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					Strong focus now on operational
   excellence…what is next?
      Food for thought and thoughts on food

              Sofia, November 11, 2009

                   Jan van der Oord
A.T. presence with local teams...teaming
with our clients...”best practices” mixed with “pragmatic”

 UK                               Benelux   Northern Europe   Central Europe


                                  Iberia    Mediterranean     Eastern Europe

  = Consumer           = Retail
Source: A.T. Kearney
                                                                A.T. Kearney 43/11.2009/17607p   2

Topics of today‟s presentation

                   The crisis is here to stay, also in 2010
                   What to do about it?
                   Ok crisis, but what is next?

                                                     A.T. Kearney 43/11.2009/17607p   3
                                                                                        Crisis here to stay

Troubles peaked in 2008 amidst 3 simultaneous bubbles in
Finance, Fuel and Food

                Finance                        Fuel                            Food
      Size of Financial Assets     Average Annual Price of Crude        Price of Soybeans
      Relative to Global GDP           Oil Since, 1948-2008         ($2008/Metric Ton), January
                 (%)                     (2008 US Dollars)                  1989 –2009

             Nearly unprecedented spikes in the value of all the 3 Fs occurred by 2008

Source: World Bank, BP, IMF
                                                                             A.T. Kearney 43/11.2009/17607p   4
                                                                                   Crisis here to stay

The recovery under way…only after massive stimuli and
increases in money supply following the Financial Crisis

                                     Estimated real GDP growth select economies

   $3 trillion in
 deficit and fiscal
  stimulus from
 and $2.5 trillion
    in liquidity
   provided by
  central banks

Source: IMF, A.T. Kearney analysis
                                                                        A.T. Kearney 43/11.2009/17607p   5
                                                                                                    Critical concerns

The banks are not yet “fixed” – further write downs and
recapitalizations are necessary for the system to be stable

   There were over $1 trillion in write downs                  Hundreds of billions of dollars will
   during the worst months of the Crisis, and               need to be further recapitalized in order to
   this may reach $4 trillion by the end of the                 completely stabilize the financial
                   recession                                                 system
 Cumulative bank write downs during the crisis             Estimated bank re-capitalization needs for select
 (US$ billions)                                            economies (US$ billions)

                                         Long range
                                      forecasts of write
                                        downs by the
                                          end of the

Source: IMF, A.T. Kearney analysis
                                                                                        A.T. Kearney 43/11.2009/17607p   6
                                                                                                                                            Critical concerns

The Bulgarian economy, like the rest of the world, has
stagnated with negative GDP growth expected for 2009
Gross domestic product and unemployment (2006-2009)

(EUR)             3,278                  3,773                4,506                  4,391

40,000                                                                                                        • Unemployment will grow
                                                             34,118                                             further

30,000                                 28,899                                                                 • Negative GDP development
                                                                                                              • Fear amongst consumers
                                         6.9%                                         9.0%                       – Low confidence in

10,000             6.3%                  6.2%                                                                    – Job security

                  2006                  2007                  2008                 2009E

    GDP (MM EUR)             Real GDP growth (%)          Unemployment (%)

Notes:    (1) 2009: estimate
Source:   Bulgarian National Bank; National Statistical Institute; Eurostat; Economist Intelligence Unit; A.T. Kearney analysisA.T. Kearney 43/11.2009/17607p   7
                                                                                                                         Critical concerns

Consumer expenditure is very related to the GDP
development as seen by its high % share

Consumer expenditure as % of GDP in 2007


 AUT    BUL     CRO     CZ     FRA    GER    GRE     HUN     ITA   LAT   LIT   NED   POL   ROM   RUS   SVK    SLO      SPA      UK

Source: A.T. Kearney analysis, European retail handbook 2008/9
                                                                                                             A.T. Kearney 43/11.2009/17607p     8
                                                                                            Critical concerns

