Wearables Becoming the Foundation for Our Daily Lives

Insight Presentation – December 2016

Based on our global program of store visits, we’ve identified 15 of the best store formats that bring to life how grocery store formats are evolving against a backdrop of key industry trends.

Retailers are focusing new format development on providing shoppers with new reasons to visit, emphasising their value credentials, integrating online and digital initiatives and building a stronger presence with food-to-go.

For many retailers the focus is on reinventing or re-engineering existing store formats. Carrefour in particular had been making significant progress in this area, accounting for three of the featured stores.

Despite a significant amount of technology–led innovation, this theme does not feature widely within our group of selected stores. In-store technology has not yet gone mainstream within the grocery sector.

Retailers’ increasing level of investment in prepared foods/food-to-go is evident. This is a key trend shaping format development in several markets and we expect to see further development at the intersection of retail and foodservice.

Source: IGD Research © IGD 2016 Introduction

Although we continue to see an accelerating shift towards online and digital retailing, physical formats will remain an important element of the mix for most grocery retailers globally.

Against this backdrop we continue to see a high level of innovation as retailers focus on the development of new offers and services to drive traffic to core formats, invest in new channels, and repurpose existing space to ensure the future relevancy of existing stores.

With our team of analysts visiting over 20 countries this year, we’ve identified the Top 15 stores you should visit which bring these trends and others to life. This insight report was prepared by IGD’s regional research managers Featuring a mix of core stores, new concepts and unique operators which can drive inspiration across the sector, we’ve highlighted the stores to visit in 2017 and what you can learn by seeing these examples of retail development. Nick Miles Gavin Rothwell Milos Ryba Stewart Samuel Jon Wright Source: IGD Research Asia Pacific Latin America Central Europe North America ©EMEA IGD 2016 15 stores to visit in 2017

Stockholm: Toronto: London: Urban Deli Pusateri’s Food Sainsbury’s Shanghai: Hall Easy Carrefour Bucharest: Mega Image

Paris: Ljubljana: Carrefour Saint Mercator Ho Chi Minh: Los Angeles: Emart 365 by Whole Marcel Foods Market Munich: Aldi

Bangkok: Jeddah: Central Food Hall Nahdi

Buenos Aires: Carrefour Monroe

Cape Town: Woolworths Sydney: Woolworths

Source: IGD Research © IGD 2016 North America: 365 by Whole Foods Market

Overview: Silver Lake, Los Angeles, California, USA Whole Foods Market launched its new value-focused store concept in May. The smaller format store features a curated range of mainly private label products at value prices. Featuring a contemporary look and feel, the store is geared towards millennials and utilises technology to streamline the shopping experience.

Future development With three stores up and running, the retailer is now taking a pause ahead of its next opening in spring 2017 in Austin, Texas. The retailer has 17 additional sites under development, and the Why we chose it expectation is that this new 1. Unique concept but is complementary to the core Whole Foods Market chain. chain could grow to be as large 2. Developed with a lower cost structure and operating model that is providing learnings as it core business which which are being applied across the business. currently numbers over 400 3. Re-thinks the Whole Foods Market model through external partnerships as part of its stores. ‘Friends of 365’ program.

Source: IGD Research © IGD 2016 North America: Pusateri’s Food Hall

Overview: Pusateri’s, Eaton Centre, Toronto, Canada As part of its entry into the Canadian retail sector, US department store chain Saks Fifth Avenue has partnered with Toronto based Pusateri’s, one of the leading gourmet-focused retailers in the city, to create a food hall offer within its stores. Including two Saks food halls, the retailer operates six stores in total across the city.

Why we chose it 1. Incorporates a number of innovative elements including a ‘vegetable butcher, ‘dait bar’ and a vegan and gluten- free bakery. Future development 2. Inspirational concept for operators looking at creating a Saks is expected to open a further five department stores distinctive and elevated food experience through a range in Canada, although given their likely locations beyond of dine-in options, unique products and service counters. Toronto, it may chose to work with other locally relevant 3. Provides a contemporary take on the traditional food hall operators. However, Pusateri’s has scope to grow within format, comparable to operators such as Eataly, with the Greater Toronto Area, particularly given the minimal new ideas for product merchandising. level of competition in the premium segment.

Source: IGD Research © IGD 2016 Latin America: Carrefour Monroe

Overview: Carrefour, Buenos Aires, Argentina Carrefour has innovated in a big way in store formats across many different markets over the past year, and the Monroe compact hypermarket in Buenos Aires stands out as one of its most progressive in how it has integrated digital into the mainstream proposition to improve the shopping experience.

