2011-H2 Breakthrough Insights

Second Half 2011
Focus on the Horizon
/ Design
Jennifer Zipp Lisa Weiderman
/ Research Team
Sara Al-Tukhaim Frank Badillo Jessica Campbell Wilson Chen Alida Destrempe Karolina Fiedler Ray Gaul Bryan Gildenberg Kaina Hamed Doug Hermanson Yi Ting Hu Rema Iyer Simon Johnstone Laura Kennedy Vadim Khetsuriani Amy Koo Jim Leonard Stephen Mader David Marcotte Alexandra Mansfield Rachel McGuire Leon Nicholas Ivana Nikolic Mike Paglia Himanshu Pal John Rand Bryan Roberts Kate Senzamici Robin Sherk Steve Spiwak Xue Fei Sun Lynne Vantassel Mary Brett Whitfield Lisa Wiltshire Fan Zhang Anne Zybowski
2011 Kantar Retail LLC. All Rights Reserved. Disclaimer: The analyses and conclusions presented herein represent the opinions of Kantar Retail. The views expressed in this publication do not necessarily reflect the views of the companies covered by this publication. This publication is not endorsed, or otherwise supported, by the management of any of the companies covered herein. Copyright Notice: No part of this publication may be reproduced in any form or by any means without the express written permission of the copyright owner.
96
Breakthrough Insights
/ In This Issue
Foreword 2
Retail Insights
UK Online Grocery: Comparison Shopping Trips Online Retail in China: Getting Ahead of the Curve Adding Clarity or Clutter? A First Look at Walgreens and CVSs New Private Brands, Nice! and Nuance What Targets Suppliers Need to Know about Walmart Canada Getting it Right: Anticipating Amazons Growth Trajectory Tesco Price Drop: Seismic Shift or Smoke and Mirrors? Safeways Strategic In-Store Marketing Beyond the Box: Costcos Digital Dive 5 14 20 24 34 39 44 49
Shopper Insights
Value Discounters Continue to Attract More Shoppers Where the Men Are/Arent Shopping Through the Eyes of a Low-Income Shopper 59 67 73
Economic Insights
The Global Macroeconomic Outlook for Retail: Danger from Europe to China The Macroeconomic Outlook for U.S. Retail: Pushed Toward Recession 80 88
FOREWORD
Welcome to Kantar Retails semi-annual collection of Breakthrough Insightsour recent research pieces that we feel best reflect the key issues in the rapidly changing retail landscape.
Figure 1: The 5 Shares Map
Many years ago, my father took me deep-sea fishing for the first time, Share of Wallet and during the voyage I began to feel more than a little queasy. My Share of Share of Dad looked down at me at one point and saw me closing my eyes, Real Growth Engagement hoping that the swells rocking the boat would pass. His simple instruction to me at the time is something that has stuck with me ever Retailer/ Shopper since:The only way youll feel better is if you keep your eyes open and Landscape Post-Recession focused on the horizon. Your eyes will see the movement you feel in Market Evolution Digital Shopper and Conditions your head, and youll stop feeling sick. Ive thought of that advice many times over the years, and quite freInformation quently recently as the queasiness has come back with a vengeance Post-Desktop in the second half of 2011. Those of us in the northeastern United Information Share of Share of States have experienced hurricanes, earthquakes, tornadoes, floods, Solution Decision and a freak late autumn blizzard in this six-month period, and thats even before we think about the turbulent global economic and retail Source: Kantar Retail landscape! Ive written many times in the last six months about the need to cope more effectively in uncertain and volatile times, but I have gradually come to realize a simple point that to some degree contradicts that characterization of the world today: only infrequent volatility is uncertain. What we are faced with today, and what Kantar Retail believes will be the modus operandi for the global retail marketplace in 2012 and beyond, is a sort of perpetual volatilityat which point volatility becomes a known that needs to be planned for, not an unknown that surprises. Management guru Jim Collins builds on this idea in his writings on why formerly great companies fail. Great companies are rarely derailed by the unknown, as the unknown tends to relatively evenly impact all companies and their competitors. Great companies that avoid failure do so with one simple skill: the ability to sift through the known to find the truly important, and to plan and act in a way that deals with and capitalizes on that known. In pursuit of that theme, what you will find in Kantar Retails H2 Breakthrough Insights collection is a series of works that define the major factors that are shaping the retail landscape and what the strategies should be that surround those great big knowns. To establish the case for this more permanent volatility, our Chief Economist Frank Badillo has contributed two pieces that highlight its root causes and effects: the first on the uncertainty associated with many of the major retail markets around the world and the second focusing on the continued troubled outlook for the U.S. retail environment.
Two framing perspectives provide a lens to view the remaining articles. The first is Kantar Retails proprietary 5 Shares framework, and the second is those shares married with the fundamental questions companies will need to grapple with in order to thrive in this era of perpetual volatility.
Share of Real Growth: Where Will I Grow?

Fans of Kantar Retails analysis will be familiar with our oft-repeated phrase that growth is going to continue to come from less comfortable places. Phil Smiley and Justin Cook profile one of those uncomfortable knowns: online retail/e-commerce in China and how digital commerce today is going to make the Chinese retail landscape of tomorrow look foundationally different than other major global markets. We also know that U.S. retailers are increasingly going to be pushed to intensify international expansion as U.S. retail market growth sputters, and Robin Sherk maps out the showdown we expect to see as Walmart and Target square off against one another in the Canadian market. Where will I grow also is a relevant question even for U.S.-centric companies. There are unexplored channels, segments, and niches that though unfamiliar can be sources of real growth. Mary Brett Whitfield previews our findings about arguably the largest under-served shopping population in the United States todaymenby drawing conclusions from our recently augmented ShopperScape monthly U.S. shopper panel that has been expanded to more precisely analyze male shopping behavior. For the first time, channels such as home improvement, consumer electronics, and convenience get a fair shake from our analysis as the male voice is heard more clearly. Gen Xers redefining gender roles at home and marriage-delayed Gen Ys are responsible for the dramatically increased mens involvement in shopping and shopping decisions. Kantar Retails work here can help our clients develop strategies to capitalize on this key known.
Share of Engagement: How Will I Cut Through the Clutter and Connect to Shoppers?
The risk of focusing on the known is in resorting to lazy clich or not challenging conventional ideas, and nowhere is this risk greater in a known which needs more dimension: the idea that retailers need to make their stores more experiential to compete with online competitors. Some retailers do, but in fact, some may compete by making their stores simpler and faster to shop instead of more interesting and engaging. Retailers that are enhancing their store experience need to do so with a firm eye on how that improved experience causes sales increases. As our Kantar brethren at TNS are fond of reminding us, keeping people in the store longer doesnt necessarily sell moremost retailers that are successful sell and close quickly and effectively. With that screen in place, Alida Destrempe evaluates Safeways attempts to re-invigorate its store experience and value communication in a photo-based study.
Share of Decision: Why Will Shoppers Choose Outlets and Brands?

Price today remains a cornerstone of shopper outlet choice, and there is no concept more fundamental to the relationship between retailers, suppliers, and shoppers than price. To a casual reader of the newspaper, a short-duration extreme discounting concept like Groupon having a market capitalization of more than USD10 billion should highlight one simple known: list price and average selling price are going to become increasingly disassociated from one another. The implications of this known are massive and impact virtually every core retail industry processpricing strategy, promotion, placement, product availability, branding, and new item strategy. Our price-based analysis this month takes us to the United Kingdom, where Bryan Roberts highlights the offline grocery price battle that has turned into an Orwellian state of permanent total war, and to the United States, where Leon Nicholas investigates how low-income shoppers are getting price signals from retailer opening price point (OPP) assortments and pricing models.
Breakthrough Insights 3
Share of Wallet: How Much Will Shoppers Spend?

Building on the OPP theme, the rise of discount formats in various retail markets around the world is another key known. The United States in particular is susceptible to this, as it by far the largest retail market in the world and one with a relatively large disparity of income (otherwise known as a Gini coefficient). To understand this phenomena in much more detail Dave Marcotte profiles the rise of discounters in the United States and shares insights on both who is shopping in these stores and what is driving them there. A few key categoriessuch as party, occasions and greeting cardsare responsible for a surprisingly high amount of destination traffic. Understanding this is key to understanding this channel in the United States, Walmarts continued attempts to respond to it, and to understanding low-income shoppers in general. U.S. shoppers making less than the median household income would be the third-largest retail market in the world (behind only the wealthy U.S. shoppers and China) if they were a standalone country.
Share of Solution: What Will We Sell Shoppers?

Share of wallets long-term cousin is really share of solution:what can our share of wallet be over time? Brendan Langan takes this discount phenomenon on from a different angle and investigates the increased competitive intensity as the value channel continues to expand into areas traditionally dominated by drug. In particular, this overlap is now exacerbated by the senior leadership at both major U.S. non-food discount operators being veterans of the drugstore industry. In this case, the major known is that low-income shoppers are increasingly looking to alternative vehicles to stay healthy or cure ailments in an economically challenging environment, and the value channel will almost certainly play a critical role in this adaptation by the bottom tiers of the economic pyramid. Another retailer seeking to aggressively expand its footprint from a solution perspective is Amazon.com, and our final article for this period is Anne Zybowskis overview of how Amazon.com used its 2010 acquisition of Quidsi (soap.com, diapers.com, and yoyo.com) to expand its footprint into conventional replenishment categories. There is no thinking observer of shopper behavior who would deny that a massive amount of volume in categories that have predictable replenishment, low shopper engagement, and high shopper benefit for their household being in-stock on those items (diapers, toilet paper, etc.) increasingly is going to move to some sort of online-facilitated auto-replenishment model. Today, it remains somewhat surprising how few retailers, suppliers, or agencies have addressed this fundamental known with specific action steps to compete with or leverage this inexorable sea change in shopping behavior. We hope that these articles motivate you to attack these specific issues of course, but more importantly perhaps we hope that this overview gives you the confidence to act, convincingly and boldly, in this world of perpetual volatility. Closing your eyes or pretending that the seas arent rough is only going to make you sick. Vision firmly focused on the horizon of the Great Big Knowns and a dedication to turning insights around those knowns into action appear to be the core survival skills for the bumpy ocean of 2012 and beyond. Best of luck, and hope to see you somewhere soon,
Bryan Gildenberg Chief Knowledge Officer, Kantar Retail

4 Breakthrough Insights
UK Online Grocery: Comparison Shopping Trips

By: Bryan Roberts / Originally published: September 19, 2011
While it is relatively easy to complete comparison shopping trips at bricks & mortar stores, a comparison of online grocery retailers (all the way from browsing online to receiving the products) is a slightly more complex, not to mention expensive, affair. To conduct a genuine comparison, we felt it was necessary to actually complete a series of shopping trips with all of the major online grocers in the UK. Here we present the findings from our experience shopping all of the major online grocers, covering issues such as the online shopping experience, pricing, delivery, and accuracy.
Survey background
Our survey comprised a series of online shopping trips conducted over a two-week period, at Tesco, Asda, Sainsburys, Waitrose, and Ocado. We selected 15 SKUs (Figure 1) across a variety of categories that we assumed would be available through all of the retailers e-commerce sites. For the sake of price comparability we selected only branded items and avoided categories such as fresh produce where product weights and pack sizes are significantly variable and/or where branded penetration is low. We registered as a first-time customer at all of the sites, so, in effect, these were all first-time shops with the online retailers. During the shopping process, we timed how long it took to find and
Tesco App Enables Shoppers to Scan Ads and Add Them to Online Shopping Lists
Source: Tesco Breakthrough Insights 5
Figure 1: Selected 15 SKUS Across Variety of Categories
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Shower gel Dishwasher tabs Kitchen roll Laundry tabs Tea Water Fruit Squash Baked beans Brown sauce Cider Bread Cheese Wine Sausages Toothpaste
Original Source Lime Shower Gel 250ml Finish All In 1 Regular 28 Pack Plenty Kitchen Towel White 2 Roll Ariel Liquitabs Colour 23s Yorkshire 80 Teabags 250g Highland Spring Sparkling Water 6x500ml Squash Robinsons No Added Sugar Orange Drink 1l Heinz Baked Bean In Tomato Sauce 415g HP Brown Sauce 425g Strongbow Cider 4x440ml Warburtons Wholemeal Bread Medium Sliced 400g Cathedral City Extra Mature 350g Wolf Blass Yellow Label Chardonnay 75cl Walls Classic 8 Pork Sausages 454g Colgate Max White Toothpaste 100ml
Source:Kantar Retail
In terms of price comparisons, the fact that some of the SKUs were not stocked by some of the retailers meant that exact comparisons across all retailers was not possible. But in order to achieve comparability, we made the assumption that when a retailer did not carry a particular item, the item would be included in that retailers basket at the lowest non-promotional price offered by one of the other retailers. While we acknowledge that this methodology is not strictly watertight, it was preferable to simply deleting four SKUs from our 15-SKU basket. Throughout, we have ranked the retailers on the various criteria featured, with 5 as the best score, and 1 as the worst.
Availability
The 15 SKUs were selected Availability scores with the assumption that Asda 4 as well-known brands and Ocado 4 routine pack sizes, they Sainsburys 3 would be available through Tesco 5 all of the retailers. Alas, this Waitrose 5 was not to be, creating the aforementioned complication in price comparisons. Waitrose and Tesco offered all 15 products; there was one SKU missing from the Asda shop (Highland Spring water was available in a 9-pack rather than a 6 pack); Ocado did not sell the 80-pack Yorkshire Tea bags; and Sainsburys did not offer Finish dishwash tabs in the required pack-size and Walls sausages were simply unavailable in a category dominated by brand leader Richmond, private label, and more upscale gourmet ranges.
select the 15 SKUs and kept separate timings of the check-out process. Throughout the process, we were keeping an eye out for features such as the hierarchy of brands/private labels as they appeared in each category, product suggestions or recommendations, special offers and multi-buys, any evidence of vendor investment in terms of space on shelf, availability of the 15 SKUs, and any hints or reminders that were intended to prompt us to exploit special offers.
Shopping trip duration

The relative navigability of Shopping trip stores clearly had an impact duration scores on the length of time each Asda 3 shopping trip took. We Ocado 5 expect subsequent trips to Sainsburys 5 be faster as we get the hang Tesco 4 of the vagaries and quirks Waitrose 2 of navigating each site. That said, there were clear disparities in shopping trip duration. Sainsburys and Ocado came out on top as the easiest/fastest sites to shop, with Tesco and then Asda offering the next fastest sites to navigate. Rounding out the pack is Waitrose, a site where we believe there is still a huge amount of work to be done to improve the shopper experience.
Delivery time-slots: Proximity

While not necessarily Time-slots: something that is within proximity scores a retailers control (a Asda 5 successful service will be Ocado 4 heavily booked up), there Sainsburys 4 were some real differences Tesco 4 in terms of how quickly Waitrose 3 the retailers were able to provide delivery. Asda was able to offer us a delivery later in the day of our order, while Ocado, Tesco, and Sainsburys were all able to fit our delivery on the following day. The biggest lag was for Waitrose, where the nearest available timeslot was two days from the time of order. A useful feature offered by Asda allows shoppers to choose a timeslot (indicated by a van symbol on the scheduling tool) for when a van is already scheduled to be in your area enabling shoppers to coordinate their deliveries with other shoppers in their area, minimising the environmental impact of their deliveries and increasing efficiencies for Asda. A similar feature also is offered by Ocado.
Checkout
The next stage of the Checkout scores shopping process was Asda 5 checkout and, again, there Ocado 3 was a marked variation in Sainsburys 2 the speed of this process. Tesco 3 Coming in last was Waitrose 4 Sainsburys, with around five minutes needed to complete our order. The Tesco experience was marred by the site crashing midway through checkout, although we were quickly able to log back in and thankfully retrieve the shopping basket and restart checkout. Asda was the clear winner, offering a rapid and effective checkout process that took just two minutes.
Delivery Timeslots: Duration