Many companies are practically owned by the banks

The bank debt trap

                        Event                     Reaction                   Result
                        Company‟s liquidity is    Company asks for loans      Company‟s equity/debt
 Way to the debt trap

                            decreasing                from the bank           ratio starts to decrease

                        Company‟s liquidity is    Company asks for more        Company‟s equity/debt
                          still decreasing         loans from the bank       ratio decreases even more

                                                    Company continually
                                                                              Company‟s equity/debt
                        Company‟s liquidity is    asks for loans from bank
                                                                             ratio continually worsens
                        continually decreasing      (or more loans from
                                                                                   in favor of debt
                                                        more banks)

                        Company is not able to     Bank loans (interests)
                          take any more loans      continue to grow while     Banks are the
                        based on poor Balance
                         Sheet and inability to
                                                    company creates no
                                                      liquidity for their
                                                                              new, reluctant
                         repay cumulated debt            repayment               owners

                                                                                A.T. Kearney 43/11.2009/17607p   9
                                                                                                                          The Path Ahead

On the horizon are a series of technology breakthroughs in
fuel and food with potential to bring revolutionary change

                  Energy                                      Nutrition                                        Water

• Focus on cleaner air and reduced CO2         • Nutraceuticals, bioactive chemicals         • Increased availability for agriculture
  emissions through carbon capture and           derived from foods, will become important     through drip irrigation and improved water
  storage                                        dietary supplements                           management projects
• Renewables rebalance current accounts        • Personalized medicine will have long-       • Nanotechnology can increase the viability
  and are carbon neutral and cost                term implications for improved health,        of desalination technology, doubling the
  competitive with coal                          longer life spans and more efficacious        amount of water produced
• Switch grass and algae ethanol to                                                          • This translates to a 20% reduction in
  combat climate change combined with          • Biotechnology and widespread use of           energy requirements or a 70% increase
  alternative power trains, especially for       existing irrigation methods will increase     in water productivity at the same cost for
  plug-in hybrids                                agriculture yields                            an entire desalination plant
• New molecular coating that improves          • 23 mn hectares of unused land in Russia,
  efficiency of nuclear power and allows for     Ukraine and Kazakhstan could increase
  deeper drilling                                global food production

   All previous major failed forecasters – from Thomas Malthus to Paul Ehrlich to Dennis
             Meadows – failed to account properly for the impact of technology
Source: A.T. Kearney analysis
                                                                                                             A.T. Kearney 43/11.2009/17607p   10
                                                                                                                                           The Path Ahead

Bulgarian consumer and retail expenditure are amongst the
lowest compared to the European peer group
Consumer expenditure per capita in 2007 in EUR

16,812                                    16,274                                             16,114
                                                   14,436           15,220

                         5,268                                               5,721   5,458                                    5,608
                 4,719                                                                                4,353   4,742
         3,194                                                                                                        3,179

 AUT     BUL     CRO      CZ      FRA     GER      GRE      HUN      ITA     LAT      LIT     NED     POL     ROM     RUS     SVK      SLO      SPA       UK

Retail expenditure per capita in 2007 in EUR
 5,619                                                                                                                                                   5,762
                                                   4,773                                                                                        4,710
                                          3,959                                                                                        4,186
                         2,815                                                                        2,601                   2,488
                                                            2,031                                                     2,184
                                                                             1,898   1,651
         1,126                                                                                                1,178

 AUT     BUL     CRO      CZ      FRA     GER      GRE      HUN      ITA     LAT      LIT     NED     POL     ROM     RUS     SVK      SLO      SPA       UK
Source: European retail handbook 2008/9
                                                                                                                              A.T. Kearney 43/11.2009/17607p   11
                                                                                             The Path Ahead

Mixed opinions on the short-term path of the global

  L-Shaped Depression           U-Shaped Recovery                   W-Shaped Downturn

                                                3                      1
       1                                                                          2           3

                                                             2008   2009   2010       2011        2012   2013
2008       2010   2011     2008        2010   2011

