Driving Profit and Growth Through Store Operations Excellence Adam - - PowerPoint PPT Presentation

Driving Profit and Growth Through Store Operations Excellence Adam Pressman Partner Adam.Pressman@atkearney.com Mobile – 773.251.1667 www.atkearney.com

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

2

Why is store operations important?

The top 25 retailers in the U.S. spend ~$100 billion on store labor In the U.S., retailers lease or own over 14 billion square feet of retail space For a typical retailer, every $10MM in store

• perations improvements is worth more than

$100-$150 million in market value

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

3

Common Questions ■ “How do I ensure my store

• perations drive improved

customer experience?” ■ “Am I getting the maximum productivity from the store team?” ■ “How can I achieve better compliance across my store network?”

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

4

• Overview of AEROTM survey
• Overview of survey findings and our insights
• Next steps for retailers

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

5

Survey Overview

Source: A.T. Kearney 2013 AEROTM Study

AEROTM Survey

Scope

Strategy, tactics and execution

Outputs

Benchmarking, leading practices

Size

~100 questions

Format

Online, secure survey

Sectors

Multiple retail sectors

Geography

Over 20 countries

Confidentiality

All company-specific data strictly confidential

E R O perations A chieving

xcellence in etail

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

6

Participation from a wide range of retailers

2013 AEROTM Participation by Sector (%)

17% 17% 20% 36% 3% 7% Apparel Health/ personal care Cash & Carry Food/ grocery Electronics Mass Market/ Hypermarket

Source: A.T. Kearney 2013 AEROTM Study

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

7

Deliver Core Store Value

Improve efficiency and effectiveness inside the four walls of the store while delivering a superior customer experience

Communicate and Adopt Change

Driving lasting change through the store network in a consistent and practical way

Enable Store Value

Use customer and market insights to set strategic direction

Drive Store Value

Optimizing capital and

• perating expenses

through the store life cycle to reduce total cost

• f ownership and improve

return on investment

AEROTM Framework

Merchandising/ Supply Chain Interfaces Store Operations Field Leadership Stores Business Planning Channel Strategy Voice

• f the Customer

Store Technology Operating Expense Control Real Estate Lifecycle Management Change Management & Communication

Source: A.T. Kearney 2013 AEROTM Study

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

8

Lessons from AEROTM

Measure, Analyze and Act Unleash field leadership Enable with technology Don’t leave the front line behind

1 2 3 4

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

9

• Overview of AEROTM survey
• Overview of survey findings and our insights
• Next steps for retailers

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

10

• Know your customer
• Leverage your

employees

• Invest in tools and skills

Voice of the Customer

Communication

Merchandising/ Supply Chain Interfaces Store Operations Field Leadership Stores Business Planning Channel Strategy Voice

• f the Customer

Store Technology Operating Expense Control Real Estate Lifecycle Management

Change Management

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

11

Limited use of customer data sources

• 1. Frequency of use of data ranges from less than 25% of respondents (“rarely”) to in excess of 75% of respondents (“common”)

Source: A.T. Kearney 2013 AEROTM Study

Frequency of Use of Selected Customer Data

(percentage responses) Rarely Commonly POS Transactions,, Units Survey Customer Surveys, Focus Groups, Intercepts Loyalty Loyalty Program data External Industry Research, Vendor-Led On-line Social Networks – Corporate and 3rd Party Product Review Products Reviews Examples Contact Center Contact Center data Store Employee Store Employee generated insights In-Store Traffic, Conversion Rate, Traffic Flow

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

12

Social network data not valued

66% 40% 35% 8% 3rd party Domains Company Domains

Very Important Collected

Customer Data Collected versus Importance for Generating Insights

(percentage responses selected; percentage responses indicated “very important”)

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

13

Direct contact with customers not widely leveraged

Customer Data Collected versus Importance for Generating Insights

(percentage responses selected; percentage responses indicated “very important”) 57% 50% 70% 40% Store Employee-generated Customer Data Call Center Contact Data

Very Important Collected

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

14

Those that invest in enabling store employee feedback put it to use

Use technology to enable employee feedback None 38% Limited 21%

Neutral 3%

Somewhat 17% Extensively 21%

Technology-enabled Store Employee Feedback

(% respondents)

