Jean Rickli and John Williams J.C. Williams Group 2

Transcription

1 Advanced Retailing: Coming Face to Face with the Omni Channel Phenomenon Instructors: John C. Williams and Jean Rickli 1:00-2:30pm Jean Rickli and John Williams J.C. Williams Group 2 1

2 Resources Retail 4G Retail Innovations National Retail Bulletin (NRB) 3 Totally New Game! I. Introduction: Massive Disruption! II. Changing Consumer III. Ways to Make Money IV. Retail Strategies that Work V. New World of Retail VI. Planning for the Future 4 2

3 I. Introduction: Massive Disruption 5 Traders Enter: A New Distribution Channel! Fairs Towns Stores Catalogues NOW! 6 3

4 New Distribution Channel has Created: New technologies New shopping patterns New operating models New everything! Biggest Single Business Disrupter Ever! 7 New Channel is at a Tipping Point Select commodities are at 20% online Same size of market different distribution! 2% 20% Stores Stores The pie has not grown other channels impacted! 8 4

5 Retail in Distribution Old Way 9 Shopping Today 10 5

6 New Compressed Lifecycle Emerging Growth Maturity Decline Years 11 Sales & Profit Growth Personalization/ Customization Home Delivery Automated Shopping The Retail Lifecycle Unless innovation, decline is certain! Digital Home Improvement Office Superstores Hypermarkets Lifestyle Retailers Drug Teen Specialty Retailers Stores Wholesale E commerce Supercentres Clubs Quick Casual Rest. Hard Discount Omni channel C stores Global Platforms Fast Supermarkets Food Dollar Stores Discount Stores Gen. Merch. Music Retailers Toy Superstores Department Stores Video Innovation Acceptance Maturity Decline 12 6

7 Successful Retailing Touches the ever-evolving consumer Always changing life cycle Has more of what people want, less of what they don t want Differentiates Difficult to do exceptionally Finds the right people 13 Thousands of Different Contacts/Customers 24 Hours a Day, 365 Days a year, global 14 7

8 The Really Big Picture! Time Retail Format Values Customer Department Main Street Assortment Traditional Stores Specialty Stores Shopping Centre Variety Middle Mass Big Box Power Centre Value Suburban Rise of E retail Web Convenience Young 2010 Cross Channel Store, Catalogue, Web Digital Mobile Tablet Smart Phone Research Simple Low cost Instantly Mass Early Adopters Omni channel Store Digital Price Convenience Assortment Global 15 The Decline of Department Stores Department Store Share of Non-Auto Retail Sales ( ) 12.6% 12.2%12.1% 11.8% 11.3% 10.6% 10.2% 9.6% 8.9% 8.3% 7.7% 7.2% 6.8% 6.3% 6.3% 6.0% 5.6% 5.2% 4.9% 4.6% 4.5% 4.2% Source: U.S. Census Bureau Department stores (excl. Leased Departments) share of Total Retail Sales (excl. motor vehicle and parts dealers) 16 8

9 U.S. Online and Web-influenced Retail Sales ($ billions) $4,000 $3,500 $3,000 $2,500 $1,374 $1,481 $1,580 $1,677 $1,766 For $1 spent online, $5 of offline sales are influenced by the Web $2,000 $1,500 $294 $325 $355 $385 $414 Web influenced offline sales Online retail sales $1,000 Offline Sales $1,551 $1,524 $1,512 $1,506 $1,513 $500 $0 U.S. online and webinfluenced retail sales as a % of total sales % 54% 56% 58% 59% Source: JupiterResearch 17 JCPenney.com Omni-channel Synergy Total Spending Increases as Customers Shop Multiple Channels Average Yearly Dollars Spent by Customer $157 $195 $201 $446 Internet Retail Catalogue Internet + Catalogue $485 Internet + Retail $608 Catalogue + Retail $887 Catalogue + Retail + Internet 18 9

