Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014...

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Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment

Transcript of Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014...

Page 1: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

Presented by:

Amy Koo, Senior AnalystLaura Kennedy, Principal Analyst

Mass Webinar

May 29, 2014

Target and Walmart:Next Steps in Multichannel Fulfillment

Page 2: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Copyright © 2014 Kantar Retail. All Rights Reserved.

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No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photography, recording, or any information storage and retrieval system now known or to be invented, without the express written permission of Kantar Retail.

 

The printing of any copies for back up is also strictly prohibited.

 

Disclaimers

The analyses and conclusions presented in this seminar represent the opinions of Kantar Retail. The views expressed do not necessarily reflect the views of the management of the retailer(s) under discussion.

 

This seminar is not endorsed or otherwise supported by the management of any of the companies covered during the course of the workshop or within the following slides.

Page 3: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Agenda

• Target Flexes its Fulfillment Beyond the One-Stop Box–Closing Considerations for Target Suppliers

• Walmart Expands Small Formats to Create a Market Ecosystem–Closing Considerations for Walmart Suppliers

3

Page 4: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

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Target Flexes Its Fulfillment Beyond the One-Stop Box

4

Page 5: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Target’s Hard Reset

1. Achieve faster growth in the U.S.

2. Dramatically improve Canadian performance

3. Accelerate the digital transformation

Updated priorities in the post-Steinhafel era

Source: Kantar Retail research and analysis 5

“We need to accelerate our digital transformation and become a leading omni-channel retailer [by becoming] more flexible in how we serve our guests…. This includes delivering products and services more flexibly, in our stores or anywhere else the

guest wants to receive them.”

-John Mulligan, Q1 Earnings Call, May 2014

Page 6: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Target Pitted Against Online Growth DriversUnderstanding the context for the value of multichannel guests

6Source: Kantar Retail analysis

CONVENIENCE24/7, save time, delivery

ASSORTMENTEveryday + the Long Tail

PRICE & VALUESame or better value

1

2 3

Page 7: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

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Physical Store Not the Preferred Venue

Store Computer Tablet Smartphone

Gathering info about products considering purchasing 12% 63% 19% 6%

Having a convenient shopping experience 38% 43% 13% 6%

Having a stress-free shopping experience 30% 51% 16% 4%

Feeling like I’m making a safe, secure transaction 64% 26% 8% 2%

Shopping for fun 62% 21% 14% 3%

Getting my shopping done quickly or efficiently 39% 43% 13% 4%

Online/mobile preferred for 4 of 6 types of shopping

Kantar Retail ShopperScape®, March 2013 7

Best Shopping Experience, by Type of Shopping(among past four-week Target/SuperTarget shoppers who own all devices)

Prefer online/ digital

Prefer online/ digital

Prefer physical store

Prefer physical store

Page 8: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Amazon Threatens Target’s Core Model

Hitting both sides of Target’s “Expect More, Pay Less” proposition with deliberately strategic categories:

• Baby

• Groceries

• HBA

• Apparel

• Toy

And loyalty programs:• Amazon Prime

• Amazon Fresh

• Amazon Mom

• Subscribe & Save

• Familyhood

From books, to electronics, to stealing groceries

8

Subscribe & Save permanently removes a trip driving item from a Target basket…or even eliminates a trip!

Source: Kantar Retail analysis

Page 9: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Also New Disruptive Grocery Delivery ServicesStealing trips for perishables too!

Source: Kantar Retail research and analysis 9

• Currently in limited to select metro areas

• Personal shoppers will deliver from eligible stores in the surrounding area including Whole Foods, Costco, Market Basket & more.

• Delivery under 2 hours is $3.99.

• Limited to Stop & Shop regions

• Shoppers can place orders for next-day delivery or up to two weeks in advance.

