The Future Shopper


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The Futures Company and Kantar Retail explore the growing complexity of the shopping experience and how the increasing blur between virtual and physical environments can be managed, and set out a model to help retailers and manufacturers sharpen up strategies to meet the needs of the shoppers of the future.

The Future Shopper

  1. 1. The Future Shopper1The Future ShopperHow changing shopperattitudes and technologyare reshaping retail
  2. 2. © 2013 The Futures Company/Kantar Retail. Some rights reserved. 1Future Perspectivesare thought-pieceswith concise, focusedinsights into importantissues of interest tomarketing and businessstrategists.For more information please FutureShopperBill Gates once said that,“we overestimate thechange that will occur in the next two years andunderestimate the change that will occur in thenext 10.” Shoppers and shopping are just reachingthe tipping point between the short term and thelong. In this Future Perspective we explore howthe combination of digital technologies, consumerexpectations and socio-economic change istransforming the way we shop and what it means forsuppliers, manufacturers and retailers alike.One thing is clear: The change in shopper behaviorand attitudes that has been linked by some to thefinancial crisis is, in fact, a deeper shift causedby the intersection of changing social attitudesand technology, and reinforced by the economicenvironment. Similar changes are seen in bothricher markets and emerging markets, even thoughthe latter have been affected less by the aftermathof the financial crisis.This Future Perspective starts by reviewing theways in which shopper behavior has been—andwill be—transformed by the digital and mobilerevolution. It then moves on to look at the broadertrends shaping the shopping environment beforeintroducing a model that helps retailers and
  3. 3. The Future Shopper2manufacturers sharpen up their strategies in thenew shopper environment. Finally, we look at someof the emerging retail models that are attempting tomarry virtual and physical environments which arebecoming increasingly blurred.It is, of course, difficult to discuss the future ofshoppers without also discussing the future of theretail environment, and inevitably these issues areintertwined here.What’s striking about the story that we are tellinghere is the collision of the old and the new. It isa world in which the needs of shoppers remain,in many ways, largely unchanged—but theirexpectations of how businesses will fulfill thoseneeds are being transformed.The changing shopper worldDigital technologySocialattitudesEconomicsRetaildynamics
  4. 4. © 2013 The Futures Company/Kantar Retail. Some rights reserved. 3Understanding shoppersused to be simple. They wereunderstood as people whodid things in a linear way,progressing in a beelinefrom awareness through topurchase. Awareness wouldlead to Consideration, whichwould then lead to Selectionand Purchase, and afterPurchase, to Loyalty. Therewere acronyms such as AIDA(Awareness-Interest-Decision-Action) to help. Prospectswould be ushered along apurchase funnel, arriving alongthe journey at one or more‘moments of truth’ that led topurchase. While it probablywas never that simple, at leastoutside of the Marketing 101textbooks, it is certainly nottrue now. The purchase funnelhas become a ‘purchase fish,’a complex world of feedbackinvolving research, multi-channel contact with the sellerand eventual purchase, as wellas the testing of opinion withan ever-larger group of otherconsumers.1This increasinglycomplex purchase worldwas identified in 2004 inpioneering research for AOLby The Futures Company(as The Henley Centre).2As Steve Yankovich of eBayMobile told the New YorkTimes in December 2012:“They might discover anitem on a phone or tablet,do a saved-search pushlater on some other screenEverywhere commerceThe ‘purchasefunnel’ hasbecome a‘purchasefish’—acomplex worldof feedback andopinion testingThe purchase fishSource: Resource Interactive/The Futures Company
  5. 5. The Future Shopper4and eventually close on thewebsite. People are buyingand shopping and consumingpotentially every wakingmoment of the day.”3So it is not surprising thatdefinitions of e-commerce aregetting murkier. The HarvardBusiness Review asked, in2011,“Is it e-commerce if thecustomer goes to a store, findsthe product is out of stockand uses an in-store terminalto have another locationship it to her home? Or if shefinds a lower price throughher smartphone and ordersit electronically for in-storepickup?”4As shopping changes,the shopper’s experiencebecomes more complex,and harder for retailers andbrand owners to manage.The notion of ‘everywherecommerce’ was developed bythe digital agency ResourceInteractive in late 2010, and inthis world transaction costsfall, along with knowledge andinformation costs. Knowledgeand information make thebiggest difference to theshopper.From the customers’perspective, they nowexpect access to the wholecatalog, not just the goodsin a particular location, andthey expect the retailer tokeep track of their personalshopping history with thatretailer, regardless of locationor platform. In other words,the customers want theretailer to manage their “3Ps” (profile, personal historyand preferences) and letthem access it whenever andwherever they want it.From the retailers’ perspective,they are now in a world withfar more intermediaries thanbefore, making it much harderto communicate directlywith the shopper. Shoppingdecisions are now framedand managed by aggregators,deal sites, social media andsocial recommendations. Thespeed of this change has beenremarkable. Only a quarterof Americans believe thatadvertising is a credible sourceof product information. Friendswho have used the product arementioned more than threetimes more frequently.But there is an upside here.Companies that do manageto make the connection withtheir shoppers are rewardedwith permission to have a fullerrelationship than traditional,mainstream bricks-and-mortarretailers ever did.All of this new conversation isbeing shaped and enabled bya surge in personal, portabledigital technologies, mostlysmartphones, but also tablets.These are already widely usedfor shopper R’n’R (researchand recommendation) andWho do you trust?Source: Edelman Trust Barometer, US consumer survey, 201090%70%25% Friends whohave usedthe productStrangerswith productexperienceAdvertising
  6. 6. © 2013 The Futures Company/Kantar Retail. Some rights reserved. 5are being used for purchaseas well, especially by youngershoppers. This intersectionbetween shoppers, retailersand technology has, for thefirst time, given shoppers thepotential to access retailers’management and informationsystems—provided the retaileris willing to allow it. In thefuture, doing this well will bea source of retail competitiveadvantage.It is easy to imagine that thisis a phenomenon largelyrestricted to rich markets.But the rapid growth ofmobile—the mobile Internet,in particular—in emergingmarkets means that bothdigital purchases and otherdigital shopper behavior isgrowing rapidly in emergingmarkets too. Globally,48 percent of smartphoneusers have downloaded aretailer app. Of these, 90percent say they’ve found ituseful.5Even by the end of2010, 16 percent of Indonesianmobile phone users hadmade a payment via theirphone, compared with just fivepercent of U.S. mobile users.The comparable figure forJapan was 40 percent.6From digital immigrant todigital dependentTwo interlocking trends, onesocial and one technological,mean that these changes arelikely to accelerate. The firstis the change in generationalbehaviors around digitaltechnology. The notion ofShoppers’ technology(e.g. car, catalog)Source: The Futures Company/Kantar RetailRetailers’ technology(e.g. logistics,information systems)The old shopper conversationShopper Retailer/brandsE-commercesnapshotsnn In South Africa,Internet retailing grew15 percent in 2011.nn 140 million Chinesehave made purchasesthrough onlinechannels.nn In Brazil, couriercompany DirectExpress now makesonly 60 percent of itsdeliveries to affluentareas.nn Online channels inthe U.K. now accountfor approximately 10percent of all sales.7
