The document discusses trends in the retail industry post-financial crisis, including changing customer mindsets, new shopping formats like online and multi-channel shopping, and the challenges of differentiation and social media. Retailers must stay relevant to customers who value health, freshness, and sustainability. New shopping modes like online and multi-format stores are on the rise. Developing brands and creating value will require effective use of social media while managing reputational risks.

1. Creating Added Value Post Crisis Trends Clive Woodger, SCG London

2. Customer Mindsets – staying relevant Shopping Modes – formats … multi channel Differentiation – brand development Social Media Challenge Creating Added Value Post Crisis Trends

3. Strategic Consulting Group International Strategic branding and design consultancy. 13 years … 60+ Russian managements We work in the retail, financial, real estate sectors by creating

4. Creating Added Value Customer Mindsets Staying relevant

5. Customer Mindsets Staying relevant – Lifestyle changes Marrying later … Rise of single households Time poor – cash rich er Value ‘ Values’ Freshness … Health … Choice Changes in Society, needs and aspirations

6. Increase Decrease No Change Consumer confidence – Russia = ‘average’ Return of Consumer confidence? International

7. Return of Consumer confidence? International

8. Return of Consumer confidence? Russia

9. Shared Norms for the New Reality “ we live in a world that is becoming increasingly complex and interconnected but also experiencing an erosion of common values and principles”. DAVOS 2011 Opinion poll 2010 … global values for cooperation 40% chose honesty … integrity … transparency 24% chose others’ rights, dignity and views 20% chose the impact of actions on the wellbeing of others 17% chose the preservation of the environment Universal Values?

10. Food Trends – Customer Attitudes Value Health Connectivity Home Dining Fresh Sustainability Energy vs. Relaxation Internationalism

11. Food Trends Value “ Constrained consumers” More for Less pragmatic .. careful… planned shopping Price led but value driven Quality … Choice … Experience … environment / service / process The best quality at the best price A good ‘deal’ … every time you shop

12. Food Trends Health … nutrition food / pharmacy realistic claims – growth of ‘proven’ products

13. Food Trends Connectivity … social media marketing campaigns

14. Food Trends Home Dining … indulgence at home / new products for creative home cooking ‘ eating out at home’ Premium ranges – gourmet and restaurant dishes Budget – cooking from scratch ‘ Ingredient foods’ – less pre-made / packaged Tesco launches City Kitchen range

15. Food Trends Fresh Demand for Freshness Minimal processing, chilled, minimal packaging Food safety Organic products Diet books Increased frequency of shopping trips Highlighting ‘sell by’ dates Organic and Ethical label range opportunities

16. Food Trends Fresh Back to basics – Fruit & Vegetables Less packaged / processed food Smoothies / packaged fruit snacks

17. Food Trends Sustainability … environmental / ethical / social … People … Planet … Profit Consumers want to feel ‘good’ about what they buy - how was it procured, grown, reared, caught, manufactured, transported, by who, how? Emergence of the ‘principled consumer’ Did it harm the environment, people, communities? Was it ‘Fair Trade’ CSR industry - differentiated by values ‘ Look behind the label’ …. M&S

18. Food Trends Energy vs. Relaxation

19. Internationalisation Regional / Locally sourced Ethnic / Fusion cuisine “ Now all fresh meat at Morrisons is 100% British”

20. Creating Added Value Shopping Modes - Formats Multi Channel

21. Shopping Modes - Formats shopping centres hypermarket supermarket convenience stores discounters online “ MULTI CHANNEL”

22. Shopping Centres Trends …. Food Experiences & Services Crisis exposed weak developer strategies In UK 60% of centres in trouble, only super regional will survive? What lessons for Russia?

23. Shopping Centres “ the city centre at your doorstep” Kaleidoscope Tushino, Moscow

24. Hypermarkets More than functional warehouses – providing services and non food as lifestyle pit stops and community destinations Choice Price Services Lifestyle pitstops /centres - ‘everything for your life’ big was better? Retail theatre … events / workshops / parties

25. Supermarkets “ making shopping a pleasure” Balancing convenience, quality and experience Range – focused to local catchments … demographic … ethnic More space for deli and fresh produce Food to go / Cafes Services – financial, mobile phones, … Sales densities vs better environments

26. Supermarkets “ making shopping a pleasure”

27. Convenience Stores “ my place” Near to the customer … work or home Baskets not trolleys Coffee cafes - takeaways “ Marks & Spencer struggle to keep up with demand for wine by the cup concept” Open … 7am to 11pm

28. Discounters “ quality repositioning”

29. Online “ total convenience … to your door” According to sales data collected through the UK’s leading website MyVoucherCodes.co.uk, Tesco enjoys the majority share of online grocery shoppers, with 41% of supermarket sales through Tesco.com, compared to 27% via Asda.co.uk