• Shoppers can also save time by copying their shopping list into the ‘Express Shop’

• Limited to NYC metro region • Shoppers can also sign up for

a ‘Delivery Pass’ membership• Site features meal ideas,

Fresh Direct coupons, and weekly ‘President's picks’ sales

Page 10: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Target Shoppers Shop Online at Higher Rates

10

Online penetration of consumables still relatively low

Note: Online shopping rates are for shopping/purchasing at any retailer online, not necessarily Target.comPink boxes indicate Target shoppers also more likely than average shopper to purchase product online (95% confidence level)

Source: Kantar Retail ShopperScape®, July 2013

Page 11: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Mobile as a Delivery PlatformProviding on-the-go guides and references

Source: Kantar Retail research and analysis, Target and shopkick mobile app 11

Guests sent to Target’s guide for winter baby gear

Learn more about Target’s special collections with video and look books

Target’s shopkick lookbooks curate styles, seasons, and outfits to browse

Page 12: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

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Target Ticket Aligns to Digial Media TrendTarget’s 3rd mobile app enables digital distribution

Source: Kantar Retail research and analysis, TargetTicket.com 12

• Beta mode released in September 2013, update scheduled for spring 2014

• 30K+ titles to rent or buy

• Partnered with Common Sense Media for parental controls for kids’ profiles

• 10 free videos for new members

• REDcard 5% savings applies

• Enables Target to distribute exclusive content digitally by code redemption

Page 13: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Target Subscriptions RelaunchesMore categories and more discounts

Source: Kantar Retail research and analysis 13

“Think of all the extra space you’ll have in that red shopping cart…for clothes, home décor –

and, oh yeah, the baby.”

- abullseyeview.com, Sept. 25, 2013

“Think of all the extra space you’ll have in that red shopping cart…for clothes, home décor –

and, oh yeah, the baby.”

- abullseyeview.com, Sept. 25, 2013

• Revamped in April 2014 to adjust for other programs’ extra savings

• REDcard holders can stack discounts for 10% off with subscription

• Trying to steal back Subscribe & Save attrition

Page 14: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Social Media As Transaction PointBeauty guests get first Facebook product program

Source: Facebook.com/TargetStyle and Kantar Retail research and analysis 14

Target Style Facebook Fans were given the opportunity to order the retailer’s first ever sample box program in April 2013, sent directly to guests’ homes.

For this limited trial run, only 20,000 boxes were available, and were sold out within a week.

Page 15: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

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Guests Want More Mobile Use in StoreParticularly among Hispanics

Source: Kantar Retail ShopperScape®, May 2013 15

What Would You Like to Be Able to Do on the Target App While in Target?(among past four-week Target shoppers who own a smartphone)

Index vs. Total

Urban Hispanic

95 114

101 119

86 112

101 136

77 139

92 133

104 125

75 128

90 160

56 120

99 224

Page 16: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Connecting Mobile to the Physical StoreInfrastructure updates to improve engagement

Source: Kantar Retail store visits , research, and analysis; Target mobile app 16

All Target stores have free WiFi as of the end of 2012, to leverage guest mobile capabilities in the stores

“We’ve rolled out free in-store WiFi across the chain, allowing guests to research products and use our apps while they’re shopping in our stores.”

- Gregg Steinhafel, 2012 Q3 Earnings Call, November 2012

All Target store POS scanners can now read barcodes on the mobile device

Older red-light scanners couldn’t read these

Every Target store became shopkick location-enabled by May 2012

Page 17: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Cartwheel Integrates Facebook and the Store

• Users can select a limited number of coupons at a time from a list of hundreds

• In-store coupons range from 5%-30%

• Mobile app released in June 2013

• Redemption rates are “10 times higher” than Catalinas or emails

Allows guests to share coupon offers with friends

Source: Kantar Retail research and analysis, cartwheel.target.com 17

savings as of 5/27/2014

“Active Cartwheel users have on average increased their trips and spending at Target by nearly 30%, driving hundreds of millions of incremental sales from these households.”

- Kathee Tesija, Q1 Earnings Call, May 2014

Page 18: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

In-Store Mobile Enriches & Expands ShelfQR codes quickly link displays to content

Source: Kantar Retail store visits and analysis 18

Online only colors “baked in” to store signage

Page 19: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Several Retailers Utilizing Store PickupTarget is not a fast follower either

Source: Kantar Retail research and analysis 19

Amazon offers 2 day shipping to local lockers, as well as fresh food delivery

Walgreens order online, pick up in store

Walmart enables multiple fulfillment and delivery options

Where is Target in this next step?Where is Target in this next step?

