NAVIGATING THE TRANSFORMATION OF RETAIL, SHOPPERS & PL - Market Shift Trends Mark Wright and Donna Wydra 2018
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Market Shift Trends NAVIGATING THE TRANSFORMATION OF RETAIL, SHOPPERS & PL Mark Wright and Donna Wydra June 2018
Today’s Presenters
• Mark Wright
Principal, Consumer &
Shopper Marketing, IRI
• Donna Wydra
Principal, Consumer &
Shopper Marketing, IRI
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Fill Out the Survey at the End
for Some Quick Insights from Our Top Studies
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What You Will Learn
Today’s Discussion
BIG Shifts Underway in the Retail Marketplace
The Evolving Roles of Private Brands
Navigating Life in the Fast(er) Lane
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BIG SHIFTS ARE
UNDERWAY IN THE
RETAIL MARKETPLACE
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Retail’s Greatest
Change Since the
Advent of the Automobile
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Mergers, Acquisitions and Other Recent Events in the Retail Marketplace
Southeastern Grocers Dollar General plans to Sam’s Club announces
files for bankruptcy, open 900 new stores, closing of 63
announces closing of 94 remodel 1,000 existing sites warehouses across the
stores SEG Release and relocate 100 stores US. Walmart Release
03/15/2018 Chain Store Age 12/7/2017 1/11/2018
Albertsons Companies Lidl plans to open as
Amazon acquires Whole many as 600 stores in
announces a merger
Foods Markets the US. Business
agreement with Rite Aid.
Amazon Release 6/16/2017 Insider 5/17/17
Albertsons Release 2/20/18
ALDI announces plans to Bodega Latina Corp will
The Kroger Co. agrees to
expand to 2,500 US stores acquire Fiesta Mart ‘s 63
sell its 700+ store c-store
by the end of 2022. ALDI Hispanic-themed stores.
business
release, 6/12/17 Progressive Grocer
Progressive Grocer,
3/26/2018
2/05/2018
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 7
Continued Growth in Online Sales
Quarterly Share of e-Commerce
Sales of Total U.S. Retail Sales % Online to CPG All Outlet Sales
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
-
IRI E-Market Insights ©2018
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 8
Accelerating Innovation in Order and Delivery Options…
Albertsons announces new Digital Marketplace providing for consumer-direct ordering and shipping
Albertsons Companies 03/20/2018
Albertsons Companies and Instacart to bring same-day grocery delivery to 1,800-plus stores
Progressive Grocer 11/28/2017
Amazon and Whole Foods Market announce the introduction of free two-hour delivery through Prime Now
Amazon Company Release 2/8/2018
Prime Now delivery makes Whole Foods competitive on price with Kroger in Cincinnati
Fooddive.com 3/29/2018
Walmart plans to expand its popular Online Grocery Delivery option to more than 40% of U.S. households
Walmart Release 3/14/2018
Kroger Announces 1,000th ClickList Store and Introduces Seamless Digital Shopping Experience
Kroger Company Release 12/18/2017
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…across the Industry
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 10How Important is Online Ordering?
55% of Millennials and 45% of Gen X’ers Say They
Intend to Purchase Groceries Online in the Coming Year
Likelihood of Purchasing Groceries Online in the Coming Year
% of Respondents
18% 20%
31% 34%
46%
27%
35%
29% 31%
27% 21%
20% 27% 12%
17%
21% 28% 22%
18% 18%
Total U.S. Millennials Gen Xers Boomers Seniors
Very likely Somewhat likely Not very likely Not at all likely
Source: Consumer Connect™, Q4 2017
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 11Of those Shopping Online, Many, Especially Younger Shoppers,
Feel Shopping Online Saves Money and Offers Convenience
Gen X’ers and Millennials also cited reduced impulse buying and ease of finding needed items.
