ACHIEVING TOTAL RETAIL SUMMARY OF PWC GLOBAL MULTICHANNEL SURVEY
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Advisory Consulting
Achieving Total Retail
Summary of PwC Global
Multichannel Survey
Strictly Private
and Confidential
February 2014
Agenda
Page
1 With you today 1
2 Introduction 3
3 Key messages and implications 6
4 Russian retailers and Total Retail 20
Section 1 With you today Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014 PwC 1
Section 1 – With you today
Natalia Kozlova Martijn Peeters David Kovacic
Partner, Tax Services, Retail & Partner, Consulting, Retail and Director, Consulting retail and
Consumer Industry Leader Consumer products consumer products
• Natalia joined PwC in 1997 and • Martijn leads the Retail & • David is a retail specialist in
currently leads the Retail and Consumer Consulting practice in Moscow consulting practice
Consumer practice in Russia Moscow • He has over 8 years managerial
• Natalia’s focus is the corporate tax • He has over 15 years of experience experience on top positions in
issues including tax optimization, in strategy and operations European retail
efficient management and consulting
ownership structures and tax risk • As a consultant he worked with
• He advises retail and CPG
management electronics, food and fashion
companies in various areas, retailers in Russia and abroad on
including multichannel
themes like process optimisation,
management and on-line strategy strategy and multichannel
management
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 2
Section 2 Introduction Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014 PwC 3
Section 2 – Introduction
PwC conducted a global survey to understand and compare consumer
shopping behaviors across 15 territories world wide
Global research Methodology
• Significant (15,080) number of responses received
Netherland
from 15 different countries
Canada
Russia
• In order to survey the most appropriate
demographics the following factors were taken in
UK Germany
account:
France Italy
Turkey
China/HK
US
Switzerland
Middle East - Age
India
- Gender
Brazil
- Employment status
South Africa
- Region
Survey was conducted across 15 territories
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 4Section 2 – Introduction
Russia was included in the global survey for the second year in row – we
interviewed over 1000 on-line users from all federal districts
The main characteristics of our respondents: Frequency of on-line shopping 94% shops
- Our survey included 1047 respondents in Russia on-line at
- All of them are internet users Daily 42 4% least once
a year
- Representative sample of internet users in terms of
age, place of living and level of income
Weekly 186 17%
Number of respondents by geography:
Moscow 388 36%
Monthly 395 37%
Privolzhsky FD 124 12%
Urals FD 116 11%
A few times 31%
Saint-Petersburg 105 10% 337
a year
Siberian FD 83 8%
Central FD
(exc. Moscow) 78 7% Once a year 46 4%
Southern FD 78 7%
Far-Eastern FD 66 6%
Never 68 6%
Northwestern FD
(exc. Saint-Petersburg) 36 3%
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 5Section 3 Key messages and implications Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014 PwC 6
Section 3 – Key messages and implications
E-commerce will continue gaining importance in Russia, having a large
impact on retailers
E-commerce will continue to gain relevance… This will disrupt retail, but the magnitude
% of e-commerce in total retail value by country of impact will vary by categories
10% CAGR 2008-2013
Share of online sales in total retail value by
Russia 16%
different consumer categories in UK , 2013
6% 6%
Germany 17% Consumer Electronics
3% 3% 18%
and Video Games
1%
UK 13%
Apparel 15%
2008 2013
Russia Germany UK Consumer Appliances 11%
…supported by growing internet penetration Traditional
9%
% of people using internet in total population toys and games
85% 89% 89% 93% Consumer Health 7%
78% 78%
70%
57% Beauty and
6%
Personal Care
27%
Food and drinks 5%
2008 2013 2018F Home care 4%
Russia Germany UK
Source: Euromonitor; PwC analyis
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 7Section 3 – Key messages and implications
Retailers need to adapt, otherwise they jeopardise their business future
Key issues resulting from the development of the e-commerce:
1 • Pure players (with lighter cost structure)
Entrance of new competitors • International players (the costs of physical spread presented barrier before)
• Manufacturers (can sell directly to end consumer)
2
Falling revenues per m2 in As revenue migrates on-line, stores are left with the same costs, but
physical stores lower revenues.
What role should a store play in the future?