10 1919 II. Changing Consumer Those darn shoppers keep changing on me! 20 10

11 Demographics Changing Population Changing Households Demographics Ethnic Diversity Income Polarization 21 Percent of Population over % 40.4% 40.9% 41.5% 39.0% 35.9% 36.7% 37.3% 38.1% 34.6% 29.8% 31.5% 27.6% 24.4% 25.6% 26.0% 25.8% 25.5% 26.0% Source: U.S. Census Bureau 22 11

12 Population is Shifting to Older Age Cohorts 23 New Role of Women +50% college degrees Majority of law, doctors, teachers, business 15 20% are at the top Median age for marriage: 1960=20; 2015=

13 Changing Diversity of the U.S. Population It will drive increased complexity and new targeting efforts for retailers 25 Changing Diversity of the Canadian Population Distribution of Foreign-born Population, by place of birth 26 13

14 Percentage Percent of Women Ages 20 to 64 in the Workforce Civilian labor force participation rates by sex, 1950 to 2005 and projected 2010 to Source: Bureau of Labor Statistics Men Women 27 Haves & Have Nots Mean Household Income (adjusted dollars) 28 14

15 Success Has Been In Catering To The Extremes 29 Changes in Consumers Values Social consciousness Environmental sensitivity Traditional values Empowered consumers Value orientation Time compression What is going on right now? 30 15

16 Trading Up and Trading Down Trading Up Trading Down 31 Customer Behaviour: Shifting Priorities Consumers are adding more criteria to their shopping requirements beyond the initial selection of a product or service. Goods Services Over eight in 10 women prefer to do something for themselves rather than buy something for themselves, it is no surprise that luxury services are often in strong demand and that, according to American Demographics, 72% of women said that their last luxury purchase was because they wanted to treat themselves to something special

17 Shifting Priorities Customer Behaviour: Item Solution 33 Shifting Priorities Customer Behaviour: Mass Individualization 34 17

18 So, the Future Consumer Income? Debt? Aging? Negative towards consumption? Demanding? Services? 35 III. Ways To Make Money 36 18

19 Profit Model: Traditional Retailers Dept. Store/ Specialty Chain Promotional Dept. Store Mass Merchandiser/ Chain Discounter Specialty Book Store Sales 100% 100% 100% 100% Gross Margin ±40% 35% 28% 39% Operating ±37% 32% 26% 35% Expenses Operating Profit 3% 3% 2% 4% Turnover Sales per sq. ft. $200/300 $200/300 $300 $ Profit Model: New Wave Retailers EDLP* Discounter Super Centre Category Killer Club Warehouse Sales 100% 100% 100% 100% Gross Margin 25% 23% 15 22% 11 12% Operating Expenses 19% 18% 13 18% 10% Operating Profit 6% 5% 4% +2% Turnover Sales per sq. ft. $300 $500 +$700 $1000 What is the Difference? 38 19

20 Profit Model: Internet Models Sales 100.0% Gross Margin 29 Operating Expenses 29 Operating Profit 0% CAGR ( 01 08)* +20% Turnover 11.1 Source: Annual Reports 39 Plus New Operating Models! Activity Old Now (Fast Fashion) Create/buy 2 3 months 13 days Delivered 4 weeks/3 days 1 2 days, 2 hours Advertised 4 weeks/2 days 1 week, instantly Sold In stores Anywhere 40 20

21 NOW POWER Drives Growth! Metrics Old New Growth 0 3% 20% Time to market 2 3 months 13 days Margin % 40% ±60% Turnover 4 20 Result $160 $1, NEW Lower Expenses for Some Distribution Centre In store Old Some handling Automated Payroll 17 20% Semi self Full service cash (Some self serve) New Random location Drones Multiple DCs Robots Same 30% payroll 10 15% 5% if club 42 21

22 In Summary Speed Save 2 months Margins Add 10 20% Costs Save 5 10% Growth High velocity 5 20% 43 New Competition No rules Most liked Fastest 450 million SKUs Now Whole Foods 44 22

