Precima to finalize

Preparing for the Future of Grocery Shopping:

What Retailers Need to Do, Now!
Actionable Takeaways from this session:

• With the continued shift in consumer behavior trends,

focus on a loyalty strategy - not just programs
• Accelerate enterprise-wide innovation to drive loyalty
• Make your loyalty processes smarter within an
enterprise AI/machine learning strategy
Today’s Presenters

Steve Hasen Greg Girard

AVP, Business Development Program Director, WW Retail Intelligent
Product Merchandising & Marketing
Strategies

© IDC 4
Disruption on All Fronts!

Omni-channel Marketplaces speed

The “store” is redefined Store automation matures AI-driven engagement
fulfillment is required global growth

» Kroger meal kits » Amazon–Whole Foods » Alibaba—Auchan, Macy’s » Tencent automated store » Hyper-personalization to
» Bodega » Instacart » Amazon–Kohl’s » BingoBox segments of one, at scale
» Hema Fresh (Alibaba) » Target–Shipt » Walmart » Amazon Go » Next best action
» 7-Fresh (JD.com, Walmart) » Walmart » Zalando » Auchan Minute
» Kroger » Karstadt
» Alibaba » Facebook and WeChat

© IDC 5
Thrive Amidst Disruption

Profitable Loyalty
Differentiate business – build unique emotional
and economic relationships with customers
Create an adaptive enterprise through sustainable
intelligent innovation

© IDC 6
The King of Loyalty

© IDC 7
 Amazon Reaches Far More Hearts and Minds
Than Other Retailers

Likely position of
Insurmountable
broadline mass retailers Profitable Loyalty

Logarithmic Scale

Likely position of Emotions

customer-focused
retailers of Loyalty

Source: IDC, Beyond Its CX Technology and Shopping Options, Amazon's Hold on Consumers' Emotions, Not Just Wallets, Matters Most, N=2,064 © IDC 8
Mission of Retail in Age of Intelligence:

Create Emotionally Rewarding Experiences

in the Customer’s Stream of Life

© IDC 9
Mission Create Emotionally Rewarding Experiences
Transformational Strategy Foundations for Loyalty
Strategic Priorities Programs
Experiential Commerce Treated fairly
Omni-channel Commerce Intelligent Order Fulfillment & Returns
Virtual & Augmented Engagement

Intelligent Product Design

“Just the right thing”
Curated Merchandise Curated Product Assortment & Positioning
Life-cycle Management Product Innovation

Next-gen Customer Care

“Just for me”
Omni-experience Customer Experience Analytics
Customer Engagement Hyper-personalized Engagement

Optimized Supply Networks Convenience

Digital Supply Chain
Optimized Fulfillment Operations
Optimization Supply Chain Accountability

Efficient & Innovation-ready Mobile Enterprise Profitably & Securely

Connected Workforce
Operations Secure Omni-channel Operations

© IDC 10
Preparing for the Future of Grocery Shopping
IDC Retail Insights Research:
» Shopper/Consumer Loyalty Survey, December 2017
» Retailer Loyalty Survey, December 2017
© IDC 11
Stream of Life: People Grocery Shop to Enjoy Meals
Context: People Like Restaurants and Take-out Options
Restaurants' revenue up

61%
prefer eating out experience versus
5.3%
buying items from the store in 2017

39%
of adults want to eat at
73%
say technology improves
restaurants more often their guest experience

Sources: National Retail Association’s 2017 State of the Industry Report; Restauant Success in 2017 Industry Report, Toast 12
© IDC
Mission of Retail in Age of Intelligence:
An Emotionally Rewarding Experience in Food Retailing
Meal Kits

© IDC 13
Shifting Appetites and Innovation Erode Food
Retailers’ Share of Stomach
Total Food Market, U.S., Current Dollars
Outside of home CAGR is

2X retail store CAGR.

