Who wins in an environment where stores are not only physical, but, both physical and digital, and anybody can set up a store front very easily.  Where the role of the retailer of the future is not merely delivering product to the shelf, but will include pricing, picking, and delivering product right to the household.

1. “The
Revolu�on
at
Retail”
June
2015

2. What’s Happening?
Who’s Winning?
Jon Kramer, CMO, RockTenn
How to Get
in the Loop

3. MMaaccrroo PPooiinntt--ooff--VViieeww
NNoott AAnnsswweerrss
PPoossiitt aann
AApppprrooaacchh
FFoooodd ffoorr TThhoouugghhtt

4. OVERVIEW
The retailing world
in which we do business
is experiencing a
tsunami of change
There is hope:
Elements of a
Winning Strategy
Upcoming In-Store
Innovations that
Might Help
We are not in the
driver’s seat

5. If you are doing
business today the
same way as you did
business yesterday,
CORE CONCLUSION
Peter Drucker

6. 6
If you are doing
business today the
same way as you did
business yesterday,
If you are doing
business today the
same way as you did
business yesterday,
chances are that you
won’t be doing
business tomorrow.
Peter Drucker
CORE CONCLUSION

7. WARNING
Be Careful What You Think You Hear
7
“More Mobile Phones in the World than People”
International Telecommunication Union, 2014
“Amazon to Open its first Retail Store”
Forbes, 2014
“Drones will Deliver Your Groceries”
Credit Suisse Financialist, 2014
“QR codes are dead”
Advertising Age, 2013
“Brick-and-Mortar Retailers are Dinosaurs”
Rocket Internet, 2014
“72 % Use Phones for Shopping”
Pew Research, 2014

8. DRIVERS OF CHANGE
8
ECONOMIC
SOCIOLOGICAL TECHNOLOGICAL

9. DRIVERS OF CHANGE
Economic
9
Median Household Incomes down 8% since 2007
$56.9 $51.9
2007 2013
$49.6
1993
§ Majority of Americans make less than $20/hr
Source: US Census Bureau
US Department of Labor
Inflation adjusted

10. DRIVERS OF CHANGE
Economic
10
Source: Bureau of Labor Statistics
Jan
1990
Sep
2014
# of Part-Time Workers at an All-time High
§ Approaching 25% of work force

11. DRIVERS OF CHANGE
Economic
11
50 Distinct Economies
Employed % of Total Population
Source: Bureau of Labor Statistics 2013

12. DRIVERS OF CHANGE
Sociological
12
Population Rapidly Aging
>20
20-30
30-60
60+
18% 20% 21% 23%

13. DRIVERS OF CHANGE
Sociological
13
5 Different Generations Consume Very Differently
Source: RetailNet Group
The Silent
Generation
Baby BoomersGeneration XMillennialGen Z
(1927-1945)(1946-1964)(1965-1979)(1980-2000)(2001-Present)

14. DRIVERS OF CHANGE
14
Impact of Aging: -$55+ Billion Annually
Peak Spending
Aging In Aging Out
Source: US Census Bureau
RNG Analysis
<25 25-34 35-44 45-54 55-64 65-74 75+
-$55+ Billion
Sociological

15. DRIVERS OF CHANGE
Sociological
15
Millennials, besides being tech savvy, are:
Source: RetailNet Group
More Diverse Marriage Later Kids Later
Earnings
Polarized
Educated
Urban Growth,
Rent

16. DRIVERS OF CHANGE
Technological
16
Massive Shift in How Consumers Spend Time Online
§ Mobile Apps now dominate
Source: Comscore
Internet World Stats
225 Million Americans access Internet via Broadband
§ 71% of Population
173 Million Americans use a Smartphone
§ 54% of population, 74% of mobile subscribers
Mobile Apps on Smartphones & Tablets 52%
Web Browsers on Desktops & Laptops 40%
Web Browsers on Smartphones & Tablets 8%

