The New Consumer and Changes in Retail
Presented by: Perry James
November 2019
Copyright 2019. The NPD Group, Inc. All Rights Reserved. This presentation is proprietary and confidential and may not be disclosed in any manner, in whole or in part, to any third party without the express written consent of NPD. Today’s Topics Of Discussion
Overarching The State of Industry Trends & Drivers Consumer Ecommerce Trends
The State of Office Convenience and Final Thoughts Supplies
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 2 The Consumer Needs Driving Trends
Convenience Health & Wellness Entertaining
Travel and Experiences Sustainability
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 3 Industry Trends Total U.S. market (all channels)—12 months ending September 2019
Total $2.0T (+1.8%)
Year over year % change Dollars (adjusted )
Source: NPD US Consumer Tracking Service *Nielsen Retail Measurement Services, Total Food View, 52 weeks ending Sept ’19 Auto, Beauty, Office Supplies, Housewares, Juvenile – NPD Retail Tracking Service Total $ does not include Books, measured in Units Video Games – Market Dynamics Report; Media Entertainment – Video Watch + DEG **Numbers reported for 12 ME Jun ‘19 SVOD estimates Nielsen data from Nielsen Retail Measurement Services DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 4 Retail Growth The third quarter saw stable growth in line with the previous quarter
Rolling 12ME Adjusted Dollar Growth Trend Sales
Total Market w/o Commercial Food Total Market
Source: NPD US Consumer Tracking Service Includes Accessories, Apparel, Auto, Beauty, Footwear, Housewares, Juvenile, Office Auto, Beauty, Office Supplies, Housewares, Juvenile – NPD Retail Tracking Service Supplies, SDA, Tech, Toys, Video Games, Media Entertainment, CREST, and Nielsen CPG Video Games – Market Dynamics Report; Video Entertainment – Video Watch categories Nielsen data from Nielsen Retail Measurement Services
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 5 Industry Trends Total U.S. online market—12 months ending September 2019
Total $195.2B (+9.7%)
Year over year % change Dollars (adjusted)
Source: The NPD Group/ US Consumer Tracking Service 12ME Sept 2019 except Consumer Electronics: Checkout Tracking Service Beauty, Office Supplies – NPD Retail Tracking Service; Media Entertainment – Video Watch *12 ME June ‘19
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 6 E-commerce Growth E-commerce is still growing in the high single digits, but has levelled off
Rolling 12ME Adjusted Dollar Growth Trend E-commerce Sales
Online Market
Online Market w/o Commercial Food
Source: NPD US Consumer Tracking Service Industries include Accessories, Apparel, Beauty, CREST, Footwear, Housewares, Office except for Beauty, Office Supplies and Housewares – NPD Retail Tracking Service Supplies, SDA, Tech, Toys, Media Entertainment, and physical Video Games and Consumer Technology – NPD Checkout Tracking
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 7 Industry Trends U.S. B2B channel sales—12 months ending September 2019
Year over year % change Dollars (projected)
Source: The NPD Group/ US Retail Tracking Service 12ME September 2019
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 8 Industry Growth—Top Categories 12 months ending September 2019
Y/Y $ Growth Millions and Y/Y % Growth Additions from Q2 Stereo Headphones 35.7% • Basketball Inspired Tablets & e-readers 19.9% footwear Running Inspired 12.3% Tech • Smart Displays Total Sweatshirts 6.9% Skincare 4.9% Beauty Cookers 16.0% Smart Entry 60.8% Apparel Tablets & e-readers - Accessories 42.5% Video Game Accessories 9.7% VG Total Other Bottoms 49.5% Subtractions from Q2 14.8% Security & Monitoring Footwear • Outerwear Tops 20.4% Specialty Cleaning • Wipers Casual Athletic 5.8% SDA Basketball Inspired 5.1% Smart Displays 5911% Auto Hair 16.4% Hand/Stick Vacuums 11.6% Toys Cross Training Inspired 59.9% Total Sleepwear 2.1% Skate 16.3% $0 $400 $800 $1,200 $1,600 $2,000 Source: The NPD Group/ US Retailwatch Tracking Service Note: Mobile excluded pending the addition of a retail tracking service; video games is physical product only *Video Games- Consume Tracking Service
