Bangkok

Beijing

Boston

Chennai

Chicago

London

Los Angeles

Melbourne

Milan

Mumbai

Munich

New Delhi

New York

Paris

San Francisco

Sao Paulo

Seoul

Shanghai

Singapore

Sydney

Tokyo

Wroclaw

The new face of retail

Retail and consumer trends reshaping the landscape

The materials contained in this document are intended to supplement a discussion with L.E.K. Consulting. These perspectives are confidential and will only be meaningful to those in attendance.

L.E.K. Consulting LLC, 75 State Street, 19th Floor, Boston, MA 02109, USA T: 617.951.9500 F: 617.951.9392 www.lek.com

©2014 L.E.K. Consulting

April 2014

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A number of major trends are reshaping the U.S. retail landscape

The new face of retail

More spending among high and low income levels as middle class is squeezed

Hourglass economy

1

Population is becoming older and more ethnically diverse

Demographic shifts

2

Information transparency and accessibility creating empowered, sophisticated consumers who expect more from retailers

Uber consumers 3

Digital tools and channels have reshaped the purchase cycle… and role of physical stores

Omni-channel6

Paper and broad-based ad vehicles declining, but not dead

Decline of traditional media

7

Balance of power has moved to new channel segments

Channel shifts8

International markets provide source of growth in otherwise low growth world

International10

Brands establishing direct consumer relationships and building own commercial channels (stores and e-com)

Brands going direct to consumer

9

Consumers want specialized brands, products, and experiences that deliver on specific needs

Smaller and focused is better

4

Brands / retailers building a deeper understanding of consumers and tailoring product, messaging, and experience to their specific needs

One-to-one customer

engagement5

©2014 L.E.K. Consulting

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The rising income inequality gap is squeezing the middle class, resulting in an “hourglass” economy

Source: U.S. Census, CBRE; L.E.K. research and analysis

©2014 L.E.K. Consulting

The new face of retail

Top 20%

Bottom 20%

50

100

60

0

10

20

30

40

70

80

90

  Lowest quintile

  Second quintile

2005 2010 20121975 1980

  Highest quintile

  Fourth quintile

1985 1990 1995 2000

U.S. shares of household income(1970 – 2012)

1970

  Third quintile

1

2

3

4

5

The highest 20% of earners accounted for more than half of the income earned in 2013, up from 43% in 1970

Upper-middle class proportion of income has declined ~2ppt since 1970, largely at the benefit of the top quintile

Meanwhile, the share of middle-income households has markedly declined

- Third quintile middle-class share has declined 3ppt since 1970, or 20% of its relative share

Lower-income households have largely maintained income levels and even increased spending power, due in part to government assistance (transfer payments, tax credits, subsidy programs, etc.)

1

2

3

4 5

Macroeconomic indicators suggest these trends are structural and unlikely to

change in the near future

Hourglass economy1

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The effects of the hourglass economy can be seen all around us

Source: Bloomberg, Forbes, QSRWeb.com, USDA, Financial Times, Savings.com,, Euromonitor, NRN, company websites©2014 L.E.K. Consulting

The new face of retailHourglass economy1

Private label accounts for nearly 23% of unit sales in the U.S.

Dollar General added ~650 stores in 2013 and plans to open 700 additional stores in 2014

Deals offered by major department stores and apparel retailers increased 63% between 2009-2012, with average discounts rising from 25% to 36% over the same period

P&G developed dish soap Gain specifically targeting low-income brackets; the product achieved retail value sales growth of 70% in 2012

Fast casual restaurant traffic rose 8% in 2013, compared to a decrease of 1% and 2% for casual dining and midscale restaurants, respectively

The luxury market in the Americas grew ~4% p.a. from 2008-2013

Global sales at LVMH grew ~4% in 2013

Neiman Marcus experienced same store sales growth of ~6% in the first half of FY 2014