Why we chose it Future development Digital extends to tie in neatly with 1. Digital from start to finish – the huge digital screen on entry features welcome messaging that the retailer’s online proposition, still can change at different times of the week or seasons, and to promote relevant offers in-store. at an early stage of development in 2. Targeting a key area of frustration – the queue. We were struck by the value that digital Argentina. While there are no plans integration added in saving shoppers time at the checkout – a common area of frustration in- to roll-out all the technology across store, in enabling shoppers to start queuing digitally during, rather than after, their shop. all of the estate, this store is an 3. Making the standout parts of the store stand out more. Signage at the counters helps the important step forward in helping us decision-making process for shoppers, by providing supporting product information and to understand what shopping trips of relevant offers. the future could entail.

Source: IGD Research © IGD 2016 Western Europe: Sainsbury’s Nine Elms

Overview: Sainsbury’s, Nine Elms, London, UK Nine Elms is Sainsbury’s new London flagship, showcasing the layout, look, environment, service and product offer of Sainsbury’s supermarkets of the future. A store of many firsts, it hosts both an Argos and a Habitat concession, following the £1.4bn acquisition of Home Retail Group by the UK’s second largest grocer. The store also debuts Sainsbury’s new ‘Foodhall’ concept and is the first to include a purpose built Lloyds Pharmacy outlet.

Future development Sainsbury’s plans to have opened 30 digital Argos store and 200 digital collection points by the end of 2016 as it looks to leverage Argos’s sector leading logistics capabilities. Seven Habitat concessions will also open by next March, an upper- Why we chose it mid market brand that has a natural fit with Sainsbury’s. 1. Demonstrates how Argos and Habitat can provide compelling new ‘Foodhall’ has much potential to reasons to shop at Sainsbury’s, allowing Sainsbury’s to capture a much emphasise Sainsbury’s food greater share of shoppers’ spend. credentials in store with an 2. Re-imagined food-to-go offer enables this large (5,700 SQ M) store to expanded non-food offer. serve food-for-now shopper missions as effectively as main shopping trips. 3. Sushi Gourmet concession reinforces a re-styled bank of counters and makes the ‘Foodhall’ concept more experiential.

Source: IGD Research © IGD 2016 Western Europe: Carrefour

Overview: Carrefour, Saint Marcel, Paris, France The first interpretation of the ‘gourmet’ or ‘premium’ format that Carrefour has added in France, Saint Marcel opened in July 2016. The store was redesigned with the shopper firmly at the forefront of the planning. A food-to-go area at the entrance has longer operating hours than the rest of the store, enabling shoppers to buy breakfast and evening meal solutions quickly and easily. The rest of the store’s offer, meanwhile, has been adapted to meet local shoppers’ needs.

Future development Carrefour’s premium or gourmet format has been added in Italy, Poland and Spain, underlining its global potential. In France, the company believes there is the opportunity for only about 30 upmarket stores, with most to be opened in Paris.

Why we chose it 1. While the format may not be rolled out to hundreds of locations, it adds another option for Carrefour to flex its offer to meet the needs of different shoppers, especially in urban areas. 2. Operating within the centralised buying structures of Carrefour, the format provides store managers with the opportunity to adapt ranges, echoing the benefits of the franchise model. 3. From the food-to-go area, to locally-focused ranges and a range of checkout options, Carrefour Saint Marcel has been designed with shopper missions firmly in mind. Source: IGD Research © IGD 2016 Western Europe: Urban Deli

Overview: Urban Deli, Sveavägen, Stockholm, Sweden Urban Deli is a combination between a restaurant, a food hall, a supermarket and a bakery. The business originally launched in 2009 and now operates three sites in Stockholm. Urban Deli also has its own bakery production and offers catering, rental, conference and banqueting facilities. Leading Swedish retailer Axfood acquired a 50% stake in the business in 2014.

Future development Earlier this year, Axfood appointed Jesper Weidlitz as President of Urban Deli. Weidlitz originally founded the concept and will combine his new role with business development.

Why we chose it 1. Despite only operating three stores, this concept could grow further: it’s on trend with the evolution of broader food-led spaces, rather than being a just food retailer or restaurant. It’s store in Sveavägen is a blend between a retailer, restaurant and rooftop bar, with a focus on food-to-go. 2. Modern design, cool look and feel and unique branding that sets it apart from the competition. 3. It will be interesting to see how Axfood grows the Urban Deli brand further and implements learnings into its other store formats.

Source: IGD Research, Urban Deli, Urban Orzolek, Axfood © IGD 2016 Western Europe: Aldi

Overview Aldi Süd in Germany has opened a total of three ‘Future stores’ in 2016. The new concept has been designed to incorporate the strategic focus of the business and has a bigger focus on the shopper. With a modern look and feel, and initiatives such as digital screens and a coffee machine, the store shows a significant shift in thinking for the retailer.

