technology trends in home improvement retail

October 17, 2012

Winston Ledet – COO

[email protected]

678-279-8252

www.premiumretailsolutions.com

Technology Trends in Home Improvement Retail

Presented at Fall 2012 HIRI Conference

mailto:[email protected]


Premium Business Model Winston Ledet

Premium Retail Solutions - Chief Operating Officer • Co-Founder of Retail’s Solutions

group focused on strategy, analytics and insight

• Worked with over 50 current and prospective suppliers

• Former Home Depot Merchandising Vice President -Merchandising Strategy and Innovation

• Led corporate strategy at Home Depot for three years prior.

• Strategic consulting background with McKinsey and Company

My Background

http://www.mohawk-flooring.com/Default.aspx

http://www.target.com/gp/browse.html/ref=nav_t_logo/602-6467706-2475052?_encoding=UTF8&node=1038576


Last Year at HIRI

Building a Consumer Brand.

Driving Bottom Line Profitability.

Current Playing Field • Traffic • Conversion • Share

Expand Into Adjacent Areas

What does the future look like?

A warning about the future- Across all of retail:

• Single formats are almost never

dominant for more than 30 years

• Almost all major retailers from 40 years ago are either out of business or in decline

• Real Estate location, once a strength becomes a burden

• The market goes to those who find a new way


Technology in Home Improvement

Technology change is a wild card that could re-shift the balance of power…

Retailers have gained influence over the last 35 years

Home Improvement has been a slow follower in retail technology for most of its history

• While the consumer and retail trends are undeniable…

• …the approaches to deal with them presented may be very different than the ultimate solutions

• The challenge for industry participants is to keep working on the trends without locking in to just one solution

…however, it rarely moves in a straight predictable line

1978

Most categories in Home Improvement: 1 of the top 5 Brands is “I don’t remember” / “I don’t know”

2012

60% Consumer Share


The New Way to shop

Source: Modified from McKinsey & Co and Coca-Cola Retailing Research Council & The Integer Group

Consumer actions / Moments of Truth

PRE-TAIL RETAIL

POST-TAIL

Shopping / Location

Purchase

Browsing & Evaluating

Use

Inspiration / Consideration

Repurchase / Bond Advocate


Trends to Watch

• Pre-Tail and Post-Tail • Social Media • Search • Content

• Retail

• Utilizing online sales • On-demand data to shoppers • Showrooming • Video and Photo Insights • Tele-presence

Source: IBM Consumer Research


Online Usage in Home Improvement

50%

42%

40%

35%

27%

18%

18%

14%

8%

18%

20%

18%

7%

9%

3%

2%

20%

3%

Retailer websites (e.g., www.homedepot.com, www.lowes.com)

I type the product or project into a search engine and go to the websites where it directs me

Product reviews

Product manufacturer websites

Social media sites (e.g., Facebook, Pinterest, YouTube, etc.)

Publications focused on Home Improvement or Home Decor

Blogs

I do not use any online resources to research Home Improvement products or projects

Other

Online resources used to research products or projects in Home Improvement

Select all sources Primary source

Retailer Website

Search

Product Reviews

Manufacturer Websites

Social Media

Home Improvement / Home Décor Publications

Blogs

None

Other

Source: Premium Retail Solutions Consumer Research, September 2012


Social Media in Home Improvement

Yes, 38%

No, 62%

Ever used social media to learn about or research anything in HI?

80%

58%

40%

31%

28%

18%

17%

9%

Facebook

YouTube

Twitter

Pinterest

GooglePlus+

MySpace

Linked In

Other

Of those that used Social Media in HI - Where did they go?

68%

62%

60%

42%

40%

22%

Get inspired

Product reviews

Research a home improvement project

Know how (how to's)

Share my project ideas with friends

Other uses

Of those that used Social Media – How did they use it?

• 38% of respondents said they have used social media to learn about or research something in Home Improvement

• Facebook (80%) is the primary source used followed by YouTube (58%)

• Top uses are get inspired, product reviews, and research a project



Engaging & Delivering Content

1. Monitor 2. Respond 3. Amplify 4. Create

Inspire Brand Monitoring Addressing Issues and answering questions

Connect potential purchasers with advocates

Awareness campaigns / Deals How to (confidence)

Shop

Evaluate

Product Launches

Purchase

Deals / Offers

Use Customer Service How to

Foster communities Consumer Insights Customer Input

Advocate Encourage trial, rating and recommendation

Bond

Ho

w t

he

Co

nsu

me

r Sh

op

s

How Brands and Retailers Can Participate

Source: Modified from McKinsey & Co

A new lease on life – Brand Building

PRE-TAIL RETAIL

POST-TAIL

Shopping / Location

Purchase

Browsing & Evaluating

Use

Inspiration / Consideration

Repurchase / Bond Advocate


Monitor and Respond

Monitor and Respond Don’t Abandon

Answer Questions

Watch for fake or derogatory entries


Connecting – Building Trust

1 in 4 Consumers Already Engage in Advocacy (good or bad)

Building your post purchase interactions with clients can improve this

Yes, 41%

No, 59%

Have you ever posted a product review online?

