Retail 2020: Retail Will Change more in the Next 5 Years than the Last 50

1. Generous Brands Serious Business of Play Joy of Shopping GenZ Retail’s New Reality Experience Signatures Must Sees Quarterly trend reports Kantar Retail/PWC Retail 2020 Where we got our thinking:

2. #FITCHRetail2020 @FITCHdesign @cdaviesFITCH Join the discussion

3. Retail will change more in the next 5 years than the last 50

4. The fundamentals of what a store “is” (its purpose and its function) are in flux.

5. This change is not just driven by economic, product or industry trends (although they remain an influence).

6. Rather, tomorrow’s store is being shaped by new behaviors, needs and demands of shoppers.

7. In 5 short years…X Y Z

8. By 2020, Xers will be enjoying the fruits of the peak-earnings decade of their careers.

9. While quietly freaking out about their ill-planned retirement.

10. By 2020, Millennials will no longer be the kids in your store.

11. In fact, they are more likely to be shopping for their kids.

12. Retail today is “under-delivering against millenials’ expectations.” Source: Accenture Millenial Outlook, 2013

13. The brands thriving in 2020 will clearly have solved this challenge. Happy Millennial

14. Because lack of engagement with a group this big is not optional Net effect of bored Millennials

15. GenZ will be the newbies, but collectively they are retail’s future.

16. By 2020, they will be the largest group of shoppers worldwide.

17. And their behaviors will represent our collective norm.

18. FITCH describes GenZ as “shopping in a constant state of partial attention”. Source: FITCH Gen Z Future of Shopping Report, 2014

19. Success at retail in 2020 will only be achieved by embracing this somewhat challenging idea.

20. So, what will this world look like? We see 6 trends for retail’s future

21. 1Retail’s role in society will change significantly by 2020.

22. On every level: Macro Micro Global and societal issues Local and community issues

23. Both millenials and GenZ believe strongly in the importance of good citizenship. 78% would recommend a company seen as such 74% would be proud to be associated with it 71% say they would be loyal to such a business. Source: MSL Future of Business Citizenship Report, 2014

24. On a Macro level this trend will influence the products and services retail brands choose to provide. Example: CVS

25. It will drive the way we present those products in our stores. Example: Original Unverpackt

26. And will even lead to decisions around the types of stores we decide to build. Example: Walgreens

27. It will push us to continue to explore how the act of buying can be a force for good. Example: Toms

28. And to explore the part that retail can play to truly make a difference

29. On a Micro level stores won’t just be located in communities they will be woven into their fabric. Example: CityTarget

30. ”On average, CityTargets generate double the sales per square foot of larger Target stores.” Source: USA Today, 2015

31. This is indeed the new Seattle, the post-WaMu Seattle. Here, on Second and Union, you have the feeling that downtown is beginning to rise. The Seattle Stranger, August 2012 Example: CityTarget

32. “Our stores are integral parts of the neighborhoods we are joining” N e i l B l u m e nt h a l , C o -‐ C h i e f E xe c u t i v e , Wa r b y Pa r ke r

33. IKEA Hire local Incentivize employees to ride to work Employee housing Promise to improve the site they develop

34. Generous Brands Wearing your heart on your sleeve… In a world where consumers are becoming increasingly aware of ‘mean’ brands it was time to begin researching the concept of generosity. Generous brands are those who show more of a heartbeat, take the ﬁrst step and display a genuine understanding of their customer needs. This is a long way from 2 for 1 deals and bonus points, but rather a tone of voice and general personality that encourages consumers to warm to their offer and become advocates.

35. By 2020… We believe shoppers will absolutely want to know what retailers care about. How will acting as a “generous brand” define the future for stores?

36. Stores in 2020 will take many forms. And ideas like “one size fits all” will seem archaic.2

37. “Retailers will have to rethink their scalable ―one size fits all approach. Any retail strategy must include a plan to fit the ever-diverging needs of the US shopper.” Source: Kantar Retail/PWC Retailing 2020 Report, 2014

38. We predict far fewer retail brands by 2020. But far more variety.

39. Two trends: Format Expression Offering, footprint, location, operations Planned variance across the estate

40. Starbucks.

41. 2008 Militant consistency Corporate driven messaging 1 look, 1 format Mass production of product and service.