Why we chose it? Future development 1. This store demonstrates the shift in direction Aldi is starting to take, moving away from the bare Whilst it is unlikely this format will bones hard discount format and creating a store which has some ‘supermarket’ elements. be rolled out, Aldi Süd is refreshing 2. Learnings from this concept are being used to influence the refresh of the rest of the estate, the entire German estate over the such as lower shelving to make it easier for customers to access products. next four years and will be 3. There are more brands in-store, showing Aldi’s willingness to adapt to the market- In Germany introducing some elements from this customers are increasingly loyal to brands, particularly in categories such as baby and pet food. concept into the stores.

Source: IGD Research © IGD 2016 Eastern Europe: Mercator

Overview: Mercator hypermarket, Ljubljana, Slovenia Mercator, owned by the Croatian Agrokor Group, is the leading retailer in Slovenia while Agrokor Group (Mercator and Konzum) is the largest retailer in the ex-Yugoslavia region. Mercator has recently remodelled its hypermarket in Ljubljana Šiška to its newest store concept showcasing the latest retail innovation. A similar flagship store was opened in Zagreb Radnicka, Croatia early this year.

Why we chose it Future development 1. Impressive 25M delicatessen counter with wide range of hot meals. Hypermarkets are not the core format of Konzum (Mercator). The 2. Broad range of services such as florist and pharmacy. majority of its revenues are generated from small store formats. It is 3. Focus on in-store theatre including pizza making at the deli, bread very unlikely that the newest store concept will be rolled out in other making etc. Konzum markets like Serbia and Bosnia and Herzegovina.

Source: IGD Research © IGD 2016 Eastern Europe: Mega Image

Overview: Mega Image Baneasa supermarket, Bucharest, Romania Ahold Delhaize’s Mega Image is the largest retailer in Romania and a key player in the Balkans. It operates a portfolio of supermarkets and convenience store with a strong base in Bucharest. Mega Image is one of the most innovative retailers in the region. It has been testing several new store concepts featuring traditional local food, wine humidor and healthy living product.

Why we chose it? Future development 1. Focus on premium elements including large wine humidor and cheese With its strong market share in Bucharest, Mega Image humidor. will be targeting other large cities in Romania. In 2. Emphasis on creating a market look and feel within the produce department. addition to its successful Mega Image supermarkets, 3. Focus on organics and healthy living as key differentiators within the market. the retailer will be developing network of Shop & Go convenience store network.

Source: IGD Research © IGD 2016 China: Easy Carrefour

Overview: Easy Carrefour, Gonghe, Shanghai Carrefour China introduced Easy Carrefour, a new neighbourhood convenience concept, in Shanghai at the end of 2014, to capitalise on the growth in proximity shopping. These stores feature food-to-go options with seating, fresh produce and offer free wi-fi as well as parcel collection services for online shopping. The retailer is currently operating 16 stores under this banner in China.

Why we chose it Future development 1. The store offers a wide food-to-go selection, with both Asia and Western foods and beverages, As the hypermarket format driving footfall and increasing dwell time in-store. continues to struggle, Easy 2. The store differentiates itself from other convenience store chains by carrying a much broader range Carrefour is becoming a growth of fresh produce at the same price as in Carrefour's hypermarkets. engine for Carrefour, besides the 3. The store is ‘connected’ with free wi-fi, kiosks for various services, QR code to promote its account online channel. It is rolling out on social media and parcel collection for online shopping. this format in Shanghai.

Source: IGD Research © IGD 2016 Thailand: Central Food Hall

Overview: Central Food Hall, Bang Na, Bangkok Central Food Hall is an upscale supermarket banner of Central Food Retail, one of the leading multi-format retailers in Thailand. There are eight stores under this banner, located in shopping centres in affluent residential areas or tourist locations. This format endeavours to be “the best place to eat, shop, explore and experience a fusion of tastes from around the world.”

Why we chose it Future development 1. The store looks to show off its fresh produce sections and has a clear focus on high quality The retailer will expand this format in products, featuring a strong range of organic produce. It also excels at creating theatre in-store. areas where affluent shoppers and 2. The store offers a superb food-to-go selection including a salad bar, a soup bar, and counters for expatriates live and work. cold deli and cooked food. The existing outlets are regularly 3. The retailer aims to bring an exclusive selection of exciting products to shoppers. As an exclusive refurbished in order to stay fresh and importer of Waitrose to Thailand, Central food Hall stocks its private label products in-store. exciting.

Source: IGD Research © IGD 2016 Vietnam: Emart

Overview: Emart, Go Vap, Ho Chi Minh Emart, South Korea's largest hypermarket chain, opened its first Vietnamese branch in the Go Vap district of Ho Chi Minh City in December 2015, which is a 12,000 AQ M hypermarket.