Whole Foods’ 2013 profit was up ~20% YoY

Patron Tequila has capitalized on “ultra-premiumization” to reach >2M cases/year

BMW posted record sales of over 309K units in the U.S. in 2013, representing 10% growth over 2012

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Note: * Non-Hispanics onlySource: U.S. Census Bureau, L.E.K. Analysis©2014 L.E.K. Consulting

CAGR %(2012-20F)

0.9

3.2

2.0

1.0

2.3

0.8340

320

300

280

260

240

220

200

180

160

140

120

100

80

60

40

20

0

U.S. population by ethnicity(1980-2020F)Millions of people

2020F20121980

Total

The new face of retail

Demographic shifts are changing the composition of the U.S. consumer base

Demographic shifts2

180

200

160

140

120

100

80

300

320

340

280

260

220

240

40

60

20

0

U.S. population by age group(1980-2020F)Millions of people

Kids (3-8)

Infants (0-2)

2020F

333

2012

314

1980

227 Young Adults (18-29)

Middle Youth(30-44)

Tweens (9-12)

Seniors (60+)

Mid-Lifers(45-59)

Teens (13-17)

0.1

CAGR %(2012-20F)

0.4

0.1

0.5

0.3

0.7

0.8

Total

(0.2)

(0.5)

2.9

American Indian& Eskimo*

White*

Hispanic

Black*

Two or MoreRaces & Other*

Asian & NHPI*

∆ million people

(2012-20F)

0.2

1.7

2.7

3.0

10.8

1.6

20.0

∆ million people

(2012-20F)

0.4

(0.3)

0.1

0.8

1.1

4.0

(2.5)

15.5

19.0

81% of U.S. population growth coming from Seniors (60+)

76% of U.S. population growth coming from Hispanic and

Asian households

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The new face of retail

Forward-looking consumer businesses are finding ways to exploit these trends

Source: U.S. Census Bureau Consumer Expenditures Report, Euromonitor, Convenience Store News, Kurt Salmon, Latin Post, Whole Foods, L.E.K. analysis©2014 L.E.K. Consulting

Demographic shifts2

Aging population

Ethnic diversity

Broaden products and engagement tactics to cater to an older consumer base without losing focus on the

younger demographic

Evolve traditional approaches (product,

marketing, distribution, etc.) to access growing ethnic

consumer segments

Channel and location

presence

Evolve product for consumers

Tailored media /

advertising

• Hispanics spend more on food than any other item and more on apparel & services than any other consumer group

• 61% of Hispanics shop with a child or another adult, vs. 38% of gen. pop.

• U.S. Hispanics consume more media via mobile phones & magazines than non-Hispanics, but less on tablets & TV

• Hispanics have a different channel mix (e.g., over-index in bodegas and dollar stores)

• 7-11 growing in Hispanic neighborhoods to compete with bodegas

Contemporary needs

Tailored offerings for

seniors

Key segments intrinsically advantaged

1

2

3

1

2

3

• Retailers directly targeting seniors and giving them specific experiences / products (e.g., Amazon’s easy-to-navigate micro-site for older consumers)

• Certain categories should see out-sized benefits due to key themes (e.g., travel & leisure, heath & wellness, etc.)

• Today's seniors are different (e.g., live longer, are healthier)

• They’re physically active and want to look / dress / feel younger

• They are digitally savvy

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Today’s consumers are highly informed and savvy, which is raising the bar for retailers and brands to win their business

Source: L.E.K. analysis ©2014 L.E.K. Consulting

The new face of retail

Customers “know” the products better…

…understand they have a multitude of

options…

…know exactly what each of those options

are charging…

Ability to instantly shop and compare across channels / brands

Access to countless sources of information

With online product reviews, real consumer experiences matter; it’s no longer just about marketing

A deeper understanding of products and their attributes means falling short on any one attribute can be devastating

Visibility and access to countless brands / products

Outside the confines of the physical (e.g., mall and shelf), the universe of options is vast and competition is much greater

