenda

Introduction 3

Retail 5.0 and the New Battleground for Shoppers 4

4 Ways Consumer Brands Can Prepare for Future Trends 6

Sizing the Prize: The Delivery Intermediary Opportunity 9

Master Alibaba’s Digital Ecosystem to Succeed in China 12

About The Consumer Goods Forum 15

About Edge by Ascential 15 RETAIL ON THE CUSP OF A NEW ERA | EXECUTIVE SUMMARY

Introduction

Over the past 25 years, retail where necessary and understand how has been on a difficult journey: from a to optimise their operating models and physical-only activity to an omnichannel business and marketing strategies to pursuit. The growth of ecommerce capture the marketplace shopper can win around the world is well documented and big in this new era. Those that are slow to the pandemic has accelerated digital retail do this will fall behind fast. as shoppers have shifted their spending The Consumer Goods Forum and from experiences and holidays to Edge by Ascential hosted a virtual cooking equipment, TVs and trampolines. SpringBoard event on 4th March 2021 to By 2025, online sales will account for discuss the future retail environment and about 40% of total sales in the consumer the biggest challenges and opportunities goods industry and ecommerce will be for CPGs in the new era of commerce. This dominated by a handful of major platforms Executive Summary offers an overview of and marketplaces, such as Alibaba and the key themes of the event, with a focus Amazon. on why CPGs must embrace the might of This is the next phase of the retail the marketplaces and change priorities revolution - an era categorised by over the next few years to achieve results marketplaces mastering personalisation in Retail 5.0. at scale and big data being effectively leveraged. Consumer packaged goods’

(CPGs) brands that are agile, can pivot SPRINGBOARD

3 RETAIL ON THE CUSP OF A NEW ERA | EXECUTIVE SUMMARY Retail 5.0 and the New Battleground for Shoppers

“By 2025, five marketplace giants will generate Since the beginning of the century two-thirds of global ecommerce sales” and the early days of the internet, -Edge by Ascential research retail has had to evolve in line with the emerging drivers of industry growth. As digital marketplaces gained traction with shoppers, consumer packaged goods Global Growth in ad spend on Amazon (non-DSP), Year-on-year % change companies (CPGs) had to figure out how to manage transparency in a digital world. They had to work out how to allocate their advertising budget effectively, product Speaker: innovation and fulfillment strategies for Deren Baker, CEO, a world of clicks as well as bricks. Then Edge by Ascential came the fantastic rise of algorithm-driven commerce and the development of the technologies that we are seeing scaled today. The big challenge for CPGs over the past decade or so has been speed to market. Now, we are heading into a new era of retail, what we at Edge by Ascential call Retail 5.0.

Source: WARC *Excludes demand side platforms

Brands must focus on digital retail, where transactions actually happen. Expensively trying to buy a crowd is not a strategy that can succeed in the Retail 5.0 future.

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Mastering Personalisation advertising to increase shopper loyalty levers that power each marketplace and marketplace marketing because that’s at Scale and grow new customer markets and consistently managing these variables where your customers are already buying segments. In addition, the death of at scale, across multiple retailers and your products. Retail 5.0 is a big shift in This new generation of retail is the cookie means data management regions. how most brands and manufacturers characterised by marketplaces mastering platforms (DMPs) won’t offer brands an currently operate and could require a new personalisation at scale and leveraging alternative personalisation option. The fundamentals of shopping organizational structure as well as new big data to win. For the most well-known and driving sales have not changed: business and marketing priorities, but marketplaces today, commerce is just Effective Marketplace ensure your products are available, easy doing business like it’s 2010 is simply not one spoke of an integrated ecosystem Strategies Will Be Key to to find and are compelling enough to an option in the 2020s and beyond. with shopper data at the core. Amazon Future Growth drive conversion. In the world of scaled has a loyalty programme, entertainment ecommerce, we believe this translates to services through Prime, cloud computing Our Retail Insights analysts predict managing inventory in line with the rules through Amazon Web Services among that by 2025, five marketplace giants will of the marketplace, mastering the search other service lines that make the shopper generate two-thirds of global ecommerce algorithms to rank high in the results experience “sticky”. In 2020, Amazon sales. This underscores the urgency of and using content, rating and reviews spent almost USD $43 billion on research CPGs to master a defined set of priority to improve the shopper experience and and development. e-tailers, tiering them and then targeting boost conversion. them methodically. Brands must focus We have seen estimates that by resources on learning the dynamics and Shift Your Ad Spend 2025, marketplaces could spend as mechanics of these global marketplaces much as USD $60 billion on R&D. CPGs based on category and geographical Finally, we recommend CPGs move will simply be unable to compete with the coverage to drive sales share and their advertising and marketing spend capital availability that these marketplaces optimise revenue in mature markets. This away from more generic search and social have at their disposal for innovation and means really understanding the individual marketing and allocate it to on-platform

