Window on the world of retail How are the tectonic plates between mature and emerging markets shifting? In this session we will see how global players are adapting to local markets and how local retailers are reinventing formats. We will also examine the different roles of technology in developed and developing markets. And we will discover how we can use the experience of real and virtual worlds to change our business models. Speakers: Rodney Fitch, Fitch Global; Rick Brindle, Kraft Foods. Facilitated by WPP.

1. “Window on the World
of Retail”
29th May, 2008

2. Agenda
• A Global Tour of the world of retail
- Rodney Fitch, Fitch Global
• The Collaborative Experience in Virtual Worlds –
- Rick Brindle, Kraft Foods
• Panel: World’s Collide!

3. Window on the World of Retail
• Exploration of what is happening in the real world of
retail
– mature to emerging markets
– global players adapting to local markets
– local retailers reinventing formats
– changing consumer drivers (eg luxury vs value)
– technology changing our world
• Learnings from emerging and enabling eCommerce
technologies
– virtual worlds of social networking and 2nd life
– challenges of convergence between ‘real’ and ‘virtual’
– changes to business models required for future success

4. Panel Discussion: World’s collide
• What are the implications for the future?
• How can we use the experience of the
convergence between real and 'virtual'
worlds to change our business models?

5. Agenda
• A Global Tour of the world of retail
- Rodney Fitch, Fitch Global

6. WINDOWONTHEWORLD

7. WINDOWONTHEWORLD
RODNEY FITCH CBE
rodneyfitch@fitch.com
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8. FOUR PROPOSITIONS…
“…SHOPPING IS THE PURPOSE OF LIFE…..”
“…SUCCESSFUL RETAILING WILL ALWAYS MIRROR THE
SOCIETY IT SERVES…..”
“…THE TECTONIC PLATES OF WORLD RETAILING ARE SHIFTING…..”
“…INNOVATION AND THE CUSTOMER SHOPPING EXPERIENCE
ARE PARAMOUNT…..”
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9. SHOPPING IS THE PURPOSE OF LIFE…
AND DRIVER OF CHANGE…
GLOBAL
…THE WORLD’S TOP 5 RETAILERS HAVE A
COMBINED REVENUE OF $600 BILLION….
MORE THAN THE ENTIRE ECONOMIES OF SWEDEN,
THAILAND AND KUWAIT COMBINED
…THE IKEA CATALOGUE HAS A CIRCULATION OF
110 MILLION - FOUR TIMES GREATER THAN THE
BIBLE
…ONLINE SHOPPING IN THE UK GREW BY 50% IN
2006
…THERE ARE MORE AVON LADIES IN BRAZIL THAN
PERSONNEL IN THE ARMED FORCES (GFK)
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10. WHICH DO YOU PERSONALLY DO TO IMPROVE YOUR SENSE OF WELLBEING?
CONSISTENTLY RANKED AS ONE OF THE TOP FOUR ACTIVITIES THAT IMPROVES CONSUMERS SENSE OF WELLBEING
2007: AVERAGE LEVEL OF IMPORTANCE OF ACTIVITY IN MATURE MARKETS 40% AND 42% IN EMERGING MARKETS
A INCREASE OF IMPORTANCE OF 5% IN MATURE MARKETS AND 9% IN EMERGING SINCE 2003
BRAZIL IN THE TOP QUARTILE
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11. BUT SUCCESSFUL RETAILING MUST ALWAYS
MIRROR THE SOCIETY IT SERVES….
USA MORE CONSERVATIVE, LESS INNOVATIVE, MORE LIFESTYLE DRIVEN
DUBAI A VISION TO BECOME THE WORLD’S TOURISM AND SHOPPING
DESTINATION, WITH MORE AND BIGGER MALLS
UK BECOMING A NATION OF ‘ARMCHAIR SHOPPERS’ WITH ONLINE GROWTH
TWICE THAT OF EUROPE
RUSSIA SHIFT FROM COMMAND TO DEMAND ECONOMY
INDIA BURGEONING SPENDING CLASS,WITH THE WORLD’S LARGEST AND
YOUNGEST MIDDLE CLASS
BRAZIL YOUNGER, MORE ASPIRATIONAL CUSTOMERS WILL NEED MODERN AND
COMPELLING RETAIL
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12. …A HISTORY OF RETAILING IN SIX IMAGES
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13. “…THE TECTONIC PLATES OF
WORLD RETAILING ARE SHIFTING…”
REAL
MATURE EMERGING
MARKETS MARKETS
VIRTUAL