17. DRIVERS OF CHANGE
Technological
Action Code Usage is Growing
§ QR is 75% of the Market
Blippar
17
QR Codes
documobi Digimarc
Microsoft Tag
Kooaba

18. DRIVERS OF CHANGE
Technological
18
Growth of Mobile Payment and Digital Wallet
§ ApplePay will drive the market
Beacon-delivered messaging
§ Delivered to your wrist

19. Source: RNG Analysis
Last Big Retail Innovation Was the “Super Center”
That was so ‘80’s …
TRANSFORMATION OF THE RETAIL INDUSTRY
Traditional
Big Box
Fewer Cars
Saturation
Demand for
convenience
Digital Small /
Proximate
Urbanization
Smaller
Households
Aging
Population
§ Big Box Operators facing pressure across the board
19

20. The Evolution of Shopping
20
SYMPTOMS OF CHANGE

21. The Evolution of Shopping
21
SYMPTOMS OF CHANGE
By 2020-30 55% of Transactions Will Involve Digital
Traditional
0-45%
Store Automation
0-45%
Digital / Pick-up
15-20%
Digital
15-25%
Shopper Digital
In-Store
25-30%
Manual Digitally Enabled Digitally Managed Digital Trip

22. TRANSFORMATION OF THE RETAIL INDUSTRY
Retailers Rapidly Acquiring Digital Technology
In the past 18 months alone:
22
Product Search
Predictive Intelligence
WALMART
Online Front-end Optimization
Online Community
AdChemy
Inkiru
Torbit
Luvocracy
KROGER
AMAZON
Digital Offer Network Provider
Ecommerce Company
Video Broadcasting Game Site
YOU Tech.
Twitch
VitaCost.com

23. STORE
TRANSFORMATION OF THE RETAIL INDUSTRY
Yesterday
23
STORE
Today
On-Call
Omnipresent
Personal
Service

24. STORE
TRANSFORMATION OF THE RETAIL INDUSTRY
Yesterday
24
Tomorrow …
the VIRTUAL
shopping trip?
STORE
Today
On-Call
Omnipresent
Personal
Service

26. TRANSFORMATION OF THE RETAIL INDUSTRY
Stores are NOT Dinosaurs
US will add $800+ Billion in Total Retail through 2020
$3,099
$3,778
$4,250
$4,612+$834
§ Store Based Retail Still Majority of Both $ and $ Added
Informal
Traditional
Chain – Digital All Other
Chain – Digital Marketplace
Chain – Store Based Retail
Source: RNG Database; USD constant 2013
26

27. TRANSFORMATION OF THE RETAIL INDUSTRY
Stores are NOT Dinosaurs
US will add $800+ Billion in Total Retail through 2020
§ However, Non-Store Digital growth is 3-4X faster
27
CAGR
15.8%
3.5%
10.1%
2.9%
$ Added
-1.1%
3.5%
$119
$574
$156
-$84
$69 Informal
Traditional
Chain – Digital All Other
Chain – Digital Marketplace
+$834
Chain – Store Based Retail
Source: RNG Database; USD constant 2013

28. TRANSFORMATION OF THE RETAIL INDUSTRY
Ecommerce contributing to growth for
Especially for major players
28
*
Tablet
+
Smartphone
Source
:Internet
Retailer
:RetailNet
Group
AMAZON
WALMART
TARGET
Total
Sales
90.0
B
+20%
476.3
B
+
2%
72.6
B
-­‐
1%
Ecommerce
Sales
90.0
B
+20%
7.9
B
+15%
2.5
B
+17%
Mobile*
Ecommerce
Sales
16.8
B
+110%
1.4
B
+90%
.4
B
+100%

29. WHO WINS?
The Shopper is the Clear Winner
Her Toolkit is Expanding
29
Smart Shopping List
Price Comparison
Store Navigation
Product Search &
Availability
Personalized Offers
Mobile Checkout
Instant Payment
Anytime Delivery