5 RETAIL ON THE CUSP OF A NEW ERA | EXECUTIVE SUMMARY 4 Ways Consumer Brands Can Prepare for Future Trends

“Winning on a digital ecosystem is like learning a new Every year, our Retail Insight analysts video game… first, learn the rules, then play until you review what we see as the biggest drivers figure out how to win” of change that could disrupt business in - Xian Wang, VP, Retail Insight, Edge by Ascential the retail industry under five core themes: society, technology, economy, industry and policy. We call these the STEIP drivers. We use the STEIP framework as a lens to form a view on how the future will unfold, with an emphasis on shopper mindsets and behaviours and market trends. Speaker: Xian Wang, VP, Retail With this set of assumptions about Insights, Edge by Ascential the future world, we recommend market, customer and talent strategies that will help forward-thinking businesses succeed. Despite the uncertainty of the future outlook, CPGs must still make plans.

Based on our 2021 research, here are 4 key recommendations for CPGs in 2021.

*57% Of global sales will be made online by 2025 *3 X By 2025, ecommerce will grow that much faster than store-based channels Data provided by Edge by Ascential

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Engage With All Digital drive innovation. Strong execution through who is maturing and moving into their 1. Touchpoints social media will be key to facilitating prime spending years. Brands that can discovery, inspiration, conversion and demonstrate localism, provenance and In 2020, retailers embarked on a loyalty in 2021 and beyond. transparency will earn the confidence of needs-based digital expansion to serve these coming-of-age green consumers their stuck-at-home customers during the Innovate With New Models - and using popular social channels in COVID-19 pandemic. Many have spent 2. and Digital Touch Points innovative ways to drive engagement and the past 12 months trialling new initiatives Like Social Commerce sales should be seriously considered. in ecommerce, fulfilment and technology to better meet consumer needs for Social media is an established Differentiate Through convenience and safety. This trend will influencer in shopper behaviour. The rise 3. Speed and Convenience continue with retailers tailoring platforms, of Tik Tok, Pinterest and Instagram has pricing and engagement to win over been quite tremendous over the past few Speed will become a major differentiator shoppers in an increasingly omnichannel years. But one of the things we saw last this year and beyond. Not only have shopper society. Brands must leverage all digital year and we expect to see grow in 2021 expectations increased with respect to channels and platform tools to connect is social becoming a sales channel in and fulfilment requirements, but priorities are with shoppers, particularly as physical of itself. This has led to a rise in sponsored fast-changing too. To compete, brands must shelf space continues to decline. Support advertising and purchasing through social develop the analytics capabilities to predict your retail partners with online-to-offline platforms. Livestreaming is booming, first demand more accurately as well as develop integration that will build brand loyalty popularised in Asia but now spreading more flexible product innovation cycles and in-store but also, understand you can no across borders. It started with fashion supply chains that can keep pace with fast- longer just rely on these retailers to build and apparel but now increasingly food is changing customer requirements. This is a loyalty for you. being featured. Cooking demonstrations radical change to the go-to-market of five are gaining traction. This is an emerging years ago. Direct-to-consumer channels are but potentially significant opportunity to worth considering, with a laser focus on connect with the purpose-driven and constant testing and real shopper insight to socially responsible Gen-Z shopper,