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14. THERE IS NO WINDOW…THERE IS NO WORLD.
RATHER THERE ARE
MANY WINDOWS AND MANY WORLDS…
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15. “…THE TECTONIC PLATES OF
WORLD RETAILING ARE SHIFTING…”
MATURE MARKETS EMERGING MARKETS
CONSOLIDATION CHOICE
TECHNOLOGY ORGANISED SECTOR
NEW FORMATS GLOBALISATION
SUSTAINABILITY TRAINED STAFF
PRO-ACTIVE CONSUMERS ASPIRATIONAL CONSUMERS
TRANSFER BRAND EQUITY LOCAL PLAYERS
LUXURY (EXCLUSIVITY) LUXURY (STATUS)
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16. “RETAIL PIONEER AMAZON EUROPE IS “THE MALL IS FULL OF ENERGY. IT’S FULL OF
PLANNING TO AQUIRE A MAJORITY STAKE IN LIFE…THERE YOU CAN DO ANYTHING YOU
LOVEFILM - WHO ITSELF CONTROLS 70% OF WANT…AT HOME IT’S RESTRICTED AND
THE INTERNET RENTAL MARKET” (MINTEL 2008) BORING” (TECHNOPAK, INDIA 2007)
MATURE EMERGING
CONSOLIDATION… CHOICE…
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17. “BY 2011 70% OF THE UK SHOPPING “…WITH 95% OF INDIA’S RETAIL SALES HELD
POPULATION WILL REGULARLY BE BUYING BY THE TRADITIONAL SECTOR THINGS HAVE
GOODS ONLINE COMPARED TO JUST OVER TO CHANGE...”
50% OF CONSUMERS TODAY (PRICE
WATERHOUSE COOPER LLP 2008)
MATURE EMERGING
TECHNOLOGY… ORGANISED RETAIL…
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18. “TO INCREASE MARKET SHARE AND “IN RUSSIA TOTAL RETAIL SALES ARE
ATTRACT NEW CUSTOMERS BEST BUY EXPECTED TO DOUBLE BY 2010 FROM
CONSTANTLY EXPLORE NEW IDEAS AND $245BN TO $526BN - MAKING IT THE 9TH
RECENTLY DEVELOPED THREE NEW LARGEST RETAIL MARKET IN THE WORLD”
FORMATS - STUDIO D, ESCAPE AND EQ (MINTEL 2007)
LIFE” (BEST BUY)
MATURE EMERGING
NEW FORMATS… GLOBALISATION… a
Q
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19. “88% OF UK CONSUMERS MENTIONED AT “INDIA: 45M GRADUATE POPULATION YET
LEAST ONE ENVIRONMENTAL ISSUE OF 700M DEPEND ON AGRICULTURE”
CONCERN AND 60% AT LEAST ONE (DEMOS 2007)
ETHICAL ISSUE”
(MINTEL GREEN & ETHICAL CONSUMERS 2007) “THE GROWING ORGANISED SECTOR WILL
NEED 10M TRAINED STAFF BY 2010”
(TECHNOPAK, INDIA 2007)
MATURE EMERGING
SUSTAINABILITY… TRAINED STAFF…
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20. “H&M’S FACEBOOK GROUP PROMOTING ITS “I DON’T THINK THERE IS A SINGLE PERSON
RECENT FASHION AGAINST AIDS CAMPAIGN WHO DOESN’T LIKE SHOPPING…”
BOASTS 27,568 FRIENDS WORLDWIDE” (TECHNOPAK 2007)
1 IN 10 PEOPLE ON THE PLANET ARE UNDER 25
AND LIVING IN INDIA (CNN)
MATURE EMERGING
PRO-ACTIVE ASPIRATIONAL
CONSUMERS… CONSUMERS…
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21. “OWN LABEL BRANDS ARE FUELLING THE “OF THE US $30 BN TO BE INVESTED IN
GROWTH OF THE EU FOOD RETAIL MARKET, ORGANISED INDIAN RETAIL OVER THE NEXT
EXPECTED TO RISE 36% IN A DECADE TO 4-5 YEARS, US $20 BN WILL COME FROM
€1,063BN BY 2010” (MINTEL, 2008) INDIAN BUSINESSES” (TECHNOPAK, INDIA 2007)
MATURE EMERGING
TRANSFER OF EMERGENCE OF
BRAND EQUITY… LOCAL PLAYERS…
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22. “£135K THE COST OF A PRIVATE SPACE “THE GLOBAL NUMBER OF THOSE CLASSED AS
FLIGHT IN 2012 ” (THE TIMES) WEALTHY (WITH PORTFOLIOS OVER €1M), HAS
DOUBLED OVER A DECADE”
(WORLD WEALTH REPORT 07)
“A PRADA HANDBAG IS EQUAL TO ABOUT HALF
THE ANNUAL INCOME OF THE AVERAGE
BRAZILIAN HOUSEHOLD”
MATURE EMERGING
RETURN TO EXPLOSION OF
EXCLUSIVE LUXURY… LUXURY STATUS…
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23. INNOVATION AND THE CUSTOMER SHOPPING
EXPERIENCE ARE PARAMOUNT…
REAL
MATURE EMERGING
VIRTUAL
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24. THE CUSTOMER SHOPPING EXPERIENCE
NEW FORMATS - POPUP
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25. WINDOWONTHEWORLD ILLY, VENICE

