The Physical Store: New Realities, New Opportunities

welcome to everybody who's joining for the first time um i know we've been doing this for about a year now so if you've if you've joined before welcome back we're happy to have you um and again if you've been here before you've seen the ground rules uh just a reminder we are at the mercy of the tech um you know we haven't had many tech errors today so hopefully everything uh goes smoothly but just in case it doesn't just be patient with us we're all not tech experts here that's for sure um i also want to just remind everyone to be respectful um we do have a comment section if you're on the zoom so feel free to reach out with questions and stay engaged as well just be respectful while you're doing so and then also just a reminder to network engage interact with our presenters a lot of people will leave their email addresses so you can reach out afterwards um i know i've already spoken with peter he said at the end of the presentation he will have his email address so if anyone has any questions that don't get answered or if you're just interested in following up uh feel free to do so and with that um i would like to introduce our speakers we have um three of the four today is jill joining us no one kills one of the catholics okay so we have joe and peter from chase design and jack from sympactful and they'll be presenting the physical store new realities new opportunities and so i'm going to go ahead and stop sharing my screen and i will pass it over to you guys okay thanks election all right hopefully people are seeing our title slide the physical store new realities new opportunities um if for some reason you haven't call lexi she's a nice person she'll fix it thanks for joining us today um we really we we're going to use this time to share with you trends and changes that we see coming to the visible store in 2021 or what we see as the new realities and new opportunities as the pandemic begins to recede and shoppers rethink how they view physical stores and they are today's presentation has been developed jointly by the teams at chase design and simpactful i'll briefly just tell you a little bit about each chase is a human-centered retail design firm we have a focus on translating how and why shoppers buy to develop more persuasive retail experiences we do that at the category department and in some cases at the full store level it's all about driving incremental revenues at full price so think how i experience categories and aisles and and full departments so impactful is a leading retail consultancy they're focused on helping cpgs and retailers uncover winning solutions their difference really is that they're they're driven by a team of former retail industry executives with real blue chip experience um with a lot of insight uh and deep connections within the industry uh you've been introduced to the team um so i woke up too much further except to say that my background has all been in retail marketing and in retail design joel and purchase our president uh much the same he's worked with leading cpgs like code craft heinz png uh and and work with them to create winning experiences at walmart target kroger etc and then jack a senior partner with impactful he's worked with clients on a store back approach to shopper needs uh sales management operations he spent about 35 years uh with procter gamble and retail strategy and other retail execution roles so brings an incredible perspective to what we're going to talk about today which is new realities and new opportunities and so really you can crystallize what we're going to talk about as two things the challenge and the opportunity the challenge is the pandemic has accelerated a kind of i don't know i call it an arms race to find faster better and easier ways to streamline or even avoid in-person shopping altogether so when buying goods means people no longer actually have to step into a store to shop physical stores themselves risk becoming mere points of fulfillment really differentiated only by level of convenience we think the opportunity is to provide the convenience shoppers need and want while also delivering the inspiration discovery and the uh the inspiration the the enjoyment of shopping that they truly want so in other words are these things mutually exclusive can stores deliver the ease and convenience people need in their buying transactions well also delivering the inspiration and delight and social connection that people want from their shopping experience now why are we talking about the physical store when it would be easy to think that ecommerce and click and collect buying solutions are where all of our attention should be focused as i mentioned earlier the pandemic has accelerated adoption of pretty much every digitally enabled buying channel while in-store sales in 2020 were in decline that is quite true but shopping in physical stores still dominates even in this pandemic a little under 90 percent of all purchases still happened in a physical store and in a study that chase design fielded just this past month shoppers say they're going to increase spend and trips to physical stores versus last year substantially and retailers have noticed this isn't just shoppers telling us they're returning to physical stores ulta is opening 40 stores in 2021. sephora is opening 60 that's to say nothing of the 200 store within store locations that you're going to find in colts amazon fresh we keep forgetting that amazon is a grocer they're opening 39 stores aldi you won't be surprised opening 100 stores and the whole value channel is exploding i haven't even listed dollar general they're opening something like 600 old navy 40 stores sprouts 20 tj maxx 122 and target 40. the retail community is putting their money where their mouth is they're betting on the fact that shoppers are coming back in fact target's gonna invest four billion dollars annually in new store openings and remodeled as was announced in their q1 earnings call we think they're really a good example of what what's been happening at mainstream retail not specialty where indeed you know if you're attached to a mall it's been a very painful experience but mainstream retail you know the the focus has been on going on one-stop shopping at the retailers that we know and love and target's done so well because of ceo brian cornell's investment in the focus on target stores we think that the target store has become