30. WHO WINS?
Retailers Who Master
the Five “Ds”
Data
Differentiation
Digital/Physical Integration
Delivery
Decentralization

31. 31
Data
WINNING RETAIL STRATEGIES
Content
Management
System
RetailMeNot
Coupons.com
Catalina
Valassis
Digital Wallet
Analog
(Store & Print)
FSI’s
Load to Card
3Party App
Retailer App
Location
Based
Loyalty Card
BRANDS&
RETAILERS
HUB
Multiple Ways to Connect & Offer Coupons/ Promotions

32. 32
Data
Building Online/Offline Targeting & Tracking Capabilities
WINNING RETAIL STRATEGIES
WINS (Web Influenced In-store Sales)
Source: RNG research & analysis

33. 33
Data
Layered Pricing: Fun for Shoppers / Limits Transparency
WINNING RETAIL STRATEGIES
Source: RNG research & analysis

34. 34
Data
Layered Pricing: Fun for Shoppers / Limits Transparency
WINNING RETAIL STRATEGIES
Source: RNG research & analysis

35. 35
Differentiation
WINNING RETAIL STRATEGIES
Source: RNG research & analysis
Three Core Positionings Lead to Superior ROIC:
9% of Dollars
16% of Growth
ENGAGING3.
11% of Dollars
10% of Growth
QUALITY1.
34% of Dollars
37% of Growth
LOW PRICE2.

36. 36
Differentiation
WINNING RETAIL STRATEGIES
Source: RNG research & analysis
Compressing and Pushing Back the Center Store
§ To expand differentiated offerings

37. WINNING RETAIL STRATEGIES
37
Differentiation
Not your Father’s private label
Good Better Even Better Very Best
“We’re not offering knock-offs … we want to be Knock Out.”
Gil Phipps, VP

38. WINNING RETAIL STRATEGIES
38
Differentiation
Not your Father’s private label

39. 39
WINNING RETAIL STRATEGIES
Differentiation
Bottom Line: It’s all about the Shopper Experience

40. WINNING RETAIL STRATEGIES
Decentralization
40
Getting Closer to
the Customer
§ Smaller Store Formats

41. WINNING RETAIL STRATEGIES
Decentralization
41
Getting Closer to
the Customer
§ Smaller Store Formats

42. WINNING RETAIL STRATEGIES
Decentralization
42
Getting Closer to
the Customer
§ Order Online,
Pick Up in Store

43. WINNING RETAIL STRATEGIES
Decentralization
43
Getting Closer to
the Customer
§ Digital Storefront

44. WINNING RETAIL STRATEGIES
Decentralization
44
Store-Within-A-Store
§ Credited with the
BestBuy turnaround

45. WINNING RETAIL STRATEGIES
Decentralization
Store-Within-A-Store
§ Now being emulated
across the industry
JCPenny meijer
MACY’S

46. WINNING RETAIL STRATEGIES
Decentralization
46
Store-Within-A-Store
§ Now being emulated
across the industry
KOHL’S
OFFICEMAXTARGET
LOWE”S

47. WINNING RETAIL STRATEGIES
Digital / Physical Integration
47
“Our investments in e-commerce
and mobile are very important,
as the lines between digital and
physical retail continue to blur…
our customers expect a
seamless experience….”
Doug McMillon
President/CEO
“Our investments in e-commerce
and mobile are very important,
as the lines between digital and
physical retail continue to blur…
our customers expect a
seamless experience….”

