The Future of Shopping

AKA: The Toughest Race on Earth

Gary Orosy, O&CO

March, 2013

Topics

• The Premise

• The Race is On!

• Stage 1: Future Shopper Types

• Stage 2: The Customer’s Equipment

• Stage 3: The Retailer’s Equipment

• Who Will Win?

THE PREMISE IS SIMPLE

THE SOLUTION IS COMPLEX

Up until very recently, shopping was a

common experience, shared by all

Everyone went to a store

and got their stuff

But now multiple

technologies are shape-

shifting the marketplace

…folks are getting their

stuff in different ways

This development has started “the greatest race on earth”

THE RACE IS ON!

The race is on…two groups of contestants

The Customer

A customer wants to:

Make better decisions,

Save time,

Live better

The Retailer

Retailers want to:

Acquire more customers,

Increase lifetime value,

Make more money

For customers/shoppers, the race is for time

Source: TimeUse Institute, 2011

Weekly Time Allocation for Grocery Shopping

33 to 36 hours/year,

almost a complete work

week

For retailers it is about the prize

To win the shopper’s heart, mind and

pocketbook…is a big prize for retailers

How big is the prize, you ask?

Total US Retail Sales

$4.4 Trillion Source: Department of

Commerce, December 2012

Total Global Retail

Sales

$14.3Trillion Source: Canadean, 2011

Total US GDP

$15.1 Trillion Source: The World Bank

Group, December 2012

Total Global GDP

$67.3Trillion Source: CIA World Fact

Book, 2012 Est.

/

/

= 29%

= 21%

But…what it takes is not easy

Retrofitting an industry:

HUGE technology integration issue +

new, smart supply chains =

multiple options for purchase and

delivery

That is why it is the toughest race in the world

The Antarctica Desert Race:

One of the official “four” desert races in the world, but

clearly the toughest.

Antarctica is the great last desert - a polar region with little

precipitation, no lakes and no rivers.

Fifteen competitors completed 250 kilometers – 168

miles in three locations: Esperenza, Deception Island

and King George Island.

Competitors are delivered to each stage by zodiacs.

Equipment must be transported in waterproof bags

Pretty much analogous to the toughest sport race in the world

Retailer: what does this have to do with me?

• Are you one of these five brands…as researched by Forbes,

2012? Customers were asked, “which will be defunct?”

Major problem…

Here’s where retail buyers live Here is where the race is run

Market conditions for success:

•Affluent customer population

•Low unemployment, deflationary

economy

•Pursuit of luxury goods and

perception of better lives

Market conditions for success:

•Thoughtful customers chose products

carefully

•Economic conditions can be

unpredictable and shift geographically

•Customers are value-sensitive and

SMART

Welcome to the future of shopping

• It’s the greatest race of all time

• For the biggest prize on the planet

• A zero-sum game

• Winners will take home the entire prize

• Losers will be in line at the soup kitchen

RACE: STAGE I -- ESPERANZA

FUTURE SHOPPER TYPES

ESPERANZA BASE

Esperanza (Spanish "Hope Base") is located in Hope Bay,

Antarctic Peninsula. It is one of only two civilian settlements on

Antarctica (the other being Chilean Villa Las Estrellas)

From the data, change in shopping

approach is underway

Source: TimeUse Institute; projections are for further trends in the same direction

Shoppers shift to use time to research

and learn about lifestyle solutions

How customers research solutions

50% of consumers spend 75% or more of their total shopping time

conducting online research.

– From 2010 to 2011, these numbers doubled!

Other findings:

• 1 in 3 shoppers (34%) spends a few days conducting research about important

products such as computers, appliances, and TVs before purchase.

• More than 4 in 10 of shoppers (44%) start online product research process with

a search engine.

Source: Hubspot, 2011

Customers are forming new shopper segments

Four types of shoppers are solidifying their behavioral

affinity or lack thereof for the experience…

Interest in Shopping

Val

ue

of

Tim

e Bankers

Savers Splitters

Investors

High Low

High

Definitions – How customer segments are defined…

• Time Bankers: highly value the time they would normally spend shopping to

do other things of interest to them. This category is growing.