                                    -Shaped Scenarios
                                                       1 Strong bounce from stimulus
                                                         followed by moderate growth
                                                         Moderate bounce from
                                                       2 stimulus followed by slow,
                                                         sustained growth
                                                       3 Slow turnaround
                                                         after the bottom

             2008        2010                   2012

                                                                             A.T. Kearney 43/11.2009/17607p     12
                                                                                                          The Path Ahead

In the long term, growth forecasts are broadly positive in
both the developed and developing world

 Despite the Recession‟s severity, the world is                    The world‟s centers of economic gravity
    at the start of a long term economic                            will be able to sustain growth through
                  expansion                                                           2014
 GDP growth (Index: 2006 = 100)                                  Recent and potential real annual growth rates for
                                                                 USA Euro zone and East Asia, 2006-2014 (%)
                               Recovery and expansion                                      Recovery and expansion

                                                                                        Strong indication of
                                                                                        square root recovery

                                           But…in the long run we are all dead
Source: IMF, A.T. Kearney analysis
                                                                                             A.T. Kearney 43/11.2009/17607p   13
The crisis is here to stay, also
in 2010
What to do about it…now?

                   A.T. Kearney 43/11.2009/17607p   14
                                                                           What to do about it?

Globally, many companies are responding to crisis
conditions by taking action in the obvious areas

Easy-to-Implement Levers

                                        Conserve Capital       Control Expenses

                                       • Stop/Slow Store      • Freeze Salaries
     High                                Openings &           • Marketing cut with
                                         Refurbishments         > 20 %
Impact                                 • Postpone IT          • Reduce Corporate
                                         investments            G&A
                                       • Align Inventory to   • Restrict Expenses
     Low                                 Sales                  (Travel, Training &
            Low                High    • Monetize Assets        Discretionary)
              Ease of Implementation

                                                                   A.T. Kearney 43/11.2009/17607p   15
                                                                       What to do about it?

Crucial is a balanced approach of scenario planning,
immediate cash flow improvement & cost effectiveness

                             Know the scenarios, be
                               prepared and act

     Ensure a healthy cash                            Shape corporate fitness
             flow                                       in and for the crisis

     Ensure a sustainable                             Capture opportunities in
    communication with key                                   the crisis
                             Crisis Approach

                                                               A.T. Kearney 43/11.2009/17607p   16
                                                                                     What to do about it?

Do not forget the perspective of your banks

Money will no longer be the unlimited and cheap resource, short term debt will
bring uncertainty among companies
 Assessment of long term stability of the company; is the company worth investing your
  money in?

 Assessment of overall debt situation of the company; what is the position of other creditors?

 Assessment of bank‟s position in the company; at the front, last/unimportant, what is our
  negotiation position?

 Supporting the decision whether to pull the plug now, stay neutral, or invest more to make
  them „make the break‟

 Assessment of the payback period under given terms

   Do you have a consistent story for the banks covering their main concern:
                      How am I getting my money back?

                                                                             A.T. Kearney 43/11.2009/17607p   17
                                                                                              What to do about it?

Pro-active communication with all key stakeholders right
from the start

             Internal communication                               External communication
•   Board Members                                      •   Investors
•   Senior Management                                  •   Banks
•   Mid management                                     •   Customers
•   Employees                                          •   Suppliers
•   Workers council                                    •   Unions

                       Agreement                                           Agreement
•   On targets to be reached                           • On debt restructuring, payment terms, consolidation
•   On remodeling actions within the activity units    • On sales terms, prices, and quality
•   On efficiency improvement potential                • On purchase prices, payment terms, and shared risk
•   On precise responsibilities

                  Communication critical for immediate results and mitigating risks
                                                                                      A.T. Kearney 43/11.2009/17607p   18
                                                                                                             Quick wins

Include all cost blocks…sourcing the single biggest short
term lever in improving the operational cash flow

