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Retail, Redefined

Retail, Redefined. November 2013. The recession was a wake-up call. 2010-2013. 2009. Zzzz. The Challenge for growth. Cpg STILL SPUTTERING FOR growth IN north America. Canada. United States. + 1.5. +1.6. + 0.2. +0.1. Dollars. Units. Dollars. Units.

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Retail, Redefined

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  1. Retail,Redefined November 2013

  2. The recession was a wake-up call 2010-2013 2009 Zzzz

  3. The Challenge for growth

  4. Cpg STILL SPUTTERING FOR growth IN north America Canada United States +1.5 +1.6 +0.2 +0.1 Dollars Units Dollars Units Nielsen: MarketTrack - Total Tracked Sale 52 wks ending October 19, 2013 Nielsen: ScanTrack - Total Tracked Sale 52 wks ending October 26, 2013

  5. CPG Growth slowing over the past 5 years Slow growth, driven only by inflation Source: Nielsen MarketTrack, National All Channels – YTD 44 weeks to October 19, 2013 - Total Tracked Sales excluding Fresh Random Weight

  6. 2013 is shaping up to be a slow growth year Slow growth, driven only by inflation Source: Nielsen MarketTrack, National All Channels – YTD 44 weeks to October 19, 2013 - Total Tracked Sales excluding Fresh Random Weight

  7. Not all regions are created equal The Prairies lead regional growth – twice the National average 52 week Regional CPG Performance Source: Nielsen MarketTrack, National All Channels – 52 weeks Ending October 19, 2013 - Total Tracked Sales excluding Fresh Random Weight

  8. Trends impacting growth Cyclical Changes • Economy still fragile • Cautious Consumer Structural Changes • Value Motivators • Retail, Redefined • Evolving Consumer

  9. Value remains a key driver of sales $$$

  10. Since before the recession, % of retail sales sold with a price cut has increase 10 points % Dollars Sold on TPR An increase of $3.9 billion But total sales only increased $3.5 billion Quarterly Periods Source: Nielsen MarketTrack, National GB+MM+DG - 12 week periods ending June 29,, 2013

  11. It’s important to really understand “incremental” Nielsen Innovation: Promotion Source of Volume Market Expansion Incremental Volume Brand Switch Store Switch Time Switch Subsidized Volume Subsidized Volume Non – Promoted Volume Non – Promoted Volume Past Paradigm Purchase Behaviors

  12. It’s important to really understand “incremental” Nielsen Innovation: Promotion Source of Volume Market Expansion Incremental Volume Brand Switch New Paradigm Store Switch Time Switch Subsidized Volume Subsidized Volume Non – Promoted Volume Non – Promoted Volume Past Paradigm Purchase Behaviors

  13. While promotions are increasing rapidly, the benefits are not what they seem Promotional Impact Framework High Retailer Growth Mutual Growth 22% 14% Retailer Benefit Subsidization Manufacturer Growth 42% 22% Low Manufacturer Benefit Low High Source: Nielsen Promotional Source of Volume Models

  14. Our strategy needs to change “ It’s not about how low can I go, but how low do I need to go in order to stay profitable and create win-win scenarios ”

  15. Traditional retail under attack

  16. Traditional CPG are channels relatively flat Conv & Gas* +0% Grocery -1% Drug -1% Mass Merch -5% less Zellers +3% Source: Nielsen Homescan Channel Watch – Canada - 52 weeks to September 28, 2013 *Convenience Tract 52 weeks to August 24, 2012 * Excluding Cigarettes

  17. Electronic, department and office supply stores report the greatest loss Electronic -12% Department -12% Office Supply -11% General Merch -4% Hardware/DIY -2% Conv & Gas* +0% Grocery -1% Drug -1% Mass Merch -5% less Zellers +3% Source: Nielsen Homescan Channel Watch – Canada - 52 weeks to September 28, 2013 *Convenience Tract 52 weeks to August 24, 2012 * Excluding Cigarettes