“We're also dividing meaningful resources to enhance the flexibility of our fulfillment network, which includes our stores, regional distribution

centers, online fulfillment centers and import warehouses.” -Kathee Tesija, Q2 Earnings Call, August 2013

Page 20: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Early Success with In-Store Pick UpDriving online holiday sales, and in-store sales

Source: Kantar Retail research and analysis 20

We continue to see encouraging results from our recent rollout of in-store pickup of digital orders [which] make up about 10% of our digital

transactions….- Kathee Tesija, Q1 Earnings Call, May 2014

Team members pick from shelves and back rooms, with significant utilization for high-ticket discretionary items as a way to reserve before a visit.

Page 21: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Piloting Other Flexible Fulfillment Options

• Store to Home– Same Day Rush Delivery to select areas in Boston, Minneapolis,

and Miami starting in June. Orders placed by 1:30 PM will be delivered that evening for $10

– Standard Shipping from stores will roll later in the year for 136 stores in 38 markets, utilizing stores as fulfillment centers with 1-2 day shipping windows

• Pay in Store, Pickup in Another options are also currently being tested

Goal is to transition to guest facing this year

Source: Kantar Retail research and analysis 21

Page 22: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Third Parties Help on Flexible Fulfillment

eBay Now tests are still ongoing in SF and NYC areas. Target is one of many retailers.

Google Shopping Express tests are ongoing in LA and SF areas and include other retailers.

Net-a-Porter will continue delivering international orders for the Target’s designer collections, including upcoming Altuzarra

Testing other options with partners on the ground

Source: Kantar Retail research and analysis 22

Page 23: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Closing Considerations for Target Suppliers

Target is in the process of transforming its business to be more convenient for its guests through more fulfillment options. Across the path to purchase, help Target:

Understand guest preferences for learning about and buying your products in-person, online, and through flex options

Expand your assortment online and link to this “endless shelf” in-store and across other channels

Engage guests through mobile to offer easy points of connection to your brands and Target – particularly in store

Improve the store experience of your products to offer something unique in-person that guest’s can’t get virtually

Understand guests’ demand for flexible fulfillment

Source: Kantar Retail analysis 23

Page 24: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Walmart Expands Small Formats to Create a Market Ecosystem 

24

Page 25: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Walmart US’s Strategy is Adapting

Source: Kantar Retail analysis, company reports & presentation25

“Walmart is redefining the next generation of retail growth and is the best-positioned retailer to win at the convergence of digital and physical retail” –Bill Simon, April 2014

Page 26: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Multiple Format Strategy to Serve Range of Trips

26Source: Company presentations, Kantar Retail analysis

“We're going to provide greater access to our customers by using all of the formats in our portfolio” – Bill Simon, Oct. 2013

Page 27: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

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Neighborhood Market and Small Format Take Off

Source: Company reports, KRIQ, Kantar Retail analysis 27

“We are excited to be on the edge of a new transformation in retail” -Bill Simon, March 2014

Sales (USD Millions)Store Count

Page 28: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Express Is Breaking Out

Walmart Express details:

• 10,000sq ft -12,000 sq ft, 11,000 – 13,000 SKUs

• Designed for urban & rural locations, net 20 open to date, with expansion plans ramping up in FY2015

28Source: Company presentations, Kantar Retail analysis

“We are very, very pleased with the topline.”– Bill Simon, April 2014

“We are very, very pleased with the topline.”– Bill Simon, April 2014

Page 29: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

In Rural Locations, Strong Results

Source: Company presentation, Kantar Retail store visits, analysis 29

“We have the best results in rural and the likes of suburban with pharmacy and with gas, and that’s exciting for us, a very nice model there.” –Bill Simon, March 2014

Gentry, Ark.Richfield, NC Dunn, NC

Page 30: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Prices versus a Neighborhood MarketLargely aligned