40% of HI shoppers said they often or always read reviews prior to product purchase

Advocacy

Source: Google – “Zero Moment of Truth” – ZMOT macro study Source: Premium Retail Solutions Consumer Research, September 2012


Inspire

Understand the inspiration process for your category. Where will consumers go first? Don’t just rely on the endemic user base on these platforms Post links in twitter feeds, Facebook postings, review responses and product web pages


Encouraging Trial

Create Awareness Make Offers


Consumer Insights

Out of the Lab…

Customer interactions for sales were separate and distinct from research • Surveys • Focus Groups • Copy Tests

…and into the Wild

Customer interactions are often linked • Mining review data and social media

conversations for issues and latent needs • Creating user communities

(Comunispace) and interacting • Mining trends from social media postings • Crowd Sourcing • Mining POS transactions • Ethnography / Digital


Search

Implications For Research and Marketing How and when do consumers research your category? What terms do they search for? Can you build those terms into organic search? Should you purchase terms through a search engine?

Example: The term “Paint Colors” is searched 2.4M times a month. Neither Behr nor Valspar make the first page

Search - the #2 source of information – are you managing it?

Source: Google Trends and Google Ad Words


Content

What you need

• A team and/or agency focused on creating digital content

• A team or agency focused on linking content to user touchpoints

• A strategy on what platforms will best suit your needs

Building your content • Video is viewed about 1000

times more than text • Simplify the buying process • Simplify the installation process –

build confidence • Make it interactive

(configuration, comments, linkable…) leverage consumer stories

• Tell dynamic stories – to build your brand – you are a contributor and the editor

• Make it easily linkable Superior content allows you to expand your digital footprint

Retailers and aggregators are starved for content – package yours in a way that it can be easily shared and used


Do’s and Don’ts

Do • Focus on interacting with people not just

technology • Monitor the traffic on your brand(s) and

answer bad reviews quickly • Understand where your target customer is

interacting. What touchpoints you can tap into

• Leverage the retailer’s traffic (they are hungry for content)

• Invest in content – especially video • Publish new, meaningful content regularly • Collaborate in your space with other

manufacturers to make your content more project rather than product based

• Focus on Know-How content • Collect reviews on your site and link to

retailers

Don’t • Focus on consumer networking sites

alone if your product is an infrequent purchase – who interacts with your product daily or weekly?

• Put up access points that you are not going to staff and monitor

• Assume most of your customers are actively engaged on all social media sites. Steer them to your content

• Focus on just one technology/platform


Online Shopping and Buying

Huge variability by category

Percent of Sales Online Percent who shop online

Source: Internal Tracking Survey

0%

2%

1%

2%

1%

2%

3%

2%

4%

3%

4%

5%

5%

6%

4%

7%

6%

9%

0%

1%

2%

2%

2%

3%

3%

4%

4%

4%

6%

8%

8%

10%

10%

13%

14%

15%

Paint

Building Materials

Soft Flooring

Electrical

Kitchens

Millwork

Live Goods and …

Hard Flooring

Plumbing

Hardware

Hand Tools

Major Appliances

OPE

Faucets

Bath Fixtures

Storage

Lighting

Power Tools

2012 2007

5%

15%

13%

5%

22%

24%

11%

43%

26%

11%

11%

41%

36%

22%

25%

28%

25%

30%

7%

14%

13%

8%

22%

27%

11%

51%

27%

16%

15%

51%

41%

27%

31%

32%

34%

39%

Paint

Building Materials

Soft Flooring

Electrical

Kitchens

Millwork

Live Goods and …

Hard Flooring

Plumbing

Hardware

Hand Tools

Major Appliances

OPE

Faucets

Bath Fixtures

Storage

Lighting

Power Tools


Online Share Can be Very Different

Amazon 31%

Home Depot 12% Sears

10% Lowe's

6%

Ebay.Com 6%

Harbor Freight 2%

Other 29%

Power tools 15% purchased Online Online Outlet Share ($)

