The state and future of ecommerce in canada

www.retailnetgroup.comKnow Tomorrow Today
Winning in a Digital World
June 4, 2014 | Toronto
Keith Anderson | keith@retailnetgroup.com | @keith_rng

What We Stand By
Traditional
planning process
RNG process
Today T + 5T - 5
We Bring the Future to the Present
Tracking Drivers Shaping the 2020 Retail Landscape
ocietal echnology conomic ndustry olitical
Trends Drivers of
Change

• What is predictable,
when less predictable
• Abrupt
The Dynamics of Accelerating Change
Step Change Linear/Incremental Exponential
• Slow and predictable
• Incremental
• Rewards planning,
process, and
execution
• Higher uncertainty
• Rate increases
proportionally to scale
• Disruptive to status quo
• Rewards vision, agility,
versatility, and speed
Source: RetailNet Group Analysis

Assumptions for the Future
Ecommerce will grow to 10% of all Canadian retail by 20201
Stores (units) and average store size will decline by 5-15%2
Grocery/CPG will finally migrate online4
Amazon will expand, but the story’s not over5
4
Digitally-influenced retail will surpass out-of-store retail3

Canada Under-Indexes in Ecommerce Share of Chain
Retail, but Poised for Accelerated Growth
Source: RNG research & analysis

Barriers to Ecommerce in Canada
6
Local Investment &
Innovation
Population Distribution
Currency, Customs &
Import Tariffs
Language Translation Sales Tax ParityLocal Limited
Assortment

www.retailnetgroup.comKnow Tomorrow TodaySource: RNG research & analysis

Drivers of Ecommerce in Canada
8
Changing Shopper
Expectations
Ecommerce Investment
by Incumbent Retailers
Improving Investment &
Innovation Culture
Millennials Tiered Delivery NetworksGrowth of Flexible
Fulfillment

9

2012 % of Total Category Sales Online
and Estimated 13E-17E CAGR
1
0
Consumer
Electronics:
(5.8%, 18%)
HBC (0.8% Share,
14% CAGR)
Grocery
(0.3% Share
18% CAGR)
Toys & Games
(1.3% Share,
10% CAGR)
Apparel
(2.3% Share,
16% CAGR)
DIY
(1.7% Share,
9% CAGR)
Note: Data is for total Canada, not specific to any individual retailer or retail format
Source: RNG analysis
Books/Music/Video
(38.4% Share, 17%
CAGR)
Furniture
(0.9%, 10%)
Big Box Retailers
Leasing Empty Space
to Increase Productivity
& Profit
(2012 % of Category
Sales Online, 14E-17E
CAGR)
Consumer
Appliances:
(4% Share, 7%
CAGR)

Developed Online Categories Align With Store Closures
Source: RNG database & analysis

How Retailer Strategy
Will Change
Pricing & Loyalty Assortments Footprint
Fulfillment Layout & Adjacencies
POS & Front End ServicesDigital Integration

13

Digital Influence > Ecommerce

Use Cases & Shopping Behaviors Vary by
Screen
Source: ComScore, Nielsen, Compete, BGR, RNG analysis

Mobile ROI: Meta-Apps Will Enhance In-Store Experience and
Drive Trips, Conversion, Basket, & Loyalty
Walgreens 3rd party
app Aisle411
item locations
Price Comparison
Store Navigation
Mobile Checkout
Mobile Payments
“Check-in”
Product Search
& Availability
List Management
Mobile Offers
Source: RNG research; Shop.org Conference
Walmart In-Store
Mode
Safeway & Giant
Eagle Test iBeacon
for lock-screen
engagement

Broadband OS Chat Search
Ad
Platform
Gaming
Platform
Portable
Devices
B2C
Retail
Site
Commerce
Platform
Operations
Payments
Last Mile/
Fulfillment
Android
Console
Rumored
Mobile
Payments
Rumored
Android
Console
Rumored
Smartphone
Rumored
AMOS
Minority
stake
Mobile
Gaming
Services
Platform
Upcoming
“Rookie
Network”
logistics
system
Technology Companies: Partners or Competitors?

