David Ian Gray retail presentation at Canadian Marketing Association National Conference, 04/09 Toronto, Canada. Topic: Forces of Change in Canadian Retail. Can be downloaded from www.dig360.ca

1. Forces of Change
in Canadian
Retail
David Ian Gray
CMA National Conference - April 28,
2009

2. Change
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3. Collage
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4. Complex systems
Shoppers Retail
shape shapes
retail shoppers
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5. Retail Structure
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6. Strategic evolution
1994 - 1996 2009
Strategy = Buying Season Strategy = LT Planning
5 Year commitments 3 Year commitments
“We walk the floor” Data-driven
Insular Help from outside
Beginning of competitive Perpetual new
boom competition
Minimal technology Tech impacting all aspects
“We know” “We need answers”
Retail = formula New skill-sets
Few tools Many affordable apps
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7. Types of retail competitors
Growth start-
Mom & Pops
ups & Chains
(Self employed)
concepts*
The majority Fewer in Concentration
number of Sales $
At risk (but
continuously Catalysts for Greatest
emerging) retail influence
innovation
Growth mode
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8. Two retail worlds
2/3
Chain $ Sales
Stores
(3+ Stores)
! Large Retail has clout & influence
! Small Retail has entrepreneurship,
flexibility, adaptability
! All Retail is part of the Larger System
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9. 2/3 of retail = auto, food & drug
Canada (1997 - 2007)
Source: Statistics Canada (Trade Group)
25%
7%
34%
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10. www.dig360.ca

11. Retail strengths and weakness
! Strong: on tactics and short-term strategy,
adaptation to its ‘environment’ and
adopting new tactics.
! Weak: true innovation, organizational
change, long-term vision and strategy.
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12. Rich brand experience = complexity
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13. Canada is under-competed
! Just 11 of top global
250 are Canadian
! Only 7 of top global 20
are in Canada today
! Foreign retailers often
choose Canada as
warm-up for US
! Outperforming US past
few years
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14. Do not overlook small markets
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15. Land economics drive location
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16. Consumer Trends
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17. Technology adoption
!Shopper research &
knowledge
quot; Including global exposure
!Transparency
! Ubiquity
! SM Saturation?
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18. Instant gratification
! Point-and-click
! Drive-thrus
! 24/7 support
! Assisted self-service
! But self-serve only
when ‘better’:
quot; Self-check out can
be a problem…
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19. Health & Wellness
!Driven by Boomers
!Physical Health &
‘Looking Good’
!Younger Canadians
concerned with healthy
eating and exercise
!Childhood obesity a
looming issue
www.dig360.ca 19

20. “Good & Evil”
!Often a paradox in the
same shopper.
!Shoppers want green
plus:
! Price
Quality
Convenience
!Needed: Eco-products
with Style & Design
www.dig360.ca 20

21. Community
!Cocooning never really
happened
!Social networks & media
!Building community
with your audiences…
but also enabling them
with each other
www.dig360.ca 21

22. Immigrant impact more than
demographics
! Parents bring values… and value
! Interested in Canadian brands and Canadian
shopping … but who is showing the way?
! Children combine with
brand interest and
disposable income
! Influence the
mainstream
quot; T&T Supermarket
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23. Status Redefined?
!Growth of luxury retail
quot; Younger, global
!Abruptly ending in ‘08
!Coach Moving to ‘mid’
!“Trading up – Trading down”
Meant corresponding growth in commodities (Costco)
!Conspicuous consumption ‘frugal chic’ &
green?
www.dig360.ca 23

24. Retail Trends
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25. Technology: Key #1
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26. Global Sourcing: Key#2
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27. Bricks & Mortar more critical
than ever
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28. Multichannel works
! Only 13% of Cdn. retailers sell over the web
! Canadian shoppers have tremendous access
to physical retail
! Cross-channel influence is vital & expected
! Canadian chains have been giving up too
much brand control on web
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29. New competition a constant
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30. Wal-Mart a force
! Its actions impact many
! Still room to expand
! Grocery, Supercentres
! Leadership on: Ethnic, CSR,
Micro-mass
! But slow same-store sales in US remind: good
retailers survive and thrive in Wal-Mart world
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31. Death in the “middle”
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32. Quebec-based retailers going
global
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33. Design is everything
! Aesthetics rose to
fore in good times
! From product …to
store
! Brand builder,
storytelling device
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34. Sustainability drivers
! Waste Reduction – cost savings
! Not green product sales
quot; Health + kids excepted
quot; Prices falling will help
! Labour Market key
! Risk management
! Brand differentiation
www.dig360.ca 34