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 9 Stereo Headphones Dollars and ASP Dollar sales and average sale price continued to climb for this category in 2018
$3.0 $70
$2.5 $60 $50 $2.0 $40 $ ASP $1.5 $30 $ Billions $ $1.0 $20 $0.5 $10 $0.0 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: The NPD Group Inc . U.S. Consumer Tracking Service Stereo Headphones – over ear with headbands/band top of head
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 10 Industry Growth—Bottom Categories 12 months ending September 2019 Y/Y $ Growth Millions and Y/Y % Growth Additions from Q2 -4.7% Total Knit Shirts • Action Movies -17.4% Video Games Hardware • Streaming Audio -11.7% Total Woven Shirts Speakers -9.0% Total Dresses Tech • Cell phone accessories -6.4% Total Jeans • Pants -5.8% Makeup Accessories • Video Game Hardware -2.2% Total PCs -7.7% Bags Apparel -10.3% Infant/Toddler/Preschool Toys Video Scan -18.1% Vehicles Subtractions from Q2 Outdoor & Sports Toys -6.0% Beauty • Juvenile Furniture -2.1% Total Pants • Children/Infant sets -5.9% Cell Phone Accessories Watches • Video Cards -10.9% Streaming Audio Speakers Video Games • All other toys -12.2% Total Digital Still Cameras • Juvenile Travel -3.5% Total Shorts Toys -14.8% Plush -1.3% LCD TV -4.6% Inkjet Cartridges -14.1% Action/Adventure -$1,000 -$800 -$600 -$400 -$200 $0
Note: Mobile excluded pending the addition of a retail tracking service; video games is physical product only Source: The NPD Group/ US Retailwatch Tracking Service
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 11 E-commerce—Retail Penetration 12 months ending September 2019 45% 41%
31% 29% 26% 24% 25% 22% 20% 18%
11% 6% 5%
2 0 2 2 4 3 2 2 0 1 2 3 5
Toys
Auto
CPG**
Video Games
Apparel
Prestige Beauty
Office Supplies*
Footwear
Small Appliances
Technology
Accessories Commercial Food Commercial
CPG** Commercial Office Auto Toys Small Prestige Apparel Footwear Accessories Video Technology Media Entertainment Media Food Supplies* Appliances Beauty Games Entertainment
*Excludes Commercial Channels **CPG number sourced from Accenture “Winning in the Digital Channel” Source: The NPD Group/ US Consumer Tracking Service, except Office Supplies and ***% of buyers online via NPD Car Care Track Beauty: Retail Tracking (POS) Service, Consumer Electronics: Checkout Tracking
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 12 Where is E-commerce Growth Coming From? Retailer dot coms are gaining traction
Q1 2019 E-commerce Performance
Contribution of Dollar Growth
19% 17% 13% 6% 7% 3% 1% 2%
Amazon.com Walmart Target Etsy Best Buy Home Depot Costco Mr. Chewy
Source: The NPD Group, Checkout, 3 ME March 2019
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 13 What’s Trending? Save Me Time Consumers who value “convenience” and reward retailers for this Eliminate Time friction
MSE (Make Shopping Easy) 1 2 Remove Extra Steps & Trips
Success: “Endless Aisle” More Customer Service 4 3 and Right Effort
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 14 Set It and Forget It Video and Music streaming and housing payments have the highest occurrence of automated payments or recurring use % of Respondents 33.0%
22.0% 21.6%
16.4% 14.9% 10.4% 8.0% 7.9% 5.5% 4.9% 4.4%
Video & Housing Auto Medication Reading Sport/ Education/ Clothing/ Beauty Other Food/ Music Payments Materials Fitness Tuition Apparel Prepared Streaming Meals
Q.4 For Which Of The Following Types Of Products Or Services, If Any, Do You Currently Source: The NPD Group, Omnibus, October 2018 Subscribe To And Receive Automatic And delivery for? Source: The NPD Group, custom consumer survey, April ’19
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 15 Consumers are King
