Retail Mobility Report -- 25 JUNE 2012

• 1.Retail MobilityIs Mobile the New Answer to Propel Growth?7/1/2012By Lora Cecere Founder and CEO Supply Chain Insights LLC

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ContentsContents ................................................................................................................................. 1Executive Summary................................................................................................................ 2The Race Is On ...................................................................................................................... 3Focus ..................................................................................................................................... 4Barriers................................................................................................................................... 4Convergence Takes Many Forms ........................................................................................... 5Recommendations.................................................................................................................. 6Appendix ................................................................................................................................ 8 About Supply Chain Insights LLC .......................................................................................12 About Retail Connections...................................................................................................12 About Lora Cecere .............................................................................................................12Copyright 2012Supply Chain Insights LLCPage 1 3. Executive SummaryIn the last two years, retail growth has shifted to e-commerce pure-play retailers. Revenue perstore has flattened and the consumer is more fickle expecting more from a cross-channelexperience. While the e-commerce pure-play retailer has continued to power growth in the post-recession economy, as shown in table 1, the traditional store formats of mass merchant andspecialty retailers have not been so lucky.TABLE 1: Growth by Industry Retail SectorGrowth by Retail Sector 2000-20042005-2009 2010-2012 e-commerce Retailer 15.7%16.0% 26.6% Drug Retailer 14.8%19.7%9.5% Grocery Retailer12.2%21.5% 19.6% Mass Merchant 30.6% 9.6%9.1% Specialty Retailer14.7%12.2%3.0% Source: Supply Chain Insights LLC Analysis of Annual ReturnsA new battle wages to redesign the shopping experience. All retailers are turning to mobility, andthe use of digital technologies, to capture market share. While mobile strategies offer greatopportunities for the extended supply chain, from the shopper through suppliers supplier, thecurrent focus is on demand generation. It is early. The efforts are in test mode, but excitementabounds.This report shares insights from a quantitative study of forty retailers conducted in May-June2012. The study was designed and developed in conjunction with RetailConnections insupport of their Mobile Impact Summit 2012.Copyright 2012 Supply Chain Insights LLCPage 2 4. The Race Is OnThe study results are clear: the current focus for the retailer in mobility is on demand generation.While there are a myriad of opportunities in the extended supply chain, the focus for retailerstoday is on e-commerce/social and mobile convergence. It is more marketing driven thanmarket driven. It does not extend to supply.The barriers are more human than technical. Listening, testing and learning are new concepts.The redesign of the shopper experience is fraught with organizational change managementissues. By and large, today, the retail mobile efforts are embedded deep into the e-commerceorganization with companies taking first, and often baby, steps.The techniques vary both by industry sub-segment and by technology adoption maturity. Theresults will be over-arching and will extend across the extended supply chain; but this willhappen over time, not today. The focus is currently marketing within the retailers marketingorganization. This is good news and bad news. While retail marketing professionals embracenew technologies, they dont always understand the implications of technology adoption. As aresult, this offers a new opportunity for retail Information Technology (IT) professionals andmarketing within retailers to collaborate.In figure 1, we share high level insights from the quantitative study:Figure 1: Survey FindingsCopyright 2012 Supply Chain Insights LLC Page 3 5. FocusThe sands are shifting. The mobile initiatives are a little over a yearold, but it is slowly transitioning from mobile for mobiles sake to digitalconvergence. While many in the industry have given up on social-50% of US adults own a smartphone.commerce (the use of social technologies to improve the shoppingexperience and drive commerce), in this study, we find increasing-Worldwide, there are now more smartphones sold thaninterest in social commerce. Slowly the digital strategies are comingcomputers.together within marketing. However, the use of mobility for the larger -33% of shoppers are willing toorganization is still uncharted territory. share geolocation data. -36% of shoppers makeBarriers purchases while on their phone in the store.The barriers are many. The believed benefits are great. Executivesupport is high. The mission is clear. The race is on. The largest -44% buy digital media while 18% buy groceries throughbarrier is human. Getting the right talent is a limiting factor for themobile applications.team building the mobile strategy. The second barrier is existingElectronics and clothing are the fastest growing categories.technology. -The number one reason forThe technology limitations are two-fold: the use of mobile for shopping is I am bored and looking to Outside-in. Increasingly teams working on mobile pass time.strategies find that there is no place to put the new forms of -There is a higher conversiondata coming from mobile applications. The reason israte on tablets than Smartphones. Browse-to-buysimple. The design is