Prevalence of Analyses of Store Employee Input

(% respondents) 20%

• 70%

Moderate use of technology to enable employee feedback Extensive use of technology to enable employee feedback

66%

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

15

Over half still do not mine loyalty data regularly

Frequency of Loyalty Data Analysis

(% respondents, 2009 v 2012)

Barriers to Increased Consumer Insights from Loyalty Data

(% respondents)

28% 10% 10% 51% 19% 11% 22% 48%

5 10 15 20 25 30 35 40 45 50 55

Continuously/ Monthly Rarely/ Never Every 1 to 3 years Quarterly/ Semi- Annually

2012 2009

27% 43% 60% Technology 3% Legal Restrictions Workforce Capability Lack of Perceived Need

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

16

• Integrate your multi-

channel strategy

• Prioritize supporting

technology investments

• Align metrics to drive

results

Multi-Channel Strategy

Communication

Merchandising/ Supply Chain Interfaces Store Operations Field Leadership Stores Business Planning Channel Strategy Voice

• f the Customer

Store Technology Operating Expense Control Real Estate Lifecycle Management

Change Management

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

17

Consumers expect to use both physical and digital channels in their journey

How Consumers Shop?

After Sales Experience Product Pick- Up / Delivery Purchase Trial / Test Research Product

Description

• Discovery of

products

• Customer considers

various product/ service options

• After making a

preliminary selection, customer verifies that it is the right product

• Customer obtains

and pays for product

• Customer obtains

products purchased (pick-up in store or delivery)

• Customer

satisfaction is maintained post- purchase (including returns)

Increasingly Common Behaviours / Expectations

• Read dozens of 3rd

party reviews online

• Influenced by social

media

• Visit product in store

to test / trial / try-on products researched

• nline
• Purchase in-store

but have shipped to home; “Select and Ship” stores

• Order product online

and pick-up in store same day

• Return items bought
• nline or in-store

and vice versa

Source: A.T. Kearney Future of Stores Survey

45% 55% 19% 81% 24% 76% 24% 76% 17% 83%

Online Stores

Cross-Channel Capabilities in Consideration

• “Customers Like You

Also Purchased…”

• Shipping samples to

home (lengthy trials)

• Triggered by

targeted offer

• Beacons / micro-

location targeting

• Order online for

“drive-up” pick-up

• Share / post

purchases (e.g., Twitter)

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

18

Strategically, retailers should define desired customer experience at each journey step, by channel, and across channels

Acquisition Service & Relationship Management

Customer Lifecycle

Discussion Points

• Experience at each step: Companies must define

the desired customer experience at each lifecycle stage… and by channel

• Economics: Companies must understand the

economics of each lifecycle stage by channel in order to guide business process decisions

• Segmentation: Leading companies may further

define experiences for distinct customer segments… and align processes and costs accordingly

• Overall experience: An ideal experience (at the right

cost) can be defined by following the customer journey and defining flows between channels

Source: A.T. Kearney

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

19

Consumers go to stores to fill immediate needs, try out new products, and to spend time with others

What Drives Consumers To Stores?

Top Stated Reasons

Note: n=2400; Survey question: What are the top 5 reasons you go to STORES as opposed to shopping another channel (online, by your mobile phone, or by catalogue)? Source: A.T. Kearney Future of Stores Survey

• Survey respondents highlighted

immediacy, and experiential factors (e.g. product touch/feel) as motivators for in-store shopping

• Essential for retailers to convert

trial/test to purchase and to manage inventory to ensure products are in- stock and available for purchase

• A trip to the store remains a social
• ccasion with consumers going to

stores to spend time with friends and family Store Shopping Drivers

7% 9% 13% 15% 24% To trial/test (try on) products To fill an immediate need To find promotions & special

• ffers

To compare prices To spend time with friends/family “I like the instant gratification of taking an item home “ “I like the personal touch

• f a store”

“Stores that treat me like a person and not a number get my business.” “Like being able to get items right away, trying it

• ut”

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

20

The key is to understand the role of the store…for your industry…and your customers

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

21

Customers report that Online, Mobile, Social and Self-Service Kiosks show growing usage

Net percent change in channel usage versus prior year (2013 over 2012)