Consumers can now Retail store formats Consumer trends “choose” the course adapted to the desires influenced the of their viewing of consumer merchandise assortments
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 16 Social Influence is Changing Word of mouth recommendations through social media are growing in importance
Q: Which of these do you believe has the most influence on what you buy, where you eat, or the movies or TV shows you watch? 17
Comments or 2 recommendations Ads I see 23 I see on 40% 45% on TV social media
15%
Ads I see on the internet
Source: Civic Science, pop 13+
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 17 Service is the New Product Retailers and Brands are focusing on new incentives to drive store visits and loyalty
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 18 Travel Continues its Growth Categories connected to travel have seen the benefit of global air traffic growth of +8% in 2018
STEREO HEADPHONES LUGGAGE SETS FANNY/WAIST PACKS STEAMERS +38% +11% +57% +3% $ sales in 2018 $ sales in 2018 $ sales in 2018 $ sales in 2018
Source: The NPD Group, Consumer Tracking Service, $ adj. 12 ME Dec ‘18
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 19 The Rise of Direct to Consumer Brands are able to bypass traditional retail models to sell directly to their targeted consumer base
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 20 Trend: Private Label vs. National Brands U.S. private label unit growth in 2016 through 2019
National Brand Private Label
2/2016 - 1/2017 2/2017 - 1/2018 2/2018 - 1/2019
1.1% 2.8% 0.5% 7.9% -5.0% 11%
Source: The NPD Group/ Retail Tracking Service Brand Type Field Units from Accessories, Apparel, Footwear, Housewares, Team Sports Equipment, Tech, and Watches
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 21 Best in Class Right Now
Customer Experience Brand Innovation Online Loyalty Brand Trust
Technology On Trend Brand Rebound Eco-system Subscription
Directional Listing For Reference Only
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 22 Today’s Topics Of Discussion
Overarching The State of Industry Trends & Drivers Consumer Ecommerce Trends
The State of Office Convenience and Final Thoughts Supplies
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 23 Office Supplies by Channel Office supplies annual sales are $16 Billion through September, down (2%) vs last year. Ecommerce grew +11% and is gaining share.
Office Supplies Retail Industry Dollar Volume Annual Dollar Volume (Billions) Dollar Share Point Change $12 1.5
$10 1.0
Billions $8 0.5 $6 0.0 $4 $2 (0.5) $0 (1.0) Brick & Mortar Commercial B2B Ecommerce Drug Food Source: NPD Retail Tracking Service/Retail 52WE Oct 05 2019/Commercial 12ME Sep 2019 Excluding Janitorial and Breakroom
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 24 Ecommerce crushed it during BTS 2019 BTS 2019 retail dollar sales were flat (0%), despite an online growth rate of (+20%). Office Supplies Volume Percent Change
FY: 2017 – 2018 YTD 2019 BTS: 2017 – 2019 25 20 Ecommerce 20 16 13 15 11 11 8 10
5 1 1 0 (1) 0 (0) Total Retail 0 Food (5) B&M Drug (10) (15) FY 2017 FY 2018 YTD 2019 BTS 2017 BTS 2018 BTS 2019
Source: NPD Group Retail Tracking Service/Excluding Janitorial and Breakroom/FY 52WE Jan 5 2019/YTD 37WE Sep 21 2019/BTS 13WE Sep 21 2019
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential Consumer Orientation Towards Convenience Time-strapped consumers want convenience through one-stop shop or online; dollars stores continue to grow share as they expand their footprint.
Channel Dollar Share
Mass Merchant
Office Supplies Specialty 2019 2018 E-commerce Pure Play
Dollar Store
Off Price
0% 10% 20% 30% 40% 50% 60%
Source: NPD Retail Checkout Tracking Service/2ME Aug 2019/Excluding Janitorial and Breakroom
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 26 BTS drove over 50% of Ecommerce growth in 2019!