kind of a total commerce hub so the majority of sales are in fact in store about 85 percent of targets sales are in store and their foot traffic by the way was up five percent for zero go and then orders at target.com are fulfilled in a couple of ways either click and collect i i drive up to the store and i go inside or or like or i do curbside pickup or deliver to home the delivered home piece is all done by shipt which of course they own the point is the vast majority of of all of these things are picked packed and fulfilled from the store itself it has become the hub by which people buy shop and fulfill their orders now let's take a look at a video of brian cornell and how he discusses the role of the physical store if we go back five or six years our target stores really served one role it was a place you can shop today they're at the very center of our strategy both from a physical and a digital standpoint we want to make sure when you're in our store it is a great in-store experience and we're investing in ours and our team labor and wages to make sure we find a great experience but our stores are at the center of our digital growth they're fulfilling the majority of our orders whether it's order pickup or drive up it's where we fulfill most of those orders in local neighborhoods so the stores are centered at everything we're doing at target so as as brian so eloquently put it stores are at the very center of everything we're doing at target so this is a time where physical stores are taking on a new more important role so let's jump in and see how brands and retailers are making the most of the physical store experience we're going to cover three areas today the first is delivering delight at retail and how retailers are creating destinations and experiences etc that really deliver on that shopper desire that shopper expectation the second is innovation and bold choices and that's about who was unlocking new innovation at stores today new new experiences and what's coming tomorrow and then what we call taming the checkout challenge uh how retailers are turning those pain points into a win and it is the number one cited pain point you won't be surprised to know so let's begin with delivering delight at retail how are retailers and brands creating destinations experiences that deliver on shop or delight and i'm going to ask joe to talk to us next joe thanks peter um so what you see here is this this is actually a relatively uh consistent coffee owl that you saw maybe five six seven years ago and it still exists in some retailers um but what we found through this category is that there's a lot of emotion people who actually love coffee love to shop for coffee but there's not a lot of emotion in the style as you can see and starbucks who reinvented coffee worldwide is just sitting on you know white shelves with white lighting white linoleum flooring and not a lot of excitement so what we did is through some some work specifically startup starbucks is trying to figure out how to help safeway drive people down the aisle more frequently and so taking the cue off what a starbucks store cafe looks like how do we bring that excitement into the store and take over a permanent end cap and deliver you know kind of new innovative um you know coffee offerings from starbucks but also draw them down the aisle to drive total category growth so this was a total category solution for safeway and it had so much success they rolled it out and then kroger you can go to the next slide you know kroger and other stores started to have their similar format to drive excitement into the coffee package good aisle there's also some interesting work that's going on of where to locate the strawberries cafe that actually is sometimes attached or inside the grocery store instead of on the fourth wall by the entrance and exit is moving the coffee shop more into the store so those aromas and that chance to experience coffee you know firsthand leads you right down then into the aisle packaged goods so bringing that aroma and really elevating the entire category experience a couple other smaller examples are you know for harry's here when they launched exclusively in target they really pushed target to kind of push the boundaries on you know end cap guy lines and so doing something very disruptive and very simple here to create a very very big brand impact into the shaving aisle to cause disruption another one on the right that we did for nespresso is actually something that you know to really this is a different target store in houston which is a new format to really bring exciting new offerings in the coffee machine or coffee you know maker aisle and showing that they actually also offer very premium coffee makers like nespresso as a premium end cap here with a in a sense a permanent encap with the lighted display so some smaller ways of getting you know bringing that emotion back into the store to drive category growth one of the interesting shifts at brick and mortar is the influx of digitally native brands as of 2019 and that's going back a little bit half of digitally native brands were also being sold at brick and mortar and with harry shaves that joe just mentioned direct to consumer brands have all recognized they can't really thrive without a presence in physical retail and they are fast appearing in stores their own and others in fact one of the most successful dtc brands warby parker sells more eyeglasses in physical stores than it does online by a wide margin it's they've been selling more in store than online since 2017. and target's taken a very aggressive stance in terms of bringing direct to consumer brands into retail often on an exclusive basis to start and frequently with an end cap anchor on the left you can see quip which is due to oral care what harry's did for men's shave and on the right is winky lux a dtc beauty brand that has enough sense of cool and cachet that people are actually taking their photos next to the ncap and posting on social media they're delivering the brand is delivering on a more engaging more fun shopping experience and one of the newer dtc brands of target is function of beauty perhaps you've seen it it's bringing a really interactive fun experience to retail that invites shoppers to select the hair formula that's right for them in two steps i think the first is you know you choose the base formula shampoo or conditioner across four hair types and then the second