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Urbanization Impact on Retailers _Kimberly Clark_IIR USA_shopper insights_fractal analytics

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Kimberly-Clark's Joe Bourland and Natwar Mall of Fractal Analytics present the urbanization impacts on retailers and shoppers at IIR's Shopper's Insights in Action conference in 2011.

Kimberly-Clark's Joe Bourland and Natwar Mall of Fractal Analytics present the urbanization impacts on retailers and shoppers at IIR's Shopper's Insights in Action conference in 2011.

Published in: Business, Technology

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  • 1. ®Impact of Global Urbanization on Retailers & Shoppers July 2011 Joe Bourdland, Director, Category Management Kimberly Clark Natwar Mall VP, CPG & Retail Practice Fractal Analytics
  • 2. ®Continuing Analytics from2010 Shopper Insights in Action ConferenceConfidential | Copyright © Fractal 2011 2
  • 3. ®Discussion Outline  Urbanization  Analytics - Urban Vs Suburban/Rural Stores – Differences – Drivers  Insight to Action  Summary/ConclusionsConfidential | Copyright © Fractal 2011 3
  • 4. ®Did you know?By 2030, 60% of Global Population will live in Urban AreasConfidential | Copyright © Fractal 2011 4
  • 5. ®The Quiet Urbanization MegatrendConfidential | Copyright © Fractal 2011 5
  • 6. ® US Sales by Box SizeUSD Billions CAGR $2,015 Size of Store CAGR CAGR in Gross Square Feet 06-11E 11E-16E $1,676 $1,513 LESS THAN 20,000 3.9% 5.0% BETWEEN 20,000- -0.5% 3.0% 50,000 BETWEEN 50,000- 3.1% 3.4% 100,000 BETWEEN 100,000 AND 0.1% 3.3% 150,000 ABOVE 150,000 4.0% 3.4% KR Store-Based Chain Retail 2.1% 4.5% Source: KantarRetailIQ.com Confidential | Copyright © Fractal 2011 6
  • 7. ® Income Extremes will both be strongly represented in Urban Areas -----------------------------------Household Income in 2009-----------------------------------Less than $70,000 – 60% HH $70,000 to $180,000 – 35% HH More than $180,000 – 5% HH 50.9% 51.9% 51.9% 51.1% 51.8%32.5% 31.1% 29.1% 27.4% 26.6% 21.5% 21.7% 18.9% 16.6% 16.9%1969 1979 1989 1999 2009 1969 1979 1989 1999 2009 1969 1979 1989 1999 2009 Confidential | Copyright © Fractal 2011 7
  • 8. ®US & Canada – Wide Open Spaces US & Canada Rest of World Tesco:15000 sq ft Average store size in 2010 46000 sq ft Reliance Fresh:4000 sq ft Sales % of HH Income 6%+ 8 – 43% Types of products Food & non-Food Primarily Food Average # of SKUs 47000 6000 Days between trips 3 per week Daily Private Label % of Sales 25% 30% - 50%Confidential | Copyright © Fractal 2011 8
  • 9. ® Compact Urban Retailer Reality Family Dollar Dollar General Aldi Dollar Tree Trader Joes Save-A-Lot 99¢ OnlySize of Store 40Has Stronger Size of Bubble (& text)= # of SKUs 7,000 Correlation 99cent with 30 Employees per Store Employees 1,500 Needed Sav-A-Lot 20 Trader Joes than 3,500 6,000 Dollar Tree # of SKUs 1,400 10 Aldi 11,000 Dollar General 8,000 0 Family Dollar 5,000 10,000 15,000 20,000 25,000 -10 Square Footage per Store Source: Kantar Retail analysis Confidential | Copyright © Fractal 2011 9
  • 10. ®Urban/Small Format Challengesto Business Models Retailers  More Small Format (Chain?) Stores  Sales Per Store Averages  Fewer, Harder Working SKUs  Employee requirements vs cost  Supply Chain Manufacturers  3rd Party Distribution  3rd Party Sales  Number of Employees  Supply Chain Researchers Are we ready?Confidential | Copyright © Fractal 2011 10
  • 11. ®What did we want to test? • How are Urban Shoppers different from Rural? • How are Urban Stores different from Rural stores? • How are category dynamics different in Urban stores vs. Rural stores? • How are drivers different between Urban stores vs. Rural stores?Confidential | Copyright © Fractal 2011 11
  • 12. ®We classified ~ 4000 stores as Rural, Suburban and Urbanstores to understand the impact of urbanization Rural Stores Based outside of Urban/Suburban with populations less than 10,000 For example: Bentonville County Suburban Stores Based urbanized counties with population of 50,000 or more, minimum 500 per square mile For example: Schaumberg Urban Stores Typically located in inner city, minimum 1000 people per square mile For example: Manhattan Confidential | Copyright © Fractal 2011 12