One of the inconveniences associated with any sort of home shopping is the requirement for someone to be in at the delivery address to receive the order. Indeed, this is one of the key drivers behind the growth Time-slots: duration scores Asda 4 Ocado 5 Sainsburys 5 Tesco 4 Waitrose 4
of the drive-thru grocery ecommerce model in markets as diverse as the US, Germany, France, the UK, and Spain; such services provide all of the convenience of online shopping without the burden of being housebound. In ranking timeslot duration, higher scores have been awarded for the shortest timeslots, the logic being that these shorter slots are more convenient for time-pressed shoppers. Sainsburys and Ocado triumphed thanks to the availabilityof one-hour slots as opposed to the two hours offered by the alternative services.
sent a reminder SMS on the day before delivery. The clear winner here was Ocadowe were fully informed throughout the process and were left confident that our delivery would be timely and accurate.
Pricing
As referenced above, the Pricing scores fact that not all of the Asda 4 retailers stocked all of the Ocado 5 SKUs meant that we had to Sainsburys 3 improvise slightly in order Tesco 2 to construct comparable Waitrose 1 baskets. We accept that this might not be the most scientifically rigorous piece of analysis, but it was either this solution or disregarding the SKU for all of the retailers. The instances of unavailability are highlighted in red in the Figure 2, while promotions are highlighted in green. Where products were replaced by items of a different value, we have included the original price of the item, again for the sake of comparability. And finally, as was the case with Tesco, when a retailer ended up not processing/delivering an item, we have included that items price as though it were delivered. Surprisingly, perhaps, the clear winner in terms of basket pricing was Ocado. This is a clear result of its brand price-matching with Tesco plus a couple of fortuitous promotions (on wine and dishwash tabs) that brought its basket in at the lowest price by far. Without the promotions, Ocado would have been beaten on price by Asdaits EDLP strategy coming throughas well as by Tesco and Sainsburys.
Communications
A common theme with Communication home shopping in general scores is the need for confirmation Asda 3 and reassurance on Ocado 5 orders and deliveries. The Sainsburys 4 supermarkets in question Tesco 4 here varied enormously Waitrose 3 in the way that they communicated between the time the order was placed and the time the delivery was received. All of the supermarkets issued a confirmation email upon receipt of the order. This is where Waitrose and Asda both stopped: the next time we heard from them was when our groceries were delivered. Ocado was much more active in communicating with us: as well as the confirmation e-mail, we received a reminder SMS message the day before delivery. On the day of delivery, we received an SMS telling us of changes to the order and another SMS on the day to remind us of the delivery time and to assure us that there were no unavailable items. Both Tesco and Sainsburys
Figure 2: Price Comparisons
Product Original Source Lime Shower Gel 250ml Finish All In 1 Regular 28 Pack Plenty Kitchen Towel White 2 Roll Ariel Liquitabs Colour 23S Yorkshire 80 Teabags 250g Highland Spring Sparkling Water 6X500ml Robinsons No Added Sugar Orange Drink 1l Heinz Baked Bean In Tomato Sauce 415g HP Brown Sauce 425g Strongbow Cider 4x440ml Warburtons Wholemeal Bread Medium Sliced 400g Cathedral City Extra Mature 350g Wolf Blass Yellow Label Chardonnay 75cl Walls Classic 8 Pork Sausages 454g Colgate Max White Toothpaste 100ml Total basket
Key: Unavailable; Promotion
Waitrose 1.94 7.65 1.87 7.09 2.28 2.39 1.25 0.69 1.99 3.83 0.70 4.50 9.99 2.28 2.00 50.45
Asda 1.94 5.00 1.86 6.79 2.28 2.34 1.10 0.69 1.68 3.50 0.70 3.98 7.98 2.28 2.00 44.12
Tesco 1.94 6.00 1.87 6.79 2.28 1.99 1.25 0.50 1.69 3.99 0.70 3.98 9.99 1.14 2.00 46.11
Ocado 1.94 3.83 1.87 6.79 2.28 2.34 1.25 0.69 1.50 4.79 0.70 3.98 6.66 2.28 2.00 42.90
Sainsburys 2.00 5.00 2.00 7.09 2.28 2.39 1.25 0.69 1.69 3.99 0.70 4.48 7.49 2.28 2.00 45.33
Source:Kantar Retail
The most expensive by far was Waitrose, which comes as a surprise as it also price matches Tesco on 1,000 branded SKUs. This price matching was claimed by the Waitrose website to apply to baked beans, squash, tea, sausages, bread, shower gel, and sauce, but it became clear when we shopped Tesco that Waitrose was 19p more expensive on baked beans and 30p more expensive on brown sauce. For sausages, Tescos half-price offer meant that Waitrose was really off the mark. It might be the case that we shopped Waitrose at a time when it was in between Tesco price comparisons (although it claims to check prices twice per week), but even so, we are not left with a huge sense of confidence in Waitroses price matching claims.
Delivery charges
The issue of delivery charges Deliver charges can be a complex one, as scores many of the retailers have Asda 3 a sliding scale of delivery Ocado 4 charges depending on size of Sainsburys 1 shopping basket, day of the Tesco 2 week, and time of day. We Waitrose 5 therefore acknowledge that, if we had spent more money, or chosen another day/ time, then some of these charges might have been lower or not have existed at all. Its clear that online retailing is more economical for larger trolley-style shops than it is for the relatively small basket such as ours. A larger basket will often avoid delivery
charges, or at least reduce them in terms of cost per item. Waitroses approach is much simpler (free delivery for shops of over 50), while the other retailers have a sliding scale depending on order value and schedule of delivery. Asda charges between 3 and 5. Ocado deliveries can be free (in the graveyard slot of 10:3011:30 p.m.) but usual charges vary from 49p to 4.99. Tescos scale ranges from 3.00 to 6.00, while Sainsburys has a similar range of 3.50 to 6.00. What our shopping experience revealed is that there are a number of trade-offs available to online shoppers. The Waitrose delivery is free, but we are likely to pay a higher price for our groceries. Similarly, a higher delivery charge will be levied for those times of day that are convenient for most shoppers: we must trade off between low cost and convenience. One trade-off becomes very clear: for online grocery to be at its most economical from the shoppers perspective, shoppers must purchase high-value, large-basket orders. Funnily enough, we suspect that the same logic holds from the retailers perspectiveby baking in delivery charges based on basket size and schedule, shopper behaviour is being shepherded in the direction desired by the retailers.
and Tesco all arrived within Timeliness their allotted time slots. scores Ocado demonstrated some Asda typically elegant customer Ocado service: our driver (James in Sainsburys the Odette Onion Van) called Tesco to say that he was in the Waitrose area and asked if we were willing to accept an early delivery. We answered in the affirmative, and he arrived 30 minutes ahead of schedule.
5 5 5 5 5
Delivery service
The basic distinction here Service scores is: will the driver offer to Asda 4 take groceries into the Ocado 5 customers kitchen, and Sainsburys 5 possibly even offer to help Tesco 3 unpack? The experience Waitrose 5 here varied from extremely good (Waitrose, Ocado, and Sainsburys all delivered the bags into the kitchen), to the moderate (Asda dumped our bags on the front door mat) to the less than ideal (we had to unpack our own bags from a Tesco crate on the front step). While we appreciate that there might be certain legal/insurance/safety concerns with delivery staff entering customers homes, the delivery experience actually can have a significant effect on the entire process.
Timeliness
Clearly, a key performance attribute for grocery e-commerce operators is timeliness, and none of the providers let us down here. Sainsburys was actually a few minutes early, while Asda, Waitrose,
Bags
The UK press has periodically had a field day over the excessive bagging perpetrated by online
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grocers. We certainly had a mixed experience. The second-best performer here was Ocado, which used four bags for 15 items. The delivery, from the main Hatfield fulfilment centre, came in four colour-coded bags (purple for ambient and red for fridge) and our excellent Ocado driver was keen to point out the bag recycling service that the company offered. Asda was the worst for baggingusing seven bags for 14 SKUs. One bag was dedicated to a single substitute product (Substitutions are easy to spot theyre always delivered in a separate bag and are clearly marked on your delivery note), although, as there was no bag colour-coding, this was not immensely helpful. Tescos bags were colour coded: green for chilled products; white for ambient, and blue for substitutions. Some of the bagging was faintly ridiculous, obviously based on the picking regimen in the Greenford dark store: baked beans and brown sauce came in their own bags, while some products were loose in the crate. A total of five bags were used. Waitrose did very well here: four bags were used for 15 items. They were colour-coded (blue for fridge and green for ambient) and the driver reminded us of the bag recycling service offered by the retailer.
our email confirmation Accuracy from Tesco, the delivery scores receipt omitted the wine Asda 5 and, indeed, the wine was Ocado 5 nowhere to be found in the Sainsburys 5 delivery. For the purposes Tesco 4 of the pricing comparison, Waitrose 5 we have assumed it was delivered at the same price, but this explains Tescos poor standing in the accuracy scores. The only consolation was that we were not charged for the missing item.
Substitutions
Product substitutions have Substitutions been another contentious scores issue for online grocers, Asda 4 with assorted inappropriate Ocado 5 and/or comedic substitutions Sainsburys 5 making the press. Ocado Tesco 4 and Sainsburys were Waitrose 3 the only two retailers to escape unscathed in this way, delivering exactly the products as ordered. Waitrose made two substitutions for out of stock items, replacing Plenty kitchen towels at 1.87 with Thirst Pockets at 1.22 and the 350g Cathedral City Extra Mature with a Mature 600g pack (charging the lower price of 4.50 rather than 5.29), slightly compensating us for the wrong flavour of cheese with extra volume. A nice touch here was that the substitutions brought us below the free delivery threshold of 50, but we were still given free delivery. Asdas one substitution saw them replace the dishwasher tabs with Finishs Lemon variant
Accuracy
Aside from the issue of substitutions (see next section), we only had one example of poor accuracy. Despite ordering a bottle of wine on Tesco.com, and despite this bottle of wine being featured in
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at same price, while Tesco also substituted this product. The 6.00 28 pack was unavailable, so (according to the delivery receipt) we were given two 15 packs for 7.76, the 1.76 difference being refunded. One problem here is that we were actually given two packs of 14.
Final scores
Having judged the various Final services on 14 criteria, scores Ocado , the only onlineAsda 52 only specialist under Ocado 62 consideration, emerges as Sainsburys 52 the clear winner. All three Tesco 52 of the Big Three retailers Waitrose 54 scored level points, with Waitrose pipping them at the post in second place. Asda was let down by a poor show in terms of bagging and shelf-life; Ocados only real weakness was the checkout experience; Tesco was undermined by pricing, delivery charges, and accuracy; Sainsburys fared badly on the cost of delivery and availability; and Waitrose has work to do on improving its website and sharpening its pricing. The good news for all operators is that not one of them had an absolute shocker; most were let down by one or two facets of their online operations.
Shelf-life
Shelf-Life The final criteria the scores retailers were judged on Asda 2 was shelf-life. Some of the Ocado 3 retailers (e.g. Waitrose) use Sainsburys 3 the longest possible shelf Tesco 5 lives as one of their selling Waitrose 4 points, while others have been castigated for using online shopping as a complex stock rotation system, foisting near-expired products on the unsuspecting public. In this basket, this criteria boils down to the sausages, as the cheese ordered lasted a couple of months from all of the retailers. Sainsburys did not stock the sausages, so they get the benefit of the doubt here, while Asda was the only retailer with an issue here. A use-by date of August 20, with the delivery occurring on the evening of the August 18, meant that an enforced change of menu planning was in order. Only two days shelf life compared poorly to the eight from Tesco, seven from Waitrose and five from Ocado. We have arbitrarily given Sainsburys the same average score as Ocado as they did not stock the item in question.
Implications for suppliers:

There was not a great deal of evidence throughout our shopping trips that suppliers are currently able (or perhaps willing) to secure a more prominent place on shelf in the online shopping experience. Indeed, most of the sites/categories we shopped were in alphabetical order or were front-loaded with private brand.
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There are clearly some ways of bolstering a presence in these retailers online stores. Securing space to announce new products or promotions is commonplace, and we encountered several sticky product advertisements that followed us around a shopping trip, even into different categories. In terms of the alphabetical-order issue, and this might sounds like something of a fatuous recommendation, ensuring that brands (or rebrands) are named with an early letter in the alphabet might be a relatively simple way of ensuring online prominence. Another way of securing prominence will be to ensure a brands participation in online features such as recipe-based shopping lists and pre-made shopping lists. At the moment, these pre-made features are extraordinarily skewed toward private brands. Sampling is an opportunity with online. Rather than relying on the hit and miss approach of instore sampling, which is untargeted and dependent on traffic flow in the store, delivering free product
or product miniatures alongside e-commerce deliveries enables manufacturers to send samples directly into shoppers homes, often targeted by shopper group or by geography. Impulse, contrary to popular belief, can still be achieved online, such as with Tescos Goes Nicely With feature that can lead shoppers into new categories and new adjacencies. This appears to be a currently underutilised function by both retailers and suppliers. Online also appears to be a more favourable arena for multi-brand or multi-category suppliers to implement cross-brand or cross-category promotions. These win favour with retailers through basket-building but are often difficult/expensive to achieve instore as space constraints mean that displaying the participating SKUS in close proximity is often problematic, meaning that shoppers might have to visit four or five different aisles. By displaying these promotions during the online shopping trip or at check-out, shoppers, retailers, and brands should be able to more readily benefit from trans-category promotional programmes.
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Online Retail in China: Getting Ahead of the Curve

By: Phil Smiley and Justin Cook / Originally published: August 2, 2011
Rapid growth in Chinas fledgling modern retail market will drive companiesboth retailers and manufacturersto invest heavily in gaining market share. Online retailing still represents a fraction of total retail sales in China. However, online retailing represents a very large and fast growing portion of modern retailing in China. Kantar Retail predicts that many executives will learn that investing heavily in online business platforms will be a requirement for retailers wishing to dominate share in Chinas rapidly evolving modern trade. The result will be a modern trade environment the likes of which weve never seen before.
When Walmart had just 300 stores in the United States, the Internet didnt exist. Today, Walmart operates 338 stores in China, a country with more than 400 million Internet users and one where the online shopping bug is spreading fast. Online retail is going to play a major role in the development of Chinas retail market. It will likely occupy a larger share of transactions than
in Western markets. Online shopping in China is already gaining adoption faster than we have seen in Western markets. Consequently, online retail will play a disruptive role in the development of modern retailing in China. Many Chinese cities dont have a modern retail store and are unlikely to get one soon, but they do have extensive Internet access. These cities also have millions of consumers with a desire for convenience and value. Online retail can and will deliver for these consumers.
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Could it be that offline store networks of the size we see in other markets, such as the US or European markets, will not materialize in China due to the early and fast penetration of online retail? Judging by recent events, Walmart China along with other leading local and global retailers may already be thinking this way. Walmart operates more than 4,300 stores in the US and 338 stores in China. But will Walmart build more than 4,000 stores in China? It is more likely that Walmart and other leading retailers will operate a two-tier strategy. First, they will develop an online retail network that can reach all 400 million modern trade consumers. Second, they will invest in growing and connecting this network to online-integrated brick-and-mortar stores. Theyll grow both businesses at the same speed. The result is a very different business model from what is seen in Western markets. Because the business model is different from models weve seen before, it is hard to visualize. For example, recently, Walmart acquired a stake of Chinas largest online hypermarket called Yihaodian, which means No.1 store. Yihaodian is a promising company with a promising online platform. Yihaodian has grown online sales from USD 0.64 million (RMB 4.17 million) in 2008 to USD 125 million (RMB 805 million) in 2010. They have recently set up an online retail team in Shanghai to handle online operations in China. This move indicates Walmart Chinas plans to focus on ecommerce operations in the future. This ecommerce center joins Walmarts original center, located in New York.
Other leading retailers are setting up and expanding their online businesses. In addition to Walmart, Tesco and Carrefour also have announced plans to expand their online retail operations in China. Taobao, the leading online retail site which hosts B2C and C2C transactions, has experienced rapid growth in recent years. Taobao revenues in 2010 were estimated to be USD 60 billion. In fact, if we classed Taobao as a retailer it would be by far the largest retailer in China, dwarfing the sales of high profile retailers such as Walmart, Carrefour, and Tesco.
Chinas Online Consumers

China has a huge base of Internet users, and it is still growing at an amazing speed. Retailers in China are finding it easier to reach remote consumers via clicks and ship retail models
Figure 1: Penetration of Shopping Online (% HHs) - Personal Care
18% 16% 14% 12% 10% 8% 6% 4% 2% 0% National Urban China 4 Key Cities A Cities B Cities C Cities D Cities 12% 10% 16% 13% 11% 8%
Source: Kantar Worldpanel China: 52 weeks ended 25 March 2011
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rather than by building new stores. Chinas Internet-savvy consumers are willing to accept new technology and innovation in their life and are already accustomed to Internet shopping. In some categories, such as Baby, it is estimated that up to 15% of sales are taking place through online channels. Kantar Worldpanel reported that 17% of National Urban Chinese households have used the Internet to purchase grocery products online with sales growing at 59% year-on-year. Personal care products are more sought after online compared with food and household cleaning items (Figure 1). The proportion of households who shop online for personal care items is actually higher in the C cities compared with A cities (13% vs. 10%). This is because shoppers in the lower tier cities may struggle to find the products they want to buy in traditional brick and mortar stores, so as an alternative, seek them out through online stores. Kantar Worldpanel identifies two key motivations for purchasing FMCG products online: price and convenience. The key personal care categories, which are more likely to be sought after, are the more expensive ones, such as cosmetics, facial skincare, perfume, and hair colorants. Within these categories, shoppers are opting for more premium brands, but are actually paying a much lower price per item. Therefore, shoppers want premium but at a value price. Convenience also plays a key role, particularly for categories which are heavy or bulky in their nature. For categories such as soft drinks, laundry powder, and instant coffee, shoppers are purchasing much
bigger pack sizes to take advantage of the items being delivered to their home. For example, the average pack size for soft drinks is 2.3 liters in traditional stores but 3.5 liters online.
Making Sense of the Online Retail Market

The online market can be a confusing place, littered with different terminology and jargon. Kantar Retail analysts break the online retail market in China into four segments, as illustrated in Figure 2. The first segment is B2C key accounts which would include internet retailers such as Amazon.cn, Buy 360, Dang Dang, and the online operations of retailers such as Tesco, Carrefour, and Walmart. In this segment products are selected by the retailer who then takes full control of assortment, price, promotion, website design, and the user experience. The second segment is what we call the online B2C General Trade. This segment is effectively the small, independent business traders operating and selling directly to consumers via the Taobao exchange.
Figure 2: Online Retail Market Segmentation
ONLINE RETAIL
B2C Key Acc Amazon.cn Buy 360 Dang Dang Tesco.com Carrefour.com B2C GT Taobao Small Business Trader B2C FLAGSHIP C2C
Eg LOreal Flagship Store, Wyeth Flagship Store
Taobao Exchange
Source: Kantar Retail Analysis
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The third segment is B2C Flagship. These are online stores that are generally operated by manufacturers and hosted on Taobao Mall. In this case, manufacturers are selling their brands directly to the consumer via proprietary online stores. As such, Taobao is effectively operating as an online broker between manufacturers and consumers. The fourth segment is online retail from Consumer to Consumer. This is most prevalent through the Taobao exchange where consumers sell goods and services to each other, much in the same way that eBay operates in other markets.
Consumer-to-Consumer platform designed for consumers and small businesses; Taobao Mall, a business-to-consumer marketplace; and eTao, which will target the shopping search market. All three companies will continue under the Alibaba Group. In an e-mail to Alibaba employees, company CEO Jack Ma said the company is making the move as e-commerce has faced disruptive changes, pointing to social trends and the entrance of new companies in the market. He stated that significant change has taken place in customer demand we need to offer consumers more sophisticated and customized services.
How Will Chinas Online Channel Evolve?

There is no doubt that Taobao leads the game at the moment, yet B2C online retailers such as Amazon and Dang Dang and the online operations of retailers such as Tesco, Carrefour, and Walmart are making strong progress in the market. Kantar Retail forecasts that while Taobao will retain its dominant position, online retailers such as Amazon and the major hypermarket retailers will grow faster in coming years and wrestle business away from Taobao. Taobao, Chinas largest online retailer, has already recognized the threat from growing B2C Online retailers such as Amazon and Dang Dang and has taken steps to restructure its business model. Taobao has recently split into three separate companies to better address its target markets, according to parent company Alibaba Group. The restructuring creates Taobao Marketplace, a
Online Can Change the Rules of the Game

Traditional marketing models dont necessarily apply in online retail. An example of this is the diapers category in China, where Procter & Gamble dominates the offline market with its Pampers brand. P&G has gained its position through heavy marketing expenditure alongside strong in-store presence and promotion. Yet for certain online retailers, the Mamy Poko brand challenges the dominance of Pampers. This is due to two reasons. First, Mamy Pokos lower price point appeals to value-seeking online shoppers. Second, Mamy Poko receives online consumer reviews and ratings that are equal to or better than Pampers ratings (Figure 3). Consumer recommendations go a long way to helping sell the brand.
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Figure 3: Diaper Wars on Amazon
Source: Amazon.com
What Are the Prospects for Online Retail in China?

Online retail is set to continue its exponential growth in China with little in the way to stop it. The potential introduction of taxes and the lack of infrastructure in some parts of the country may inhibit the speed of growth. However, these potential changes pale in comparison to some factors driving growth such as:
Growing consumer desire for convenience and

value
Poor access to offline retail stores in rural

areas
Rapidly improving national infrastructure Improving online payment systems

These factors will ensure that online retail will enjoy a strong and enduring growth trajectory.
High Internet usage and rapidly expanding

broadband network
Supplier Implications
All suppliers need to form a point of view on how their category fits with Chinas online retail market. This will help frame up the potential opportunity of
High mobile phone penetrationit is estimated

that 300 million consumers go online via their phones in China
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doing business online. This can be done in three steps. First, suppliers need to consider which products are best suited to the servicing the needs of online shoppers. Within personal care, for example, shoppers are seeking more premium products at a value price. Also, shoppers will look to take advantage of the convenience of delivery and purchase larger pack size which is particularly important for drink and baby categories. Second, suppliers need a plan to develop their business in this fast-growing and unfamiliar channel. Without one, they risk getting left behind or missing the opportunity to convert offline brand share to online brand share. Developing a plan means figuring out where to play and how to win in the online retail market. Third, companies need to learn before moving ahead in online brand promotion. In many ways online brand promotion is unchartered territory. Most suppliers have mastered the art of brand promotion via key customers using the annual joint business planning process. However, most online retailers do not even conduct annual planning.
The business is much more spontaneous and fast moving. As a result, no manufacturer has built an institutional understanding of how to drive business with online retailers. Manufacturers struggle to build visibility and meet the dissimilar needs of online retailers. This third activity is critical. Online retailers operate differently from offline retailers and have different requirements from suppliers. A good pack shot and product description can be the difference between success and failure. Yet many suppliers fail to provide adequate support to online retailers. By the same token, some online retailers, such as Amazon, offer a national distribution service to the consumer (i.e., if the product they order in Shanghai from the Shanghai fulfillment center is not available, Amazon will ship to the consumer from another city such as Beijing). In this case, the product may be handled many times in the supply chain and without special packaging to protect it the chances of it arriving at the consumer damaged are greatly increased.
Kantar Retail Point of View

A Checklist for Suppliers
Prepare a strategy for online retail Identify which sectors of online retail you want to focus on Get to know the B2C retailers early Prepare a learning plan for online retailunderstand what drives sales in online retail, understand
shopper needs and drivers
Figure out how to drive demand for your brands in an online retail environment
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Adding Clarity or Clutter? A First Look at Walgreens and CVSs New Private Brands, Nice! and Nuance
By: Brendan Langan / Conversation originally published: August 2, 2011
Conversations
Walgreens and CVS have stepped up the pace of private brand development over the past few months, cutting-in hundreds of new items across the store. Recent additions to the shelf have included new economy brands (Nice! and Just the Basics) as well as more fully developed proprietary brands (Good & DeLish and Nuance Salma Hayek). For now, it remains to be seen whether these brands will add useful choice and clarity to the merchandising ladder, or merely add to the clutter on the shelf. Either way, neither Walgreens nor CVS intend to take their foot off the accelerator anytime soon, with aggressive plans to increase private brand share of sales and shelf space.
Figure 1. Chain Drug Private Label Comparison Walgreens Front Store Sales (billions) National Brand Sales (billions) Private Brand Sales (billions) Private Brand % Front Store Sales Est. Private Brand SKUs Priate Brand % Front Store SKUs Front Store Sales National Brand Sales Private Brand Sales Primary Private Brands
Walgreens, W, Good & Delish, Pet Shoppe, Caf W, Deerfield Farms, Big Roll, Casual Gear, Penway, Pure American, Big Flatts 1901, Mens Zone, Xcel, Details, Bioinfusion, Studio 35 Duane Reade, DR, DR Delish, Good & Delish, Apt. 5, Apt. 5 Goes Green, Pet Shoppe, Prevail CVS, Gold Emblem, Just the Basics, Essence of Beauty, BIG CHILL, Nuance Salma Hayek, Absolutely Divinie, Blade, Fuel, Earth Essentials, Pet Central, Caliber, 24.7, skineffects, Christophe, Ellin Lavar, Fruitopia, Bioluxe Rite Aid, Simplify, Pantry, HOME, Renewal, tugaboos, Pure Spring, PharmaAssure, Thrify, Rx Suncare
Duane Reade $979.4 $866.8 $112.6 11.5% 2,000 N/A CAGR 20052009 4.4% 3.3% 14.7%
CVS $18,350.4 $15,230.8 $3,119.6 17.0% 5,100 26.2% CAGR 20052010 12.6% 11.5% 18.8%
Rite Aid $8.1 $6.8 $1.3 16.0% 3,300 13.2% CAGR 20052010 5.0% 4.0% 11.6%
$21,995.6 $17,486.5 $4,509.1 20.5% N/A N/A CAGR 20052010 8.2% 7.3% 12.4%
Source: Kantar Retail research and analysis, company reports 20 Breakthrough Insights
Increased Focus on the Bottom of the Ladder