is you pick a pot or a special additive based on your individual hair goals whether you want volumize split ends hydrate or oil control that kind of thing the result however is customized to you something that heretofore you'd really need to do online but now we're delivering a physical store experience so there are opportunities to bring branded fun and brand benefits into the retail environment and we're seeing retailers embracing this increa increasingly it's not all dtc brands that are bringing brand assets and equities into store yeah i wanted to talk a little bit about some what i'll call some simpler and not necessarily super expensive options long time ago there was more brand presence within stores then that shifted to where the store wanted to be the brand and now we're singing a swing back here's two examples lego barbie but you can see a lot of these in stores where they're really taking these iconic brands like joe talked about starbucks but they're taking them and all it's requiring is some simple signage to stop the shopper but then also a different way that they think about assorting and organizing the product it's not very expensive to do this but it obviously has been super powerful you'll see this within a lot of different uh retail formats today okay thanks jack okay so at an even higher level this collaboration between brands and retailers has resulted in some fairly remarkable success stories so we're going to ask now what are some of the ways in which brands and retailers are partnering to reimagine in this case full departments um and i'm going to turn it back to joe for this thanks peter yeah here you see a shot from target this is actually about 10 years ago and you can see here's this is the beauty in cosmetics department at target uh and and they skewed heavily to the female target uh who overlapped with uh you know um alta and sephora at the same time yet they were they were under indexing sales to her well if you look at how it's merchandised this environment is not near competitively or valuable to the the female shopper on cosmetics versus others alternatives so hence why they're getting what they need at a target and then leaving and going to ulta or sephora so working with png uh we actually helped target reinvent what we called destination beauty uh really getting you know first destination beauty out there maybe nine maybe ten years ago you know first pilot stores then showing literally triple digit growth increases to the extent that um they rolled it out to all 1700 target stores this is uh it drove billion dollars incremental revenue in that first year so it was it paid back in spades not only for target but for png and all the other vendors in the process they're in now destination beauty 3.0 which you actually saw uh some glimpses in that uh brian cornell video which what they're doing is they're bringing besides these concave shapes and lower end caps is they're bringing the entire aisles down so the sight lines across the entire department so she can actually see what's across the entire department versus just seeing a couple aisles so it's a big transformation that's going on target they're now recently and we'll talk later about alta even though there's destination beauty 3.0 um so another example is uh with meyer with baby we worked with png uh and in the png baby categories pampers and you know uh diapers and wipes and so they were just one of many different categories that go across the store of what they sold to moms with babies and infants you know you think of not only diapers and wipes but food and clothing and baby carriages and toys and blankets and pillows and you know clothing all these different departments but they're spread throughout the store so you'd have to literally walk of the 270 000 square feet you'd probably have to walk 130 000 of it just to shop for your baby well uncovering some insight we said why don't we pull it all together for her i mean she's obviously time starved she may even have the baby on her hip or in the in the cart and so she doesn't have a lot of time what if we brought it all together as one baby department what really transformed meyer to to you know substantially grow their business with her during those years those those baby and infant years to drive a substantial amount of sales for meyer and it was all driven off the inside of working with just one brand one subcategory with png so just a transfer you know huge transformation it was a huge success okay let's move the focus to consumables for a bit the pandemic of 2020 shifted nearly all food consumption and home and a lot of restaurants and qsr suffered from that so food growth was significant for many mainstream retailers so the question is what are retailers doing to sustain or even build that growth well as restaurants are reopening grocery retailers are working harder than ever to retain their share of stomach so food inspiration is important and the perimeter is where retailers evoke the senses inspire more at home dining options produce meats fish bakery and deli are all perimeter departments attracting a lot of focus stores like whole foods do an amazing job in produce and i'm sure if you've been to whole foods in your area you've seen that yourself and we expect to see continued expansion of prepared foods as you see here in this kerger marketplace whether that's ready to eat ready to heat or take and make meal kits in fact kroger acquired home chef meal kits in 2018 and now sells them as an exclusive in kroger stores uh they're simple to prepare and they provide high quality ingredients and again a real time saving meal solution for today's busy consumers and part of building and defending share of stomach because that's what it's about right means retailers will accelerate the shift from providing ingredients or prepared foods to quick serve dining service in some cases that means retailers will create their own in-store dining solutions as you see here in hyvee and if you have ever been to a wegmans you've seen what they offer increasingly it sit down get it yourself let it sit down and dine or here we see kroger partnering with cluster truck their meal delivery service that operates out of a ghost kitchen and they do this across the u.s this pilot allows kroger shoppers to order dinner for the family while shopping or pick it up on the way and pick it up on the way out it's an exclusive for kroger and a very innovative step