Source: A.T. Kearney 2013 integrated Channel Engagement Survey

Though the online channel reported the highest increase in usage, channel growth is slowing when compared to 2012’s study

Discussion Points

• Physical Stores:
• Net contracting usage, according to

consumers

• Loyalty data, script pickups, and or

credit card data should indicate trends in number of visits

• Online + Mobile: Additional evidence of the

urgency to position for on-line and mobile as customers report significant growing use

• Experience: While use of given channels is

rising / falling, an overall integrated experience across channels is increasingly expected by consumers

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

22

16% 27% 42% 62% 33% 33% 35% 25% 38% 31% 18% 12% 12% 10% 1% Occasionally Often Never Seniors Rarely Baby Boomers 5% Gen X Millenials

Customers engage organizations through multiple channels simultaneously…and do so increasingly

• 1. Millennials: 1980-present; Gen X: 1964-1980; Baby Boomers: 1946-1964; Seniors: 1946 & before

Source: A.T. Kearney 2013 integrated Channel Engagement Survey

30% 35% Total Respondents

2013 2012

Using Multiple Channels Simultaneously

Year over Year Comparison 2013 ICE Survey Responses by Generation

35% avg.

Meanwhile, organizations are very rarely designed to engage consumers across channels in a consistent fashion simultaneously

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

23

Few truly integrate channels

Types of Multi-channel Offerings

(% respondents)

50% 40% 37% 17%

Buy from other channel and return to store Buy on-line and pick up in store Ship from store to home Competitive price checks Store inventory visibility through

• ther channels

Source: A.T. Kearney 2013 AEROTM Study

58% cite technology as greatest barrier

• f the Customer

57%

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

24

Only 14 % make field managers accountable for non-store channel

Performance metrics do not support multi-channel results

21% 13% 11% 5% 5% Demand Fill Rate Returns Rate Sales Growth Sales Inventory Turns

Cross-Channel Performance Metrics in Use

(percentage of respondents)

Source: A.T. Kearney 2013 AEROTM Study

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

25

• Balance your performance

scorecard

• Be more forward looking,

longer horizon

• Increase granularity

Stores Business Planning

Communication

Merchandising/ Supply Chain Interfaces Store Operations Field Leadership Stores Business Planning Channel Strategy Voice

• f the Customer

Store Technology Operating Expense Control Real Estate Lifecycle Management

Change Management

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

26

Employee and operational dimensions underweighted

Employees

4%

Operations

23%

Customers

31%

Financials

61%

Only half measure all four performance dimensions Average Weighting of Performance Dimension

(percentage of responses)

Important Very Important Most Important

Source: A.T. Kearney 2013 AEROTM Study

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

27

Store-level plans often exclude key inputs

100% 83% 62% 45% 38% 10%

Above + Demographic Above + Economic Above + Competitive Above + Promo Plans Historical Store-level

All Inputs Included in Store-level Business Plans

(percentage of respondents)

Source: A.T. Kearney 2013 AEROTM Study

Above + Weather

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

28

Field Leadership

• Enable increasing spans
• Prioritize field manager

activities

• Enable informed decision-

making

Communication

Merchandising/ Supply Chain Interfaces Store Operations Stores Business Planning Channel Strategy Voice

• f the Customer

Store Technology Operating Expense Control Real Estate Lifecycle Management

Change Management

Field Leadership

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

29

Field leaders managing more stores

38% 57% 56% 47% 42% 26%

Level 0 (Store) Level One Level Two Level Three Level Four Level Five

Increase in Average Number of Stores per Management Level

(percentage of respondents)

Source: A.T. Kearney 2013 AEROTM Study

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

30

More time spent on administration than customers and team

Management Time Allocation

(mean percentage of responses, selected activities)

Source: A.T. Kearney 2013 AEROTM Study

• f the Customer

Store Management Field Management

• Customer service
• Customer complaints
• Customer satisfaction

analysis

• Management reporting
• Planning & scheduling
• Purchasing (operative)
• Trainings
• Target setting
• Performance reviews
• Implementation of

corporate initiatives

• Controlling of compliance
• Assessing feedback

Tasks

To be reduced

7% 20% 38% 4%

Corporate compliance Customer interaction Coaching direct reports Administration

11% 18% 19% 34%

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

31

Leaders provide HR and finance training

43% 67%

HR skills Financial skills

Training Provided to Field Management

(percentage responses)