23 Amazon Disrupts! Prime members: 60% USA; 30% Canada Impacts national brands Now 50% e-commerce Driving all innovation ($15 billion per year) Alexa and Echo voice enabled speakers 45 New Opportunities Logistics being redefined Mega DCs: Robotics, drones Random storage Cross-dock Specialists: Cool Fast movers Fresh Warerooms: hubs with store Strategic locations Total technology driven 46 23

24 Retail Operating Statement Net sales (after taxes and returns) Less cost of goods: Freight in Markdowns, shrinkage, work room Gross margin, gross profit Less: Expenses: fixed variable depreciation (non cash) Pre tax profit 100% 45% 5% 50% 44% 6% 50% 47 Retail Operating Statement Expenses Wages (store and non-store; management and staff) Benefits Occupancy (rent, taxes, etc.) Marketing Accounting, IT Banking, credit Administration Buying Receiving Depreciation Total expenses Pretax profit % 48 24

25 Operating Ratios Sales and sales per square foot Retail system Markdowns Sales/wages ratio Net profit Stock to sales ratio Turnover Gross margin return on inventory investment 49 Sales and Sales per Square Foot All ratios are measured as a % of net sales. Sales are after taxes and returns Sales per square foot: Net annual sales $350,000 = $350 Total selling area in sq. ft. 1,000 Measure productivity and efficiency Track and follow closely Why the big range in performance by category? 50 25

26 The Balance Sheet Provides a financial snapshot of the assets and liabilities of the company Prepared at least once a year (or on a monthly or quarterly basis) The primary tool (used both internally and externally) to assess the health of your business 51 Retail Balance Sheet (e.g., Successful Supermarket) Current Major Current Cash Short term Accounts Receivable Inventory Other; Total Fixed assets, real estate Other; Total Accounts payable Income tax due Bank loan, etc. Debt due in year Assets ($000) $686 $364 $381 $1,310 $175; $2,916 $4,174 $4,851; $9,025 Liabilities ($000) $2,242 $78 $630 $259; $3,209 Long term Debt (bonds) $2,684; $5,893 Shareholder Equity Capital Retained earnings $3,124 $9,

27 Liquidity Ratios: Current Ratio Inventory Turnover/Ratio Accounts Receivable/Ratio Profitability and Activity Ratios Gross and Net Profit Margins Return on Net Assets (RONA) Break-even Calculation Financial Ratios Gotta Know Inventory Turnover/Ratio Profitability and Activity Ratios Gross and Net Profit Margins Otta Know Break-even Calculation Can Know Current Ratio Accounts Receivable/Ratio Return on Net Assets (RONA) 53 IV. Retail Strategies That Work Where can I go? Can I cover all the bases? How will I become a legend? 54 27

28 Retail Strategic Compass Model Which E will you be rated a 5 on? 55 A Customer Focused Strategy Strategic Es Compass Model: Is customer based Solutions are often multi-faceted Retailing is a service/solutions industry That s the value added! Need to score 4s on one to survive Can score 4/5 on two to dominate Score 5 on three to become legendary 56 28

29 Easy: They are Efficient, I Save Time Location and open hours Layout, signage, checkout efficient Omni-channel e-retail support shopping anywhere Assortment dominance (all in one place) Big-box, Home Depot, Bed, Bath and Beyond one-stop; shopper saves time Shoppers Drug Mart/McDonald s are everywhere Amazon s services

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31 61 Economical: I Always Save There" Lowest prices and speed are important Operational efficiency drive costs out and download to customers Supply chain management Walmart, Costco, Dollarama, Uniqlo 62 31

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33 Experiential I m Going to Reward Myself Today Learning, free fun, sensual, sophisticated Constant renewal is required Disney, Eataly, Build-a-Bear Workshop, amazon Theatricalization of shopping!