for them to be connecting with this very popular ghost kitchen brand and there's certainly opportunity for cpg brands who play in the food space to find ways to help retailers bring meal inspiration to the store too really it's as big as as your imagination or can be here you see boar's head and then of course mccormick using brand assets and wayfinding solutions to inspire and help shoppers create the right meal solutions for themselves or their families okay so with with changing food preferences toward healthier foods whole new categories are exploding and you've seen this i'm sure imagine you're walking into your favorite grocery store plant-based foods are now a whole category organics cbds and others but it's led to a proliferation of options and not always that that well thought through because it's it's it's all very new and this is actually made some things fairly confusing for shoppers jack i was going to turn this to you to walk through yeah so for example if you think about this i mean peter said it very well you've got plant based up 38 percent you got all these brands out there new opportunities new um sources but how do you present yourself so go to the next slide you know one way and by the way as you would well imagine anytime anything new comes along there's a certain confusion there's not a single right answer on how should they be presented how should they be organized but it's a question that needs to be answered so how do you get it right do you take plant based and you put them as a separate subcategory away from your regular meats as a way to help wife ending or de-integrate it the research needs to be clear and it needs to be shopper based so that there is less friction in their shopping and the closure rate goes higher against not only the meat products but also the other ones thanks jack i i i think there was some industry research that was done that showed getting the answer right on this is a 20 difference in sales so you know you ask be shopper led ask shoppers how they view the category view the category and then adjust the presentation accordingly okay so we've covered a lot of ground in these first uh sections um let's jump into our next segment uh all about innovation and imagination what's required to unlock new possibilities in physical stores today and what's coming tomorrow and as it turns out it begins with good retail execution and jack will go back to you we'll talk a little about some of the services yeah so one of the dynamic we see today is the difference between the blocks on the left and the right services are going to continue to grow we're going to talk a little bit more about that in a bit but they're going to continue to grow warehouse and online fulfillment is going to grow it's also going to take up space so there's naturally going to be a normal squeeze that's going to take place relative to traditional merchandising and it's going to carry with it some consequences that we need to be wary of go ahead peter so for example when we think about services some we know about we've used the geek squad probably one of the first interesting ways a retailer chose to commercialize some capability but in the form of service if you go to the next slide one of the great frankly very very great thoughts was when staples started to go toward co-working it would have been very easy for staples to have allowed a massive online drift of a lot of their products but instead they created co-working spaces which invited the audience to buy their products while they were doing their work if you go to the next slide you know there's two different examples here one obviously with amazon and kohl's you know that started off as an interesting and peculiar kind of a relationship and yet the growth not only for the convenience of the shopper for amazon drop-offs went high but the lift that coal's getting because of foot traffic same dynamic which orange therapy and hyvee you buy your food and then you work it off i mean the whole idea of blending two different things that are kind of related but you normally wouldn't put under one platform of services those are the partnerships we continue to see that are going to grow i think another area is the health care services area where we're seeing uh you know we call the retailization of health care um you know the number of banners that you see on the left have actually gone pretty fast and furious into healthcare services you know mainly the pharmacies but also uh grocery stores with pharmacies or even creating little clinics or whatever it may be but providing a breath of services from x-rays to physical exams to immunizations to flu shots to um you know as far as they can push a nurse uh kind of practitioner uh you know where you know where other than you know having to go to actual doctor but you can see here some big contra uh investments happening from walmart creating their walmart health centers um sometimes even having a like a whole separate section of the building separate entrance from walmart they'll generally be still being attached to a walmart cbs minute clinics but this is actually a picture in the center is what cbs has also done is tried a whole new convenient kind of you know pharmacy convenience store of calling the health hub where it's a very different than a normal cvs where it doesn't even feel much like a convenience store anymore it feels like a whole mini health service almost hospital clinic and then the little clinics that have been launching continue to launch in kroger i think they have a little over 200 of these clinics now across the nation but having you know great success with that also i think the other thing too is is you know as jack made a reference to that orange theory attached to the hyvee is i think people are realizing just you know they it's what they put in their body and what they do to their body that's going to give them the long-term health and there's been a lot of studies to show that um you know you can actually keep yourself healthy and you know and even cancer-free by what you put in your body and so there's a lot of you know push around food as medicine kroger specifically and other retailers have you know even hired full-time registered nutritionists wegmans got full-time nutritionist giant hyvee kroger and so on because it's become a lot bigger push as people are more concerned about as cancer becomes more all different forms of cancer kind of coming