Source: A.T. Kearney 2013 AEROTM Study

• f the Customer

89% 89%

Others Leaders

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

32

Varying levels of store manager autonomy

Store Manager Degrees of Autonomy

(percentage of respondents) Labor Scheduling

11% 50% 32%

Hiring

15% 11% 67% 7%

Customer Complaint Resolution

31% 50% 19%

Source: A.T. Kearney 2013 AEROTM Study

Limited Decisions Own Decision within Guidelines Own Decision Headquarters

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

33

Merchandising/Supply Chain Interfaces

• Detail inputs for out-of-

stock performance

• Measure to reduce shrink
• Enable local

merchandising…

• …But check compliance

Communication

Store Operations Stores Business Planning Channel Strategy Voice

• f the Customer

Store Technology Operating Expense Control Real Estate Lifecycle Management

Change Management

Field Leadership Merchandising/ Supply Chain Interfaces

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

34

Out-of-stock: SKU-level goals improve performance

Store/Category/ Sub-Category Level

68%

SKU Level

32%

7.5% 4.0%

Average 7.3%

• 47%

All Others

Level at Which In-Stock Goals Are Defined

(percentage of respondents)

Out of Stock Performance

(Average percentage of respondents)

Source: A.T. Kearney 2013 AEROTM Study

Performance based SKU Level Goals

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

35

Shrink: Set targets by category

Shrink Management Approaches

(percentage respondents indicating “extensive” or “somewhat”)

38% 54% 58% 65% 65% 81% 85% Establish shrink targets by category Use financial incentives Establish shrink targets by store Shrink is a key performance metric Use technology to manage shrink Formal process in place Well documented strategy

Leading Practice

Source: A.T. Kearney 2013 AEROTM Study

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

36

Local merchandising: Limited degree of local influence

High Degree 15% No Influence 21% Low Degree 64% Portion of End Caps/Aisles All End Caps 50% 7%

Store Influence on Assortment

(% responses)

Autonomy over Merchandise Display

(% responses)

Source: A.T. Kearney 2013 AEROTM Study

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

37

Merchandising compliance: Variable focus

Store Team Corp Staff 18% 3rd Party 18% Field Merchandisers 36% 57% Above Store Manager 93% 31% 17% 10 hrs to 22.5 hrs 5 hrs to 9.5 hrs 0 to 4.5 hrs

Approach to Assessing Merchandise Compliance

(% responses)

Weekly District Management Time Spent Auditing Stores

(average hours, Level One)

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

52%

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

38

Store Operations

• Dedicated resources to

process improvement

• Measure in-store
• perations
• Plan, communicate and

measure for peak performance

Communication

Stores Business Planning Channel Strategy Voice

• f the Customer

Store Technology Operating Expense Control Real Estate Lifecycle Management

Change Management

Field Leadership Merchandising/ Supply Chain Interfaces Store Operations

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

39

Revenue/training per store employee increasing

Store Revenue per Employee 62% Avg Training Hours per Employee 52% % FT Employees 11% Management Turnover 35% Employee Turnover 35% 15% 16% 30% 31% 38%

Increasing

Operations Trends Over Past Two Years

(percentage responses indicating “large/slight increase” and “large/slight decrease”) Decreasing

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

Significant Somewhat

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

40

Expert field resources drive continuous improvement

83% 18%

• 78%

All Others Leaders

100% 77%

• 23%

All Others Leaders

Formally-trained Field Process Improvement Team

(percentage of respondents)

Store Teams Expected to Drive Continuous Improvement

(percentage of respondents)

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

41

Many key metrics not measured

Merchandising Compliance 65% Planogram Compliance 31% Non-Customer- Facing Processes 35% Customer Wait at Service 24% Customer Wait at Checkout 15%

Frequency of store performance measurement

(percentage of respondents)

• f the Customer

Daily/Hourly Semi-Weekly/Weekly

Source: A.T. Kearney 2013 AEROTM Study

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

42

Variable recruiting practices

Tests for Store Hiring

(percentage responses)