Why we chose it? 1. The retailer has designed an impressive centre store, with a dedicated zone for shoppers to trial drones and other electronic products. 2. Its food-to-go section also includes a wide variety of international food, prepared freshly in-store by well trained staff. 3. Emart highlights its strengths in its private label range, No Brand, which provides a clear value proposition and point of difference for the retailer to stand out from the competition.

Future development Emart has announced that it plans to tap into the Vietnamese market by investing US$200m in the country by 2020. Under a strategic partnership signed with the city of Ho Chi Minh, the retailer is planning build more hypermarkets, supermarkets and various other types of commercial facilities in the city. Source: IGD Research © IGD 2016 Australia: Woolworths

Overview: Woolworths, Warringah Mall, Sydney Woolworths relaunched this store in November 2016 and is the latest iteration in the retailer’s efforts to renew growth across its portfolio. The store takes on a completely new design to a typical store, with an opened up store entrance, new layout, better fixtures and lighting, plus a more consistent colour scheme throughout.

Future development Woolworths is cutting back on new space growth in the year ahead and investing more attention into Why we chose it? improving its existing stores, with 80 1. The new format offers an excellent fresh food hall as you enter the store, with low level units locations due to features the new look and great sightlines. The use of wooden fixtures, chalk boards and new lighting, really helps and feel by the end of the financial the retailer re-establish its slogan, as ‘the fresh food people’. year, plus a further 50 stores to have 2. The store features Australia’s strongest health food range, including single pick organic fruit front of store upgrades. and vegetables, as well as 26 bays in one aisle dedicated to on-trend health foods. 3. Upgraded services are also on offer with more space given over to bakery, new sushi, meat and fish counters, plus a cheese room, with its own dedicated full time cheese expert.

Overview: Nahdi, Jeddah, Saudi Arabia The first of the retailer’s ‘future pharmacies’, the Nahdi store opened in November 2016 underlines how the chain has added technological solutions, expanded its ranges and evolved the shopper journey through the store, while adhering to its small selling space design.

Future development The new design and layout will form the template for all Nahdi stores that will be opened in the short term. Given the success of the pharmacy channel in Saudi Arabia and Nahdi within it, it is likely to prove popular with shoppers.

Why we chose it 1. Saudis trust pharmacists and the small size of stores mean they benefit from being near to shoppers, which means that there is less pressure on them to evolve. Despite this Nahdi has continued to innovate to stay ahead of the market. 2. The recent unsuccessful attempts by hypermarket operators to open profitable convenience stores in Saudi Arabia underlines the challenges proximity formats face in the country. Nahdi’s success with the format belies the challenges that it faces. 3. Using its positive perception and strength in the market, Nahdi has been able to add to its offer by signing exclusive deals with international brands, such as Derma, a natural skin care product.

Overview: Woolworths Waterstone, Cape Town, South Africa Woolworths’ flagship store in South Africa , Waterstone spotlights its food credentials through the quality of its offer, food-to- go ranges and its dine in café/restaurant area. The retailer’s standard grocery offer is enhanced at Waterstone by the presence of a coffee bar, chocolate concession and a wonderful bakery offer, all of which provide shoppers with reasons to stop and spend longer in-store.

Why we chose it? Future development 1. Woolworths Waterstone is a statement from the retailer about its strength in grocery; Woolworths sees limited opportunities spotlighting its local buying and long-standing relationships with suppliers. to recreate the totality of what is on 2. The retailer spotted shoppers’ desire for convenience and happiness to eat at supermarkets, offer at Waterstone, choosing instead to with the food-to-go ranges complemented by the café/restaurant at this store. roll out the elements that it believes 3. Waterstone is a great example of how supermarkets are able to blur their strategies and offers work best and have the widest with elements of consumer foodservice to target new shoppers missions. application across the whole country.

Given the rapid evolution of store formats, is it time to re-think how you segment and categories your key customers? Many retailers are moving into new channels and 1 reaching out to new customer groups through format development.

Repurposing existing space remains a key trend. Are the customers and missions that core formats are aiming to meet through this process creating new opportunities for 2 your products, or challenging your existing business?

There is enough digital experimentation underway to suggest that it will have a

significant impact on store formats in the future. Is your business engaging in this 3 experimentation to identify where the opportunities might be?

With foodservice development a priority for a number of grocery retailers, what opportunities does this present for your company, either through the supply of raw 4 ingredients or cross-merchandising relevant products?

While there are specific trends which are shaping format development in individual markets, it is important to look globally at the changes underway and what lessons can 5 be applied across regions and markets.

Source: IGD Research © IGD 2016 Organise a retail study tour Learn more about Retail Safari program and how we can build a customised study tour for you and your team

Looking for inspiration in key cities? Click here to see some of our city guides including Boston, London and Amsterdam.

Review the latest store concepts Visit our store visits hub to read our latest reports showcasing other new store formats from across the world.