• Time Savers: know they can “order online or automatically” and not have to

trundle off to a brick and mortar, but will do so when necessary. This segment

is growing.

• Time Splitters: buy everything they can automatically (toilet paper, toothpaste,

etc.) and shop only for those items of significant interest or investment. This

segment is forming and is rapidly developing.

• Time Investors: “we like to shop and shopping is what we do” types who enjoy

the experience…this segment is declining and is the source of growth for other

segments

STAGE II: DECEPTION ISLAND

THE EQUIPMENT OF CUSTOMERS

DECEPTION ISLAND

The derelict hangar

The destroyed British base

Remains of the whaling

station’s boilers

What shoppers “pack”

Some say in a few years retail stores will exist

for a "touch and feel" experience, but no actual

sales.

By Alejandro Gonzalez, USA TODAY

The convergence of smartphone technology, social-media data

and futuristic technology such as 3-D printers is changing the

face of retail in a way that experts across the industry say will

upend the bricks-and-mortar model in a matter of a few years.

Customers are armed to shop >>

With an invaluable tool for shopping

Global shoppers have access to Internet resources

Smart devices as fashion statements

Project Glass. Interactive glasses superimpose virtual data onto real-world environments. Deeply integrated to Google’s other services—such as Google Maps, Google +and Google Talk (Snap a picture with the built-in camera, for instance, and you can share it with your Circles instantly.) Whether you see the glasses as bane or boon depends on where you stand on privacy. Until you turn them off, you can give up any illusion of solitude—you’re plugged into the hive mind all day, all the time.

Why not shop at home?

• Samsung Galaxy Beam projects

images

• Within years these could be

immersive, such as like being in-store

• Interactive functionality allows for

product examination – opening

package – and “touch ordering”

Why not just print it out at home?

The Urbee is the

world’s first totally

“printed” car

Strong as steel, half

the weight

What’s in your printer ink supply? Food ingredients by chance?

Why Leave Home? Fate of brick and mortar?

Within 10 years, retail as we know it will be unrecognizable, says Kevin

Sterneckert, a Gartner analyst who follows retail technology.

Big-box stores such as Office Depot, Old Navy and Best Buy will shrink to

become test centers for online purchases. Retail stores will be there for a

"touch and feel" experience only, with no actual sales.

Stores won't stock any merchandise; it'll be shipped to you. This will help them

stay competitive with online-only retailers, Sterneckert says

STAGE III: KING GEORGE ISLAND

THE EQUIPMENT OF RETAILERS

KING GEORGE ISLAND

In the mid-1990s Patriarch Alexius II of Moscow gave his

blessing for this audacious project. The church was

constructed in Russia and transported to its present

location. One or two monks from Troitse-Sergiyeva Lavra,

considered the most important Russian monastery as it is

the spiritual center of the Russian Orthodox Church,

volunteer to man the church year-round.

Big data = Competitive advantage

Companies that have taken

on big data initiatives have a

4 percent greater rate of

customer growth year-over-

year than their counterparts

Retailers appeal to specific customer needs

"The first 15 years of online

shopping was about making it

easier for people to find and

purchase items they were

looking for," says David Fisch,

director of platform partnerships

at Facebook, which is working

closely with retailers.

"Now, it's about helping you

find what you may not know

about, based on your social

(media profile)."

Big Data: making stores smarter Merchants know what you plan to buy

next.

Target combs shopping data via

purchases, e-mail, activity on Target.com

accounts and more to determine which

customers are pregnant, so it can sell

goods popular to them such as orange

juice

Target spokeswoman Molly Snyder

acknowledges it uses "research tools that

help us understand guest shopping trends

… (but) we take our responsibility to

protect our guests' trust in us very

seriously."

Enhanced store experience with AR

Augmented reality technology adds a visual layer of information on top of

surfaces such as a mirror.

AR displays are being tested to show video a curved wall at the NASCAR

Museum and in Charlotte within subways and airports.