Online Shopping Value Perceptions by Generation (Top 2 Boxes)
55%
Online order/in-store pickup (click- 52%
and-collect) allows me convenience
without the added shipping fee 36%
25%
30%
Buying online allows me to find lower- 26%
priced food and beverage options 18%
11%
Millennials Gen Xers Boomers Seniors
Source: Consumer Connect™, Q4 2017
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 12But, Nearly 74% of Shoppers Have Not
Tried any Online Ordering or Delivery Service
Their Reasons Vary, as Does Their Usage
Usage of Online Ordering Reasons for Not Ordering
and Delivery Varies by Age Groceries Online to be Shipped
84.7%
70.2% Prefer to physically see and 84%
None of these 63.3% choose groceries 84%
67.5%
6.0% Products more expensive 34%
Order online, Pick up in drive-thru 7.6% online than in-store 26%
lane 9.8%
7.0%
Age 55+ 17%
Tried it and didn't like it
10.4% 27%
Order online, Pick items up inside 10.2% Age 45-54 2016
store 11.5%
11.9% Not home during the day to 16% 2017
Age 35-44
accept shipments 16%
19.6% Age 21-34
Order online, Not same day home 17.2%
delivery 18.9% Service not available where I 14%
17.0% live 11%
6.7%
Order online, Same day home 7.7% 12%
delivery 10.6% Products not delivered fresh
12.5% 10%
0% 20% 40% 60% 80% 100% 0% 50% 100%
Source: IRI AttitudeLink™ Survey March 2018 Source: AlphaWise, Morgan Stanley Research
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 13Marketers Must Stay in Lockstep With Evolving Consumer Needs
and Wants to Encourage Engagement and Purchase Activity
Capabilities That Drive Channel Selection | % of Respondents
58%
57%
Online purchasing with free delivery 49%
39%
45%
43%
Online purchasing with fast delivery 34%
25%
44%
43%
Online purchasing with in-store pickup 30%
22%
42%
Online purchasing of freshly prepared 34%
items 24%
17%
31%
Subscription services for frequently 30%
purchased items 20%
11%
Millennials Gen Xers Boomers Seniors
Source: Consumer Connect™, Q4 2017
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 14Market Entries and Acquisitions
Lidl Amazon-Whole Foods Aldi
Value and Private Brands at the core of retail changes
Polar ends of the value spectrum outperforming
middle-of-the-road peers*
*Source: Deloitte
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 15Lidl Enters the U.S…
40% became aware
DRIVING by the store
said Lidl offered
69% 70% Good Value
for the Money
liked the
FRESH PRODUCE
was the top product purchased 59% Private Brand
assortment
69%
CURIOSITY
& 64% PRICE/INCENTIVES
drove them to the store
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 16…Resonating with Some Customers, But Not with All
• Initially some good news…
• 20% are shifting much more of their
shopping over to Lidl stores
• Half said their experience was better
than expected
• 58% said they definitely will visit Lidl
again in the future
• But sales are soft…
• 16% said Lidl was worse than expected
• Repurchase intent dropped by more
than half (from 44% to 21%)
from fall opening to March, 2018
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 17Lidl’s Market Entry has had Mixed Results
Shoppers are the big winners…
• Lidl’s entry sparked industry-wide activity, forcing competing retailers and
manufacturers to up their merchandising games
• Lidl significantly impacted grocery prices -6.3% in Grocery channel, -6.6%
Pricing Impacts of Lidl Store Openings
in All-Outlets* and -2.5% to -13.9% declines at Walmart, Food Lion,
Kroger, Publix and Aldi**
Aldi
The U.S. Market Continues to Challenge Lidl
Food Lion
• Aggressive growth plans and sales expectations have not been met
Kroger
• Most shoppers liked Lidl stores, but haven’t transferred their loyalty to Lidl Grocery
Channel
• In response, new stores will have smaller footprints and more-limited All Outlets
assortment, rolled out more slowly in more urban markets
Publix
Recommendations for Competitors Walmart
• Know your customers and your markets – localized and personalized
-15.0% -10.0% -5.0% 0.0%
actions are essential to prevent Lidl triers from becoming Lidl loyals
• Key themes to blunt Lidl’s messaging: greater product variety, produce
freshness & quality of your own private brand items * IRI POS Price comparison
**UNC Lidl Price Survey, stores within 1.7 miles of Lidl store
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 18ALDI Growing Quickly by Offering Value
With 1600 Stores Today and Adding 900 More by 2022
Aldi Could be the Third Largest Grocery Chain
Selection of
93% 61% FRESH
PRODUCE
Store Brand
products &
said that good/affordable
pricing/value price is what they
(77%) was the Unique
drove them top product products offered are
liked about ALDI
to ALDI purchased liked at ALDI over
other retailers
Half said their experience was Better Than Expected
1/3 shifting much more of their shopping to Aldi
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 19Aldi’s Expansion Quietly Continues, and Shoppers are Very Aware
Shoppers will be the big winners here as well!