out of nowhere more and more studies are showing it's some of it's hereditary but the other part of it's it's what we're doing to our bodies that that we could actually have we could selectively change by just our nutrition alone um peter next slide sure okay so a key area of retail innovation innovations day involves shopper personalization we're all aware um and so that's pretty easy to imagine online we can all imagine you know any time you go to onto amazon it's got your prior purchases people will like this like that but how does that work at the store level well turns out that retailer apps are a real bright spot here um the research we completed earlier this uh this month we have shoppers which retailer apps are the most useful in their shopping experience and strangely enough to the decimal place target and walmart were tied to first kroger and costco rounding out the top four but we wanted to dig deeper what's behind us what makes a retailer's app helpful and useful for a shopper well this particular shopper talked effusively about the target app again it tied for first love the fact that when i'm shopping i can check for inventory i can compare prices and store it online i can see if i can ship to home check for coupons check my shopping list locate items in the store and so on it became a way and the the shopper actually used these words my shopping experience in the physical store is enhanced with this digital tool it's better than it would be without it now of course walmart's app app now combines their one separate walmart grocery app and walmart.com app into a single shopping application that's loaded with functionality really a lot of things that you just saw on target item finder price checker store maps walmart pay the list goes on it's a it's a very handy list of benefits and conveniences more importantly the app has been developed in concert with the design of walmart's newest stores so that the app and the physical shopping experience work together for the shoppers so as a shopper enters the the new stores there are about 200 of them now entryways encourage shoppers to open their shopping app and aisles are clearly defined by letter and number a bit like gates at an airport terminal and you see use of icons that designate those categories you see on the top right there there's a shirt that says women's apparel and in fact shoppers who are searching for an item on the app are directed to the specific aisle and exact shelf or gondola location by letter and number so if i'm searching for women's apparel it sends me to b28 and then if i want a t-shirt it sends me to gondola b25 item zero two the search results use the same look as the wayfinding signage in the store it helps shoppers navigate more easily but it should also speed pick and pack shoppers who are using you know the professional stop shoppers now who are doing the click and collect orders decreased time spent looking should increase shopping satisfaction but it may also drive larger baskets because you have more time spent potentially and inspiration versus frustration and the implication for brands here is be present in the retailer's app and more broadly find a home in the retailer's media ecosystem which is growing by the day and personalization of the store level is already happening by zip code retailers like cvs and walgreens are managing category planograms and assortment based on zip code tailoring the assortment and presentation based on local demographics and preferences amazon fresh this is exactly how they develop their current footprint each store has been placed in a market based on amazon prime membership and penetration and then assortment has been tailored based on those consumers orders over the past few years and they're going to continue to use the strategy as they open up the other three dozen plus stores i mentioned earlier for the rest of this year it's very very focused on the data driven uh insight they get from their amazon prime membership but what about click and collect orders it's a huge area of growth for retailers how is this working at the store level jack let's turn it over to you for this yeah go ahead so if you picked up on one theme in our discussion so far it's all about shopper centric and it's about frictionless and frictionless can obviously be accomplished by a lot of what we've shown but now with this later this latest change and certainly accelerated by uh the pandemic the level of by online pickup in store obviously is growing like crazy but it still needs to be taken to the operational level and so for example you've got demand of products from the normal shopper you got demand of products from the click and collect and if we don't maintain a level of in stock it starts to fall apart here you can kind of get a sense for what the online growth is right and obviously 21 grew like crazy go back one slide real quick quickly here peter um it went it went way way up what's interesting is look what's happening as we project out for february 21 uh not a surprise because there is it supports the idea of people going back into store but we're still going to have a substantially larger buy online pickup in store presence which is still going to require different capabilities and different ways to maintain in stock levels so the foundation of the the business is solid next slide so this is the fascinating point right satisfaction with grocery pickup is down 35 so part of our thinking here is last year it was a panacea for a tough year but the shopper has learned how to have high expectations and where they start to see too much substitution where they start to see too many out of stocks and so forth as their satisfaction drops they're going to react so it just once again points that the foundation of the store has got to be really really really strong particularly when you think about two-thirds of the people don't even plan to use grocery delivery after the pandemic they want to return so now ours is not to say whether they will if it'll be two-thirds or one-half our implication is we're going to have to be really really capable in all these areas because another pandemic could hit and then it could grow and then of course as you see here the growth of inline shopping uh slowing down in 21 which really goes to show that there is going to be a boomerang effect that's going to take place yeah there's there's a real shift and many of those numbers came out of the research