Source: Kantar Retail research, store visits, and analysis 30

Method:

•Basket of 40 edible, non-edible and HBA items

•Collected March 2014 in Fayetteville, AR

•Pricing was largely parallel, though edible was more expensive at Express, and non-edible was slightly cheaper

•6 Rollbacks at both, though NMKT had 3 in edible to Express’ 2

“[Pricing] starts out the same…the aim is for it to be the same and we don’t charge more for the convenience” –Bill Simon, March 2014

ExpressNeighborhood

Market

Index(Express to N'Market)

Edible Grocery $44.56 $43.68 102Non-Edible Grocery $58.41 $58.76 99HBA $36.46 $36.46 100

Total $139.43 $138.90 100

March 2014 Results

ExpressNeighborhood

MarketIndex

(Express to N'Market)Soup $1.58 $0.80 198Potato chips $3.48 $2.68 130Orange juice $3.48 $3.00 116Pasta (dry) $1.28 $1.28 100Canned tuna $0.88 $0.88 100Peanut butter $2.78 $2.78 100Butter $2.00 $2.00 100Ice cream $3.88 $3.88 100Ketchup $1.96 $1.96 100Coffee $3.88 $3.88 100Frozen pizza $3.48 $3.48 100Salsa $2.48 $2.48 100Apple sauce $1.98 $1.98 100Bread $2.58 $2.68 96Cake mix $1.18 $1.28 92Cereal $2.74 $2.98 92Baby food $0.98 $1.08 91Pop $3.94 $4.58 86

Paper towels $2.97 $2.97 100

Laundry detergent $9.97 $9.97 100Dish soap $0.97 $0.97 100

Blue window cleaner $2.87 $2.87 100Trash bags $7.48 $7.48 100Food storage bags $4.38 $4.38 100Aluminum foil $5.38 $5.38 100Diapers $17.97 $17.97 100Toilet bowl cleaner $1.97 $1.97 100

Disinfecting wipes $2.48 $2.48 100Dryer sheets $1.97 $2.32 85

Vitamins $5.98 $5.98 100Women's razors $5.78 $5.78 100Men's deodorant $3.97 $3.97 100Shampoo $1.50 $1.50 100Liquid hand soap $0.98 $0.98 100Shaving gel $1.67 $1.67 100Ibuprofen $3.48 $3.48 100Lip balm $1.00 $1.00 100Mouthwash $5.97 $5.97 100Toothpaste $1.96 $1.96 100

Antibiotic ointment $4.17 $4.17 100E

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Page 31: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

HBA Ladder: MouthwashExpress assortment skews private label; price mix needs work

Source: Kantar Retail research, store visits, and analysis 31

Mouthwash Assortment:

Express Neighborhood Market Supercenter

% Private Label 25% 18% 12%

Page 32: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

But is this Targeting a Convenience Trip?Operational simplicity vs. shopper simplicity

Source: Kantar Retail store visits, analysis 32

“We can assort a 12,000 or a 15,000-sq ft [Express] store with the entire assortment from a Supercenter, a 600,000 distribution system” – Bill Simon, March 2013

“We can assort a 12,000 or a 15,000-sq ft [Express] store with the entire assortment from a Supercenter, a 600,000 distribution system” – Bill Simon, March 2013

Page 33: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Meanwhile, Neighborhood Market Accelerates

33Source: Kantar Retail store visit, company presentation

Enablers to Neighborhood Market’s expansion:

•Assortment mix refined, with the importance of the pharmacy identified and removal of full-service counters to reduce costs

•New merchandising approach, differing from the Supercenter

•Operational structure, market managers roles redefined to ensure appropriate attention to the box

“This format has a long runway in

front of it” – Bill Simon, March

2014

“This format has a long runway in

front of it” – Bill Simon, March

2014

Q1 comps: 5%

Page 34: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Penetrates Urban Markets for a Quick Trip

• In the Presidential Towers,

(555 W. Madison St.)

