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Defining a Next-Generation Grocery POS Platform Strategy June 2017 Sponsored By BRP provides comprehensive consulting for retail, restaurant and private equity companies including: strategy, selection and implementation services.

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Page 1: Defining a Next-Generation Grocery POS Platform Strategymarketing.us.fujitsu.com/rs/407-MTR-501/images/Defining a Next... · Defining a Next Generation Grocery POS Platform Strategy

Defining a Next-Generation Grocery POS

Platform Strategy

June 2017

Sponsored By

BRPprovidescomprehensiveconsultingforretail,restaurantandprivateequitycompaniesincluding:strategy,selectionandimplementationservices.

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Table of Contents

Customers Aren’t Asking – They’re Demanding a Better Grocery Store Experience......................................3

Rethinking Grocery POS: The Convergence of Efficiency, Flexibility, and Usability.......................................4

Building upon Speed of Service....................................................................................................................4

Grocery POS for Traditional Front-End and Perimeter Department Checkout.............................................5

Speed of Service Matters – To Both Customer AND Cashier........................................................................6

Strategic Priorities for Grocery POS Selections – Mileage Varies..................................................................6

Next Generation Grocery POS: Selection Imperatives......................................................................................7

Evaluating the Vendor Marketplace: A Checklist...............................................................................................8

The Road Ahead: Unified Commerce for Grocery..............................................................................................9

Key Takeaways......................................................................................................................................................10

About BRP..............................................................................................................................................................11

Sponsor Perspective.............................................................................................................................................12

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Customers Aren’t Asking – They’re Demanding a Better Grocery Store Experience

Grocery retailers are under siege.

That is not an exaggeration.

Consider the facts.

In 2015, U.S. census data showed that restaurant and bar revenues surpassed grocery store revenues in the United States for the first time on record[1], driven by a rapid shift in eating and dining habits and spending behaviors among Millennials and Baby Boomers. Wal-Mart continues to aggressively optimize both center store and fresh/prepared food categories across its long-standing big box stores, focused Neighborhood Market locations, and its rapidly expanding e-commerce channel - resulting in continued grocery-specific market share growth across all channels. Aldi has announced a $3 billion plan to expand their grocery store footprint in the U.S. The Dollar store brands are expanding food merchandise offerings while same-store sales growth results from shopper bargain hunting. Traditional convenience stores have put greater emphasis on prepared foods - attacking traditional grocers from yet another angle. Finally, as if all that competitive pressure on grocers wasn’t enough, Amazon has announced its intent to acquire Whole Foods for nearly $14 billion in cash - accelerating the convergence of their leading omni-channel technology and supply chain infrastructure, product selection, massive Prime-based loyal customer base and new-age store thinking right through the front door of a highly-regarded national brick-and-mortar grocery brand. While one “glass half-full” viewpoint could be that the $780 billion food market opportunity remains quite large, the risk of success surrounding so many competitive strategies targeting traditional grocery retailers means there is clearly something changing in the minds of both long-standing and emerging grocery shoppers everywhere. What do grocery customers actually want? It’s a long list. In simple terms – shoppers want more for their grocery spend. They want better service, better prices, better quality, more personalized rewards for their loyalty, and more choices in how they shop and check out. Grocery shoppers want more recognition – for today’s visit, not tomorrow’s. They want non-intrusive adjustments to their shopping experience that reflect unique characteristics of both their demographic and specific customer behavior. They want more personalized engagement from their favorite stores – who should be using the social media tools and apps they prefer. They want to be assured that “speed of service” will always be a priority – whether with a cashier through a traditional checkout counter, or while on their own via a self-service checkout lane. And they want grocers to adapt to these wishes – yesterday.

[1]2015U.S.Censusdata;NationalRestaurantAssociationPressRelease,May15,2015

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In BRP’s 2017 POS / Customer Engagement Survey, the top customer experience priorities reflect how retailers are acknowledging and responding to these wishes – both conceptually and specifically - as shown in Exhibit 1. Grocery retailers are keenly aware that without the IT and operational investments necessary to support these critical, customer-demanded changes, the threats represented by so many direct and indirect competitors could be devastating.

