Phil Streatfield. LCP Consulting Ltd, The Stables, Ashlyns Hall, Chesham Road, Berkhamsted, HP4 2ST UK Tel: +44 (0) Fax: +44 (0)

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1 Phil Streatfield LCP Consulting Ltd, The Stables, Ashlyns Hall, Chesham Road, Berkhamsted, HP4 2ST UK Tel: +44 (0) Fax: +44 (0)

2 Agenda Quick intro to LCP Background to the report Key messages for CEOs and boards Compelling need to change Change is multifaceted and challenging Investment is significant and may not have return Brand considerations are significant Boards will need to evolve Other observations Close 2 September 2013

3 Firstly a quick introduction - LCP Leading specialist consultancy in supply chain & operations management Bring trusted advice and an independence of view coupled with broad market understanding Retained by some of the world s largest retailers, manufacturers and service providers Take a total business perspective on supply chains Supporting a number of retailers on the Omni journey 3 September 2013

4 Background Why did we do it? Few have a clear understanding of Omni and what it means To understand the scale of the change and what it entails To test how retail boards are embracing the change Report credentials Independent research Board level retail executives in the USA and UK Supplemented by a panel of 4 UK based retail experts Graham Barnes (Supply Director Argos) David Wild (Former CEO Halfords & Group Supply Chain Director Tesco) Dino Rocos (Operations Director, John Lewis Partnership) Neil Ashworth (CEO, Collect +) 4 September 2013

5 Key messages for CEOs On line and stores need to be integrated not like now Doing it is more difficult and complex than you think IT; Supply chain infrastructure; how the company runs (processes); how the company manages (culture) It will take more capital than you think and the return on that capital may be low its keeping you in the game To be successful you need to get the basics right delivery on time in full when you said it would happen Its going to need different skills than you have now If no omni channel plan now danger 3 years to fix 5 September 2013

6 Compelling need to change 73% of respondents are investing in Omni simply to compete Increasingly tech-savvy consumers Already shopping across channels in an Omni-behavioural way Unsustainable multi-channel inconsistencies and inefficiencies Inexorable economic pressures require a shift to new business operating models Retail is a challenging environment, but some are really expressing an interest in Omni because they can see they are losing market share; they re losing in the race to build sales. We have reached the point where we have to re-engineer the retail model - change or die 6 September 2013

7 Change is multi faceted and challenging Customer driven can Omni-channel offer a differentiated experience to a pure play on line retailer? Digital technology what s the real impact? Fulfilment integrated or separate? Fast or consistent? Inventory deployment where s the shelf edge now? Slick and responsive supply chains - do we understand our channel economics? What about returns? Single view of customer and stock how critical is this? Delivering the change how big an impact on our people and leadership? How do we manage it? 7 September 2013

8 Investment in the transition is well under way and will accelerate over the next 2 years Planned investment in Omni- channel is estimated to reach 5bn over the next 5 years 63% of retailers aim to make the transition to Omni in the next 2 years Many are investing to remain competitive, not on the basis of a defined ROI Regardless of cost, Omni-channel is becoming the need to have model for the retail industry It has almost reached the tipping-point of change or fail 8 May 2013

9 Surprisingly - the top benefit identified was an improved business operating model 9 September 2013

10 Many saw the challenge of maintaining brand consistency as a big deal The biggest output from an Omni-channel approach is a better relationship with the customer. Some of the capabilities identified in aligning the brand to the customers needs: Understanding customer data and managing the customer interface (CRM) Tightly integrated IT systems Controlling all elements of the supply chain Changing the way we measure and manage our business 10 September 2013

11 Boards will have to evolve You have got to be prepared to set aside the silos that inevitably exist within most retail organisations More than a third of those surveyed stated that an aligned Board was essential in delivering a clear brand to the customer The level of Board influence from a supply and distribution perspective is greater than it was even twelve months ago This could mean the elevation of supply chain, IT and other less traditional functions to the top table In a good retail business, everyone in the Executive Team must become literate with the changing technology and understand the impact that it will have on their function. It is moving to becoming everyone s job, rather than a requirement for a single Director or Digital Evangelist within the Leadership Group. 11 September 2013

12 Some other observations about the responses received Clothing retailers seemed more progressed on the omni channel journey than others Some pure play on-line retailers indicated that they were looking at an omni world Of the GM and Electricals retailers 75% currently saw themselves as multi not omni channel players Nearly 80% expressed a brand concern with the dependency on 3PLs to provide last mile capability 12 September 2013

13 Change is inevitable Omni-channel looks a more sustainable business operating model Build your understanding from a customer perspective: that was critical to us. Also you ve got to be prepared to set aside the silos that inevitably exist within most organisations. Changes to supply chain have to be part of a more holistic business change: buying, retail, supply chain systems. All of us are on the same page chasing a single customer experience. In an Omni-channel world, you can t do it in isolation. To succeed its important to fundamentally rethink how things are done 13 September 2013