ceo viewpoint 2017 the transformation of retail

CEO Viewpoint 2017: The Transformation Of Retail

JDA Executive Luncheon at NRFJanuary 17, 2017

Copyright © 2017 JDA Software Group, Inc. Confidential

Respondent profile351 responses across a range of markets, retailer tiers and business types

Base: 351

1

9

12

24

27

27

Other (Retail & Consumer)

CPG

eCommerce

Grocery

Soft Lines

Hard Goods

%

Breakdown of business type

Top 250 retailers = revenue $5 billion + Top 251- 1000 retailers= revenue between $250 million- $5 billionOutside the top 1000 retailers= revenue less than $250million

Retailer tiers

32%

53%

15%

Top 250 retailers

Top 251 - 1000 retailers

Outside top 1000 retailers

Geographical markets

United States28%(100)

Mexico10%(33)

United Kingdom17%(60)

Germany15%(51)

China16%(55)

Japan14%(50)


Confidence in overall revenue & profit growthOnline is the biggest area of confidence both in terms of revenue and profit

Q32. How confident are you about your organization’s prospects for profit growth during the next 12 months in the following c hannels:

Q27. How confident are you about your organization’s prospects for revenue growth during the next 12 months?

41335124

16

5812

11

610

16

36

41343734

3931

31

435151

4448525447

Total business2016

Total business2017

OnlineStoresTotal business2016

Total business2017

OnlineStores

%

Very confident

Somewhat confident

Not very confident

Not at all confident

Revenue Profit

Base: 351 Please note: ‘Don’t know’ and ‘Prefer not to say’ responses are not included.

Mexico: 74%Japan: 26%

US: 54%

Denotes sig. difference Denotes US for info only


Omni Channel competencies Compared to 2014, there has been a marked deterioration in retailers ability to handle omni channel execution

Base: 351

Q10. Which of the following best describes your organization in relation to omni-channel fulfilment?

2017 2014

We provide a seamless shopping experience and offer complete omni-channel fulfillment. However, the offering is too complex/expensive and we are looking to scale back our delivery options 12% 19%

We have the ability to offer our customers a seamless shopping experience but we struggle to meet customer’s omni-channel fulfillment demands 38% 31%

We have distinct channels operating as silos to meet customer demand 37% 30%

We have refined our omni-channel offering to a point where we are now able to make a profit while fulfilling our omni-channel demand 10% 16%

US: 26%

Don’t know: 4%


Investment Priorities


Digital transformation strategyDigital Transformation becomes the highest investment priority

But more than half of retailers have not started implementation of a digital transformation strategy

5%No plans to develop a digital transformation strategy

We are struggling to define a digital transformation strategy 9%

Digital Transformation strategy is being developed but implementation has not yet started 38%

Digital Transformation strategy is well defined and is being implemented 49%

40

20

60

80

100 48% increase

45% remain the same

5% decrease

Core supply chain capabilities

China: 73%

%

Mexico: 86%

US: 60%

40

20

60

80

100

%

69% increase

28% remain the same

1% decrease

Digital transformation

40

20

60

80

100 51% increase

42% remain the same

3% decrease

Omni-channel fulfillment

%



26

28

31

39

40

46

36

44

53

53

55

31

31

30

37

36

33

40

37

32

33

30

43

40

39

24

25

21

24

19

15

14

16

In-store virtual changing rooms

Robotics and automation

In-store augmented reality

In-store clienteling

Personalized mobile ‘push offers’ in store

(Beacons)

Smart Mobile device for staff in stores

Integration of IOT devices and data

Collaboration across supply chain partners

Use of social media data

Big Data availability and analytics

Mobile enabled applications

Have implemented Plan to implement in next 12 months No plans to implement in next 12 months

Digital transformation strategyDigital capabilities outside of the store feature in the top 3, ahead of all in-store capabilities, with mobile applications in 1st

Base: 351

Q18. Please indicate the level of implementation for each of the following digital capabilities:

Outside of store

In-store


27

32

33

33

34

38

42

38

41

40

38

37

19

20

16

17

20

17

9

8

6

6

5

5

3

1

3

3

3

2

Capturing unstructured data about your customer(social, reviews)

Having a single view of the customer across allchannels and touchpoints

...in the personalization of the customer experiencein your physical channels (stores)

...in the personalization of the customer experiencein your digital channels

…to gain insight into customer preferences and

shopping behaviors via data science techniques

...in the planning and development of your customeroffers

Significantly Moderately Minimally Not at all Don't know

Leveraging customer dataRetailers say they are currently best at using their customer data for planning and developing offers

Base: 351Q21. Thinking about customer data, please indicate the level to which your organization performs the following.

