THE OMNICO GAP BAROMETER METHODOLOGY INTRODUCTION 04 THE RETAIL GAPS 05 IN-STORE VERSUS ONLINE 06 THE MOBILE FUTURE 08

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1 BAROMETER 3

2 Cloud based technology powering point-of-sale and customer engagement solutions THE OMNICO BAROMETER INTRODUCTION 04 THE RETAIL S 05 IN-STORE VERSUS ONLINE 06 THE MOBILE FUTURE 08 IMPROVING THE SHOPPING EXPERIENCE 09 THE EXPERIENCE ECONOMY 10 THE FUTURE OF IN-STORE RETAIL TECHNOLOGY 12 METHODOLOGY From the total of 11 questions in this research project, five questions were used to form the Omnico Retail Gap Barometer benchmark. These questions are repeated each quarter, to understand how consumer behaviour is changing over time and where the gaps exist. The scoring methodology used for the five Barometer questions required the respondents to rank each of the answers with a score of one to five (one being very poor, two being below average, three being average, four being good and five being outstanding). Each question carries a possible score of 20, meaning the maximum total from all five questions is 100. This quarter we received results from 1,000 consumers from across the UK. As the worlds of retail, entertainment and leisure continue to collide, it is creating what is now known as The Experience Economy. Brands today need to understand the impact of this conversion, meeting consumer expectations that no longer focus solely on the shopping experience, but also on the dining and leisure opportunities. Consumers now expect to move between the different brand offerings simply and easily, however and whenever they choose to engage. Brands must bring these customer journeys together with technology underpinning the point-of-sale (PoS) transactions, promotions, messaging and loyalty schemes, all in a seamless and connected way. While this quarters Barometer has still charted the gaps between consumer expectations and their actual retail experiences, Omnico has also analysed in more detail the impact of The Experience Economy, questioning consumer demands for future technology CONCLUSION 15 03

3 INTRODUCTION THE RETAIL S The below graphics illustrate the largest gaps between each of the Omnico Retail Gap Barometers, showing the ways consumers of today now shop and the customer journeys that retailers must invest in. It reveals the retail experiences shoppers have rated good or outstanding and the difference in percentages between the previous and latest Barometer results. In this quarters Omnico Retail Gap Barometer report, we have compared the results with the previous two Barometers, revealing the gaps that have appeared in consumers views of their shopping experiences. When comparing the previous and latest reports over the previous six months, we see a sharp decrease in consumers rating their shopping experiences good or outstanding, for example the experience of ordering and paying online but collecting in-store, and ordering and paying online with home delivery. Interestingly, in-store has become the preferred channel, with the experience of entering a physical store receiving the smallest decrease in a good or outstanding rating. Additional questions in this Omnico Retail Gap Barometer looked at The Experience Economy trend, where retail, food and beverage and leisure / entertainment experiences collide. This report highlights an overall desire to have more activities and facilities available to consumers in a single complex to ensure a more enjoyable shopping experience. However, there is also a call to improve the shopping experience itself, with later store opening hours and longer Sunday trading. Retailers must understand and embrace these changing consumer expectations and understand the areas they are less satisfied with, in order to stay ahead of the competition. 72/ % 69.3% -2% -10.6% -10.1% 72/100 70/ % 47.1% 74.2% 64.1% OVERALL SCORE Ordering and paying online but collecting from in-store Ordering and paying online with home delivery In comparing the November 2016 and the latest May 2017 Barometers, we see an overall score decrease in consumers shopping experiences, indicating there are areas that retailers can focus on to improve customer satisfaction. It is those customer journeys that include the use of online as a channel that have declined 61.5% 61.6% 27.4% -8.8% -7.9% +1.4% 61.9% 53.1% 63.2% 55.3% 26.6% 28.0% Product returns that were ordered and purchased online Visibility of stock when shopping online Customer experience via phone (e.g. call centres) most significantly, for example a 10.6% decrease in good or outstanding for ordering and paying online, but collecting from in-store, and the experience of ordering and paying online with home delivery decreasing by 10.1%. The only experience to gain an increase in good or outstanding ratings, was customer service via the phone, for example when speaking to a call centre. 05