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Case Study: Walmart.com. As more retailers cooperate Mars Wrigley brands, such as Mars, Galaxy Dinner brought to you by with these intermediaries as a cost-effective and Bounty within an hour of having a By partnering with personalised way to scale up fulfilment capacity quickly, craving. The service was piloted in Delhi, meal planning app Dinner Daily, Kroger we see them becoming essential points of Bangalore, Kolkata and Chennai with the is making life easier for its existing influence in a shopper’s purchase decision. understanding that it would be rolled out customers and attracting the attention of Brands must start treating intermediaries across the country in due course. new shoppers too. Dinner Daily creates as customers to win visibility on these weekly meal plans according to member platforms. They will also have to also work food preferences, health and dietary closely with their retailer partners from requirements. Customers easily select whom the intermediaries pick and pack from the items they need on the app which is to ensure on-shelf availability. If that sounds integrated with Kroger’s online ordering like business becoming more complex, that system, incorporating Kroger special is certainly the case. Brands should treat offers so customers can take advantage the rapidly-growing intermediary segment of discounts. as a rising channel to customer, developing tailored product, pricing and promotional Treat Intermediaries as strategies to drive conversion on these 4. Customers platforms.

On-demand delivery providers, Case Study: like , and Shipt, were Mars Wrigley and the “Snickers standout performers in 2020 and we Store” anticipate they will be sticking around. In Confectioner Mars Wrigley launched the US, grocery sales on these platforms a dedicated online store on India’s boomed. Instacart led the way reporting delivery platform in 2020. USD $12.6 billion of sales in 2020, double Through the Snickers Store, chocolate its nearest rival, the grocery platform of lovers in India can access the popular

8 RETAIL ON THE CUSP OF A NEW ERA | EXECUTIVE SUMMARY Sizing the Prize: The Delivery Intermediary Opportunity

Panellists: Doug Koontz, Director, Content Strategy and Analytics, Retail Insight, Edge A channel sitting between consumers and merchants by Ascential Robert Gregory, Research Director - Advisory, Edge by Ascential Paul Harrison, Chief Operating Officer, Ascential Jonathan Jagard, Senior Manager, eCommerce Insights, Edge by Ascential

“Our data predicts by 2025 delivery intermediary GMV will more than triple to more than $980 billion, from $261 billion in 2020”

“The scarcity of publicly available data makes it difficult for CPGs to quantify the size of the opportunity and so justify the size of the investment - yet intermediaries cannot be ignored”

Last-mile delivery is an evolving, complex and growing sub-channel of ecommerce. Ascential’s ecommerce experts take stock of a dynamic market.

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What Are Delivery significant mergers and acquisitions in the in 2019 to 14% in 2020 as supermarkets Intermediaries? sector as leading players made some big sought distribution partnerships to boost bets on the potential size of the last-mile capacity and keep up with demand. In Delivery intermediaries are food delivery market. the UK, Aldi, Waitrose and Morrisons aggregators or last-mile delivery forged partnerships with . In the providers. They are platforms that sit One example was Dutch online food US, 7-Eleven teamed up with DoorDash, between the consumer and the merchant. delivery service Takeaway agreeing to and Favor Delivery. Typically, the way they work involves the pay USD $7.8 billion for the UK’s consumer placing an order through an and then as the ink was still drying on that There have also been interesting intermediary’s app and then the platform deal the combined firm offered to buy US developments happening outside leverages a network of local couriers to rival in a deal worth USD $7.3 the grocery category. Skincare-to- provide an on-demand delivery service. billion at the beginning of 2021. These are cosmetics firm Avon in December 2020 very big sums and send a clear message announced the launch of an on-demand This sector began life working with - global market dominance is the name of same-day delivery service courtesy of a restaurants to deliver food on-demand the game. partnership with , which will pilot in but with the exponential growth in Brazil. Consumer electronics chain Best demand for ecommerce in 2020 as a Rethinking Convenience: Buy partnered with Instacart as a cost- result of the pandemic and lockdowns, Grocery and Beyond effective, more reliable and faster option some intermediary platforms expanded of being able to offer its US customers the their offering, developing partnerships As the biggest names in the sector convenience of same-day delivery than with retailers and supermarkets. expanded their geographic reach last the traditional package carriers. year, some of them also started looking to Gross Merchandise Value (GMV) or new services, categories, and channels to total revenue in the sector worldwide sustain growth in a post-pandemic future. grew by about 64% in 2020, faster The grocery category was one area of than ecommerce as a whole. 2020 expansion. Edge by Ascential data shows also sounded the starting gun on some that GMV in the category grew from 10%