Price transparency has never been greater

Consumers are sophisticated in comparing price and value

Digital makes everything convenient; there’s no longer a reason to pay higher price

Consumers don’t have tolerance for paying price premium

Uber consumers3

…and therefore require true

differentiation

The product and value proposition must clear and compelling

Need to differentiate and eliminate choice; consumers must want YOUR product

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For example …

Source: Pew Internet & American Life Project, Google Shopper Marketing Council Insights

©2014 L.E.K. Consulting

21

15

9

0

5

10

15

20

25

30

2010

15%

Researched a Product / Service Online Yesterday (2004-2010)% of Americans

20072004

Mobile is accelerating this trend 79% of smartphone owners use their device to assist with

shopping at least 1x / month; of these shoppers:

44% make price comparisons

44% find promo offers

31% find product information

31% find product availability in-store

30% find product reviews

84% use to help shop while in-store

Uber consumers3 The new face of retail

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Consumers have increasingly higher expectations of retailers and brandsA

bilit

y to

buy

onl

ine,

pick

up

in-s

tore

50%

71%

Abi

lity

to v

iew

in-s

tore

in

vent

ory

onlin

eSource: Forrester, Accenture, Oracle©2014 L.E.K. Consulting

Consumers expect …

73%

Onl

ine

and

in-s

tore

pr

icin

g to

be

the

sam

e

61%

Onl

ine

and

in-s

tore

pr

omot

ions

to b

e th

e sa

me

Res

pons

e w

ithin

2

hour

s of

com

plai

nt

on T

witt

er

52%

Uber consumers3 The new face of retail

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These rising consumer expectations are putting pressure on retailers to evolve their go-to-market strategies to meet consumers’ needs

Before… Today!

Price

Selection

Convenience

Availability

Selection, Availability, Price, Convenience

Free shipping / returns

Multi-channel shopping, delivery, & returns

Bigger selectionSame / next day

delivery

Personalized experiences

Uber consumers3

Impartial recommendations

Consistent engagement

Easy navigation

Promotions

Whatever, wherever, and whenever

The new face of retail

©2014 L.E.K. Consulting

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Brands are becoming increasingly specialized across categories … and bigger is not always better

The new face of retail

Source: Company websites, L.E.K. analysis©2014 L.E.K. Consulting

Smaller & focused is better

4

Food & beverage

Personal care

Apparel & accessories

Other

Energy / recovery Sport performance

Healthy lifestyle

Cosmetics Health & wellness

Bath & body

Outdoor apparel Focused lifestyle

Active lifestyle

Technology

Fitness & clubs

Fast food

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Brands and retailers are building more robust datasets of their customers; sophisticated data analytics can unlock substantial benefits via more tailored strategies (experiences, messaging, assortments, offers, etc.)

The new face of retail

Source: Experian, Company websites, L.E.K. analysis©2014 L.E.K. Consulting

One-to-one customer engagement

5

Transaction history

Behavior by channel

Demographic information

Stated preferences

Sophisticated data analytics

Tailored offerings delivering enhanced value to consumers based on their specific needs

Personalized messages perform 10x better in

terms of revenue generated per message, than

traditional batch and blast emails

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Deeper insights are enabling companies to establish stronger connections with consumers and deliver a more compelling value proposition

The new face of retail

Note: * As told to Advertising AgeSource: Advertising Age, MGI, ICLP, Internet Retailer, Retail Touch Points, Company websites, L.E.K. analysis©2014 L.E.K. Consulting

One-to-one customer engagement

5

Shoedazzle steers customers in the direction of the product which they would most likely be interested in by collecting shopping preferences via a quiz prior to giving the customer product recommendations

“… We ask them what they’re looking for next month… They tell [our client services team] what they’re looking for and ultimately that information informs the algorithm …”

