Understanding your Customer. J.C. Williams Group 1 INSIGHTS INTO DISTRUPTION. November 2017

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1 Understanding your Customer INSIGHTS INTO DISTRUPTION November J.C. Williams Group 1

2 Traders Fairs Towns Stores NOW Catalogues 3 New Distribution Channel Has Been Created NEW Shopping Patterns NEW Technology NEW Operating Models BIGGEST Single Business Disrupter EVER! 4 J.C. Williams Group 2

3 New Channel is at a Tipping Point Select commodities are at 20% online Same size of market different distribution! PRESENT Stores Online 20% BEFORE Stores 2% The pie has not grown other channels impacted! 5 THE CHANGING CONSUMER 6 J.C. Williams Group 3

4 Changing Population Changing Households DEMOGRAPHICS Ethnic Diversity Income Polarization 7 Percent of Population over % 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 35.9% 36.7% 37.3% 38.1% 39.0% 39.9% 40.4% 40.9% 41.5% 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 8 J.C. Williams Group 4

5 Changing Diversity of the Canadian Population Distribution of Foreign born Population, by place of birth British Isles United States South Asia Middle East Central/South America Caribbean Africa 9 Percent of Women Ages 20 to 64 in the Workforce 10 J.C. Williams Group 5

6 Haves & Have Nots Mean Household Income (adjusted dollars) 11 Consumer Spending by Generation J.C. Williams Group 6

7 CUSTOMER BEHAVIOUR 13 Success Has Been In Catering To The Extremes 14 J.C. Williams Group 7

8 Trading Up and Trading Down Trading Up Trading Down 15 Shifting Priorities Customer Behavior Adding shopping requirements beyond the initial selection of a product or service. Over eight in 10 women prefer to do something for themselves rather than buy something for themselves, 16 J.C. Williams Group 8

9 Shifting Priorities ITEM SOLUTION 17 Shifting Priorities MASS INDIVIDUALIZATION 18 J.C. Williams Group 9

10 The New Sharing Economy Millennials are Reluctant to Buy Inclined to Share Cars Music Luxury Goods Real Estate Want to own without the. burdens of ownership 19 So, the NEW consumer SAVE FAST NOW DISTRUPTIVE 20 J.C. Williams Group 10

11 Pulse of the Canadian Retail Market RetailWATCH Canadian E tail Report tracks 5,000 Canadian consumers digital shopping 21 Omni Channel = Retail Physical Stores Online Catalogues 22 J.C. Williams Group 11

12 Facts You Need 85 % Of Canadians researched information online last quarter before making a purchase Of Canadians made a return during the second quarter of % 29 % Of Canadians are Amazon Prime subscribers 54 % Of all Canadians purchased cross border in the second quarter of % Of Canadians have bought a product online 23 E commerce $38B Industry Growth rate: +14%/year (CAGR) Penetration: 6 7% Source: emarketer 24 J.C. Williams Group 12

13 E commerce Penetration Spend (by Category) E-commerce Penetration (Q4-2016) Entertainment Electronics Jewellery & Watches Children/Baby Toys & Games Sports & Leisure Equipment Clothing Kitchen, Home & Related Accessories Footwear Furniture & Large Appliances Health & Beauty Products Auto Parts & Accessories Gardening Goods & Suppliers Food & Grocery 5% 29% 26% 24% 22% 20% 17% 17% 15% 14% 12% 10% 35% J.C. Williams Group RetailWATCH - Canadian E-tail Report 25 Shopping Location Visit Frequency 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 7% 21% 51% 23% 30% 26% 21% 22% Shopping Centre/Enclosed Mall 72% 48% 29% 25% 35% Main Street/Town Online Retail Site or City Centre or Marketplace 21% 26% 29% 36% 46% 49% 11% 13% Power Centre 41% 26% 9% Outlet Centre Store 35% Never More than 3 months At least monthly At least weekly J.C. Williams Group RetailWATCH Canadian E tail Report Q: How frequently did you visit the following locations AND make a non grocery related purchase through this location, in the past 3 months? 26 J.C. Williams Group 13

14 Non traditional Influencers Influence of Non-traditional Factors in Making Purchasing Decisions (% Influential /Very Influential) Online ratings and reviews on retailers' sites and marketplaces 34% Retailer/brand websites, /online newsletter and online flyer 27% Shopping centre websites, s/online newsletter and online flyer Coupon sites 21% 21% Review sites 20% Social platform 18% Online articles, editorials and blogs 14% J.C. Williams Group RetailWATCH - Canadian E-tail Report Q: Please rate on a scale of 1 7 the influence of these factors when deciding where to shop or what products/brands to purchase; % shows respondents who chose 6 7 rating; 27 Plotting Two Paths to Purchase Necessity Based On time, replacement, price Edited assortments Easy to buy Low price Branded or not Simple Solution: Shop Online Complex Options and Context: Shop Multi Channel Expression/Ego Based Multiple options for product and environment Joy of product and search For ego/status Multi dimension experience 28 J.C. Williams Group 14

15 Emerging Technologies 29 Virtual/Augmented Reality (VR/AR) Retailers are introducing consumers to unique, interactive and immersive experiences enabled by VR and AR technologies Drones Amazon has been testing drones for Prime Air Services and aims to deliver packages in 30minutes Visual Search Using artificial intelligence to capture items and source the retailer selling in seconds 30 J.C. Williams Group 15

16 Uber Everything 31 Autonomous Vehicles Assumption: 90% of the driving population will utilize AV for all car travel Only 10% will want to own a car for specialtypurpose reasons. Urban will be affected more than rural. This will take 5 10 years to happen. 32 J.C. Williams Group 16

17 Activity New Operating Models Old Create/buy 2 3 months 13 days Now (Fast Fashion) Delivered 4 weeks/3 days 1 2 days, 2 hours Advertised 4 weeks/2 days 1 week, instantly Sold In stores Anywhere 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) Now (Fast Fashion) Random location Drones Multiple DCs Robots Same 30% payroll 10 15% 5% if club 34 J.C. Williams Group 17

18 In Summary SPEED MARGINS COSTS GROWTH Save 2 Months Add 10 20% Save 5 10% High Velocity 5 20% 35 New Competition No rules Most liked Fastest 450 million SKUs Now Whole Foods More to come 36 J.C. Williams Group 18

19 Amazon Disrupts! Prime members: 60% USA; 30% Canada Impacts national brands Now 50% of E commerce Driving all innovation ($15 billion per year) Alexa and Echo voice enabled speakers 37 Surviving the Perfect Storm of Channel Creation 38 J.C. Williams Group 19

20 The Retail Shop. Toronto Chicago Montreal (416) John Williams Maureen Atkinson 39 J.C. Williams Group 20