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Our data predicts that by 2025 mean for content, assortment and Intermediaries are an emerging delivery intermediary GMV will more than pricing? How does the digital shelf and complex aspect of ecommerce but triple to more than $980 billion, from $261 differ from mainstream commerce? they will quickly become a core part of billion in 2020. The opportunity cannot the shopper ecosystem that help create be ignored, but at the same time, the fast- • How are our competitors structuring “stickier” consumer experiences and changing dynamics of the market - with and partnering with the sector? encourage brand and retailer loyalty. almost constant innovation, entries and exits - and the scarcity of publicly available These are challenging questions to data makes it difficult for CPGs to quantify answer, especially with limited industry the size of the opportunity and where - precedent and a lack of historical data and so justify the size of the investment. about this rapidly evolving channel. Certainly, the sector is in an experimental Evolving but Important phase, with businesses trialling certain Channel approaches that will not always be successful. There is also often a degree of scepticism internally about the channel In February, we released our most and its long-term prospects. These are in-depth dataset of the intermediary some of the challenges we hear: sector - globally and by region - with deep analysis and predictions of its trajectory • Which would be right for over the next five years. It is available us and our shoppers? to subscribers of Retail Insight, our retail intelligence platform that gives our clients • Which should we prioritise? the knowledge, tools and data to win in a fast-moving world of omnichannel retail. • What are the characteristics of each channel and what does that

11 RETAIL ON THE CUSP OF A NEW ERA | EXECUTIVE SUMMARY Master Alibaba’s Digital Ecosystem to Succeed in China

“What is perhaps less understood is Alibaba is the world’s largest retailer But what is perhaps less understood Alibaba’s huge and growing power as a ahead of Amazon and Walmart. In 2020, is Alibaba’s huge and growing power as a marketing and advertising company, with it reported revenue of USD $667 billion marketing and advertising company, with a data capture and management system and most of that was generated in China a data capture and management system at its core” through the ecommerce giant’s Tmall at its core. This capability through Uni-ID and Taobao shopping apps. Alibaba has allows Alibaba to trace the footprint of for years been investing in these digital the consumer on its multitude of different ecommerce platforms to meet diverse channels online and offline and so offer demands from different demographics the brands that use the marketplace a and drive domestic consumption. In rich consumer data centre to guide sales Speaker: parallel, Alibaba has been growing and tactics and long-term business strategy. Amber Chen, CEO, Duo Zhun developing a sophisticated ecosystem.

The company has added consumer 881 million touchpoints in all areas, from entertainment Alibaba monthly active users (September 2020) and cloud computing to payments and social networks. Of China’s almost 1 billion 940 million internet users, about four fifths regularly Number of internet users in China - netizens (June 2020) access an Alibaba channel. That is all quite well known.