Chief Marketing Officer, Shoedazzle

Harrah’s considers its loyalty program “the vertebrae of the company” and utilizes customer data to personalize the guest experience before, during, and after visits

“… We know if you like golf, chardonnay, down pillows, if you like your room close to the elevator, which properties you visit, what games you play, and which offers you redeem …”

Former CMO, Harrah’s*

Amazon utilizes collaborative filtering to generate add-ons and adjacent product recommendations

- The company attributes up to 30% of sales to its recommendation engine

Williams-Sonoma uses personalized e-mail targeting by combining shopper history with broader demographic information on ~60 million households (e.g., income, home values, and number of children)

- The company cites a 10-18x better response rate of these targeted emails

Revolve Clothing allows shoppers to build their own digital boutiques, which they curate with assortments of their favorite products and designers from the store

- The company cites that shoppers using the interactive feature are 6x more likely to convert than consumers that browse on the standard e-commerce site

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The traditional purchase path …

The new face of retail

Awareness

Consideration

Purchase

Intent

Omni-channel6

Source: L.E.K. analysis©2014 L.E.K. Consulting

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… has been dramatically changed by technology

The new face of retail

Educate

Compare

Reflect & share

Omni-channel6

Awareness

Consideration

Purchase

Intent

©2014 L.E.K. Consulting

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The lines between offline and online shopping experiences are blurring

In-store

Online

51% Research

online and visit store to

purchase

44% Research

online and buy products

online

17% Visit a store

first, and then purchase

online

32% Research

online, visit store to view product, then return online to purchase

Source: Google Think Insights©2014 L.E.K. Consulting

The new face of retailOmni-channel6

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Some examples of the way consumers are engaging outside the store …

52% of shoppers share retail-related posts via social media, of which:

• 51% post pictures of items they’re interested in

• 37% post items they’ve purchased

• 29% post about coupons / sales

65% of tablet device owners used their

device for shopping activities in Q3 2013

Blogs are most likely to influence a

purchase after retail / brand sites; they rank

favorably for trust, popularity &

influence

Source: Nielson, JiWIre, Shop.org, Business Insider©2014 L.E.K. Consulting

The new face of retailOmni-channel6

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The new face of retail

Retailers are experiencing a significant channel shift as consumers increasingly utilize e-commerce in lieu of stores

*Note: 2011 is the most recent year with annual figures; analysis excludes Building materials and supplies stores, Health and personal care stores, and General merchandise stores because of data limitations, and Nonstore retailers and Gas Stations because of relevance Source: U.S. Department of Commerce, L.E.K. analysis ©2014 L.E.K. Consulting

Store-based retail sales are not growing; virtually all growth in consumer

spend is being captured by e-commerce

Omni-channel6

7

2

45

78

9

18

22

0

2

4

6

8

10

12

14

16

18

20

22

U.S. online sales as percent of total retail sales* by product category (2013E)Percentage

Com

pute

r an

d el

ectr

onic

s

App

arel

and

ac

cess

orie

s

Boo

ks, m

usic

, vid

eo

Aut

o &

par

ts

Fur

nitu

re a

nd h

ome

furn

ishi

ngs

Hea

lth a

nd p

erso

nal

care

Toys

and

hob

by

Foo

d an

d be

vera

ge

Tota

l

82,046

1330

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

In-store E-commerce

Change in U.S. retail sales, 2006 – 2011*$M

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*Note: Traffic data is collected from 60,000 traffic-tracking devices installed at malls and large retailersSource: Wall Street Journal, ShopperTrak, L.E.K. research and analysis©2014 L.E.K. Consulting

18

21

25

34

0

5

10

15

20

25

30

35

40

2013201220112010

Total mall and large retailer foot traffic for November and December 2010-2013 (ShopperTrak)Billions of Visits*

-20%

The new face of retail

The widely cited fall in mall traffic is the most visible sign of the rapid change that retailers are facing