48. WINNING RETAIL STRATEGIES
Digital / Physical Integration
48
List Management Fulfillment
List Management Drives Digital Engagement
Pre-Shop

49. WINNING RETAIL STRATEGIES
49
Delivery
Ahold: the early
Innovator

50. WINNING RETAIL STRATEGIES
Delivery
50
Walmart:
pushing the
envelope

51. WINNING RETAIL STRATEGIES
Delivery
51
As is Amazon

52. WINNING RETAIL STRATEGIES
Delivery
52
The USPS is getting into the act

53. WINNING RETAIL STRATEGIES
Delivery
53
What’s Next?
“We’re in the business,
today, of delivering
cars in five minutes.
But once you’re
delivering cars in five
minutes, there’s a lot of
things you can deliver
in five minutes.”
Travis Kalanick, CEO

54. WHO ARE THE RETAIL WINNERS?
Amazon+Walmart: 21% of US Chain Sales by 2020
54
Source: RNG Database Analysis
Includes Digital Marketplaces
2015E 2020E 2015E 2020E 09-14 15E-20E 09-14 15E-20E 09-14 15E-20E
1 Walmart $352 $400 14% 12% 2.1% 2.6% $41 $57 9% 7%
2 Amazon $122 $290 5% 9% 38.2% 19.6% $85 $191 18% 25%
3 Kroger $111 $132 4% 4% 6.6% 3.6% $34 $25 7% 3%
4 Costco $82 $108 3% 3% 5.8% 5.6% $23 $30 5% 4%
5 Walgreens $79 $94 3% 3% 4.4% 3.7% $17 $19 4% 2%
6 Home Depot $77 $93 3% 3% 2.4% 4.0% $10 $19 2% 3%
7 Target $74 $82 3% 3% 2.4% 2.0% $9 $9 2% 1.2%
8 CVS Health $68 $83 3% 3% 5.3% 3.7% $18 $16 4% 2%
9 Albertsons $57 $61 2% 2% 52.6% 1.1% $52 $4 11% 0.5%
10 Lowe's $57 $67 2% 2% 2.1% 3.5% $7 $12 1.4% 2%
11 McDonald's $38 $44 1.5% 1.3% 3.5% 2.8% $7 $7 1.5% 0.9%
12 eBay $36 $50 1.4% 1.5% 10.6% 7.5% $15 $18 3% 2%
13 Best Buy $36 $38 1.4% 1.2% 0.2% 1.3% $0 $3 0.1% 0.4%
14 Publix $31 $37 1.2% 1.1% 3.9% 3.5% $6 $7 1.3% 0.9%
15 Sears Holdings $30 $29 1.2% 0.9% -4.9% -0.7% -$11 -$1 -2% -0.2%
Top 15 Total $1,251 $1,608 48% 50% 5.2% 5.1% $313 $416 66% 54%
16-30 $304 $368 12% 11% 3.7% 3.9% $58 $76 12% 10%
All Other Total $1,028 $1,259 40% 39% 1.8% 4.3% $100 $279 21% 36%
RNG US Chain Total $2,583 $3,235 100% 100% 3.6% 4.6% $471 $771 100% 100%
Rank by
2015E
Sales
Sales
(USD bil)
Sales CAGR
Sales Added
(USD bil)
Share of
Sales
Share of Sales
AddedRetailer
2015-­‐2020
EST
SHARE
OF
SALES
SHARE
OF
GROWTH
WALMART
12%
7%
AMAZON
9%
25%
TOTAL
21%
32%