Recent efforts to establish a more consistent opening price point (OPP) value proposition have been apparent across the Big 3 drugstores, beginning with the introduction of Rite Aids new private brand architecture in 2010, featuring its new price fighter brand, Simplify. In February 2011, CVS rolled out approximately 100 new items under the Just the Basics name, spanning various categories and departments across the store. The range was positioned as a functional, value-priced, opening price point offering, with a smart simplicity appeal, priced at a discount between 40% to 70% vs. the national brand. In early August, Walgreens threw its hat into the OPP ring, cutting-in a dozen items under the Nice! brand in dry grocery as part of a broader department reset. The new brand replaced tertiary brands and select Deerfield Farms items. Packaging has been revamped, featuring a stripped-down and cleaner look and feel. In-store signage and packaging have been designed to position the brand as smart. quality. everyday.
Figure 2. Walgreens Introduces Nice! Dry Grocery Brand
Source: Kantar Retail store visit
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Walking Walgreens, Nice! Execution Inconsistent

Although still early, execution has been inconsistent and the shelf crowded with Nice! positioned alongside other private brands (W, Caf W, Deerfield Farms, Good & Delish, etc.). It may stand out on the shelf, but its value proposition is not immediately clear. Further, operational execution and presentation at the half dozen locations visited were all over the place. While this is not that uncommon in the early weeks of a launch, these issues were compounded by this weeks circular that featured a coupon for Nice! Macaroni & Cheese for 49 (with a 3 piece limit) versus the $1.29 shelf price (a 62% discount). With one facing and a Figure 3. Walgreens Introduces Nice! Dry Grocery Brand, Early Execution Mixed very deep discount, it was not surprising to see numerous out of stocks on the first day of the ad. Addtionally, the store visited indicated they would not receive a shipment until Friday, resulting in a poor first impression and lost sales. Several other stores did not yet have the item in stock and were instead offering a branded equivalent. When asked about the new brand, most store associates had not heard of it (despite the radio loop) or were not aware that it was a Walgreens item. Outside of spotty in-store signage, radio, and the one coupon in this weeks ad, Walgreens has yet to invest in marketing or online resources to build awareness, which leaves customers and associates ill-informed. For now, it remains to be seen whether Walgreens is adding clarity or clutter, but in the interim, it looks like the latter. That being said, I do not feel this will be the case for long as they leverage learnings from Duane Reade and work to significantly rationalize their portfolio of private labels while building standalone brands and accelerating private label sales growth.
Source: Kantar Retail store visit
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CVS Introduces Holistic Beauty Solution: Nuance Selma Hayek

On the other end of the continuum, CVS has introduced a holistic beauty solution and integrated campaign with the launch of its Nuance Salma Hayek product range. CVS has invited its shoppers and beauty bloggers to Discover Nuance Salma Hayek, a unique collection of products designed for women who seek high-quality, efficacious beauty products customized to address their personal needs. The line includes approximately 100 items spanning skincare, body care, hair care, and cosmetics, and features reasonable pricing ranging from $7.99 to $19.99. This line is one of the most comprehensive for CVS to date, and has been in development for the past three years. The launch has been supported with a comprehensive campaign leveraging online, social media, beauty advocates, in-store signage, and sampling. Conversations Is Your Personal Connection to Kantar Retails Experts ... Online To join the Conversation, visit Kantar Retail iQ and click on the Conversations tab. All Kantar Retail iQ members have full access to Conversations.
Figure 4. Introducing Nuance Salma Hayek
Source: cvs.com
Figure 5. CVS Begins Cutting-In Nuance
Source: Kantar Retail store visits
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What Targets Suppliers Need to Know about Walmart Canada: The Overview
By: Robin Sherk / Originally published: September 19, 2011
Although Walmart Canada may be familiar to Target teams, Walmarts Canadian operations are distinct from its U.S. counterpart. Overall, Walmart Canada will be a formidable competitor to Target across grocery, consumables, and general merchandise. It has a wide reach in the market in terms of stores and audience penetration, and its footprint is expanding as a one-stop grocery shop. Moreover, Walmart Canada is investing in insights and leveraging Wal-Mart Stores, Inc.s best practices, particularly from the U.K. and the U.S. Although Walmart Canada presents challenges for Target, its positioning also allows Target opportunity to gain traction in the market.
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Store Locations and Formats

Walmart entered Canada in 1994 with the acquisition of 122 Woolco locations from Woolworth Canada. The chain comprised only discount stores until 2006, when Walmart Canada began adding Supercentres. By mid 2011, the retailer had stores (190 discount stores and 135 Supercentres) in every province and territory except the far northern territory of Nunavut. Figure 1 illustrates that its overall store presence is concentrated in Ontario, though there also is a significant presence in Quebec, Alberta, and British Columbia. Its Supercentres are primarily in Ontario, Alberta, British Columbia, and Saskatchewan, with recent introductions in Manitoba and Quebec as well. Unlike in the U.S., Walmart does not operate any supermarket or convenience formats in Canada. In terms of format expansion, Walmart Canada is focused on the Supercentre. The retailer continues to convert its discount stores into Supercentres, as Walmart
Canadas Chief Executive, David Cheesewright asserted in June 2011, other than a handful we think every store can be converted to Supercentre. As a result, over the last five years, though Walmart Canada added 36 net new stores in total, it added over 135 Supercentres due to conversions. In short, Walmart Canada is leveraging its store base to better serve onestop, stock-up shopping trips.
Walmart Canadas stores are smaller than in the U.S. In 2010, they averaged 129,000 square feet, with a range of 70,000 to 200,000 square feet. Comparatively, Walmart US discount and Supercentres average 169,000 square feet. Its Canadian stores accordingly tend to carry fewer items, averaging 100,000 SKUs, with a range from 65,000 to 120,000 SKUs.
Figure 1: Walmart Canadas Store Presence
325 Stores: 190 Discounts 135 Supercentres
Note: Walmart has stores in Yukon and the Northwest Territories, but it does not have enough locations to reach 1% of the store base. Source: Walmart.ca, June 2011, Company reports
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In Canada, Walmart operates Supercentres across the spectrum of urban, suburban, and rural areas. Though the majority of Walmart Canadas stores are in areas analogous to the U.S., such as in shopping plazas and on the outskirts of smaller towns, it has an urban presence across a number of cities, including Toronto, Vancouver, Calgary, Winnipeg, Halifax, Ottawa, and Quebec City. Walmart, therefore, has a proven ability to serve urban customers in Canada, a key difference compared with its U.S. counterpart.
Walmarts services and the proportion of stores with each offering. A key difference between Walmarts U.S. and Canadian stores is the latters bank. Launched last year, it currently offers only a credit card that is mainly promoted in stores; 90% of new applications are taken through its cashiers. This year, Walmart Canada is looking to expand its offering to other products such as insurance, but its first priority is to develop the credit cards penetration among shoppers. The retailer also offers gift cards and money transfer services. Walmart USs efforts to start a bank have long been thwarted by regulatory authorities, leading it to expand its MoneyCenter services. As Walmart Canadas credit card expands, it also gives the retailer a tool to offer shoppers rewards for their loyalty. Currently, Walmart Canadas credit card gives Walmart Rewards that amount to 1.25% for every purchase at its stores and 1% wherever else the card
is used. As more shoppers adopt the card, the retailer may also gain insights into its shoppers spending behaviors. Overall, Walmart Canada has an added tool to contend with Targets practices should Target bring a 5% REDcard Rewards program to Canada.
Figure 2: Online Retail Market Segmentation
% of Walmart # of Canada Stores Stores 321 314 305 228 217 201 133 66 55 35 27 26 24 19 16 12 10 8 3 2 1 99% 97% 94% 71% 67% 62% 41% 20% 17% 11% 8% 8% 7% 6% 5% 4% 3% 2% 1% 1% 0%
Service Pharmacy PhotoCentre McDonalds Portrait Studio Tire & Lube Express Centre Vision Centre Connection Centre SmartStyle Hair Salon Magic Cuts Lotto (Good to Go!) Marlin Travel Hear at Last Regal nails Medical Clinic Tim Hortons Wine Rack Fun Factory Cadet Cleaners Sussex Insurance Dental Office Bubble Tea
Store Services
As in the U.S., additional store services offered by Walmart Canada include the Pharmacy, PhotoCentre, and McDonalds. Many of the retailers stores also offer a Portrait Studio, Tire & Lube Express service for cars, and Vision Centre. Services targeted to local needs and tastes also are prominent, including hair salons, wine shops, Tim Hortons coffee and doughnuts, travel services, and dry cleaners. Figure 2 outlines
Source: Walmart.co, June 2011
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Of the differences in services between Canada and the U.S., the most striking is the lack of a website-to-store pick-up option in Canada. In the U.S., this service, called Site to Store, accounts for 60% of Walmart.coms orders. Online ordering through Walmart.ca only began in mid 2011, and the retailers website currently offers a limited selection of general merchandise for home delivery only. Accordingly, the multichannel experiences advancing at Walmart US are not (yet) reflected in the Canadian market.
Assortment and Private Labels

Last year, just under half of Walmart Canadas sales were in Grocery and Health & Wellness (including Baby) categories. While this is a smaller proportion than in the U.S., consumables share of sales will rise due to Supercentres continued expansion in Canada. Walmart Canadas general merchandise assortment, which is analogous to the U.S. in covering apparel, home, entertainment, and hardlines, will accordingly comprise a smaller proportion of Walmart Canadas sales over time. Though Target is increasing its focus on consumables
(currently at 41% of sales in the U.S.), its emphasis remains on discretionary items. Its focus on consumables in Canada remains unclear at this time, but Walmarts proportion will likely allow it a point of differentiation compared to Targets customary discount store offerings (even if PFresh is introduced in Canada). While maintaining a house of brands proposition, Walmart Canada leverages best practices in private label from both its U.S. and U.K. operations. In grocery and consumables, Canadian shoppers can purchase Walmart US biggest private
Figure 3: Collage of Walmarts Fresh, Prepared Food Options
Source: Kantar Retail Store Visits
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lines, including Great Value, Equate, Ol Roy, and Parents Choice. Walmart Canadas private grocery lines generally maintain opening price point (OPP) propositions. It does not have the Marketside, Prima Della, or World Table offerings that are available in the U.S. However, the retailer does carry select grocery items from ASDAs Extra Special line, and it is adding a more premium, Our Finest line in frozen (shown in Figure 3, left-hand side), fresh prepared foods, and non-edible grocery. In fresh, prepared meal options, Walmart Canada also takes a lead from ASDA, offering options appealing to Canadian tastes (Figure 3, middle and right photos). Looking at other key categories, its apparel positioning is anchored by an expansive George brand. Launched as a monobrand in the fall of 2010, it now covers junior fashions, mainstream, and more traditional clothing offerings for men, women, and children. Walmart Canada works closely with Walmart US for sourcing and ASDA
for its styles. In June 2011, Cheesewright explained that in preparation for Targets entry into Canada they have stepchanged the fashionability of our core ladies [apparel] as they want to be ready for when Target arrives. Supported with mass media advertisements and a noticeable placement on Walmart.cas landing page, its awareness with shoppers is rising. Walmart Canada reports that recognition of its George brand is now over 60% of Canadian consumers. The private label Home category offering also establishes a unique position. Similar to the U.S., its range includes Mainstays, Better Homes and Gardens, and the more stylish Home Trends line. However, instead of featuring Canopy, Walmart Canada emphasizes George brand home items, ranging from desk lamps to kitchen mitts. In this way, the home department leverages the equity of its lead apparel brand while refining its assortment to match the styles of its audience.
Audience Reach and Shopper Analytics

In June 2011, Cheesewright explained that about 80% of Canadians shopped its stores last year. He added that everyone shops at Walmart Canada, stating, Its a bit of a myth that we only have low affluent [lower income] customers. Brandzs 2010 Brand Equity Study adds detail about the Supercentre shopper, explaining that 65% of primary household grocery shoppers report having shopped at a Walmart Supercentre. Though below Walmart USs levels, Walmart Canada nonetheless has wide shopper penetration. Regarding target audiences, Walmart Canada segments its shoppers similarly to the U.S. In 2011, the retailer reports that 57% of Canadian consumers fall into one of its three target clusters; in the U.S. this proportion is comparable at 59% (Figure 4). Examining these segments further though, Walmart Canada has more Price Sensitive Affluents (higher income shoppers that like receiving deals) and fewer
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Price Value Shoppers (lower income shoppers that need the deal) relative to the U.S. This difference likely reflects the two countries varied economic conditions, as Canada never experienced the severity of the U.S. housing crisis, and its unemployment rate is currently lower than in the U.S. Canadas relatively more affluent audience is noteworthy because recent Kantar Retail ShopperScape data indicates
Figure 4: Shopper Segment ComparisonsWalmart Canada
Walmart Canadas Shopper Segments
Lower % of Price Value Shoppers than in Walmart US
that higher income Walmart US shoppers who are shopping the retailer less favor moving to Target vs.other retailers. If this tendency parallels across markets, then Target Canada should anticipate greater head-on competition for its more affluent, price sensitive audience. Looking broadly, Walmart Canada is advancing its use of analytics. Over the past three years, Cheesewright has made it a priority to develop the retailers insights capabilities, establishing metrics to analyze everything from the store experience to the companys image. Wal-Mart Stores, Inc.s Executive Vice President of Global Consumer Insights, Cindy Davis, also is working with Walmart Canada to evaluate its metrics and develop best practices across countries.
Shopper Segment: Proportion of Audience
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Walmart US
Other Price Value Shoppers Price Sensitive Affluents Brand Aspirationals
in Figure 5) illustrates how Walmart Canadas approach mixes Walmart USs light blue imagery, low price, and Ad Match assertions with stark red and yellow text and a unique, slanted Rollback arrow. The Walmart Canada cover also replaces the tagline, Save Money, Live Better with the functional subhead of Supercentre. The in-store messaging (Figure 6) similarly includes modifications. For instance, the Everyday Low Price sign shown in Canada puts a greater emphasis on the word Everyday. There are also different signs in Canada, such as Limited Time Only promotions and shelf tags to highlight specific price points. Viewed broadly, Walmart Canadas marketing materials tend to have a relatively stark presentation around price, reinforcing the notion that its items are inexpensive.
Moreover, its marketing does not facilitate online social communities and engagement around its brand to the same extent as in the U.S. For instance, in recent years both Walmart US and Wal-Mart
Marketing Message
Walmart Canada
Source: June 2011, Company Presentation and Kantar Retail Analysis
Walmart Canada tailors Wal-Mart Stores, Inc.s marketing themes to fit its audience. A comparison of recent circular covers (shown
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Figure 5: Circular Cover Comparison: Walmart US versus Walmart Canada Walmart US Circular Cover Walmart Canada Circular Cover
Stores, Inc.s Sams Club have held online campaigns to let Facebook fans vote for which American communities and charities will receive grants for causes related to its Live Better brand message. Comparatively, Walmart Canada does not even have an established social media presence on Facebook outside of its U.S. counterparts umbrella. In this way, Walmart Canadas leverage of social media is relatively under developed, allowing Target Canada a means to develop a rapport with Canadian audiences distinct from Walmart Canada.
Source: Walmart
Figure 6: In-Store Signage: Walmart US versus Walmart Canada Walmart US, Promotional Signage (July 2011) Walmart Canada, Promotional Signage (August 2011)
Implications for Target Canada

Overall, Walmart Canada will be a formidable competitor to Target across grocery, consumables, and general merchandise. It has a wide reach in the market in terms of stores and audience penetration, and its footprint is expanding as a one-stop grocery shop. Moreover, Walmart Canada is investing
Source: Kantar Retail Store Visit
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Locations
in insights and leveraging Wal-Mart, Stores, Inc.s best practices, particularly from the U.K. and the U.S. Although Walmart Canada presents challenges for Target, its positioning also allows Target opportunity to gain traction in the market.
Walmart Canada vs. Walmart US

Walmart US 77% are Supercenters, as of 2010. Store formats: Walmart Canada 58% are Discount stores, as of 2010. Store formats:
Formats
Stores almost exclusively in Rural and Suburban markets
Stores present across Rural, Suburban, and Urban markets
Services
Walmart Canadas Advantages vs. Target:
Unique services include: Site to Store MoneyCenter
Unique services include: Bank and credit card product with Walmart Rewards
Tailored Services,
AssortmentsThe ethnic profile of Canadian audiences is quite different from the U.S., and the diversity of both its services and assortment at Walmart Canada is increasingly accommodating its markets. Accordingly, suppliers that can offer advice around what tailored assortments mean at Canadian sites will be valuable as Target looks to meet the needs of its new guest.
Newer lines include
Newer lines include
Private Label
Examples:
Examples:
In-Store Messaging
140 million shoppers a week, which is 45% of the population* 8 million shoppers a week, which is 24% of the population*
Target Audience
Established Grocery
PresenceAlready, nearly half of Walmart Canadas sales come from grocery; as the Supercentre
Segments: Price Value Shoppers = 20% Brand Aspirationals = 26% Price Sensitive Affluents = 13%
Segments: Price Value Shoppers = 13% Brand Aspirationals = 28% Price Sensitive Affluents = 16%
*population of the country from the CIA factbook, 2011 estimates
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expands, this proportion is set to rise. For Target to assert its position in this space, it must consider that Canadians familiarity with Target might be limited to mass media advertisements that focus on discretionary goods or cross-border shopping that would restrain a grocery trip. Accordingly, Targets messaging in Canada must acknowledge the audiences perception of the retailer and seek to shape it.
Walmart Canadas Relative Weakness and Targets Opportunties:
Lack of Private Brand

Equity in Apparel, Home Though Walmarts George brand has widespread awareness, this does not ensure the brands appeal. Given the recent repositioning of the line as a monobrand, it hasnt had the time to establish a position with shoppers. Targets strong apparel and home lines have an opportunity to develop affinity with Canadian guests, especially those guests familiar with their U.S. offering. Target has trumpeted research indicating that 70% of Canadians are already familiar with the Target brand, so Target has a foundation on which to build.
Coordinated Distribution
NetworkIn market for nearly two decades prior to Targets entry, Walmart Canada has had time to establish a distribution network for both grocery and general merchandise, setting Targets inexperience (particularly in grocery) as a relative disadvantage in serving this audience.
example. Target Canada should evaluate developing a differentiated position in this space, building communication with its audience to advance its contact and loyalty with guests. Its recent relaunch of Target.com in the U.S. demonstrates its ability to tailor its online presence to guests needs. Target may accordingly want to develop its online offering in tandem with its store offering, as Target has recently suggested that its .ca services will likely follow store openings in 2013.
Stark Message of Cheap

In Canada, Walmarts messaging starkly emphasizes its inexpensive price, distracting from the live better side of its brand promise in the box. Target has an opportunity to balance its Expect More quality and service dimension, as well as its Pay Less assertion, thus differentiating itself in the market.
Underdeveloped Social,
Online PresenceWalmart Canadas online presence is limited, lacking a distinct Facebook page from its U.S. counterparts, for
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2012 EMEA Events Calendar

Kantar Retail Events | Less Opinion, More Insight
Q1
Digital Retailing SessionAmsterdam, Netherlands
NEW
Retailer Financial Models Session Istanbul, Turkey

NEW
Jan 26
Geographical Coverage - Europe
Feb 23
Geographical Coverage - Turkey
Carrefour Middle East SessionDubai, UAE

Feb Geographical Coverage Middle East
Carrefour G5 SessionParis, France

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Getting it Right: Anticipating Amazons Growth Trajectory

By: Anne Zybowski / Originally published: October 26, 2011
One year ago on Nov. 8, 2010, Amazon announced its plans to acquire Quidsi (parent company of diapers. com and soap.com among newer sites), giving it another strong foothold in a specialty e-commerce business. In the Breaking News Insight article we wrote that day, we identified three moves that were significant about this acquisition: 1. 3. Driving penetration of key categories E-tailers: moving from online to bricks & mortar? expected due to high attachment rates. As of July 2011, HBC is one of the top categories shopped online by Amazon shoppers with 43% of monthly shoppers looking for HBC (vs. 23% across all primary shoppers) (Figure 1). While baby supplies is one of the lowest-ranked categories, with only 11% of Amazons monthly shoppers having shopped for the category, stay tuned for #2.
2. Targeting mom and the replenishment trip
A year later, its as if Amazon continues to work from our playbook and has made significant progress against each one of these plays. Lets take a look at the highlights:
1. Driving Penetration of Key Categories

Heading into 2011, Amazon was trying to get its head around selling CPGhow could shipping anything less than a club pack make sense? Amazon started testing eaches (individual pack sizes) vs. club packs to see both the impact on sales and profitability. Results exceeded expectations as sales took off and handling costs were lower than
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2. Targeting Mom and the Replenishment Trip

