Growth Channels & The Impact On Checkout Categories

Growth Channels & The Impact On Checkout Categories November 2012 Bryan.roberts@kantarretail.com Twitter: BryanRoberts72 www.kantarretailiq.eu

Shoppers Driving Discounter & Online Growth Discounters and online to drive growth €1,951 €1,548 €1,357 *Chains: Data represents the over 500 European retail chains that Kantar Retail tracks and forecasts, generally these are chains with annual turnover exceeding EUR 1 billion Source: KantarRetailIQ.eu

The Impact of ‘Where’ Within global grocery, smaller stores are winning

Big Boxes Not a Great Deal of Fun in Mature Markets Source: Carrefour

Reasons for the Big Box Decline • Non-food lines available through price-competitive online channels • Better service-led offer from specialist retailers • Some categories (music, DVD, gaming) are transitioning to non-physical delivery/consumption • Economic pressures are impacting discretionary spending/non-food demand • Shoppers are less willing to devote time travelling to out-of-town stores or navigating a 10,000 square metre store

Reasons for the Big Box Decline • Rising numbers of grocery trips are transitioning to online/Drive • Aging populations less amenable to big box experience • Petrol prices making out-of-town travel more expensive • Decline in meal planning/large basket trips • Reluctance from shoppers to invest in household inventory

This Trend is Bad News for the Hotzone

Other Checkout Trends are Equally Dispiriting • 64% of self-checkout grocery shoppers said retailers who offer self-checkout options provide better customer service • 78% of self-checkout users prefer them because they are faster • Certain impulse items can be found in 5% of baskets processed through regular checkouts, but in only 2% of self-checkout baskets Source: NCR; Kantar Retail

The Lure of Proximity – the Shopper • Urbanization • Longer working hours – little & often trips • Rising petrol prices • Growth in out-of-home food & drink • Decline in home meal planning • Decline in pantry/trolley shopping • e.g. average of nine grocery shopping trips per household per week in the UK

This Trend is Also Bad News for the Hotzone

Rapid Discount Growth Creates Issues Some Signs of Progress … • Fewer checkouts than supers & hypermarkets • Skew towards PL at checkout • Historically poor at impulse / checkout shopper marketing • Aldi has installed branded confectionery / gum

Explosive Growth of Online is a Worry • Shopper marketing less advanced online • Lack of impulse / adjacency • Compete: 32% of shoppers prefer online, as it removes temptation • Few retailers successfully recommend linked items • Trip disruption! • Example: Ocado theoretically removes six million shopping trips per year from the UK market

Some Positives Though • Non-food click & collect will drive traffic • Smaller stores increasingly part of the multichannel solution • Pick-up points often at impulse-heavy check-outs • 70% of pick-up shoppers make in-store purchase • Increasing use of pick-up lockers by the likes of Amazon • Likely to drive footfall into impulse-rich c-stores, CTNs & drugstores

Now What? • Acknowledge that hypermarket traffic will be stagnant or declining in many markets: perhaps consider devoting more shopper marketing resource to other channels • Develop counter-top merchandising solutions for smaller stores • Improve abilities to develop FSDUs for use in proximity stores • Clip-strips—when executed correctly—are excellent for creating impulse in the small store environment

Now What? • Create merchandising solutions for queuing areas for both regular and self-checkouts • Implement an impulse strategy for the discount channel—FSDUs and checkout displays are options here • Collaborate with retailers to create impulse/adjacency in the online environment • Development of merchandising solutions for Click & Collect pick-up points?

Now What? • Monitor the implementation of Amazon Lockers – will there be greater impulse opportunities at Amazon’s retailer partners? • Consider on-screen impulse merchandising for self-checkouts • Work with retailers and/or self-checkout vendors to develop merchandising solutions for self-checkout units • Create smartphone marketing strategies to anticipate the adoption of smartphone self-scanning by more retailers/shoppers

Growth Channels & The Impact On Checkout Categories