Rethinking Grocery POS: The Convergence of Eff ic iency, Flexibi l ity, and Usabil ity Building upon Speed of Service As the technology center of the checkout experience, traditional grocery POS solutions have struggled to keep pace, both functionally and operationally, with the breadth and depth of business demands driven by changing market and competitive dynamics. Overall speed-of-service remains critically important to grocers, but customer demands for more choice in touch points within the store (e.g. self-checkout, mobile and wearable devices) as well as more transparent integration with online channels and personalized customer engagement have increased the priority for configuration and integration flexibility. In BRP’s 2017 POS / Customer Engagement Survey, the top POS priorities for retailers reflect these requirements. Exhibit 2 shows more than half of respondents (52%) placing omni-channel integration as their top POS priority. This is followed closely (48%) by the desire to add capabilities to their current POS platform – which is not always easy to do. Close behind are efforts to enhance payment security – not just for PCI or regulatory compliance but for better customer data protection – and the opportunities represented by mobile point of service.

55%

50%

45%

42%

32%

24%

Ophmize the customer experience

Increase customer loyalty

Improve mobile shopping experience

Create a seamless experience across channels

Enhance personalized service/sales assistance

Provide personalized promohons, recommendahons and/or

offerings

Top Customer Experience Priorihes

Exhibit 1 : BRP 2017 Customer Experience/Unified Commerce Survey

52%

48%

46%

46%

44%

37%

22%

Omni-channel integrahon

Add capabilihes to current POS

Payment security/PCI compliance

System upgrade/replacement

Mobile POS

Hardware upgrade

Unified or single commerce plamorm

Top POS Priorihes for 2017

Exhibit 2 : BRP 2017 POS/Customer Engagement Survey

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Grocery POS for Traditional Front-End Checkout and Perimeter Department Ordering Grocers are rethinking store layouts to meet customer and market demands for broader variety and higher quality products in perimeter departments. This drives the opportunity to bring tailored checkout engagements closer to those new offerings via customized POS order experiences.

Fundamental to these changes is a common POS platform architecture that supports not only traditional front-end transactions but also, native configurations for unique customer engagement and tendering efforts in other portions of the store as shown in Exhibit 3. Some examples include:

• Quick serve-oriented transactions (e.g. modifiers and combos) in the Deli • Self-directed kiosk ordering of unique items in the Bakery • Express checkout in the Prepared Foods area • Fast casual ordering in the sit-down Café • Real-time customer order and/or loyalty information via mobile and wearable devices

Even with these unique department-specific checkout experiences, it remains crucial that all PLU, transaction, payment, and customer information remains centralized at store-level and available for polling to corporate.

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Speed of Service Matters – To Both Customer AND Cashier No matter how extensive and complex the technical, operational or competitive changes to the grocery customer experience, nothing will ever be as important to the intersection of shopper satisfaction and profitable operation as speed of checkout.

In a 2015-2016 NGA shopper study, 43% of grocery shoppers noted that “wait time” was the most bothersome aspect of their customer experience1. No matter the most difficult-to-identify produce item, or the most complicated promotion or discount, or even the latest in EMV-enabled electronic payments – customers expect to be on their way as quickly as possible. This requires a POS platform that leverages the latest in human factors engineering (HFE) and user experience (UX) technologies to help optimize each step of the checkout process. This means having a POS configuration capability that can graphically define the most efficient cashier workflow for every complex transaction type.

And any improvement to the grocery shopper experience with speed of checkout will also be seen by cashiers as well, as the same HFE and UX improvements to POS will benefit front-end personnel through shorter training times and faster resolution to problems.

Strategic Priorit ies for Grocery POS Selections – Mileage Varies

In determining the crucial decision points and evaluation criteria surrounding the selection of a next-generation grocery POS platform, it rapidly becomes apparent that functional, technical, and strategic requirements begin to diverge toward the different needs of internal and external stakeholders.

There are (4) common stakeholder groups either involved in or impacted by grocery POS selections, and the key strategic priorities for each is outlined in Exhibit 4.

Customers Store Operations IT Organization Leadership • Efficiency • Accuracy • Informative • Engaging • Security

• Customer Satisfaction • Reliability • Reduced Training • Throughput • Ease of Use • Data Access • Configurability

• Security • Speed • Flexibility • Modern Architecture • Integration-Friendly • Remote Management • Configurability

• Security • Total Cost of

Ownership • Efficiency • Engaging • Enable Increased

Sales

Exhibit 4: GroceryPOSPrioritiesbyStakeholder

1http://www.nationalgrocers.org/docs/default-source/Surveys-Reports-(2015-2016)/consumersurveyreport2015.pdf

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Next Generation Grocery POS: Selection Imperatives When considering a new grocery POS software platform against the backdrop of market pressures and stakeholder-oriented strategic priorities, it becomes important to orient your POS assessment around a defined set of key functionality and technology capabilities. Ten important selection criteria that should be central to any grocery POS evaluation and are summarized in Exhibit 5.