18

5 Fundamental CPG / Grocery Fulfillment Models
National Ship
Delivery Click & Collect
Store-Picked
Warehouse
Picked

20

How the Landscape Will Organize
Pure Play
Omnichannel
Vertical
Generalist
9% of CA ecommerce sales in 2017
6% of Sales Added 14E-17E

2013E 2017E 2013E 2017E 09-13E 14E-17E 09-13E 14E-17E 09-13E 14E-17E
1 Staples $1,054 $1,181 19% 12% 3.0% 2.9% $143 $127 6% 3%
2 Amazon $615 $1,660 11% 17% 44.6% 28.2% $518 $1,045 21% 24%
3 Grand and Toy* $576 $623 10% 6% 4.2% 2.0% $106 $47 4% 1%
4 Sears Holdings $318 $524 6% 5% 16.8% 13.2% $172 $205 7% 5%
5 Costco $250 $397 4% 4% 15.4% 12.2% $128 $147 5% 3%
6 Well.ca $231 $544 4% 6% 115.2% 23.9% $226 $314 9% 7%
7 Best Buy $192 $261 3% 3% 14.4% 7.9% $94 $69 4% 2%
8 Apple $187 $314 3% 3% 34.4% 13.9% $144 $127 6% 3%
9 CDW $182 $232 3% 2% 13.1% 6.2% $84 $50 3% 1%
10 Systemax $164 $191 3% 2% -0.7% 3.9% -$6 $27 0% 1%
11 Dell $154 $126 3% 1% -11.2% -5.0% -$125 -$29 -5% -1%
12 Netflix $150 $359 3% 4% - 24.4% $150 $209 6% 5%
13 Office Depot* $146 $143 3% 1% -6.8% -0.5% -$62 -$3 -2% 0%
14 Gap $144 $260 3% 3% - 15.8% $144 $115 6% 3%
15 Shop.ca $115 $1,108 2% 11% - 76.0% $115 $993 5% 23%
$4,480 $7,923 81% 80% 11.1% 15.3% $1,832 $3,443 74% 80%
$916 $1,674 16% 17% 22.0% 16.3% $577 $757 23% 18%
$162 $267 3% 3% 8.7% 13.3% $55 $105 2% 2%
$5,558 $9,863 100% 100% 12.4% 15.4% $2,464 $4,305 100% 100%
Share of Sales
Added
Top 15 Total
16-30 Total
All Other Total
RNG Canada Ecommerce Total
Rank by
2013E
Sales
Retailer
Sales (CAD bil) Share of Sales Sales CAGR
Sales Added
(CAD bil)
The Top 15 Canadian Online Retailers Make up 74% of
Ecommerce Sales Added Since 2008
Source: RNG database & analysis *Grand & Toy broken out due to Office Max acquisition

Amazon’s Growth Model
Source: Amazon

Massive Transitions Underway Globally
Source: Tesco Investor Relations

Strategic
Initiatives
2020 Retailer Strategic Initiatives
Top Retail Initiatives
Capital Discipline
Big Data / Customer Experience Management – New Marketing Platform
Organization 2020
Services
Redefining Differentiation 2020
Logistics / Supply Chain
Advanced Branding & Merchandising
Digital & Physical Integration
Store & Network Renewal
Customer Service

The Critical Intersection of Brands & Retailer Capabilities
Retailer
Brands
High
HighLow
Low
Collaborate
CO-DEVELOP

The Work in a Digital World
Structure
Principles &
Policies
CapabilitiesStrategy
• Dedicated vs.
shared
• HQ vs. field
• Global vs. local
• Decision rights
• Processes
• Metrics
• Brand/channel
access
(conflict)
• Assortment
• Pricing
• Shipping
• Funding
• Sales
• Digital
Content
Management
• Digital
Shopper
Marketing
• Insights &
Analytics
• Supply Chain
• Size of the
prize
• Offense or
defense
• Where to play
• Consumer
Direct
• Amazon
• B&M.com
• Full-basket
delivery/drive

In Conclusion
• Move fast & learn by doing
• Don’t mistake technology for strategy
• Look externally for inspiration but innovate, don’t
replicate
• Work backwards from shoppers’ needs & wants
• Descriptive  Predictive  Prescriptive (If, then)
• Don’t compete on Amazon’s terms

Keith Anderson, VP, Advisory
RetailNet Group
keith@retailnetgroup.com | @keith_rng
www.retailnetgroup.com
Thank you! Questions?

The state and future of ecommerce in canada

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