Typical Cost Structure for a Grocery Retailer


                                                                Strategic Sourcing

                                     Store productivity

                                                 Supply chain improvement                  Overhead reduction

     Sales             C.O.G.S     Store        Logistics   Administration    Indirect    IT                 Profit
                                 operations                                  purchases

Source: A.T. Kearney analysis
                                                                                         A.T. Kearney 43/11.2009/17607p   19
                                                                                                                      Quick wins

Attack marketing spend…we often hear lots of „good‟
arguments not to fully address the media spend

Typical concerns                                                                                        Client examples

 “We have already achieved significant media savings this year…”

 „Our spend is in good hands – we have very experienced media managers...‟

 “The marketing & media plans are fixed, we cannot change them...”

 “Media auditor reports show we are doing very well on costs....”

 “If a media saving opportunity existed, our media agency would surely have told us,
  wouldn‟t they…?”

 “Markets will be improving in the second half of current year so forget any media savings
  this year...”

         Current market environment offers cash saving opportunities bigger than ever

Source: Advertisers‟ quotes during recent A.T. Kearney media sourcing assignments across Europe
                                                                                                  A.T. Kearney 43/11.2009/17607p   20
                                                                                          Quick wins

Improving ROI on marketing by addressing both
effectiveness and efficiency
               freed up
                             Align spending
                             patterns with
                             branding and          Share
                             growth strategies     (%)
             Effectiveness   Make sure current             Potential relationship
                 (drive      expenditure has               between marketing spend
               revenue)      greatest impact               and share
                             on revenue
 Improved                    performance to
                             maximize total
 return on                   contribution
investment                                                      Current relationship
                             Improve marketing                  between marketing spend
                             planning and
                             control processes                  and share
              Efficiency     Consolidate supply
             (lower cost)    base and improve                                            Marketing
                             contracting process                                         spend (€)
                             Negotiate lower prices
                                                                      A.T. Kearney 43/11.2009/17607p   21
                                                                                    Corporate Fitness Program

Select high impact projects in Operational excellence AND
Merchandising productivity
High-Impact Improvement Levers

                                                        Operational            Merchandising
                                                        Excellence              Productivity

      High                                                         Labor       Assortment
                                                               Effectiveness    Selection

Impact                                                   Process                            Value Pricing

             Low                       High
               Ease of Implementation                    Supply                           Merchandising
                                                       Management                           Execution

                                                                 Life Cycle

 Operational Excellence   Merchandising Productivity
                                                                                     A.T. Kearney 43/11.2009/17607p   22
                                                             Operational Excellence: Labor Effectiveness

Adapt to the traffic or adapt the traffic to your flexibility

  Common Scheduling           The resulting schedule is                     Levers for
     Inefficiencies           costly, ineffective and does                 improvement
                              not serve the customer
• Misaligned with                                                         Full
  Customer Traffic                                                     Time/Part
                                                                      Time Ratios
• Scheduling to Staff                             Transactions                               Spans of
  Availability                   FTEs                                                        Control
• High cost of                                                          Shifting
  Management                                                                               Training/
• Inefficient shift changes                                            Hire for
• No consideration for                                                                     Open/Close
  individual productivity                                                                    Hours
• Non-compliance with the     9am                           9pm      Scheduling
  schedule                          Example – 1 Day Sales Staff                             Recruiting
                                           Schedule                                         Retention

                                                                              A.T. Kearney 43/11.2009/17607p   23
                                                           Operational Excellence: Process Efficiency

Take out non-customer facing activities

Are Your Store Processes as Efficient as they can be?