• 27,000 sq ft store

• Site to Store, MoneyCenter, Pharmacy

Chicago’s West Loop store is a good example

34Source: Kantar Retail store visits and analysis

“And we'll connect those stores with our eCommerce platform so we'll be able to access [urban markets].” –Bill Simon, Oct. 2013

“And we'll connect those stores with our eCommerce platform so we'll be able to access [urban markets].” –Bill Simon, Oct. 2013

Page 35: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Services Make the Store Distinct, Drive Trips Pharmacy, MoneyCenter, Site to Store…

Source: Kantar Retail store visits, analysis 35

Featuring access to Walmart, Inc’s range

of services

Featuring access to Walmart, Inc’s range

of services

Page 36: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

A Closer Look at the MessageCan it have credibility as the neighborhood store?

36Source: Kantar Retail store visits, and analysis

Positioning as a “local grocery”, with “fresh”, “fast”, “new” and “bright”

Messaging in line with

Walmart’s

Messaging in line with

Walmart’s

Selection emphasizes

local ties

Selection emphasizes

local ties

Messages geared toward health

Messages geared toward health

Page 37: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Market’s Positioning versus the Supercenter

• Fayetteville, AR locations

• 43-item branded basket, covering edible, non-edible, and Health & Beauty aids

• NMKT had more Rollbacks at 6; Supercenter only had 3

Prices largely align on basket

37Source: Kantar Retail store visits, analysis

Ed

ible

Gro

ce

ryN

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Neighborhood Market Supercenter

Index(N'Market to SC)

Salsa Pace $2.48 $1.98 125

Baby food Gerber $1.08 $0.98 110

Cereal Cheerios $2.98 $2.74 109

Cake mix Betty Crocker $1.28 $1.18 108

Pop Coca-Cola Classic $4.58 $4.48 102

Bread Nature's Own $2.68 $2.68 100

Pasta (dry) Barilla $1.28 $1.28 100

Canned tuna Starkist $0.88 $0.88 100

Orange juice Tropicana $3.00 $3.00 100

Peanut butter Jif $2.78 $2.78 100

Butter Country Crock $2.00 $2.00 100

Ice cream Edys $3.88 $3.88 100

Soup Campbell's $0.80 $0.80 100

Potato chips Lay's $2.68 $2.68 100

Ketchup Heinz $1.96 $1.96 100

Apple sauce Motts $1.98 $1.98 100

Frozen pizza Tombstone $3.48 $3.48 100Coffee Folgers $3.88 $3.88 100

Paper towels Sparkle $2.97 $2.97 100

Laundry detergent Tide $9.97 $9.97 100

Dish soap Ajax $0.97 $0.97 100

Blue window cleaner Windex $2.87 $2.87 100

Trash bags Glad $7.48 $7.48 100

Dog food Pedigree $11.88 $11.88 100

Food storage bags Ziploc $4.38 $4.38 100

Aluminum foil Reynold's $5.38 $5.38 100

Diapers Huggies $17.97 $17.97 100

Toilet bowl cleaner Lysol $1.97 $1.97 100

Disinfecting wipes Clorox $2.48 $2.48 100

Dryer sheets Bounce $2.32 $2.32 100Total $70.64 $70.64 100

Vitamins Flintstones $5.98 $5.98 100

Hand lotion Curel $8.88 $8.88 100

Women's razors Bic Soleil $5.78 $5.78 100

Men's deodorant Old Spice $3.97 $3.97 100

Waxed floss Glide $3.37 $3.37 100

Handsoap Softsoap $0.98 $0.98 100

Baby powder Johnson & Johnson $3.42 $3.42 100

Ibuprofen Advil $3.48 $3.48 100

Lip balm Chapstick $1.00 $1.00 100

Mouthwash Listerine $5.97 $5.97 100

Shave gel Barbasol $1.67 $1.67 100

Shampoo Suave naturals $1.50 $1.50 100

Toothpaste Crest $1.96 $1.96 100

Antibiotic ointment Neosporin $4.17 $4.44 94

March 2014 Results

Neighborhood Market Supercenter

Index(N'Market to SC)