  7. 7. The Future Shopper6‘digital immigrants’ and ‘digitalnatives’ is well-known. Nativesgrew up in a world of screensand digital devices, with theWeb and some connectivity,and expect to use all of them.Immigrants, who tend to beolder, started work in a world inwhich the desktop computers(or even typewriters) were stillthe most widespread pieceof office technology. Theyhave had to learn (or moreaccurately re-learn) how tofunction in the digital world.Now even natives havebeen superseded by anew generation of digitaldependents whose lives andbehaviors are shaped by theseamless interconnectivitybetween devices enabled bywireless and broadband.In terms of their shopperbehavior, the three groups aredistinct. Digital immigrants,born and raised before PCs,tend to see technology as aparallel track to digital retail,and have a relatively rigidassociation between categoryand channel. They have notassimilated mobile into theirshopping world, beyondperhaps using it for wishlistsor checking in with a questionwhile shopping.Digital natives, by contrast,were born in the age of thePC and raised in the eraof the Internet. They haveintegrated technology intotheir shopping habits and, asa result, move fluidly betweenin-store and online, based onprice, convenience, quality,brand and personal fit. Forthem, mobile is a tool forcomparison, discovery and,increasingly, transactions.The younger digitaldependents, born sincethe Web was invented, seetechnology as integral to allof their interactions. Theyhave grown up surrounded bytech and become frustratedif they don’t have access toit, whether in a retail settingor elsewhere. (For example,this generation can regardaccess to social media as adeal-breaker when choosingjobs.) Mobile is their defaultplatform, and they won’t tradeoff convenience or control forsavings. But if retailers thinkthat this gives them time torespond while the digital-Shoppers’ technology(e.g. car, catalog)Source: The Futures Company/Kantar RetailRetailers’ technology(e.g. logistics,information systems)The old shopper conversationShopper Retailer/brandsShopper information(e.g. stocks, prices,history)Source: The Futures Company/Kantar RetailRetailers’ technology(e.g. logistics,information systems)The new shopper conversationShopperThe shopper’s 3PsMobile and smartphoneNew intermediariesTechnologyRetailer/brands
  8. 8. © 2013 The Futures Company/Kantar Retail. Some rights reserved. 7dependent generation comesof age, they should think again.As digital technology hasmatured over the past twodecades, younger, leading-edge users have invariablyeducated older users aboutthe possibilities of newapplications, such that usagehas boomed among oldergenerations. We saw this withtexting a decade ago. Nowwe’re seeing something similarwith video-calling servicessuch as Skype or AppleFaceTime.SoLoMoThe second trend is theinteraction betweensmartphones, typically carriedby purposeful users, and dumblocation-based information,embedded in objects throughsensors.SoLoMo is an ugly, if catchy,acronym; it stands for theforms of exchange, media andcommerce that are enabledby the growth in personalportable platforms: Social,Locational and Mobile. Thephone enables all three incombination. Social mediaapplications become place-specific when operated onmobile devices, while socialmedia is rapidly turning into‘social commerce’ (see panel).Smartphone-enhancedshopping is becomingstandard. Two-thirds ofsmartphone owners in theU.S. say they use them whileshopping in grocery stores;nine percent say they usethem to download and redeemcoupons.8But ‘locational’ is the mosttransformative of these threeelements. Most consumers saythey’re willing to allow theirphone to share their locationin exchange for perks, such asmobile coupons or free use ofapps. One-tenth of Americancellphone owners use mobilelocation services at leastweekly.9The venture capitalistand tech analyst, Bill Gurley,suggests there is significantgrowth to come here,especially in local markets,enabled by services suchas the U.S.-based Yelp andvertical service providers suchas OpenTable or AirBnB. Only12 percent of U.S. restaurantreservations were bookedonline in 2011, whereas matureInternet sectors are now atThe see-throughproductThe German Androidapp Barcoo combinesQR scanning and GPStechnology to directshoppers to providersthat are the cheapestand closest to them. Italso provides informationon the eco-footprintsof companies and‘nutritional traffic lights.’Everything you need toknow about a product isnow available to you—onthe device in your hand.Going tomarket isa humanbehavior thatdates back10,000 years
  9. 9. The Future Shopper8saturation. Southwest Airlines,by comparison, booked 86percent of its revenue online inthe fourth quarter of 2011.10In this SoLoMo world, it ispossible to build up a pictureof how the emerging digitalgenerations will integratesocial and mobile platformsinto their lives. In short, thereare seven stories:nn The first screen will be aportable screen, likely to bea tablet device or a mobilewith a larger screen sizethan most current mobilephones.nn There’s an app for that—anapp designed to maximizethe potential of the portableplatform, not downsizedfrom a laptop package.nn It is a personal portalproviding access topersonal resources storedin the cloud, allowing youto get what you need whenyou need it.nn Intuitive interfacesincluding voice controls,facial recognition andgestural management makethe portable device morepersonal, more secure,more useful and easier tomanage.nn It knows what you want,at least some of the time,because it knows whereyou are and has built up apicture of your habits overtime.nn It carries cash, not literally,but has an interface (aslikely to be hardware assoftware) that allows youto buy small value productsand services effortlessly—and also take paymentsand other credits (e.g. storepoints). Everyone becomesa merchant.nn It knows who you areand can verify this toothers, enabling you toaccess buildings, such asworkplaces, and to confirmyour age or identity.It’s worth underlining thatdespite the ubiquitous natureof personal and portabletechnology in this shopperenvironment, it does not followthat the continuing growthin e-commerce will be eitherinevitable or relentless. Thereare many reasons for this,ranging from the specificcharacteristics of the goods ina given category (perishability,bulk, uniqueness, etc.), to theeconomics of the logisticsinvolved, to social habit. Afterall, going to market is a humanbehavior dating back 10,000years to the early history ofancient Persian civilization.What we’re seeing in ‘earlyadopter’ e-commerce marketsis, at best, steady, slow growth.By 2020, e-commerce isforecast to reach 14 to 15percent of total sales in theU.K., 10 percent in the U.S. andfive to six percent in Japan.The growth ofsocial commercenn Social networkinghas created a newdirect selling channel.People, accordingto research groupAltimeter, arebecoming the fifth“P” of marketing—after product, price,placement andpromotion.11nn By 2009, Dell Outlethad sold $6.5 millionin products throughits Twitter feed.12nn Sales of goodsthrough socialchannels arepredicted to hit $30billion by 2015—upfrom $5 billion in2011.nn In North America,B2C companies havealready acquired newcustomers throughFacebook.
