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Technology Trends In Home Improvement Retail


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This presentation, given at the Fall Conference of the Home Improvement Research Institute, focuses on emerging consumer trends in Home Improvement retail and how technology might help address these.

Technology Trends In Home Improvement Retail

  1. 1. Technology Trends in Home Improvement Retail Presented at Fall 2012 HIRI Conference Winston Ledet – COO 678-279-8252 www.premiumretailsolutions.comOctober 17, 2012
  2. 2. My Background Premium Business Model Winston LedetPremium Retail Solutions - ChiefOperating Officer• Co-Founder of Retail’s Solutions group focused on strategy, analytics and insight• Worked with over 50 current and prospective suppliers• Former Home Depot Merchandising Vice President - Merchandising Strategy and Innovation• Led corporate strategy at Home Depot for three years prior.• Strategic consulting background with McKinsey and Company
  3. 3. Last Year at HIRI Building a Consumer A warning about the future- Across all of retail: Brand. Expand Into Adjacent Areas • Single formats are almost never dominant for more than 30 years Current Playing Field • Almost all major retailers from • Traffic • Conversion 40 years ago are either out of • Share business or in decline • Real Estate location, once a Driving Bottom Line Profitability. strength becomes a burden • The market goes to those who find a new way What does the future look like?
  4. 4. Technology in Home Improvement www.premiumretailsolutions.comRetailers have gained influence over Home Improvement has been a slow followerthe last 35 years in retail technology for most of its history 60% Consumer Share • While the consumer and retail trends are undeniable… • …the approaches to deal with them1978 2012 presented may be very different than the ultimate solutionsMost categories in Home Improvement: • The challenge for1 of the top 5 Brands is “I don’t industry participants isremember” / “I don’t know” to keep working on the trends without locking in to just one solutionTechnology change is a wild card that …however, it rarely moves in acould re-shift the balance of power… straight predictable line
  5. 5. The New Way to shop PRE-TAIL RETAIL Inspiration / Shopping / Consideration Location Browsing & Repurchase / Evaluating Advocate Bond POST-TAIL Use Purchase Consumer actions / Moments of TruthSource: Modified from McKinsey & Co and Coca-Cola Retailing Research Council & The Integer Group
  6. 6. Trends to Watch • Pre-Tail and Post-Tail • Social Media • Search • Content • Retail • Utilizing online sales • On-demand data to shoppers • Showrooming • Video and Photo Insights • Tele-presence Source: IBM Consumer Research
  7. 7. Online Usage in Home Improvement Online resources used to research products or projects in Home Improvement Retailer websites (e.g.,, Retailer Website 50% 18% I type the product or project into a search engine and go to the 42% websites where it directs me Search 20% Product Reviews Product reviews 40% 18% Manufacturer Websites Product manufacturer websites 7% 35% Social Media Social media sites (e.g., Facebook, Pinterest, YouTube, etc.) 27% 9% 18% Home ImprovementHome Improvement Publications Publications focused on / Home Décor or Home Decor 3% Blogs Blogs 18% 2% I do not use any online resources to research Home None 14% Improvement products or projects 20% Other Other 8% 3% Select all sources Primary sourceSource: Premium Retail Solutions Consumer Research, September 2012
  8. 8. Social Media in Home Improvement Ever used social media to learn about or • 38% of respondents said they have used social research anything in HI? media to learn about or research something in Home Improvement • Facebook (80%) is the primary source used Yes, followed by YouTube (58%) 38% • Top uses are get inspired, product reviews, and No, research a project 62% Of those that used Social Media in HI - Of those that used Social Media – Where did they go? How did they use it? Facebook 80% Get inspired 68% YouTube 58% Product reviews 62% Twitter 40% Research a home improvement Pinterest 31% 60% projectGooglePlus+ 28% Know how (how tos) 42% MySpace 18% Share my project ideas with 40% Linked In 17% friends Other 9% Other uses 22% Source: Premium Retail Solutions Consumer Research, September 2012
  9. 9. Engaging & Delivering Content PRE-TAIL How Brands and Retailers Can Participate RETAIL Inspiration /1. Monitor 2. Respond 3. Amplify Shopping / 4. Create Consideration Monitoring Inspire Brand Addressing Issues and answering Connect potential Location with purchasers Awareness campaigns / Deals questions advocates How to (confidence) How the Consumer Shops Shop Browsing & Product Launches Evaluate Repurchase / Evaluating Advocate Purchase Bond Deals / Offers Use Customer Service Foster communities Consumer Insights How to Customer Input Advocate Encourage trial, rating and recommendation POST-TAIL Bond Use Purchase A new lease on life – Brand BuildingSource: Modified from McKinsey & Co