26. WINDOWONTHEWORLD STARBUCKS SALON, NEW YORK

27. WINDOWONTHEWORLD MOTOROLA RED, CHICAGO

28. THE CUSTOMER SHOPPING EXPERIENCE
NEW FORMATS - TARGETTED OFFERS
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29. PLASTIC SURGERY - SINCE 500 AD
TRIGONOMETRY - SINCE 700 AD SPACE OBSERVATORY - 1727 BC
WINDOWONTHEWORLD TESCO, LONDON CARREFOUR, BUENOS AIRES

30. WINDOWONTHEWORLD CARNIVAL, DALLAS

31. WINDOWONTHEWORLD COS, LONDON

32. THE CUSTOMER SHOPPING EXPERIENCE
NEW LUXURY
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33. WINDOWONTHEWORLD HARVEY NICHOLS, ISTANBUL

34. WINDOWONTHEWORLD PAUL SMITH, LONDON

35. WINDOWONTHEWORLD PAUL&JOE/TARGET, MELROSE AVE LA

36. THE CUSTOMER SHOPPING EXPERIENCE
ONLINE
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37. WINDOWONTHEWORLD NET-A-PORTER WEBSITE

38. WINDOWONTHEWORLD AMAZON WEBSITE

39. PLASTIC SURGERY - SINCE 500 AD
TRIGONOMETRY - SINCE 700 AD SPACE OBSERVATORY - 1727 BC
WINDOWONTHEWORLD DELL WEBSITE COURTS, SINGAPORE

40. FOUR THOUGHTS…
NEW RETAIL RITUALS
GENEROUS BRANDS
THE C2C COMMUNITY
FREE’TAIL
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41. ™
RITUALS
CONSUMERS ARE SEARCHING FOR A MORE STRUCTURED
SHOPPING EXPERIENCE AND EQUALLY RETAILERS AND BRANDS ARE
LOOKING FOR WAYS OF CREATING MARKERS IN PEOPLES LIVES
THAT HELP TO BUILD LOYALTY AND A REASON TO RETURN.
EXPLORING NEW RETAIL RITUALS CAN BEGIN TO ESTABLISH A
COUNTER POINT TO THE INCREASING NUMBER OF SALES BEING
MADE ON LINE, PROMPTING A VISIT VERSUS WAITNG FOR
CONSUMERS TO ARRIVE.
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42. WINDOWONTHEWORLD SELFRIDGES - EAT MY CITY

43. ™
GENEROUSBRANDS
IN A WORLD WHERE CONSUMERS ARE BECOMING INCREASINGLY AWARE OF
‘MEAN’ BRANDS FITCH HAS BEGUN RESEARCHING THE CONCEPT OF GENEROSITY.
GENEROUS BRANDS ARE THE ONES WHO SHOW MORE OF A HEARTBEAT, TAKE
THE FIRST STEP AND DISPLAY A GENUINE UNDERSTANDING OF THEIR
CUSTOMERS 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.
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44. Subject: The Commoditization of the Starbucks
Experience
As you prepare for the FY 08 strategic planning process, I
want to share some of my thoughts with you.
Over the past ten years, in order to achieve the growth,
development, and scale necessary to go from less than 1,000
stores to 13,000 stores and beyond, we have had to make a
series of decisions that, in retrospect, have lead to the
watering down of the Starbucks experience, and,
what some might call the commoditization of our brand.
HEARTFELT MEMO FROM HOWARD SHULTZ
FEB 14 2007
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45. C2C
COMMUNITY
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46. FROM ‘AVON LADIES’ TO
FRIEND AS SHOPKEEPER
A NEW RETAIL LANDSCAPE
REFERRAL AND SHARING
TRANSACTIONS
FROM FARMERS MARKETS TO
PEOPLE MARKETS
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47. FREETAIL
WHYPAY?
THE ‘PENNY GAP’
Zero Market versus The Rest
ECOSYSTEM MARKETS
THE ‘ATTENTION’ ECONOMY
THE ‘REPUTATION’ECONOMY
‘FREEMIUM’
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48. WINDOWONTHEWORLD

