Catch 'Em and Keep 'Em

Catch ’Em and Keep ’Em Revitalizing the Store in a Cross-Channel World Cisco Internet Business Solutions Group (IBSG) Lisa Fretwell, Jon Stine, Jeff Loucks, James Macaulay, and Michael Adams January 2012 http://www.cisco.com/web/about/ac79/retailcpg/nrf-2012.htmlCisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 1

What We Think1 Is Happening

Today’s Technology-Shaped Shoppers Are Driving Four New Trends Internet shoppers seek best deals  45% of shoppers seeking more deals It’s now a cross- Retail real estate channel world in decline  More than 30% of  2010: U.S. sales up U.S. shoppers touch 3.5%; store traffic more than one down 0.5% channel before making a purchase Midmarket retailers struggling  Upper / lower ends of market thriving Sources: Google and Ipsos OTX, 2011; Pew Research, 2010; IDC, 2011; Forrester Research, 2011; TheWall Street Journal, 2011; Google, 2011; Cisco IBSG, 2011Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 3

Hypothesis 1: Effective, Engaging Experiences Revitalize the Store Emotion Triggers Buying  Emotions drive  Help shoppers make buying decisions decisions (don’t  Prime the pleasure overwhelm them) centers  Provide information to  Spark emotions and reassure shoppers people will buy…but not necessarily what you showed them + they’re making the right decision  Make it easy to pay =  Images and pictures (buy without thinking) create an emotional  Create the thrill now response to drive buying  Encourage buying things that make a societal difference Emotions don’t compare prices Source: Cisco IBSG, 2011Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 4

Hypothesis 2: Four Buying Triggers Drive Purchases High 1. Inspire Treat, pleasure, personal, feeling good Feel part of something, trend-creating, coveted, celebrity “Oh, I like that.” 2. Discover Have a need…find an answer Retail Create my recipe margins / Orchestrate choices to meet needs shopping “That’s how I could do it.” complexity 3. Best Deal Too good to miss, great value Price, offers, rewards, scarcity “I would be crazy not to buy it.” 4. Find Information, price, product Right item, right place, right price Available “Found it. That was easy.” Low Sources: Cisco IBSG, 2011; “How We Decide,” Jonah Lehrer, McGraw Hill, 2010Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 5

Hypothesis 3: Mashops Keep Customers Inside Brand During Shopping Journey Today’s Mashops Catch ’Em and… …Keep ’Em Channels Search Online Store Mobile Win eyeballs / foot traffic Maintain margins Social Grow basket size Increase Shopping Journey conversion rates Source: Cisco IBSG, 2011Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 6

Hypothesis 4: There’s a Recipe for Buying-Trigger Mashop Concepts Outcome: Create Step 1: Develop and Design Step 2: Apply triggers to sell Content Right screen type more + Right location / Customer position Design Experience + Right time Concept + Clear usage information + Encouragement Social to use Development Path Source: Cisco IBSG, 2011Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 7

Key Findings from2 Cisco IBSG Primary Research

Finding 1: Online Sources Trump “Real People” for Making Buying Decisions What are the three most important sources of information you use to help make buying decisions? 80% Friends and family 70% 68% 60% 60% Customer reviews on 52% retailer sites 50% 41% Online professional 40% reviews 36% 29% Manufacturer site info 30% 27% 24% 21% 20% In-store employees 13% 11% 9% 10% Social networks 0% 2010 2011 Source: Cisco IBSG, 2011Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 9

Finding 2: Digital Content / Experiences Influence All Four Buying Triggers Buying Triggers Top Digital Content Used  Online retailer recs. 44% 24%  Online buying guides 24% 37% 1 Inspire  Online solution guides 22% 32%  Online videos 28% 22%  Online retailer recs. 49% 25%  Online buying guides 30% 36% 2 Discover  Online solution guides 27% 32%  Online videos 30% 23%  Retailer websites 63% 20%  Price-comparison sites 28% 34% 3 Best Deal  Coupon sites 23% 29%  Social networks 27% 18%  Retailer websites 65% 19% 4 Find  Social networks 32% 15%  Mobile apps 20% 21% Source: Cisco IBSG, 2011 (U.S. data) Do it now InterestedCisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 10