55. WHO ARE THE RETAIL WINNERS?
In Grocery, the Premium Operators Win
55
Source: RNG Database Analysis
Includes Digital Marketplaces
2014E 2020E 2014E 2020E 10-14E 15E-20E 10-14E 15E-20E 10-14E 15E-20E
1 Walmart Neighborhood Market $9 $33 2% 6% 25.2% 23.1% $6 $23 10% 22%
2 Whole Foods Market $14 $26 3% 5% 12.0% 11.0% $6 $12 10% 11%
3 Kroger $45 $56 11% 11% 7.3% 3.7% $13 $11 22% 10%
4 Publix $30 $36 7% 7% 4.3% 3.4% $6 $7 9% 6%
5 H-E-B $17 $21 4% 4% 5.7% 3.7% $4 $4 7% 4%
6 Wegmans $7 $11 2% 2% 7.5% 5.9% $2 $3 4% 3%
7 Sprouts Farmers Market $3 $6 1% 1% 43.1% 12.1% $2 $3 4% 3%
8 ShopRite $13 $15 3% 3% 4.4% 2.9% $3 $2 4% 2%
9 Food Lion $14 $16 3% 3% 2.2% 2.3% $1 $2 2% 2%
10 Safeway $23 $25 6% 5% - 1.3% $23 $2 39% 2%
11 Hy-Vee $8 $10 2% 2% 5.3% 3.3% $2 $2 3% 2%
12 Harris Teeter $5 $7 1% 1% - 5.0% $5 $2 8% 2%
13 Winn Dixie $9 $11 2% 2% - 2.7% $9 $2 15% 1%
14 Market Basket $4 $6 1% 1% 8.2% 5.1% $1 $2 2% 1%
15 The Fresh Market $2 $3 0% 1% 14.9% 10.3% $1 $1 1% 1%
$203 $280 50% 55% 11.5% 5.5% $85 $77 141% 72%
$73 $85 18% 17% 5.9% 2.7% $18 $12 30% 12%
$128 $146 32% 28% -5.6% 2.2% ($43) $18 -71% 17%
$404 $511 100% 100% 3.3% 4.0% $61 $108 100% 100%
Share of Sales
Added
Top 15 Total
16-30 Total
All Other Total
RNG USA Grocery Total
Rank Banner
Sales
(USD bil)
Share of
Sales
Sales CAGR
Sales Added
(USD bil)
$
BILLIONS
2014
EST
2020
EST
WHOLE
FOODS
14
26
H-­‐E-­‐B
17
21
WEGMANS
7
11
SPROUTS
3
6
HY-­‐VEE
8
10
HARRIS
TEETER
5
7
MARKET
BASKET
4
6
FRESH
MARKET
2
3
TOTAL
53
90
8 Differentiated Leaders: 70% Growth vs 26% Market

56. WHO ARE THE RETAIL WINNERS?
56

57. WHO ARE THE RETAIL WINNERS?
57
-­‐2.3%
4Q 2014
RESULTS
-2.3%
-3.1%
+1.0%
+10%
+25%
+70%
+245%
Blinkbox
Rentals
Online
Clothing
Online Gen’l
Merchandise
Online
Grocery
Express
Stores
Large
Stores
57
Source: Tesco Analysts Meeting

58. Building a Collaborative Organization
Adding value to the retailer’s data-driven initiatives
Creating Custom Retailer Programming
§ Shopper Centric Retailer Solutions
Building Direct Relationships with Consumers
Omnipresent Brand Availability
Meaningful Engagement
Bringing Innovation to the Table
Shopper Insights Technology
P-O-P WOW
HOW DO WE GET IN THE LOOP?
58

59. THE COLLABORATIVE ORGANIZATION
Organizational Framework Must Change
Traditional Relationship
Mfg. Marketing Mfg. Sales/Trade
Retailer
Marketing
Shopper Consumer
Retailer
Merchandising
59

60. Traditional Relationship
Mfg. Marketing Mfg. Sales/Trade
Retailer
Marketing
Shopper Consumer
Retailer
Merchandising
New Collaborative
Relationship
Mfg. Marketing
Retailer
Marketing
Mfg.
Sales/Trade
Retailer
Merchandising
Shopper
Insights
Retail Store
Experience
Shopper Consumer
60
THE COLLABORATIVE ORGANIZATION
Supplier/Retailer Collaboration is Critical

61. DIRECT CONSUMER ENGAGEMENT
61
National Brands are Becoming Retailers
From retailer reliant to self-reliant

62. DIRECT CONSUMER ENGAGEMENT
62
National Brands are Becoming Retailers
From retailer reliant to self-reliant

63. DIRECT CONSUMER ENGAGEMENT
63
National Brands are Becoming Retailers
From retailer reliant to self-reliant

64. DIRECT CONSUMER ENGAGEMENT
64
National Brands are Becoming Retailers
From retailer reliant to self-reliant

65. BRINGING INNOVATION TO THE TABLE
Technology is Creating Opportunity
The Secret Weapon of Mobile Technology is INSIGHT
65
We know how
many went in
the door
We know who
checked out and
what they spent
THE
GAP

66. TRENDS IMPACTING OUR BUSINESS
Technology is Creating Opportunity
The Secret Weapon of Mobile Technology is INSIGHT
66
BUT… did they:
66
Visit Your Category?
Stop There?
Engage? How?
Buy? Why?
From Display or Shelf?
From You or Your Competition?
What was the R.O.I.I.?