49. INNOVATION AND THE CUSTOMER SHOPPING
EXPERIENCE ARE PARAMOUNT…
REAL
MATURE EMERGING
VIRTUAL
WINDOWONTHEWORLD

50. Agenda
• A Global Tour of the world of retail
- Rodney Fitch, Fitch Global
• The Collaborative Experience in Virtual Worlds
• - Rick Brindle, Kraft Foods

52. The Collaborative Experience in
Virtual Worlds
Rick Brindle, Kraft Foods

53. Agenda
• Kraft.
• Emerging technologies changing OUR world.
– Recent, Current, Future
• How our industry should participate.

54. One of Best Brand Portfolios in F&B Industry
40+ Brands over 100 years old
50+ Brands over $100 million
9 Brands over $1 billion

55. Kraft’s Key Growth Platforms
Health &
Wellness Snacking
Premium Quick Meals

56. Kraft eSales
Serving Two Major Constituencies
eTAILERS GROCERY
&
RETAILERS eCOMMERCE
(since 1997)

57. In the U.S., “Grocery
Shopping”
ranks 24th out of 25
in terms of “Desirability”
of weekly household
tasks…
…lower than “going to
the dentist”!
Source: Supermarketguru.com

58. EU – “Shoppingas a a chore”
View Shopping is Chore
43.6
34.5
Source: Verdict

60. By the first half of last year, sales were
£748 million…
…up 35% versus 2006…
…profit up 62%!
Receives over 300,000 orders each week.
Internet sales contributes ~ 4.2% of
Tesco's group profits and 3.1% of sales.
Customer base of more than one million
active users and up 20%!

61. e-Grocery Consumer is Too Important to Ignore!
Busy Suburban Families Connected to the Internet
Spend ~$5k/yr on food
(+25% vs. avg. U.S. HH)
Highly loyal to the home
delivery channel
(~80% share of wallet)
Presence of children is
the single biggest driver
of order size
Source: eMarketer.com

62. Before I go any further, a question…
Are our children going to
Mall
Shopping buy their groceries the
is an
EVENT same way we do?
Grocery
Shopping
Communications? Relationships?
is a CHORE Current Events? Entertainment?
Electronics? Clothes? Cars? Pictures?
Yard Sales? Directions? Information
Gathering? Real Estate?
Investments? …

63. Some Learning’s…
• eBusiness is Business. Forget this and fail.
• Success in eBusiness is defined by
measurable business results
increased sales/reduced costs
improved productivity
enhanced consumer satisfaction/loyalty
• Three Major Factors have Accelerated
Growth in Online Grocery:
1. BROADBAND
2. DEMOGRAPHICS
3. MOBILITY

64. Broadband Penetration – U.S.
Rural Suburban Urban
50%
2/3 of US Web Users are
45%
now on Broadband
40%
35%
30%
25%
20%
15%
10%
5%
0%
ome ome ome ome ome Work
1-H 2-H 3-H 4-H 5-H e&
200 200 200 200 200 Hom
Source: Pew Internet & American Life Project, Feb. 2006
10

65. Broadband Penetration – EU
Netherlands,
> ¾ of EU Web
Denmark and UK
Users are now on
leading the way
Broadband

66. Broadband Penetration – EU
The correlation
between broadband
adoption and online
shopping is 0.86.
Source: Forrester

67. US – Women Dominate!
In 2006, Women
became the largest
user of the Internet.
Our best customer!
The Internet
Generation is
Growing up!
Source: eMarketer.com

68. EU – Woman are closing in!

69. Women use the Internet to…
Shop.
Research future purchases.
Create Community.
Self-Expression.
Share their experiences with
YOUR stores and brands!

70. Mobility
“The device formerly
known as the cell phone.”
The 4th
Screen
Today, you follow the
Internet…
…In the next ten years, the
Internet will follow you.

71. Mobility
In 2006, 25% of the
world’s 2B mobile phones
are 2.5-3G…
…This means they are
broadband enabled.
60% of EU will have 3G
phones by 2010.

