Highlights from RetailNet Group's February Conference, Store-Based Retailers in a Digital World. The first in the series kicked off with a bang, with many great insights and speakers. Please visit our event site for full details: http://events.retailnetgroup.com

1. Store-Based Retailers In a Digital World: Conference Highlights
Following are highlights from RetailNet Group’s conference in Dallas, TX on Feb 16 & 17.
Who is RNG? – RNG is an advisory firm that works with both retailers and brands on 4 continents: North America, Latin
America, Europe, and Asia. We have deep experience in retail, CPG strategy, and technology. Our goal is to help clients
out-earn and out-grow the markets in which they compete.
Future to the Present – Our approach is unique. When most companies plan, they extrapolate recent trends into the
future. RNG guides clients to “bring the future to the present,” starting from possible futures to identify and prioritize
the decisions, strategies, and capabilities to pursue today.
We Bring the Future to the Present
Traditional
RNG
planning
process
process
T-5 Today T+5
Major Inflection Points in Chain Retail
2
RNG believes the chain retail industry is at a critical inflection point—one of just 3 in our careers as analysts.
Phase 1 (Brands in Control)
 The average retailer’s “heavy shopper” was a woman born between 1930 and 1960. Fewer women were employed.
 Chain retailers, collectively, controlled around 25% all retail. Sears, Montgomery Ward, and a handful of others
aspired to “national” scale, but local and regional chains were more prevalent.
 National media had massive reach and relevance, giving brands a powerful platform to communicate with shoppers.
 In an unconsolidated industry, brands had a great deal of control over how their products were distributed,
marketed, and merchandised.
Phase 2 (Retailers in Control)
 Supercenters, warehouse clubs, and specialty retailers drove most of the growth (the “alternative” channels).
 Leading brands migrated to these new channels, innovating their business models & organizations along the way.
 “Concentration & Consolidation” – as retailers’ buying power became more concentrated, the industry
consolidated. The first truly national retailers emerged.
 There was a clear power shift to retailers; these “alternative channels” drove most of the growth during this phase,
and for some leading brands, formats like the Supercenter accounted for greater than 100% of growth. Category
management was the primary (if not only) way for brands to engage at the store level.
Phase 3 (Shoppers in Control?)
A new phase driven by technology; now retailers and brands are following the consumer. Transparent, Social,
Personalized, Targeted, Local, Contextual.

2. A New Industry Structure
Consumer Retailing 2015: The New Competitive Landscape
Baseline Growth
Pure Social
SBR Brand Brand
SBR Play. Retail.
.com Stores .com
com com
RNG believes this latest inflection point will bring a new industry structure in consumer retailing. The way we’re
organized—and the strategies and capabilities that carried us through the last phase of growth—won’t carry us through
the next.
4 4
Source: RNG analysis
Of course we have stores. And stores remain at the core of the industry. But increasingly, growth is coming from new
places.
 Store-based retail (SBR) – existing scale… key is to maintain existing relationships while finding funds to fuel
new growth
 E-commerce – $ growth, marketing influence, and insights-generation
 Brand.com – Direct connection to the consumer… R&D, CRM, user-led innovation
For retailers and brands to outpace the market, we have to start thinking differently. We have to segment the market
differently and develop different strategies and capabilities. And that’s why we’re here today.
How did we get to this conclusion?
RNG uses a model pioneered by the oil industry called STEIP—Society, Technology, Economy, Industry, and Politics. We
believe understanding the high-speed, high-impact drivers in each of these areas guides firms to better strategies.

3. Two quick points reinforce why we brought some of the industry’s best minds together now to take on these issues.
The first is societal: There are huge distinctions in how people consume goods and services over the courses of their
lives. The average American spends 2/3 of her total lifetime spend at retail between the ages of 25-55.
The next generation of heavy shoppers is very, very different from the generation that powered the last phase of retail
growth. They’re digital, not mechanical. Email is too slow for them. But maybe the simplest point is this: as an industry,
we target our messages via the media they are least engaged with.
The second point is technological: Each successive computing platform reaches more people more quickly than the last.
The iPad is now the fastest-selling mobile device in history; some retailers are reporting that half of their mobile traffic
comes from iPads. Technology is accelerating; it’s becoming not just ubiquitous, but much more embedded in the way
people live and shop.
Today, the shopper is more engaged with their own technology than retailers. Retailers are at a disadvantage. The
consumer (and brands) are disintermediating them.
Trip Type Transition
So we predict a major transition in terms of trip type. You can classify trips in three simple ways:
1. Purely analog— Trips that take place in stores and are unaided by consumer technologies
2. Digitally-influenced – Trips that originate or end in stores but are influenced by consumer technology
3. Purely digital - “E-commerce” as it is commonly known
100%
Digital Only 7% 21%
90% 30% Digital Only
80% Digital
70% Influenced 65%
60% 63%
50% Digital
40% Influenced
Analog Only
30%
20%
10% 14%
Analog Only
0%
2010 2020
And as we’ll argue, the biggest transition isn’t that purely digital trips will grow. It’s that the store will have to evolve.