                                   Efforts that Don‟t Drive

          Store                                                    • Centralized ordering
                                   Transfer Work to the
                                                                   • Shelf ready shipments
       Productivity                Most Efficient Place;           • Consolidate admin,
          Cycle                    Industrialize
                                                                     pricing, preparation

                                   Measure and Reward

                                                                           A.T. Kearney 43/11.2009/17607p   24
                                                                    Operational Excellence: Supply Management

Tackling the whole process from plant/DC to shelf

         Historical “Black Box”                                Traditional retailer focus
    (Little retailer insight or control)                      (Focus on internal efficiency)

  Procurement            Production            Distribution          Store                 Customer

                                           Distribution                  Stores
   Supplier                                                              Efficiently get products
                                           Attack cost and
   Address low margin                                                    from the back door to
                                           service levels
   generating supplies                                                   the store shelf

                                                                                     A.T. Kearney 43/11.2009/17607p   25
                                                      Operational Excellence: Store Lifecycle Management

More effective new store development and critical review of
low performers

Store Footprint Growth                           Store Footprint Rationalization

                                                                          Protect & Grow
  Design                                                                  • Maintain cost structure
   and            • Consider future                                       • Monitor and adjust to local
Specification                                                               market conditions

   Location       • Lock in low occupancy

                                                         Annual Revenue
 Identification     costs – retain flexibility


  Upgrade/        • Use current climate to
  improve           lower cost of building                     4-Wall Cash Flow
                                                 Fix or Close          Improve
                    services, fixtures, on-
 Operations                                      • Lease Negotiations • Control operating costs
                    going maintenance            • Downsize
     and                                                               • Improve customer
 Maintenance                                     • Sub-let               service
                                                 • Close               • Battle local competition

                                                                                  A.T. Kearney 43/11.2009/17607p   26
                                                        Merchandising Productivity: Assortment Selection

Data driven understanding of assortment performance

                                           Competition                  Switching Patterns
                                     Match changing depth and        Leverage customer loyalty
     Consumer Behavior                breadth of competition             to reduce SKUs

• Value for money, “invest”
• Appetite for in-store promotions

        Cost of Goods

• Currency rates
                                             Space                        Private Label
• Use of scale/competition
                                        Aggressively delist         Consider increasing PL and
                                      underperforming SKUs                value brands

   Manufacturer Response

• Managing complexity
• Conserving vendor funds
• Evaluating terms of sale

                                                                              A.T. Kearney 43/11.2009/17607p   27
                                                                 Merchandising Productivity: Pricing Analysis

Price perception does not mean the lowest price

Sample Pricing Analysis

40                                                          Selectively offer higher price point
                                                                products to enable up-sell

        £31                                                   Close Price Gaps to avoid lost
30      £29                      £29                                  opportunities
        £25                                £25
25                               £25
                                                         Create competitively priced products you
                                                                     can promote
        £20      £20
20      £19      £19
                                 £20       £20
        £18              £18     £18
        £17                                £18
        £16              £16               £16            Influence your perceived price through
15      £15
        £14      £14     £14
                                 £15       £15
                                                                 Average Price of Supply
                                 £12       £12
        £10              £10
10                               £10

                                                         Introduce new entry price points to attract
                                                                price sensitive customers
     Comp     Comp     Comp    Comp    CLIENT
       A        B        C       D

                               Premium segment is still alive, use it
                                                                                   A.T. Kearney 43/11.2009/17607p   28
                                                       Merchandising Productivity: Merchandising Execution

Shop as starting point, not as process end

    Stock the Shelves           Inform the Customer                Maintain the “Look & Feel”
• Information – Provide the   • Signage - convey the              • Merchandising condition –
  right information             desired message                     maintain high standards
• Inventory Level – Match     • Price Tags – keep if              • Assign responsibilities –
  inventory to the              simple, promote your                set processes and
  planogram                     deals                               responsibilities
• In-store processes –        • Flyers – if you promote it,       • Accountability – for
  Execute, execute,             help your customer find it          leadership and team
  execute!                                                          members

              Merchandising Execution is about respecting your customer
                                                                                 A.T. Kearney 43/11.2009/17607p   29
                                                                Merchandising Productivity: Promotion Effectiveness