While Subscribe & Save was launched in 2007 with grocery items, the program really took off in 2011 as more participating vendors means more eligible products online, and Mom became the gateway to new purchase behaviors. Mom, coveted by bricks & mortar retailers like Target and Babies R Us for the basket that comes with the frequent stock-up trip for diapers, is the lynchpin for the online basket as well. Launched in September 2010, the Amazon Mom program (which offers 30% off diapers and wipes and gives shoppers an Amazon Prime membership for up to a year based if monthly spending of USD25+ is maintained) has had a significant impact on shopping and purchasing behavior because of its tremendous value offer. By July 2011, 4% of all shoppers and 10.9% of monthly Amazon.com shoppers are members of the Amazon Mom program (Figure 2).
Figure 1. Products Amazon Shoppers Shop for Online: CPG Scores High on the List
All Primary Shoppers
Monthly Amazon.com Shoppers
Sample Size
Womens apparel/shoes HBC Hardcover or paperback books DVD or Blu-ray movies Consumer electronics (e.g., digital camera, television, DVD player) Mens apparel/shoes E-books Grocery Non-Food items Laptop/desktop/netbook computer Furniture (assembled or ready-toassemble) Video games Prescription drugs Toys/dolls/games Infants/toddlers/kids apparel School/home office supplies Tablet computer (e.g., iPad, Galaxy Tab, PlayBook) Grocery Food items Home textiles Building products (e.g., paint, flooring, cabinets, plumbing supplies, etc.) Baby supplies (e.g., diapers, wipes, etc.) Hand tools or power tools None of these
4061
33% 23% 21% 15% 13% 12% 12% 11% 11% 9% 9% 9% 8% 8% 7% 6% 6% 5% 5% 5% 4% 35%
814
50% 43% 42% 34% 26% 23% 27% 20% 22% 17% 20% 11% 18% 17% 14% 15% 13% 11% 8% 11% 9% 9%
Bolding/highlighting indicates a significant difference between column percentages (96% CL) Source: Kantar Retail ShopperScape, July 2011
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And in case you are wondering if membership changes shopping behavior:
49% of Gen X women who are Amazon program

members shop weekly, as compared with only 16% of Gen X women females who are NOT members
Figure 2. Monthly Amazon Shoppers Who Are Members of Amazon Mom/Subscribe & Save All Shoppers Monthly Amazon Shoppers
From the perspective of shoppers who purchase key consumables categories, the highlighted areas in Figure 3 indicate the category purchaser groups that over-index with Amazon program members.
19% of shoppers who purchased baby

supplies in the past four weeks and 15% of toy purchasers are Amazon Mom members strong penetration in a short time.
Shoppers of personal care and household

cleaning products over-index with Subscribe & Save membership at 6% and 5%, respectively.
Sample size
Amazon Mom Amazon Subscribe & Save BOTH Amazon Mom Subscribe & Save Neither of these
4061
4.0% 4.7% 1.6% 92.9%
815
10.9% 13.5% 6.3% 81.9%
Given the digital nature of Amazon as well as

the instant access to movies via Amazon Prime, it is no surprise that 10% of all shoppers who purchased video games and 9% of those who purchased DVDs/movies also are members of Subscribe & Save.
Source: Kantar Retail ShopperScape, July 2011

Figure 3: Amazon is Penetrating Trip-driving Categories
Purchased Category in the Past 4 Weeks All Shoppers Baby food and supplies Video games DVD / Blu-Ray Movies Sweet snacks Color cosmetics Personal care products
Toys*
Sample Size
Amazon Mom Amazon Subscribe & Save
4061
4% 5%
320
19% 14%
322
15% 9%
288
7% 10%
491
7% 9%
2391
5% 5%
971
4% 5%
2268
4% 6%
Purchased Category in the Past 4 Weeks All Shoppers Pet supplies Household cleaning products Dry / canned groceries Salty snacks Household paper goods Non prescription drugs
Pet food
Sample Size
Amazon Mom Amazon Subscribe & Save
4061
4% 5%
913
4% 5%
2574
4% 5%
2985
4% 5%
2841
4% 5%
2616
4% 5%
1850
3% 4%
1561
3% 4%
Source: Kantar Retail ShopperScape, July 2011
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3. E-tailers: Moving from Online to Bricks & Mortar?

Far-fetched, right? Amazon is a pure-play, onlineonly retailer, but there is something to be said for physical proximity. Multi-channel is often (lazily) used to describe a store-based retailer that also runs an e-commerce business to drive growth, but the same works in reverse. True multi-channel is about leveraging the best of each channel to meet the shopper where they want to interact with the brand. Our initial speculation was that Amazons initial physical presence would be a drive-thru location. That may yet materialize, but until then Figure 4 shows the locker presence that Amazon is testing in the US (via 7-Eleven) and the UK (in shopping centres). These lockers began testing in September 2011 and heres how it works:
Figure 4. Amazon lockers coming soon to a shopping mall (UK) or 7-Eleven (US) near you
Choose a locker location at checkout (vs. a

home address)
Your package is delivered to one of

approximately 40 PO boxstyle lockers centered around a monitor resembling an ATM interface
Scan an emailed barcode at the locker to get a

pin and locker #
If rumors are true, potential US rollout to

7-Eleven locations nationwide could be summer 2012
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Our coverage of Amazon will continue to evolve as this retailer continues to test, learn, implement, and then iterate again. Remember, as Jeff Bezos reminds shareholders every year by attaching the 1994 Letter to Shareholders to the annual report Its still Day 1. As we head into 2012, our online coverage (beginning with the December Year-End Forum event) will increasingly explore the implications of Amazons growth and changes in both technology and shopper behavior on bricks and mortar retailers. These customers are increasingly looking to their suppliers to help stop the leakage to online. Smart suppliers will recognize that competing against Amazon as well as other e-commerce business models isnt just about helping your customers sell online, but is more importantly about adapting existing business models, integrating digital presence with physical presence, and highlighting unique and differentiated value propositions. Digital represents a huge opportunity to lead in partnership with your bricks and mortar customers.
Source: Amazon.com
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Tesco Price Drop: Seismic Shift or Smoke and Mirrors?

By: Bryan Roberts / Originally published: September 28, 2011
Never has a major pricing offensive by a leading retailer been so badly kept under wraps or so widely documented. A combination of ill-advised comments on an unofficial Tesco employee forum (concerning managers leave being cancelled on Sunday 25th September plus inordinate amounts of point of sale being delivered) and some mischievous social media activity meant that Tescos planned reveal of its Big Price Drop campaign was brought forward from Monday, September 26, to Friday, September 24 (Figure 1 and 2). Despite fevered speculation for the best part of the week that Tesco was poised to unleash a seismic EDLP-led price war that would destabilise its competitors and tip the playing field back in its favour, what was actually revealed by beleaguered Tesco UK CEO Richard Brasher was 3,000 price cuts across a mix of branded and private label SKUs. The UK business press, full of talk of a price war, has since recast the move as a price skirmish. Why was anticipation so fevered and expectations so high over Tescos move? Simply put, the UK business has been underperforming competitors in terms of like-for-like sales growth and market
Figure 1. Price Drop Campaign Signage
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share performance: Morrisons has been making steady progress with an excellent reputation for fresh, value and service; Sainsburys has retained a combination of quality and strong promotions; and Waitrose has augmented its undoubted quality credentials with those of value and affordability through private label innovation and price-matching Tesco on brands. Asda, which has not been setting the world on fire in performance terms either, still trumps everyone else on pricedue to both its EDLP stance and its 10% Asda Price Guarantee. While modest in scale if not in influence, Aldi and Lidl have also been gaining share at a mercurial rate as British shoppers continue their flight to value. The Tesco model is not broken (it is still growing, it still has a virtually unassailable lead in the UK grocery market, and it makes double the operating margins of everyone else), but it is not where it used to be. It has lost its place at the vanguard of innovation and best practice, it has let the pricing lead slip to Asda, and the industry is awash with talk of falling in-store standards and overcentralisation. All of these have combined to see a gradual, but steady, erosion in the retailers market share and the unfamiliar and uncomfortable experience of like-for-like sales declines (excluding VAT and petrol). There have already been some efforts to regain momentum in 2011. Tesco has invested in some potentially successful innovation in private brands it has continued to improve its already world-leading grocery e-commerce business and, now, it has sought to re-establish its pricing credentials.
Figure 2. Price Drop Campaign Signage
Its relative stagnation led many to believe that Tesco was readying itself for a dramatic and potentially redefining moment of pricing action. At a time when consumer spending is weak (particularly in nonfood), the major supermarkets continue to open new space at a record rate, leading us to believe that the net effect has been a cannibalisation of each other and themselves. While like-for-like sales in the UK market have been surprisingly buoyant compared with other mature markets such as France, Germany, and the US, there is a sense that the UK might start flattening and perhaps even declining in general terms as turgid consumer demand combines with increasing overcapacity. The current environment was seen as one in which Tesco could launch a hugely aggressive price offensive that would be difficult for its competitors to equal. With industry-leading buying power and margins, Tesco would be uniquely placed to be able
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to unleash a fierce price campaign that would be unable to be matched by its competitors without them devastating their already razor-thin margins. Instead, what we have seen has been something of an underwhelming halfway house that has already been dismissed by Sainsburys as smoke and mirrors and by Asda as spin, the latter hitting back at Tescos Big Price Drop newspaper ads with its own full-page ads proclaiming that only one supermarket is always 10% cheaper. The three main thrusts of the Big Price Drop are: 1. Shoppers want more help with the cost of their weekly shopping. Tesco therefore reduced the prices of more than 3,000 products that customers need to buy every daysuch as milk, bread, fruit and vegetables. Future cuts will also focus on products that families need most.
prices changing too often. Tesco stated that, We are going to simplify promotions, reducing the number of multi-buys particularly in fresh foods where customers have said they can drive waste. Having given it a day to let the dust settle and to get out and see the Big Price Drop in a variety of Tesco store concepts, heres our take on the initiative and some of the related issues. The first assertion that Tesco will be saving shoppers money on the items they buy every day is a noble one and one that is hard to argue about, at least for existing Tesco shoppers who will continue to shop at the retailer. There are plenty of examples where the branded price cuts mean that Tesco is now cheaper than Asda on some branded SKUS, but there also are examples of whereeven after the cutsTesco remains more expensive.
Figure 3. Price Cuts on Custard
2. Shoppers are turning away from expensive brands to more affordable own label ranges. Tesco will focus most of the investment in the Big Price Drop on reducing prices on more than 1,000 Tesco brand products. Tesco branded products are already considerably cheaper than comparable brands. As a result of this move they will be even better value, in many cases more than 50% cheaper than the brands. Buying Tesco brand can significantly reduce the rate of inflation that customers are currently experiencing in their weekly shop. 3. Shoppers have said that they are weary of having to shop around for the best deals and
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Around a third of the cuts were applied to Tesco private label, which makes comparability a shade more problematic, but the fact remains that the mighty 2p price cut on Tesco Value Custard now means that it costs the same as Asda Smart Price tinned custard (Figure 3). Will a cut in the price of Red Square Vodka from 14.32 to 14.29 get shoppers deserting Waitrose and Aldi and flocking into Tesco? Perhaps not. Another criticism is that Price Drops are to be found in a category such as dried herbs & spices, which we are not convinced falls into the need to buy every day bucket. A further complication arises from Tescos multiformat strategy and the price differential that it executes across its different trading platforms. Across its different formatssuch as Express convenience stores, Tesco superstores, and the Tesco.com e-commerce storeTesco states that the was (pre-Price Drop) prices were charged at most Tesco stores in GB. One query we have is that most Tesco stores in GB are Tesco Express units (there are around 1,300 Express stores compared to 870 Tesco, Tesco Metro and Tesco Extra outlets in the UK) and our research has indicated that Tesco Express prices are 4% higher than in larger Tesco stores or Tesco.com. So, when we visited a Tesco Express unit, we were confronted with a price tag for Tesco Luxury quilted toilet tissue of was 2.08, now 1.92, while larger stores were showing was 2.00, now 1.85: both price tags assuring us that the was price was charged in most Tesco stores in GB (Figure 4). Confusion reigns supreme.
Figure 4. Toilet Tissue Price Drop
Despite Tesco stating that the split in Price Drop was to be 2:1 in favour of branded SKUs, the sensation in store (helped by the Price Drop POS which almost exclusively highlights Tesco brand items) is one of Price Drop being used as a private brand vehicle rather than a value mechanism. This makes sense for a couple of reasons (more headroom in PL margins for price cuts and it also muddies the waters to thwart Asdas Price Guarantee comparisons), but it also has meant that in some categories, the Price Drop private brand is located alongside a branded competitor on deal that is only pennies more expensiveonce again creating confusion and something of a muddled value proposition. As with any price initiative, speculation has been rife that Tesco might well have manipulated prices in an upward direction ahead of the Big Price drop, or has used the campaign in a less than straightforward way to actually engineer the
average selling price in an upward direction. A 4-pint bottle of milk was at 1.43 before the Price Drop, with a 3 for 3 multi-buy also available. The Price Drop saw the price fall from 1.43 to 1.25, although the multi-buy was removed (meaning that for some shoppers, the Price Drop here was actually a 25% Price Increase). Elsewhere, milk is 2 for 2 at Asda and 3 for 3 at Sainsburys and Morrisons. One of Brashers comments at the launch was: Were giving customers a more straightforward shopreducing the number of promotions and putting the emphasis on clear and reliable savings that everyone can benefit from. With milk, there are certainly less promotions, but were not convinced on the clear and reliable savings component. Perhaps the most controversial aspect of the initiativeat least to the mind of Sainsburys, which described the move as giving with one hand and taking away with anotherhas been the removal of Double Clubcard points (effectively a 2% retrospective discount given to shoppers in voucher format). The 2% has been halved to the traditional 1%, but Tesco has increased the exchange rates available to Clubcard holders for trips to restaurants and theme parks. Quite how restaurant and theme park discounts sit with Brashers assertion that across the country people are saying they need more help with the cost of living. With rising utility bills and soaring petrol prices, families are having to cut back on the staples, not just the extras is another question altogether.
Sainsburys proposed 350 million as a valid estimate of how much Tesco would be saving by axing double Clubcard points, suggesting that the 500 million investment in the Price Drop was largely a reallocation of marketing spend rather than a meaningfully aggressive price reduction programme. In February 2011, the week that Brasher took the reins as UK CEO, Tesco unveiled a 200 million price-cutting programme. The previous October, it unleashed an 800 million price reduction/promotional programme, preceded by a 280 million round of price cuts in December 2009 and 250 million in November 2009. So, taking out the purported 350 million saving from halving Clubcard points, the resultant 150 million price investment appears relatively modest in contrast to the 1.5 billion that preceded it over the previous two years. The issue with the Big Price Drop programme is that it indicates to us that Tesco continues to preoccupy itself with retaining UK margin rather than regaining market share. Its sleight of hand that sees Clubcard points being halved will generate substantial annual savings (the Double points scheme was initially launched in Summer 2009) and will undoubtedly benefit Tescos profitability. While 500 million is a big number, Tescos main goal is to increase its return on capital: a genuinely destructive price war that eroded gross margin would not have sat well with this aspiration.
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Safeways Strategic In-Store Marketing

By: Alida Destrempe / Photo album originally published: September 11, 2011
Safeway is one of the largest food and drug retailers in the United States. The retailers core market is the Western half of the US, with approximately 30% of its store base located in California. Historically, Safeways growth has been driven by factors such as sales, cost reductions, and private brand innovation. Yet since the downturn of the economy, Safeway has suffered from financial distress, losing its value perception on top of store traffic. Today, Safeway is in the process of changing shoppers conceptions of it being too expensive. The retailer has developed several new and creative marketing campaigns to separate itself from its competitors in order to help persuade buying behaviors.
Safeway Ready in Three In 2010, Safeway launched Ready in 3 or Its Free, a campaign for its in-store, prepared meals offering. It appears that the retailer is attempting to align itself better to current shopping trends by offering products for quick, convenient shopping trips. The signs and ordering department
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are located near the entrance to enhance convenience. Prepared Meals Marketing Quality produce, a scratch bakery, a deli with an ordering department, cheese bar, and seafood are commonly found around Safeways perimeter. Many stores feature prepared meals, but Safeway has used its prepared foods as an addition to its catering services. The quick additions to any party tag line places further emphasis on pre-packed and pre-cut party platters from its Signature Caf label. The retailer also has cleverly positioned its marketing in an area of the store that has high traffic and volume.
Safeway Pantry Essentials Safeway is currently transitioning some Value Red private label products into a new label called Pantry Essentials. The new label is slowly being revealed as items from the retailers Value Red, low-price brand are absorbed into the brand. It appears that Safeway is re-assorting its current private brand structure to create a solid mid-tier brand. Safeway has created in-store marketing, such as shelf talkers, to help introduce the new brand through the transition.
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Safeway Kitchens At the beginning of 2011, Safeway launched Safeway Kitchens, an addition to its line of private labels. The label features bread and bakery products, which are marketed through a crossmerchandising tactic. Safeway not only advertises the new product through shelf talkers, but places the marketing signs with other Safeway brands that pair well with the new bakery line.
Cupcakes & Wine It appears that Safeway has built a strong supplier relationship through its Cupcakes and Wine marketing campaign in the bakery department. The retailer created its own specialty, gourmet cupcakes that would pair well with the national brand wine. The campaign includes signage as well as supplier funded merchandising displays around the bakery/wine department. Safeway has an extensive wine collection, where suppliers are challenged in getting a message out to catch the shopper. With a category that creates so much white noise, this marketing campaign is a smart way to show product attributes, as well as catch the attention of shoppers.
Health & Wellness Interrupters Safeway has incorporated large interrupters that assist in delineating products within the dairy case. Safeway categorizes its products by proactive health,organic/natural, light, all messages that promote wellness. For a retailer that has a strong health and wellness initiative, these marketing signs are practical and can assist shoppers in making healthy shopping decisions. This illustrates Safeways ability to take conventional marketing and align it to in-store initiatives.
Safeway New Items Safeway recently added in-aisle displays to its mix of merchandising in order to better market newer products. It is essential for retailers to provide different forms of marketing when incorporating new merchandise to its existing product mix and call attention to shoppers. Whether that product will be successful is dependent upon how shoppers respond, so it is a smart marketing tool for shoppers to easily recognize new items.
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Safeways Promise Campaign In 2009, Safeway revamped its pricing strategy and developed the Promise Campaign, which offered low prices on thousands of products. The retailer invested heavily in advertising the new, low-price position, yet still struggles with how that perception ended up playing out. Today, the yellow everyday low price signs remain a prominent marketing scheme within stores. Signs call out specific products and point to where they are in the aisle. Safeway does a fairly good job at promoting lower prices at a store level. The main issue is the price shoppers actually see on the shelf, and whether they recognize Safeway as having a lower price within the market.
Enhanced Media Gallery: Retail Photos, Albums and Analysis

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Explore new stores and formats and global innovative merchandising trends without having to leave your desk with our interactive Media Gallery! The enhanced Media Gallery seamlessly integrates dynamic photos and albums throughout the Kantar Retail iQ website. Improved functionality allows user to better explore our photos and albums, as well as easily download, save to myiQ or email photos and albums. Learn from our experts as they analyze, compare and contrast various retail competitors with our photo albums. Gain insights into new and seasonal trends and best practices in merchandising and marketing by browsing through our rich photo library.
Beyond the Box: Costcos Digital Dive

By: Sara Al-Tukhaim / Originally published: August 9, 2011
Long-praised (and often prodded) as a consistent and disciplined retailer, Costco seldom departs from its proven and successful model. While the if it aint broke, dont fix it mentality has served them well through the years, the combination of an aging member base along with the emergence and adoption of new technologies has prompted Costco to leverage more innovative member appeals to stay connected in a digital world. As this article reveals, Costcos recent initiatives in the digital realm point to key shifts in strategy moving forward.
Ranging from the mundane (e.g., creation of a Facebook page) to the more innovative (e.g., testing of sharing-enabled Web videos), Costco has significantly, albeit quietly, ramped up its memberfacing digital initiatives during the last two years (Figure 1). Costcos efforts signify an important departure from its conservative adherence to the no-frills club model and open up the possibility of extending member value through digital means in and beyond the club. In seeking to maximize visibility with members across their paths to purchase, Costcos digital initiatives span three key touchpoints:
Mailer (MVM) and The Costco Connection.
On the Go: Beyond the club, Costco has

introduced text message offers, launched its mobile site, and is developing an app with several features in consideration.
Across the Network: Costco has taken

important steps to improve member transparency and access to the retailer at home and via emerging digital touchpoints, including increased monitoring of and responsiveness to social networking platforms.
In the Club
Mobile codes provide members with a platform to assess product value, thereby influencing purchase decisions on the spot and appealing to Costcos upper-income, tech-savvy shopper.
In the Club: Kantar Retail has noted increased

mobile coding both on products and on various promotional vehicles, like the Multi-Vendor
Figure 1. Costcos Digital Initiative Timeline
Text message offers introduced (Sept) Mobile site launched (Nov)
WINTER 2010
Facebook page formalized
Social media feedback reported in Connection (Apr) Sharing-enabled Web video testing
SUMMER 2011/EARLY 2012