• 60% to 70% of markets experienced price declines when Aldi opened
• Pricing impacts are broad, but small—overall market prices declined by an
average 1-3%, while category price impacts ranged from +2% to -15%
• Savings opportunities exist against specific competitors
(Nancy Luna, Orange County Register/SCNG)
What to do? Aldi’s prices are lower than many competitors’
Ralphs
• Know your own customers—identify and meet their needs
Vons
• Clean up your own house before Aldi opens—eliminate any issue Meijer
that would give a new competitor an opening with your shoppers Food Lion
Albertsons
• Focus on strengths—broader assortment, private brand offerings Publix
and quality, produce and meat quality, etc. Kroger
Walmart Total
• Monitor and respond to Aldi pricing as appropriate
Aldi
-5% 0% 5% 10% 15% 20% 25%
Price per Volume Comparison, Edibles Categories, IRI Consumer Network
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 20Amazon Announces Its Purchase of
Whole Foods in June 2017
In February 2005,
Amazon launched Amazon Prime,
an all-you-can-eat express shipping
membership program for about a
million products.
Our vision was that fast delivery
should be an everyday experience—
rather than an occasional
indulgence, and many skeptics
thought we were crazy.
— amazon.com website
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 21Many Whole Foods Shoppers Use Amazon
Prime, Either by Paying For It or Sharing
% Use Amazon Prime
29%
Pay for Prime
Membership 55%
71%
of Whole Foods Shoppers
Use Someone
Else's Prime have Prime access
Do Not Have Prime
Access 16%
IRI Whole Foods Amazon Study, March 2018
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 22Shoppers are Aware of the Merger, and Some are Buying More Because of It
91% 15% 28%
of Whole Foods of WF shoppers are of WF Shoppers
(WF) shoppers buying more at WF purchase
are aware due to the merger groceries
of the merger on Amazon*
Whole Foods Amazon Study, March 2018
* Mostly non-food and bulky items
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 23Whole Foods Shoppers Expect Better Price and Delivery Options
Expected Shopping Benefits of Merger
Better prices 59%
Better sales/coupons 38%
Amazon Prime discounts 38%
Whole Foods' brands sold and shipped at
32%
Amazon.com
Amazon Prime delivery 29%
More frequent sales/coupons 29%
Whole Foods selling products on
27%
Amazon.com Only 18% of WF shoppers are
More Amazon Prime-only offers 26%
aware of Amazon/WF benefits
Whole Foods Amazon Study, March 2018
Q4. In which of the following ways, if any, do you expect to benefit as a shopper to Amazon's purchase of Whole Foods?
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 24Whole Foods Shoppers with Amazon Prime Access Motivated by Free Delivery
Effect of Free Whole Foods Delivery; Would Buy More at Whole Foods if Free Delivery Was Offered
61%
Yes
No 39% Currently only 2% do all of their
shopping at Whole Foods
88% of trips are Fill In,
Whole Foods Shoppers with Amazon Prime Access
Single Item, Special Deal
Whole Foods Amazon Study, March 2018
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 25The Amazon/Whole Foods
Evolution is a Work in Progress
Shoppers just starting to see the effects
• While awareness is high, new benefits are still mostly unknown
• Some shoppers have noticed lower prices and Amazon lockers,
but out-of-stocks have increased
• Free delivery partially offsets higher prices
• “New news” still coming out about merger effects and benefits
What to do?