  • 13. ®Methodology Store Catchment Store Category Category • Demographics Characteristics • Aisle location Performance • Competition • Size • Blocking / • Total Sales • Pharmacy / Gas Adjacencies • Normalized Sales Inputs Grocery & Drug Stores Winning Stores Losing Stores Driver’s Analysis Process using Multiple Regression Success Drivers OutputsConfidential | Copyright © Fractal 2011 13
  • 14. ®Distinct Income distribution50% Household Income40%30%20%10% 0% <$29K $30 TO $39K $40 TO $49K $50 TO $59K $60 TO $74K $75 TO $99K >=$100K Rural Suburban Urban• Rural areas have the highest density of low income households• Suburban stores have households spread out evenly across Income ranges• Urban areas show two income profile peaks – very low income as well as high income groupsConfidential | Copyright © Fractal 2011 14
  • 15. ®Urban stores showing highly diverse ethnicityConfidential | Copyright © Fractal 2011 15
  • 16. ®Rural = Older householdsSuburban/Urban = Younger householdsConfidential | Copyright © Fractal 2011 16
  • 17. ®Fewer Urban households have childrenConfidential | Copyright © Fractal 2011 17
  • 18. ®Grocery Stores• Urban Store productivity = 2.3 times Rural Stores• Number of employees correlated to Size of StoreConfidential | Copyright © Fractal 2011 18
  • 19. ® DiapersDrug Channel
  • 20. ®Diapers in Drug Stores Rural Suburban UrbanStore Size 1X 1.8 X 1.3XLinear Feet 28 ft 43 ft 36 ftNumber of UPCs 27 35 23Feet per UPC 1X 1.09X 1.45XAverage Price 100 103 121Category Sales $1,671 $6,164 $14,039 8.4 timesConfidential | Copyright © Fractal 2011 21
  • 21. ®Brands, Pack Size – in Drug Sales by Pack Sizes Sales by Brands 47% 48% 47% 45% 46% 42% 8% 6% 7% 3% 0% 0% Rural Suburban Urban Rural Suburban Urban Brand 1 Brand 2 Brand 3 All others Small Medium Large• Small pack assortment preference for Urban stores• Brand 2 set to ride the Urbanization trend Confidential | Copyright © Fractal 2011 22
  • 22. ®How are drivers of sales different in Urban Drug StoresVs Rural Drug stores Top 3 Drivers of Diapers Category Sales in Drug Stores Rural Urban Number of UPCs Household Income Private Label blocked by Brand % of HHs living Affluent Lifestyle Private Label intermixed with Category leads the aisle National brands in the store Top Drivers in-store Top Drivers store-catchmentConfidential | Copyright © Fractal 2011 23
  • 23. ®Other analytic solutions to decode shopperbehavior … What is working? • In-store Mix Driver’s Analysis Where to • Store Segmentation implement ? How to • Store Tests – Experimental Design Scale?Confidential | Copyright © Fractal 2011 28
  • 24. ®Insight to Action
  • 25. ®Urban Store Strategies Destination Urban Limited Competition Stores Expanded Assortment Convenience/Fill InBaby Category Core Suburban Grocery & MassStrategy & Plan Stores Moderate Assortment Big Box SC/Club Dominance Dominant Convenience Stores Limited AssortmentConfidential | Copyright © Fractal 2011 30
  • 26. ®Urban Store Merchandising• Increase selection - Food & Formula items, Diapers, Pants and Wipes and increase OTC Childs Meds.• SKU Rationalization – Toiletries, Q-Tips, Baby Oil, Distilled Water.• Adjacency Opportunities / End Cap Opportunities• Higher penetrated categories in back of the aisle to drive shoppers down the entire aisle• Increase Food with emphasis on organic products while also increasing formula and have it out of lock up BRANDED END CAP TOYS 8’ 28’ DIAPERS/TRAINING AND YOUTH PANTS WIPES 2 PACK STRATEGY TO FOCUS ON SHOPABILITY AND IN-STOCK END CAP DIAPERS 8’ 4’ CHILD 4’ 12’ FOOD 8’ TOILETRIES MEDS ACCESSORIES 16’ LINEAR ORGANIC FORMULAConfidential | Copyright © Fractal 2011 31
  • 27. ®Kleenex SKU Counts --- Urban Store SKU Counts ---Confidential | Copyright © Fractal 2011 32
  • 28. ®What happens when we combine Urban Growth with theother Growth Channel of the next 10 Years? Confidential | Copyright © Fractal 2011 33
  • 29. ®Summary Conclusions Urban Stores & Small Format to outpace  Are we ready?  It’s the Trip  Is your sub-category right?  Assortment Challenge  Urban & Mobile = Step Change in SellingConfidential | Copyright © Fractal 2011 34
  • 30. ®Fractal is a leading provider of consumer analytics to Insurance carriers, Consumer Banks, CPG and Retailcompanies. Fractals analytical solutions help companies across the globe enhance profitability by powering their customer management efforts with scientific decision making. www.fractalanalytics.com United States | United Kingdom | Singapore | India