Mobile app to launch prior to year end (Aug) or early FY 2012 at the latest
FALL 2010
SPRING 2011
Source: Kantar Retail research and analysis; Company reports and collateral
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A. Mobile Coding on Products and Fixtures

Costcos use of mobile codes spans departments, from produce to electronics and seasonal. More recently, mobile coding has been found on product packaging for computerware, charcoal briquets (Figure 2), and even watermelons, all of which extend and enhance the member experience. Mobile codes are not only appearing on products, but also directly above or beneath a product on the store fixtures themselves. As Figure 3 shows, this particular code provides members with the opportunity to instantly compare products and reviews.
Figure 3. Displaying Mobile Code Messaging on the Steel
Source: Kantar Retail club visit (April 2011)
MVMs: Between January and May 2011 alone,

two of four Costco MVMs featured an ad with a mobile code, compared to none that were available the previous yeara small but key indication that this is a strengthening trend.
B. Mobile Coding in Promotions

Mobile codes also are increasingly prevalent in coupons and other promotional material regularly distributed to Costcos members.
Figure 2. Using Mobile Codes to Enhance the Member Experience: A Case Study Case Study: code Links to Costco Grilling Center
The Connection: Most recently, Costco also

began featuring mobile codes in its Connection magazine, leveraging a 2D barcode (in at least two separate locations) that links members directly to the issues online edition. As Figure 4 shows, the use of mobile codes in Costcos promotional material provides a broader platform for vendors to demonstrate the value-add that is so vital to selling to club.
On the Go
In response to a notable increase in mobile device traffic to its site, Costco has significantly ramped up its mobile strategy to become and stay relevant to its tech-savvy member base.
A. Introduction of Text Message Offers

Source: Kantar Retail research and analysis; Costco multivendor mailer (March 2011)
To increase online and in-club traffic and improve
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Figure 4. Using Mobile Codes to Demonstrate Value
overall ticket values, Costco began delivering text message offers in September 2010 to members who opt in to them (Figure 5). Distributed at a maximum of eight messages per month, the offers share the following features:
New and Featured Items: These offers appeal

to members with a promise that they will be the first to learn about new + featured items @ Costco.
Calls to Action: Texts heavily promote MVMs,

Source: Costco Multi-Vendor Mailers (February and March 2011)
seasonal items, online exclusives, Costco services, and Kirkland Signature products.
Club Openings and Happenings: Alerts for new

club openings, closures, and local road shows or demos are provided. For Costco, the introduction of text message offers extends an essential component of its modelits reliance on member-driven word of mouth.
Figure 5. Examples of Costcos Text Message Offers
TAKEAWAY: In the Club The use of mobile coding on products and fixtures and within promotions provides Costco vendors with cost-effective means to extend the club offer and demonstrate unique added value.
Mobile coding on products offers members a

real-time response to lingering questions that may otherwise inhibit purchasequestions that may be addressed in the form of a solution, pricing transparency, and/or extended demonstration of unique value.
Mobile codes in promotions provide a quick,

relatively cost-efficient way for vendors to demonstrate product value and maximize member appeal where space for messaging and promotional signage is otherwise tight, as these examples illustrate. When combined with broader social media and/or club-specific initiatives, mobile codes pose unique opportunities to innovate in club and deepen your alignment with Costco beyond the product itself.
Source: Kantar Retail analysis of Costco text message offers; Costco.com
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B. Mobile Site Launch

In response to a 1400% increase in mobile-device traffic to its PC site, Costco launched its mobile site in November 2010 (Figure 6). The site currently enables users to:
C. Smart Phone App in Development

A natural progression for any retailer in todays digital world, Costco has indicated that it will launch a smart phone application (app) at some point in fiscal 2011 (ending August 28). Costco is considering several features for the app (Figure 7) and has probed member preferences for the types of information that would be most valuable to them. The development of a Costco app is eventful but not surprising given its members growing technological savviness. Nearly one third (30%) of Costco members own a smart phone, compared with 25% of all shoppers (according to Kantar Retails ShopperScape survey of members shopping monthly at the retailer in 2010)and this figure is on the rise.
Shop costco.com on the go Access online product descriptions, shipping

information, and reviews
Identify the nearest club warehouses Check the status of their current order(s) Learn what is new at the clubs Browse The Costco Connection
Costcos launch of its mobile site aligned with its introduction of text message to promote on-the-go holiday shopping. Currently, Costco is promoting its mobile site through its website and Facebook pages.
Figure 6. Costco.com Mobile Web Features
Source: Costco.com (May and August 2011)
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Figure 7. Smart Phone App for Costco: Features in
Note: Features are grouped according to categories established by Kantar Retail Note: Features are grouped according to categories established by Kantar Retail Source: Kantar Retail research and analysis; Costco Connection (October 2010)
TAKEAWAY: In the Club Costcos efforts to go mobile pose opportunities for suppliers to co-promote, tie-in to social media, and conduct more sophisticated member data analysis.
In mobilizing word of mouth through text message offers, Costco not only further promotes the value of its
membership but also empowers the members to pass on (forward) the word (text) at the click of a button. For vendors, Costcos text offers also help validate participation in MVMs and seasonal promotions.
With plans to launch apps for BlackBerry, Android, and iPhone, despite the lack of Apple products in its
clubs, Costcos app will serve as a key vehicle for communicating with and appealing to members, in addition to enhancing online traffic and sales. Suppliers seeking to partner with Costco should leverage these mobile opportunities to engage Costcos member base at this increasingly significant touchpoint along the path to purchase.
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Across the Network

Over the last several months, Costco has taken important steps to provide members with greater transparency and access to the typically hands-off retailer, while increasing oversight and monitoring of its online and social media presence.
Figure 8. Formalization of Costcos Facebook Page
A. Formalization of Social Media Platforms

Despite being late to the game, Costco entered the social media realm with the launch of its Facebook page toward the end of 2010. Costcos presence on Facebook, its only formal social media platform to date, provides important insight into the roles it seeks to play with its member in the digital realm.
Facilitator: Facebook as a member-to-member

and vendor-to-member platform
Source: Costcos official Facebook page (May 2011)
Moderator: Facebook as a platform for

empowering the collective voice of a portion of the member community indicating it is carefully monitoring how its members relate to Costco beyond the club. Specific areas of focus have included members social network usage and adoption of technologies such as smartphones and tablets. Most recently, Costco has been testing the use of sharing-enabled web videos as an online promotional vehiclerevealing a willingness to innovate beyond the traditional adherence to its model.
Promoter: Facebook as a platform for

promoting seasonal offers, regularly distributed MVMs, and mobile site access and awareness
Researcher: Facebook as a platform for

understanding member and visitor interests (e.g., via live polls) As Figure 8 highlights, many of the features of Costcos Facebook page are focused on creating a dialogue with and among members while also appealing to prospective members. Through 2011, Costco has continued to probe social media and technology usage among its members,
B. Incorporation of Social Media Feedback

Not only is Costco monitoring its online presence, it is actively incorporating social media feedback and commentary through key promotional vehicles, such as The Costco Connection. In a first for the Connection, Costco began regularly featuring
55
Off-the-Network member comments starting with its April 2011 issue. As Figure 9 shows, these comments originate from member Twitter feeds and blogs, proving to readers that even when they are not in club, Costco gets them.
Figure 9. A First for the Connection: Off-the-Network
TAKEAWAY: Across the Network Nurturing relationships with members is essential to the success of a limited assortment, renewal-driven retailer such as Costco; this goal has no doubt driven its growing attention to social media.
In formalizing and monitoring its digital
presence, Costco is doing what is so vital to its model: Affirming itself as a retailer who gets its membersaccordingly, it will prioritize those vendors who equally get them and who can translate this understanding online. empower its members: Focused on extending its reach, Costco is leveraging the digital network to empower current members, attract new members and promote solutionsIt will expect similar behavior of its suppliers.
Costco is looking to the social network to
Source: Costco Connection (April 2011)
Costco is clearly keeping a close eye on member adoption of social networks, despite a past reluctance to jump on the digital bandwagon. This will pose unique opportunities for suppliers with the foresight to extend and deepen Costcos dialogue with members beyond the box.

Costcos recent digital initiatives reveal much more than a growing digital sophistication; they signify a notable transition from its usual hands-off approach to member outreach toward the more dynamic and formalized facilitation of member interaction. Given the time it has taken Costco to get here, the question remains: Why now? Despite its success, Costco is contending with a more intense battle for members share of wallet today than in the past. A number of marketplace dynamics are in flux:
More intense competitive landscape: Economic uncertainty has aggravated the competitive pressure
that Costco faces, especially online, where much of its online-only assortment tends to be discretionary. This is most apparent in Costco members increasing propensity to also shop on Amazon. According to ShopperScape, the percentage of Costco members who regularly shop Amazon jumped from 38.4% in 2009 to 47.5% in 2010. With competitive pricing and comparable products to Costco, the threat of Amazon has intensified the need for its vendors to demonstrate unique club product, value, and experience.
More fiscally conscious, tech-savvy shoppers: As members have become more fiscally conscious, they
have not only shifted their spending toward less discretionary, smaller ticket items, but they also are much more adept at using social media and mobile technology to enable them to compare across retailers to obtain the best prices.
More digitally engaged members: Member behavior is undergoing a key shift, forcing Costco to reconsider
how it attracts, engages, and retains members. Between 2010 and 2011 alone, the percentage of club members who purchased a product online jumped from 64% to 71%; those who spent time on social networks increased from 45% to 52%; those who researched a product online prior to in-store purchase grew from 48% to 54%; and those who accessed a retailer site on their mobile device increased from 8% to 14% (Source: ShopperScape). To respond to these and other marketplace shifts, it is clear that Costco needs to ramp up its digital strategy. Though online represents a higher percentage of total sales vs. its club competitors, Costcos online sales growth also has historically lagged its club competitors (Figure 10). With an aggressive goal to reach USD 5 billion in online sales in the next five to 10 years (compared with the USD 1.8 billion it produced in 2010), Costco will have to increase its pace of growth.
Figure 10. Costcos Online Sales
Online Sales as % of Total Sales

Costco Sam's Club BJ's
4.7%
Online Sales (USD, Millions)

costco.com samsclub.com bjs.com
3.5%
3.5%
Online CAGR Sales (USD, 01 -06 06-11E 11-16E Millions) Costco 60.9% 19.8% 12.2% Sams 79.4% 24.2% N/A 52.1% BJs 11.1% 17.2% 2,160
3,836
2.5% 1.9%
2,230
1,316
1.1% 0.8% 0.3% 0.1% 0.1% 1.2%
874
446
81 24 0
0.0%
11
2006
90
2011 E
198 2016 E
2001
2006
2011 E
2016 E
2001
Note: US sales only; Costco excludes Business Centers and Home; BJs excludes ProFoods; Sams Club excludes Mas Source: Kantar Retail research, analysis, and estimates 57 Breakthrough Insights Breakthrough Insights 57
Given the word of mouth power that Costcos members boast, this poses several implications for its suppliers (Figures 11).
Figure 11. Digital-Related Implications for Partnering with Costco
Takeaway Implication(s) Costcos growing mobile integration enables the retailer to connect with members on a deeper level than product packaging and messaging alone. For a retailer whose model is based on successful member recruitment and retention, each opportunity to deepen its connection with members is key. For vendors, there are several upsides to Costcos growing use of mobile codes: It is cost-effective,
In the Club
easy to incorporate and, perhaps most importantly, places power in the supplier to facilitate member interaction.
On the Go
Through the introduction of text message offers, launch of a mobile site and development of a smart phone app, Costco has acknowledged the need to get and stay relevant to members beyond club walls. Increasing member touchpoints while they on the go provides quick and cost-effective opportunities to improve overall engagement and drive online/in-club traffic. For vendors, consider the opportunities for cross-collaboration that Costcos push toward digital
poses.
Across the Network
Costcos efforts to connect with members beyond the club, such as through its Facebook page, are largely focused on creating a conversation with members while also appealing to prospective members. As it continues to monitor and probe its members online behaviors, vendors who understand and
incorporate these insights will serve a particular asset to the retailer.
Source: Kantar Retail research and analysis
This also poses several opportunities for Costcos vendor partners to deepen member engagement, broaden member touchpoints, and nurture member loyalty (Figure 12).
Figure 12. Digital-Related Considerations for Partnering with Costco
Takeaway Consideration(s) Create Calls to Action: Deepen digital engagement via mobile coding and/or social media initiatives on product packaging, pallet displays or the product itself Promote Broader Solutions: Reconsider the broader, seasonal and/or more customized member solutions your product(s) offer and the multi-channel opportunities for promoting them Extend the Experience: Leverage digital to extend the in-club experience beyond the box (e.g., use a mobile code on your pallet to direct members to a related online initiative offered exclusively to Costco members) Drive Traffic Online: Support Costcos online sales goal by driving traffic to its PC or mobile site (or partner with Costco to establish a page on its site, to which members are directed to via a text offer or mobile scan) Enable Word of Mouth: Design in-club and/or online events, initiatives and offers with the goal of sparking word of mouth, both on and off the network Monitor Progress: Measure and demonstrate to Costco the ROI of your digital-related club efforts as they relate to member recruitment and retention
In the Club
On the Go
Across the Network
Source: Kantar Retail research and analysis 58 Breakthrough Insights
Value Discounters Continue to Attract More Shoppers

By: David Marcotte / Originally published: August 23, 2011
Value discounters continue to attract more shoppers, an extension of a trend that has been several years in the making. Overall, the only loser to date in regards to shopping penetration is Big Lots. With its focus on close-outs and deal merchandise, it suffers from direct competition from all the other channels that have adopted more aggressive price positions to appeal to recession-weary, value-oriented shoppers. Growth for all others continues to be strong, and ShopperScape data indicates shoppers now think of the channel as a primary and secondary location for purchasing a range of items.
The question for this group of retailers has always been success outside of the recession. Nearly two years into the recovery after the Great Recesssion (albeit a very modest recovery), it is clear the changes made by the value discounters to stay in front of consumer needs have worked well, and leading players have kept and grown the market share gained in hard times. The question that now rises is if they will continue to be successful if the economy shifts to recession again. An excellent indicator may be that many low-income shoppers now see this channel as the best shopping option given my personal economic situation. Given the current economic environment, all indications are that low-income shoppers will continue to be significant component of shoppers overall, which is a key factor that supports Kantar Retails strong five-year growth forecast for the channel. Dollar Generals strategy of moving into a more predictable convenience and groceryrich store format appears to
be paying off, but at the cost of general merchandise and treasure hunting sales. Dollar Tree is having equal success but far more so with the last two types of trips than grocery trips. Family Dollar is somewhere in between, with shoppers using them for all trip types somewhat evenly. What seems not to be working for Dollar General and Family Dollar is their investment in store space and product quality for apparel and OTC, both which show poor scores and even willingness to experiment and try. All of them are doing well with office and school supplies. The back-to-school period has become a major promotion
and display event for each, with Dollar Tree moving to permanent aisle positions for these products.
Growing shopper base

The value discount channel continues to show strong shopper base growth, with Dollar General and Dollar Tree sustaining growth through 2011 (Figure 1). Family Dollar had the strongest growth from 2009 to 2010, but is tailing off in 2011 in contrast to competition. Big Lots, which took a hit during the recession when it had to compete with major retailers major markdowns, continues to weaken with shoppers.
Figure 1. Past Four-Week Shopper Trends: Value Discount/Dollar Stores

PPT Change 2009-11 2010-11 3.1 0.8 3.0 3.7 4.0 0.3 -2.1 0.2 1.5 0.7 1.6 0.9 -0.9 0.0
SMALL-FORMAT DISCOUNT (NET) Dollar General Family Dollar Dollar Tree 99 cent only Big Lots Tuesday Morning
May-09 47% 19% 13% 21% 5% 13% 2%
May-10 49% 21% 16% 23% 4% 11% 2%
May-11 50% 22% 17% 25% 5% 11% 2%
Source: Kantar Retail ShopperScape, May 2009, May 2010, and May 2011
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Planned general merchandise impulse trips no longer as important

Overall, shoppers making planned trips to retailers in the channel has dropped with the slight exception of grocery trips (Figure 2). Though down from 2008, planned general merchandise trips have recovered slightly from 2010, but treasure hunting has dropped considerably, reflecting Dollar General and Family Dollars move to predictable value and stock-up grocery options.
Figure 2. Reasons for Last Value Discount/Dollar Store Trip* (among shoppers who shopped a value discount/dollar store in past 4 weeks)
35% 31% 25% 19% 16% 17% 15% 16% 2008 2011 25% 16% 12%
15%
Planned general Impulse trip; no Planned grocery Planned grocery Planned bargainmerchandise trip particular fill-in trip stock-up trip hunting/treasure purchase in mind hunt trip
Some other reason
*Multiple answers allowed Source: Kantar Retail ShopperScape, May 2009, May 2010, and May 2011
31% 28% 32% 35%
26%
The pattern of trips shoppers make to Dollar Tree shows the trade-offs of going with a richer mix of products in standard store formats results in greatly improved grocery scores overall but with a discernable hit to the bargainhunting trips that in the past have been so profitable (Figure 3). Dollar General continues to push its general merchandise offer with marketing and via
19% 15% 16% 21%
19%
19%
16% 19% 15% 14%
13%
9%
Planned general merchandise trip
Impulse trip; no Particular purchase in mind Dollar General
7%
Planned grocery ll-in trip Family Dollar
Planned grocery stock-up trip Dollar Tree
All Shoppers
Big Lots
*Multiple responses allowed Source: Kantar Retail ShopperScape, May 2011
9%
Planned bargainhunting/ treasure hunt trip
17% 14%
17%
15%
24%
Dollar Trees evolution drives planed general merchandise trips
Figure 3. Reasons for Last Value Discount/Dollar Store Trip*
30%
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store placement; the retailer especially focuses on general merchandise solution areas such as school supplies and hobbies.
Younger shoppers using the channel for grocery shopping

Using the channel for general merchandise shopping is under-indexed in shopper groups younger than 45, while shoppers 18- to 24-years-
old over-index significantly in impulse and grocery trips (Figure 4), another sign that younger generation shoppers are changing their selection criteria for grocery shopping in general. Though bargain hunting trips are less prevalent overall, they still register as part of the shopping expectation in the channel.
Shopping behavior patterns by income do not lead to the expected relationship between wealth and shopping this channel
The expectation that lowerincome shoppers are the core of the discount channel weakens when higher-income shoppers are clearly shopping the channel for planned general merchandise trips and impulse shopping (Figure 5). Though higher income shoppers shy away from food trips, they
Figure 4. Reasons for Last Value Discount/Dollar Store Trip*, By Age (Shoppers who shopped a value discount/dollar store in past month)
Over/Under-Index vs. All past four-week value discount shoppers (index +/- 10% shaded) Past 4Week Value Discount Shoppers 31% 19% 17% 16% 15% 16% Over-index by >10% Gen Y (born 1982 to 2002) 58 100 122 102 98 123 Under-Index by >10% Gen X (born 1965 to 1981) 91 95 113 111 90 112 Baby Boomers Seniors (born (born before 1946 to 1964) 1946) 108 125 109 101 104 107 82 90 64 73 102 104
Planned general merchandise trip Impulse trip; no particular purchase in mind Planned grocery fill-in trip Planned grocery stock-up trip Planned bargainhunting/treasure hunt trip Some other reason
18-24 25 132 128 132 69 121
25-34 95 88 120 91 102 120
35-44 85 92 111 116 90 112
45-54 97 97 99 118 112 84
55-64 119 121 102 91 100 78
65+ 125 90 64 73 102 104
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clearly are looking to the treasure hunt as part of their experience.
Figure 6. Category Purchasing at Value Discounters (among past 4-week value discount shoppers)
Buy Category at Dollar Store 77% 73% 72% 69% 67% 67% 63% 62% 50% 49% 47% 45% 43% 38% 35% 29% 24% 19% 17% 16% 15% 8% Don't Buy Category at Dollar Store 23% 27% 28% 31% 33% 33% 37% 38% 50% 51% 53% 55% 57% 62% 65% 71% 76% 81% 83% 84% 85% 90%
Category purchasing reflects changes in merchandising in past year