Promotion must be more than a price reduction…analyze,

• Is your promotional market                                                 • Are you getting high value for
  share better / worse than                                                    marketing dollars (ROMI)
  regular market share?                                                      • Are our promotions driving
• How does your promotion                                                      incremental sales and profit?
  pressure compare to                                                        • What are the most effective
  competition?                                                                 promo SKUs?
                               1                     2
                                     Promotional         Promotion Lifts

                                3                    4
• What is the optimal                                                        • Are you timing your
  promotion price point?            Event Patterns        Seasonality          promotions to be in-line with
• What is the optimal                                                          sales seasonality?
  promotion frequency?                                                       • How does promotion plan
                                                                               compare with the main

                               Time to challenge “corporate truths”

                                                                                         A.T. Kearney 43/11.2009/17607p   30
                                                                                      What to do about it?

Ok crisis, but what is next?

1. Retail sector will further consolidate

2. Only opportunistic entry of foreign retailers, no large push expected

3. More usage and investment in customer intelligence

4. Growth of multi-channel retailing (This time for real!)

5. Living with more price sensitivity, less brand pull…growth of corporate brands/private labels

6. Consumer wants to engage, more use of customer energy

7. Use of consumer trends Food Safety/Health/Roots/Pure and “in-store seduction”

                                                                              A.T. Kearney 43/11.2009/17607p   31
                                                                                                      1. Retail sector will further consolidate

Retail as industry still in the early stages of consolidation

 CR3                                                                                                                         Balance/
                Opening                                     Scale                            Focus
 100%                                                                                                                        Alliance
                                               2a        2b         2c       2d     3a      3b      3c        3d

 70%                                                     Appliances & Consumer Products
                                                                     Div. Electrical
                                                                Trucks & Trailer                                  Electrical Automotive Supplier
 60%                                                                                                     Business Machines & Of f ice Equipment
                                                        Automatic Controls                           Employment Services
 45%
                                                                           Pumps                Express
                                                            Securities Brokerage
                                            Airlines              Publishing
 40%                   Medical & Surgical Supplies                Div. Metal        Paint & Resin
                                                              Products Mf rs.
                         Electronics Retail
 30%                                                                Div. Chemical
                               Apparel Retail                            Food Retail
 20%          Investment Companies

 10%                 Div. Construction                  Utilities

 0%     -10             -5                 0                        5                10                  15              20                   25
                                                                                                                    A.T. Kearney 43/11.2009/17607p   32
                                                                      1. Retail sector will further consolidate

In Bulgaria further consolidation is to be expected

Share of top 10 largest CG&R companies in consumer expenditure
(in 2007)
  100%         100%        100%   100%   100%   100%   100%   100%   • A share below 10% indicates
                                                                       high market fragmentation,
                                                                       where clear industry leaders
                                                                       have yet to be established
                                                                     • There is a large number of
                                                                       smaller companies which
                                                                       control smaller market shares
                                                                       and possess some market
                                                                       power in the form of regional
                                                                     • Compared to the past
                                                                       developments in western
                                                                       Europe, market concentration
                                                                       will increase
                                                                     • Market leaders (foreign or
                                                                       domestic) which will control
                                                                       significant market shares will be
   BUL         CZE         FRAN   GER    HUN    POL    RUS    UK

Source: A.T. Kearney analysis
                                                                                   A.T. Kearney 43/11.2009/17607p   33
                                                                                                              1. Retail sector will further consolidate

Strong differences per sector…Bulgarian food retail in
process…CE sector already consolidated

Market shares of stores according to                                                        Market shares of Bulgarian CE
format                                                                                      Retailers
                                                                                            (€ mil)
     100.0%                100.0%               100.0%                100.0%

      25.0%                                                                                                    Other                  Technomarket
                            31.3%                36.0%                 40.1%




      14.6%                 11.7%                10.1%                 8.9%

       2007                2008(a)              2009 (f)              2010 (f)

