Getting here! The Changing Retail Landscape Jaideep Thyagarajan Senior Market Analyst – IDC Retail Insights April 2018 Agenda Retail Is Technology Changing The What are the Differentiator winners Digitally doing? Transforming Experiences Industry Trends Redefining Achieving Retail Business Models Omni-Channel Digital Excellence Transformation 2 Everything is Changing in Retail Store The store is changing 64% Showroom/ experience center 53% Value-added fulfillment services 27% Fulfillment center for online orders Source: IDC Omni-Channel Survey, 2017 (n = 707) 3 Everything is Changing in Retail eCommerce >$2.3 trillion Global ecommerce revenue by 2018 3rd generation of ecommerce 38% AP retailers investing in ecommerce platforms in 2017 4 Everything is Changing in Retail AP Retailers >50% investing in logistics and fulfillment management in 2017 Micro-merchandising 5% in revenue Omni-channel +20% in stock turns fulfillment and new merchandise planning 5 Everything is Changing in Retail AP Consumers 51% want next-day delivery for online orders Consumers are 39% increasingly search online and buy demanding in-store 6 Everything is Changing in Retail DX Initiatives Digital Transformation (DX) 34% IoT for supply chain & customer experience 36% Advanced analytics/ artificial intelligence 7 Top Business Priorities for A/P Small-Format-Retailers Improving customer service 47% Introducing/improving products or services 43% Cost Cutting / Cost Containment 40% Selling more to existing customers 40% Increasing brand equity 33% Productivity improvement 23% Selling into new geographies 17% Moving operations to lower cost geographies 17% Attracting and retaining a skilled workforce 17% CanadaAll Industries (All Selling to new industry sectors 10% Industries) Working more closely with business partners 3% Resolving compliance issues RetailRetail 3% Other 0% 0% 10% 20% 30% 40% 50% Sample Size: 347 (All Industries), 30 (Small-Format-Retail) Source: IDC Retail Insights 2017 8 Question: Which business or organizational issues will take priority for your organization over the next 12 months? Did you know: Amazon & Alibaba are betting big on brick and mortar? Reinventing the in-store experience Social media and rewards Omni-channel retail strategy Improve online delivery times 1. Patents 6. At Home Smaller store format 2. Fulfillment 7. Service 3. Transportation 8. Bots 9 4. Products 9. Replenishment 5. Physical Retail 10. Store Automation © IDC Visit us at IDC.com and9 follow us on 9 Twitter: @IDC What are the winners doing? 1 Digital-TechnologyLed Customer Focus 2 Bigger Dreams - Smaller Stores 3 Reimagining Brands 10 1. Digital Technology Led Customer Focus Consumer Facing Innovation Core Data Accuracy and Insights Outside-In Process Integration Everywhere Everywhere Everywhere Commerce Customers Employees 11 11 2. Converging Models | Bigger Dreams – Smaller Stores • Simply no longer the need for large showroom floors where traditionally a wide range of products and brands were displayed. • Small shops can be located in many more areas, offering customers convenience & accessibility for quick shopping trips. • Higher sales per square metre, lower real-estate costs. Higher staff ratios and opportunity for hyper-personalization. 1212 3. Reimagining Brands 1313 How can YOU be a winner? Customer Experiences in the Stream of Life Omnichannel Platform Business Customer-centric Side-car approach Innovation model approach Isolated touchpoints Islands of innovation © IDC 14 Innovation models in the ecosystem Q. Could you please indicate, from the following list, the top 3 innovation models in terms of priority for your company? Top 3 Innovation Models Platform extension marketplaces Startups / Emerging technology vendors Co-innovation with large IT vendors n = 400 Source: IDC’s 2017 Retail Innovation Survey © IDC 15 Biggest retail innovation challenges / opportunity: Piloting and scaling innovation programs at speed Q. What are the top challenges that your organization is facing today to drive innovation? Top 3 Innovation Challenges Discovery & Selection Pilot, Implement and Scale Implementing at scale 9% 31% Defining the right 9% 30% innovation model • Innovation discovery and selection are Building a platform 11% 25% already at a more mature level. • Retailers' abilities to pilot, implement and 0% 10% 20% 30% 40% scale innovation are at a low level of maturity. Extremely challenging Very challenging n = 400 Source: IDC’s 2017 Retail Innovation Survey © IDC 16 Don’t lose sight of what the customer wants! Source: IDC Retail Insights Survey 2017, n=60 1717 Addressing Four Important Questions WHO WHAT WHEN HOW Intelligence Personalization Automation Channels • Life-cycle • Personalized • Timely triggers • Email segmentation browsing • Analysis • Web • Predictive • Web • Content • Mobile/SMS analytics recommender optimization • Social • Performance • Email • insights recommender Loyalty app • Store recommender 18 Noise is real: Differentiating Technologies mPayment system Mobility & Digital Apps Digital Cloud Commerce Marketing Analytics automation © IDC Visit us at IDC.com and follow us on 19 Twitter: @IDC How 3rd Platform Technologies enable Transformation? • Inventory • Service • Processes • Interfaces • Customer • Responsiveness • Interactions • Processes • Products • Product Introductions • Execution • Interactions Visible Fast Automated Intuitive • Demand • Product development • Orders • Collective intelligence • Offers • Social networking Anticipatory Participatory 20 Emerging Technologies Drive New IT Priorities © IDC Visit us at IDC.com and follow us on 21 © IDC Visit us at IDC.com and follow us on Twitter: @IDC Twitter: @IDC Competing on Experience Achieving Individualized Marketing Personalization 48% Differentiate 36% 13% 3% Static Dynamic Personas Real-time Segments Segments Contextual N=400 Source: IDC Global Retail Innovation Survey 2017 © IDC 22 Competing on Experience Winning the «Passive» Customer / Buyer Beyond “Traditional” Always Connected Self Educating Service Customers Customers Social Networks “Trusted Source” “Things” as Massive Growth customers in Customer Data © IDC 23 What matters? – Doing it right! Employee Performance Optimization Value . Automated Decision Processes . Streamlined Communication Customer . Continuous Planning | Feedback Satisfaction . Self-Learning/Training Sweetspot . Innovative Customer Experience Performance Disruption Value of Workforce Value Management Management Mastery . Contextualized Personalized Interaction . Consumer/Product Life-Cycle Interaction . Engagement Transcends Place and Time Customer Experience Performance Optimization Value Value of Customer Intimacy 24 Executive Summary Most retailers consider innovation as an opportunistic initiative (52%), 1 focusing innovation projects on delivering short-term results. The biggest retail innovation challenge – and the largest opportunity – is driving effectiveness in piloting and scaling innovation programs at 2 speed. The adoption of a platform is considered essential for innovation by the majority of retailers. 46% of retailers are planning to invest in a 3 retail omni-channel commerce platform over next 12 months. Customer experience is the core of digital transformation, but the retail market is at low maturity, with only 3% of retailers adopting a 4 real-time hyper micro autonomic approach for personalization. © IDC 25 Conclusion Observation Yes No Physical-Digital Convergence Need for Omni-Channel Strategy Store Strategy in Place Roadmap to Omni-channel established Omni-channel Work Complete 26 Change is Not Optional © IDC 27 For More Information Jaideep Thyagarajan [email protected] +61-451788655 Twitter https://twitter.com/@IDC LinkedIn https://www.linkedin.com/company/idc © IDC 28.