42. 2008 8% drop in sales Stock plummeted more than 50% 1,000+ Corporate layoffs Shuttered 600 stores

43. 2015 Exploring new formats Empowering their people Dialogue with their guests Passionate commitment to causes

44. Format Strategy:Drive Through Express Urban Suburban Premium (Reserve)

45. Format Strategy: MUJI 5 formats, one city

46. Format Strategy: Lawsons Not driven by products, operations or location, but by people and niche needs.

47. Happy Lawson – moms and kids

48. Lawson Plus – elderly

49. Natural Lawson – health conscious

50. Expression Strategy: “The Catalog”

51. Operational efficiency across format types, but everything else has changed.

52. What will this combination mean by 2020? Format Expression ?

53. No two alike.

54. By 2020… We believe the concept of “engineered diversity” won’t just be the norm, it will be mandatory. The only question will be: what formats, forms and expressions make the most sense?

55. 3The ways in which we speak to shoppers will shift dramatically.

56. By 2020, absolute transparency will be table stakes.

57. Only 5% of consumers in the US & UK currently believe big businesses are being transparent enough. Source: Cohn & Wolfe Oct, 2013

58. “By 2020, apps will proactively inform a shopper regarding specific issues with products or retailers upon entering brick-and-mortar stores or websites. Managing and manipulating information (rumor control), will be more of an issue than ever as flash truth reports are distributed more frequently. Brand management by 2020 will need to develop a host of new skills, tools, and communication modes, both nimble and innovative, than are typical today.” Source: Kantar Retail/PWC Retailing 2020 Report, 2014

59. A differentiated voice will be critically important.

60. But retail brands will also be more tight lipped.

61. everything’s coming up spring $50 everyday liz claiborne handbag $12 february women’s gold toe sock 6-pack $18-$20 everyday misses’ bisou bisou swimwear $75 everyday men’s nike shoes $17 everyday juniors’ arizona shirt $12 february men’s st. john’s bay polo $15 february misses’ made for life jacket $30 february twin comforter set $20 everyday juniors’ olsenboye blouse $130 everyday rachael ray 10-pc. cookware set $14-$20 everyday floppy hat or thong sandal $14 everyday mixit bracelet $20-$25 everyday men’s j. ferrar shirt or tie $4 everyday home expressions bath towel $ everything’s coming up spring $50 everyday liz claiborne handbag $12 february women’s gold toe sock 6-pack $18-$20 everyday misses’ bisou bisou swimwear $75 everyday men’s nike shoes $17 everyday juniors’ arizona shirt $12 february men’s st. john’s bay polo $15 february misses’ made for life jacket $30 february twin comforter set $20 everyday juniors’ olsenboye blouse $130 everyday rachael ray 10-pc. cookware set $14-$20 everyday floppy hat or thong sandal $14 everyday mixit bracelet $20-$25 everyday men’s j. ferrar shirt or tie $4 everyday home expressions bath towel everything’s coming up spring $50 everyday liz claiborne handbag $12 february women’s gold toe sock 6-pack $18-$20 everyday misses’ bisou bisou swimwear $75 everyday men’s nike shoes $17 everyday juniors’ arizona shirt $12 february men’s st. john’s bay polo $15 february misses’ made for life jacket $30 february twin comforter set $20 everyday juniors’ olsenboye blouse $130 everyday rachael ray 10-pc. cookware set $14-$20 everyday floppy hat or thong sandal $14 everyday mixit bracelet $20-$25 everyday men’s j. ferrar shirt or tie $4 everyday home expressions bath towel The good news? Ours won’t be the loudest, or most important voice at all. .