67. BRINGING INNOVATION TO THE TABLE
67
Live In-Store
Learning Lab
Technology is Creating Opportunity
The Secret Weapon of Mobile Technology is INSIGHT
Not what they
SAY they do …
but what they
really DO do.
Tracks Real
Shopper Behavior

68. BRINGING INNOVATION TO THE TABLE
68
Powered by C.A.R.T
Smartphone
GPS tracking
linked to P-O-S system
Technology is Creating Opportunity
The Secret Weapon of Mobile Technology is INSIGHT
Live In-Store
Learning Lab

69. BRINGING INNOVATION TO THE TABLE
69
Powered by C.A.R.T
Smartphone
GPS tracking
linked to P-O-S system
Powered by C.A.R.T
iBeacons push
promotional offerings
Technology is Creating Opportunity
The Secret Weapon of Mobile Technology is INSIGHT
Live In-Store
Learning Lab

70. BRINGING INNOVATION TO THE TABLE
70
Powered by C.A.R.T
Deep Data & Analytics
In-store Tracking
& Conversion
FSC data 80+%
of Transactions
Quantitative Analysis
of Shopper Behavior
Technology is Creating Opportunity
The Secret Weapon of Mobile Technology is INSIGHT
Live In-Store
Learning Lab

71. BRINGING INNOVATION TO THE TABLE
71
Traffic to Store
Traffic to Aisle / Department
Fixture/Product Dwell Events
Dwell Times
Purchase
Dwell-Point
Conversion
Defining Metric:
Technology is Creating Opportunity
The Secret Weapon of Mobile Technology is INSIGHT

72. BRINGING INNOVATION TO THE TABLE
72
% Store
Category
% of Category
Dwell
% of Dwells
Conversion
Opportunity
TOTAL HBA 67.4%
Hair Care 22.0% 49.0% 32.6% 67.4%
25.8% 44.9% 14.6% 85.4%
28.0% 40.6% 36.8% 63.2%
24.1% 29.4% 42.9% 57.1%
Oral Care 18.6% 40.1% 36.3% 63.7%
Pain/GI 27.0% 36.3% 38.9% 61.1%
15.2% 29.0% 43.8% 56.2%
Cold/Allergy 32.0% 39.9% 30.9% 69.1%
First Aid 13.1% 38.7% 31.4% 68.6%
17.9% 37.0% 28.5% 71.5%
Nail Care 29.0% 20.7% 48.2% 51.8%
Skin Care / Lotions 9.2% 45.1% 28.1% 71.9%
Hand Soap 24.8% 30.9% 26.0% 74.0%
Vitamins 18.4% 27.4% 9.0% 91.0%
Foot Care 16.6% 27.7% 6.5% 93.5%
25.8% 44.9% 14.6% 85.4%
Skin Care / Lotions 9.2% 45.1% 28.1% 71.9%
Technology is Creating Opportunity
The Secret Weapon of Mobile Technology is INSIGHT

73. SUMMARY
The Retail World Is Changing
There is no one answer
§ Flexibility is required
Shopper Activation Is Critical
Across multiple touch points
§ Test & Learn
Store Based Retail Still Key
However evolving/changing
§ Less will need to be more
Retailer Collaboration is Critical
Leveraging THEIR Insights
§ Will take organizational change

74. “The
Revolu�on
at
Retail”
To
view
a
video
log
on
to
h�p://www.rocktenndisplays.com/rr-­‐webinar