     Organized trade         Small grocery        Other
1) Ef f ect of discounters and retailers entry on small stores was analyzed in similar markets like Romania, Slovenia and Croat ia and used to estimate the
    development of BG market; 2) Organized trade includes hypermarkets, supermarkets, discounters, and cash & carry
Source: Gf K reports, National Statistical Institute, AT Kearney analysis
                                                                                                                              A.T. Kearney 43/11.2009/17607p   34
                                                                                                              2. Only opportunistic entry of foreign retailers

Other countries are even more attractive targets

                                Opening                                 Peaking                              Maturing                             Closing
    High Priority                                                Vietnam (2006)       Russia (2006)
                                                        China (2003)                          Vietnam (2009)
                                                   Russia (2003)                                      China (2006)
                                                                                     India (2006)                India (2009)
                                   Colombia (2009)                                                                   Russia (2009)
                                   Bulgaria (2003)      India (2003)         Poland (1995)                               China (2009)
                           Saudi Arabia (2006)                                                                                Poland (2000)
                                                 Vietnam (2003)
GRDI Priority                                  China (1995)
                                                                                                                                        Bulgaria (2009)
                                              Russia (1995)
                                           India (1995)

                                    Hungary (1995)
                                  Poland (1990)                                                                                          Poland (2005)
    Low Priority
                     Consumers explore unorganized        Heavy investment in new                 Desirable real estate is difficult   Market is saturated, forcing
                     formats; government relaxes          development and shopping districts;     to secure; consumer spending         increased investment in brand
 Definition          restrictions                         consumer are ready to shop in           has expanded significantly
                                                          organized formats
                     Monitor markets and conduct          Identify local partners and real        Increase market entries to           Determine leadership status
 Action for          consumer research                    estate; identify pilot stores and       capture share or identify            (profitability) in the segment
 Retailers                                                supply-chain options                    potential acquisition targets

                     Consider minority investment in      Consider supermarkets,                  Consider discount, warehouse         Move to wave-two formats,
 Method of           local retailer                       hypermarkets, cash-and-carry and        or apparel                           including EEO, DIY, and
 Entry                                                    convenience stores                                                           specialized apparel*

                     Identified skilled labor pool for    Hire, train local talent; balance the   Change balance from expatriate       Fully align incentives across
 Labor               market                               mix of expatriate staff                 to local staff                       regional staff
*Source: A.T. Kearney EEO ref ers to electronics, entertainment and of f ice retailing; DIY is do -it-yourself
                                                                                                                                       A.T. Kearney 43/11.2009/17607p   35
                                                                                             3. More usage and investment in customer intelligence

The GfK „store choice monitor‟ shows some important
differences between the different age and income groups
Store choice Income                     HH with kids                      HH without kids „older‟                 HH without kids „young‟
                                  6.1            7.1 (1)            8.1       6.1              7.1   1)     8.1    6.1            7.1   (1)           8.1

          Price               H
   (low price, attractive     M

 (quality, large selection,   M
 good fresh department)

  (friendly, professional     M
      and fast service)

          Store               H

     Accessibility            H
   (opening hours, good       M
    reachable / parking)

1) Average given score of all f actors and all 9 lif e stage / income segments is 7.1 (scale 1 – 10)
Source: Gf K rapport, A.T. Kearney analysis
                                                                                                                         A.T. Kearney 43/11.2009/17607p   36
                                                                                                                                        4. Development of Multi-channel retailing

Preparing for multi-channel…now it will really come

Multi-channel retailing heatmap

                              Search and buying behavior – Today                  Search and buying behavior – Forecast 2012

                                                         Searching                                                                         Searching
                                                      Catalogue/                                                                        Catalogue/
                                         Stationary              Internet   TV                                             Stationary              Internet        TV
                                                        Print                                                                             Print
         Internet Catalogue Stationary

                                                                                           Internet Catalogue Stationary
                                            79%         19%       41%                                                         68%         10%        27%