Omni-channel6

• Fewer store visits and transactions

• Non-destination categories (e.g., impulse, add-on purchases) particularly at risk

• Stores are playing new roles

Traffic to U.S. retailers is declining, in large part due to a shift to digital tools and e-commerce

- There is a lesser need to go to stores given other options for research and purchase

Shoppers also aren’t using physical stores to browse as much anymore

- Shoppers visited an average of 5 stores per mall trip in 2007, vs. 3 stores in 2013

These trends continue to prevail and should drive even further e-commerce penetration

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The new face of retail

To win business in this new multi-channel environment, companies must define what ‘omni-channel’ means for them and make investments to enable this

Omni-channel6

Channel strategy

Single view of the customer

Organizationalalignment

Fulfillment / logistics

Marketing Merchandising

Increased:TrafficEngagementSalesLoyalty

Seamless, holistic

customerexperience

Omnichannelinteractions

Foundational enablers

1 2 3

4 5 6

©2014 L.E.K. Consulting

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We believe that developing an omni-channel strategy is best done by considering the needs across the full consumer lifecycle

The new face of retailOmni-channel6

Learn

Research

Purchase

Support

Share

Consumer engagement lifecycle

ProductWhateverWheneverHowever

ProductWhateverWheneverHowever

Channels

Marketing and tools

Increase awareness

Share and socializeExpand community

Drive consideration and selection

Post-purchasesupport

Facilitate the purchase processSource: Company websites; FierceRetail; BusinessInsider©2014 L.E.K. Consulting

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Engagement with traditional media continues to decline…

The new face of retailDecline of traditional

media7

Source: Editor and Publisher Yearbook, Alliance for Audited Media, Nielsen Media Research©2014 L.E.K. Consulting

4343

4952

54

0

5

10

15

20

25

30

35

40

45

50

55

U.S. weekday newspaper circulation (2004-12)Millions of subscriptions

121008062004

-8-9-8

-9

-11

-15

-10

-5

0

5

10

15

U.S. magazine single-copy sales(2008-12)Percent change in sales

121110092008

0

1

2

3

4

5

6

7

8

9

10

12100806

U.S. broadcast television ratings(2004-12)Average rating per night

2004

CBS

ABC

NBC

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… however, the growth of digital provides retailers with increasing opportunities and formats to engage with consumers

The new face of retailDecline of traditional

media7

0

5

10

15

20

25

30

35

40

45

50

20122011201020092008200720062005

U.S. advertising revenue by media (2005 – 2012)Billions of dollars

Newspaper

Internet

Radio

Cable television

Broadcast television

Note: * “Social media advertising” encompasses all money spent on ad formats across social networks, including both display and native advertisingSource: Pew Research Center, IAB, PWC, BIA / Kelsey©2014 L.E.K. Consulting

CAGR %(2005-2012)

(1.1)

16.8

3.7

(12.1)

(2.7)

0.0Total

Marketers are still spending the same amount on advertising, but through

different media

11

10

8

7

6

5

0

2

4

6

8

10

12

14

16

U.S. social media advertising growth (2012-17F)*YoY percent growth

17161514132012

Social media advertising is projected to grow at a CAGR of ~19% through 2017

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Retailers and brands are working hard to effectively realign their marketing strategies in this environment

Marketing objectives

Reactivate lapsed customers

Build awareness

Engage / retain customers

Acquire new customers

Stimulate purchases

Marketing tools

The new face of retailDecline of traditional

media7

How do you effectively deploy

these tools?