62. Millenials and GenZ want to create content, not just absorb it.

63. And 2020 will be all about dialogue not broadcast 25% A d v e r t i s i n g 70% S t r a n g e r s w i t h p ro d u c t e x p e r i e n c e 90% F r i e n d s w i t h p ro d u c t e x p e r i e n c e Source: Edelman Trust Barometer, 2014

64. Find ways to connect with the crowd.

65. And then engage it in-store.

66. Create destinations for conversations. Example: TopShop Chirp Garden, 2014

67. Stop worrying about controlling the message and embrace that it can be owned by others Example: Selfridges #denimlovers

68. When you do speak in-store, keep it simple - Millenials already over- index on “tuning out noise”. Example: Primark

69. Great visual is a draw for them because it signals inspiration. So let the product literally “sing”. Example: H&M

70. And they are apathetic to marketing. Clutter is a turn-off for them. So keep it ordered. Example: Uniqlo

71. Finally, whenever you speak, tell the real stories behind the product without needless fluff.

72. Let other people do your bragging.

73. And did we mention transparency?

74. “Leading retailers will be classified by those that are the best conversationalists, along with communicating a secure and self- confident image to their consumers.” Source: Kantar Retail/PWC Retailing 2020 Report, 2014

75. By 2020… How will this manifest itself in store? We see a co-authored narrative delivered with the impact of a tweet, the interest of a pin, and the emotional pull of a post.

76. Seamless will be an absolute must.4

77. Consumer Purchase But while omnichannel implies Seamless, the reality can be anything but.

78. Seamless is so important because Millenials and Zs don’t think “clicks vs bricks.”

79. We believe that by 2020, Seamless Interactions “Out Of Store” will be largely resolved

80. Because the US shopper is insanely demanding

81. And this demand will simply…

82. Demands like:Internet of things 20-30 billion “always on” interconnected devices by 2020 Source: Garnett Research, 2014

83. Same day FREE home delivery: No matter who ends up delivering

84. And concepts like: Mobile payment: Which will seem like second nature by 2020

85. Dominant platforms and conventions around retail out of store will have evolved and will be widely embraced and adopted. Retail brands en-masse will be adept at managing and supporting these channels. But one problem will still exist

86. #retailfailWhether retail can bridge the yawning chasm between “Out Of Store” and “In”

87. And whether the store can not just create “continuity”, but truly pay off and enhance the OOS activity.

88. It’s been an interesting month… Remember this?

89. Example: Piper Lime And this? With all the hype and the backing, why did they fail?

90. These concepts had the logistics, infrastructure and tools in place and the support of backers with deep pockets. We believe they lacked continuity in their in store experience and that will need to be our biggest focus in the future.

91. By 2020… What percentage of our in-store media will be dedicated to driving “continuity”? How can we finally make the physical store enhance our OOS activities?

92. 5By 2020 the entire concept of convenience and value will shift.

93. Convenience for the new guest will not be defined in traditional terms of time and ease.

94. And certainly not in antiquated ideas like “one-stop” shopping.

95. We believe the highest currency for these new consumers will be RELEVANCE.

96. 89% of millenials want personalization when they visit stores, but only 18% see it from retailers today. Source: Vibes Marketing Personalization Report, 2013

97. The customer is free interact with the retailer on their own terms. Face to face Direct/Email Print Television Online MobileCall Centre Loyalty E-commerce Review Advice and Support Search Social Bricks and Mortar Consumer 4 3 1 2 5 1 2 3 Shopper centric path to purchase. How they want to buy, not how we want to sell.

98. A shift from locating products to locating the best products for me. Example: Forever21 -‐ ClosetSOS, 2014

99. And using technology to bring a relevant experience in-store. Example: Klepierre -‐ Inspiration Corridor

100. A new service paradigm – where the guest is the focus, not the sale Example: Bonobos – Guideshops

101. In 2013, the overwhelming reason shoppers changed brands was poor customer service (66%). In almost every case (88%) the situation could have been saved, but wasn’t. Source: Accenture Global Consumer Pulse Survey, Nov 2013

102. And service empowered by technology Example: Virgin – Google Glass partnership

103. Part of personalization will be the ability to customize/tailor more and more products. Example: Creyate

104. All, of course, executed in a way that is wholly seamless. Example: Creyate

105. By 2020… Imagine a 150,000 square foot store that treats everyone in it as an individual. What will it take to get us there?