Know where your category is purchased Source: Internal Tracking Survey


What Sells Online

Open up your catalog to online – Rethink your product for online

• Easily comparable products with clear

specs and especially with known brands

• Large products that customer will struggle to get home from stores (e.g., grills, patio furniture, riding mowers)

• Products with customization or semi-customization

• “Long-tail” products – hard to find niche products


Online Shopping and Buying- Takeaways

Implications for Research: • Understand the online behaviors

for your category (Where, When, What information, Purchase or Research)

• Understand where your customers shop online

• What are the barriers to purchase online

Marketing and Operations: • Handling the shipping yourself

reconnects you to the consumer

• Enhance your content with pictures, videos, accurate descriptions, tags to related items, Q&A and answered poor reviews

• Price shop your online offering (both for internal consistency and competitive purposes)


On-Demand Product Information

18%

20%

22%

16%

20%

38%

Yes, I have used a Smartphone to look up pricing on a product

Yes, I have used a Smartphone to look up product reviews

Yes, I have used a Smartphone to scan a QR code

Yes, I have used a Smartphone for another use

No, I have a Smartphone but have never used it while shopping in Home

Improvement stores

No, I do not own a Smartphone

Have you ever used a Smartphone while shopping in a Home Improvement store?

Appliances

Paint

Lights, light fixtures

Work Clothes

Lumber / Wood

Flooring

Lawn mowers, weed eaters

Faucets

Toilets

Grills

Tools

Plants, care needed for plants

Electronics

Furniture

Doors and windows

Tool box

Bath fixtures

Countertops

Bathroom

Weed eaters

Cabinets

Vents

Railing

Columns

Fertilizer

Cement

Categories that customers look up in store: (Mentions - in order of # of mentions)


42% Have Used Smart Phone While shopping


On-Demand Product Information

Digital Signage and Interactive displays

In addition to user initiated search, other ways that retailers can deliver information

QR Codes

• Fairly ubiquitous • Retailers have largely taken

control • Lightly used so far (22%

consumers report having used them in HI*)

• Decentralize the technology investment

• Making a comeback in HI retail

• Getting to be very big in Best Buy and other CE retailers

• Very hard to maintain and keep operational

• Very expensive • Digital kiosks making a

reappearance for wayfinding and “endless” aisle shopping

Innovation End Caps at Lowes

Customer Kiosks at Home Depot

Interactive displays exploding in CE Channel


Showrooming

18% of Home Owners

report checking prices online in HI retail stores

Dealing with Showrooming

It is the wave of the future. Find ways to embrace it and guide it to your advantage rather than resist it.

Manufacturer: Make sure your brands are on the relevant places customers will search. Integrate your online and in-store pricing

Retailer: Insist on your own codes to keep customers in your system When possible get exclusives for the store, even if in name only Try to limit the premium for in-store over online to 5% or less Deliver superior service in store that justifies any premium

Collaboration: Romance the product with live demos, customer interactions, give your customers a chance to interact with the product

However, customers who interact with an

associate are 12.5%

more likely to purchase in-store Sources: PRS Research, September 2012; GroupM Next study – “Showrooming & The Price of Keeping Buyers in Store, August 2012


Hi-tech cameras

Passively collect data

Quantify behavior

Report insights

Passive = silent, unnoticed, anonymous

Capture natural customer behavior

24/7 recording for days, weeks, ongoing

“Open-ended” quantitative

Recorded behavior is quantified using automated

and semi-automated techniques

Measure pre-determined metrics and new, unexpected

behaviors

Collaborate with clients throughout

Multimedia PowerPoint report with key insights, charts, graphs, tabular data, highlight footage,

summary and recommendations

Key insights have vivid visual proof

QuantiView Process: Video Capture to Data Analytics

Set up in store or wherever behavior must

be understood

Motion-triggered

High-resolution, >“Full HD”

Bringing Ethnographic studies to the digital age

Usually combine:

wide contextual views

&

zoom views of key

products

STATIONARY CAMERAS

27 Camera View: Freestyle drive-thru (medium)

Example: 3 seconds of fill (0:08, no sound)

Click to Play Video

29 Often video captured will lead to shopper insights that may be unexpected

EXAMPLES OF FULLY-AUTOMATED MEASURES

State of the art video analytics identify every human, record their path as a function

of time, and log the info to a database for analysis.