Source: Calculated by the Economic Research Service, USDA, from various data sets from the U.S. Census Bureau and the Bureau of Labor Statistics 14
© IDC
For Millennials and Boomers, Food Shopping
Blends Into Eating Inside and Outside the Home
Important to Deciding Where to Shop

Source: IDC Retail Insights, IDC Shopper/Consumer Survey, December 2017 & IDC Retailer Loyalty Survey, December 2017 15
© IDC
Create Loyalty With Assortments and Experience

Source: IDC Retail Insights, IDC Shopper/Consumer Survey, December 2017 & IDC Retailer Loyalty Survey, December 2017 16
© IDC
Shopper Loyalty Is More Highly Prized than
Ever Before

76% of retailers stated that the importance

of loyalty has increased.

Shopper loyalty isn’t just an emotion.

Shopper loyalty can be earned and lost in

many ways.

Source: IDC Retail Insights, IDC Shopper/Consumer Survey, December 2017 & IDC Retailer Loyalty Survey, December 2017 17
© IDC
There's a Huge Opportunity to Cash in on Loyalty

Meanwhile, 43% of
retailers believe their average
customer is very loyal.

Source: IDC Retail Insights, IDC Shopper/Consumer Survey, December 2017 & IDC Retailer Loyalty Survey, December 2017 18
© IDC
Complement Your Loyalty Program With
Value-Added Services Customers Say Are Important
Believes Attribute Is More Important than Loyalty Program

Source: IDC Retail Insights, IDC Shopper/Consumer Survey, December 2017 & IDC Retailer Loyalty Survey, December 2017 19
© IDC
Think Beyond Your Loyalty Program to Align Your
Loyalty Strategy With What Customers Value
Performance vs. Importance in Deciding Where to Shop

Underperforming on Overperforming on
critical table stakes emerging differentiators

Consumers rated importance and performance on a 5-point scale where 5=high and 1=low

Source: IDC Retail Insights, IDC Shopper/Consumer Survey, December 2017 & IDC Retailer Loyalty Survey, December 2017 20
© IDC
Retail Tops Other Verticals on
Cognitive/AI Spending
$ 100,000
Cognitive Artificial Intelligence Systems

$ 80,000

$ 14,033
Spending (Millions)

$ 60,000
$ 11,159 Retail
Banking
$ 8,652
$ 40,000 Discrete Manufacturing
$ 6,287 Healthcare Provider
$ 20,000 $ 4,019 Process Manufacturing
$ 2,543
All Other Verticals
$ 1,108
$-
2016 2017 2018 2019 2020 2021 2022

Source: IDC Worldwide Semiannual Cognitive Artificial Intelligence Systems Spending Guide, 2017H2 © IDC 21
Summary of Findings
It’s share of stomach, not share of wallet, and grocery retailers have an opportunity to
expand their offerings to satisfy emerging food and eating preferences and habits.

Food retailers have an opportunity to increase basket size and shopping frequencies among the 79% of
shoppers who say they’re loyal—to get a sliver of the 93% of their food dollars spent elsewhere.

The core merchandising areas (good prices, quality products, good promotions) and core shopper experience
elements (clean stores, good customer service, short checkout lines) are important to all shoppers.
Elements such as personalized offers, ecommerce, and digital engagement are more important to millennials.

Beyond just points empowered shoppers want personalization and choice in loyalty programs.
They find special events, tiers, and syndicated points less appealing and can be disappointed.

Loyalty programs are just part of a loyalty strategy. Shoppers want new value beyond them—
personalization, restaurant alternatives, e-commerce and mobile services.

© IDC 22
Recommendations
The size of the prize is significant
Business Strategy
• Identify customer-driven growth opportunities
• Allocate resources to attractive customer, category
and store opportunities

Program Tactics Daily Decisions

• Early, frequent, relevant rewards • Shopper-driven price/promotion decisions
• Timely In-context communications • Shopper-driven assortment/space decisions
• Personalized offers • Shopper-centric marketing decisions
Deploy your 3D loyalty strategy to reposition your value proposition. Along with innovations in assortments,
prices, and technologies, loyalty is critical to taking market share back from restaurants and other grocery
retailers as millennials increasingly shape demand.

