BETTING ON WALMART: THE BULLISH CASE AND HOW SUPPLIERS CAN WIN

Transcription

1 BETTING ON WALMART: THE BULLISH CASE AND HOW SUPPLIERS CAN WIN Presented by: Leon Nicholas Senior Vice President March 2014

2 Copyright 2014 Kantar Retail. All Rights Reserved. 501 Boylston Street, Suite 6101, Boston, MA (617) No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photography, recording, or any information storage and retrieval system now known or to be invented, without the express written permission of Kantar Retail. The printing of any copies for back up is also strictly prohibited. Disclaimers The analyses and conclusions presented in this seminar represent the opinions of Kantar Retail. The views expressed do not necessarily reflect the views of the management of the retailer(s) under discussion. This seminar is not endorsed or otherwise supported by the management of any of the companies covered during the course of the workshop or within the following slides.

3 Kantar Retail is the leading provider of strategic insight, consulting, and thought leadership on the retail landscape. The leading suppliers, brand manufacturers, retailers, financial services, and strategic marketing firms rely on our insights to transform their businesses. 3

4 Walmart & Sam s Workshop April 15 16, 2014 Bentonville, AR Doubletree Suites, Bentonville, AR Where are the opportunities for growth at Walmart & Sam s? How will the recent Walmart management and merchandising announcements impact your business? How can you stay ahead of Walmart investments in small box and digital in order to realize increased business? How are Sam s members evolving? How is Sam s current evolution going to affect supplier demands? For more info on this event, visit our website Or, us events@kantarretail.com

5 This Morning Our POV on Walmart US recent performance Betting on Walmart: Logistics and Analytics Shopper Impact What has to happen next for Walmart and Suppliers?? Source: Kantar Retail analysis 5

6 Walmart US: Tough Going 8% Walmart US Sales growth Walmart US Comps Walmart US: Average Customer Traffic and Ticket 7% 2.0% 6% 1.5% 5% 1.0% 4% 0.5% 3% 0.0% 2% 1% 0% -0.5% -1.0% -1% -1.5% -2% -3% Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13-2.0% Q Q Q Traffic Q Q Q Ticket Q Q Source: Company reports, KRiQ.com 6

7 Walmart US Q4 Highlights Walmart US Q4 (Jan. 31, 2014) Net Sales (USD billions) Q4 % Change $ % Comps -0.4% Operating Income (USD billions) $ % For FY2015, we re focusing on growth and returning to positive comps. -Bill Simon, Feb Performance by Department: Apparel = low single-digit positive Home = low single-digit positive Entertainment = mid single-digit negative Hardlines = low single-digit positive Health & Wellness = low single digit positive Grocery = low single digit negative Walmart US Q4 Notes: Average ticket up 1.3% Traffic down 1.7% OpEx up 1.4% Gross profit rate down 41bp Inventory up 3.8% Without.com, comps -0.7% Source: Company reports, Kantar Retail analysis 7 7

8 Top Destinations Shopped for Holiday Gifts Among holiday 2013 gift shoppers Source: ShopperScape 8

9 Amazon Effect is Longer-Range Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec % Past 4 Week Shopping Inccidence 90% Amazon Walmart/Walmart SC 80% 70% 74% 73% 74% 71% 70% 69% 66% 60% 50% 45% 50% 59% 40% 30% 34% 30% 34% 40% 20% 10% 0% Source: Kantar Retail ShopperScape, Dec 2007 Dec

10 On the Plus Side, Smaller Boxes Accelerate From ~+135 ~+270 new smaller boxes Walmart, Inc. Capital Expense Plans We ve been working to improve our speed to market and lower capital costs to allow us to move more aggressively Charles Holley, Feb Source: Company presentation, Kantar Retail analysis 10

11 So, Why The Case for Optimism? 2 very big reasons Data/Analytics Logistics Walmart s investments in these areas lie at the heart of its core capabilities. This is Walmart s turf. Source: Kantar Retail Analysis 11

12 @WalmartLabs: Mass and Me Kosmix Social Calendar OneRiot Small Society Grabble Set Direction Tasty Labs OneOps Inkiru Torbit Yumprint Filter & Organize Social Media Networks Holiday & Birthday App Geo- Targeted Mobile Ads App Develop Mobile Point-of- Sale Tech Software Developers for Mobile Apps Social Tools Easy-to- Scale Platform Tools Predictive Analytics Enables users to search topics and see connections Helps users organize and send greeting card and social expression via Facebook Rich content, targeted by interests, demos, & location iphone and ipad apps, focused on utility/user experience Links to checkout to collect data, allow targeting, and remove the paper receipts Acquired shortly after setup, its goal was to enable web and mobile experiences Social software, helps users voice and solve their needs Platform for fast, flexible, scalable cloudbased computer apps Leverage data to aid the shopping experience and optimize process efficiencies Founding company Source: Kantar Retail analysis 12

