Tomorrow's Intelligent Store

Retail Leaders Discuss NewShopper Experience Research: Tomorrow‟s Intelligent Store

Cognizant‟s Annual Shopper Experience Study2

What is the shopper experience? A Zillion Promo focused Apps and Few hundred Retailer Native Apps! Websites! A Million Mall experience and Out of 4000+ Social Apps spreading the word! store – Shop easy solutions! Retailers must teach the new3 | ©2012, Cognizant ways of shopping

The future of shopping is upon us • Easy to brush aside shopper • The whole world knows complaints complaints instantly • Variability of pricing not known or • Full and instant access to all your understood offers • You were the only source of • Independent third parties put offers information together • Everything was time-boxed • Everything is 24 x 7 • Everything is seen and touched • Virtual shopping decision making • Task workers • Knowledge workers • Dumb in-store assets • Interactive in-store assets • Focus on fundamentals • Focus on fundamentals Retailers must re-integrate the4 | ©2012, Cognizant shopping experience

Methodology – United States • Survey conducted November 2011 Male 30% Emerging • 1503 shoppers surveyed in the Elders Gen Y United States Female 70% Baby • Baselined against 4000 shopper Boomers Gen X survey in May 2010 and 2011 • 70% female to 30% male to mirror influence in buying decisions Under $25,000 • Age groups are split into four large $25,000-$49,999 segments with an emphasis on $50,000-$74,999 Baby Boomers $75,000-$99,000 $100,000-$149,999 • Income group breakout matches the $150,000-$199,999 overall population picture $200,000+ Prefer not to answer5 | ©2012, Cognizant

What is the shopper experience? RESEARCH7

Traditional methods (at least from the last 10 years) still hold sway. Prior to making a purchase decision, what steps are you most likely to use to ensure you have all the relevant information Web Research 52% Retailer Web Manufacturer website 32% research preference Family & Friends 28% exploded Discount Sites (i.e. Coupons.com) 26% since May 2011 Shopping Comparison Site 17% Research with Smartphone or Tablet 14%Review social networking sites (i.e. Facebook) 9% 0% 10% 20% 30% 40% 50% 60% Small, but doubled since May But Gen Y is ramping up the usage8 | ©2012, Cognizant of smartphone and tablets

“What‟s on the box” is still important If each of the following were available, which would be your preferred method to receive product information Better information on product packaging 68% Signs or cards on store shelves 65% Informed store associate 53% Dynamic display that allows you to scan 30% product information Online customer feedback on store site or 29% social media platformReview publications (i.e. Consumer Reports) 29% Scanning with personal mobile device 27% 0% 10% 20% 30% 40% 50% 60% 70% 80% Continues to grow but still wide disparity with traditional methods Shoppers lowered expectations on9 | ©2012, Cognizant store associate knowledge & signage

There‟s no overwhelming preference to use mobile methods for retail services If a retailer offered the following services for a mobile device, indicate how likely you would be to use them on a scale of 1 to 10 Coupons 5.8 Product and price lookup 5.4 Ability to instantly use loyalty program awards/offers 5.3 Store locator 5.3 Product comparisons 5.2 Ability to place an order 5.1 View your status/points in the store loyalty program 5.0Ability to receive location, personalized or time-based product 4.7 offers 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 High income indexes higher for contextual offers While mobile is dramatically10 | ©2012, Cognizant increasing, no feature stands out.

Have shoppers been turned off by the retailer mobile experience to-date? If a retailer offered the following services for a mobile device, please indicate how likely you would be to use them using the 10-point scale Coupons 7.0 5.8 Product & Price 6.6 5.4 Product comparison 6.0 5.2 6.2 2010 Store locator 5.3 2011Ability to place an order 5.9 5.1 View/Use loyalty 5.6 rewards 5.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 This was a startling statistic 11 | ©2012, Cognizant from the survey

But as with all things retail, you need to know who your customer is If a retailer offered the following services for a mobile device, indicate how likely you would be to use them on a scale of 1 to 10 4.0 Ability to instantly use loyalty program awards/offers 5.0 6.0 6.5Ability to receive location, personalized or time-based product 3.2 4.3 offers 5.3 5.8 3.4 4.6 View your status/points in the store loyalty program 5.7 6.2 3.8 5.0 5.7 Ability to place an order 6.1 4.4 5.4 Coupons 6.5 7.0 Emerging Elders 3.9 4.9 Store locator 5.8 6.6 Baby Boomers 3.7 Product comparisons 4.9 5.9 6.6 Gen X 3.7 5.0 Gen Y Product and price lookup 6.1 6.9 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 When do you chase “Generation Y”12 | ©2012, Cognizant behavior & attitude?