that we just completed last month we're picking up on as we talked about earlier retailers are too with all the store openings there is a refocus before i had to order online and pick up i had to have it shipped to my home it was a safety thing it was you know maybe life and death now that the options are becoming more available you're seeing people shift back to where do i prefer to transact what do i do i prefer to do this online or is it do i like do i i actually have a fine enjoyment about going in store okay so peter i think and jack i think there's another thing that was going on too is um even the people that decide to still go to the store they decided to reduce their cross-channel shopping substantially because they said if they're going to go out and about they're going to say okay where am i going to go to get 95 of what i need instead of going to three stores i'm going to go to one and then maybe backfill it with online uh or just forget about it right and so i think what's going to happen now is people are coming back to stores the stores and the brands are going to win are the ones that actually make that experience uh most fulfilling as possible to because people will get back to cross-channel shopping at some point but the more that you can actually maybe wow them where kroger maybe in the invoke set of retailers for grocery was maybe getting 50 of all purchase trader joes was getting at 25 maybe costco was getting the other 25 how does kroger get you know 75 when they come back and stick to that 75 and how do your brands play into that to make sure that if that's going to happen that you have the best brand presence in that retailer who's really investing to win when when these waves of shoppers come back great okay another source of innovation at retail today are the partnerships retailers are creating helping to deliver better more engaging shopping shopping experiences and this is one of the things that just hits right to the point i was talking about is because of cross-channel shopping and getting reduced during cobit and now as people come back i think retailers have tried to figure out who do we need to partner with the fact that if we put two brands together could it actually get could it get the two trips into one trip in the building so if you look at so this next slide here just shows some very innovative partnerships you know between you know kroger express and walgreens so again kroger reaching out to walgreens say hey walgreens you you almost have ten thousand store footprint we have four thousand store footprint so you you have two and a half times the footprint what if we put a kroger express inside your walgreens so you can get some of the traffic that we may not be getting because they're going somewhere else and so we can actually win together and you can you can win your pharmacy business while we give you the you know the fresh side of your business so i think it's a great partnership i think the other things that are going on is where brands and retailers are working together to create this interest to draw people back into the store just recently launched and it's actually for a short time only until supplies last as levi's launched an entire um new set of products not just obviously the clothing products that people know the levi's brand for but a whole set of home goods glassware napkins plate where pillows blankets chairs uh you know a lot of home goods uh with you know with the levi's branding um and it's for a short time only so it targets investing in relationships like this with iconic brands to kind of create that interest i think the other thing that you you may have read recently in the process apple is investing pretty pretty fast beerus into creating you know apple stores inside target they had they had maybe an apple kiosk or an apple counter but they didn't have an apple store so they're going to make an investment in real estate inside target which honestly may feel in this when those launch may be the easiest place to kind of get your apple products because you know how crazy getting to an apple store can be this may be another outlet where you can get to your experience faster with some other cross-channel shopping going on inside the one venue as we talked about destination beauty was you know in its third phase well look at its fourth face it's fourth way to say look we keep trying to fight against ulta what if we actually talk to him and say hey why don't you put yourselves inside our store we have the exact same shopper sometimes you know we're getting her but she's still feeling like she's getting a better selection in some cases at alta because there's some unique offerings that ulta that target doesn't have so they decide to come get together and so you're now going to start to see ulta beauty at target so you know you could almost call this destination beauty 4.0 but 4.0 is a partnership another interesting partnership here is between sephora and kohl's i think is kohl's continued to be that disruptive and successful the probably last standing one of the few last standing department stores kind of at the lower mid-tier level um you know this is actually an upgrade for them to partner with sephora where sephora and kohl's can come together because i think sephora had a slightly higher kind of equity value uh when it came to you know the products they carried so i think this is a great partnership that kohl's is able to negotiate with sephora agreed okay so let's move into our third and final area of discussion today we're going to bring focus to what we call the checkout challenge and it is the most often cited pain point for shoppers so how are brands and retailers turning this pain point into a win and joe we're coming back to you all right uh good i just took a sip of coke get ready so um here's a picture of a typical shelf checkout at walmart you've seen this across many stores and you know it's not very organized uh at the same time what happened was walmart saw a huge decline peter i don't know exactly what it was but it was in it was in the single-digit billions of impulse purchases being lost when they went to self-checkout why because they moved a lot of the responsibility to the shopper you know the as the shopper was kind of waiting in line looking for which of the six checkouts was opening so you're kind of your heads-up moments are constant you may be just checking your phone and then looking at the