  10. 10. © 2013 The Futures Company/Kantar Retail. Some rights reserved. 9Although technology has beenthe most visible factor shapingshopper behavior, there areother macro factors that areat least as influential, includinga cluster of attitudinal factors.The outcome is that shoppersare increasingly sophisticated,increasingly savvy andincreasingly considered intheir shopping decisions.The global contextThe story so far has been oneof different types of digitalinterfaces between shoppersand retailers, creating newflows of information andknowledge, and changing thebalance of power betweenthem. But this story is playingout against some significantshifts in the overall globallandscape. These also areshaping the retailer response.In this section we take a top-level look at these trends.The growing globalmarketBrazil, Russia, India andChina are now among the top10 economies in the world,with China, now the second-largest economy in the world,forecast to account for abouta quarter of all global retailsales by 2022—twice as muchas the U.S..13In another 15years, consumption patternswill have changed again. Asecond generation of countriesis following the BRICs. Thelists of these countries vary,but any of Bangladesh,Colombia, Egypt, Indonesia,Iran, Mexico, Nigeria, Pakistan,the Philippines, Turkey, SouthAfrica, South Korea andVietnam could see sustainedgrowth.14For companies inrecession-hit markets, thefuture seems to be a foreigncountry.15That said, it iseasy to exaggerate the scaleof the opportunity and thespeed at which it will unfold.In our Future PerspectiveUnlocking new sources ofgrowth, published last year,we noted that many middle-income countries never crossThe wider trends shaping the shopper
  11. 11. The Future Shopper10the threshold to high-incomemarkets. As a strategic betbased on historical experience,most developing countriestoday are a long way frombeing a sure thing.17Changing householdstructuresThe average size of shoppingbaskets is getting smallerand the average numberof weekly shopping trips isfalling. Globally, householdsare increasing in numberbut decreasing in size. Morepeople are living alone. Morechildren are being brought upin single-parent households.This is a worldwidephenomenon. The numberof single-person householdsin Brazil is approximatelynine million—a threefoldincrease since 1995. In Japan,single-parent households areexpected to grow in numberby 22 percent between2000 and 2030. Europeanhouseholds, meanwhile, nowhave an average of 2.4 people,compared with 3.9 in 1980.18In search of valueIn richer markets, the financialcrisis gave permission topeople to look for value,although the trend predatesthe crisis. In emergingmarkets this has long beenthe case. Shoppers arebetter informed—partly asa result of digital and socialmedia—about deals and aboutwhether they represent goodvalue. Discount retailing isbooming. In Germany, home toAldi and Lidl, discounters nowcontrol nearly 46 percent ofthe grocery sector.19This is notjust a reflection of continuingincome disparities in high-growth markets. In China,where the “tuanguo” practiceof group-buying originated,there’s a strong tradition of the“best deal.” Discounters areexpanding in these marketstoo: In China, Mexico andBrazil, they’re predicted togrow more than 60 percentbetween 2010 and 2015.20For increasing numbers ofconsumers, price and valueare more important thanbrand. One outcome will be thecontinuing strength of privatelabel.21In search of assuranceShoppers are adoptingshrewder and savvierapproaches to theirpurchase decisions. Thereare a number of importantattitudes and behaviorsbehind this. Consumers, ingeneral, are skeptical of thepromises and claims madeby businesses, and in theshopper environment thistranslates into a need forother sources of informationthat are more trustworthy.In China, as we reportedin our Future PerspectiveChina’s Challenges, angerabout food quality has forcedthe government to tightenregulations and imposetougher penalties, includingdeath, for offenders. InEurope, scandals such asthe continuing horsemeataffair underline a generaland widespread view that ifbusinesses think they can getaway with something, theywill try to do so. Shoppers,certainly in richer markets,are also more risk-averse thanthey used to be; shorter oftime and money, they have lessmargin for error. And at theThe growth ofmodern retailModern retail isadvancing rapidly in Asia,albeit unevenly. In China,modern trade grew from34 percent of the marketin 2000 to 64 percentin 2009. In India, onlyfive percent of packagedgrocery trade takes placethrough modern, formalchannels. In formerAsian tiger Malaysia, 70percent of shoppers stillvisit independent grocerystores two to three timesa week.16
  12. 12. © 2013 The Futures Company/Kantar Retail. Some rights reserved. 11same time, they are more ableto express their opinions andto share their views outside ofmainstream channels.The implication for retailersand manufacturers is thatthey have to design productsand services with betterguarantees and warranties,that encourage people to feelconfident in using them, andalso to engage better withshoppers sources of trustedinformation and advice.In search of mental spaceAcross the world, in richermarkets as well as poorerones, shoppers are respondingto economic and socialpressure by reducing theemotional and mental clutterin their lives so they canmake space for the importantthings in their lives. They arelooking to simplify, so they cancreate more time and space intheir lives and can take morecontrol. In richer marketsthis can be because they arehaving to work longer hours orhave increased responsibilitiesas caregivers as levels of socialprotection are cut back bygovernments.What this means in practiceis that shoppers avoid, orremove from their repertoires,products that create additionalcomplexity in their lives orgenerate more emotionalclutter. It also means that theirtime is more important—andthat retailers cannot afford towaste their shoppers’ time ontransactions that ought to bestraightforward. Convenienceformats are growing in richerand emerging markets alike.In the U.S., Walmart hasunveiled its ‘express’ format.In the U.K., upmarket grocerychain Waitrose is openingconvenience stores calledLittle Waitroses, often closeto train stations. In SouthAfrica and Mexico, Pick n Payand Oxxo stores are luringcash-rich, time-poor shopperswilling to pay premium prices.The increased demand forconvenience is closely linkedto increased urbanizationand changing employmentpatterns. In Indonesia, forexample, the number ofconvenience stores increasedmore than fivefold to 11,500between 2000 and 2010.22The winners—in terms ofretailers and manufacturers—are the ones who designformats, products or servicesto be more streamlined atpoint of decision or purchase.This can mean revisiting thecategory to decode language,packaging, or messaging.In search of qualityNevertheless, even shopperswho are squeezed for moneyand short of time still desireConsumers want to simplify“More and more, I find I am lookingfor ways to simplify my life”Global average% total agreeSource: The Futures Company, Global MONITOR71%201257%2008