106. Experience will remain king.6

107. Foot traffic is down. N o v / D e c F o o t Tr a ff i c 40 Billion Visits 30 20 10 2010 2011 2012 2013 1 7 . 6 B i l l i o n Source: The Wall Street Journal, 2014

108. The sky is fricking falling. N o v / D e c F o o t Tr a ff i c 40 Billion Visits 30 20 10 2010 2011 2012 2013 1 7 . 6 B i l l i o n Source: The Wall Street Journal, 2015 2014

109. There are now less than 50% of the warm bodies in US retail stores during the biggest shopping season of the year than were there 5 years ago. How many will there be in our stores 5 years from now?

110. Only in stores delivering truly unique experiences do we see increased visits and footfalls.

111. And in-store experiences remain the absolute best way to engage and connect with shoppers.

112. The 19-year commercial Web experiment has shown; you can't hold attention for very long, can't offer a point of view, can't control the experience, and, in a sense, never own your audience — at best, it's a fleeting, utility-like relationship. Source: Michael Wolff, USA Today, 2013

113. Stores re-imagined around unique, defensible branded experiences may well be the biggest change over the next 5 years. And tomorrow’s shopper craves these experiences.

114. So, what are we waiting for?

115. The problem? True “experience stores” are expensive, complicated and difﬁcult to scale.

116. Even when you only have 8 of them

117. Experience Signatures

118. An Experience Signature is a distinct collection of brand led moments, totally unique in combination from one brand to the next.

119. A retailer’s Experience Signature lies at the heart of why we choose one store over another. They are the things retailers become known for. They are the reasons we come back for more.

120. PEOPLE PLACES COMMS TOOLS EVENTS SERVICES WEB SOCIAL GUEST

121. Today, these moments of connection are often fractured, and only sporadically effective

122. PEOPLE PLACES COMMS TOOLS E V E N T S SERVICES WEB SOCIAL GUEST

123. In an Experience Signature the moments of connection are uniﬁed, and brought into harmony

124. PEOPLE PLACES COMMS TOOLS EVENTS SERVICES WEB SOCIAL

125. PEOPLE PLACES COMMS TOOLS EVENTS SERVICES WEB SOCIAL GUEST

126. PARITY

127. DUPLICATION

128. PEOPLE PLACES COMMS TOOLS EVENTS SERVICES WEB SOCIAL BRAND

129. DISTINCTION

130. DIFFERENTIATION

131. Only with touchpoints in harmony, and infused with a brand’s DNA, have we achieved an Experience Signature

132. A way to express yourself to the world that feels intuitively right

133. And which simply couldn’t be someone else’s

134. By 2020… We believe the brands who are thriving will be the ones who have crafted the strongest Experience Signatures. And are well on the road to redeﬁning a bright future for physical stores.

135. If you’d like to know more… www.ﬁtch.com www.slideshare.net/FITCH_design

136. To ﬁnish…BONUS LAS VEGAS THEMED DISCLAIMER!!!!!

137. No one can predict the future

138. And listening to data can be dangerous

139. 1977:170

140. 2000: 80,000

141. # of Elvis impersonators Time 1977 RIP Elvis Plot this data trail to its logical conclusion…

142. We believe that by 2043…

143. So again, no one can predict the future

144. “But equally no-one can afford to be unprepared for what does arrive.” Source:(Wa+s(Wacker,(Futurist(

145. thanks… www.ﬁtch.com

146. FITCH thinks of Seamless as a palette of touchpoints Physical: The tangible – from objects that can be touched to settings that can be experienced Human: Dynamic interactions – with individuals, employees and social groups Digital: Electronic Tools – technologies that talk to everyone, or just talk to me P H D

147. Exploring Purchase intent in the category Locating Specific product or service Dreaming No specific purchase intent Being inspired Learning Having fun Browse easily More information Narrow choices Easy to find Useful reminders Reassurance

148. PHD/DEL MATRIX Physical Digital Human Dreaming Exploring Locating

152. The Holy Grail of Seamless is true omnichannel retail multichannel crosschannel omnichannel Shopping using different channels Several channels, same purchase Simultaneous use of channels and seamless delivery between them

153. To achieve that a Holy Grail we have to know what it is… Crosschannel done well or with more finesseOmnichannel is not: Omnichannel is: Continuous Retail: Interconnectedness between touchpoints everywhere and anywhere Perceiving all things and creating a true CONTINUITY of experience