next one opens because you want to get to your checkout lane you know because the person behind you is going to push you if you don't and you get to yourself check out lane think about what you got to do you got to do all the work right so there's not a lot of dwell time where you can actually just sit there and meander through a magazine or look at different snacks what we realized though is how disorganized this was we worked with coke to actually help walmart re-figure this out and actually doing some queuing and fueling up people but again the heads-up moments are very short in this in this uh retailer situation so we had to be very simple very intuitively organized so coke products are in the coke cooler pepsi products are in the pepsi cooler treats to go bars to go we even went more and called it salty snacks savory snacks you know protein snacks that type of thing because just to make and make sure it was merchandise that easily and simply also leaving last minute opportunities where we actually created merchandising units right at the self checkout because even though you may have missed it on the in the line is now coke getting that last placement of you know some you know ready to drink offerings from coca-cola and obviously some snacks to go uh and this actually turned around their impulse uh purchases where they're now anywhere from 30 to 50 to 70 depending on the 50 stores we tested in now is rolling out to 250 more stores and and so on um what's interesting though is i don't know peter if we have the picture of the uh so that's that's again yeah savory snacks here's a picture of the latest walmart that was launched where the entire store is self-checkout now what's interesting is you think again total respect for walmart they know what they're doing but in this case there's some silos going on because this store what happened impulse shopping dropped again because there's there's you know now you got this massive where everyone's self-checking checking out and there's no queuing up from a standpoint an opportunity to actually buy any impulse because you can't see at each self-checkout there's not you know so we're working on another solution now for them to bring impulse purchases back uh even if it's just small merchandising with a little bit of snacks gum and maybe a cooler under that table again right so it's just simple solutions like that and i had skipped over i'm going to go back this was the the full execution of what we had sketched out for you this is yeah you can see coca-cola cold drinks savory snacks salty snacks dairy juice very literal uh controlled merchandising so it always was what's there is actually a pepsi product always a coke product and so on because it's tsd and then i think here you can see how this this also got launched in target an opportunity you know not as extensively but it's still an opportunity to take cold drinks snacks gum uh last minute purchases that you could do while you're actually checking out because you're you can see it right in front of you um so i think the other thing here is just if you look at um this was the store pickup area in target in 2019 which they just used their customer service desk to do it you know again what you see if you see mom with little johnny holding her hand um you know though he's looking at a screen we could use those same principles and you can see what the now the store pickup looks like at target where you know i wish we would have had mommy with little johnny again because you could have seen johnny you put would have put his phone down and grab some gum or some snacks and said you know pulled on her say hey buy this so an opportunity to actually increase that last minute basket i think the last thing we talked about in this section is you know curbside pickup we talked about you know part of uh curbside delivery at home delivery some of the satisfaction rates aren't that high uh part of it is there's dwell times that's causing it too that you know even though you're you're using the app and you're checking in that you're there the wait times can sometimes be up to five seven ten minutes well what a great opportunity that we could start to collaborate with the retailer to figure out how within the app or how could a manufacturer especially if you're in an impulsive category you know offer offer them at something at maybe even at a discount uh impulse you generally don't have to but maybe it's a surprise and delight discounts hey since you're waiting would you like would you like a 20 discount on uh for breeze products you know for your car type thing whatever it may be so it's an opportunity to upsell why you know turn something that's kind of a a nasty experience or not a pleasurable experience into a surprise and delight opportunity okay so checkout is also where a lot of the tech forward solutions are appearing how are retailers approaching this opportunity today and where is it going jack i'm going to turn this to you yeah thanks peter so obviously if you've not seen an amazon go or one of their new formats you want to get into one because it's the beginning of what was a transformation relative to automating checkout particularly with technology if you go to the next slide um it's expanding and so now all of a sudden amazon's got their dash cart where the product goes in it gets read comes up on the screen and so you once again in the pursuit of reducing friction are starting the friction reduction shopping enhancement from the very beginning right this is happening in other places for example kroger is now launching krogo soby's has got a smart card albertsons has got it so we think that this is going to continue to flourish particularly when you start to think about taking pressure off of the checkout process it's got to be technic technically bound one of the more interesting ones we saw was in beijing where not only do they have a cart that can read and scannable items but you put a band on your hand as a shopper you activate the band and the cart follows you around like a puppy so then everywhere you go the card is there uh and you put your products into the cart and it still scans it so it makes it even easier we've they've removed pushing carts from the friction the friction process the other dynamic which hopefully many of you have experienced if not it's worth it and that is the whole notion of scan and go walmart they call it scan and go where you scan as you go through the