  10. 10. Monitor and Respond www.premiumretailsolutions.comDon’t Abandon Monitor and RespondAnswer QuestionsWatch for fake or derogatory entries
  11. 11. Connecting – Building Trust 1 in 4 Consumers Already Engage in Advocacy Have you ever posted a product review (good or bad) online? Yes, 41% No, 59% Advocacy 40% Building your post purchase interactions with clients of HI shoppers said they often can improve this or always read reviews prior to product purchaseSource: Google – “Zero Moment of Truth” – ZMOT macro study Source: Premium Retail Solutions Consumer Research, September 2012
  12. 12. Inspire Understand the inspiration process for your category. Where will consumers go first? Don’t just rely on the endemic user base on these platforms Post links in twitter feeds, Facebook postings, review responses and product web pages
  13. 13. Encouraging Trial www.premiumretailsolutions.comCreate Awareness Make Offers
  14. 14. Consumer Insights Out of the Lab… …and into the Wild Customer interactions for sales Customer interactions are often linked were separate and distinct from research • Mining review data and social media conversations for issues and latent needs • Surveys • Creating user communities • Focus Groups (Comunispace) and interacting • Copy Tests • Mining trends from social media postings • Crowd Sourcing • Mining POS transactions • Ethnography / Digital
  15. 15. Search Implications For Research and Marketing How and when do consumers research your category? What terms do they search for? Example: The term “Paint Colors” is Can you build those terms into organic searched 2.4M times a month. search? Neither Behr nor Valspar make the Should you purchase terms through a search first page engine?Source: Google Trends and Google Ad WordsSearch - the #2 source of information – are you managing
  16. 16. Content Retailers and aggregators are starved for content – package yours in a way that it can be easily shared and usedBuilding your content What you need• Video is viewed about 1000 • A team and/or agency times more than text focused on creating digital• Simplify the buying process content• Simplify the installation process – • A team or agency focused on build confidence linking content to user• Make it interactive touchpoints (configuration, comments, • A strategy on what platforms linkable…) leverage consumer will best suit your needs stories• Tell dynamic stories – to build your brand – you are a contributor and the editor• Make it easily linkable Superior content allows you to expand your digital footprint
  17. 17. Do’s and Don’ts Do Don’t • Focus on interacting with people not just • Focus on consumer networking sites technology alone if your product is an infrequent • Monitor the traffic on your brand(s) and purchase – who interacts with your answer bad reviews quickly product daily or weekly? • Understand where your target customer is • Put up access points that you are not interacting. What touchpoints you can going to staff and monitor tap into • Assume most of your customers are • Leverage the retailer’s traffic (they are actively engaged on all social media sites. hungry for content) Steer them to your content • Invest in content – especially video • Focus on just one technology/platform • Publish new, meaningful content regularly • Collaborate in your space with other manufacturers to make your content more project rather than product based • Focus on Know-How content • Collect reviews on your site and link to retailers
  18. 18. Online Shopping and Buying Percent of Sales Online Percent who shop online Power Tools 15% Power Tools 39% 9% 30% Lighting 14% Lighting 34% 6% 25% 13% Storage 32% Storage 7% 28% 10% Bath Fixtures 31% Bath Fixtures 4% 25% 10% Faucets 27% Faucets 6% 22% 8% OPE 41% OPE 36% 5% Major Appliances 51% Major Appliances 8% 41% 5% 15% 6% Hand Tools 11% Hand Tools 4% Hardware 16% Hardware 4% 11% 3% 27% 4% Plumbing 26% Plumbing 4% Hard Flooring 51% Hard Flooring 4% 43% 2% Live Goods and… 11% 3% 11% Live Goods and… 3% 27% Millwork 24% Millwork 3% 2% Kitchens 22% 2% 22% Kitchens 1% 8% Electrical 5% Electrical 2% 2% Soft Flooring 13% 13% Soft Flooring 2% 14% 1% Building Materials 15% Building Materials 1% 7% 2% Paint 5% Paint 0% 2012 2007 0%Source: Internal Tracking Survey Huge variability by category
  19. 19. Online Share Can be Very Different Power tools 15% purchased Online Online Outlet Share ($) Other 29% Amazon 31% Harbor Freight Home 2% Depot Ebay.Com Sears 12% 6% 10% Lowes 6%Source: Internal Tracking Survey Know where your category is purchased
  20. 20. What Sells Online • Easily comparable products with clear specs and especially with known brands • Large products that customer will struggle to get home from stores (e.g., grills, patio furniture, riding mowers) • Products with customization or semi- customization • “Long-tail” products – hard to find niche products Open up your catalog to online – Rethink your product for online