© IDC 23
Key Actions to Make Loyalty Work for
Your Business
Seize the loyalty advantage through emotionally and
economically rewarding customer experiences

Accelerate enterprise-wide innovation to drive loyalty across

commerce, stores, marketing, customer care, assortments,
supply chain, and operations

Make your loyalty processes smarter within an enterprise

AI/machine learning strategy

© IDC 24
Increasing Importance of Digital in Food
Retailing
Takeaways so far from a forthcoming InfoBrief sponsored by Precima,
Spring 2019
Global Surveys of 4,003 Shoppers | 403 Retailers in Europe and U.S.
• Differentiate brand using customer-facing devices and screens to create
individualized experiences
• Apply AI to weave personalized incentives and rewards into a seamless,
tailored customer journey
• Focus on end-to-end convenience and personalization for online success
• Deliver promotions how, when, and where each shopper wants—email,
mobile apps, printed coupons, loyalty cards, or at checkout

© IDC 25
 Loyalty is NOT a card or a program or an initiative
Loyalty has to be earned by Best Satisfying the Needs of Customers

To achieve this, retailers need to realize two objectives:

Understand Consistently
Customer Needs Execute Actions
on a granular, timely & that best satisfy customer
frequent basis needs

26 CONFIDENTIAL
Loyalty as a Strategy: Daily Decisions, Focused Goals

27 CONFIDENTIAL Source: Precima

Loyalty as a Strategy: Largest customer-driven growth
opportunities
What are the largest customer-driven opportunities to drive growth?

28 CONFIDENTIAL Source: Precima

Loyalty as an Outcome of Daily Decisions: Assortment
What items in the assortment have high value and are important to loyal customers?

Core Items appeal

to Best Customers
and have few
substitutes

Delist Opportunities
hold less appeal to
Best Customers and
have most
transferability

29 CONFIDENTIAL Source: Precima

Loyalty as an Outcome of Daily Decisions: Total Store Pricing
Where should you personalize prices?
Price Volume Sales GP$’s Delivery
90% of
All $1.99 +2.2% +2.3% +1.4% Shelf
Customers

Price Current Value Potential Value Intent Delivery

$1.89 high low Defend & retain email
$1.85 high med Retain & grow app
$1.95 med high Grow paper
$1.80 high low Defend & retain online
10% of $1.75 high low Defend & retain email
Customers $1.80 high med Retain & grow app
$1.65 med high Grow email
$1.69 high low Defend & retain app
$1.79 med high Grow paper
$1.89 high low Defend & retain online

30 CONFIDENTIAL Source: Precima

 Loyalty as an Outcome of Daily Decisions: Promotions
What promotions are valuable for the category and for loyal customers?

31 CONFIDENTIAL Source: Precima

 Loyalty as an Outcome of Daily Decisions: Personalized
Marketing
How do I identify offers for each customer How do I incorporate customer-driven
that drive response & incremental sales? offers into the personalization process?
Thank You

Incremental Sales (Cross Sell/Up Sell)

Improve Category Penetration

Support Brand Objectives

Total Spend and Frequency

Total Store Offer Bank Offer Optimization Engine

32 CONFIDENTIAL Source: Precima

 Loyalty Delivers Differentiated & Sustainable Results

Loyalty Strategy

Shopper-Driven
Enhanced Loyalty Personalized Customer-Centric
Supplier
Programs Marketing Merchandising
Collaboration
ROI 1-1.5X 2-3X 4-6X 5-8X

33 CONFIDENTIAL Source: Precima

Get Your Free Copy of the Study!

•Stop by Precima Booth #601

or
•Download the full report:
precima.com/future

CONFIDENTIAL
 Precima Thought-Leadership
Download the Precima “Next Generation Loyalty”
Part 1 & 2 Reports at www.precima.com

35 CONFIDENTIAL
 Coming Up

See us at FMI Midwinter - January 25-28, 2019

Miami, Florida

New Research from IDC Retail Insights and Precima:

The Increasingly Important Role of Digital in Food
Retailing

For more information on Precima: www.precima.com or inquiries@precima.com

Presentation Contact: Shasen@precima.com
36 CONFIDENTIAL
 Questions?

37 CONFIDENTIAL