13 Role, Direction Social Mobile Enables Analytics We're going to develop all the new capabilities that are available [and] get their faster than anyone else Neil Ashe, Oct Source: Kantar Retail research and analysis 13

14 Retail Link 2.0 Arrives Considering the next generation of collaboration We can now combine our internal data, our POS data, our inventory data with external sources of information, as well as with our supplier partners, our retail supplier partners. Karenann Terrell, Oct Source: Company presentation, Kantar Retail analysis 14

15 Reaching Across to Empower Decisions Enabling the shelf and the customer experience Know the Platform Big Data Analytics team is focused on building frameworks that correlate multiple data sources to create consumable data sets for end users. Retail Link 2.0 will provide us with capabilities with external data, with our partners' data, and with data across Wal-Mart's entire enterprise, all channels; online, offline, mobile, whether a customer sees us in a store or whether they see us in a mobile experience Karenann Terell, Oct Source: Company presentation, Kantar Retail analysis 15

16 Walmart Exchange: Identifying Marketing ROI? Incorporating new media channels, big data analytics Ads Analysis Results Source: Kantar Retail analysis 16

17 Mupd8: Processing Big, Fast Data A real-time stream processing platform Designed around low latency, high scalability to keep up with social media Lets users write applications to process their own data, leverages open use of Mupd8 (Muppet 2.0): Extract and collect videos, images, location info, and status updates from these social media streams Categorize & track info including key influencers, relevant videos, images and websites for each product By mid 2012, it was processing 300 million + status updates daily, gathering real-time information on its product taxonomy Source: Kantar Retail store visits and analysis 17

18 Social Analytics to Aid Buyers Decisions Tools that combine trends on walmart.com, sales trends in Walmart stores, and social buzz all in one place to help make correlations. Examines trends on social platforms to predict hot products, aid buyers Social buzz typically precedes retail buzz Our goal is to tap into this social buzz and help Walmart with decision making on aspects like inventory and assortment. - Arun Prasath, Jan The Social Store team at WalmartLabs is developing technology that taps into the vast social media universe and marries it with the massive Walmart transaction database to identify consumer trends and help Walmart decide what products to carry in stores Source: Walmart.com, Kantar Retail research and analysis 18

19 Smart Pricing for the Shopper? Considering where this will head Know the built a pricing tool: Merchant tool that gives full visibility to the retailer s pricing position online Manage price position, literally minute by minute across their entire assortment Reports that Walmart.com is the lowest price online 70% of the time Going to show [customers] even more of the savings and prove it to them [more] than we've been able to do in the past Stephen Quinn, Oct Source: Kantar Retail research and analysis 19

20 What s Happening Already?: Polaris Walmart.com s internal search engine Experience Launched August, 2012 Head by Sri Subramaniam, former VP of engineering at Kosmix Developed in-house for 10 months Uses semantic search technology to anticipate the shopper s intent Also emphasizes engagement understanding, accounting for how a user is interacting on the site Walmart.com reported ~12.5% increase in purchase conversion Used on mobile, and will expand to Walmart International When will Walmart introduce picture based search? Predictive lists? Source: Kantar Retail research and analysis 20

21 Messaging, Website Become Personal Targeted based on browsing behaviors Just for You s launched Aug Know the Customer We built a sophisticated, brand-new recommendation engine that's been built internally by the Walmart Labs Joel Anderson, Oct Walmart.com targeted appeals, launched early 2013 Source: Kantar Retail research and analysis 21

22 Asking Shoppers to Pick the Products Contest to let shoppers submit, vote on new items Assortment Get on the Shelf competition: Users submitted videos of their product Winners receive listing on Walmart.com and marketing support. The grand winner may also be carried on Walmart stores, and receive guidance on scaling production. Already expanded to other Walmart countries Further experimenting with contests, marketing efforts: Holiday card design Chosen by Kids holiday toys Source: Kantar Retail research and analysis 22