Office Supplies Ecommerce Absolute Dollar Growth Annual Ecommerce Dollar Growth BTS Ecommerce Dollar Growth
$200 $180 $145
$150 Millions
$100 $94 $46 $50 BTS Contribution BTS Contribution to Growth = 32% to Growth = 52% $0 2018 2019
Source: NPD Group Retail Tracking Service/Excluding Janitorial and Breakroom/FY 52WE Oct 05 2019/BTS 13WE Sep 21 2019
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 27 School List and Classroom Fulfillment Options
Item-by-item Picking Pre-configured School One-Click/ Add All In-stores + Online Supply Kits Standardized Kits to Cart Donations
• Customized • Customized • Available in-stores • Customized • Amazon Classroom • Several Trips • PTO/PTA Program and online. • Teachers Lists API • Wish List (on Amazon • Parents searching • Parents notified by • Package items vary. • Complete the list since 2010) for deals email. • Spotted at Office with “one-click” • Kits in Need • Provides quality • Starts early in the Depot and Kroger. • More expensive • Donors Choose time and touch and season (May/June) • More likely to yield • Used BOPIS or • Fund My Classroom feel PL rather than • Logistically Home Delivery • Adopt a Classroom national branded • Takes more time cumbersome • Other Tech: sales. • #ClearTheList (20K CALCUSO QR code members on FB)
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 28 Private Label hitting 40% of unit sales in stores during BTS
Office Supplies Retail Industry Private Label Share Unit Share of Channel Sales Dollar Share of Channel Sales 45 40 40 35 35 30 25 27 25 26 25 20 19 20 15 10 5 0 Stores - Annual Stores - BTS Online - Annual Online - BTS
Source: NPD Retail Tracking Service/52WE Jan 05 2019/Excluding Janitorial and Breakroom
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 29 Private Label Top Impacted Categories at Retail • STORES: PL gained +$600K in dollar share value and +24MM in unit share value versus national brands during BTS driven by mailing and shipping products.
• ONLINE: PL lost ($7MM) in dollar share value and gained +156K in unit share value versus national brands during BTS driven by filing and file storage and portable storage products.
Office Supplies Private Label Top Impacted Categories at Stores and Online
Stores Online (Dollar Volume Growth Contribution) (Dollar Volume Growth Contribution) Top 6 PL Growth Top 6 PL Decline Top 6 PL Growth Top 6 PL Decline Corrugated Boxes All Other Filing and Storage Shredders All Other Filing and Storage Loose Filler Paper Portable Storage Encased Pencils Portable Storage Portfolio Binders Composition Notebooks Cushioning Cushioning Traditional Pens Laminating Machine Accessories Self-Stick Flat Notes All Other Binder Accessories Expanding Portfolio Correction Tape Binder Dividers Painting Accessories Spiral Notebooks Wall Calendar
Source: NPD Retail Tracking Service/52WE Jan 05 2019/Excluding Janitorial and Breakroom
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 30 Considerations for Back-to-School 2020
Summer Vacations Summer Olympics Late Labor Day Convenience Altruism Connecting 4th of July falls Seamless One Week Later community with on a Saturday in Jul – Aug 2020 Purchase teachers & in 2020 (Sep 7) 2020 Method underserved schools. Opportunity for Consumers Will Be Season May Shift Continued Growth +60% consumers Creative Solutions Preoccupied Even Later Online donate
Seasonal Impact Elections School Calendar BTS School Lists Methods
Creative Solutions (1) Weather #ClearTheList One-Click Nov 3 2020 (2) Tourism Supply Packs Disposable (3) Antiquated Add All to Cart Supply Drives Income Calendar In-Store Courses
Source: The NPD Group
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential Key Drivers Impacting Industry Sales
Methods of Committed Consumer Blending Physical Experiences & Macro Engagement Consumption Life Stages With Digital Weather Vacations Trends Impacting Sales
Emphasis on Capturing Share of Back-to-School List Greater Focus Industry Altruism July Black Friday STEM/STEAM Teachers & Schools Fulfillment on Servicing B2B Trends Impacting BTS Sales
Ecommerce: Private Label: School Starts: Factors +$94MM Spend Dollar Stores: +$11MM Spend Shifted Sales to Seasonal BTS Tax-Free Holiday Shifted Online +14% Growth Shifted to Brands Mid-Season Sets in Stores Influence Season Spend
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential Retail Summary Call to action
Brands need to match distribution to Retailers need to be cautious of short where consumers now shop term private label strategies; play the Experiment in every channel long game
Brands need to have an overall Stores are not dead; win that traffic MarketPlace/platform strategy
Retailers need to put efforts towards Innovate, Innovate, Innovate areas they can actually compete in For Brands this is all about distribution Best Buy is winning with stores/e-commerce For Retailers this is about having a value combined strategy proposition to compete against platforms
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 33 Thank you
DocumentThe classification: NPD Group, External Inc. | PublicProprietary Use and confidential 34