  13. 13. The Future Shopper12quality. Some have usede-commerce to reduce thecost and time involved inbuying basics so they canspend more of both on quality.As awareness of food andmanufacturing processesrises, so shoppers are lookingout for specialist providersthat can ensure the quality offood. One of the flip sides ofthe rise of discount clothingand apparel companieshas been greater interest inmanufacturing quality anddurability.In the U.K., the numberof butchers, bakers, farmshops and fishmongers hasincreased by 11 percent since2008.23Specialist chains inthe U.S. such as Trader Joe’sand Whole Foods continue toexpand. In developing markets,meanwhile, specialists fit withthe tradition of independentretail.At the same time, perceptionsof quality extend to theproduction chain. Shoppersincreasingly understand thatcheaper goods are morelikely to involve compromises,whether this is to do withthe quality or type of labor,the environmental impactor the returns to suppliers.Some of this overlaps with thedesire for assurance: Salesof organic products in Chinaquadrupled between 2007and 2012, and are growing ata rate of 40 percent per yearin Brazil.24Demand for ethicalbusiness and CSR remainshigh globally—holding steadydespite economic turmoil at71 percent of consumers in2011.25Taken altogether, theseshopper perspectivesrepresent a challenge to bigretailers. Some drive downmargins; some reduce sales.Some reduce the overall valueof baskets at the supermarketcheckout while reducingthe premium element at thesame time. Finding new andimaginative ways to matchshoppers’ desires for value,assurance, mental space andquality will become priorities. Itis still possible to make money,but you have to understandyour shoppers better than everbefore. Simply put, retailerswill have to be more clever.Watching thedemographicsGerman supermarketKaiser’s has openeda branch in Berlinspecially adapted forolder shoppers, withbrighter lighting, non-slipfloors, steps to accessshelves and magnifyingglasses for readinglabels. In South Korea,SK Energy has openedspecial gas stations forfemale customers. Thesestations are magenta andpink and include powderrooms.To makemoney,you have tounderstandyour shoppersbetter thanever before
  14. 14. © 2013 The Futures Company/Kantar Retail. Some rights reserved. 13So the world of retail isin transition as digitaltechnology disrupts shoppers’expectations regarding howthey interact with the worldaround them—a world in whichcomputing is no longer lockedup in devices but embeddedin everything, pervasiveand persistent, sensitive tothe presence of people andobjects.Both retailers and suppliersalike will need to adapt tothis new world to survivethe shoppers’ changingexpectations about how theywish to engage all along theirpath to purchase. Digital tearsdown the walls of the store,and the successful retailersof the future will need to teardown the walls of their currentthinking about retailing. Theretailers that win in the newenvironment will do at leastmore than one of these thingswell:nn Reinvent convenience.nn Redefine loyalty.nn Re-imagine experience.nn Reposition value.In short, they will havefound new ways to addressunderlying shopper needsacross channels, formats andtouchpoints.Reinventing convenienceHistorically,‘Convenience’ hasreferred to a physical channelor store that caters to shoppermissions such as fill-in, top-up,impulse or distress. Theseshopper need states havehistorically been addressedthrough smaller stores withoptimized assortmentsintended to save the shoppertime. However, this definitionof Convenience is no longersufficient in a world in whichthe shopper is digitallydependent and channelagnostic.In order to meet the needsof the future shopper, theGetting CLEVerSource: Kantar Retail analysisologystics,ems)CLEV:Convenience, Loyalty, Experience, Valueands/brandsRIGHT WOWNOWSMARTEXPERIENCECONVENIENCELOYALTYVALUE
  15. 15. The Future Shopper14idea of Convenience will notnecessarily involve a physicallocation and will shift tocontextual and situationalmethods of solving the ‘now’need state of the shopper forinstant gratification all the wayalong their path to purchase.We can simplify the ‘now’ needstate into three main buckets:nn Shopping (informationgathering)nn Purchasing (transacting)nn Fulfillment (takingownership of the purchase)Retailers and suppliers mustbe ruthless in understandinghow the shopper behaveswithin each of the buckets,and active in creating multipleoptions for the shopper tomove between them. In stores,this might involve armingthe floor staff with mobiledevices to facilitate in-aislepurchasing, or building robustmobile applications that allowthe shopper to browse andpurchase virtually while in thestore.The ‘Drive’ model, which isnow a significant feature of theFrench groceries market, savescustomers time by unbundlingthe shopping, purchasing andfulfillment elements. Differentstores operate differentmodels, but in essence ‘Drive’allows customers to orderonline (or, in some cases, onarrival at the Drive location)and then collect their boxed-uporder. The model has takenoff in France because Frenchcustomers are resistant topaying delivery charges andreluctant to block out time athome to wait for deliveries.According to research fromKantar Worldpanel, 2.3 millionFrench households