Whole Foods still lags far behind on value and price
• Competitors to push messaging of these benefits
Whole Foods doesn’t meet all its shoppers grocery needs nor does Amazon
• Position competitors as a one-stop shopping… both in store or online
Keep abreast of changing Amazon/WF benefits and messaging
• Continue to develop and communicate strategies to defend
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 26THE EVOLVING
ROLE OF
PRIVATE BRANDS
From Imitator to Disruptor
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 27Changing Consumers are Driving Change
Transparent & Always On Personal Value Is King
Simple • 77% of Americans own a • Want brands that align • 45% of grocery shoppers
• 94% of consumers say smart phone with their belief systems say they are visiting
they would be loyal • Any time, any place - • Only 49% of consumer value-oriented stores
to a brand that offers convenience as the new say their main grocery more often
complete transparency loyalty. store connects with them • 70% of consumers say
• 54% of consumers look • They research, explore in a relevant way. technology has made it
for food/beverages with a compare and share. • 69% of engaged U.S. easier than ever to take
short list of recognizable shoppers want to be able their business
• 70% of consumers trust
ingredients to give feedback to help elsewhere.
online suggestions more
than brand statements. improve the experience.
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 28Changing Consumers are Driving Change
Less Retailer
Brand Agnostic Loyalty
Consumers For most food
moving toward categories,
whatever meets less than 1/3 of
their needs shoppers are loyal Less Channel
Less Brand “People around to a specific chain Loyalty
Trust the world
Shopping more
42% of Americans wouldn’t care if
channels today than
find brands and 74% 3 years ago
companies less of brands 9.3 vs 8.2
truthful today than disappeared.” channels in 2014
20 years ago -Havas Meaningful Brands
Global Study 2017
in 2017
-McCann, Truth About
America 2017
Daymon Worldwide, 2017–2018 Global TrendWheel
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 29Retailers Are Responding
Role of Retailer Private Brands Has Shifted from Margin to Loyalty Builder
68% 44%
strongly strongly
agree agree
Industry Role of Industry Role of
Private Brands is as Private Brands is as
Loyalty Builders Margin Builders
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 30Traditional Retailers are Doubling Down on Their Private Label Strategy
…Increasing Shopper Loyalty, Improving Margins and Creating Better Leverage with National Brands
Managing a Focused on Acquiring retailers Benchmarking Decentralizing
multi-tier driving private with proven strength Private Label its corporate
Private Label label and success in store with other retailers, structure
brand strategy penetration brand while demanding price to make local
in house from the concessions from customization
current rate of National Brands easier
25 percent to
37%
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 31Retail Is Hyper-Focused on Private Brand
Mass Grocery Drug
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 32Retail Is Hyper-Focused on Private Brand
Amazon
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 33Retail Is Hyper-Focused on Private Brand
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 34A Private Brand Resurgence
U.S. Private Brands Performance
Dollar Sales Change Unit Sales Change
5.0% 4.0%
4.0% 4.1% 3.0% 3.0%
3.0% 2.0%
2.0% 1.0%
1.0% 0.0%
0.0% -1.0%
-1.0% -2.0%
2014 2015 2016 2017 2014 2015 2016 2017
Total CPG National Brands Private Label Total CPG National Brands Private Label
IRI Market Advantage™, calendar years; Total US—MULOC.