Greeting cards continue to build a display space in value discount while the reference to household cleaners as being a best buy at value discounters in various consumer magazines has shifted that product to more endcaps and displays (Figure 6). Seasonal goods have been a stable in all companies in this channel as has party supplies. One of the surprises that emerge is the rise of school/ office supplies, again another
Greeting cards or gift wrap/bags Household cleaning products Seasonal Snack foods Household paper products Candy/gum Party supplies School/home office supplies Small housewares Boxed or canned food items Beauty or skin care products Home textiles Soft drinks or other non-alcoholic beverages Toys/dolls/games OTC drugs Pet food and supplies Adult basic apparel Adult casual apparel Baby supplies Kids clothing Infants and toddlers clothing Beer and wine
Source: Kantar Retail ShopperScape, May 2011
Figure 5. Reasons for Last Value Discount/Dollar Store Trip*, By Household Income (Shoppers who shopped a value discount/dollar store in past month)
Over/Under-Index vs. All past four-week value discount shoppers (index +/- 10% shaded) Past 4-Week Value Discount Shoppers 31% 19% 17% 16% 15% 16% Over-index by >10% Under-Index by >10%
Planned general merchandise trip Impulse trip; no particular purchase in mind Planned grocery fill-in trip Planned grocery stock-up trip Planned bargain-hunting/treasure hunt trip Some other reason
<$25K 93 96 123 107 91 103
$25K $49.9K 95 85 100 108 97 115
$50K $74.9K 90 121 96 99 90 89
$75K $99.9K 111 107 67 83 150 79
$100K+ 135 110 69 78 111 91
63
merchandising shift, especially for the back-to-school season. And given the investment in space in many of these stores, the expectation would be that clothing, pet, and OTC would do better overall.
Figure 7. Category Purchasing at Value Discounters (among past 4-week value discount shoppers)
Use Dollar Store as Primary Store 45% 34% 33% 28% 24% 22% 20% 19% 13% 12% 12% 10% 10% 9% 8% 8% 5% 5% 4% 3% 3% 2% Secondary Store 32% 38% 31% 45% 43% 45% 48% 43% 38% 35% 33% 33% 25% 40% 30% 21% 19% 13% 12% 12% 16% 6% Don't Buy Category at Dollar Store 23% 28% 37% 27% 33% 33% 31% 38% 50% 53% 55% 57% 65% 51% 62% 71% 76% 83% 84% 85% 81% 90%
Secondary store preferences are where the new strengths in value discount show best
Beyond greeting cards, value discounters are more likely to be a secondary store of choice than the primary store where shoppers purchase the category (Figure 7). The low scores against clothing, especially the high percentages of channel shoppers who dont buy the category there at all is problematic for Dollar General and Family Dollar given that both retailers have doubled the space devoted to that category in many stores. Dollar Tree, with its greater coverage of stores in all neighborhoods, shows greater primary scores for basics (Figure 8). About half of all Dollar Tree shoppers use the store as their primary store for greeting cards and party supplies.
Greeting cards or gift wrap/bags Seasonal Party supplies Household cleaning products Household paper products Candy/gum Snack foods School/home office supplies Small housewares Beauty or skin care products Home textiles Soft drinks or other non-alcoholic beverages OTC drugs Boxed or canned food items Toys/dolls/games Pet food and supplies Adult basic apparel Baby supplies Kids clothing Infants and toddlers clothing Adult casual apparel Beer and wine
Source: Kantar Retail ShopperScape, May 2011
Deciding factors for shopping the value channel have less to do with item pricing then personal assessment of economic conditions
Item and basket pricing are not as important as factors that drive shoppers to the channel as would be suspected, with lower-income shoppers only slightly more concerned than average and that concern dropping off as income levels rise (Figure 9).
Best shopping option given personal economic situation, shows as the highest driver for those with household income less than $25k, closely followed by limited assortment reduces buying temptations, which appears to indicate those with a self-assessed lack of income shopping in these stores, but not with the same feeling about low prices. Easy to shop also shows as important among lower-income shoppers,
64
Figure 8. Use Dollar Stores as Primary Store for Product/Category, By Retailer

All Shoppers
Greeting cards or gift wrap/bags Seasonal Party supplies Household cleaning products Household paper products Candy/gum Snack foods School/home office supplies Small housewares Beauty or skin care products Home textiles Soft drinks or other non-alcoholic beverages OTC drugs Boxed or canned food items Toys/dolls/games Pet food and supplies Adult basic apparel Baby supplies Kids clothing Infants and toddlers clothing Adult casual apparel Beer and wine 45% 34% 33% 28% 24% 22% 20% 19% 13% 12% 12% 10% 10% 9% 8% 8% 5% 5% 4% 3% 3% 2%
Dollar General (a)

42% bD 29% 23% 35% CD 30% CD 25% D 23% C 20% D 13% 14% CD 12% 12% CD 14% CD 10% C 9% 13% CD 10% CD 6% C 5% C 4% Cd 4% C 2%
Last Trip was to ... Family Dollar Dollar Tree (b)

35% 30% 24% 34% CD 27% CD 22% d 22% 16% 14% 15% CD 14% 11% cD 11% C 8% 6% 12% CD 6% C 5% C 6% C 5% Cd 5% C 3% c
Big Lots (d)

32% 31% 24% 18% 17% 15% 17% 12% 11% 7% 8% 5% 7% 7% 6% 4% 3% 3% 3% C 1% 3% c 2%
(c)
56% ABD 38% Abd 45% ABD 22% 20% 21% d 18% 21% D 12% 9% 11% 8% 7% 6% 10% b 2% 2% 2% 1% 1% 1% 1%
Superscript letters indicates significant difference from number in column corresponding to letter; upper case = 95% CL, lower case = 90% CL Source: ShopperScape, May 2011 Figure 9. Importance FactorsWhen Shopping a Dollar Store (% of shoppers rating factor Very Important)
Importance Factors -- When Shopping a Dollar Store (% of shoppers rating factor "Very Important") Total 2003 Item pricing (individual items cost less at $store than elsewhere) Basket pricing ($store is less expensive for overall basket) Convenient location Quick in-and-out Best shopping option given personal economic situation Easy to shop Friendly neighborhood atmosphere Wide variety of national brands "Thrill of the hunt" Limited assortment reduces buying temptations 66% 57% 52% 45% 38% 36% 30% 24% 24% 18% 18-24 115 55% 49% 46% 48% 42% 35% 30% 26% 25% 31% 25-34 346 57% 53% 48% 43% 43% 38% 30% 26% 27% 21% 35-44 342 69% 56% 56% 48% 40% 36% 29% 27% 25% 17% 45-54 434 70% 62% 57% 47% 43% 38% 32% 25% 28% 17% 55-64 378 71% 60% 53% 45% 35% 36% 31% 24% 24% 18% Over-index by >10% 65+ 388 66% 56% 48% 41% 30% 30% 28% 18% 14% 14% Under-Index by >10%
$25K - $50K - $75K <$25K $49.9K $74.9K $99.9K $100K+ 655 558 355 178 257 68% 62% 56% 48% 52% 43% 37% 30% 25% 24% 71% 59% 53% 46% 37% 39% 34% 24% 25% 18% 65% 50% 50% 43% 31% 29% 23% 19% 21% 13% 60% 54% 46% 36% 27% 21% 24% 17% 25% 12% 58% 52% 48% 45% 26% 27% 20% 20% 19% 14%
Source: ShopperScape, May 2011 Breakthrough Insights 65
Item pricing (individual items cost less)
66%
28% 34% 37% 43% 41% 47% 46% 46% 36%
6% 9% 11% 13% 20% 18% 23%
which may be a factor of store placement in lower-income areas along with changes in merchandising to appeal to a more convenience-oriented shopper by most of the chains in this channel. Among all shoppers, item and basket pricing top the list of drivers, followed by convenience and speed of shopping (Figure 10). Best shopping option for my personal economic situation drops as an overall driver but still shows as somewhat or very important for 80% of the respondents.
Basket pricingImportance Factors When Shopping a Dollar Store 57% Figure 10. (less expensive for overall basket) Convenient location Quick in-and-out Best shopping option given personal economic Easy to shop Friendly neighborhood atmosphere Wide variety of national brands "Thrill of the hunt" Limited assortment reducestemptations Very important 52% 45% 38% 36% 30% 24% 24% 18%
30% 40% 41%
40% Not at all important
Somewhat important
Source: ShopperScape, May 2011
Figure 11. Importance Factors When Shopping a Dollar Store, By Retailer (% of shoppers rating factor Very Important)
All Shoppers Item pricing (individual items cost less at $store than elsewhere) Basket pricing ($store is less expensive for overall basket) Convenient location Quick in-and-out Best shopping option given personal economic situation Easy to shop Friendly neighborhood atmosphere Wide variety of national brands "Thrill of the hunt" Limited assortment reduces buying temptations 66% 57% 52% 45% 38% 36% 30% 24% 24% 18% Dollar General (a) 65% D 57% D 61% bCD 55% BCD 41% D 43% CD 36% CD 30% CD 20% 22% C Last Trip was to ... Family Dollar Dollar Tree (b) (c) 64% D 55% d 55% D 48% cD 41% D 39% cD 36% CD 27% C 23% 19% 73% ABD 60% D 49% D 41% d 37% 33% D 26% 20% 24% 16%
Shopper concerns and drivers show little variation based on retailer

Dollar Tree is dominated by item pricing versus other banners which is expected given its fixed price mission (Figure 11). Aside from that, scoring is reasonably close across the banners with Big Lots scoring in all save Thrill of the Hunt.
Big Lots (d) 53% 45% 38% 33% 30% 23% 23% 20% 25% 19%
Superscript letters indicates significant difference from number in column corresponding to letter; upper case = 95% CL, lower case = 90% CL Source: ShopperScape, May 2011
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Where the Men Are/Arent

By: Mary Brett Whitfield / Originally published August 31, 2011
Findings from Kantar Retail ShopperScapes new male shopper database reveal male heads of household and the average primary household shopper have different store sets in terms of channels and retailers shopped. Walmart tops the list of retailers shopped by a wide margin for both primary household shoppers and male shoppers; Amazon.com ranks #2. The respective male and all-shopper lists then begin to deviate with a shuffling of retailer positions, and some additions and omissions. The male Top 10 retailer list includes Best Buy, eBay.com, and Kroger. But Kohls, JC Penney, and Dollar Tree, which make the all-shopper Top 10, miss the cut on the male list. There are some noticeable differences too when looking at retailers shopped by males of different generationsfindings which could impact retailer and supplier merchandise and marketing decisions.
Like all shoppers in general, the top two retailers where male shoppers are most likely to be found are: Walmart, with 62% of male shoppers being past-month shoppers; and Amazon.com, with 43% of male shoppers as pastmonth shoppers.
Many Stereotypes Hold When Looking for Male Shoppers

Among the Top 10 most-shopped retail channels, channels that disproportionately draw male heads of household shoppers vs. all primary household shoppers include (Figure 1):
Like all shoppers in general, the top two retailers where male shoppers are most likely to be found are: Walmart, with 62% of male shoppers being past-month shoppers; and Amazon.com, with 43% of male shoppers as past-month shoppers (Figure 2). The Top 10 retailers shopped by male shoppers include some retailers that do not make the Top 10 among all primary household shoppers: Best Buy, eBay.com, and Kroger. Retailers on the allshopper Top 10 list that miss the cut on the male list include: Kohls, JC Penney, and Dollar Tree.
Home improvement retailers (attracting 62% of

male shoppers in the past month vs. 52% of all primary household shoppers, a +10 percentage point swing)
Electronics retailers (+9 ppts) Convenience stores (+6 ppts)

Retail channels where disproportionately fewer male shoppers vs. all primary household shoppers are found include:
Among the Top 25 retailers shopped by male

heads of household, men over-index most at The Home Depot, Lowes, Best Buy, Office Depot, and liquor stores. Other retailers where more male than female shoppers are found include Sears, warehouse clubs Sams Club and Costco, eBay.com, Safeway, and Staples.
Apparel specialty stores (-17 ppts) Value discount/dollar stores (-10 ppts) Department stores (-6 ppts)
Male shoppers under-index relative to all

primary household shoppers most at Kohls, Dollar Tree, and Macys.
Figure 1. Top 10 Most-Shopped Retail Channels Male Heads of Household Age 18+ vs. All Primary Household Shoppers (Shopped retail channel during past 4 weeks)
1 2 3 4 5 6 7 8 9 10 Male Heads of Household Supermarkets Mass channel Home improvement/hardware retailers Drug stores Department stores Electronics/computer retailers Convenience stores Amazon.com Warehouse clubs Value discount/dollar stores 88% 78% 62% 57% 49% 45% 43% 43% 40% 39% 1 2 3 4 5 6 7 8 9 10 All Primary Household Shoppers Supermarkets Mass channel Drug stores Department stores Home improvement/hardware retailers Value discount/dollar stores Apparel specialty stores Amazon.com Convenience stores Warehouse clubs 88% 83% 63% 55% 52% 50% 42% 42% 37% 36%
NOTE: Shading indicates retail channels where shoppers over-index vs. other shopper type by more than 10% Source: Kantar Retail ShopperScape, MarchJune 2011
68
Figure 2. Top 25 Retailers Shopped by Male Heads of Household Age 18+, Compared with All Primary Household Shoppers
Shopped Retailer during Past 4 Weeks Male Heads of Household 62% 43% 38% 34% 34% 32% 29% 26% 24% 23% 22% 21% 20% 20% 20% 19% 19% 18% 17% 16% 16% 15% 15% 15% 14% All Primary Household Shoppers 65% 42% 30% 28% 37% 39% 31% 19% 21% 23% 27% 27% 19% 22% 17% 17% 15% 16% 18% 14% 24% 14% 19% 13% 11%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21* 22* 23 24* 25*
Walmart Amazon.com The Home Depot Lowe's Walgreens Target CVS/pharmacy Best Buy eBay.com Kroger (all supermarket banners) JCPenney Kohl's Netflix Dollar General Sam's Club Costco Liquor/wine stores Staples Barnes & Noble Sears Dollar Tree Safeway (all aupermarket banners) Macy's SuperValu (all smkt banners, excl SAL) Office Depot
Index vs. All Primary Household Shoppers 95 102 126 121 90 83 92 135 114 102 83 77 106 91 115 111 129 111 93 118 64 112 77 111 126
NOTE: Yellow shading indicates retailers where male shoppers over-index by 20%+ vs. all shoppers (index of 120+); gray shading indicates retailers where they under-index by 20%+ (index 80) *Retailer makes Male Shoppers Top 25 Retailer list, but not All Primary Household Shoppers Top 25 Source: Kantar Retail ShopperScape, MarchJune 2011
69
Figure 3. Top 25 Retailers Shopped by Male Heads of Household Age 18+By Generation (Shopped retailer during past 4 weeks)
Male Heads of Household 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Walmart Amazon.com The Home Depot Lowe's Walgreens Target CVS/pharmacy Best Buy eBay.com Kroger (all supermarket banners) JCPenney Kohl's Netix Dollar General Sam's Club Costco Liquor/wine stores Staples Barnes & Noble Sears Dollar Tree Safeway (all aupermarket banners) Macy's SuperValu (all smkt banners, excl SAL) Ofce Depot 62% 43% 38% 34% 34% 32% 29% 26% 24% 23% 22% 21% 20% 20% 20% 19% 19% 18% 17% 16% 16% 15% 15% 15% 14% Gen Y a 65% CD 56% 30% 23% 31% CD 41% c 33% BCD 40% BCD 40% 21% d 25% 24% BCD 34% bCD 25% 17% c 22% CD 24% 20% BCD 30% D 20% CD 21% 19% BCD 27% 14% C 18% Gen X b 63% CD 50% a 37% A 33% 32% CD 41% 29% CD 30% CD 29% 24% D 24% 22% CD 25% 20% 19% 19% 19% 17% CD 22% D 17% Cd 17% 15% CD 18% 16% 15% Baby Boomers c 61% D 39% Ab 41% A 36% 35% d 28% 28% D 24% D 22% d 25% 22% 21% D 17% 20% 19% 17% 18% 18% d 14% D 16% 14% 15% 12% 15% 13% Seniors d 59% 31% A 39% Ab 37% 34% 24% 30% 17% 14% 21% 19% 19% 12% 17% AbC 23% C 21% 18% 20% 11% 12% 14% 16% 11% 13% 14%
Note: Letters represent significant difference with corresponding column; lower case at 95% confidence level, upper case at 90% confidence level Source: Kantar Retail ShopperScape, MarchJune 2011
Young Males Adopting New Shopping Routines

Generally speaking, ShopperScape finds a higher percentage of young males (especially Gen Y) shopping across the board (at most retailers) vs. their older counterparts (Figure 3). Likely reasons:
Shopping as a social activity for young males

Looking at the male Top 25 retailer list, key differences among generations emerge:
Compared with older shoppers, a significantly

higher percentage of younger male heads of householdspecifically Gen Y and Gen X (who today are 1846 years old)shop the following formats/retailers:
Higher percentage of young single males who

dont have a female partner with which to share shopping duties
Busy lifestyles of older males in family

lifestages limit shopping around
70
- Online/non-store shopping options, e.g.,

Amazon.com, eBay.com, Netflix
Top Retailer Lists Differ By Generation

A different set of retailers pop as the Top 25 shopped by males of different generations (Figure 4). Key findings:
- Best Buy - Fashion retailers Target and Macys - Value discounters Dollar General and
Dollar Treea finding which seems at odds with conventional wisdom that the format draws typically female shoppers, and in particular older ones with fixed/ constrained incomes
The Gen Y male heads of household Top 25 list

differs the most from the all-male list. Five retailers make the Gen Y list that are absent from the all-male list: GameStop, Apple, 7-Eleven, Family Dollar, and Kmart. Apple and GameStops presence suggests that Gen Y males prefer gadgets more than groceries since those falling off the list include several food retailers: Safeway, Supervalu, and Sams Club.
More male shoppers in older generational

cohorts tend to shop the following formats/ retailers:
- Home improvement centersThe Home

Depot and Lowes draw significantly more Baby Boomer and Senior males than Gen Y males, largely because older shoppers are more likely to be married home-owners with maintenance responsibilities and long honey-do lists
A mix of small-box retailers appear on the lists

of older male shoppers: Ace Hardware and Family Dollar make the male Baby Boomer list; Ace Hardware, Rite Aid, and Trader Joes make the senior males list. This finding helps to prove the Kantar Retail hypothesis that older shoppers find the quick and easy shopping convenience of small-box formats appealing. Falling off the senior males list: Macys, Netflix, and Barnes & Noble, suggesting that maintenance of health and home takes precedence over fashion and fun for older shoppers.
- Club retailer Sams Clublikely because

older shoppers tend to be more affluent shoppers, a core characteristic of the club shopper base
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Figure 4. Top 25 Retailers Shopped Differs by Generation, Male Heads of Household Age 18+ (Shopped retailer during past 4 weeks)
Males Head of Household Top 25 Walmart 62% Amazon.com 43% The Home Depot 38% Lowe's 34% Walgreens 34% Target 32% CVS/pharmacy 29% Best Buy 26% 24% 23% 22% 21% 20% 20% 20% 19% 19% 18% 17% 16% 16% 15% 15% 15% 14% Gen Y Males Top 25 Walmart 65% Amazon.com 56% Target 41% Best Buy 40% eBay.com 40% Netflix 34% CVS/pharmacy 33% Walgreens 31% GameStop The Home Depot Barnes & Noble Macy's 7-Eleven Dollar General JCPenney Kohl's Liquor/wine stores Lowe's Costco Kroger (all supermarket banners) Dollar Tree Family Dollar Kmart/Big Kmart Staples Apple 31% 30% 30% 27% 26% 25% 25% 24% 24% 23% 22% 21% 21% 20% 20% 20% 20% Gen X Males Top 25 Walmart 63% Amazon.com 50% Target 41% The Home Depot 37% Lowe's 33% Walgreens 32% Best Buy 30% eBay.com 29% CVS/pharmacy Netflix JCPenney Kroger (all supermarket banners) Barnes & Noble Kohl's Dollar General Costco Sam's Club Liquor/wine stores Macy's Dollar Tree Sears Staples Supervalu (all smkt banners, excl SAL) Office Depot 7-Eleven 29% 25% 24% 24% 22% 22% 20% 19% 19% 19% 18% 17% 17% 17% 16% 15% 15% Baby Boomer Males Top 25 Walmart 61% The Home Depot 41% Amazon.com 39% Lowe's 36% Walgreens 35% Target 28% CVS/pharmacy 28% Kroger (all 25% supermarket banners) Best Buy 24% JCPenney 22% eBay.com Kohl's Dollar General Sam's Club Staples Liquor/wine stores Netflix Costco Sears Ace Hardware Safeway (all aupermarket banners) Supervalu (all smkt banners, excl SAL) Family Dollar Dollar Tree Barnes & Noble 22% 21% 20% 19% 18% 18% 17% 17% 16% 15% 15% 15% 15% 14% 14% Senior Males Top 25 Walmart The Home Depot Lowe's Walgreens Amazon.com CVS/pharmacy Target Sam's Club Costco Kroger (all supermarket banners) Staples JCPenney Kohl's Liquor/wine stores Best Buy Dollar General Ace Hardware Safeway (all aupermarket banners) Rite Aid Dollar Tree eBay.com Office Depot Trader Joe's Supervalu (all smkt banners, excl SAL) Sears
1 2 3 4 5 6 7 8
59% 39% 37% 34% 31% 30% 24% 23% 21% 21% 20% 19% 19% 18% 17% 17% 16% 16% 14% 14% 14% 14% 13% 13% 12%
9 eBay.com 10 Kroger (all supermarket banners) 11 JCPenney 12 Kohl's 13 14 15 16 17 18 Netflix Dollar General Sam's Club Costco Liquor/wine stores Staples
T s r e
19 Barnes & Noble 20 Sears 21 Dollar Tree 22 Safeway (all aupermarket banners) 23 Macy's 24 Supervalu (all smkt banners, excl SAL) 25 Office Depot
Shading represents retailer new to the Top 25 list vs. all-male heads of household list Source: Kantar Retail ShopperScape, MarchJune 2011
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Shopping Through the Eyes of a Low-Income Shopper