3
Managing operations with Margins are usually lower on-line because of high price transparency
on-line margins and and ease of comparison, while operating physical stores incurs costs,
off-line costs which some pure on-line players do not have (in-store labor, rent…)
4
It is a much bigger challenge optimizing delivery to numerous and
Managing fulfillment unpredictable individual end-consumers than to own stores, especially
in terms of inventory management and transport optimization
5
With increasing connection among the channels, sometimes within the
Measuring the performance same customer journey, measuring performance becomes a much
more difficult task
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 8Section 3 – Key messages and implications
Consumers are becoming more internet savvy rapidly – as a consequence
their behaviour and expectations change rapidly
Consumers are rapidly becoming more advanced on-line
% of active adult population in developed countries
100 Traditional customers
90
• Use internet occasionally
80
• Traditional media remains their
70 main source of information
60
Digital converts
50
• Born before internet spread
40
• Adopted internet to become a
30
relevant source of information
20
10 Digital natives
0 • Born in time when internet has
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024
Transitional Digital Natives
already been a significant part of
Traditional consumers Digital converts Digital natives life
Up to 2013 2013-2019 2020 and beyond • Have always been using it as the
Traditional consumers Digital converts Digital natives main source of information
are the majority are the majority are the majority
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 9Section 3 – Key messages and implications
For this reason we focused on customer centricity in our survey – we
analysed what customers want and assessed implications for retailers
What does this mean for retailers’
What are customer expectations?
business models?
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 10Section 3 – Key messages and implications
Customer expectation nr. 1
A compelling brand story that promises distinctive experience – critical to loyalty
What does telling a compelling brand story
Number of retailers shopped with is decreasing
mean for retailers?
Percentage of retailers shopped with over the last 12 months Survey outcomes:
17%
• Compelling brand story fosters loyalty
Only 1 retailer
9% ─ The main reason why shoppers buy at their
favourite retailers is because they trust the brand
52%
2 to 5
53% ─ Other relevant reasons include the service level
(fast delivery, friendly staff, reasonable prices…)
22%
6 to 10
32%
Implications for retailers:
• Retailers need to on one hand differentiate their
11 to 20
7% brand, so that it stands out in the crowd and targets
6%
specific group of customers
1% • On the other hand they need to execute in line with
21+
0% their brand promise, so that customers can rely on
them and hence trust them
0% 20% 40% 60%
• If they succeed in this, they will be rewarded with
Increasing share of Russian shoppers prefer to shop withy loyalty, which will bind the customers to them
limited number of retailers
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 11Section 3 – Key messages and implications
Customer expectation nr. 2
Customized offers based on totally protected, personal preferences
and information – a very good opportunity to sell more
Shoppers are getting less worried about What does this mean for personalization of
personal data retailers’ offers?
Survey response to the question: “why don’t you buy Survey outcomes:
products online?”
• Worry about personal data is becoming less of a
barrier to on-line shopping than before
I prefer to touch/try the 74%
product 75% • While shoppers like to be recognised by their
favourite retailers (66% of respondents shop
62%
I just prefer to shop in-store 40% because of loyalty programme or points)
I don't trust online payment 38% 2013
• And they also like to get personalised offers or
methods 43% information (59% used a coupon they received on
2012
I'm worried about the 22% smartphone)
security of my personal data 36%
Implications for retailers:
I don’t have a credit/debit 7%
card 11% • Willingness to share personal data in return for
customised offering brings enormous opportunities
0% 20% 40% 60% 80%
for retailers to tailor the value proposition to
individual customers
Worry about data security is less and less of a barrier for on-line • Tailored offer is more likely to be purchased by the
shopping in Russia customer than undifferentiated one
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 12Section 3 – Key messages and implications
Customer expectation nr. 3
An enhanced and consistent experience across all devices – customised shopping
journeys for each device
Shoppers want to be able to shop through What does “shopping anywhere, anytime”
various devices mean for retailers?
How often do you buy products using the following shopping Survey outcome:
channels?
• Use of smartphones and tablets for shopping is
increasing rapidly
Implications for retailers:
• Retailers need to adapt user interfaces of their on-
41% line shops to mobile devices
Through smartphones
28% • They also need to adapt the content, as shoppers use
2013 different devices for shopping at different occasions
44%
2012 • Transition among devices must be smooth, enabling
Through tablets
31%
seamless experience during various phases of
shopping journey
0% 10% 20% 30% 40% 50%
Use of smartphones and tablets for shopping in Russia is
increasing rapidly
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 13Section 3 – Key messages and implications
Customer expectation nr. 4
Transparency, real time, into a retailer’s inventory – engaging customers in traditional
stores with digital
Russian shoppers believe technology can
How can retailers use this for their benefit?