                                             5%         70%        3%                                                          3%         69%        4%

                                            16%         11%       55%       15%                                               29%         21%        65%          19%


                                                                   1%       85%                                                                      4%           81%

Source: A.T. Kearney analysis in West and Central Europe
                                                                                                                                                      A.T. Kearney 43/11.2009/17607p   37
                                                                                                      4. Development of Multi-channel retailing

As always…no “One size fits all”

Integration spectrum – examples
        One channel strategy1)                                                       Multi-channel strategy
 Ex. (1)                                             Ex. (2)                       Gruppe)
                                                                                                        Ex. (3)

         Online                  Offline                    Online                   Offline                    Online                    Offline

  X                                                                                                                              =
                                                               None to little integration                               Strong integration
 • Conflict of interests between locally            • Schwarz-Groups plans to open an Online-           • All products (>100.000) and services are
   optimized prices in the stores and the             Shopping-Platform                                   of f ered via catalog/mail order, branches and
   Internet-shop with national prices resulted in   • Online business should be operated as an            the internet
   the elimination of online sales                    independent business segment                      • Order online, pick up offline f easible (same
 • and sites as             • Handling of online orders presumably via            applies to returns)
   communications tool of stationary specialty        external service provider (PVS Fulf illment-      • Own logistics center (Wernberg) f or delivery
   stores                                             Service GmbH)                                       (of national and international customers,
                                                                                                          companies and key accounts )

                               Strategy spectrum ranges from focusing offline to the
                                       fully integrated multi-channel retailing
1) Other companies change f rom traditional to modern sales channels and pursue a one channel strategy; example
Neckermann Switzerland: no catalogs are shipped in Switzerland; the assortment can by purchased via the Internet only
Source: A.T. Kearney analysis
                                                                                                                          A.T. Kearney 43/11.2009/17607p   38
                                                                                                                 5. Growth of private labels

With the crisis and the development of the Bulgarian retail
market, PL share of sales is expected to increase

Private label share (% of sales)

                                                                                         Trends and development
                                                                              • More scale through consolidation and
                                                                                retail collaboration
                                                                              • Stronger trust in retail as a brand
                                            20%                               • Newcomers such as Lidl, Plus and
                                      27%                                       Mercator will increase acceptance
                      34%             21% 24%
                                                                              • Brand innovations are incremental only
                                16%                                             in most cases
  27%                                               5%
           35%                                                                • Price sensitive consumer here to stay
                                                                              • Large manufacturing capacities

Source:   Private Label Strategy, Kumar and Steenkamp, 2007, HBSP, Gf K Consumer Scan, MEMRB, A.T. Kearney analysis
                                                                                                                 A.T. Kearney 43/11.2009/17607p   39
                                                                            6. More use of customer energy

The customer wants to engage…cost effective AND
community building

Identify Customer Energy opportunities along the value chain                             Drivers
• Customer Energy is the sum of all non-monetarian contributions a mass        Individual Customer
  customer is offering at the interface towards his suppliers to increase
  the individual benefits – he may even become supplier himself (cf. Web       Energy benefits
  2.0)                                                                               Cost advantage
• Customers are interfering along all stages of the value chain

                                         Produce     Enrich       …                   Convenience

                 Marke-    Produc-                                                         Choice
        R&D                            Sales       Care After
                  ting       tion

                                                                                     Self expression

                                                                                 A.T. Kearney 43/11.2009/17607p   40
                            7. Trend Food Safety/Health/Roots/Pure and “in-store seduction”

“In-store seduction” + “Pure/Health” + “Convenience”

                                                                 A.T. Kearney 43/11.2009/17607p   41
                             7. Trend Food Safety/Health/Roots/Pure and “in-store seduction”

“Back to basics” + “Roots” + “Street market flavor”

                                                                  A.T. Kearney 43/11.2009/17607p   42

Description: Form Retail Apparel Job Responsibilities document sample