visited aDrive during 2012 and thatnumber will all but double, to4.5 million in 2015.26Redefining LoyaltyIn today’s world of largeconsumer datasets, loyaltyhas traditionally been aboutidentifying correlations andunderstanding behavior, withthe end goal of optimizingpricing and assortment tomaximize trips and basket.This sort of analysis, whilebeing strong on transactionalrecord-keeping, has beenweaker at understandingunderlying motivationsas well as at uncoveringshopper activities outside ofthe confines of the store ordataset. Simply put: currentloyalty data reveals the Where,What and When, but fails toreveal the Why.As described previously, thefuture digitally dependentshopper has differentexpectations on how he orshe interacts with the world,Amazon customers in the U.K. can choose to have a product delivered to one ofits standalone lockers rather than a home address if this is more convenient. Thislocker is situated in a shopping center close to a transport hub.Photo:TheFuturesCompany
  16. 16. © 2013 The Futures Company/Kantar Retail. Some rights reserved. 15expectations that are defined,in part by technology. Thismanifests itself in what KantarRetail describes as the ‘right’need state—an expectationto have a contextualized,tailored and personalizedrelationship with a retailer orbrand, on the shoppers ownterms, wherever and howeverhe or she wants. Loyalty is nota strategy; it is an outcomeof having a shopper-centricframe of mind.One striking example ofhow to move beyond storedata is the Spanish retailerMercadona, which conductsmore shopper research thanany of its competitors. Theresearch allows it to connectwhat they buy (which it knowsfrom store data) to why theybuy. Without in-depth shopperresearch, motivations area blind spot. By combiningthe store data and shopperresearch, Mercadona opensup new insights into the needsof its customers, creating aplatform for improvement andinnovation, both in the typesand range of goods it sells,and in building more effectivecommunications, messagingand conversations. In turn,this makes it a far higher valuepartner for its suppliers.Re-imagining experienceThe re-emphasis onExperience has been one ofthe more obvious levers thatretailers are using to meet theexpectations of the FutureShopper. New stores withemphasis on design, visualaesthetics, theater and serviceopen every day—often inan attempt to replicate thesuccess of the Apple storewithout fully understandingApple’s economics. The firsttask of retailers, then, is tocreate emotional resonancefor the shopper in a way thatis contextually appropriate—the ‘wow’ need state—whilealso removing the barriers topurchase once shoppers reachtheir decision points.Neiman Marcus, a premiumU.S. department store, hastaken this to heart in howthey have leveraged mobiletechnology into its physicalstore environment. Througha mobile application, theshopper can check into thestore, alerting the NeimanMarcus personal shopper tohis or her arrival. The personalshopper then calls up theguests previous purchasesso that he or she can moreaccurately pull merchandisebefore the customer arrives.As digital manufacturingprocesses become moresophisticated, the Experienceproposition will extend topersonalizing designs andeven specifications at the pointof sale for later delivery.One of the key issues forretailers is that getting theemotional environment inperfect tune is not enough;the execution must be flawlessas well. Retailers need aAugmented realityoffersThe Chinese e-commerceplayer Yihaodian recentlylaunched 1,000 ‘virtualstores’ that could beaccessed only in specificlocations using thecompany’s Virtual Storeapp, which uses GPS tocreate a store on theuser’s device in a specificlocation. Each ‘store’was packed with offersand discounts—a rewardto customers who haddownloaded the app andtaken the time to finda location. The schemewas acknowledged byYihaodian’s agency,Ogilvy & MatherAdvertising, as beinga “guerilla marketingstunt,” and the locationsincluded stores belongingto competitors and iconicChinese tourist spots.Sooner or later, though,a savvy retailer is goingto execute this on apermanent basis, not as apromotion.27
  17. 17. The Future Shopper16deep understanding of thepsychology and mechanics ofthe purchase process in orderto eliminate all barriers to sale.Repositioning ValueValue is a word often usedto describe low prices or tojustify higher ones. For thefuture shopper, value willmove beyond simply price toa message from the retailerthat the shopper is making a‘smart’ decision to purchasefrom them. Retailers cateringto the ‘smart’ need state ofthe future shopper are expertson one of the components ofthe new value equation: price,service and quality.One of the opportunitiesafforded by everywhere-commerce is based on thefact that retailers can expectto have information aboutindividual profiles and theshopping history of everyshopper. Safeway in the U.S.has introduced ‘Just For U’pricing that leverages onlineand mobile applications totake pricing out of the publicdomain and tailor it privatelyto individual shoppers basedon their profile and purchasehistory, satisfying the ‘smart’need state by helping theshopper get a better deal.Just For U is linked toSafeway’s Clubcard scheme,but it effectively goes onestep beyond the conventionalclubcard by providingindividualized offers that gobeyond the clubcard discount.The company estimatesthat these represent furthersavings of between 10 and20 percent for the shopper;savings are shown on the tillreceipt. Just For U launchedlast year, and so far 5.4 millionhouseholds have signed up forit, representing 45 percent ofits sales base.But value propositions canbe simpler. In the apparelcategory, Zappos has createdan unlimited free shipping/return policy for productsbought online—because itidentified that shoppers’concern about the cost ofreturning items was a barrierto sales.Incorporating thevirtualIn Germany, Adidas hasbeen piloting an AdiverseVirtual Footwear Wallthat lets customersbrowse a 3-D footwearcatalog in which they canzoom and rotate. When acustomer finds a pair oftrainers he or she likes,a sales assistant checksstock levels (on a tabletcomputer, of course) andlets people pay withouthaving to go to a cashregister.
