1. The role of manufacturers in multi-channel
retailing
Getting Ahead of the Value Chain Integration Curve

2. 2
Multi-channel retailing in the US is rapidly growing driven largely
by advancing technology and shifting consumer behavior
Advancing Technology
• Tablet and smart-phone adoption
• Big data & analytics
• Social media
• Cloud computing
Shifting Consumer Behaviors
• Information-seeking
• Mobile and social generation
• Convenience premium
US Retail eCommerce Sales, 2011-2017
($bn)
$434.2
$384.9
$338.9
$296.7
$258.9
$225.5
$194.7
2014
18.0%
2013
15.0%
2012
11.0%
2011
7.0%
21.0%
2016
25.0%24.0%
2015
mCommerce(%of
eCommerceSales)
TotaleCommerce
Sales($bn)
+14%
2017
eCommerce
mCommerce(% of total eCommerce)
Note: eCommerce sales exlude travel and event tickets
Source: eMarketer, Forrester Research, National Retail Federation, comScore
Multi-channel Growth Drivers
Driver Description

3. 3
Retailer / Dealer
Wholesaler /
Distributor
Manufacturer
• Define offering and product
specifications from demand
• Design / enhance products
lines
• Produce new / existing
products
• Bundle products into end
consumer batches
• Distribute consumer batches
to points of purchase and/or
consumption
• Display products for consumer
discovery and trials
• Provide products for
consumers to try and test
• Offer vehicle for consumers to
make purchases
• Ensure order fulfillment
The traditional value chain is blurring under a multi-channel
environment
Reconfigured Multi-channel Value Chain
Traditional Manufacturer
Responsibilities
Forward Value Chain Integration by Manufacturers
Forwardly Integrated Responsibilities under Multi-channel
Source: A.T. Kearney
Backward Value Chain Integration by Retailers/Distributors

4. 4
Manufacturers across sectors are pursuing forward value chain
integration
Depth of Offering
Multi-Channel Value Chain Integration Curve
Source: A.T. Kearney
Level 1 Level 2 Level 3 Level 4
Level 5
(Omni-channel)
Research
Shop
Service /
Omni
• Online/mobile product search
• Side by side feature comparisons
• Online memberships
• High resolution specs/photos (3D)
• Product narration
• User feedbacks and reviews
• Smart recommend
• User communities
• Buy online for
direct delivery
• 1-click and/or
mobile-
payment
• Store pick-up
• Global shipping
• Store fulfill with
last mile delivery
Buy / Fulfill
• Subscriptions
• Segmented assortment by channel
• Product sampling for VIP customers
• Online customization
• Retail location recommend
• Customized order management
• No hassle
returns
• One click live
customer service
• Omni-channel
integration

5. 5
Leaders have started unlocking value as they climb the forward
value chain integration curve
Source: Mobile Marketer (1/12), Lululemon Annual Reports; A.T. Kearney
• Web sales grew over 10% faster
than sale via other channels last
year
17%
Web
30%
15%
Other
Channels
Total
Channel Growth (2011 – 12)
• In under 4 years, web sales
have grown to 14.4% of
company revenues
• Mondelez is devoting 10% of
marketing budget to mobile
– Oreo “Daily Twist” campaign,
which published new mobile
content for 100 days,
reached over 30 million
social followers and fans
– Use of geo-fencing
technology in partnership
with Waze mobile app and
Target, users receive
coupons when near Target
0
2009
197,255
1,173,103
2013
353,488
Channel Growth (2009 – 13)
Other
Web
Strategy: Focus on using
breadth of coverage to bridge
online commerce with in-store
experiences
Strategy: Focus on using depth
of capabilities to build a local
communities of engaged
consumers
Strategy: Apply innovative
digital solutions to engage
consumers and drive sales via
more traditional retail channels
Mondelez
“Daily Twist”
Campaign

6. 6Source: A.T. Kearney
1. Consistent brand experience –
Consumers have a consistent brand
experience and not one that changes by
channel
2. Seamless integration –
Customers experience an effortless
transition along the journey and across
touch points (“anything, anytime,
anywhere”)
3. Single view of the customer –
The manufacturer/retailer has a singular
view during the customer journey and
across all touch points
Omni-channel key success factors
Consistent experience of
manufacturer brand
Integrate own touch
points and align to
retailer channels to
maximize likelihood of
consumer continuing
journey with brand
Strengthen direct
relationships with
customers across touch
points and channels
Consistent experience of
retailer brand
Integrate channels to
maximize likelihood of
shopper continuing the
journey in the retailer’s
channels
Build and maximize a
long-term, channel-
agnostic customer
relationship
RetailerManufacturer
The end-state objective is to offer a consistent brand, seamless
integration and one view of the customer

7. 7
Social Media
To succeed, manufacturers and their retailing partners must
manage channel conflict
Source: A.T. Kearney
Online MobileRetailer /
Dealer
Pricing
• Define and set integrated pricing based on channel offerings and objectives
• Define coordinated promotions and sales plan
Cannibalization
Stealing Share
from Partner
• Segment product by channel (long tail vs. fast mover)
• Focus on complimentary product via desired channels
• Ensure effective inventory deployment across channels
• Increase transparency (leverage customer data to show win-win rather than
zero-sum impact)
• Link partner trade funding to manufacturer’s overall sales across all channels

8. 8
Three steps manufacturers can take to get ahead of the multi-
channel value chain integration curve
Source: A.T. Kearney
 Assess tailored multi-channel engagement journeys across purchase
cycle for core and new customers
 Assess size of prize and cost to serve economics
Actions
 Develop multi-channel 5 year strategic vision (multi-channel offerings by
category and customer segments)
Steps
Assess the sector’s current
value chain structure
Define the manufacturer’s
desired strategic role in the
value chain
Develop roadmap to build
out capabilities to desired
level
 Define sequenced and flexible capability build program
 Identify and active pilot offering programs
 Identify cross-sector best practices and approach to multi-channel rollout

9. 9
A.T. Kearney is a global team of forward-thinking, collaborative partners that delivers immediate, meaningful results and long-
term transformative advantage to clients.
Since 1926, we have been trusted advisors on CEO-agenda issues to the world’s leading organizations across all major
industries and sectors. A.T. Kearney’s offices are located in major business centers in 39 countries.
Raj Kumar
Partner
raj.kumar@atkearney.com
Michael Hu
Principal
michael.hu@atkearney.com
Contacts
Amy Engel
Consultant
amy.engel@atkearney.com