Edible Grocery $43.68 $42.64 102Non-Edible Grocery $70.64 $70.64 100HBA $52.13 $52.40 99

Total $166.45 $165.68 100

Page 38: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Food Merchandise LadderNMKT has too many SKUs…

38Source: Kantar Retail store visits and analysis

Mustard Assortment:

Express Neighborhood Market Supercenter

% Private Label 33% 25% 24%

Page 39: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Non-Edible Grocery Ladder: Paper TowelsMix and number well-proportioned

39Source: Kantar Retail store visits and analysis

Paper Towel Assortment:

Express Neighborhood Market Supercenter

% Private Label 27% 25% 23%

$3 or less: 45% of

Express SKUs vs.

25% at SC, NMKT

Page 40: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

© Copyright 2014 Kantar Retail

Where Else Do N’Market Shoppers Shop?Convenience and value focus are prominent

Source: Kantar Retail ShopperScape®, January-December 2013 40

Past Four Week Neighborhood Market

Shoppers

Walmart (excl. Neighborhood Market) 72%*Amazon.com 57%

Walgreens 57%

Target 57%

CVS/pharmacy 47%

Dollar Tree 44%

Kroger 36%

Dollar General 35%

Family Dollar 32%

Costco 30%

Sam's Club 29%

Safeway 28%

7-Eleven 28%

Kmart/Big Kmart 26%

Big Lots 24%

Supervalu/Albertsons 24%

Trader Joe's 18%

Whole Foods Market 18%

Publix 18%

ALDI 16%

Top 20 CPG Retailers Also Shopped by Regular Neighborhood Market Shoppers

Top 20 CPG Retailers Also Shopped by Regular Neighborhood Market Shoppers

* Read as “72% of past-four-week Neighborhood Market shoppers also shop regularly at Walmart”

Among value discounters, Dollar Tree has the highest cross-shop with NMKT

Club retailers rank higher than most other grocery retailers (except for Kroger) for cross-shopping

“We top the major grocery chains in sales

per square foot” – Bill Simon, March 2014

“We top the major grocery chains in sales

per square foot” – Bill Simon, March 2014

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Even More Targeted: Walmart On CampusFocus on quick, small portions; electronics and office

Source: Kantar Retail store visites 41

Fayetteville, AR (University of Arkansas)

Tempe, AZ(Arizona State)

Added 9 locations in 2013; coming in 2014 to the University of Missouri and University of Central Florida

Added 9 locations in 2013; coming in 2014 to the University of Missouri and University of Central Florida

“Give us a lot of learning about how young people shop and how they carry their habits forward when

they leave the store” –Bill Simon, March 2014

“Give us a lot of learning about how young people shop and how they carry their habits forward when

they leave the store” –Bill Simon, March 2014

Atlanta, GA(GA Tech)

Page 42: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

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Now Testing: First C-Store, in BentonvilleWalmart to Go is “tethered” to the nearby Supercenter

Source: Kantar Retail store visit 42

• Opened March 19, 2014, near HQ• 16 gas pumps• Product mix: Grab-and-go: candy, fountain soda,

coffee, Marketside pizza, prepared sandwiches (deli run by Bentonville Butcher & Deli)

Convenience: charcoal, baby food, window cleaner, pet food

Impulse: DVDs, flowers, seasonal toys

“You'll see us use fuel as a major piece from a convenience perspective for the [small] stores as

we add them to the pipeline.” – Bill Simon, Oct. 2013

“You'll see us use fuel as a major piece from a convenience perspective for the [small] stores as

we add them to the pipeline.” – Bill Simon, Oct. 2013

Prices for 9 out of 10 items at To Go matched prices at

the nearby Supercenter

Prices for 9 out of 10 items at To Go matched prices at

the nearby Supercenter

Page 43: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

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• Rolled out nationally in 2011, expanded to 40,000+ items

• Includes baby, toy, home décor, hardware & outdoor living, consumables

• Sends a text when the order is ready

• Test launched in mid-2013 in D.C. area

• Lockers located at the store, to provide greater pick-up convenience

• Initial feedback in August was positive, with plans to expand further

• Grocery delivery started in 2011 in southern Calif., this pilot expanded in 2012