Finding 3: In-Store Digital Content Is Important Influencer of What People Buy Percentage of respondents who currently  Growing interest in rich / visual use or are interested in using to shop content in the store to make 60% buying decisions  Mobile increasingly vital for 50% online searchin stores 40%  49% of shoppers already use or 31% are interested in connecting to 27% 30% 20% Wi-Fi outside home 27%  1 in 2 shoppers now use / 26% 20% want to use in-store kiosksthat unite web info, self- 10% 20% 21% 20% service, access to greater range 15% 9% of items 0%  Over40% of shoppers say video Kiosk in Digital Video Mobile in Tablet PC walls / digital screens could store screens in walls in store in store change what they buy store store  Tablet interest rising fast: Do it now Interested 35% use / want to use in stores Source: Cisco IBSG, 2011Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 11

Finding 4: Kiosk and Mobile Play Key Roles in Capturing Store Traffic / Sales Search Buy Do It Now / Interested Key Insights Online research / in-store purchases still most PC Store 57% 17% popular for cross-channel shopping Shoppers using stores as showrooms for online Store Online 38% 19% purchases, further pressuring margins Kiosk Store Opportunity to keep shoppers in brand using in-store 24% 29% kiosks that enable immediate sales… Immediate in-store sale Kiosk Store …and allow customers to pick up items in the store 19% 27% at a later date Later in-store pickup Kiosk Store Strong willingness to interact / transact via self- 15% 28% service kiosks in the store Delivery to location of choice Use of mobile as a search device gaining Mobile Store 24% 21% momentum… Mobile PC 26% 18% …but there is cross-channel even within online Source: Cisco IBSG, 2011 Do it now InterestedCisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 12

Key Concept Test3 Findings

Five Concepts Tested 1 2 3 4 5 Immersive Product Shelf help Personal Shopper experiences viewer mobile favorites shopper Ability to visualize Large, interactive Ability to see Personalized Screen shows yourself wearing screen provides product info, offers, based on products rated by clothes and product videos, comparison transaction history popularity, votes, accessories info, views, directi s at with retailer and “likes” virtually ons, and reviews shelf edge; option to speak with virtual expert Source: Cisco IBSG, 2011Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 14

Immersive Shopping: All Women / Gen Y Men Want To Use Immersive Shopping Top findings by age / gender  Most popular concept among all groups  High interest from women of all ages; Gen Y and Silvers most interested  Women most interested in clothes, room design, and makeup By standing in front of a large, full-  Gen X and Y want to see what others bought length screen, shoppers select and when shopping for similar items “wear” items virtually. They also view items in a room setting, such as furniture, lighting, and blinds. Features shoppers like best Shoppers say it’s best for  “Try on” items (46%) Electronics / Home- Health / Grocery Apparel  Coordinate items such as Appliances wares Beauty furniture, clothes, and accessories (44%)  View / buy products available (29%) and not available (19%) in store Source: Cisco IBSG, 2011 Broad interest Niche interest Low interestCisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 15

Product Viewer: Women, Young Men Like “The View” Product Viewer Top findings by age / gender  Most-interested groups: Gen X and Gen Y men, and women of all ages  Social network integration: Sharing “likes” and recommendations popular with Gen X and Y  Older shoppers, especially women, want directions to products in store Shoppers use a large, high-definition display to look for specific products or just browse. Shows “go withs,” ratings, “likes,” and location. Shoppers say it’s best for Features shoppers like best Electronics / Home- Health /  Compare product / price (45%) Grocery Apparel Appliances wares Beauty  Detailed product specs (32%)  “Like” product on screen (29%) Gen Y  Directions to products in store (27%) women Source: Cisco IBSG, 2011 Broad interest Niche interest Low interestCisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 16

Shelf Help: Appeal Across Generations, Genders Shelf Help Top findings by age / gender  Most consistent appeal across segments  Video experts “important” or “very important” part of value for 36% of shoppers (spread evenly across segments)  Most want to interact using touch screen at Shoppers receive expert advice shelf, especially older shoppers through self-service guided selling or  Ability to interact with social network unpopular via video chat with a remote expert. Can be delivered through interactive screens at shelf, employee tablet, or shopper’s smartphone. Shoppers say it’s best for Features shoppers like best Electronics / Home- Health /  Compare product / price (43%) Grocery Apparel Appliances wares Beauty  Price at competing retailers (40%)  Detailed product specs (31%) Gen Y men; Gen X and  Guide for selecting best product (30%) Silvers Y women Source: Cisco IBSG, 2011 Broad interest Niche interest Low interestCisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 17