shopping experience and then you zap the barcode qr code at the end and all of a sudden you're out the door it just takes that complicated task and it moves them up in the shopping experience meyer is called shop and scan we continue to see this as being a huge growth area but it carries a consequence and that is for cpg companies and retailers we're really going to have to be brilliant based upon the way the rest of the store looks as they expedite people through the last 10 yards okay amazon one which is basically the coolest technology where it not only can read you based on palm but it would be relevant not only for checkout but it would be relevant for certain purchases that require an i an id so now all of a sudden reading your palm as opposed to having to look at a driver's license becomes an alternative and yet a more frictionless way to to work your shopping experience thanks jack okay so that kind of brings us back to where we began our discussion today we've shared areas where brands and retailers are creating real success stories in delivering shopper delight driving innovation and bold choices and overcoming the checkout challenge so as we think about how shopping and physical stores is evolving i'm going to sharpen the focus right now on six key takeaways from what we've just discussed today here we go the first is that physical stores remain at the core of shopping i know all of the headlines and all the chatter and all the discussion and all the new job postings are typically not about the physical store it's very much around digital but as brian cornell at target said stores are at the very center of our strategy to win a total commerce solution target has shown is a winning model where the store becomes the center of gravity for where people shop where you pick and pack and where you ship from in 2021 online buying behaviors are projected to moderate that's not out of our study that's a marketer saying the growth from of up 33 is gonna be now up to five six seven percent and in store growth will accelerate so we see there's a return to physical stores and that they remain at the core of shopping secondly buying convenience and shopping delight must co-exist because if all you're doing is fulfilling against people's transactional requirements you're just a vending machine you got to get that right you have to deliver self-checkout e-commerce and pick and pack but getting it right means creating the right commerce cocktail think about it as one part physical two parts digital walmart's store design is built to work seamlessly with their app scan and go technologies are making checkout faster and easier so we often view digital as an alternative to the physical retail shopping experience if i'm buying on my screen i'm buying online and therefore not at a store it turns out the real opportunity is how digital can enhance the shopping experience while you're at the store and that's where an awful lot of time energy money is going from brands and retailers today third delivering delight can be easier as a shared endeavor so retailers and brands so at the category level think back to starbucks or boar's head at the department level think about target and p g beauty with destination beauty and retailers plus retailers think about target and levi's and apple or kohl's and sephora and walgreens and kroger a lot of opportunities to add delight and engagement by partnering four fast growth categories we think are ripe for reinvention so jack talked about this plant-based products in dairy and in meats and cbd's and organics they're all becoming categories overnight and i'm exaggerating but very very quickly there's a lot of product proliferation we think and our research shows there's great confusion there that it is not necessarily being well merchandised and presented to shoppers in a way that is intuitive to them our suggestion there is to take the time to learn how shoppers understand the choices not how your algorithms and data suggest but rather talk to shoppers to find out how they do it five move beyond selling things to providing solutions you know we didn't touch on it but um pet retailers have been doing this for decades right they used to sell kibble in a bag and um wet dog food in a can or a pouch and they realized that was a commodity right so they've shifted from food only to grooming to pet boarding to training um you name it and they've become much more in the process connected to and emotionally connected to pet owners pet parents so rethink whether your value proposition can expand into as we i mentioned in pet services whether you're a retailer or a brand so staples adding co-working in their stores nothing shy of brilliant i think kohl's partnering with amazon to uh return products and returns i think that's initially i thought it was crazy turns out it's brilliant even tide it was a laundry detergent forever and now they've extended that brand to also be dry cleaners it's worth thinking about and a final thought no one person or organization can do it all we think you guys should consider benefiting from an outside perspective as you're on this journey to rethink how do i activate the visible store in 2021 there is a return there and you can work with the teams that you currently have on staff and the people that you know and you'll do well we think you might be able to benefit from an outside perspective people from different brands different uh retailers and categories and always as i mentioned earlier keep the shopper at the center of your choices and with that i think we probably have a little bit of time for some q a and so i'm gonna shut this puppy down and if there are any questions lexi will turn it to you it looks like there are no questions at the moment um and we're about to have to wrap up anyway billy's hopped in to be the next mc so i'm gonna have to pass off my duties to her uh but thank you so much joe peter and jack for taking the time to present today i know i really enjoyed it and i'm sure everybody else did as well and as mentioned to all the viewers out there you saw their email addresses were in the presentation and i believe bill will be sending those out um in the next few days so feel free to reach out to joe peter or jack with any questions or follow up conversations that you want to have with them happy to send you a pdf or discuss discuss burger thank you lexi thank you thank you appreciate it everyone thank you bye all right