35. Fall 08:
Sudden change
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36. Economy = tide is changing
!Long period of
growth slowing
even earlier
!“Rocks” getting
exposed
!There will be a
period of retail
chaos
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37. Home-related will fall hardest
Canada (1997 - 2008)
Source: Statistics Canada
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38. Canadian Retail Sales % Change
1999-2008
Sales grew 50% on 1999 base.
% change in dollar sales from prior year
6.4% !quot;quot;#$%&'(quot;
)%**#'+&,
4.8%
3.2% Ave. 5%
1.6%
0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
www.dig360.ca Source: Statistics Canada

39. Canadian Retail Sales % Change
Decline begins in Nov.
10.0% % change from same month prior yr.
7.5%
5.0%
2.5%
0%
-2.5%
-5.0% !quot;quot;#-%&'(quot;
)%**#!+&,.,&(/%
-7.5%
-10.0%
Jan-08Feb-08Mar-08Apr-08May-08
Jun-08Jul-08Aug-082-Sep Oct-08Nov-08Dec-08Jan-09Feb-09
www.dig360.ca Source: Statistics Canada

40. www.dig360.ca

41. US Retailers on brink
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42. Closing stores or slowed expansion
! The Home Depot
! Lowes
! Abercrombie
! Crate & Barrel?
! Implications for Canada
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43. Riding the storm:
12-18 months
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44. ! No growth
! Some winners
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45. ! Landlords
holding 2008
rates
! Tenants
demanding
reductions
! Crux = dark
space
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46. ! Credit crunch
and sales
declines
! Backruptcies
+M&A
! Shakeup
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47. ! Reduced ad
budgets
! Creative
approaches
sought
! SM ‘hail mary’
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48. ! BOGO vs. 50% off
! Brand erosion
long-term?
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49. ! Green still on
agenda
! Must help
bottom line
! Catalyst to price
curve
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50. ! Major opportunities
! For those with
good balance
sheets
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51. Future:
Reinvention
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52. Survivors will be strong
1. Community centres
2. A true hub of societal influence
3. Social Media integrates with retail
4. Learning organizations
5. Store as media channel
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53. Sustainable Retail
! The next
transformative
catalyst
! Similar to
Internet in 90’s
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54. Lessons from Internet adoption
Dial-up, bbs Publishing “Retail Dead” Alt. Channels Multi-Channel
email “Yellow Page” New Economy DSL Web 2.0
Netscape Ecommerce Rich media Alt Platforms
1993 1998 2008
Disruptive or Transformative?
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55. Thanks!
For more information, Contact:
David Ian Gray
DIG360 Consulting Ltd.
davidiangray@dig360.ca
www.dig360.ca
www.twitter.com/davidiangray

56. Extras
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57. Co-creation?
!Designers and retail
!Wal-Mart and suppliers
!Can we rethink the
landlord – tenant
relationship?
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58. Three levels of true green
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59. Green retail activities
(Executive survey from DIG360 Retail Cares Study)
More common Less common
! Reducing waste in operations +/or ! Supporting specific environmental
reducing energy use. groups
! Conducting green building and
! Offering environmentally friendly design (such as LEED)
products to consumers
quot; Many mall-based / leased
! Mandating eco-friendly packaging premises
! Developing or designing green ! Using green power
products ! After sales environmental product
stewardship
! Incorporating green procurement of
supplies and services. ! Public accountability reporting
! Participation in carbon offset
programmes
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60. Green retail drivers
(Executive survey from DIG360 Retail Cares Study)
More common Less common
! It’s simply ‘the right thing to ! Generating sales from “ethical”
do’ –no real business case shoppers
! Reducing costs, saving money ! Responding to key product
vendors’ demands
! Acts as a general brand
differentiator in the marketplace ! Attracting investors
! Avoid being perceived to lag
behind our peers in our category.
! Attracting and retaining
employees
! Meeting regulations or legislation
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61. Possible barriers…
(from DIG360 Retail Cares Study)
! Customers not paying for it.
! Lack of human resources
! Budget restraints
! Lack of time
! We are doing much already; there are diminishing
returns to our efforts.
! Customers not demanding it
! Difficult to make a business case
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62. Historical power structure
Manufacturers
Information flow
Retailers
Few substitutes
Stable competition Consumers
Cost of entry: low for one
Locations for chains
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63. Changing power structure
Consumers Information flows
Retailers
Emerging substitutes
More competition Manufacturers
Cost of entry: locations
plus IT plus supply chain
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64. Research & retail
1. Research has underserved retail, but improving
2. Retailers have undervalued research, but improving
3. Retail biased to execution over strategy
4. Retail can be research (if always testing, measuring)
5. Need specific solutions & contextual understanding
6. Rethink relationship: Participant-centric research & CRM
7. Engage the c-suite: its about learning
8. Understand the org chart: who will benefit and why?
9. Consider research a verb, not a noun.
10. The method to be used is the last thing to worry about.
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65. Current DIG360 convergence
Labour
Market Retail
Ethnicity
Sustainability
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