• Fresh grocery picked from store shelf and delivered by Walmart, $5 to $10 delivery charge

• In January 2014, began piloting a complementary store pick-up option for online orders in Denver

• Standalone pickup point set to open in Arkansas; 15,000-square-foot facility will house 10,000 items

• Free shipping on orders of $50+ (up from $45+ last year)

• Expanded to cover most (98%) items Walmart.com sells

• 6-9 day delivery window; $2.97 charge for 3-5 day option

• Pilot expanded in Q1 2013

• Shipping select orders from certain stores directly to customers

• Majority of orders delivery in 2 days or less

Leveraging the Supercenter for Pick Up, DeliveryMeeting shoppers’ needs for immediacy

Source: Kantar Retail analysis; company materials 43

“The backroom were not only served as a holding area for the sales floor, but it would also serve as a kind of a little mini warehouse…”- Bill Simon, Oct. 2013

“The backroom were not only served as a holding area for the sales floor, but it would also serve as a kind of a little mini warehouse…”- Bill Simon, Oct. 2013

Page 44: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

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The Vision: Market Ecosystem

Source: Company presentation, Kantar Retail analysis 44

“The roadmap is well underway. We've been testing each and every one of these individual elements all along the way”

– Bill Simon, Oct. 2013

Page 45: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

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Tethering Small Stores to the Supercenter

Source: Company presentation, Kantar Retail analysis 45

“The next generation of retail, we believe will be channel agnostic”

– Bill Simon, Oct. 2013

Page 46: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

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The First Tethering Test? Near Oriental, NCExpress opened May 2, NMKT opened this spring

Source: Kantar Retail research and analysis 46

Other tethering tests underway

in AR

“Customers are buying products, such as bicycles

and swimming pools, which they can’t traditionally get inside a 10,000-square-foot

box” –Bill Simon, May 2014

“Customers are buying products, such as bicycles

and swimming pools, which they can’t traditionally get inside a 10,000-square-foot

box” –Bill Simon, May 2014

Page 47: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

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The Store in the Larger Context

Source: Kantar Retail analysis, store visits 47

Manufacturer Warehouse Stores Home

“The biggest opportunity…is winning the intersection between physical and digital retail” – Mike Duke, Oct. 2013

“The ability to use our supercenters as a cross-dock platform to serve

other stores, particularly smaller

stores” – Bill Simon, Oct. 2013

“The ability to use our supercenters as a cross-dock platform to serve

other stores, particularly smaller

stores” – Bill Simon, Oct. 2013

Page 48: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

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Closing Considerations for Walmart Suppliers

• Walmart will create access through its ecosystem. The development of Walmart’s integrated distribution architecture will be central to its efforts to combat the Amazon threat, which means suppliers must think not only about new banners, but also about the logistics to move products between those formats.

• Develop strategies for selling through all of Walmart’s banners. Given Walmart’s plans to grow these formats and target them to specific shopper needs, it is now necessary to have distinct selling propositions for each.

• Be proactive in tethering tests. Track how much and which sizes of your products sell well in various Walmart banners. Helping Walmart understand these distinctions will benefit you now and help you grow together as they expand their ecosystems.

Source: Kantar Retail research and analysis 48

Page 49: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

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June 4–5 in Chicago, IL or June 18–19 in New York, NY

ForumForumMid YearMid Year

New Planning Coordinates: Navigating The Multichannel World

Join Kantar Retail thought leaders for our signature Mid Year Forum aimed at ensuring you formulate future plans that are strategically vital, predictively

accurate, and closely aligned against your most important customers. Please email [email protected] for more information.

Page 50: Presented by: Amy Koo, Senior Analyst Laura Kennedy, Principal Analyst Mass Webinar May 29, 2014 Target and Walmart: Next Steps in Multichannel Fulfillment.

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Contact:

Amy KooSenior [email protected]

617.912.2872www.kantarretailiQ.com

Laura KennedyPrincipal [email protected]

617.912.2851www.kantarretailiQ.com