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Online markets in the world of retailing

Alan Giles, Associate Fellow

Trends in Retail Competition, 10 June 2016

Agenda

Challenges for retailersRetailer responses

MultichannelInternationalisationServicesPersonalisationInnovation

Challenges for regulators

2

The changing shape of UK grocery

3Source: IGD, September 2014

Non-food growth is hard to come by…

4

…with the resultant squeeze on profitability

5

Technology is driving change

Empowering consumers

Enabling efficiency

Disrupting competition

6

Digitally enabled: Walmart savings catcher

7

Price transparency: CamelCamelCamel

8

Agenda




9

The UK is the world’s e-commerce leader

e-commerce Spend / Connected Consumer, 2013£

e-commerce Share of Retail Market, 2013% Sales

0%1%1%

2%2%

3%3%3%3%

5%5%5%

6%6%6%

7%7%7%7%7%

8%9%9%9%

14%

Turkey

South Korea

India

AustraliaNetherlands

Czech RepublicAustria

Canada

Norway

Japan

Germany

Spain

France

Denmark

ChinaIreland

Sweden

Poland

Brazil

Belgium

Italy

Russia

FinlandUSUK

940

6882

98108

151181188188

237253

299309312

339364

420432443447

525556

616662

Belgium

ItalySpain

CanadaCzech Republic

NetherlandsJapan

France

India

AustraliaDenmark

Austria

Finland

Germany

BrazilRussiaPoland

Turkey

china

South Korea

Sweden

Norway

Ireland

USUK

Source: World Bank, Eurostat, OC&C analysis, 2014

2611

2_R

ET

Online penetration by category

11Source: Ecommerce Foundation, Google Barometer 2016

12

Pureplays are the benchmark

Source: Accenture, 2014; Forrester, 2011

Multi-channel consumer buying process

Successful multichannel competitors are narrowing the gap on pureplay competitors

Evolution of Proposition Rating – Pureplay vs MultichannelRating Out of 100

20152011

40

60

80

100

TrustProducts that Suit

Me

Wide Product Choice

Store Look

& Feel

Quality of

Products

Value for

Money

ServiceLow Prices

Online Rating

40

60

80

100

Quality of

Products

Wide Product Choice

Online Rating

ServiceProducts that Suit

Me

Low Prices

Store Look

& Feel

Value for

Money

Trust

John LewisAmazon (UK)

Rating

Delta -8.1 -9.9 -34.7 -11.9 1.8 0.8 -21.3 -3.5 -1.5 -5.5 -8.2 -22.4 -6.1 4.2 7.3 -9.9 1.4 3.9

2611

2_R

ETSource: OC&C, 2015

Delivery – new solutions

15

Non-food retail exposure to Amazon

16Source: UBS Evidence Lab, 2016

The economic squeeze on stores

17Source: Deloitte, 2015; McKinsey, 2014

Tesco Extra, Watford

Agenda




19

Primark internationalisation

20

Digital businesses internationalise faster

2

1

6

6

332

41

32

24

16

WalmartAmazon

News CorpHuffington Post

HertzZip Car

Hilton HotelsAirbnb

Visa

PayPal

Retail

News

Car Rental

Travel

Payments

x 2.6

Top 6 US Digital / Technology Businesses2

$1.2tr

$0.5tr

Top 6 US Traditional Businesses1

CAGR

2005-14 3% 11%

Market Capitalisation, Traditional vs Digital Cos $ Trillion

Time Taken to Establish First International PresenceYears

1. Based on market cap Oct 2014. Excluding banking & finance stocks & companies where data not available to 2005. Companies included: Exxon, Walmart, General Electric, Chevron, Johnson & Johnson, Procter & Gamble

2. Based on market cap Oct 2014, companies included: Apple, Google, Microsoft, IBM, Oracle, Amazon

Source: Press Search, Company Websites, BvD, Google Finance, OC&C analysis

# Countries Enteredin First 10 Years

1

4

1

11

1

4

1190

1

>100

2611

2_R

ET

Agenda




22

23

Pets at Home: goods versus services

24

Retail classrooms: Hobbycraft

Agenda




25

Recognition and personalisation

26

Tesco & IFTTT

27

Case Study: WeChat in ChinaTop 5 Social Media Platforms% of Population Using

Who are the competitors? Social Shopping

43%FacebookFB Messenger 23%

Whatsapp19%Twitter18%

Skype 13%

Social NetworkChat App

Google+ 14%

42%

PinterestTwitter

FacebookFB Messenger 20%

17%19%

25%Sina Weibo25%Qzone

21%

Wechat 30%

Youku 19%Tencent Weibo

Source: Global web index, company website / apps, OC&C analysis, 2015

Restaurant

Movies

Taxi

c.600mn users on WeChat (10mn investment fund

users), having grown 145%pa 2012-14

Brands can create “official accounts” on WeChat to send targeted messages

and deals to followers

2611

2_R

ET

Conversational commerce: SoMe chatbots

29

Agenda




30

Convenience spreads beyond grocery

31

Pure-plays become physical

32

Private label innovation in grocery

33

Kingfisher Innovation Centre, Lille

Buying alliances

35

Content and commerce

‘Consumers now seek a shopping experience online just as they do offline, especially in fashion. They want inspiration and sexiness to seep through their shopping journey. Which is why Robertson believes Elle magazine launching online is far more a threat to him than the mighty Amazon’s recent push into fashion. Amazon is not cool, it’s functional and fashion ecommerce needs more than just functionality; which is why Asos, with its cutting edge editorial, sexy imagery and style advice, continues to be the reigning king of fashion etail.’ Gemma Goldfingle, Retail Week, May 2013

http://www.retail-week.com/companies/amazon

But in 2015 Amazon spent $10bn on R&D (10% of revenues), and has bought 100 companies since October 2010

37Source: CB Insights, 2016

Agenda




38

The smartphone revolution: not everyone benefits…

39

Local – and national – markets trickier to assess

Innovation in price promotions – pick your own

41

Time limited discounts

42

Price discrimination through loyalty cards

Electronic shelf edge labels – a Trojan horse?

44

Pureplay retail: does the winner take all?

Source: L2 Intelligence from Internet Retailer and US Commerce Department, 2015

46

Amazon.com profitability

Source: L2 Intelligence using SEC filings, 2016

47

Attempting to compete against Amazon Prime

Market entry is difficult: cash burn at jet.com

Source: Wall Street Journal, November 2015

Competitors collaborating

49

2002

2013

2016

Marketplaces are growing in importance…

50

…often with a complex eco-system

51Source: Alibaba Group, 2015

A retailer or a tech ecosystem?

2611

2_R

ET

Will retailers lose out in the value chain?

53Source: OC&C, 2013

Online markets in the world of retailing

Alan Giles, Associate Fellow

Trends in Retail Competition, 10 June 2016

online markets in the world of retailing - faculty of law ... markets in the world of retailing alan...

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