Interesting Tidbits • Time is money - higher incomes over-index for web research versus other segments • Your mom reads the newspaper - 40% of females use when shopping for groceries • Internet is best for apparel research information • Discount/deal sites preferred to geo location sites for all groups13 | ©2012, Cognizant

In Summary - What did we learn? • Social Media is not the dominant driver of decision making • “On the box” still dominates • Retailer mobile solutions seemed to regress in preference • Retailer web-based research is preferred • Mobile research on the rise, but still not preferred Carefully understand the social14 | ©2012, Cognizant media hype

What is the shopper experience? SHOP15

Checkout speed, a key aspect of the customer experience, tops consumer issues Which of the following experiences do you dislike most when shopping in a store? Out of stock on the product you seek 75% Slow checkout 71% Store associates with poor product knowledge 44% Will not provide a cash refund even with a receipt 29% The in-store price is different than the online price 28% The in-store promotion is different than the online No movement 16% promotion since May Will not accept a return without a receipt 13% 2011Will not accept return from another store within the chain 12% No refund for online purchase 11% 0% 10% 20% 30% 40% 50% 60% 70% 80% Dwindling customer experience16 | ©2012, Cognizant forces shoppers to seek alternatives

Generation Y is even more sensitive to price inconsistency Which of the following experiences do you dislike most when shopping in a store? 76% Out of stock on the product you seek 77% 77% 70% 71% Slow Checkout 69% 75% 69% Emerging Elders (Year End) Baby Boomers (Year End) 58% 46% GenX (Year End)Store associates with poor product knowledge 39% GenY (Year End) 33% 17% The in-store price is different from the online 27% price 30% 39% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Are we creating retailer agnostic17 | ©2012, Cognizant generation Y customers?

Execution issues indexed higher than all others Which of the following experiences do you dislike most when shopping in a store?A product is marked "on sale" but when you get to the cash register, it rings up at the 87% regular price, or a different price Store is difficult to navigate through - too 75% cluttered, and/or with poor access to aisles Poor promotional signage - no clear way to 70% know what is on sale 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100% Customer experience will determine18 | ©2012, Cognizant retailers long-term viability

Shoppers are telling you how to fix the poor associate knowledge problem In general, which of the following would you most like to see improved among store associates? Ability of store associates to match competitive 69% online prices Improved customer service skills enabled by 61% technology More store associate engagement in the aisles with 60% check-out processing capabilities Better electronic access to product information, 53% inventory location and ordering Better product knowledge enabled by smart phone, 27% tablets and digital signage More multi-lingual store associates 8% 0% 10% 20% 30% 40% 50% 60% 70% 80% Knowledgeable assisted sales drive19 | ©2012, Cognizant transaction size and satisfaction

Interesting Tidbits • Male shoppers continue to exhibit an increasing level of frustration with slow check out • Facebook tied with Groupon, at least for the Gen Y’s • Personalized store experience – more important for men than women • Women have a lower tolerance than men for poor store service • Older shoppers consistently have higher expectations of store associates20 | ©2012, Cognizant

In Summary - What did we learn? • In-Stock Position is King • The Basics Still Rule • Shoppers Want Technology-Enabled Associates • Cross-channel Price Inconsistency Is an irritant, especially Generation Y • Poor Associate Knowledge Shopper sophistication is21 | ©2012, Cognizant increasing rapidly

What is the shopper experience? TRANSACT22

Time is money, for you and your customers In general, which of the following would you most like to see improved among store associates? Wait in line 58% Slow or inattentive cashiers 50% Products without stock numbers 42%Bar code that does not work at check-out 34% 0% 10% 20% 30% 40% 50% 60% 70% Probably nothing new here…23 | ©2012, Cognizant

Mobile Payments – not ready for prime time Which aspect of the check-out process at a store do you dislike? Not being able to use a personal mobile device to checkout 5% 0% 10% 20% 30% 40% 50% 60% How likely would you be to pay using a personal mobile device (scale of 1 to 10) Gen Y 5.1 4.7 Gen X 4.3 Coupons & gift 4.6 cards preferred. 2011 Baby Boomers 3.4 4.0 Interest in Paypal 2010 Emerging Elders 2.2 3.1 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 Standards and customers in US24 | ©2012, Cognizant are not ready