Grocery POS Platform – Evaluation Matrix Criteria Capabil it ies

Architecture • Standards-based design • Data models • Service-based integration(s) • Modern development tools/technology

Security

• Native data and code encryption • Intrusion detection • PCI abstraction • Data masking • Data access controls

Integrat ion

• Self-checkout • Self-service kiosks • Online & mobile ordering (omni-channel) • Wearables • Digital displays (menu boards, signage) • Voice communications • Fuel / Forecourt Control • Pharmacy management • Labor management • CRM • Promotions • Information/data access • Returns • Third party delivery

Rel iabi l i ty • Native server/client redundancy (primary & secondary) • Automated failover • Parameter-based offline mode and transparent recovery

F lexibi l i ty • Structured deployment modes • Extended touch points (self-checkout, self-service, mobile)

Management Intel l igence

• Deployment & installation • Predictive support & problem detection • Reactive support • Software updates • Reporting & analytics • System integrity / breach detection

Exhibit 5: Grocery POS Platform – Evaluation Matrix

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Grocery POS Platform – Evaluation Matrix (cont.)

Criteria Capabil it ies

Automation • Cash management • Back office data & reporting synchronization

Usabi l i ty

• HFE/UX-driven workflow configurations • Visual engagement (cashier and customer) • Easy of training / ease of use • Optimized experiences on common platform • Advanced touch technology support • Enabled iconography

Configurabi l i ty • Universal parameter control • Wizard and expert configuration modes • Receipt design • Data and system integration

Economics • Total cost of ownership • License models • Built-in functionality vs. add-ons • Legacy platform leverage

Exhibit 5: Grocery POS Platform – Evaluation Matrix (cont.)

Evaluating the Vendor Marketplace: A Checkl ist Beyond the breadth of mission-critical and differentiating capabilities grocers must review when selecting a next-generation POS platform, the complex evaluation of POS software vendors who profess to provide these new capabilities is equally important. Some important assessment areas for a grocery POS vendor review include:

• Vendor infrastructure – Reviewing the history, stability and viability of potential grocery POS vendors

• Global footprint – While many grocery retailers focus on specific markets and geographies, any future global expansion strategies can often be constrained by the inability of a vendor to serve a new market you want to enter. Understanding the vendor’s geographic reach helps support short and long term market growth

• Lifecycle services model – Understanding the intersection of a vendor’s software, hardware, and services portfolio and how your POS platform would be supported through its evolution and operation can help differentiate one vendor from another. Also, a key point of differentiation for some vendors is how they integrate their traditional services and support capabilities with the remote management functionality of their POS software platform

• Industry expertise – This goes beyond a vendor’s ability to support functionality for a particular retail segment (e.g. grocery). This evaluation should assess a vendor’s success and recognition across the retail industry as a whole. Many vendors have founding or leading positions in industry standards bodies (e.g. ARTS) and others have defined entirely new technology categories and software functionality

• Platform portfol io – The full solution offering of a vendor will give clear indication of their financial and market commitment to the retail and grocery industries

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Determining the best mix of product capability and vendor validity is a highly subjective activity. But without the same level of scrutiny on the vendor as you place on the product, the risks and challenges of a success grocery POS selection become bigger.

The Road Ahead: Unif ied Commerce for Grocery The future of retail is rooted in the strategy of Unified Commerce. It goes beyond omni-channel by breaking down the walls between internal channel silos and leveraging a common commerce platform to deliver a holistic, real-time, personalized customer experience. It changes the definition and expectation of customer service as the need for retailers to have a single view of their customer across all channels is now a requirement for this environment. Without this, customers don’t have a personal connection to the brand and associates are at a disadvantage when interacting with the customer.

Most importantly, we see retailers mapping out the entire customer journey as they work to enhance the customer experience, which is much more complex in a unified commerce world than it is in a pure play e-commerce or brick-and-mortar world.

Exhibit 7: TheGroceryCustomerJourney

Single set of Product Master that is accessed online, in the store and on a mobile app

A single loyalty / CRM system that is personal based and accessible across all channels and touch points, Pharmacy, Fuel, Deli, Quick serve

Integrated to shopping lists, beacons, daily promoDons and BOPIS

Flexible payments that are secure including EMV and mobile wallets

Near real-Dme integraDon to replenishment, shelf labels, and BOPIS

IntegraDon to line queues, Wi-Fi, shopping foot step paOerns

$

2.LoyaltyandRewards1.ProductInforma8on

7.Service

6.Fulfill 3.Mobile

4.BuySingle code base for POS, Fuel, Pharmacy Deli, Inventory, others

5.Maintainable

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This complexity expands exponentially as the proliferation of social media, the Internet of Things (IoT), artificial intelligence and machine learning influence the retail world and more specifically, the customer journey.