89% 82% 57% 46% 14% Drug Testing Standardized Written/ On-line Test Structured Q&A Interviews Customer Experience Skills Testing Background Check

Two-thirds of leaders test for customer experience skills

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

43

Leaders are more aggressive in peak period management

18% 45% 57% % Increase Revenue % Increase Labor Hrs 4 2 4 1 7 # Weeks to Ramp Down Labor # Hours Training to Seasonal Staff # Weeks In Advance Begin Hiring

Seasonal/Peak Performance Data

(Average Percentage/Number of Weeks)

• f the Customer

All Others Leaders

Source: A.T. Kearney 2013 AEROTM Study

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

44

Real Estate Lifecycle Management

• Continually work the real

estate portfolio

• Detail plans and align

incentives to manage cost

• verruns

Communication

Stores Business Planning Channel Strategy Voice

• f the Customer

Store Technology Operating Expense Control

Change Management

Field Leadership Merchandising/ Supply Chain Interfaces Store Operations Real Estate Lifecycle Management

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

45

Store Footprint Growth

Operations and Maintenance Fit-out Construction Location Identification Design and Specification

Store Footprint Evaluation

4-Wall Cash Flow Annual Revenue Fix or Close

• Lease Negotiations
• Downsize
• Sub-let
• Close

Protect & Grow

• Maintain cost

structure

• Monitor and adjust

to local market conditions Improve

• Control operating costs
• Improve customer service
• Battle local competition

Real Estate portfolio represents

• pportunities

• f the Customer

• Consider future

demographics

• Lock in low occupancy

costs – retain flexibility

• Use advanced sourcing

techniques to lower cost of supply for building services, fixtures, on-going maintenance

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

46

New store openings were expected to outpace closings and consolidations for 2013, but this will vary by sub-sector

Domestic Real Estate Activities

(% responses indicating “very high” and “high priority”)

Resizing 43% Renovations 68% New Stores 80% Consolidations 23% Closings 29% Relocations 38%

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

High Very High

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

47

Sustainability considered, when coupled with financial benefit

Importance of Green and Sustainable Construction

(percentage of responses)

Source: A.T. Kearney 2013 AEROTM Study

Only 17% have LEED certification

• f the Customer

4% 4% 38% 54% Not Important Number One Priority Important Consideration Incorporated Into Design When Financial Benefit

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

48

A rigorous “bottoms-up” process tied to metrics reduces cost

• verruns

45% 32% 33% 17% 0%

Exterior Construction Interior Décor Fixturing Lighting

Cost Overruns Experienced By Category

(percentage of responses)

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

All Others Bottoms-up & Construction Team Metrics

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

49

Operating Expense Control

• Support skilled, center-led

procurement

• Go-to-market regularly
• Manage demand

Communication

Stores Business Planning Channel Strategy Voice

• f the Customer

Store Technology

Change Management

Field Leadership Merchandising/ Supply Chain Interfaces Store Operations Real Estate Lifecycle Management Operating Expense Control

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

50

Store Signage Light Bulbs Store Supplies Retail Bags World-Class Processes Tools & Techniques Skills & Training

• Strategic Sourcing
• Center-led procurement organization
• E-RFX and auctions tools
• Should cost analysis and fact-based

negotiations

• Analytics, research, supply market dynamics
• Negotiations training

Untapped opportunities

Operating Expense Control

Facilities Management

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

51

Opportunities exist to drive greater focus on store expenses

Store Security 14% Store Supplier 18% Energy 20% Store Marketing 23% Store Maintenance 34% 32% Store Maintenance 28% Store Security 55% Store Supplies 32% Energy 50% Store Marketing

Retailers Procuring Indirect Spend at Store Level

(percentage of responses)

Frequency of Go-to-Market

(percentage of responses)

Source: A.T. Kearney 2013 AEROTM Study

• f the Customer

Every 2-3 yrs Every 4+ yrs Never

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

52

Rigorous demand management can contribute to cost containment

Demand Management Practices for Store Supplies

(percentage of responses)

44% 36% 36% Usage Policies Pack/Package Optimization Ordering Policies & Restrictions