  18. 18. © 2013 The Futures Company/Kantar Retail. Some rights reserved. 17So how should retailers andsuppliers respond to the futureshopper? For an answer, thisFuture Perspective turned toBryan Gildenberg, the ChiefKnowledge Officer of KantarRetail.One of the main themesof this report is that we’removing from e-commerceto everywhere-commerce.How quickly is that going tohappen?Both more quickly than peoplerealize, and slower than peoplethink. We’re not seeing acomplete replacement of non-digital retail by digital retail;you’ll see the replacement ofphysical retail by digital retailin some categories, and you’llsee pure-play digital retailerscompeting with retailerswith both a massive physicalfootprint and a massivedigital footprint. The broaderquestion, though, is about howpeople shop. That change ishappening incredibly quickly.What we’re going to find is thatdigital, mobile, social and localare going to impact almosteverything that’s sold.So if you’re looking at thisfrom the point of view of aretailer or a manufacturer,what capabilities andcompetencies do you needto increase to competeeffectively?All companies need to becomemore fluent in the tools ofthe digital world, and thattechnical fluency is going tohave to penetrate parts ofan organization that aren’thistorically digitally-centricor IT-centric. It’s difficult toimagine a marketer beingeffective five years from nowwithout a real understandingof how to connect to shoppersthrough digital, mobile orsocial platforms.Secondly, one of the reallyinteresting challenges forcompanies will be to getbetter at assimilating dataquickly and reacting to itfaster, but without gettingunmoored from their strategy.Technology can makethe shopper environmentmuch more volatile, andorganizations will have tomaster agility, By ‘agility,’ Imean the ability to see thingsand react to them, but notto get knocked off balance.For more capital-intensivebusinesses, whether physicalretailers or manufacturers,the ability to respond is tosome extent limited by yourcapital investment. How doyou respond without makingyour capital base completelyinefficient?Is this a world in whichmargins and profits aregoing to be lower?The question is, how do yourespond to competitors whomake money in a differentway from you? We’ve seenthis challenge play itself outfor years, long before digitalarrived. As you look today atsome of the more specificchallenges of the digitalworld, one is that Amazon,as a competitive entity, isan extraordinarily disruptivebusiness. This isn’t aboute-commerce in general, thisis about Amazon. The waywe always look at Amazonis that it is an e-commercebusiness that monetizestraffic. A business model thatmonetizes traffic is a differentbusiness from one that makesmoney on the trading marginon buying and selling goods,and if you don’t adapt, yourmargins will get squeezed.So you have to reconstructyour value proposition, andthat reconstruction is at theheart of winning in the futureshopper landscape. You haveto do that in four key ways,by looking at convenience,Responding to the future shopper© 2013 The Futures Company/Kantar Retail. Some rights reserved. 17
  19. 19. The Future Shopper18loyalty, experience and value[as discussed earlier in thereport].One of the things that pure-play online retailers can domore easily than brick andmortar ones is to create verydisruptive, fast-moving pricepoints. So we’re going to seea lot more retailers movetoward more personalizedand tailored propositionswhich are delivered outside ofthe public domain. Shoppingacross all retail outlets isgoing to be faster; it’s goingto be more aimed at yourpersonal preferences; it’sgoing to be more fun where itmakes sense; and the valueproposition is going to be morepersonal, more targeted andmore private.Looking toward 2020 from ashopper point of view, whatis the biggest change we’llexperience as shoppers?I’d say that it will be anintegration of the digitaland physical world, in waysthat are in some casesfairly predictable and, inothers, difficult to imagine.‘Everywhere-commerce’ isgoing to be the underpinningof what we see. You’re goingto see more businessesfigure out how to get moredigitally integrated yettangible propositions infront of shoppers in farmore interesting ways. Trueintegration of the digital andphysical world is going to comefrom retailers who may onlyhave a few products in stock,but have a three-dimensionalrendering of the rest of thecatalog that you can view andhave delivered to your homeeven before you get back. If I’mMichael Kors, and I’m thinkingabout how to sell handbags, itwould be much easier if I couldhave a kiosk where I physicallystocked my five most popularhandbags, and if my customerwants something differentor a variation, I can provide adigitized mirror so they cansee how it would look, andhave it delivered later thatday. There’s no reason in theworld why you couldn’t sell$2,000 handbags out of asophisticated digital vendingmachine.What’s not going to change?I suspect that there’s stillgoing to be places that you canfunctionally go and buy stuffthat’s going to be delivered ona low-cost operating platform.There’s always going to be anelement of transaction-drivenretail where the shopperis going to be able to buysomething simply without alot of bells and whistles. Thestory of retail since the SecondWorld War is that those modelskeep on getting better atreplicating the things thatpremium retailers do.The job of the retailer thatwants to maintain its marginsis to keep reinventing andreconfiguring the levers ofshopper value in ways wherethey can extract higher thancommoditized margins. There-imagination of consumervalue in the context of yourbrand proposition is the corestrategic challenge on thetable for anyone who’s tryingto win in this future shoppingworld.Interview by Andrew CurryThe Future Shopper18
  20. 20. © 2013 The Futures Company/Kantar Retail. Some rights reserved. 19Retailers have fewer places tohide in the future environment.Pricing is becomingmore transparent, andenvironmentally and sociallyirresponsible behaviors arepublicized online.At the same time, though, theshopper has few places to hideas well. As with distributionand supply, the Big Data ofdigital devices mean thatretailers can monitor customerbehaviors much more closely,and in real time. This takesCRM and ‘precision marketing’to unprecedented levels. Bymining Big Data, retailers havea stronger platform to bettermanage existing relationshipsand start new ones. However,shoppers aren’t always fansof such personalization. Thereis a fine line between helpingshoppers and stalking them.Customer trackingA man walked into Targetclutching coupons thathad been sent to hisdaughter, and he wasangry. “My daughter gotthis in the mail!” he said.“She’s still in high school,and you’re sendingher coupons for babyclothes and cribs? Areyou trying to encourageher to get pregnant?”The manager apologizedand called a few dayslater to apologize again.On the phone, the fatherwas somewhat abashed.“I had a talk with mydaughter,” he said. “Itturns out there’s beensome activities in myhouse I haven’t beenaware of. She’s due inAugust.”© 2013 The Futures Company/Kantar Retail. Some rights reserved. 19