4 IN-STORE VERSUS ONLINE The battle between in-store and online is still as prevalent as ever, with online retailers claiming authority over convenience and personalisation. However, according to the Omnico Retail Gap Barometer, it is online as a channel that has decreased its overall good or outstanding ratings by 6.0%, compared to in-store which only decreased by 4.1%. How would you rate the customer experience delivered by retailers across the following channels? These research results, together with news that Amazon is spreading its online wings into bricks-andmortar, reveals a sign of the times that the physical store is retaining its crown. Amazon has announced plans to build a fleet of physical stores, many focused on its grocery presence, but earlier this year Amazon Books opened its fifth physical store, where shopping there is as frictionless as a one-click purchase. 1 The company is also exploring the idea of creating stores to sell furniture and home appliances like refrigerators. The Omnico Retail Gap Barometer reveals that overall when merging the two channels together by ordering online but collecting and paying in-store, shoppers give this the smallest decrease in a good or outstanding experience from the previous report, perhaps suggesting that retailers have continued to invest in this area. How do you rate the following retail experiences? IN-STORE 56.0% -4.1% 56.0% 51.9% 57.7% -10.6% 57.4% 47.1% Ordering and paying online but collecting in-store 60.5% -5.7% 64.1% 58.4% Selecting and paying in-store ONLINE 61.5% -6.0% 62.2% 56.2% 69.3% -10.1% 74.2% 64.1% Ordering and paying online with home delivery 50.6% -5.4% 48.5% 43.1% Ordering online but collecting and paying in-store

5 IMPROVING THE SHOPPING EXPERIENCE As part of the Barometer research, additional questions focused on the collision of retail, food and beverage, and leisure / entertainment, in what is now known as The Experience Economy. While the research reveals a demand for leisure and dining experiences, it is important to note the prevalence that is still placed on the shopping experience itself. The Omnico Retail Gap Barometer has revealed that, overall, 44% of those questioned spend between one to three hours browsing and purchasing goods, versus 50% who spend up to an hour eating in shopping centres, on high streets or in retail parks. Improvements can still be made to the shopping experience, with consumers citing longer Sunday trading hours, later opening hours and a single hub for picking up click-and-collect items as priorities. CONSUMERS RATED THE FOLLOWING AS IMPORTANT OR VERY IMPORTANT FOR THEIR SHOPPING EXPERIENCE THE MOBILE FUTURE While the experience of shopping in-store is improving, more can be done to continue the drive to a fully frictionless shopper experience. Amazon s foray into bricks-and-mortar reveals a more innovative approach to the store experience, with cashless tills and automated service support. In addition, research has revealed that UK retailers plan to eliminate queuing entirely by 2021 with the introduction of mobile payment technology. Traditional manned point-of-sale checkouts have seen a major decline from 71% in 2012 to 52% this year. 2 Waitrose already uses handheld self-scanning devices that allow shoppers to upload their shopping list, and tracks the shopper s position and reminds them of goods that are nearby. Elsewhere Coop Denmark has been trialling an Omnico powered self-scan app in seven of its stores, allowing customers to jump the till queues and pay by scanning their mobile device. Meanwhile, the fashion retailer Zara has also employed the use of high-tech clothing tags which lets staff know where customers are in the store. 70% of under 35 s say it is important or very important to have later opening hours 61% of under 35 s want longer Sunday trading hours 56% of under 35 s want a single hub for click-and-collect

6 THE EXPERIENCE ECONOMY In March 2017, the British Retail Consortium s (BRC) monthly Springboard monitor revealed that it is our high streets that are enjoying rising numbers of consumers choosing to dine out, drink at bars and enjoy a more diverse range of restaurants and leisure activities. According to Diane Wehrle, marketing and insights director at Springboard: High streets are clearly benefiting as the destination of choice for dining and leisure, while shopping centres continue to underperform as they struggle with a weak entertainment and leisure offer. However, this is likely to begin to change, with Intu s Lakeside Shopping centre in Essex last year announcing plans to bring SpongeBob SquarePants and friends to its retail destination. The decision to build a Nickelodeon-branded theme park within the shopping centre is a strong example of how retail centres and amusement parks are increasingly joining forces. Regardless of the location, from a shopping mall to the high street, the goal of these hybrid destinations is to turn the traditional shopping location into the next big family destination. These new businesses draw in consumers of all ages and entice shoppers to make an entire day of their visit, while sharing the experience with others, increasing footfall and overall spend in these locations. CONSUMERS RATED THE FOLLOWING AS IMPORTANT OR VERY IMPORTANT FOR THEIR OVERALL SHOPPING EXPERIENCE 51% of under 35 s want a single loyalty programme for retail, food and beverage and leisure activities 55% of consumers want to have more activities and facilities available to them in a single complex to ensure a more enjoyable shopping experience Example activities / facilities include: 24% want fast-food outlets 20% want cinemas 16% want fine dining 13% want a family theme or amusement park 13% want a secure children s crèche 11% want an amusement arcade What is paramount for the success of retail locations that embrace The Experience Economy, is the ability to provide a single, engaging and frictionless experience, even though many different brands and operators may be involved. 11