improve their shopping experience
Percentage of respondents, who believe none of the listed in- Survey outcome:
store technologies would improve their shopping experience
• Russians in large majority believe the in-store
technology can improve their shopping experience
In-store technologies to consider:
• Ability to check other store or
• Most of all they value ability to check other store or
US 33%
online stock quickly on-line stock quickly and in-store Wi-Fi with simple
• In-store WiFi with fast, simple, login
UK 29% login Implications for retailers:
• Sales associates who can take
payment without going to the • Use of in-store technology can help retailers to
Russia 10% cash register differentiate
• Sales associates with tablets to • Given the shoppers’ preference for checking the
show you alternative products
China 7% stock in real time, they can use this to increase sales
• Using your mobile phone to pay
for your shopping Pay for an due to better availability (virtual shelf)
0% 20% 40% item through the store's app • However, sharing real-time stock level data with
customers requires sophisticated system for
Only 10% of the respondents in Russia believe none of the listed inventory management
in-store technologies could improve their shopping experience
Achieving Total Retail • Summary of PwC Global Multichannel Survey 2014
February 2014
PwC 1614Section 3 – Key messages and implications
Customer expectation nr. 5
Favourite retailers are everywhere and sell through multiple channels
Impact of e-commerce varies among What does shoppers’ use of various channels
categories, but no category can ignore it within shopping journey mean for retailers?
Percentage of respondents, who prefer on-line channel for Survey outcome:
researching and buying products in selected categories
• Regardless of the category, a significant proportion
Consumer electronics… 51%
71% of shoppers use multiple channels at some stage of
Books, music, movies… 51%
65% their shopping journey
Household appliances… 47%
69% • In case their favourite retailer closed the nearest
Health & Beauty… 39%
52% shop, the majority of respondents (58%) would start
Toys 35%
45% visiting the next nearest outlet of the same retailer
Clothing and footwear… 32%
46% RESEARCHING or start/increase using its web-page for shopping
Sports… 30%
46% BUYING Implications for retailers:
Do-it-yourself/home… 27%
42%
• Retailers need to support this loyalty by offering
Furniture and homeware 26%
46% relevant information and enable purchase in all
Jewellery/watches 24%
39% channels and enable seamless transition among them
Grocery 17%
30%
• Once the retailer gains a “favourite” status among
0% 20% 40% 60% 80% its shoppers, it can count that majority of revenue in
Around half of Russian internet users prefer to buy consumer
case of required store closure will be transferred on-
electronics, media and household appliances on-line. line or to another of his shops
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 15Section 3 – Key messages and implications
Customer expectation nr. 6
To maximize the value of mobile shopping, both store apps and mobile sites must
improve
Mobile browsers are for now slightly more
Does this mean retailers should abolish apps?
popular than apps
How often do you use mobile browser or app on your mobile Survey outcome:
device for shopping? • Internationally applications are not very popular
with shoppers
Daily 11%
11% • For shopping Russian customers also use internet
19% browser on their mobile devices more frequently
Weekly 16% than they use apps
Monthly 28% • However, contrary to global peers, they do not find
24%
Mobile browser the apps inconvenient
A few times a year 25% App Implications for retailers:
23%
9%
• Retailers need to offer both mobile browsers and
Once a year 7% apps for shopping
Never 7% • Long-term apps present a bigger opportunity, as
19%
they can have a “lock-in” effect for shoppers
0% 10% 20% 30% • Hence, retailers should improve the usability of
While Russian internet users use mobile browsers more their apps and encourage the use of them, as first-
frequently, they do not find apps inconvenient movers are likely to have a significant advantage
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 16Section 3 – Key messages and implications
Customer expectation nr. 7
Social media engagement – extremely important for brand communication and direct
sales
Use of social media for brand research, What does increased social media activity of
engagement and shopping is increasing their customers mean for retailers?
Which of the following have you done using social media? Survey outcome:
• Use of social media in all stages of shopping journey
Follow favorite 51% is increasing rapidly in Russia
brands or retailers
via social media 37% Implications for the manufacturers and retailers:
• Retailers need to systematically communicate
43%
Interacting with favorite through various social media platforms to deliver a
retailers or brands 17%
unified communication line
Comments about 56%
• This needs to be aligned with all other marketing
an experience with
31%
and PR communication of the company, as well as
a product or brand
with customer service in store and in call-centre
48% • Social media empowers shoppers to influence
Bought products
20% success of retailer’s offering, which means they are
becoming very dependent on social media reviews
2013 2012 • This means they need to engage existing and
Almost half of the respondents already used social media for potential customers in two-way communication and
shopping not just respond to potential complaints
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 17Section 3 – Key messages and implications
Customer expectation nr. 8
“Brands” act like retailers, and we’ll treat them that way – a major threat to retailers
Shopping directly with producers is increasing Does this mean retailers will lose their reason
rapidly in Russia for existence?