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 35Private Brands are Growing Across All Income Levels
Private Brands Sales % Chg. vs. YA by Household Income Level
9.0
8.0
7.0
Income < $15K
6.0
Income $15-24.9K
5.0 Income $25-34.9K
4.0 Income $35-49.9K
3.0 Income $50-69.9K
2.0 Income $70-99.9K
1.0
Income > $100K
0.0
Apr-23- May-21- Jun-18- Jul-16- Aug-13- Sep-10- Oct-08- Nov-05- Dec-03- Dec-31-
2017 2017 2017 2017 2017 2017 2017 2017 2017 2017
IRI Consumer Network™, Total US Multi-Outlet, rolling 13 week periods
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 36Private Brands Sales Have Momentum Across
Age Groups, Especially Younger Millennials
Private Brands Sales % Chg. vs. YA, by Generation
12.0
10.0
8.0
Millennials
6.0
Generation X
4.0
2.0 Boomers
0.0 Retirees & Seniors
-2.0
Apr-23- May-21- Jun-18- Jul-16- Aug-13- Sep-10- Oct-08- Nov-05- Dec-03- Dec-31-
2017 2017 2017 2017 2017 2017 2017 2017 2017 2017
IRI Consumer Network™, Total US Multi-Outlet, rolling 13 week periods
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 37Changing Consumer Attitudes Are Driving Change
7 out of 10 Millennials Prefer Stores That Have a Wide Selection of Private Brands Products
and Expect to Increase Their Purchases This Year
74%
Expect to Purchase More 67%
Private Brands During the
Next Six Months 63%
59%
70%
I prefer stores that have a 61%
large variety of private label
products to choose from 60%
54%
Millennials Gen Xers Boomers Seniors
IRI Consumer Connect™, Q3 2017 Top 2 Box Responses
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 38Younger Consumers are Embracing Private Brands
Private Brand Usage by Generation
10% 14% 10% 9%
49% 50% 45%
57% Light
Medium
Heavy
41% 40% 45%
29%
TOTAL Millennial Gen-X Boomer
IRI Private Brands Consumer survey, Total US, November 2016, N=622
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 39Partially Driven By Higher Awareness and Better Understanding
of Private Label and What it Offers
“Private label products are just as good in quality as national brands”
TOTAL 76%
MILLENNIALS 83%
GEN X 79%
BOOMERS 72%
SENIORS 71%
“Private Label products are a better value than national brands”
TOTAL 68%
MILLENNIALS 75%
GEN X 71%
BOOMERS 65%
SENIORS 64%
Source: IRI Consumer Connect Survey, Q3 2017
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 40From Imitator to Disruptor - We’ve Come A Long Way
• 1980 2018
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 41NAVIGATING LIFE IN
THE FAST(ER) LANE
Key Takeaways
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 42Takeaway #1: Private Brand Disruption Continues
1 2 3 4 5 6
Private Label Brands, New Attitudes Role Innovation Digital
to Private Tiers and Driving Evolution and Quality Connection
Brands Scale Preferences to Loyalty Leader to Shoppers
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 43Key Takeaway #2: Online Activity Will Only Increase: Are You IN or OUT?
Information is the Currency of Success in This Rapidly Evolving Marketplace
• One size does not fit all—retailers For the Largest eCommerce Categories,
and manufacturers need to know eCommerce will Represent 33% of Total CPG Sales by 2025
their customers almost CPG Growth 2017–2025 Edible eCommerce Sales
U.S. CPG Sales ($B) Non-Edible eCommerce Sales
individually…
$1,100 Total Store MULO + C Sales
– Who they are
$54
– What they think $200B
$1,000
– How they feel $28
$119B $146
– What they purchase $900
$91
$13
– How to communicate with them $65B
$52
across channels, markets and $800
media outlets
$840 $865
$700 $799
…and both need to be willing to
experiment to find the highest
$600
degree of success 2017 2022 2025
Source: eCommerce COE Secondary Research; IRI eMarket Insights; IRI Market Advantage, Total US Multi Outlet + Convenience
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 44Key Takeaway #3: Turmoil in the Retail Industry Will Continue
“Disruption” is Just Another Word for Retail
• Mergers, acquisitions, openings, and
closings are a normal part of retail, now
exacerbated by the omnichannel shift
• Customers are looking for a seamless
online/store experience, adding more
fuel to the fire
• The retailers who adapt the quickest and
the best to the ongoing omnichannel
shift are the ones that will thrive
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 45Key Takeaway #4:
Change is Everywhere,
and it is Accelerating
Enjoy the Ride!
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 46QUESTIONS
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 47Thank You!
Mark Wright Donna Wydra
Principal Principal
Consumer & Shopper Marketing, IRI Consumer & Shopper Marketing, IRI
Mark.Wright@iriworldwide.com Donna.Wydra@iriworldwide.com
210-306-9184 630-541-5898
© 2018 Information Resources Inc. (IRI). Confidential and Proprietary. 48You can also read