  21. 21. Online Shopping and Buying- Takeaways Marketing and Operations: Implications for Research: • Handling the shipping yourself • Understand the online behaviors reconnects you to the consumer for your category (Where, When, What information, Purchase or • Enhance your content with pictures, Research) videos, accurate descriptions, tags to related items, Q&A and answered • Understand where your poor reviews customers shop online • Price shop your online offering (both • What are the barriers to for internal consistency and purchase online competitive purposes)
  22. 22. On-Demand Product Information Categories that customers look up in Have you ever used a Smartphone while store: (Mentions - in order of # of shopping in a Home Improvement store? mentions) Appliances PaintYes, I have used a Smartphone to look Lights, light fixtures 18% up pricing on a product Work Clothes Lumber / Wood FlooringYes, I have used a Smartphone to look Lawn mowers, weed eaters 20% up product reviews Faucets 42% Have Toilets Used Smart GrillsYes, I have used a Smartphone to scan Phone While 22% Tools a QR code shopping Plants, care needed for plants Electronics Yes, I have used a Smartphone for Furniture 16% Doors and windows another use Tool box Bath fixtures No, I have a Smartphone but have Countertopsnever used it while shopping in Home 20% Bathroom Improvement stores Weed eaters Cabinets Vents No, I do not own a Smartphone 38% Railing Columns Fertilizer Source: Premium Retail Solutions Consumer Research, September 2012 Cement
  23. 23. On-Demand Product Information www.premiumretailsolutions.comIn addition to user initiated search, other ways that retailers can deliver information QR Codes Digital Signage and Interactive displays• Fairly ubiquitous • Making a comeback in HI• Retailers have largely taken retail control • Getting to be very big in Best• Lightly used so far (22% Buy and other CE retailers consumers report having • Very hard to maintain and used them in HI*) keep operational• Decentralize the technology • Very expensive Innovation End Caps at investment • Digital kiosks making a Lowes reappearance for wayfinding and “endless” aisle shopping Interactive displays Customer Kiosks at exploding in CE Channel Home Depot
  24. 24. Showrooming Dealing with Showrooming18% of Home Owners It is the wave of the future. Find ways to embrace it and guidereport checking prices online it to your advantage rather than resist HI retail stores Manufacturer: Make sure your brands are on the relevant places customers will search. Integrate your online and in-store pricing Retailer: Insist on your own codes to keep customers in your system When possible get exclusives for the store, even if in name only Try to limit the premium for in-store over online to 5% or less Deliver superior service in store that justifies any premiumHowever, customers who interact with an Collaboration: Romance the product with live demos, customer interactions,associate are 12.5% give your customers a chance to interact with the product Sources: PRS Research, September 2012; GroupM Next study –more likely to purchase in-store “Showrooming & The Price of Keeping Buyers in Store, August 2012
  25. 25. QuantiView Process: Video Capture to Data Analytics Hi-tech Passively Quantify Report cameras collect data behavior insights Set up in store or Passive = silent, Recorded behavior is Multimedia PowerPoint wherever behavior must unnoticed, anonymous quantified using automated report with key insights, be understood and semi-automated charts, graphs, tabular techniques data, highlight footage, Capture natural customer summary and Motion-triggered behavior recommendations Measure pre-determined metrics and new, unexpected High-resolution, 24/7 recording for days, behaviors Key insights have vivid >“Full HD” weeks, ongoing visual proof Collaborate with clients “Open-ended” throughout quantitative Bringing Ethnographic studies to the digital age
  26. 26. STATIONARY CAMERAS Usually combine:wide contextual views & zoom views of key products
  27. 27. Camera View: Freestyle drive-thru (medium) 27
  28. 28. Example: 3 seconds of fill (0:08, no sound) Click to Play Video
  29. 29. Often video captured will lead to shopper insights that may be unexpected 29
  30. 30. EXAMPLES OF FULLY-AUTOMATED MEASURES State of the art video analytics identify every human, record their path as a function of time, and log the info to a database for analysis. In: 1 Out: 0 0:04 0:15 Heat Mapping People Count Across Lines Region Dwell Times Video analytics Boundary lines are drawn on screen Rectangles and parallelograms hardware/software can detect during configuration. are drawn on screen duringand track people, even a crowd of configuration. people at once. As motion (i.e., pixel change) from identified people cross the lines, the The time that each identifiedA curved path line is recorded for “in” or “out” count is incremented person spends in each defined each person, and as the lines depending on the direction of travel. region is logged.overlap, the software makes the colors “hotter”.