  18. E-commerce, cross border and ethnic grocery leads retail growth in Canada Electronic -12% Department -12% Office Supply -11% General Merch -4% Hardware/DIY -2% Online +41% U.S. Stores +17% Ethnic Grocery +14% Pet Specialty +8% Warehouse +7% Health Food +7% Conv & Gas* +0% Grocery -1% Drug -1% Mass Merch -5% less Zellers +3% Source: Nielsen Homescan Channel Watch – Canada - 52 weeks to September 28, 2013 *Convenience Tract 52 weeks to August 24, 2012 * Excluding Cigarettes

  19. Online shopping gaining momentum Online Shopping • 1.5% share of Tracked Sales • 0.3% share of food (+150%) • 39% of households (+30%) • 15% Buying Food (+106%) • Spending $344 per year • $111 Food (+21%) +41% $1.8 Billion Source: Nielsen Homescan, National Total Expenditures, 52 Weeks Ending September 29, 2013

  20. Future growth will be fueled by consumer Preference for online shopping 30% Of consumers prefer virtual store shopping over traditional retail shopping 18-24 year olds 72% Source: December 2012 Nielsen PanelViews Media Survey

  21. Online in the U.S. forecasted to be 5% of CPG sales in 2 years – Amazon leading conversion Conversion Rates By Retailer (Based on Site Visitation & Site Purchasing) US Online CPG Sales ($ Billions) 2% of CPG sales 5% of CPG sales Amazon converts ~50% of site visitors Brick & mortar ‘multichannel’ retailers convert 1 in 5 2010 2011 2012 2013 2014 2015 Source: Nielsen NetView Panel Analysis, January 2013

  22. Online grocery sales to double in five key European markets by 2016 Britain, France, Germany, Switzerland and the Netherlands Online retailing in food and consumer goods is growing at a phenomenal rate across Europe. Technology is empowering people, fundamentally changing the way they buy groceries Joanne Denney-Finch, chief executive, IGDReuters (Berlin), Oct. 23, 2013 Source: Reuters

  23. Some e-road blocks for consumers feel the grocery store is more convenient 74% 56% feel online retailer sites are difficult to use 27% do not believe assortment is greater online 25% agree prices are higher online 14% do not trust products sold online Source: Nielsen Homescan, Panel Views Survey U.S. Q2 2013

  24. Decreasing trips but increasing touch points SHOP HERE

  25. More loyalty cards, but fewer trips 2008 2013 % of Canadians 94% 97% + Avg. # of Cards 5.8 6.3 + Trips Per Year 208 173 -17% Source: Nielsen Panel Views 2013 Loyalty Card Study: Homescan Total Expenditures – 52 wks to September 19, 2013

  26. The loyal, disloyal shopper Average Loyalty to Store The Opportunity Need to understand what and where your shoppers are spending the other 86% 14% Source: Nielsen Homescan: Top 10 Banners in Ontario - Avg $ Share of Requirements 52 weeks to Sept 19/13

  27. Shopping today is more about the experience 59% Value for Money 59% Promotions 55% Price Loyalty Programs 53% Quality Fresh Produce 48% Quality Meat Department 48% Variety and Selection 26% Exclusive Events Source: Nielsen Global Omnibus Survey Q1 2011, Q1 2013

  28. Key Takeaways • Promote for Win-Wins: It’s not about spending more, it’s about promoting and pricing smarter for sustainable growth and profitability for both the manufacturer and the retailer • Mix of Old and New: Online is growing but on a small base. The role of digital needs to be integrated with the overall shopping experience • Know your shopper: In order to build loyalty, it’s important to understand what consumers are buying outside of the store to meet new unmet needs and demand. 28

  29. Thank You! Stay Connected to Consumer and Media Trends For the latest insights, visit nielsen.com Download our app: Nielsen Top10 Questions regarding the content of this presentation, contact: Carman Allison, email carman.allison@nielsen.com

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