Yet preferences in other countries suggest its coming How likely would you be to pay using a personal mobile device China 7.7 Hong Kong 6.8 Singapore 6.8 UK 4.2 North America 3.7 1 3 5 7 9 US-Based Global retailers need25 | ©2012, Cognizant a mobile payments strategy

Shoppers want simple coupon redemption and no paper If a retailer offered the following new or alternative payment methods, how likely would you be to use them? Coupons/gift cards 8.3Pay using a mini store loyalty card that attaches 6.0 to your key ring PayPal or other third-party online services that 5.2allow payments to be made through the InternetRetailer‟s own e-wallet service with pre-filled out 4.3 credit authorization Pay using a personal mobile device 3.7 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 Aggregating coupon management26 | ©2012, Cognizant and loyalty is the next frontier

Everyone wants a better coupon management system How likely would you be to pay using alternative coupons/gift cards Gen X 8.5 Gen Y 8.4 Emerging Elders 8.3 Baby Boomers 8.3 0.0 2.0 4.0 6.0 8.0 10.0 Fast check-out, happy customers.27 | ©2012, Cognizant Seems reasonable.

Interesting Tidbits • Gen Y’s want to use digital coupons from mobile devices • Younger shoppers increasingly want mobile payment options • Level of income has little bearing on like/dislike of mobile methods • Gen Y’s more sensitive to wait in line than Emerging Elders, yet more accepting of „self checkout‟ • Men more likely than women to pay using mobile devices or 3rd party services28 | ©2012, Cognizant

In Summary - What did we learn? • Mobile Payments are not a shopper priority… • …but in Europe and Asia Pacific it is! • Coupon management is a huge sore customer pain point • Slow check-out remains an enigma Europe and Asia are driving a new29 | ©2012, Cognizant transactional model

What is the shopper experience? POST SALE30

Multi-Channel is now expected by shoppers Which store service offerings do you value 1st and 2nd Ability to purchase a product in the store and have it delivered 54% to your home at no extra charge Ability to purchase a product online and pick it up in the store 46% Are you Ability to automatically redeem a retailer or manufacturer there yet? 43% coupon Ability to purchase a product online, have it delivered to your 39% home, and return it (if needed) to the store Ability to purchase a product in the store and return it (if 8% needed) using online procedures Ability to purchase a product via a personal mobile device and 6% pick it up in the store This is worth aAbility to purchase a product via a personal mobile device, have conversation 3% it delivered to your home, and return it (if needed) to the store today! 0% 10% 20% 30% 40% 50% 60% Mobile Commerce not yet31 | ©2012, Cognizant demanded but usage certainly rising

When things go wrong shoppers still want to talk to a live body If a retailer provided access to customer service/product representatives how likely would you be to use this service Phone Assistance 6.4 Text/Call to receive Live Associate 5.2 assistance Text 4.6 Video 4.2 0.0 2.0 4.0 6.0 8.0 10.0 When you have an issue in-store, which means of communication are you most likely to use? Ask to speak with the Store Manager 6.7 Send an email to the retailers through the “contact us” link … 6.3 Call the retailer’s “800” customer service number 5.7 Post comments to your personal social networking network … 4.3 Post comments on retailer pages within social networking… 4.032 | ©2012, Cognizant 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0

Generation Y uses newer methods to connect If a retailer provided access to When you have an issue in-store, customer service/product which means of communication representatives how likely would are you most likely to use? you be to use this service Ask to speak with the Store 5.9 4.9 Manager 6.7 Video assistance 4.2 Call the retailer’s “800” 5.1 customer service number 5.7 5.9 Text assistance 4.6 Gen Y Gen Y Post comments on retailer pages within social 5.0 All Shoppers networking sites (i.e. 4.0 All Shoppers Text/Call to receive Facebook, Twitter) 6.3 Live Associate assistance 5.2 Post comments to your personal social networking 5.3 network (i.e. friends and 4.3 family) 6.4 Phone assistance Send an email to the retailers 6.4 through the “contact us” link 6.1 on the reteailers website or 6.3 mobile site 0.0 2.0 4.0 6.0 8.0 0.0 2.0 4.0 6.0 8.033 | ©2012, Cognizant

