Bricks and Clicks: Next Generation of RetailingImpact of Connectivity and Convergence on the Retail Sector

Today’s Presenters

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Archana AmarnathProgram ManagerVisionary Innovation ResearchFrost & Sullivan

Archana VidyasekarSenior Research AnalystVisionary Innovation ResearchFrost & Sullivan

Agenda

Presentation of Top Mega Trends of the Future Influencing Retail IndustryBricks and Clicks: New Trends and Business ModelsMore About Visionary Innovation Group

Introduction and Definition of Retail Industry

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Objectives of the Briefing

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• Defining the concept of bricks and clicks and understanding the consequent dynamics within the industry

• Understand the impact of Mega Trends in driving new business models , innovative technological applications in retail

• Gain insight into the impact of connectivity and convergence on new e-retailing strategies and future shopping experiences

• Looking at the Store of the Future integrated with scanners, kiosks and interactive virtual stores

• Trace the Future of Online Retailing with new Retail Formats, Store Layouts and impact of Social Media

What is Bricks and Clicks?

Department Stores SupermarketsHypermarkets Online Mobile PaymentsMobile AppsBricks (pre-2000) +Advent of Clicks (post-2000)

Interactive StoresVirtual Stores Hyper Online MarketsThe Future - Bricks and Clicks (2015 and Beyond)

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The Retail Model Will Evolve From a Single/Multiple Channel Model to an Integrated Hybrid Cross Channel Model

Global Online Retail Market

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Future of Clicks in Retail IndustryGlobal Online Retail Sales To Reach $4.3 Trillion By 2025 Accounting for 19% of Total Retail

$11.8 Trillion

$23 Trillion

$18.7Trillion$11.25 Trillion

$4.3Trillion$0.55 Trillion Online Sales Non-Online Sales5%

95%

19%

81%

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2011 2025

United States$1.32

Trillion

24%

18%

China$1.30

TrillionUnited States

$0.21Trillion

Germany$0.09

TrillionJapan$0.17

Trillion

25%

15%10%

Media and Entertainment Products to Experience the Highest Online Sales Penetration at 82% by 2025

Source: Frost & Sullivan Analysis

Electronics salesApparels & Accessories salesMedia and Entertainment1

Food & Beverages sales

2011 2025

24% 60%15% 38%5% 25%

Top Product Categories54% 82%

$0.55 Trillion $4.3 TrillionTotal Online Retail Sales

Health/Wellness/Beauty salesHome & Garden sales 7% 15%

4% 22%

Total retail 5% 19%

76%85%95%

46%

93%96%

95%

40%62%75%

18%

85%78%

81%

OnlineNon-Online

$11.8 Trillion $23 TrillionTotal Retail Sales

OnlineNon-Online

1Books, Music and Videos

Global Mega Trends and Retail

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Mega Trends Driving Retail IndustryUrbanisation Connectivity and Convergence Social Trends1 2 3

By 2025, there will be over 50 cities globally, 35 of which will be Mega CitiesBy 2025, 80 billion devices will connect the world with each person carrying 5 connected devices

By 2025, the world will have around 2.4 billion Gen Y individuals with more digital shopping habitsWhat does this mean for Retail?Smaller Stores; ‘Stores-within-Stores’, and Optimised Supply Chain

Self-service Retailing with more digital checkpoints , Virtual Stores, and Interactive StoresCollaborative Consumption, Hyper Niche Marketing, Online Hypermarkets

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Urbanization Will Compel Retailers to Shrink Store Sizes Retailer Store Size to be 15-20% Less than the Current Average Store Size by 202015%-20% smaller

Big-Box Small-Box

Examples of Small Format Stores

Wal-Mart Express City Target Tesco Fresh ‘n’ EasyBest-Buy Mobile

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Retailer handles all aspects of the buying process from picking the product for the consumer to billing.Chain stores allows customers to browse aisles and do their own shopping with minimal assistance

With Augmented Reality, LBS, and Mobile Payments, complete self-service retailing is becoming a reality19th Century 20th Century 21st Century

Connectivity Will Make the Shopping Experience of the Future More Digital and InteractiveFull-Service Retailing Assorted-Services Retailing Self-service Retailing

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Connectivity in Retail: Emerging TechnologiesTechnology Converting Buyers into Multi-Channel ShoppersLocation-based services Augmented Reality

Body ScannersSelfridges

Motion Sensing

HolographyQR Coding

Foursquare Wal-Mart

Home DepotTesco Store Trek

Diesel

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Social Trends: The Next Generation ShopperCollaborative Consumption and Targeted Marketing will Become More Common2.4 Billion Gen Y Population

Every 1 of 3 workers will be a woman.