23 Walmart Re-Released its iphone App Last Year Developing its link with plugged-in shoppers Walmart s new iphone app features: Budget tools to calculate basket price Coupons View manufactures coupons Product information, including reviews & ratings and local availability Item finder, showing aisle location of products offered at select Walmarts nationwide. Smart shopping lists via voice recognition, typing, or bar code scanning. Shoppers may also their lists. QR code scanner to find additional product info The technologies you need to have a massive impact on customers are already mainstream Gibu Thomas, May 2013 We'll turn that smart phone into a powerful tool for them to improve their shopping experience Neil Ashe, Oct Source: Company presentations, Kantar Retail research and analysis 23

24 Switching to Logistics: Stores as a Distribution Touch Point Source: Company presentation, Kantar Retail research and analysis 24

25 Convergence with Digital Will Evolve the SC As a pick-up point, and the store experience Supply chain / forecasting sophistication Providing product interaction, discovery, and linking to services Role of mobile in your category- test and learn now We're at an inflection point Bill Simon, Oct 2013 We bring online disruption into the store, and bring it back to being personal and interactive. -Gibu Thomas, May 2013 Source: Company presentations, Kantar Retail analysis 25

26 Tethering Small Stores to the Supercenter The next generation of retail, we believe will be channel agnostic Bill Simon, Oct Source: Company presentation, Kantar Retail analysis 26

27 The Vision: Market Ecosystem, Data Ecosystem The roadmap is well underway. We've been testing each and every one of these individual elements all along the way Bill Simon, Oct First pilot in May 2014 Source: Company presentation, Kantar Retail analysis 27

28 What s Already Happening? Goal is to compete with 2-day free shipping options Fulfillment Rolled-out nationally in 2011, expanded to 40,000+ items Includes baby, toy, home décor, hardware, & outdoor living, consumables Sends a text when the order is ready Test launched in mid 2013 in D.C. area Lockers located at the store, to provide greater pick-up convenience Initial feedback in August was positive, with plans to expand further Free shipping on orders of $50+ (up from $45+ last year) Expanded to cover most (98%) items Walmart.com sells 6-9 day delivery window $2.97 charge for 3-5 day option Pilot expanded in Q Shipping select orders from certain stores directly to customers Majority of orders delivery in 2 days or less Over the past 2 years, we've increased delivery speeds by over 15% while reducing cost by 10%. Joel Anderson, Oct Source: Company Presentation, Kantar Retail research and analysis 28

29 Holistic Logistics Multi-Nodal Access The biggest opportunity is winning the intersection between physical and digital retail Mike Duke, Oct Manufacturer Warehouse Stores Home Seamless, transparent, agile, and harmonized supply and delivery chains to the shopper will be the single most important success criterion this decade. Source: Kantar Retail analysis, store visits 29

30 How Will This Benefit the Shopper? The very near future We're at an inflection point Bill Simon, Oct 2013 Data/Analytics Logistics Technology Source: Kantar Retail Analysis, Company presentation 30

31 Messages that Get Me Reinforces Walmart s brand Provides utility Peer preferences, past purchases Predicts needs, tools desired Geo-targeted If out-of-stock in store, push button to get delivered for free! Source: Kantar Retail analysis 31

32 Store Converges with Digital Where it gets really exciting is the convergence of physical and digital -Bill Simon, Oct Source: Kantar Retail analysis, Company presentation 32

33 Shopping Suited to My Needs This ecosystem will make the supply chain more efficient - Bill Simon, Oct Source: Kantar Retail analysis, Company presentation 33

34 Leveraging Data to Personalize the Interaction To further facilitate the shopping experience Source: Company presentation, Kantar Retail analysis 34

35 Walmart Enablers Organizational alignment to enable internal convergence Stop the food fight Metrics and roles Re-configuration of stores, labor Tangible transformation Logistics, technology, and marketing analytics investments To enable seamlessness not bolt-ons Dialogue and collaboration with suppliers Transparency: systems, data, pilots Walmart Exchange Source: Kantar Retail analysis 35

36 Supplier To-Dos Product: Fit of product portfolio to WMT format portfolio Promotion: Next-generation, optimized tactics Analytics: Methods, providers algorithmic tactics Logistics: Elevation of logistics role strategic People: General manager skills on our WMT teams How much are we tooled to traditional SuperCenter retailing? Source: Kantar Retail analysis 36

37 Walmart Progression to Convergence Big Box Small Box & Digital

38 Contact: Leon Nicholas Senior Vice President Kantar Retail P M