30. Online “ total convenience … to your door … to your store”

31. 2010 HIGHLIGHTS Gross sales 2010: £551m Average order value: £112 EBITDA: £16m Still loss-making after 10 years Market cap: £1.13b 2010 HIGHLIGHTS Owned by amazon.com Only ships non-persihable, household goods and office supplies Sales $10m OCADO = New webvan.com … Amazon … What is the difference? 2000 2001 2004 2006 2007 2010 Founded, first distribution agreement with Waitrose Deliveries began First automated conveyor warehouse 50’000 orders delivered in a week EBITDA positive for first time 100’000 orders delivered in a week 2011 IPO, valued at £1bn Trades above IPO price for first time 1997 1999 2000 2001 Founded, $50m of seed capital raised Deliveries began $40m in annual sales, average order value $81 Bankruptcy $800m in accumulated losses IPO valued at $600m

32. Customers will shop through various platforms and formats – supermarkets, convenience stores, farmer’s markets or online. Tomorrow’s sector winners can’t ignore - customers will demand the best possible experience. We b grocery sales will increase to 9.5 billion pounds ($15 billion) by 2015, from 4.8 billion pounds this year. More 18-to-34 year-old shoppers are moving online and wider delivery coverage means sales have the potential to grow “significantly.” The Internet will account for 5.2 percent of total grocery spending in five years, up from 3.2 percent now. (IGD). In 2010 total retail spending was up 1%, online retail spending up 15%. CONVENIENCE + VALUE will fuel the online food sales. OCADO = New webvan.com ? What is the difference? The difference is structural shifts in the society and higher acceptance of online shopping

33. Multi Channel “ How to grow your business in a low / no growth industry” City … Supermarket … Convenience … Hypermarket … Online … now towns!

34. Multi Channel UK grocer challenge Intense competition … near market saturation Slow growth … rising taxes … higher inflation Grow by stealing market share from rivals … enhancing proposition … adding space (better to cannibalise sales than lose to rivals!) Race for space – but diminished site availability Need for hypermarkets lessening – growth of convenience stores and online UK petrol price increase – more local shopping Leverage of multi-channels – click & collect kiosks … direct catalogues Non food needs more space – extensions & mezzanines More services and facilities … health, finance, travel

35. Brand Experience CUSTOMER EXPERIENCE BRAND REPUTATION word of mouth, sms… advertising, direct marketing web site, social media, twitter, facebook promotional publicity posters, street signs … collateral … bags, cards, leaflets assurance, memories reminders, triggers, after service … customer journey… anticipation … moments of truth first vistas, approach, process, layout, environment, products, staff, facilities, exit experience … Managing the Process – Physical … Human … Technical coordination … consistency … control … Brand Touchpoints Awareness Promise Customer Journey Visit Afterglow Satisfaction

36. Touchpoint Synergy Food Retail Identifying opportunities … solutions ‘ Customer Journey’

37. Touchpoint Synergy People ‘ Our people make the difference’

38. Creating Added Value Differentiation Brand Development

39. Differentiation Convenience Products Service Experience Culture Why are you first choice? Brand Development - Image & Reputation “ Added Value”

40. Marketing and Communicating ‘added value’ Using media, activities and events to reinforce tangible and emotional attributes … head and heart triggers.

41. Outdoor advertising Press Radio T.v. Web banners Web search engines Talking ‘at’ ATL Talking ‘to’ BTL ‘relationship ‘ marketing Direct mail Email Printed media through database … Personal contact Events / road shows ‘ Brand Awareness’ Mass Audience Difficult to measure benefit Defines / triggers purchase Targeted Audience Easier to measure benefit / outcomes Differentiation - Marketing Methods & Media

42. Differentiation - Marketing Social Media Challenge ‘ Awareness’ ATL Individual needs ‘triggers’ action BTL ‘ Database Knowledge’ Target customer groups information / aspirations Customer Price comparison sites Social media Opinions Shared experiences

43. Differentiation - Marketing - Challenges Savvy Customers - Product Reviews ‘ To buy or not to buy?’

44. Differentiation - Marketing - Challenges Comparison websites

45. Differentiation - Marketing Email marketing – customer dialogue ‘immediacy – relevance’

46. Differentiation - Marketing Brand Reputation … Equity - P.R. Challenge International Benchmark – credibility crisis … Inept corporate governance? TESCO FISH FIGHT When ‘sorry’ is not enough … ‘ Damage limitation’

47. Differentiation - Marketing - Sponsorship Corporate Imaging’ Who gets the benefit? Cynical endorsement marketing or mutual reputation enhancement

48. Differentiation - Marketing Discounter repositioning creating quality credibility

49. There is no such thing as loyalty … you are as good as your last transaction / customer experience Challenge - loyalty programmes not just cards Transparent mutual deal - we really reward you - we learn about you - we can serve you better. It has to be relevant, clearly worthwhile, proactive. Role Model - Tesco ... Increased investment ... Key factor in success … Differentiation - Marketing Customer loyalty – wishful thinking? Hard to ensure loyalty of a fickle, frugal customer! Retailer or Partner card?