Stores must now encompass both worlds - the sensory experience generally available in the physical world, such as touching and feeling merchandise and personally interacting with a knowledgeable associate – whether simply human or a combination of AI and human characteristics – married with the unique and personalized shopping experience common in the digital world. The physical and digital worlds are forever intertwined as we look to the future. Key Takeaways

While the competitive threats facing traditional grocery retailers in 2017 and beyond are extensive, so too are the capabilities available in technology-driven software solutions ready to redefine the grocery customer experience - blending both efficient service with personalized engagement, and driving a big wedge into the gap between grocery market leaders and industry laggards. At the center of ANY strategy to redefining the customer experience is the need to find and deploy a next-generation grocery POS platform. With the right POS solution in place:

• Native integration between core POS and all other touch points (including self-service, mobile and IoT) becomes transparent

• Intelligent remote management increases system reliability and reduces support costs • Real-time, granular-level data access turns intelligence into insight • Multiple, highly optimized checkout scenarios orchestrated from a core POS platform offer a

more personalized level of shopper engagement • Total Cost of Ownership (TCO) surrounding Point-of-Service becomes more lucrative • Competitive differentiation focused on customer experience becomes an easier story to tell

Grocers who focus their efforts on supporting the rapidly changing behaviors and desired experiences of their customers will be poised to grow market share and be a transformational industry leader in an $800 billion market.

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About BRP

BRP Consulting is an innovative and independent retail management consulting firm dedicated to providing superior service and enduring value to our clients. BRP combines its consultants' deep retail business knowledge and cross-functional capabilities to deliver superior design and implementation of strategy, technology, and process solutions. The firm's unique combination of industry focus, knowledge-based approach, and rapid, end-to-end solution deployment helps clients to achieve their business potential.

BRP’s consulting services include:

Strategy Business Intel l igence Business Process Optimization

Point of Sale (POS) Mobile POS Payment Security

CRM Unif ied Commerce Customer Experience & Engagement

Order Management E-Commerce Merchandise Management

Supply Chain Networks Pr ivate Equity

For more information or assistance on any of the topics covered in this white paper, please contact:

BRP Atlanta | Boston | Chicago | Dallas | Denver | San Francisco www.brpconsulting.com

©2017 BRP. All rights reserved No part of this publication may be reproduced or transmitted in any form or for any purpose without the expressed permission of BRP. The information contained herein may be changed without prior notice.

Brian Brunk, Principal (405) 590-0542 [email protected]

Ken Morris, Principal (617) 880-9355 [email protected] Walter Deacon, Principal (781) 337-2060 [email protected]

Scott Langdoc, Vice President (925) 575-9225 [email protected] Perry Kramer, Vice President and Practice Lead (617) 899-7543 [email protected] David Naumann, Vice President of Marketing (916) 673-7757 [email protected]

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Sponsor Perspective

Fujitsu FrescoTM is a new Point-of-Service solution specifically designed for Grocery retailing. Fresco provides a single POS solution for all service areas of the Grocery Store including front-end checkout, service desk/returns, in-store deli/café service, self-checkout, self-service kiosks, cash automation, Fresco puts complete control of your store’s POS in your hands and one set of seamlessly integrated solutions.

Fresco also delivers a robust suite of support capabilities including IntegroTM real-time system monitoring and management, Automated Software Maintenance (ASM) for management of software rollouts and updates, Configuration Management that allows the retailer to make changes to standard system configurations and even the User Interface without any recoding or external 3rd party support and Work Task Management enabling remote two-way communication between cashiers, supervisors and managers to help run the entire front-end checkout operation much more smoothly. These are just a few of the new and revolutionary features Fujitsu Fresco delivers.

For more than 50 years, Fujitsu has delivered technology solutions to more than 500 retail customers in 53 countries around the world. Offering one of the widest and most comprehensive suite of retail store technology solutions from traditional POS and self-service hardware and software solutions to mobile technologies, wearables, analytics, digital consulting and managed application services, and store-wide technology deployment and support services, Fujitsu continues to innovate and co-create new solutions with retailers around the world every day. Discover what Fujitsu can help you create. Find out more, by visiting our website at http://www.fujitsu.com/us/solutions/industry/retail/

Fujitsu and the Fujitsu logo are trademarks or registered trademarks of Fujitsu Limited in the United States and other countries. Fujitsu FrescoTM and IntegroTM and are trademarks of Fujitsu America, Inc. in the United States and other countries. The statements provided herein are for informational purposes only and may be amended or altered by Fujitsu America, Inc. without notice or liability.