outside-in: from the customer, backconversion is 2X higher onto the organization. This is in stark contrast to thetablets than smartphones with larger average salesconventional design of enterprise technology systems thatpurchases (25%).were designed from the financial code of accounts out. -34% of shoppers start on one Pace and Rhythm. Traditional systems have been built ondevice and finish on another.near real-time data. Mobile data is real-time. The pace and -Mobile shopping as avolume of data is exponential. It makes the traditionalpercentage of e-commercedefinitions of Customer Relationship Management (CRM)tripled in the past year.obsolete.Source: Facts from Type of Data. QR codes, social data, tags, streaming data, presentations from Retail Connections Conferencevideo, geolocation, are all new data elements. They areeach key to mobile techniques, but they are largely outsidethe scope of traditional retail enterprise applications.Copyright 2012 Supply Chain Insights LLCPage 4 6. Figure 2: Barriers to Mobile StrategyConvergence Takes Many FormsFor the retail respondents, the focus of their mobile strategy is demand. The central theme ismobile/social and e-commerce convergence. The average respondent has 1.6 mobileapplications, and operates under three banners. They manage two e-commerce sites and overthree Facebook sites. While the majority of companies have complex supply chains, and 54%turnover in store operations, approximately 1/3 of respondents have a group dedicated toimproving operations through the use of mobile.Copyright 2012Supply Chain Insights LLCPage 5 7. Figure 3: Importance versus Performance of Retail Mobile StrategiesRecommendationsThe retailer has never had a better opportunity to know their shopper. Use this opportunity toredefine and differentiate the shopper experience. Build Organizational Listening Capabilities. Organizations are used to traditional marketing with global broadcasting of marketing messages. The trained behaviors are yelling not listening. The organization has been built with a big mouth and no ears to listen to the shopper and adapt product strategies based on consumer sentiment. The power has shifted to the shopper. Social data allows holistic listening, but too few organizations know how. Use the investments in e-commerce and mobility to build cross- functional listening skills. Reward Systems Change. With multiple devices, the shopping experience will now start on one device and end on another; or the shopper in the store may buy on a device. As a result, a major push for the retail mobile strategy needs to be a close examination of retail metrics.Copyright 2012Supply Chain Insights LLC Page 6 8. Fail Forward. Test. Test. Test. As an organization, do not take the time to get mobile right. You will not have the time for perfection. Invest in technology with the intent that it is an investment that will quickly become obsolete. Build the Right Bricks. While mobile strategies today do not extend to the extended supply chain, the impacts will quickly permeate the organization. Prepare now by implementing perpetual inventory, supply chain visibility and real-time sensing in the supply chain. Use these projects to focus on store reliability.Copyright 2012 Supply Chain Insights LLC Page 7 9. AppendixThis quantitative study was conducted in cooperation with Retail Connections in the period ofMay-June 2012 for their Retail Mobile Impact Summit held in Dallas, TX on June 25th, 2012. Thecontent of this report is based on answers from forty respondents on the role of mobility in theirIT strategies. The highest percentage of the survey responses were from specialty retail ITexecutives with an average of twenty-one years of retail experience.The respondents organizations are complex. The average person answering this survey worksat a company operating three banners, managing five distribution centers, and operates storeswith 54% employee turn-over. They are also manufacturers with 50% of the companiesanswering the survey managing supply chains that provide products for their own stores.The survey represents an active buyer of retail mobility solutions. Over 73% of the respondentsare either directly involved in the purchase of retail mobility solutions or manage groups ofpeople that are actively involved in mobility projects.Copyright 2012Supply Chain Insights LLC Page 8 10. Copyright 2012 Supply Chain Insights LLC Page 9 11. Copyright 2012 Supply Chain Insights LLC Page 10 12. Copyright 2012 Supply Chain Insights LLC Page 11 13. About Supply Chain Insights LLCSupply Chain Insights LLC (SCI) is a research and advisory firm focused on helping supplychain teams improve value-based outcomes. The offerings include research-based AdvisoryServices, a Dedicated Supply Chain Community and Web-based Training. Formed in February2012, the company helps technology providers and users of technologies gain first moveradvantage.About Retail ConnectionsRetailConnections serves senior retail executives by hosting events that provide exceptionallearning and networking. We believe the value of establishing new business relationships inperson far outweighs other forms of communication. In this era when knowledge from all retaildepartments is intertwined, events that bring together top-level management from every functionarea deliver the greatest business insights.About Lora CecereLora Cecere (twitter ID @lcecere) is the Founder of Supply Chain InsightsLLC and the author of popular enterprise software blog Supply ChainShaman currently read by 4500 supply chain professionals. Her book,Bricks Matter, publishes in the fall of 2012.With over eight years as a research analyst with Altimeter Group, AMRResearch, Gartner Group and now as a Founder of Supply ChainInsights, Lora understands supply chain. She has worked with over 600companies on their supply chain strategy and speaks at over 50conferences a year on the evolution of supply chain processes and technologies. Her researchis designed for the early adopter seeking first mover advantage.Copyright 2012Supply Chain Insights LLC Page 12