  31. 31. Semi-Automated Measures Anything viewed can be measured by QuantiView human analysts using QuantiView software. • Every person entering a defined threshold becomes a record (or row if you prefer). • A screen snip of the person is databased to keep that person’s behavior organized across time and multiple analysts. • Sample measures: – Gender – Product interaction – Age range • Before or after sales assistance – Alone or with others • Which products • Look, touch, both – With, without kids • Time begin/end look, touch products – Display has salesperson or not when arrive • Total products looked at, touched – Time points • Specific actions • Time enter/exit general area – Finger brush overs • Time enter/exit sub-regions – Turn overs (or attempts) – Ingress and Egress – Point out something to companion – Sign interaction – Push buttons, turn dials, press keys • Which signs • Level of attention • Total count of signs noticed
  32. 32. STILL IMAGES Same wide &zoom principle: Full shelf viewplus close-upsof key products
  33. 33. EXAMPLES OF SEMI-AUTOMATED MEASURESAnything viewed can be measured by QuantiView human analysts using QuantiView software. • General condition of shelf • Deviation from planogram • Presence/absence of products Status of Merchandising Displays • Presence/absence of signage (e.g., lit, unlit; obstruction, • Presence/absence of price tags general condition) • Accuracy of price tags • Aisle obstructions Products on • Shelf dimensions hangars # Product Facings ANYTHING SEEN CAN BE QUANTIFIED... INCLUDING THE UNKNOWN. Out of Stocks CAN COORDINATE MULTIPLE PHOTOS OF SAME STORE.
  34. 34. SOME REAL DATA FROM REAL STORES• Snapshots of the LED shelf were gathered in over 100 stores as part of a recent stack-out service. POP Displays Present Socket into 54% Savings Compare Color 15% Temperature Neither 31% Missing Display Bulbs - 0
  35. 35. SOME REAL DATA FROM REAL STORES• Snapshots of the LED shelf were gathered in over 100 stores as part of a recent stack-out service. Empty Facings Empty Horizontal Inches 28%24% 25% Mean = 13.4” Mean = 1.49 Max = 52.4” 6% 3% 1% 1% 1% 0%0 1 2 3 4 5 6 7 8 0 15 30 45
  36. 36. Tele-Presence Where it makes sense What is it • When you are not staffed you are “out of stock” • When you are staffed and traffic is light you are wasting payroll • 30-40% turnover means that you struggle to keep qualified people in-store and low volume stores do not allow for apprenticeship Countertop Sales by Store 900 800 Significant staffing issues Large Specialty Departments: Number of Stores 700 600 in over 1300 stores • Kitchens and countertops • Carpeting 500 400 300 200 • Doors and Windows 100 • Outdoor Power Equipment 0 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 • Appliances Weekly Countertop Sales - TransactionsSource: Premium Retail Solutions Consumer Research, September 2012
  37. 37. Tele-Presence Combating the “Ghost Town Effect” 9 – store test with Cisco at Home Depot • Limited functionality • Requires a lot of initiative by the customer to engage
  38. 38. Traiting and Clustered Assortments What is it? Will it happen? How do you prepare?• Creating clustered • While this is by no means a • Must be doing weekly assortments based on new technology for retail, tracking of sales by store the store trade area Home Improvement has been by SKU demographics slow to adopt • Analytics to look at• Used to drive sales and • It appears that the major productivity of SKUs by minimize dead inventory players are now serious about planogram type implementing this approach• Requires a way to and we will likely see • Need store trade area manage a large number movement consumer data – who of assortments shops there • An understanding on how to add value – not sell in but sell through
  39. 39. Wrap up • What technology is relevant for you depends on how your customer shops • Change is inevitable and seems to be coming faster now in the HI industry than ever before • Technology will not move in a straight line. Instead of big bets in one area, make a few bets in the most promising areas