Only 10% of retailers employ all 3 demand management practices

Source: A.T. Kearney 2013 AEROTM Study

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

53

Store Technology

• Assess customer-facing

technologies

• Prioritize operational-

efficiency technology

Communication

Stores Business Planning Channel Strategy Voice

• f the Customer

Change Management

Field Leadership Merchandising/ Supply Chain Interfaces Store Operations Real Estate Lifecycle Management Operating Expense Control Store Technology

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

54

Digital levers for better targeting consumers and increasing sales

Build rapport and brand loyalty Engage through self-service Offer recommendations; track customer contacts Improve convenience, access to information and product choices Maximize brand; “Segment of one”

Technology influences purchasing decisions

Social Media Kiosk Mobile Digital Levers

Source: A.T. Kearney

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

55

Two-thirds of respondents feel they have as good or better access to mobile capability and information as store staff

21% 45% 34% Staff has better information & capability 66% I have similar or better capability than staff

Respondent’s Mobile & Information capabilities

We have about the same I feel the staff has better tools / information than me I have better tools / information than the staff helping

Perceived capability compared to staff Implications

• Consumer Experience: Today’s consumers

need to feel that the store is a destination, to give the consumer an experience above and beyond the digital experience – up-scaling

• Re-think Product Info: Physical store does

not need to monopolize all stages in the process to be effective in generating sales

• Staff Capabilities: Staff needs to be digitally

minded, in a compelling way to help shoppers navigate product catalog and buy online any items not stocked in store

• Supply Chain Integration: With potentially

endless aisles, new supply chain processes will become necessary

Source: A.T. Kearney 2013 integrated Channel Engagement Survey, A.T. Kearney Future of Stores Document Summary, 2013

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

56

Customer-facing store technology deployment is limited

19% Mobile POS QR-code- Enabled Information In-Store Mobile Apps Free WI-FI Digital Marketing Displays Smart Carts Digitial Price Displays Self-Serve Order Terminals 58% 53% 58% 38% 50% 8% 59%

Customer-Facing Technology Deployment in Store

(percentage of responses)

74% consider technology to be “very important” to store operations strategy

Source: A.T. Kearney 2013 AEROTM Study

• f the Customer

Currently in place Considering adding

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

57

Retailers not convinced of effectiveness?

38% 19% 17% 15% 15% 8% 7% QR-code- Enabled Information Digitial Price Displays Free WI-FI Mobile POS Mobile Apps Digital Marketing Displays Self-Serve Order Terminals

Effectiveness of Customer-Facing Technology

(percentage of responses indicating “highly”)

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

58

Increased adoption of operational-efficiency technologies

Deployment of Operational-Efficiency Technology in Store

(percentage of responses)

46% 50% 62% 62% 73% 77% Hand-held Scanner for Inventory Management Tablets/ Devices Labor Scheduling Application Time & Attendance Application Free WI-FI Customer Traffic Flow Technology

Source: A.T. Kearney 2013 AEROTM Study

• f the Customer

Considering adding Currently in place

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

59

Clearer benefit for operational-efficiency technology investment

Degree of Effectiveness of Technology

(percentage of responses indicating “highly”)

58% 50% 47% 44% 39% 15% Labor scheduling application Free WI-FI Time and attendance solution Tablets / Devices Customer traffic flow technology Hand held scanner for inventory management

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

60

Tablet investment expected to grow

48% Time & Attendance Application 61% Tablets/ Devices 69% Labor Scheduling Application 71% Customer Traffic Flow Technology 91% Hand-held Scanner for Inventory Management 69%

Investment Trends Expected for Operational Efficiency Technology

(percentage of responses)

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

Significant Increase Moderate Increase

Free WI-FI

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

61

M-commerce tools and self-serve terminals lead the trend for customer technology

Smart Carts 26% Digitial Price Displays 58% Free WI-FI 70% Digital Marketing Displays 77% 91% Mobile POS 87% QR-code- Enabled Information 89% Self-Serve Order Terminals Mobile Apps 95%

Investment Trends Expected for Customer-Facing Technology

(percentage of responses)

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

Significant Increase Moderate Increase

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

62

The goal should be to address customer and business needs, not just to deploy technology

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

63

Change Management and Communications

• Listen to your employees
• Pilot most, roll-out fewer
• Build in change management