Cross-Retailer Opening Price Points
By: Leon Nicholas / Originally published: September 30, 2011
The stock-up trip is not dead, but on a weekly basis fewer shoppers make them. Instead Kantar Retail recently conducted a study to shoppers opt for more, smaller trips. Most pre-trip planning still happens offline. But retailers anddiscover how selected retailers are meeting the suppliers must prepare for next-generation shoppers who prepare differneeds of low-income shoppers seeking the best ently for grocery shopping trips.
price to meet their cross-category needs. With shoppers increasingly stretching budgets to purchase everyday needs, retailers are asserting their value messaging and emphasizing low prices. At the same time, a lower-income shoppers ability to take advantage of such assertions is limited, as retailer strategies such as multipacks with low price/volume ratios or bundled solutions are not helpful to shoppers who cant pay the often higher price points. For this shopper, the requirement to satisfy cross-category needs is fulfilled through the achievement of the lowest possible price point, often sacrificing volume purchase savings.
Toward this end, Kantar Retail selected 20 categories across the edible grocery, non-edible grocery, and HBA segments at six retailers located within a five-mile radius of each other in the Northeast U.S. For each retailer, we assessed the lowest price point available to the shopper in that category (excluding trial sizes) so that she could minimally meet her purchase requirement. This article will assess how each retailer enables the shopper to meet basket requirements at the opening price point (OPP) level.
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Total Basket Findings

Among the six retailers, the study results indicated that Walmart had the least expensive total basket, driven by lower OPPs in its edible grocery and HBA baskets. Walgreens had the most expensive total basket, driven by sharply higher edible grocery basket OPPs (see Figures 1.1 and 1.2). Of note, Walgreens higher total basket was driven in part by the type of promotions it ran, requiring in some cases that the shopper buy more than one item in order to achieve the lower price point per
Figure 1.1 Total Basket Table
item, something that a low-income shopper may not be able to afford. Stop & Shop offered the next cheapest overall basket at only 2% more expensive than Walmarts. With the lowest basket in non-edible grocery, Stop & Shop achieved its pricing position through featured price cuts totaling USD 7.52 across segments; had these cuts not been in place, Stop & Shop would have been nearly one-third more expensive than Walmart overall, and Family Dollar would have been the next cheapest relative to Walmart.
Edible Walmart Stop & Shop Family Dollar Aldi Target Walgreens $ 8.74 $10.14 $12.45 $ 8.97 $11.42 $20.81
Non-Edible $12.59 $11.13 $12.25 $12.64 $16.39 $17.16
HBA $ 4.55 $ 5.21 $ 5.00 $10.55 $ 7.36 $ 6.18
Total $25.88 $26.48 $29.70 $32.16 $35.17 $44.15
Index to Walmart 102 115 124 136 171

Figure 1.2 Total Basket Chart
$50 $40 $30 $20 $10 $-
Edible
Non-Edible
HBA
Walmart Stop & Shop
Family Dollar
Aldi
Target Walgreens
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Importantly, the opening price points were largely achieved through everyday pricing. Only selected Walgreens and Stop & Shop OPPs were reached through price cuts. Finally, we saw no clear pattern of achievement of lower OPPs through private labels or national brands, other than in the case of Aldi, whose business model is built upon private brands.
Figure 2.1 Edible Grocery Basket
Edible Grocery Segment Findings
Walmart provided the least expensive edible

grocery basket, beating Aldi by approximately 3% (see Figure 2.1). The retailer was able to provide a reasonable split between private labels and national brands for its entry level assortment within edible grocery (see Figure 2.2).
Edible Grocery Walmart Aldi Stop & Shop Target Family Dollar Walgreens
Eggs $ 0.82 $ 0.69 $ 1.59 $ 1.19 $ 1.90 $ 2.39
Pasta Canned Canned Dry Gallon Index to Sauce Vegetables Ketchup Tuna Bread Cereal Pasta Milk Total Walmart $ 0.98 $ 1.19 $ 1.00 $ 1.12 $ 1.00 $ 3.29 $ 0.48 $ 0.49 $ 0.75 $ 0.64 $ 0.65 $ 1.69 $1.00 $1.19 $1.00 $1.17 $1.00 $3.79 $ 0.60 $ 0.55 $ 0.80 $ 0.59 $ 0.75 $ 1.19 $ 0.98 $ 0.79 $ 1.00 $ 1.14 $ 1.30 $ 1.49 $ 1.00 $ 1.39 $ 1.00 $ 2.34 $ 2.00 $ 2.99 $ 1.00 $ 0.89 $ 1.00 $ 1.09 $ 1.00 $ 1.69 $1.88 $1.79 $2.00 $2.14 $2.85 $2.29 $ 8.74 $ 8.97 $10.14 $11.42 $12.45 $20.81 103 116 131 142 238

Figure 2.2 Edible Grocery Brand Composition
National Brands Walgreens Family Dollar Walmart* Stop & Shop Target Aldi 0% 20% 40%
Private Labels
60%
80%
100%
*Walmart offered the same size and price for an item that was available both as a private label and a national brand within edible grocery. Source: Kantar Retail Store Visits
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After Aldi, we saw a very steep price gap

between Walmart and Stop & Shop (16%), followed by Target at 31%. Both Stop & Shop and Target achieved their OPPs largely through private brands.
5.08 (see Figure 3.1). The retailer offered an even split of national brands and private labels for its non-edible grocery basket (see Figure 3.2).
Leveraging private label, Family Dollar was the

second least expensive for non-edible grocery, at roughly 10% more expensive than Stop & Shop.
Due to its limited assortment of edible grocery

items, Walgreens delivered the most expensive OPPs in the segment. With OPPs comprising national brands, Walgreens edible grocery OPPs registered a 238 index to Walmart.
Though it offered the lowest total basket,

Walmarts non-edible OPPs were 13% more expensive than Stop & Shop, followed closely by Aldi at a 114 index to Stop & Shop.
Non-Edible Grocery Segment Findings
Stop & Shop had the least expensive non-edible

basket, driven by temporary price cuts of USD
Figure 3.1 Non-Edible Grocery
Non-Edible Toilet Grocery Paper $ 0.85 Stop & Shop Family Dollar $ 1.00 $ 0.86 Walmart $ 1.29 Aldi $ 2.99 Target $ 0.89 Walgreens
Blue Liquid Paper Dishwashing Laundry Window Cleaner Diapers Towel Soap Soap $ 1.29 $ 1.50 $ 1.00 $ 2.50 $ 3.99 $ 1.00 $ 1.00 $ 1.00 $ 1.75 $ 6.50 $ 0.87 $ 0.97 $ 1.94 $ 5.97 $ 1.98 $ 1.79 $ 0.99 $ 0.69 $ 2.39 $ 5.49 $ 1.24 $ 2.34 $ 0.99 $ 2.34 $ 6.49 $ 1.00 $ 2.00 $ 0.99 $ 3.29 $ 8.99
Total $ 11.13 $ 12.25 $ 12.59 $ 12.64 $ 16.39 $ 17.16
Index to Stop & Shop 110 113 114 147 154

Figure 3.2 Non-Edible Grocery Brand Composition
National Brands Target Walgreens Stop & Shop Walmart Family Dollar Aldi 0% 20% 40%
Private Labels
60%
80%
100%
Source: Kantar Retail Store Visits 76 Breakthrough Insights
Both Targets (147 index to Stop & Shop) and

Walgreens (154 index to Stop & Shop) nonedible OPP baskets were significantly more expensive. In the case of Walgreens, the index was achieved despite USD 3.99 in temporary price cuts.
Family Dollar had the second least expensive

basket in this segment, registering at 10% more expensive than Walmart.
Stop & Shop followed Family Dollar closely at a

115 index to Walmart, including a total of USD 1.99 in temporary price cuts.
HBA Segment Findings
Compared to the other segments within the

study, Walgreens managed a narrower price gap in HBA with only a 136 category basket index to Walmart.
Walmart had the least expensive HBA segment

basket (see Figure 4.1). All items in the HBA basket were priced under USD 1, and three of the four SKUs were national brands (see Figure 4.2).
Figure 4.1 HBA
Bar Soap Toothpaste $ 0.97 Walmart $ 0.85 Family Dollar $ 1.00 $ 1.00 Stop & Shop $ 1.23 $ 0.99 $ 0.89 Walgreens $ 1.00 $ 2.19 $ 0.94 Target $ 1.49 Aldi $ 2.49 HBA
Shampoo $ 0.78 $ 1.00 $ 0.99 $ 1.00 $ 0.97 $ 1.59
Aspirin $ 0.98 $ 1.00 $ 1.00 $ 1.29 $ 0.97 $ 1.99
Disposable Total Razor $ 0.97 $ 1.00 $ 1.00 $ 2.00 $ 2.29 $ 2.99 $ 4.55 $ 5.00 $ 5.21 $ 6.18 $ 7.36 $10.55
Index to Walmart 110 115 136 162 232

Figure 4.2 HBA Brand Composition
National Brands Walmart Walgreens Stop & Shop Target Family Dollar Aldi 0% 20% 40%
Private Labels
60%
80%
100%
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Could the Savvy Shopper Save More?

Although Walmart delivered the least expensive total basket available in one location, a shopper could save more money through cross-shopping the different retailers. If a shopper were to purchase all of her OPP edible grocery and HBA items at Walmart and all of her OPP non-edible items at Stop & Shop, then she could save 6% relative to a Walmart-only basket. Without longitudinal data, though, it isnt clear if the segment-level savings would be consistent over time.
Taken further, if a shopper were to cross-shop the six different retailers to get the least expensive item in each of the twenty product categories, then the savings would be 19% relative to buying all of Walmarts OPPs. However, each week the shopper would have to shop each retailer separately in order to record the lowest price points per category and then re-visit each store to buy the cheapest respective OPPs.

Over time, technology may enable more efficient grocery cross-shopping, balancing trade-offs of distance and price savings across baskets with customized criteria. For now, though, our study made clear that Walmart is the least expensive one-stop shop for a cash-strapped shopper. Importantly, Walmart achieved this distinction without the use of any rollbacks. This lends credence to Walmart U.S. President Bill Simons claim of providing an every day low price on the entire basket. Shoppers could spend less by shopping around, but without the knowledge of price points in advance, the time spent gathering this data alone would be prohibitive. Clearly, Walmarts recent efforts to bolster its value positioning through smaller sizes and an increasing number of value-positioned SKUs is paying off. While it may have featured larger sizes with a favorable price/volume ratio in the past, it can now lay claim to saving the shopper money on an absolute basis in a single stop. Though Aldi came close to matching Walmarts OPPs in edible grocery, and Family Dollar was the second least expensive in both non-edible grocery and HBA, neither retailer was able to lay claim to a low OPP position overall. The studys findings, with respect to these retailers, were unexpected given their extreme value positioning. Perhaps the positioning assumes larger pack sizes at competitive retailers, an advantage that Walmart seems to have overcome. Stop & Shops positioning as a close runner-up to Walmart (on an overall basis) was perhaps surprising. Achieved through price reductions, the retailers near parity with Walmart demonstrates the effectiveness of leveraging price cuts at the OPP level to meet the needs of the shopper on the lower rungs of the socioeconomic ladder. For suppliers, it will be critical to align with retailers efforts to provide low entry-level price points to draw in the price-conscious shopper. Whether through small pack sizes, temporary price cuts, or private labels, retailers are keen to compete at this level. Savvy suppliers will partner in these efforts, making up margin losses elsewhere on Breakthrough Insights the category pricing ladder.
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2012 Americas Events Calendar

Kantar Retail Events | Less Opinion, More Insight
Q1
Chain Drug SuperSessionOrlando, FL
Jan 31 Feb 1 Feb 1 Feb 1 Feb 2
NEW
Latin American Retailing WorkshopMiami, FL

Mar 6 Latin American Retailing Workshop
Sessions TBD General Session CVS Workshop Walgreens Workshop Sessions TBD
Kroger SuperSessionCincinnati, OH
Mar 20 Mar 21 Mar 22 Sessions TBD Kroger Workshop Sessions TBD
HEB WorkshopSan Antonio, TX

Feb 28 NEW HEB Workshop
Q2
Walmart SuperSessionRogers, AR
Apr 3 Apr 4 Apr 5 Sessions TBD Sessions TBD Sessions TBD
NEW
Lowes Workshop SeriesCharlotte, NC

May 17 NEW Lowes Workshop
Mid-Year Forum EastEast Coast

June 5 June 6 June 7 Sessions TBD General Session Sessions TBD
Shopper ForumChicago, IL
Apr 25 General Session
Costco Workshop SeriesSeattle/Bellevue

May 8 May 9 Sessions TBD Partnering with Costco
Mid-Year Forum WestWest Coast

June 12 Sessions TBD June 13 General Session June 14 Sessions TBD
Value Discounters Workshop SeriesCharlotte, NC

May 15 May 16 Sessions TBD Sessions TBD
For more information - Email CustomerService@KantarRetailiQ.com or Call 1.617.588.4100
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The Global Macroeconomic Outlook for Retail: Danger from Europe to China
By: Frank Badillo / Originally published: September 15, 2011
With macroeconomic trends weak in the United States, still weaker in Europe, and precarious in China, the global outlook for retailing among countries will be especially uneven over the coming year and the years beyond. Europe is most at risk of recession re-emerging before the end of the year as the euro zones slowmotion financial crisis takes a growing toll. At best, the United States will see a sharp slowdown with a high risk of recession, depending on potential government actionboth fiscal and monetary. The wild card will be the emerging markets led by China. If Chinas inflation-fighting steps slow its economy too much, then recessionary conditions could worsen in developed markets and pull emerging markets into a sharp slowdown if not a downturn. The short-term unevenness in global trends is evident across a scorecard of macroeconomic indicators for the largest economies, as well as in terms of key trends in GDP and consumer prices. The impact on the long-term outlook among countries is evident in an index and mapping of Global Retail Opportunity as measured by Kantar Retail. These measures show the euro zone countries losing ground, primarily to emerging markets such as Brazil as well as to select developed markets such as Canada and Australia. Russia also appears to be losing ground amid recent conditions.
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Implications
Suppliers and retailers operating internationally should anticipate all their markets being affected by the developing slowdown or recession. China and emerging markets cannot be counted on for sustained strong growth. Teams in those markets should prepare for a potential hard economic landing. Price pressures are diverging among countries as much or more than growth prospects. Suppliers and retailers should expect pricing power to weaken starting first in Europe and ultimately weaken with a lag in China and emerging markets as those markets slow. Among the long-term implications of current trends is that the disparity will widen between slower-growing marketsparticularly the euro zone countriesand the faster-growing emerging markets. But the extent of the disparity depends on how countries perform relative to one another. The disparity will be minimized if emerging markets suffer a hard economic landing.
in these countriesespecially in terms of core prices excluding food and fuel. In contrast, GDP and spending measures in the United States have held up better compared with Europe. And in China, GDP, spending, and investment measures have continued to improve at a strong pace through the second quarter. The flashing warning sign in China is evident in the price inflation measures, which suggest an overheating economy. Another sign is the recent drop in consumer confidence, which is somewhat surprisingly akin to the recent steep dropoff in confidence in Europe and the United States. In Japan, the post-tsunami dropoff in confidence has started to bottom out in recent months.
First Half GDP by Quarter

GDP growth for the first half of 2011 highlights the particular risks in Europe and China (Figure 2). This inflation-adjusted growth measure is quarter-toquarter growth at an annualized rate, which is the way GDP growth is commonly reported in the United States. In Europe, this growth measure plummeted from a pace of about 3% in the first quarter of 2011 to less than 1.0% for both the euro zone as well as the broader European Union. In the euro zone, the momentum toward flat or falling growth in the second half of the year is strong, given the ongoing debt crisis that has spread from Greece. The same measure calculated for China, meanwhile, accelerated slightly despite the
Scorecard by Largest Economies

A scorecard of indicators across the worlds largest economies shows the particularly weak environment in Europe as well as Japan (Figure 1). The broad GDP measures as well as the more focused consumer spending measures have deteriorated most in Japan and the European Union, including the euro zone countries. Amid softening demand, inflationary pressures are easing fastest
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Figure 1. Selected Indicators by Country
= IMPROVING = MIXED = DETERIORATING

Period Y-to-Y 1.7% 1.9% 0.3% -5.6 2.9% 1.5% Growth Q-to-Q or M-to-M 0.9% 1.4% -0.4% -4.4 -0.4% -0.7% Growth Q-to-Q or M-to-M 0.6% 0.6% -0.9% -5.3 -0.6% -1.0% Growth Q-to-Q or M-to-M 1.0% 5.3% 0.4% -14.7 0.5% 0.2% Growth Q-to-Q or M-to-M -1.3% 1.9% -0.3% 0.0 0.1% 0.0%
European Union *
GDP (Inflation-Adjusted), Annualized Growth Rate Residential & Business Investment (Inflation-Adjusted) Consumer Spending (Inflation-Adjusted) Consumer Confidence (Points) CPI Headline Index, Not Seasonally Adjusted (NSA) CPI Core Index, excluding food and fuel (NSA) Euro Zone *
Q2 '11 Q2 '11 Q2 '11 Aug-11 Jul-11 Jul-11
Period GDP (Inflation-Adjusted), Annualized Growth Rate Residential & Business Investment (Inflation-Adjusted) Consumer Spending (Inflation-Adjusted) Consumer Confidence (Points) CPI Headline Index, Not Seasonally Adjusted (NSA) CPI Core Index, excluding food and fuel (NSA) United States Period GDP (Inflation-Adjusted), Annualized Growth Rate Residential & Business Investment (Inflation-Adjusted) Consumer Spending (Inflation-Adjusted) Consumer Confidence (Points) CPI (Headline Index) CPI (Core Index, excluding food and fuel) Japan Period GDP (Inflation-Adjusted), Annualized Growth Rate Residential & Business Investment (Inflation-Adjusted) Consumer Spending (Inflation-Adjusted) Consumer Confidence (Points) CPI (Headline Index) CPI (Core Index, excluding food and fuel) China Period GDP (Inflation-Adjusted), Annualized Growth Rate Residential & Business Investment (Inflation-Adjusted), NSA Consumer Spending (Inflation-Adjusted), NSA Consumer Confidence (Points) CPI (Headline Index), NSA CPI excluding food prices, NSA Q2 '11 Aug-11 Q2 '11 Jul-11 Aug-11 Aug-11 Q2 '11 Q2 '11 Q2 '11 Aug-11 Jul-11 Jul-11 Q2 '11 Q2 '11 Q2 '11 Aug-11 Jul-11 Jul-11 Q2 '11 Q2 '11 Q2 '11 Aug-11 Jul-11 Jul-11
Y-to-Y 1.6% 1.7% 0.5% -5.1 2.5% 1.2%
Y-to-Y 1.5% 2.2% 2.2% -8.7 3.6% 1.8%
Y-to-Y -0.9% -0.8% -0.6% -4.9 0.8% 0.3%
Growth Q-to-Q or Y-to-Y M-to-M 9.5% 25.6% 10.5% -2.8 6.2% 3.0% 9.1% -0.7% 1.5% -3.1 0.3% 0.2%
*European Union countries ( marks euro zone countries) Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany* Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Romania Slovakia Slovenia Spain Sweden United Kingdom
Sources: EuroStat, Japan National Statistics Center, National Bureau of Statistics of China, U.S. Department of Commerce, Conference Board Y-to-Y = Year-to-Year change; Q-to-Q = change from prior quarter; M-to-M = change from prior month All data is seasonally adjusted unless indicated by NSA or Not Seasonally Adjusted. 82 Breakthrough Insights
governments attempts to slow down economic growth in order to temper inflationary pressures. This is not a good sign for Chinas outlook. It suggests the countrys risk of a hard economic landing remains very high. The trends for the United States and Japan are not positive, but they are not as ominous as the trends in Europe and China. In Japan, the continued fallout from the March natural disasters was not as severe in the second quarter as the initial first quarter impact.
Figure 3. Inflation-Adjusted GDP by Major Economies (Year-to-Year Growth, Seasonally-Adjusted)

15% China 10%
5%
European Union*
United States
0% 2007.1 -5% Japan -10% 2008.1 2009.1 2010.1 2011.1
Trends in Year-to-Year GDP Growth