Interesting Tidbits • Cash is king, at least for women - More likely to want a cash refund than men • Gen Y more likely to try alternative customer service contact methods like Text and Video, but phone is still #1 • Older shoppers quicker to go to the store manager, and younger shoppers are right behind them • Gen Y will make their displeasure more widely known via Facebook, Twitter and other sites34 | ©2012, Cognizant

In Summary - What Did We Learn? • Cross-Channel Fulfillment is now “Table Stakes” • Mobile commerce lags • Nothing beats a live voice or person • A bad experience is now communicated virally Post-sale execution is even35 | ©2012, Cognizant more critical to loyalty

The 10 Megatrends we highlighted last year Taking Off Taking the Store to the Shopper Shopper Demand for Consistent Cross- Channel Experiences Drives Retailer Organizational Integration Distributed order management Integrates the Retailer Social Media and Product Development Collide The Death of the Task Worker Generation Y Changes the Behavior of All Other Generations Sales and Product Information via Mobile Phone36 | ©2012, Cognizant

The 10 Megatrends we highlighted last year Still Emerging Mobile Shopping (Finally) comes of age Death of POS becomes a possibility (but all of you are talking about this in some form!) Real SKU Rationalization Takes Hold37 | ©2012, Cognizant

RIS/Cognizant Custom Research Report Joe Skorupa Group Editor-in-Chief jskorupa@edgellmail.com joeskorupa @twitter RIS News @Facebook RIS News @LinkedIn 973-607-1369 www.risnews.com/research40 | ©2012, Cognizant

Retailer Like: Social media Retailer Dislike: Associates with poor product knowledge For the following customers likes/dislikes, what is the status of your organizations technology? 48.6% Online/store pricing discrepancies 20.0% 2.9% 5.7% 45.7% Social media engagement 42.9% 8.6% 0.0% 40.0% Slow cashiers 22.9% 8.6% 2.9% 40.0% Waiting in checkout lines 22.9% 5.7% 5.7% 28.6%Associates with poor product knowledge 34.3% 8.6% 20.0% 20.0% Up-to-date tech in place Dynamic store displays of product info 8.6% 14.3% Updating now 17.1% Will update first half of 2012 14.3% Coupon on mobile phones 17.1% Will update by end of 2012 5.7% 22.9% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%41 | ©2012, Cognizant

Adapting to Shopper Demands in an Omni-channel World 2010-2011 Comparison: For the following customer likes and dislikes, which of the following do you have up-to-date tech in place? Online/store pricing discrepancies 48.6% 28.6% Social media engagement 45.7% 37.1% Slow cashiers 40.0% 25.7% Waiting in checkout lines 40.0% 22.9% 2011 2010 Associates with poor product knowledge 28.6% 31.4% Dynamic store displays of product info 20.0% 5.7% Coupon on mobile phones 14.3% 6.7% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%42 | ©2012, Cognizant

Omni-channel/Omni-device Shoppers For the following multi-channel purchasing options what is the status of your organizations technology? 11.4% Purchase in-store, deliver to home 8.6% 11.4% 25.7% 8.6% Purchase on mobile device, deliver to home 8.6% 8.6% 25.7% 20.0% Purchase online, pick up/return in-store 5.7% 20.0% Will update by end of 2012 22.9% Will update first half of 2012 22.9% Purchase in one store, pick up another store 5.7% Updating now 11.4% 20.0% Up-to-date tech in place 20.0% Purchase on mobile device, pick up in-store 5.7% 14.3% 8.6% 17.1% Purchase online with time guarantee for 5.7% store pick up 14.3% 5.7% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%43 | ©2012, Cognizant

Filling in the Mobile Services Gaps For the following customer-facing mobile services, what is the status of your organizations technology? Store Locator 68.6% 14.3% 5.7% 2.9% Text messaging marketing/alerts 40.0% 14.3% 8.6% 11.4% Product/price look up 37.1% 8.6% 14.3% 14.3% Make a purchase 34.3% 20.0% 5.7% 8.6% Check order status 22.9% 11.4% 14.3% 17.1% Up-to-date tech in place Deals/special offers for smartphones 20.0% 11.4% 14.3% 22.9% Updating now Will update first half of 2012 Payment 20.0% 11.4% 11.4% 20.0% Will update by end of 2012 View loyalty program status/points 17.1% 17.1% 14.3% 11.4% Community 17.1% 14.3% 14.3% 22.9% Location Awareness 17.1% 8.6% 14.3% 20.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%44 | ©2012, Cognizant