Share of respondents who have bought directly from the Survey outcome:
producer in selected categories
• Shopping directly with manufacturers is increasing
Clothing and footwear… 49% rapidly in Russia (in 2012, 70% of respondents
Consumer electronics… 45% never shopped directly; in 2013 only 22%)
Books, music, movies… 28% • As the main reasons for doing so they cite better
Household appliances… 26% prices and wider assortments
Health & beauty… 25% Implications for retailers:
Toys 19% • Retailers will need to clearly define the value they
Furniture and homeware 14% bring to the shopper who buys with them, as
Jewellery/watches 12% opposed of going directly to the brand owner
Grocery 11% • This can be impartial advice in comparing brands,
Do-it-yourself/home… 11% the convenience of “one-stop” shopping, or other
Sports equipment/outdoor 10% aspects of the shopping experience that the
0% 20% 40% 60% producers themselves cannot so easily provide
Clothing and electronics categories are especially impacted by
direct-to-consumer trend
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 18Section 4 Russian retailers and Total Retail Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014 PwC 19
Section 4 – Russian retailers and Total Retail
Russian retailers are more and more facing the challenge of how to deliver
profitable growth to the ‘connected shopper’
Russian customer is empowered:
- Has a choice
Stores and - Has transparent information
in-store Smart
technology Marketing - Can change a retailer with a
couple of touches on his PC, tablet or
smartphone
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 20Section 5 – Russian retailers and Total Retail
We believe the answer to this challenge is Total Retail concept, which
places focus on seamless consumer experience regardless of the channel
Unified brand Integrated
story across all back office
Evolution of shopping experience channels which which supports the Total Retail
promises consistent delivery of that
Connected customer experience promise
experience
Total Retail
2000s- Omnichannel Omnichannel
Present
Product centric More channels
• Retailers start
1990s- Customer centric More
2000s connecting the
Pre- Channels channels with
1990s
Dot.com services like virtual
Dot.com shelf, click and
• Legacy retailer collect and similar,
Brick & Mortar start offering but still manage and
Brick and mortar
One-way products on- monitor them
experience • ‘Pure players’ line, not separately
• Only off-line start building related to
web-shops their off-line
offering
Source: PwC Global Total Retail survey 2012-2013
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 22Section 4 – Russian retailers and Total Retail
The most advanced Russian retailers provide real-time stock information
to customers, which is an indication of a sophisticated back office
• Retailer 1 has only one pick-up point for
Different Russian retailers provide different options internet purchases in Moscow
regarding connection between on-line and off-line and among • Checking the stock in other stores or on-
stores line is not possible in stores
• Retailer 2 has several pick up points in
Retailer 1 Retailer 2 Retailer 3 Moscow, but not all of their shops are
also pick-up points
• It also offers access to its inventory in
other stores and on-line via store
terminals in particular stores
• Retailer 3 is the closest to Total Retail
• Shoppers can pick up their on-line orders
in all of their stores
• It is possible to check the stocks of all
stores and on-line in any store
Our experience shows a clear connection
Consumer Consumer Consumer between the maturity of multichannel
offering and business success of the
Internet store Point of sale
Russian retailers
Sources: Company website, RRG Consulting research, PwC Analysis
Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014
PwC 24Section 5 – Russian retailers and Total Retail The change is happening fast. To win, retailers will need to get it right. Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014 PwC 24
Section 4 – Russian retailers and Total Retail Thank you! © 2013 PricewaterhouseCoopers. All rights reserved. "PricewaterhouseCoopers" and "PwC" refer to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL). Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm's professional judgment or bind another member firm or PwCIL in any way. This presentation is provided solely in connection with this event. Any liability PricewaterhouseCoopers (“PwC”) will assume will be governed by a contract to be agreed. In the meantime, this report is provided on the basis that PwC accepts no liability (whether in contract, tort (including negligence), or otherwise) to any person in respect of this document. Achieving Total Retail • Summary of PwC Global Multichannel Survey February 2014 PwC 25
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