GDP growth calculated on a year-to-year basis tends to show a less dramatic trend than quarterto-quarter growth, which can be more volatile
Figure 2. Inflation-Adjusted GDP by Largest Economies (Qtr-to-Qtr Growth, Seasonally Adjusted Annual Rate)
Q1-2011 Q2-2011
8.7% 9.1%
*European Union includes 27 countries Source: EuroStat, China National Bureau of Statistics and Kantar Retail
and is most affected by revisions (Figure 3). This doesnt change the negative outlook, given the importance of falling confidence. But it suggests that the starting point for the outlook may not be as weak as painted by other indicators. Europes growth trend, by this measure, appears much less negative than suggested by the quarterto-quarter growth trend.
2.9% 0.9%
3.1% 0.6% 0.4% 1.0%
-1.3% -3.6%
The slowing trend in the United States, on the other hand, appears somewhat more pronouncedat least from strong 2010 growthcompared with Europe.
China
European Union*
Euro Zone**
United States
Japan
*European Union includes 27 countries **Euro zone includes 17 countries Source: EuroStat, China National Bureau of Statistics and Kantar Retail
Chinas strong year-to-year growth remains steady by this measure, although relatively modest compared with the very strong growth of 2007 or early 2010.
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The comparisons to 2007 also are notable for Europe and the United States. Both had rebounded to pre-recession growth rates in 2010.
Consumer Price Trends

The escalating price pressures that have weighed on the outlook globally are clearly persisting at their worst in China (Figure 4). Although Chinas consumer price inflation rate subsided a bit in August, there is still not enough evidence to say that China finally has its inflation problem under controlparticularly given strong GDP and consumer spending growth in the second quarter. The high inflation rates remain a significant threat for both China and the global economy.
Figure 4. Consumer Price Inflation by Major Economies (Year-to-Year Percent Change)
7% 6% 5% 4% 3% 2% 1% 0% Jan-10 -1% -2% Jan-11 Japan European Union* United States China
In contrast, the price pressures in Europe peaked in April and have since been subsiding, partly in response to weakening consumer demand. This should give European central bankers a much freer hand to lower interest rates to stimulate economic growth. The uptick in Japans price pressures are focused in food, fuel, and services, which likely reflects growing scarcity in the wake of the March disasters. The United States also saw inflation pressures peak through the summer because of food and fuel prices for the most part. Those inflation pressures should subside into the second half of the year, particularly in terms of fuel prices that have come down from their mid-May peak. This will give the Federal Reserve greater freedom to use monetary policy to stimulate a slowing U.S. economy.
Global Retail Opportunity Index

The recent and emerging growth trends are having a significant impact on the relative attractiveness of retail markets in the long term. This is evident in a ranking of the markets based on a Global Retail Opportunity Index developed by Kantar Retail (Figure 5). Based on this index:
Most euro zone countries (i.e., Ireland, Austria,

Netherlands, Spain, Belgium, Italy, Portugal, and Greece) have sagged toward the bottom of the rankings.
*European Union includes 27 countries Source: EuroStat, Japan National Statistics Center, National Bureau of Statistics of China, U.S. Department of Labor, and Kantar Retail
Russias outlook also has been hit hard in this

environment, dropping it to 10th in the ranking from third. Russias households appear to be particularly hurt by inflation pressures amid
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Figure 5. Global Retail Opportunity Ranking1

Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 Prior-Year Rank 1 4 2 5 7 9 6 11 8 3 12 10 14 18 13 19 16 20 15 22 17 30 24 23 28 26 21 27 25 29 31 32 34 33 Country China Brazil United States Malaysia Australia Canada Vietnam Sweden India Russia United Kingdom France South Korea Philippines Argentina Switzerland South Africa Germany Indonesia Taiwan Japan Mexico Thailand Turkey Poland Ireland Austria Netherlands Spain Belgium Italy Portugal Nigeria Greece Region Asia-Pacific Latin America North America Asia-Pacific Asia-Pacific North America Asia-Pacific Western Europe Asia-Pacific Central & Eastern Europe Western Europe Western Europe Asia-Pacific Asia-Pacific Latin America Western Europe Africa Western Europe Asia-Pacific Asia-Pacific Asia-Pacific Latin America Asia-Pacific Central & Eastern Europe Central & Eastern Europe Western Europe Western Europe Western Europe Western Europe Western Europe Western Europe Western Europe Africa Western Europe Index 85.5 69.1 60.6 50.9 50.4 46.3 45.9 45.7 45.4 44.1 44.1 41.1 38.9 38.3 37.9 37.8 37.1 37.0 35.8 35.6 33.6 33.5 33.2 32.9 32.3 32.2 32.0 31.2 30.5 30.0 22.0 16.3 15.0 10.9
Brazil is among the emerging markets that

have continued to climb in the rankings amid developed market woesalthough the movement among emerging markets overall is quite mixed depending on specific situations. Some have held steady while others have slipped in the rankings.
Australia and Canada are among the developed

markets where sustained growth has allowed them to edge higher in the rankings.
Global Retail Opportunity Map

A mapping of the opportunity index teases out the impact that the indexs three dimensions inflation-adjusted growth, market risk, and market sizeeach have on the relative opportunity among countries (Figure 6). In this context, four countries exhibit an attractive combination of lower-thanaverage risk and higher-than-average growth: Australia, Canada, Sweden, and the United States. Countries are mapped from low- to high-growth along the horizontal axis (using inflation-adjusted 20102016F compound annual growth rates for consumer spending on retail-related categories) and from high- to low-risk along the vertical axis. (See the sidebar for more background about the risk measures and other data issues). The size of a countrys circle on the map is indicative of its relative market size in 2016. Other observations based on the opportunity map include:
1 The rankings are based on a weighted index of three measures: (1) forecasted real growth rates of spending on retail-related categories through 2016, (2) measures of market risks, and (3) size of the retail market. The weighting is skewed in favor of growth (55%) instead of risk (25%) with market size given the least weight (20%) * Euro zone countries in blue
uneven growth in the oil industry thats key to the countrys outlook.
Its all relative. Although the United States

long-term growth prospects have deteriorated, it retains its relative attractiveness among most other countrieswhich are being hurt as much,
Non-euro zone countries such as Sweden and

Switzerland have tended to edge higher in the rankings.
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Figure 6. Global Retail Opportunity Map

Low Risk
Austria* Netherlands* Germany* Switzerland Sweden U.K. France* Japan Belgium* Ireland* Portugal* -5 7 Italy* Spain* Taiwan South Korea Malaysia United States Australia
Low Risk/High Growth Best Quadrant
Western Europe
Canada
Central & Eastern Europe North America Latin America Asia -Pacific Africa
Greece*
Poland Turkey Mexico
Thailand South Africa Brazil Russia India Vietnam Philippines
China
Indonesia Argentina
High Risk
Nigeria *Euro zone members Low Growth -5 9 High Growth
*Euro zone members Explanatory note: The relative size of each countrys retail market is represented by the size of its bubble. The mapping horizontally represents the countrys forecasted growth along a continuum of low-to-high growth. The mapping vertically represents the countrys risk level along a continuum of low-to-high risk. Where each axis line crosses the continuum represents average growth or risk. So countries mapped on the right half represent higher-than-average growth. And countries mapped on the top represent lower-than-average risk. The best opportunities are in the top right quadrant, which represents low-risk/high-growth opportunities Source: Kantar Retail
86
if not more, by the current global economic environment.
PIIGS. Last year, this outlook included Italy

in a group with euro zone countries that were more troubled at the timePortugal, Ireland, Greece, and Spain. That proved to be prescient, given Italys more recent debt troubles. These countries tend to be clustered on the map, straddling the two left low-growth quadrants.
leftward movement by Russia toward a less attractive position. China retains its place as the strongest growth market.
Safe laggards. Notable among the safe

laggards in the upper left quadrant is the rightward movement by Germany toward a more attractive position. This largely reflects Germanys ability to sustain relatively better growth than its neighbors amid the euro debt crisis. And in this environment, Sweden has edged out of this quadrant into the best growth opportunity space to the right.
Risky growers. Notable among the risky

growers in the bottom right quadrant is the rightward movement by Brazil and Mexico toward a more attractive position and the
About the Global Retail Opportunity Measures

Market size. Consumer spending data reported by each country are used to define market size. Retail sales measures are not used because they can vary significantly in terms of what is included. For example, the figures for some countries are inflated by what other countries classify as wholesale sales. And some countries do not try to estimate sales of smaller retailers or informal retailers. Consumer spending data have a number of advantages. They are a component of each countrys national accounts, which tend to be measured uniformly across countries. Focusing on spending on goodsand excluding consumer spending on servicesis a good proxy of retail sales. Spending on automobiles also is excluded. The consumer spending data also are better at including sales in informal markets. Market risk. The market risk measure leverages data from the World Economic Forums Global Competitiveness Report, 20112012. Data that measure differences among countries in terms of five factors are used and weighted in the following way: 50% infrastructure and institutions, 30% higher education/training and business sophistication, and 20% technological readiness.
87
The Macroeconomic Outlook for U.S. Retail

By: Frank Badillo / Originally published: September 29, 2011
Pushed Toward Recession

A bumper sticker slogan may be as good a way as any of explaining why the economic recovery is in danger of lapsing into another recession: Humpty Dumpty was pushed!
88
Breakthrough Insights Breakthrough Insights
What looked like an economic and retail recovery in decent shapealthough not necessarily eggshapedat the start of 2011 is in danger of falling into recession by the end of 2011 because of the accumulating impact of a series of mostly unexpected shocks or market disruptions. In particular, these include:
Italy and renewed fears over Greece. Now, the crisis is evolving beyond a sovereign debt crisis into a full-blown financial crisis. This is evident in growing concerns about European banks, which are being shunned in the markets because of their exposure to euro-country debt.
U.S. debt debate. The big falloff in U.S.

consumer confidence in August and September that weighs heavy on the outlook is partly attributable to the acrimonious debate in Congress over the U.S. debt ceiling and deficit reduction. The confidence falloff also is attributable, however, to the August and September stock market selloffs, which occurred in response to broader concerns about government debt and growth globally. And those global concerns are being driven relatively moreand increasingly moreby concerns about a euro financial crisis.
Fuel price spikes/Middle East revolts. The first

big blow to consumer confidence this year was the spike in fuel prices. Prices surged from March to their May peakas oil markets were disrupted as revolts spread from Tunisia to Egypt and Libyaand remained elevated as the Libya conflict dragged on. This fuel price spike caused inflationary pressures to shift from bad to worse, particularly in emerging markets such as China.
Japans disasters. The earthquake and

tsunami-induced nuclear disaster in Japan in March quickly added to global inflation pressures as shortages occurred in key industries, particularly autos and electronics. The disruptions to the U.S. auto industry caused temporary job losses that contributed to the slowdown in U.S. job growth that emerged in May and June.
Are China and Emerging Markets Next?

Next in the string of events in 2011 that may further aggravate the U.S. retail outlook is the risk of a hard landing in key emerging markets, particularly China. The September stock market selloffs in these countries have been particularly biglarger than the falloff in developed markets. The wealth losses in these emerging markets could be the kind of shock that aggravates the steps these countries are taking to slow their economy as a way to dampen inflation pressures. The risk of a hard economic landing in China is particularly worrisome, given its key supply- and demand-side role in U.S. and global markets. A
Europes slow-motion financial crisis. The

European crisis slowly is becoming one of the most significant threats to the global outlook. The crisis has deteriorated month-by-month since the April request by Portugal for a bailout. The euro zones move to bolster its bailout programs has failed to quiet concerns, which have instead mounted with new fears regarding
89
hard landing in China also would present risks to the global financial markets, given growing concern that growth in China is being driven by a U.S.-style real estate bubble fed by easy access to credit in recent years.
Figure 1. Measures of Confidence

100 90 80 70 60 50 40 30 20 Jan-08 Jan-09 Jan-10 Jan-11
Consumer Condence* Spending Intentions*** Consumer Sentiment**
Confidence Is Paramount Above All Else

Amid the series of disruptions, the falloff in confidence among consumers and businesses remains the best window on the retail outlookand the view has not improved based on the latest data. The consumer confidence and sentiment numbers through September stayed near the lows they fell to after the initial stock market selloff in August (Figure 1). These measures paint an increasingly ominous outlook with each blow the economy has taken, starting with the March spike in fuel prices. At the same time, it will be important to see how the continued letup in confidence among consumers affects their spending intentions as tracked by Kantar Retail. The letup in spending intentions through September has been significantly less severe than the other confidence measures. If that remains the case, then it suggests that household spending likely will weaken in the months ahead but not necessarily fall off suddenly and dramatically. But it still may be not be enough to avoid a recession in the months ahead.
*Confidence is through September as reported by the Conference Board **Sentiment is through September as reported by Reuters/ University of Michigan ***Shopping Intentions from Kantar Retail ShopperScape is through September; represents sum of % of shoppers planning to spend about the same or more in the coming month Source: Conference Board, Reuters/University of Michigan and Kantar Retail
disruptions. After starting to rebound strongly through April, private sector job growth has slowed dramatically in most months through September (Figure 2). September job growth appeared to improve, but is weaker when workers returning from a Verizon labor strike is discounted. This downshift in hiring highlights the growing risk in this increasingly uncertain environment that private employers will hold back on investment and hiring that they otherwise would have moved forward with.
Private Sector Follows School Job Cuts

A corresponding falloff in business confidence which may be accelerating in the wake of the recent stock market selloffsappears to be evident in the path of job growth amid the years market
90
While the private sector job weakness may be building, whats more clear from the data is that the job market weakness since May has been led by a pickup in job cuts by government. The data further show that the bulk of the government job cuts in recent months have been local school jobs. In other words, also adding to the string of market disruptions of 2011 has been the impact of the past recession on local school districts. With property taxes collected on a lagging basis, school districts are only now feeling the full impact of the recession and declining home values on their revenues forcing the recent job cuts.
or President Barack Obama. Bernankes plan is the only one that has a chance of having an impact in the next few monthswhen it can make a difference in averting a recession. However, the immediate impact of the Bernanke plan has been negative because of the way it has raised concern among investors about significant downside risks to the economic outlook. The stimulus plans likely will have most of their impact in 2012, when they might soften the landing of an economic slowdown or downturn. In the very near term, the Bernanke and Obama plans will be hard-pressed to turn around negative consumer and business sentiment that appears to be leading the economy toward recession.
Impact of Bernanke and Obama Plans

In the short term, the recession risk posed by the years market disruptions will not be eliminated by the plans laid out by Fed Chairman Ben Bernanke
Figure 2. Job Growth: Private Sector vs. Government
Month-to-Month Change in Jobs in Thousands
Stimulus to Home Buying and Refinancing?

Bernankes plan could prove to be a powerful stimulus that would benefit retailers, particularly homegoods retailers. The 30-year fixed mortgage rate is likely to fall below 4% in the final weeks of the year, which will give households a bigger incentive to refinance mortgages and purchase homes. Refinancing would free up income to spend in the household budget and home buying would trigger follow-on purchases of homegoods. The success of Bernankes plan, however, depends on whether enough households can get loans. Many of the households that most need refinancing are underwater in terms of the value of their home. Meanwhile, banks would have to loosen their stricter credit standards and show more inclination to lend money. Unless households and banks are
300 250 200 150 100 50 0 -50 -100 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Total jobs (nonfarm) Private-sector jobs Government
Source: U.S. Department of Labor and Kantar Retail
91
able to find some common ground, the Bernanke plan is likely to produce mixed results. The data suggests the Fed may have been prodded to fix a mortgage market further crippled by the recent collapse in confidence. Mortgage rates had fallen toward 4% before the Fed plan was announced and refinancing applications had fallen instead of rising as would be expected (Figure 3). This suggests the falloff in confidence may be keeping households from making big decisions such as refinancing even when they work in their favor. The Fed action should make the incentives clear and help jolt householdsand firmsout of the inertia that has set in amid declining confidence.
Figure 3. Mortgage Rate & Refinancing Applications
Weekly Rate and Index
Implications
Retailers and their suppliers should prepare

for a recession-like environment, with discretionary categories and channels particularly apparel and homegoodsmost at risk of flat or falling unit volume emerging by the holidays.
Homegoods should benefit more than other

retail categories and channels as the Feds stimulus plan begins to have a growing impact into 2012.
Do not expect government stimulus to avert

a significant slowdown or downturn in the months ahead. Government action at best will help minimize negative conditions in the short term. In the long term, government action may help create an environment that accelerates a recovery.
5.4 5.2 5.0 4.8 4.6 4.4 4.2 4.0 3.8 2010 2011 Applications for Renancing (right scale) 30-Year Fixed Mortgage Rate (left scale)
6,000 5,000 4,000 3,000 2,000 1,000 0
China and emerging markets cannot be counted

on for sustained strong growth. Teams in those markets should prepare for a potential hard economic landing.
The impact of a U.S. downturn will remain

uneven among states and metro markets with those especially dependent on government jobs most susceptible. States with companies that sell heavy equipment and durable goods to emerging markets are at additional risk if those global markets sustain a hard landing.
Source: Mortgage Bankers Association, Federal Reserve Board, and Kantar Retail
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Global Headquarters
Glendinning House 1 Station Road Addlestone Surrey, KT15 2AG United Kingdom +44.193.283.3600
/ Contacts
Leadership Team Wayne Levings Chief Executive Officer Mayer Danzig Chief Digital Officer Bryan Gildenberg Chief Knowledge Officer Steve Pattinson Chief Executive Officer - Market Insights Bryan Roberts Director, EMEA Retail Insights Phil Smiley Chief Executive Officer - Asia Pacific Global Sales and Services Scott Butterfield, Chief Customer Officer Scott.Butterfield@KantarRetail.com Michael Pickford, Director, Strategic Global Accounts Michael.Pickford@KantarRetail.com Media Katherine Clarke, Vice President Katherine.Clarke@KantarRetail.com
Market Insights, Americas

245 First Street, 10th Floor Cambridge, MA 02142 USA +1.617.588.4100
Market Insights, EMEA

6 More London Place, 5th Floor Tooley Street London, England SE1 2QY United Kingdom +44.207.031.0272
Asia Headquarters
The Center, 25th Floor 989 Changle Road Shanghai 200031 China +86.212.405.0132
KantarRetailiQ.com / KantarRetailiQ.eu / KantarRetailiQ.cn KantarRetail.com

2011-H2 Breakthrough Insights

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2011-H2 Breakthrough Insights

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Second Half 2011

Focus on the Horizon

Share of Real Growth: Where Will I Grow?

Share of Decision: Why Will Shoppers Choose Outlets and Brands?

Share of Wallet: How Much Will Shoppers Spend?

Share of Solution: What Will We Sell Shoppers?

Bryan Gildenberg Chief Knowledge Officer, Kantar Retail

UK Online Grocery: Comparison Shopping Trips

Source: Tesco Breakthrough Insights 5

Figure 1: Selected 15 SKUS Across Variety of Categories

Shopping trip duration

Delivery time-slots: Proximity

Delivery Timeslots: Duration

Figure 2: Price Comparisons

Implications for suppliers:

Online Retail in China: Getting Ahead of the Curve

Chinas Online Consumers

Source: Kantar Worldpanel China: 52 weeks ended 25 March 2011

Making Sense of the Online Retail Market

Eg LOreal Flagship Store, Wyeth Flagship Store

Source: Kantar Retail Analysis

How Will Chinas Online Channel Evolve?

Online Can Change the Rules of the Game

Figure 3: Diaper Wars on Amazon

What Are the Prospects for Online Retail in China?

Growing consumer desire for convenience and

Poor access to offline retail stores in rural

Rapidly improving national infrastructure Improving online payment systems

High Internet usage and rapidly expanding

High mobile phone penetrationit is estimated

Kantar Retail Point of View

Increased Focus on the Bottom of the Ladder

Source: Kantar Retail store visit

Walking Walgreens, Nice! Execution Inconsistent

Source: Kantar Retail store visit

CVS Introduces Holistic Beauty Solution: Nuance Selma Hayek

Figure 4. Introducing Nuance Salma Hayek

Source: Kantar Retail store visits

Store Locations and Formats

Figure 1: Walmart Canadas Store Presence

325 Stores: 190 Discounts 135 Supercentres

Source: Walmart.co, June 2011

Assortment and Private Labels

Figure 3: Collage of Walmarts Fresh, Prepared Food Options

Source: Kantar Retail Store Visits

Audience Reach and Shopper Analytics

Shopper Segment: Proportion of Audience

Source: June 2011, Company Presentation and Kantar Retail Analysis

Implications for Target Canada

Source: Kantar Retail Store Visit

Walmart Canada vs. Walmart US

Stores present across Rural, Suburban, and Urban markets

Walmart Canadas Advantages vs. Target:

Unique services include: Site to Store MoneyCenter

Newer lines include

Newer lines include

*population of the country from the CIA factbook, 2011 estimates

Walmart Canadas Relative Weakness and Targets Opportunties:

Lack of Private Brand

Stark Message of Cheap

2012 EMEA Events Calendar

Retailer Financial Models Session Istanbul, Turkey

Geographical Coverage - Europe