©2014 L.E.K. Consulting

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The balance of power within the retail channel has also evolved dramatically

The new face of retail

Note: 1Excludes food, motor vehicle and parts dealers, and gasoline stations; 2Includes H&M, Inditex and American Apparel; 3IIncludes TJX, Ross Stores & Stein Mart; 4Includes mass merchants (e.g., Wal-Mart); 5Includes Dick’s Sporting Goods, Staples, Office Depot, Barnes & Nobles, PETCO, PetSmart, Toys R Us, Best Buy, Circuit City, Bed, Bath & Beyond, Guitar Center, Linens and Things & BordersSource: U.S. Department of Commerce, WSJ; TJX Investor Information; International Council of Shopping Centers; ICSC; L.E.K. analysis©2014 L.E.K. Consulting

Change in U.S. Retail Sales by Select Channels (2003-2013) 1

CAGR % Total Retail Sales 1 : 4.0%

-2.0

2.6

3.1

3.7

5.1

5.4

6.9

7.1

11.7

-12 -8 -4 0 4 8 12

Department Stores

Grocery

Big box specialty5

Off-Price Retail3

Fast Fashion2

Outlet Stores

Drug Stores

Dollar Stores

Mass Merchants & Clubs4

• Growth supported by the entry of international retailers such as Zara, H&M and Uniqlo

• U.S. sales at Zara more than tripled between 2007-12 and Uniqlo plans to expand its store count from ~20 currently to 200 by 2020

• Costco grew from ~430 to ~650 locations from 2003-13• Walmart and Target successful in expanding geographically and driving

traffic with super-center format

• ~4,300 and ~2,800 stores added at Dollar General and Family Dollar, respectively, since 2003

• Growing market share by substantially expanding food & consumables offer, growing private label, and building destination categories

• Subject to industry consolidation (e.g., Eckerd, Duane Reade)• Faced challenges in some categories (e.g. photography) which the

category has sought to counter by placing more focus on grocery type items & increasingly fresh food

• Competing with warehouse clubs and supercenters at the lower end• Premium / specialty segment (e.g., Whole Foods) seeing continued

growth

• More brands going direct with own stores and online• May/Federated merger resulted in net store closings• Many regional department stores have declared bankruptcy (e.g.,

Hacketts, Loehmann’s & Mervyn’s)

• Model which delivers treasure hunt for top brands at great value has driven consistent growth, even through tough market conditions

• TJX added ~650 stores between 2003 and 2013 and plans to add ~100 new locations across  the U.S. in 2014

• Outlet center openings have grown from ~2 per year in 2008 to ~8 per year in 2011

• Center owners have relaxed or abandoned former radius restrictions

• Channel has struggled to compete on the basis of breadth of product range since the emergence of online retailers such as Amazon

• Littered with bankruptcies, e.g., Barnes & Noble, Linens and Things, Circuit City. Many others facing major challenges

Channel shifts 8

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The new face of retail

Brands are increasingly going directly to the consumer

Brands going direct to consumer

9

Forgoing the traditional wholesale route of selling through multi-brand retailers

Many brands are…

Source: L.E.K. analysis©2014 L.E.K. Consulting

Increasingly making websites more commercial and marketing / selling directly to consumers

Relying on Amazon’s Marketplace to increase awareness and tap into Amazon’s ~85 million unique monthly visitors

Building direct consumer relationships and engagement via social media, community outreach, content, and value-add services

Opening outlet stores to convey full brand representation and drive incremental sales of full-price and liquidation goods

Significant incentives for brands to go direct include: higher margin capture, controlling customer relationship, and compensating for weaker points of physical wholesale distribution

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The new face of retail

Source: SEC filings, MarketWatch, Company websites, Forbes, Seattle Times, Reuters, Business Week, L.E.K. analysis©2014 L.E.K. Consulting

Brands across categories are pursuing global strategies to capitalize on macroeconomic tailwinds

Geographic distribution of sales (Percent of 2012 sales)

Retailer N. America Europe Asia ROW

68% 5% 8% 19%

48% 11% 38% 3%

64% 22% 14% -

42% 25% 16% 17%

70% 20% 10%

40% 13% 7% 40%

32% 39% 29%

EXTRA! EXTRA!