7 THE FUTURE OF IN-STORE RETAIL TECHNOLOGY With the availability of product information, next-day-delivery options, and targeted, personalised recommendations all the norm when shopping online, consumers are now expecting new levels of innovation in the physical store as well. While industry research has revealed a desire to improve the ability to access product information, like sizes, without having to engage the in-store sales personnel by , our research goes so far as revealing that it could indeed be robots that reveal stock availability to shoppers! Some of the results may be a little further away from being realised, but it reveals a strong demand from consumers for innovative new technology to improve the overall shopping experience. 61% of consumers expect some kind of new technology to be used by retailers in shopping centres, on high streets and in retail parks in the next three years WHICH NEW TECHNOLOGIES DO YOU EXPECT TO BE USED BY RETAILERS IN STORES IN THE NEXT THREE YEARS? 24% VR to view products 21% a mobile loyalty app that creates a single point for all retail, food & beverage and leisure activities 21% wearable technology like RFID wristbands, to enable a cashless experience 21% voice-activated mobile apps 20% 3D printed products personalised to your specifications 18% robots in stores to check stock 10% robots to prepare food in restaurants / fast-food outlets 25% of men want 3D printed merchandise 56% of consumers think Virtual Reality will support future retail purchases WHICH PRODUCTS DO YOU THINK VR TECHNOLOGY COULD HELP YOU TO BUY? 29% clothing purchases 24% kitchens or interior décor materials 22% cars 21% holidays 21% electronic items such as laptops or TVs 20% make-up 19% shoes 18% domestic appliances such as washing machines 17% new homes

8 CONCLUSION The Omnico Retail Gap Barometer reveals consumer expectations of the shopping experience across multiple channels, being rated good or outstanding, have declined over this six-month period. This may be due to an increase in the expectations of the consumer, or could be a reflection of the leaps popular brands, such as Amazon, have made in this space, leaving those not as far forward with their technology with less satisfied customers. Although both declined, the in-store experience is somewhat ahead of the online in terms of satisfaction, but the mixture of channels is the preferred option. This provides the convenience and personalisation of online, with the ability to touch, try-on and return items in-store. LEISURE RETAIL THE EXPERIENCE ECONOMY SPECTRUM FOOD & BEVERAGE Retailers need to improve particular customer journeys, for example ordering and paying online but collecting from in-store, and ordering and paying online with home delivery, to meet the ever-growing expectations of consumers. Those that can improve these journeys will ultimately win at the till point, or online basket, retaining their competitiveness in this retail revolution. ENTERTAINMENT THE EVERYTHING STORE We have already cited Amazon in this report as a leading player in the future of retail technology, but others, including Walmart in the US and Alibaba in China, are also front-runners in the race to be the everything store, both online and physically. Walmart has been nurturing the latest retail technologies at its Store No. 8 in Silicon Valley, while Alibaba has already made the move from pure-play ecommerce into the physical world, with the acquisition of Intime and its partnership with Bailian. While the future of retail is constantly debated, with the everything stores and pure-play ecommerce versus bricks-and-mortar, what should be considered is where on The Experience Economy spectrum those retailers lie. With shopping centres starting to expand their offering to accommodate larger amusement arcades and theme parks, retail parks and high streets must consider their own leisure and entertainment strategy. Successful shopping destinations will be those that build their strategies around a mix of experiences, ensuring they become the destination of choice for the entire family; increasing footfall, dwell time, upsell opportunities and ultimately customer satisfaction. To discuss the ways in which Omnico can help you to meet these consumer expectations and develop innovative new technology solutions, please visit our website, or contact us at enquiries@omnicogroup.com for more information. 15

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