34 67 Ego: I Really Think This Store Reflects Who I Am! Status: relates to very specific niche customers Quality beyond physical experience Neiman Marcus, Tiffany, Cole Hahn, Club Monaco, H&M, Zara Club-like, limited distribution 68 34

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36 71 Add the WOW Factor! 72 36

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39 77 It s 100% About Strategic Alignment Are the key tactics, systems and processes aligned with the strategy and culture? Culture: Core values, business values and fundamental activities Key Elements: - Merchandising - Operation - IT - Marketing - Services - Design - Real Estate - Design - Finances Omni-channel distribution 78 39

40 V. New World Of Retail 79 Definitions E-commerce retail A transactional online channel to purchase products that need to be delivered physically (excludes travel and downloads unless otherwise specified) Mobile Smartphones and tablets (unless otherwise specified) Multi-channel model Multiple sales channels (e.g., store, web, catalog) not necessarily used in a coordinated manner which produces a fragmented experience Omni-channel = Seamless cross-channel retailer Use a new retail paradigm which employs the coordinated use of multiple channels (e.g., store, web, mobile, social) to support customer sales, and education in a seamless and consistent manner Pure Play retailer A retailer who only sells through one channel 80 40

41 Terminology is in Constant Flux Omni-channel Improved cross-channel A business model and operational model The way consumers shop today Tech term = Unified commerce = Single platform 81 Mobile Users Buy More Google Shopper Marketing Council,

42 Retail and Social Media 90% of people have used social media in some way to communicate directly with a brand. Social media surpasses phone and as the first place most people turn when they have a problem or issue with a product or service. Source: Sprout Social Customer Survey, Big DATA to Transform Activities and Events Metric Description Formula Conversion rate % of visitors to orders Online order/visitor CTR click through rate % of recipients clicked to Clicks/recipients trackable link Time on web page Avg. visitor stay on page Avg. time/page per visit Average order $ Avg. $/order Sales/order Source: KPMG/NRF 84 42

43 Online Marketplaces 85 Online Power $89B (2014) 426 items/sec sold 2013 holiday 100 fulfillment centres est. 2 million 3 rd party sellers Amazon Drones Amazon Services Amazon Prime Instant Video Workspaces Affiliate Program 86 43

44 Online Power Gross sales $1.9 BILLION IN 2014 Up 43% from M active sellers, 19.8M active buyers Mobile accounted for 36.1% of GMS and 53.2% of visits 87 Smart Shopping Rooms 88 44

45 Nordstrom New fulfillment centre 30% Capex on Technology (20% before) Tech platform, fulfillment capability, personalization to keep up with omni-channel and smartphone savvy customer base ipads in dressing rooms (in-store experiences) Improvements in mobile site 89 Bullseye Playground 90 45

46 Topman Community

47 93 Online shopping in fashion area 94 47

48 ION - Singapore 95 Plaza 66 A chain shopping mall in ShenYang, LiaoNing Province, China 96 48

49 VI. Planning For The Future Omni-channel and your mall Lifecycle audit of tenants Getting tenant mix right 97 Omni-channel and Your Centre Retailers on multiple platforms Seamless experience for consumers Retailers are figuring it out What s the role of the shopping centre? 98 49

50 Shopping Centres & Partnerships 99 Aggregated Delivery Services

51 Pick-up Locations 101 Mobile & Web Food Ordering

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53 105 Beauty Events

54 107 Westfield Mall San Francisco Fashion show in the mall

55 In Summary A sea-change in values and consumption. What are your tenants doing about it? Shift in retail channels What retailers will thrive? What new trends are emerging? How will you take action on weak retail? How to harness omnichannel 109 Course Evaluation Please Complete Your Evaluation Now. 1. Take Out Your Smartphone or Tablet 2. Go to survey.icsc.org/pdwcc 3. Select this course: Advanced Retailing: Coming Face to Face with the Omni Channel Phenomenon

56 Thank you and keep in touch The Retail Shop. Toronto Chicago Montreal (416) Jean Rickli John Williams 56