  21. 21. The Future Shopper20In this emerging world, wherethe shopper and retailerinteract in more placesand also more often, thereare some important newground rules. These helpbusinesses to manage ina world where technology,economics, social behaviorand modern retail interact inincreasingly complex ways.As the management theoristPeter Drucker once observed,“The greatest danger intimes of turbulence is not theturbulence; it is to act withyesterdays logic.” In this finalsection, we lay out nine rulesfor rethinking the shopperproposition.1. The shopper contexthas changed for goodShoppers have changedfor good. Although this ispartly about the technology,changing attitudes are at leastas important. And althoughthese were cemented, at leastin rich markets, by the financialcrisis and by household debtlevels, many of the signs ofchange were there before.Shoppers will continue to beconcerned about trust andtransparency, just as they aregoing to continue to seek tosimplify their lives and free upmental space while also tryingto make sure they get fairvalue from retailers.2. The shoppingprocess has beendisaggregated—and thiswill continueThe shift from a ‘purchasefunnel’ to ‘purchase fish’model means that differentstages of the shopper processare happening in differentplaces, and through differentchannels, many of which arebeyond the control of theretailer. There are also newintermediaries (see rule 8,below). This opens up newstrategic opportunities forretailers to relate to shoppersin different ways at differentparts of the process. Forexample, a hybrid store suchas Tesco’s Homeplus storein Seoul’s Seolleung subwaystation is a virtual shop‘stocked’ with pictures andbarcodes, aimed at ‘digitalnative’ commuters who are toobusy to go the supermarket.People shop there with theirsmartphones, scanning theQR codes of the products theywant. Tesco guarantees same-day delivery for orders placedbefore 1 p.m.The new rules
  22. 22. © 2013 The Futures Company/Kantar Retail. Some rights reserved. 213. The store needs to beextended in time andspaceBecause the shopping processhas been disaggregated, thestore needs to extend itselfin time and space, beyond aphysical location or website,and technology enablesthis. But even though, froma shopper perspective,computing will be everywhere,the strategic question is howbest to optimize the store’sextended presence to best fitits positioning and competitiveadvantage. Whether by lifestage, context, mode, behavioror category, shoppers willengage with retail more orless virtually and more or lessphysically, in ways that fit theirpreferences about shoppingat any given time. One bigchange: The store will be ableto maintain a relationshipwith shopper and productafter point of sale. Think ofthe ‘intelligent warranty’ thatmaintains and repairs a smartproduct even before thecustomer realizes it has a fault.4. If you’re in bricks andmortar, you’re in digitaltooBeyond the smallest andsimplest local shops, a retailbusiness that has a physicalpresence will need to have adigital presence as well. Thisinvolves rethinking your digitalpresence beyond the walls ofthe store, and within them.For example, the Japanese-owned clothes chain Uniqlouses digitized mirrors in somestores to show customers theitem they are trying on but inthe other colors in the range—speeding up the selectionprocess for customers whilereducing the amount of stockthat needs to be returnedto racks by staff. There canbe surprising benefits. Thedepartment store John Lewisin the U.K. has found thatopening mid-sized storesspecializing in its homewareproposition, John Lewis Home,increases the level of onlinesales in the store’s trading (orcatchment) area. Within thestores, service staff are quickto help people go online to getthe goods they need ratherthan being limited to what’savailable on the retail floor.5. If you’re in bricks andmortar, make the most ofthe physical contactIt’s obvious, but bricks andmortar can do things thatpure-play digital competitorscan’t match. The physicalstore has to be more than justa place to buy things. So WholeFoods has its chefs cookingwith its fresh ingredients in fullview—combining a fresh foodmarket with a cafe. Similarly,it offers tours of its cheesedepartment, where shopperscan learn about the cheesesand taste them. In the U.K.,the clothes company Hacketthas added services such ashair care and shoeshine toits flagship store. Beyondthis, there is the store asshowroom—where it is notpossible to buy. The future ofretail is ‘high-touch’ as well as‘high tech.’6. Pricing will be becomemore personalAs seen in the Safewayexample, the digital andpersonalized world of thefuture shopper enablesretailers to offer personalizedpricing—and we expect thatthis will come increasinglycommonplace, especially asa way of rewarding regularor frequent customers. Butfairness is an essential partof such a proposition. Itworks only if the retailer candemonstrate that the offersare not arbitrary, and thatsome rationale sits behindthem.7. If your shoppermarketing is being donein-store, it’s being donetoo lateMuch of shoppers’ researchand planning is now being
  23. 23. The Future Shopper22done long before they everreach the store—whether thatstore is physical, virtual orsome combination of the two.The moments of truth tend tohappen outside of the store,even when it is still the point ofpurchase. The consequence ofthis is that shopper marketingneeds to move to where theshoppers are. If your shoppermarketing budgets are stillbeing spent in-store, you areprobably wasting most of them.8. Manage yourintermediariesOne of the results ofdisaggregation—and we haveseen this repeatedly sincethe arrival of the World WideWeb—is that it opens upspaces for new intermediaries.Typically they positionthemselves between shopperand retailer, often as a marketportal. In particular, they tendto accumulate cross-categoryinformation and comparisondata. In a world of consideredconsumption, they can bemore trusted than retailers ormanufacturers. Engage withthem and keep them onside.9. Put a smile on yourshoppers’ faces bysurprising themOne of the recurring storiesin this Future Perspective isthat shopper needs are to alarge extent familiar, but theirexpectations about how theyare delivered are changing.There’s no substitute forputting a smile on yourshoppers’ faces from time totime. This can be anythingfrom the free and personalizedproduct bundled intoSafeway’s ‘Just for U’ offer atany given time, to the ‘pop-upstore’ from the condimentbrand Marmite that appearedin London selling branded teatowels and other homewaresthat are not sold elsewhere.* * *The interaction betweenthe physical and the digitalworld opens up new businessmodels that were impossibleto imagine a generation ago,creating bold possibilitiesfor reimagining retail. Togenerate value, retailers willhave to understand morefundamentally what theirshoppers need and howbest to deliver it. It is an oldchallenge in a new world.The winners will be retailersable to hold both parts of thisparadox in their hands at thesame time, and then put themback together in a new waythat better serves retailers andshoppers alike.Retailersstill need tounderstandwhat theirshoppers needand how bestto deliver it.It is an oldchallenge in anew world.