72. OBSERVATION
GPS enabled POP!
RU POP Incentives…
– Short Codes
READY? – Mobile Couponing
POP Advertising…
– Video Clips
POP information…
– Amazon’s “textbuyit”.

73. Social revolution meets Technology evolution
Level of Interaction
3D Interaction
Web 2.0
Web 1.0
Time
The Social Web

74. What is a “Virtual World”
Also known as "digital worlds," "simulated worlds“,
“MUVE’s” and "MMOG's“, an interactive simulated
environment accessed by multiple users through an
online interface.
Five Common Features:
1. Shared Space
2. Graphical User Interface
3. Immediacy
4. Interactivity
5. Socialization/Community

75. Virtual Worlds are here to stay
Collaboration
Prototyping
Marketing
Commerce
Innovation

77. Second Life – Fast Facts
Population: >13,000,000
… Tripled since 2/07!
Gender:
Male: 59%
Female: 41%
Source: Linden Labs Monthly Data Report

78. Second Life – Top 10 Countries
1. USA 36%
2. Germany 8%
3. UK 8%
4. France 5%
5. Japan 5%
6. Italy 4%
7. Brazil 4%
8. Canada 3%
9. Netherlands 3%
10.Spain 3%
Total 80%
Source: Linden Labs Monthly Data Report

79. Second Life – Fast Facts
Age Bucket Num (%) Time (%)
13 – 17 1% .5%
18 – 24 23% 15%
25 – 34 35% 35%
35 – 44 24% 28%
45 Plus 17% 21%
35+…49% of Time
59% between 25-44 yrs.
Source: Linden Labs Monthly Data Report

80. Introducing!

82. For the Consumer:
Education, celebration, connection
For the Retailer:
Marketing research, path to future
For Kraft Foods:
Leadership, consumer branding

83. • A supermarket – all Brands invited!
• Interactive CPG packages: nutritional information,
recipes and promotional opportunities
• Virtual samplings
• Kraft Kitchens Cooking Institute
• The Food Forum
• Consumer focus group discussions
• Phil’s Food Club redeem points for rewards
• Monthly e-newsletter builds relationship in
community (events and new products)

85. Why?
1. Build brand equity
2. Provide share and relationship building
services for our valued retailers
3. Generate consumer learning’s via this
emerging media
4. Create an open innovation learning
environment for our customers, the
industry and Kraft

86. Results to Date
1. Build Brand Equity.
– 293mm media impressions in week one.
– Created the “New Product Showcase”
– Created the Maxwell House Coffee Café
– Created the Kraft Kitchen’s Cooking Institute
w/cooking videos on demand.
– Rick’s Wine Cellar -- launched wine pairings list.
– Over 27m visitors since launch.
– Joined “Second Life Residents” face book group

87. Results to Date
1. Build Brand Equity.
2. Provide share and relationship building
services for our valued Customers.
– Created a confidential password driven conference
room for focus group and strategy sessions.
– Created a stadium for open forum discussions food
and grocery retailing.
– Conducted 35 store tours with customer partners
– Exposure to several thousand retailers and
wholesalers via keynote presentations

88. Results to Date
1. Build Brand Equity.
2. Provide share and relationship building
services for our valued Customers.
3. Generate consumer learning’s via this
emerging media
– Provided a forum for over 20 confidential focus
groups and/or associate meetings.

89. Results to Date
1. Build Brand Equity.
2. Provide share and relationship building
services for our valued Customers.
3. Generate consumer learning’s via this
emerging media
4. Create an open innovation learning
environment for our customers, the
industry and Kraft
– Several other cpg manufacturers are involved!
– Kwikee product images is providing 3-D product
imaging to Kraft Foods and other cpg
manufacturers’ participating in Phil’s.

90. Observations & Best Practices
The community is real.
Social responsibility is appreciated and rewarded.
A different environment is welcome.
Being too “corporate” is a risk.
Variety is key.
People will come to the store if there is an event
happening.
There is something dynamic and important
germinating here. It is smart to keep a close eye
and participate where practical.
It is the future and worth learning more about.

91. Conclusion
LET’S
LEARN TOGETHER!

92. Agenda
• A Global Tour of the world of retail
- Rodney Fitch, Fitch Global
• The Collaborative Experience in
Virtual Worlds
- Rick Brindle, Kraft Foods
• Panel: World’s Collide!

93. INNOVATION AND THE CUSTOMER SHOPPING
EXPERIENCE ARE PARAMOUNT…
REAL
MATURE EMERGING
VIRTUAL
WINDOWONTHEWORLD