eRetail Europe - Mike Williams - PWC


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eRetail Europe - Mike Williams - PWC

  1. 1. Total Retail Profitable growth in the digital age June 2013
  2. 2. Total Retail – Profitable growth in the digital age PwC June 2013 Slide 2
  3. 3. Flat sales across the industry but a continuing trend in channel shift defines current and future trading Online retail market versus In-store sales up to 2013, UK £140,000 £120,000 £100,000 £80,000 £60,000 Expect much greater competition as this is the sole source of growth £40,000 £20,000 £0 2006 2007 2008 Total Sales Non Digital - Non Grocery 2009 2010 In-store Sales 2011 2012 2013 Online Sales Source: Verdict Research. This excludes Grocery and Media sectors Total Retail – Profitable growth in the digital age PwC June 2013 Slide 3
  4. 4. New and different types of customer behaviours are emerging – A decade of disruption is underway % UK Active Adult Population The changing mix of consumers in the UK, and the rising influence of the Digital Natives 120 100 80 Decade of change 60 40 20 0 Traditional Consumer Up to 2010 Traditional consumer behaviour is the majority The changing face of retail marketing – discussion document • Asda PwC Transitionals Digital Natives 2010–2018 Transitional behaviour is the majority 2019 and beyond Digital native behaviour dominates
  5. 5. The influence of digital will become even more widely felt as consumer behaviour continues to evolve Preference for online research and purchase, by category 80% 70% 60% Research Preference 50% 40% 30% Purchase preference 20% 10% 0% Consumer Household electronics appliances Clothing and footwear Total Retail – Profitable growth in the digital age PwC Furniture and homeware Toys Sports equipment DIY Jewellery / watches Health & Beauty June 2013 Slide 5
  6. 6. It all comes down to the customer People expect a connected experience People expect to participate People make smarter decisions People have an innovation appetite Consumers compare experiences across industries and think “if I can do that on Amazon, why can’t I do this with you?” Consumers expect to be able to find reviews and give feedback, have their views taken into account and collaborate with their favourite brands Consumers are better informed than ever, which means they make smarter decisions that lead to better personal outcomes The rapid evolution of personal technology has created consumer thirst for innovative new services and products Total Retail – Profitable growth in the digital age PwC June 2013 Slide 6
  7. 7. The challenge of delivering profitable growth to the ‘connected shopper’ Stores and in-store technology Total Retail – Profitable growth in the digital age PwC Smart Marketing June 2013 Slide 7
  8. 8. Recent results show online drives growth but not profit 25% 20% 20% 17% 13% 15% 10% 5% 5% 13% 6% 3% 2% 1% 0% (5)% (3)% (10)% (15)% (14)% (20)% (22)% Halfords (25)% Sainsbury’s M&S Overall Growth Online Growth Tesco Profit Growth Source: Published investor information Total Retail – Profitable growth in the digital age PwC June 2013 Slide 8
  9. 9. We believe Multi-channel is not the answer to delivering profitable growth in the digital age Multi Multiple channels are leading to a multiplication of cost, and retailers cannot afford it. Total Retail – Profitable growth in the digital age PwC Channel Organising around channel puts a retailer at odds with their consumers who are not channel-centric. June 2013 Slide 9
  10. 10. We believe a holistic strategy Total Retail – is required Total Retail acknowledges that customer, experience and product are at heart of the business; and channels are simply the way customers prefer to buy a specific purchase, at a given point in time. Total Retail – Profitable growth in the digital age PwC June 2013 Slide 10
  11. 11. 1. Time to change the DNA of the business Actively using data as ‘secret sauce’ to generate competitive advantage across multiple dimensions. Monitor all potential points of failure. Assess and manage cyber/ brand/reputational risks. Rapidly invest in agile, innovative, IT. Update the operating model to support better integration. Total Retail – Profitable growth in the digital age PwC Creating and building a customercentric strategy, propositions and a renewed business model. Aligning the business around the consumer. Embed digital right through the company. Introducing ‘test and learn’ approaches. Develop new ways of creating consumer value. June 2013 Slide 11
  12. 12. 2. Time for a new total retail business model Spend Category Trend Drivers IT Spend (1-2%) • Technology-driven innovation to drive customer experience Property (15-30%) • Reduced retail portfolio, increasing warehouse capacity • Store staff reductions offset increases in skilled ‘Total Retailers’ Cost of Sales (35-55%) • Pricing, promotion and assortment optimisation Marketing (1-2%) • Off-setting declining store fronts People (20-25%) Profit before tax (2-8%) Total Retail – Profitable growth in the digital age PwC ? ? June 2013 Slide 12
  13. 13. 3. Time to replace or amend traditional metrics Channel profitability Customer profitability Store like-for-like sales Regional growth Single-channel marketing ROI Total marketing ROI Channel experience Overall satisfaction with the total retail experience ‘Turnover-based’ rents ‘Value-added’ rent Total Retail – Profitable growth in the digital age PwC June 2013 Slide 13
  14. 14. 4. Time to work out the new role of the 21st century store Acts as a collection point for online Serves as a warehouse Reserve, Click and Collect, check stock Enhances the experience with ‘theatre’ ‘Theatre’: Selfridges Project Ocean Stores fulfil online orders Amazon lockers: Easy collection point Click and collect for other retailers Enhancing the customer journey with digital Single transparent stock Showroom for online sales Digital racks Augmented reality windows iPad ordering from changing rooms Pop-up at festivals Flagship store in Regent Street Engaging with the community Thursday night rides/ Show major events live at ‘cycle clubs’ Magic mirrors for sharing New store formats Total Retail – Profitable growth in the digital age PwC Prospect acquisition via store Evening yoga classes in store June 2013 Slide 14
  15. 15. So what do you need to be thinking about? • A holistic business centred around consumers not channels • Working out how money will be made • Listening and responding to the digital natives • Getting ‘Data savvy’ – it really is the key • Seizing the opportunity today! Thank you. Total Retail – Profitable growth in the digital age PwC June 2013 Slide 15
  16. 16. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2013 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details. 130611-155835-EM-OS