  24. 24. © 2013 The Futures Company/Kantar Retail. Some rights reserved. 231 The idea of the ‘purchase fish’ was initially developed by Kelly Mooney and Nita Rollins in their book The OpenBrand (2008)2 The Henley Centre/AOL (2004), Brand New World ‘As Shoppers hop from Table to PC to Phone, Retailers Try to Adapt’, NYT December 22, 20124 Darrell Rigby ‘The Future of Shopping’, Harvard Business Review, 2011.5 ‘Use of Smartphones by Bargain-Hunting Consumers is Changing the Customer-Retailer Relationship’,Accenture, December 2010, ‘The Internets New Billion’, BCG, September 2010, Euromonitor International, January 20118 G2/ Today’s Recipe Box Study, April 20109 MMA/Luth Research, Mobile Consumer Briefing, March 201010 Bill Gurley,“Social-Mobile-LOCAL: ‘Local’Will Be The Biggest of the Three”, June 25, 2012. ‘Pioneers on the Move: Rise of Social Commerce’, Altimeter Group, November 2010, Social retail data is from ‘Turning Like to Buy’, Booz&Co, 2011, Retail 2022, Economist Intelligence Unit, 201214 These combine the N-11 (Next 11) countries identified by Goldman Sachs economist Jim O’Neill in 2005 and theCIVETs, identified by Robert Ward of the EIU four years later.15 ‘Diageo Revenue Growth Supported by Premium Brands’, Reuters, February 1, 201316 ‘Asia Pacific Retail: A Decade of Massive Change, With More to Come’, Nielsen, September 201017 Unlocking new sources of growth, The Futures Company, 2012. Evolution of the Family in Europe 2009, Institute for Family Policies, 2000; Doing Better for Families, OECD, April201119 Deutsche Welle World, February 2010.20 Euromonitor, International Statistics, 201121 Retailing Today, March, 201122 ‘Asia Pacific Retail: A Decade of Massive Change, With More to Come’, Nielsen, September 201023 ‘Specialist butchers and bakers breathe life back into the high street’, The Independent, January 2011.24 The Soil Association25 Global MONITOR, The Futures Company, 201126© 2013 The Futures Company/Kantar Retail. Some rights reserved. 23
  25. 25. The Future Shopper24How The Futures Company can helpWith our proprietary knowledge, including Global MONITOR and theGlobal Energies, The Futures Company can help you to understand how key trendsand broader macro drivers are changing in different markets and geographies, andwhat this means for your Future Shopper.Using our Strategic Insight approach, we can help you understand how behavioraround digital and social technologies is changing and how this will shape attitudestowards your category and shopping behavior.Our unique Innovation Offer can help you identify emerging opportunities in yourcategory by looking at the intersection of changing attitudes, changing technology use,wider emerging trends, and changes in the shopper and retail environment.By applying our Database Solutions, we can help you identify future shoppers whoshare similar attitudes and motivations within your own customer and prospectdatabases, enabling precise targeting and relevant messaging to unlock growth nowand in the future.www.thefuturescompany.comHow Kantar Retail can helpRetailing in 2020— Market forces impacting the retail industry are significant, KantarRetail can help retailers and suppliers leverage these changes to identify new sources ofgrowth.Aligning with your retail customers— Understand how retailers are adapting to thefuture shopper’s omnichannel expectations and the ways you can partner with retailersfor success.Evolution of e-commerce— Prepare for the e-commerce challenges ahead—whetherthat is selling to or competing against pure-plays like Amazon, understanding themultichannel strategy of your retail customers, or mapping the size of the prize as yourcategories shifts
  26. 26. © 2013 The Futures Company/Kantar Retail. Some rights reserved. 25CreditsThe Future Shopper was written by Lloyd Burdett, J. Walker Smith and Andrew Curry ofThe Futures Company and Bryan Gildenberg and Steve Mader of Kantar Retail. It wasedited by Andrew Curry and additional research was by Caroline Passmore. Productionwas by Karen Kidson and Tania Conrad. Design by Tania Conrad.The Future Shopper is published under a Creative Commons license: Some rightsreserved. For more information, see The Futures CompanyThe Futures Company is an award-winning, global strategic insight and innovationconsultancy. Unparalleled global expertise in foresight and futures enables us to unlocknew sources of growth through consultancy, global insight, and a range of subscriptionsolutions. The Futures Company was formed through the integration of The HenleyCentre, Yankelovich and, most recently, TRU.The Futures Company is a Kantar company within WPP with teams in Europe, NorthAmerica, Latin America and Asia.About Kantar RetailKantar Retail is the world’s leading shopper and retail insights and consultingbusiness and is part of the Kantar group of WPP. The company works with leadingbranded manufacturers and retailers to help them transform the purchase behaviorof consumers, shoppers and retailers through the use of retail insights, consulting,analytics and organizational development services. Kantar Retail tracks and forecastsover 1000 retailers globally, has purchase data on over 200m shoppers and amongits market-leading reports are the annual PoweRanking survey (USA and China), andIndustry Shopper Study Across Retailers. Kantar Retail works with over 400 clients andhas 20 offices in 15 markets around the globe.
  27. 27. The Future Shopper26The 50-year disruptionA century and a half ago, the growth ofbig cities and the rise of railroad networksmade possible the modern departmentstore. Mass-produced automobiles camealong 50 years later, and soon shoppingmalls lined with specialty retailers weredotting the newly forming suburbs andchallenging the city-based departmentstores. The 1960s and 1970s saw thespread of discount chains [and] big-box‘category killers’. … Each wave of changedoesn’t eliminate what came before it, butit reshapes the landscape and redefinesconsumer expectations, often beyondrecognition.Darrell Rigby, Harvard Business Review, December 20113The Future Shopper26”“
  28. 28. © 2013 The Futures Company/Kantar Retail. Some rights reserved. 27Will Galgey, Global CEOT: +44 (0)20 7955 1818will.galgey@thefuturescompany.comwww.thefuturescompany.comwww. Pattinson, CEO Market InsightsT: +44 (0)20 7031 0272 / +1 617 912