Best Practices for Social Retailing Are Emerging 2010-2011 Comparison: How does your organization use social media channels? Drive customers to Web/mobile site 88.2% 76.6% Targeted marketing/promotion campaigns 82.4% 66.7% Special offers/coupons 76.5% 50.0% Customer service 67.6% 25.7% 2011 Hiring/recruiting 58.8% 40.0% 2010 Launching new products/brands 55.9% 36.7% Indentifying influencers/advocates 47.1% 30.0% Social selling 35.3% 23.3% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%45 | ©2012, Cognizant

Is This the Beginning of the End of POS as We Know It? As your organization rethinks its traditional, fat-client, fixed unit POS, what is the status of the following next generation POS alternatives? 42.9% No real change from client/server fixed-unit model 2.9% 2.9% 8.6% 11.4% Thin-client software and hardware 14.3% 17.1% 11.4% 8.6% In place today POS becomes primary transaction platform 14.5% 5.7% Will deploy by end of 201 20.0% In research/testing phase 5.7% E-commerce platform becomes primary transaction platform 2.9% Strong interest for 2013 8.6% 11.4% 8.6% Mobile POS replaces some/all fixed POS 11.4% 20.0% 34.3% 2.9% Leverage customers own mobile devices 2.9% 22.9% 28.6% 2.9% SaaS/Cloud/On-demand delivery w/ in-store back-up 2.9% 17.1% 14.3% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0%46 | ©2012, Cognizant

Conclusions: Retailers Respond When Risks and Opportunities Are High • Pricing consistency becomes the new norm – 1/5 of retailers solved this problem year-over-year • Social media engagement within retailing will reach 100% penetration by end of 2012 • In-store pick-up of online orders is not for every vertical, but rollout continues where appropriate • Shoppers lead the mobile revolution, but retailers are fast followers • Future retail success will be measured by what customers experience and not comp-store sales or number of products are sold47 | ©2012, Cognizant

Cognizant Automated Coupon Redemption (ACR) • Single Real Time Connection to POS to Clear & Validate Coupons • Eliminates Fraud • No Additional Hardware for Store • Electronically Processes Coupon Through Settlement at POS • Provides Analytics • Integrated with Digital Content Providers • Hosted on Cloud50 | ©2012, Cognizant • Increases Customer Satisfaction

Personalized In-Store Experience (PSE) • Customer & Store Associate Handheld Solution • In-Store Customer Identification • Personalized & Targeted Offers • Product Information & Ratings • Social Media Connect • Integrated Shopping Experience • Store Manager Alerts & Decision Making51 | ©2012, Cognizant

Personalized Shopping Experience (PSE) • Customer and Store associate handheld solution; Powered by a robust personalization and analytics engine on the cloud • In-store Customer Identification • Personalized and targeted offers • Product Information and Ratings • Social Media Connect • Integrated shopping experience • Store Manager Alerts and decision making Providing shoppers a personalized in-store52 | ©2012, Cognizant experience through mobile interaction

About Cognizant A leading provider of information technology, consulting, and business process outsourcing services. With more than 50 global delivery centers and over 140,000 employees*, we help clients transform vcore processes for greater flexibility, higher efficiency and lower costs. Retail: Cognizant‟s Fastest Growing Vertical: • Revenue growth of 70% y-o-y for last 3 years • 9,000+ Practice specialists - Technical and Functional consultants for Retail Practice; 700+ Retail & SCM domain specialists led by industry experts53 | ©2012, Cognizant

Thank you to our Retail Executive Panel • David Markwell - Vice President of IT Business Solutions Delivery, Loblaw Companies • Jennifer Macivor – Vice President of IT, DFS Ltd, a Singapore-based global luxury products chain • Mark McKelvey - Director of eCommerce and Cross- Channel Development, Recreational Equipment Inc. (REI) • David Durdan - Senior Director of Enterprise Technical Architecture, Walgreen’s54 | ©2012, Cognizant

If you would like more information on Cognizant‟s IntelliStoreSM Please contact: • John Russo at john.russo@cognizant.com or • Rachel Cosby at rachel.cosby@cognizant.com Please visit us at Booth #251 and our Big Ideas Session “Building the Intelligent Store of Tomorrow, Today” on Monday at 4:45 pm in Room 3D0955 | ©2012, Cognizant

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Tomorrow's Intelligent Store

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