Heat Mapping

Video analytics

hardware/software can detect

and track people, even a crowd of

people at once.

A curved path line is recorded for

each person, and as the lines

overlap, the software makes the

colors “hotter”.

In: 1

Out: 0

0:15

0:04

People Count Across Lines

Boundary lines are drawn on screen

during configuration.

As motion (i.e., pixel change) from

identified people cross the lines, the

“in” or “out” count is incremented

depending on the direction of travel.

Region Dwell Times

Rectangles and parallelograms

are drawn on screen during

configuration.

The time that each identified

person spends in each defined

region is logged.


Semi-Automated Measures

• Every person entering a defined threshold becomes a record (or row if you prefer).

• A screen snip of the person is databased to keep that person’s behavior organized across time and multiple analysts.

• Sample measures:

– Gender

– Age range

– Alone or with others

– With, without kids

– Display has salesperson or not when arrive

– Time points

• Time enter/exit general area

• Time enter/exit sub-regions

– Ingress and Egress

– Sign interaction

• Which signs

• Level of attention

• Total count of signs noticed

– Product interaction

• Before or after sales assistance

• Which products

• Look, touch, both

• Time begin/end look, touch products

• Total products looked at, touched

• Specific actions

– Finger brush overs

– Turn overs (or attempts)

– Point out something to companion

– Push buttons, turn dials, press keys

Anything viewed can be measured by QuantiView human analysts using QuantiView software.

Same wide &

zoom principle:

Full shelf view

plus close-ups

of key products

STILL IMAGES

EXAMPLES OF SEMI-AUTOMATED MEASURES

Anything viewed can be measured by QuantiView human analysts using QuantiView software.

Status of Merchandising Displays

(e.g., lit, unlit; obstruction,

general condition)

# Product

Facings

Out of

Stocks

Products

on

hangars

• General condition of shelf

• Deviation from planogram

• Presence/absence of products

• Presence/absence of signage

• Presence/absence of price tags

• Accuracy of price tags

• Aisle obstructions

• Shelf dimensions

ANYTHING SEEN CAN BE

QUANTIFIED... INCLUDING THE

UNKNOWN.

CAN COORDINATE MULTIPLE

PHOTOS OF SAME STORE.

SOME REAL DATA FROM REAL STORES

• Snapshots of the LED shelf were gathered in over 100 stores as part of a

recent stack-out service.

54%

15%

31%

Socket into

Savings

Compare Color

Temperature

Neither

POP Displays Present

Missing Display Bulbs - 0

SOME REAL DATA FROM REAL STORES

• Snapshots of the LED shelf were gathered in over 100 stores as part of a

recent stack-out service.

24% 25% 28%

6%

3% 1% 1% 0% 1%

0 1 2 3 4 5 6 7 8

Empty Facings

0 15 30 45

Empty Horizontal Inches

Mean = 1.49 Mean = 13.4”

Max = 52.4”


Tele-Presence

Where it makes sense What is it

• When you are not staffed you are “out of stock”

• When you are staffed and traffic is light you are

wasting payroll

• 30-40% turnover means that you struggle to keep

qualified people in-store and low volume stores do not

allow for apprenticeship

Large Specialty Departments: • Kitchens and countertops • Carpeting • Doors and Windows • Outdoor Power Equipment • Appliances

0

100

200

300

400

500

600

700

800

900

-1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Nu

mb

er

of

Sto

res

Weekly Countertop Sales - Transactions

Significant staffing issues in over 1300 stores

Countertop Sales by Store


What is source?


Tele-Presence

Combating the “Ghost Town Effect”

9 – store test with Cisco at Home Depot • Limited functionality • Requires a lot of initiative by the customer to engage


Traiting and Clustered Assortments

• While this is by no means a new technology for retail, Home Improvement has been slow to adopt

• It appears that the major players are now serious about implementing this approach and we will likely see movement

• Creating clustered assortments based on the store trade area demographics

• Used to drive sales and minimize dead inventory

• Requires a way to manage a large number of assortments

What is it? Will it happen? How do you prepare?

• Must be doing weekly tracking of sales by store by SKU

• Analytics to look at productivity of SKUs by planogram type

• Need store trade area consumer data – who shops there

• An understanding on how to add value – not sell in but sell through


Wrap up

• What technology is relevant for you depends on how your customer shops

• Change is inevitable and seems to be coming faster now in the HI industry than ever before

• Technology will not move in a straight line. Instead of big bets in one area, make a few bets in the most promising areas

technology trends in home improvement retail

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