Using customer segmentation insight…


Customer Order Fulfilment InvestmentCollecting orders in-store is the top collection offering but more challenging options are being scaled back

26

26

48

25

43

44

47

21

23

27

28

33

43

44

48

51

Click & collect as a drive through in your car park

Same day click & collect

Specific delivery time slots

Use third party retailers as collection points for online orders

Same day delivery

Next day delivery

Buy online, return to store

Buy online, ship to store

Click & collect in-store

%

2017 2016

Soft l ines: 64%

Base: 351Q11. Do you offer, or plan to offer any of the following customer collection or delivery options in the next 12 months?

Don’t know: 1%


20%

22%

Store Expansion InvestmentThe majority of retailers don’t plan to reduce store investment, regardless of online growth

Accelerate

No change

Reduce

58%

28

42

24

Complimentary (some Haloeffect across the channels)

Online are net additionalsales (no cannibalisation)

Cannibalising store sales

%

China: 45%

Mexico: 34%

US: 18%

US: 60%

US: 22%


Base: 351

Q9. Do you plan to reduce your store investment due to online growth?

Not sure: 1%

Base: 351

Q25. How are online sales impacting store sales?

Don’t know: 7% Denotes sig. difference Denotes US for info only


Profitability


Growth of online operating costsThree quarters of retailers believe that their online operating costs have increased as a percentage to sales in the last 12 months

23%

Cost reduction No change Some increase (0-9%) Significant increase (10% or more)

4%

19%

52%

Distinct channels: 35%

Base: 351Q28. How have your organization’s online operating costs changed as a percentage to sales in the last 12 months?


US: 18%

Don’t know: 3%

US: 50%


1

10

12

15

17

20

25

Other

Capacity to support online growth

Store inventory accuracy

Failing customer service in order fulfillment (e.g. deliveringincorrect orders, delivering orders outside of the agreed…

Rising supply chain costs

Rising inventory levels

Rising out of stock levels

Supply chain issues impacting profitabilityRising inventory levels, rising out of stock levels and rising supply chain costs constituted 62% of the responses

Ranked number 1

Mexico – 26%

Ranked #1 for Grocery & US

$10B+ (23%) vs $5-$10B (9%)

$10B+ (14%) vs $5-$10B (24%)

Base: 351Q15. Please rank the following issues within your supply chain in order of concern where #1 is the most important to your organization:

Ranked #1 for Softlines, Hard Goods, China & UK

Most frequently ranked in the top 3


3

4

32

25

46

48

14

19

for your customer order fulfillment

for your in-store customer experience

%

Cost reduction No increase Some increase Significant increase

Impact of omni-channel on cost of labor…Labor costs are increasing, particularly in enabling omni-channel capabilities for the in-store customer experience

4%

4%

Mexico: 40%

Mexico: 31%China: 27%

US: 7%

Base: 351Q13. To what extent is the cost of labor affected by enabling omni-channel capabilities…


Don’t know


Changes in order fulfilment While increased customer charges for online orders is currently the most implemented change, the next 12 months will see a rise in the minimum order value for free standard home delivery

22

25

27

27

29

35

28

27

28

31

33

22

50

48

45

42

38

43

Charge for customer returns

Apply limits on returns (e.g. max items in a time period)

Raise the minimum order value for free buy online pick up instore

Decrease customer charges for online orders

Raise the minimum order value for free standard home delivery

Increase customer charges for online orders

%

Have implemented Plan to implement within next 12 months No plans to implement within next 12 months

China: 56%

Mexico: 54% US: 56%

US: 66%Hard goods: 33%

Base: 351Q12. Have you implemented or do you plan to implement any of the following changes in relation to fulfilling orders across ch annels?


15 59 23To what extent is the cost

of customer returns eroding profit

%

To a great extent To some extent Not at all

The cost of customer returns is eroding profitsAlmost three quarters of retailers believe that the cost of customer returns is eroding profits to at least some extent

US: 36%Profitable omni-channel operation: 41%

Base: 351Q29. Please indicate to what extent the cost of customer returns is eroding profit:

3%

Don’t know


Key performance indicators62% of retailers stated their online business is making a profit – up 7% on last year

(10)

26

62%

Breaking even

Making a profit

Making a loss

Mexico: 40%

ProfitabilityThose who have a higher percentage of online revenues are more confident about their prospects for total business profit growth over the next 12 months.

US: 68%

Base: 351Q26. Is your total online business:

Don’t know: 3% Denotes sig. difference Denotes US for info only

ceo viewpoint 2017 the transformation of retail

Data & Analytics