4. The Store-Based Retailer Paradox
1. Critical shoppers, trips, and categories are moving online at different speeds… some retailers at greater risk
than others
Shoppers, Categories, & Trips – What Will Move Online?
Shoppers
•Young
•Affluent
•Seniors •Low $ •High $
•Low •Necessities •Low Cube
income
Brands &
Categories
•Convenience
•Impulse
•Replenishment
Trips & •Stock up 20
Occasions •Gifting
2. E-commerce isn’t optional—“cannibalize yourself or be cannibalized”
3. It also isn’t always incremental or accretive for store-based retailers – For most, it’s a defensive strategy—
protecting a shopper or trip
4. Some e-commerce growth will come at the expense of stores
5. Store-based retailers can’t “out-Amazon Amazon”; the multichannel competitive model is fundamentally
different and must leverage existing assets
6. Multichannel/omnichannel is hard—huge impacts on strategy, structure, systems (and vendor expectations)
Leading Store-Based Retailers Shaping Models to the New World
Stores
CRM
Social
E-Comm And
Operating Retailing
Systems
Targeted
Apps

5. Doing Business With Multichannel & Pureplay E-Commerce Retailers
Many RNG clients perceive opportunities for growth in online retailing but are struggling to build the case for
investment.
In RNG’s observation, most companies assess the opportunity from a conventional P&L point of view. But we believe
there are 3 important elements to a complete digital strategy:
1. E-Commerce – Incremental and profitable sales volume growth
2. Digital Marketing – Greater reach and relevance in influential digital media (including e-retailers)
3. Insights – Unique insights that can be reapplied in other channels
Doing Business Online: Where is the ROI?
Digital
E-Commerce
Marketing
Insights
Getting to the Plan
RNG has developed a 5-step process to help clients develop their strategies:
1. Segment Potential Partners by Scale, Growth, and Business Model – RNG’s database contains historical and
forecasted volume data for the largest multichannel and pure play online retailers in the US. Understanding
share/growth dynamics is a critical first step in determining where to play.
Pure Play Marketplaces (Amazon) Almost Double Consumer
Direct Total Growth Rate
Sales Share of Sales Added Share of
Sales CAGR
Consumer Direct Segment (USD bil) Sales (USD bil) Sales Added
2009 2014E 2009 2014E 06-09 10E-14 06-09 10E-14 06-09 10E-14
Multichannel Marketplace $16 $27 14% 15% 12.8% 11.2% $6 $11 22% 15%
Multichannel Vertical $47 $65 43% 34% 5.2% 6.3% $9 $17 31% 22%
Pure Play Marketplace $25 $61 22% 33% 13.4% 19.9% $10 $36 35% 47%
Pure Play Vertical $22 $34 20% 18% 4.1% 9.0% $3 $12 12% 16%
RNG USA Consumer Direct Total $110 $187 6% 9% 7.5% 11.1% $28 $77 16% 22%
RNG USA Store-Based Total $1,678 $1,946 94% 91% 2.4% 3.0% $149 $268 84% 78%
RNG USA Chain Total $1,788 $2,133 100% 100% 2.6% 3.6% $177 $345 100% 100%
28
Source: RNG Database; USD current

6. 2. “Trait” Online Retailers for Strategic Alignment – Beyond scale and growth, evaluating potential partners on
criteria like category commitment, supply chain and distribution model, and shopper alignment brings clarity to
where to invest.
This step often involves detailed interviews with the retailers. RNG has developed an interview guide to
accelerate this step.
3. Tier Online Retailers – Most firms are unable to support every potential partner, so tiering customers
establishes essential guardrails and guidelines for investment.
4. Develop Engagement Model – Developing an engagement model for each tier is the next step. Resource and
capability planning generally includes brand, price, and non-price considerations.
Vendor Resource & Capabilities Planning
Policies
Non-
Brand Price
Price
• Product • List to Net • People
• Pack • Terms • JBP
• Launch/support • Meeting • Demand Chain
Competition • Supply Chain
• Analytics &
Insights
5. Present the Plan – The final step is often to present a plan for management approval. RNG stewards the
development of a fact-based assessment of where to play and how to win.
Next Steps
Clients can engage RNG on these topics on several levels:
 Briefing – RNG can condense its view and present to senior executives from 60 minutes to 4 hours
 Rapid Alignment – RNG can facilitate a 1-day strategy development session, including custom analysis and
RNG’s recommendations
 Peer Communities – Non-competitive brand owners can join RNG’s Innovation Communities focused on
continuous learning
Keith Anderson
Senior Analyst
RetailNet Group
keith@retailnetgroup.com | o: 781-522-6788 | m: 617-800-3514 | http://www.twitter.com/keith_rng/