50. Tesco Tesco now has 16 million active Clubcard holders in the UK, compared to 11.7 million people who have a Barclaycard. Tesco has earmarked further investment on top of the £150m it pledged when it re-launched the Clubcard. iPhone, BlackBerry, Android, Ovi applications + Asda Invests in new TV marketing campaign Improved likelihood to shop Created better ‘my kind of supermarket’ perception … and launched own T.V. channel on YouTube ‘saving you money TV’ Differentiation - Marketing – Strategy Different investments

51. Differentiation - Marketing - Private Label ‘ More for Less’ … Something Different A key retailer differentiation strategy … Obvious growth potential with Russian mindset changes Less status conscious - more acceptable ... for anyone … democratic Less brand loyalty - consumers more likely to switch Demand for a bargain - need value for money with economy pressures Trading Up - psychological requirement to treat yourself - premium own brands e.g. Tesco Finest Variety and Choice - new products / ingredients / flavours … Organic and Ethical - retailer label ranges & opportunities

52. Differentiation - Marketing & PR Creating awareness … desire .. reputation Image development Marketing – promises … promotions ... events ‘ what you say about yourselves and offers’ … billboards, T.V., radio, themed promotions / activities … Reputation development Public Relations – corporate relationships, events, messages / crisis management .. . … Image and reputation ‘is what people say about you’ Marketing and P.R. activities and audiences are now symbiotic – social media merges B2B and B2C communication Traditional Today

53. Creating Added Value Social Media Challenge Staying relevant

54. Social Media Challenge Creating a ‘joined up’ social media strategy

55. Social Media Challenge Customer Connectivity not what retailers say … customers listen to each other ... iPhones, wifi, … food forums etc “… there are 59.7m internet users in Russia, 42.8% population” (June 2010) 61.9m people will use the internet in Russia by 2013” eMarketer “ Russians are the heaviest social networkers worldwide in terms of time spent per user” eMarketer

56. Internet Transparency Software Technology who is targeting who? Software technology can track and interface with customers through loyalty cards, touch screens and phone apps … But, …. consumers can use technology to create instant damage or enhancement to your brand – cut and paste communities – Facebook, fanclubs, Tweeters, YouTube http://www.adturds.co.uk/tag/sainsburys Brand demolition! Social Media Challenge

57. Customer dialogue – ‘the good’ Sainsbury Twitter … ‘almost’ real time response to ideas and complaints. Waitrose Forum 3500 people viewed single chat about a food recipe. 24x7 customer service. Social Media Challenge Not just advertising!

58. Managing reputations - ‘the bad’ 556,308 fans … “ 4000 chavs a year die from tesco cheap booze. Every little helps” Tesco had to pull the plug on an unofficial Facebook group of 2000+ called 'Tesco employees could rule the world’ where staff abused their customers. Social Media Challenge

59. Aldi USA Aldi “hate” sites … Live Aldi Twitter 1,614 followers in Germany 4,615 Australia Social Media Challenge

60. Russia Social Media Challenge Twitter – 3,514 followers 'enjoy the taste of our new cereal' Facebook - Russian winter campaign, 3,295 people like this Perekrestok now have active Twitter and Facebook pages.

61. Black PR – Instant ‘cut and paste’ Social Media Challenge

62. CUSTOMER EXPERIENCE BRAND REPUTATION word of mouth, sms… advertising, direct marketing web site, social media, twitter, facebook promotional publicity posters, street signs … collateral … bags, cards, leaflets assurance, memories reminders, triggers, after service … customer journey… anticipation … moments of truth first vistas, approach, process, layout, environment, products, staff, facilities, exit experience … Managing the Process – Physical … Human … Technical coordination … consistency … control … Brand Touchpoints Creating Added Value … A chieving a first choice Brand Experience Awareness Promise Customer Journey Visit Afterglow Satisfaction

63. Creating Added Value … Achieving an effective management organisation operations real estate buyers IT communications human resources management procurement sales Brand experience – for customers and employees Departmental activities / functions marketing logistics finance Marketing Department collaboration? Teamwork = Synergy Store Workplaces Service Internet

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