AR: Intel’s magic mirror

Parametric technology

simulates body type and how

fabrics fit — based on weight,

height and measurements.

A digital fitting room.

Store of the future, new formats

Stores will become more

theatrical, more immersive,

and more of a life experience

rather than simply a place to

get something

Selling products will be

selling a good time, a

lifestyle."

Store layouts = Competitive advantage

Apple applies for patent on centralized floor plan invention

The patent filing, named "System and

method for planning layout of a retail

store," combines a number of

interactive features such as dynamic

product displays, floor plan blocking

and a centralized management system

ensuring customers have a consistent

experience when visiting any Apple

Stores in the world

The core of the patent filing is a

central server that mete interpret data

and manage dynamic product

signage.

Alternative Store Formats Mattel, WalMart test virtual pop-up store in Canada

QR code-based shopping

experience for commuters

and gift-givers. Located in

the PATH, Toronto's

underground walkway, the

virtual toy store will run for

four weeks

“Smart Shelves” Shelves That Talk Back

Retailers have begun embedding near field

communication (NFC) chips, quick response (QR)

codes, or other interactive enabling technologies.

Technologies such as smart lamps from

Massachusetts Institute of Technology's Media Lab

users will be able to access a trove of relevant

information about a product, without a mobile

device.

Smart-lamp technology senses when a user has

picked up a product from a shelf and can project

images and interactive video onto the shelf (where

a normal, paper tag once was).

Each lamp has its

own internet

address

Shopping carts will become your NBF

Carts programmed to understand shopper buying

patterns.

Reveals the speed of the shopper, how long it

takes to make a selection, preferred route, and

order in which items are placed in the cart.

Equipped with a GPS, plugs into the

supermarket’s mainframe computer, making it

possible to pinpoint, within inches, exactly where

the shopper is, all the while building up a

personal shopping profile.

Shopper is promised specially customized

discounts, available only to them.

Store Service Robots Carnegie Mellon University

AndyVision — a robotic inventory system — takes the form of

an autonomous robot patrols and scans the aisles and shelves.

The robot generates a detailed aisle/shelf-level interactive store

map that is displayed on an in-store digital sign for customers to

browse the virtual world of the store using gestures on a touch

screen interface.

Store staff doesn’t always know where all of the items are

located.

Real-time product location and inventory information puts

product info into shoppers' hands as well as store staff's hands."

VR Codes embed additional information VRCodes, Viral Spaces, MIT Media Lab

Envision a world where inconspicuous and unobtrusive

display surfaces act as general digital interfaces which

transmit both words and pictures as machine-

compatible data.

VRCodes present the design, implementation and

evaluation of a novel visible light-based

communications architecture based on undetectable,

embedded codes in a picture that are easily resolved by

an inexpensive camera.

This design of a visual environment rich in information

for both people and their devices

Indoor navigation Meridian "glowing blue dot" feature

Macy's 150,000 square-foot flagship store in New York

City.

Meridian's turn-by-turn navigation system at Macy's.

Shoppers get utility to get around in stores,

Retailers send targeted offers to them based on where

they are standing.

In 2-3 years out indoor as big as outdoor GPS

Is this the store of the future?

Tesco has landed 50% share of

the market for food ordered on

the web.

The highly-automated, 115,000

square foot warehouse aims to

cover a catchment of 980,000

registered households

A "virtual store“, with no

customers.

WHO WILL WIN?

Who will win? Customers first and foremost will use their shopping time they way

they want

Retailers who cater to the four dominant shopping behavior

segments will appeal to shoppers

Within each segment there will be winners who adopt the

technologies that most thrill and super please their

customers…some of these will be bricks and mortar but more and

more so, virtual models will prevail

The OmniChannel Retailer Winning retailers interact through countless channels—

websites,

physical stores,

kiosks,

direct mail and catalogs,

call centers,

social media,

mobile devices,

televisions,

networked appliances,

home services, and more.

By the way, here’s the race end…

Don’t run into a Lion Seal,

they bite!

You can tell by the

inscription on the

Cairn stone