Communication

Stores Business Planning Channel Strategy Voice

• f the Customer

Change Management

Field Leadership Merchandising/ Supply Chain Interfaces Store Operations Real Estate Lifecycle Management Operating Expense Control Store Technology

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

64

Merchandising Supervisor

Conflicting messages strain in-store merchandising decisions

Store Manager Weekly Ads Vendor Deals Weekly Merch. Kit District Manager Central Merch Team

• f the Customer

Standard Operating Procedures

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

65

Emerging communications channels yet to be leveraged

Twittter 8% Voicemail 8% Facebook Pages 19% Mobile Device 25% Intranet/ Employee Portal 77% Email 92% Through Supervisor 96%

Frequency of Employee Communications via Channel

(percentage of responses)

Only 35% of retailers assess store employee communications and work to evolve their approach

Source: A.T. Kearney 2013 AEROTM Study

• f the Customer

Daily Weekly Monthly & Less Frequent

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

66

Leaders pilot prior to roll-out

15% of retailers use the same sample set of stores for every pilot Percentage of Initiatives Piloted Before Roll-out

(percentage of responses)

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

Leaders All Others

20% 30% 5% 45% Nearly All Majority Some Very few 100%

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

67

• Use designated ‘learning

stores”

• Complete pilots quickly

(approximately one month) Leading Practices

69% complete pilots in less than 2 months

Average Length of Pilot

(percentage of respondents)

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

4% 23% 23% 8% More than 6 months 3 to 6 mos. 1 to 2 mos. 2 to 4 weeks Less than 2 weeks 42%

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

68

Leaders quickly discontinue initiatives if objectives not met

Percentage of Initiatives Discontinued After Pilot

(percentage of responses)

• f the Customer

Source: A.T. Kearney 2013 AEROTM Study

• Establish clear metrics and

targets to define success at pilot

• Terminate initiative if success

metrics not met Leading Practices

22% 9% 13% 13% 16% to 20% 11% to 15% 6% to 10% Less than 5% More than 20% 43%

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

69

Less than half assess 6 months after roll-out

Compliance Monitoring

(percentage of responses)

35% of retailers believe they achieve 100% compliance

Source: A.T. Kearney 2013 AEROTM Study

74% 67% 48% 48% 37% For 6 months post- implementation On-going annual basis For 12 months post- implementation At completion During implementation

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

70

Attention to change management is lacking

96% 85% 81% 73% 27% 19% Follow up success measurement Clearly defined metrics Employee certification Dedicated change management program Dedicated team Employee training

Approaches to Initiative Rollout

(percentage of responses)

“Lack of dedicated project resources” and “too many initiatives at one time” most often cited as barriers to successful change

Source: A.T. Kearney 2013 AEROTM Study

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

71

Four elements to robust change management

A.T. Kearney Change Management Framework

Lead top-down; Set the mandate and organizational need for change Establish ecosystem and controls needed to sustain the change Align underlying cultural principals and change behavioral norms Drive adoption bottoms-up; Shifting individual ownership of the change Cultural & Behavioral Norms Awareness & Inclusion Ownership & Adoption Permanence

ALIGN SHIFT LEAD SUSTAIN

Source: A.T. Kearney FIT TransformationTM

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

72

Change management practices lead to more successful implementations

Success Achieving Change

(percentage of respondents)

Limited Successful Somewhat Successful Very Successful

All Others Leading Practice

Source: A.T. Kearney 2013 AEROTM Study

Leading Practice Approach

• Success metrics

defined

• Dedicated initiative

team

• Store shares

accountability

• Compliance measured

at 12 months+

50% 35% 33% 55% 17% 11%

• f the Customer

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

73

• Overview of AEROTM survey
• Overview of survey findings and our insights
• Next steps for retailers

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

74

Final thoughts from AEROTM…

Source: A.T. Kearney 2013 AEROTM Study

• Holistic continuous improvement
• Turn over every rock
• Never be satisfied with status quo
• Trial and focus…and enable adoption

A.T. Kearney 82/29951/5ert4rQlkR01QQI0R1

75

For more information www.atkearney.com

Please contact me with any questions

Adam Pressman Partner Adam.Pressman@atkearney.com Mobile – 773.251.1667