1.5 Million middle class consumers from India and China

Every 1 of 10 will be an elder above 65

Niche Marketing

Women –focused Retailing

Silver Retailing

Shoestring Luxury

Future of Social Media in Retail - Social Commerce

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Social commerce is the use of social media platforms to engage with the customer with user-generated content to market and sell the product.Social Merchandising Subscription CommerceCollaborative Consumption

Group Buying Social ShopsE.g. Pinterest E.g. Birch-Box E.g. Rent the Runway

E.g. Groupon E.g. Facebook

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Social Commerce Success StoriesFrom FMCG To Credit Card Companies Leverage Social Media

Levi’s saw 40 times increase in referral traffic from Facebook

American Express Lured Consumers to Spend $12.8 Million Through Twitter Campaign

Pampers sold 1,000 diapers on Facebook in just 1 hour of launching its Facebook Store

Future of Brick and Mortar

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Future of Bricks: Smaller Interactive StoresSensors, Digital kiosks, And Intelligent Marketing Will Shape Stores and Supermarkets of TomorrowIn-store Social Commerce Digital Personal Shoppers

In-store Digital KioskInteractive Store Marketing In-Store Design (Concept Stores)

Digital Staff

Urban Convenience

Smaller Stores

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Apple Stores: Store or Brand?Apple stores reconceptualised ‘showrooming’ by creating an innovative brand experience through their stores

Theatre Studio Genius Bar Easy Pay SystemHighest sales per sqft in the US. Twice the sales per square foot than any other US Retailer.Highest sales per sqft in the US. Twice the sales per square foot than any other US Retailer.

Stores sales have multiplied 100 times since it first made its entry in 2001 with a small store.Stores sales have multiplied 100 times since it first made its entry in 2001 with a small store.

Innovative Aspects of the Apple ‘Concept’ Store

Integration of Bricks and Clicks

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Examples Bricks and Clicks ModelsAmalgamating the Bricks and Clicks ExperienceTesco Subway Virtual Stores Coles Click and Collect Amazon Online Hypermarket

Diesel Magic Mirrors Ebay Digital Pop-Up Stores

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2 3

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Choose grocery item from “virtual shelves”

Smartphone App Registers Product of ChoiceThe product lands in customer’s “virtual cart”

The product is delivered to the customer at a time and date of his choice

Virtual Stores: Tesco Subway StoreThe Next Generation Grocery Retail Store

Number 1 shopping App in Korea, with over 900,000 downloadsOnline sales increased by 130% since launch in 2011

Bricks and Clicks Impact on Key Industries

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Top Industries Influenced by Bricks and ClicksAutomotive Financial Services

LogisticsFrom Dealership to Flagship Stores From Plastic Currency to Virtual Currency

From Distribution Centres to Distribution Points

Automotive, Logistics and Financial Services will find the Best Opportunities in Retail’s Transition to Bricks and Clicks

So what will the Future of Retail look like in 20251. Nearly 20% of retail will happen online and in some countries such as United States and United Kingdom, online retail will account for a quarter of total retail sales by 20252. Everything from the product to the in-store experience can be customised and personalised by the shopper as retailers increasingly offer real-time customisation tools to their customers3. Multi-line retailers will reduce their store sizes by 15-20% and revamp their large stores to become interactive4. Manufacturer retailers will open more connected flagship stores that are designed and created around the product’s philosophy and theme. They will aim to make their stores a destination rather than a retailing zone5. There will be lesser gestation gap between ordering a product and delivery as new services such as Same-day shipping become more affordable 26

Visionary Innovation Research

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2012 TopicsUrbanization – City as a CustomerSmart is the New GreenSocial Trends

Connectivity and Convergence

Bricks and ClicksInnovating to Zero

New Business Models: Value for ManyBeyond BRIC: The Next Game Changers

Future Infrastructure DevelopmentHealth, Wellness and Well BeingFuture of Mobility Upcoming Topics - 2013

Top Mega Trends That We Track• Bricks and Clicks: Macro to Micro Implications of Connectivity and Convergence In Retail Industry• Global Mega Trends and its Implications to Urban Logistics to 2020• Urbanisation and Mega Cities and Impact on Industries and Business• New Business Models of the Future• Macro to Micro Implications of Convergence on Industries, Products and Technologies• 3D printing and its Macro to Micro Impact on Manufacturing and Supply Chain Management• Macro to Micro Implications of Robotics and Artificial Intelligence on Industries

Frost & Sullivan’s Visionary Innovation SubscriptionProvides Global Mega Trends Analysis, Regional Implications and a Deep Dive into Specific Topics by Industry Verticals

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A Global Mega Trends Analysis• Featuring global study updates annually and analysis of key topics like Urbanisation, Smart is the New Green, Health, Wellness and Well Being

BRegional Mega Trends and Implications

• Analysis of global Mega Trends in key geographies such as1. Africa2. India3. China 4. Latin America• Identification of specific regional trends (e.g., beneficiation in Africa)

CFocus on Specific Mega Trends and Their Impact by Industry•Focus on specific Topics e.g. the Impact of Connectivity and Convergence on Healthcare Devices, Urban Logistics . • There will be over 30 such topics completed in next 12 months

360 Degree Perspective of Global Mega Trends and Analysis of their Impact on Industries

Macro Micro

From Macro to Micro: Taking Mega Trends from Information to Strategy Implementation

Mega TrendSelected trends that impact your business and markets

Sub TrendA sub-layer of trends that has a wide ranging impact Impact to Your IndustryVisualising the roadmap of these critical forces through scenario-building and macro economic forecasts

Impact on Future Product/ Technology

Analysis of Opportunities and Unmet Needs

To

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Learn More About “New Mega Trends”Published Book:New Mega Trends Implications for our Future Lives By Sarwant Singh     Publisher: Palgrave Macmillanhttp://www.palgrave.com/products/title.aspx?pid=577423

Join Our Mega Trend Group OnMega Trends: Strategic Planning and Innovation Based on Frost & Sullivan Research

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Contact Information

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