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Activating the Brand Uni Operation Personalised Databank • Provide data dashboard on a Recommendations store-by-store basis, showing store Through Uni-ID, Alibaba can help traffic and conversion data and The home page of the app will be brands influence effective business comparatives with competitors. customised to each individual shopper decisions. These are: based on search and purchase history. In addition, the company has four levers to Compared to Amazon, Taobao has a Uni Strategy: help brands engage with their consumers. more dynamic interface and is structured • Helps brands to understand the These are: to encourage its shoppers to spend more market landscape of their category time window shopping. This suits Alibaba and future trends, consumer Marketing Events shoppers, who tend to be mainly women - personas, where they are on their about two thirds of all users. purchase journey and even support Alibaba has different levels of new product launches through the marketing events. Double 11 - or Singles’ Short Videos Tmall Innovation Centre (TMIC). Day - and Double 12 are examples of top S-level promotion events. Alibaba The explosion in popularity of Tik Tok Uni Communication: said that not even 30 seconds into 2020 has seen Alibaba put greater emphasis • Identification of consumer media Double 11, Tmall’s orders set a record of on short videos. Diversified video content preferences and touchpoints, 583,000 transactions per second, 1,457 scattered through the Alibaba ecommerce whether they prefer live broadcast, times that of the first Double 11 in 2009, platform is successfully turning customer real-time bidding advertisements, and exceeding the highest transactions traffic into revenue. In fact, 80% of traffic reviews or other content and of 544,000 in 2019. Valentine’s Day, is currently coming from video and then compare campaign-to- Women’s Day and Chinese Valentine’s livestreaming. campaign ROI for more cost- Day in August are also key shopping effective media execution. festivals that brands can benefit from.

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Livestreaming Brands looking to grow their presence and sales in China should Livestreaming ecommerce is partner with Alibaba and ensure that booming in Asia - a trendy, modern take they are included in emerging initiatives, on the US shopping TV networks but such as 3D shopping experiences and with more charismatic hosts offering social commerce to encourage product entertainment as well as an opportunity for discovery and gain an early-mover the consumer to get more real-time detail advantage. on the benefits of the product in a more vivid experience. Sometimes, hidden coupons are also made available in the broadcast. Li Jiaqi earned the nickname “the lipstick king” after reportedly selling 15,000 lipsticks in less than five minutes. He has been acknowledged by Time Magazine as being one of the emerging Top 100 Most Influential People in recognition of his commercial achievements through live selling. Live broadcast currently accounts for about 10% Tmall traffic. Brand executives, even the CEO, can engage directly with their market in this way.

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About The Consumer Goods Forum The Consumer Goods Forum About Edge (“CGF”) is a global, parity-based industry network that is driven by its members by Ascential to encourage the global adoption of practices and standards that serves the Edge by Ascential helps global and to provide brands with a comprehensive consumer goods industry worldwide. local brands to win in digital commerce in solution to optimise online demand, It brings together the CEOs and senior a new and complex era of omnichannel particularly through China’s biggest digital management of some 400 retailers, retail. Our unique combination of industry- marketplaces Alibaba and JD.com. manufacturers, service providers, and leading data, analytics, market research other stakeholders across 70 countries, and expert consulting solutions inform For more information, and it reflects the diversity of the industry the ecommerce strategies of the world’s visit www.ascentialedge.com in geography, size, product category leading brands. We help our clients to and format. Its member companies have optimise their performance and always Connect with us on: combined sales of EUR 3.5 trillion and make the right investment decisions, LinkedIn @EdgeAscential directly employ nearly 10 million people, drive margin growth and achieve the Or Tweet us on: with a further 90 million related jobs necessary edge to grow. More than 400 Twitter: @EdgeAscential estimated along the value chain. It is global brands depend upon our weekly, governed by its Board of Directors, which daily and real-time data-driven insights. comprises 58 manufacturer and retailer CEOs. A subsidiary of Ascential plc, the global specialist information company, Edge by For more information, please visit: Ascential operates in North America, Europe www.theconsumergoodsforum.com. and APAC, where we work with Yimian and Duo Zhun (DZ), also Ascential companies,

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