“Walmart to invest more in Mexico this year”

“Tiffany & Co is embarking on major

expansion plans, bringing its ubiquitous name to new

areas, including India”

“Ralph Lauren reaches worldwide audience with its

Olympic made-in-America designs”“Going forward, market

penetration in China and e-commerce growth look to

be two of the biggest contributing growth factors

for Nike”

“This Bud’s for you, Brazil – AB InBev to introduce

Budweiser as a premium brand in Latin America’s

largest nation”

International 10

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Retailers are increasingly expanding to emerging economies in Asia, Africa and Latin America as the middle class in these geographies grows

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Size of worldwide middle class* population (2009-30F) Millions

North America ~(2)

Europe ~1

Middle East & N. Africa ~49

Sub-Saharan Africa ~83

Asia Pacific ~148

Central & S. America ~31

30F

~4,900

20F

~3,200

2009

~1,800

CAGR%(2009-30F)

The new face of retail

Note: * Defined by Brookings Institution as households with daily expenditures between US$10-US$100 / person in purchasing power parity terms; North America includes U.S. and Canada only; Europe includes the EU5, Russia, Scandinavian countries as well as Eastern European countries; Asia Pacific includes China, India, other Asian countries as well as Oceania ; ** India 2012 data extrapolated

Source: Brookings Institution, L.E.K. analysis©2014 L.E.K. Consulting

Europe & North America’s combined

share falls from 54% to 20% of the total middle

class population

International 10

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The new face of retail

So, what are the implications?

©2014 L.E.K. Consulting

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In light of these trends, retailers and brands should consider the following:

Challenge the status quo and ask yourself, “Are we really delivering a compelling value proposition to the customer?”

Consider how you can position brands against distinct consumer segments and their needs to separate yourself from the competition

Embrace the hourglass economy and look to exploit opportunities at the top or bottom – don’t get caught in the middle

Find ways to activate key customer groups to take advantage of shifting income, age, and ethnicity demographics, as well as changing consumer expectations

Define what omni-channel means for you, and build a pragmatic plan to get there

Holistically embrace digital and rethink the go-to-market channel plan, including the role of stores, channel mix, links between digital and traditional stores, and the appropriate media mix to drive traffic and customer acquisition / loyalty

Build one-to-one relationships with your consumers and ‘own’ your brand engagement plan with them

Refine pricing and promotion frameworks to maximize total margin dollars and profitability

Evolve the organizational structure and capabilities to meet the realities of today’s business model

Determine whether international is an opportunity for you and, if so, start planning now

The new face of retail

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Potential keys for success

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©2014 L.E.K. Consulting

CONFIDENTIAL

DRAFT

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Do we have the right brand / product mix to compete in today’s market?

Do we have a robust consumer segmentation that helps drive corporate strategy?

Are we micro-targeting consumers? Do we even have the capability to?

How does our loyalty program differentiate in an increasingly crowded space?

Does our channel plan embrace technological changes and the role of digital? Is our store strategy aligned to demand and role shifts?

Do we have the capabilities, org structure, infrastructure, and incentives in place to win and support growth objectives?

How can we preserve profitability without losing share in an increasingly price-transparent environment?

Are there activities 'on the edge' of our core business that could drive differentiation, revenue and / or customer satisfaction?

Do we have an actionable plan to grow international?

Companies are asking themselves a number of key questions, and taking action to evolve their businesses to win in this new market landscape

The new face of retail

Key questions to ask Potential areas to focus

Strategic customer segmentation and prioritization

One-to-one customer relationship management

Next-generation loyalty program

Market-based store network, role and footprint plan

Pricing and promotion optimization by objective, market, brand, etc.

Omni-channel definition and plan with clear priorities and timeline

In-store customer service best practices and training to deliver value to customer and increase conversion

Org structure and capabilities evolution

“Edge” strategy (e.g., adjacent categories, services)

International expansion (e.g., market selection, go-to-market planning, business optimization / distributor management, implementation)

©2014 L.E.K. Consulting