Personal Mobile Shopper: Smartphones Spur Gen Y Excitement Personal Mobile Shopper Top findings by age / gender  Biggest hit with Gen Y women; Gen Y men not far behind  40% of Gen Y would be more interested if tailored offers based on social media activity  44% of Gen Y would be more interested if solution automatically recognized them from Facebook account information Shoppers greeted on mobile device as  37% of shoppers want to use mobile to tell they enter the store and get personalized retailers they’re ready to make major offers based on past transactions and purchase, receive offers “likes” on retailer’s Facebook page. Shoppers say it’s best for Features shoppers like best Electronics / Home- Health /  Compare product / price (49%) Grocery Apparel Appliances wares Beauty  Ability to opt in / out (40%)  “Push” offers for big purchases (37%) Gen Y, Gen  Directions to products in store (36%) X women Source: Cisco IBSG, 2011 Broad interest Niche interest Low interestCisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 18

Shopper Favorites: Older Shoppers Love Info, Updates Shopper Favorites Top findings by age / gender  Gen Y, Boomer / Silver women most interested  Older shoppers want directions to products in store and ability to scan barcodes on screen for more information  Social network integration (sharing “likes” and recommendations) popular with Gen X / Gen Y Shoppers view new products, top sellers, and most “liked” on large, constantly updated, high-definition display. Shoppers can vote via screen or mobile. Shoppers say it’s best for Features shoppers like best Electronics / Home- Health /  Up-to-minute special offers (44%) Grocery Apparel Appliances wares Beauty  What’s new in store (43%)  Limited-time specials (41%) Gen Y  Directions to products in store (32%) women Source: Cisco IBSG, 2011 Broad interest Niche interest Low interestCisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 19

4 Achieving the Potential

To Embark on This Journey, Here’s What To Do 1. Analyze 2. Build 3. Implement Customer desires Design your concepts Set up in store  Determine cross-channel  Agree on design  Complete rapid review behavior today / future principles over 6-week period  Create endpoint  Apply recipe to your  Consider traffic / noise experience concepts  Prepare to make  Determine target buying-  Design simple / easy continuous improvements trigger mix with respect customer flows  Support concepts with to brand  Remember bold / simple shopper encouragement Shopping journey are best, beware of Operationalize  Map core cross-channel beauty vs. usability  Create overall framework journeys around brand  Create an enticing of repeatable concepts promise physical design  Develop, apply, and  Incorporate sales flows  Build prototypes create business and technology architectures  Determine key digital  Complete rapid / iterative consumer testing for 2-3  Measure and learn concepts and framework  Review / discuss with cycles of 2 weeks each target customers Source: Cisco IBSG, 2011Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 21

Example: Map Concepts onto the Shopping Journey / Create a Framework Catch ’Em and Keep ’Em Shopping Journey Aware Research / Decide Transact Service/Support Large screen / video wall inspirer Integrate with Digital screen guider / existing in-store / visualizer online influencers At-fixture guided selling screen Kiosk: extended range / guided selling Hologram / projections Staff tablet / smartphone / mobile POS Video / web advice in store / at home Shopper mobile Facebookspecial-interest page / Twitter Digital space / special-interest website Source: Cisco IBSG, 2011Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 22

Start with Customers, then Operationalize with Business / Technology Enablers Business Enablers Start Here Technology Enablers Knowledge / content mgmt. Content mgmt. / delivery  Governance / security  Customer needs / system  Roles / responsibilities / rights behaviors  Central / framework mgmt.  Content creation / quality  Concept recipe  Bandwidth capacity /  Mashop experiences optimization Operational procedures  Security / audit  Associate roles / responsibilities Store architecture  Labor / expertise optimization  CPU optimization  Evaluation / metrics  Bandwidth capacity / latency  Compensation  App delivery Channel management  Thin-store opportunities  Data integration Data integration  Cross-channel inventory fulfillment  Single data view  Revenue recognition  Flexible fulfillment  Compensation  Actionable exception mgmt.  Big-data analysis Source: Cisco IBSG, 2011Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 23

Taking Next Steps: What Type of Retailer Will You Be? Retail isn’t broken — stores are. A store must be much more than a place to acquire merchandise . . . Leader? . . . it has to help people enrich their lives. Fast Follower? Laggard? Ron Johnson CEO JCPenney Sources: Cisco IBSG, 2011; Harvard Business Review, December 2011Cisco IBSG © 2012 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 24

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Catch 'Em and Keep 'Em

by Cisco IBSG (Internet Business Solutions Group)

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