Retail Industry Global Report — 2010 - Ascendant Capital Advisors

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Increase in global online population promotes online retail spending Between 2005 and 2009, the global Internet population increased from 1 billion to more than 1.6 billion and by 2014 it is projected to grow by another 42 percent, reaching a level of 2.3 billion 1 . Most of the growth in online population is expected to come from the Asia Pacific, Middle East and Africa, which had very low Internet penetration levels of 19.7 percent as of June 2010. These regions will represent 54.9 percent of the online population in 2014, whereas North America and Europe will represent 34.1 percent. Other emerging Asian countries such as Vietnam and Indonesia are expected to have nearly 10 percent of global online users by 2014, but Apple is the only online retailer in the US which operates a transactional Web site for these countries. Global Online Population Region 2009 2010 2012E North America 259 266 292 Europe 415 475 500 Asia Pacific 645 846 1,033 Latin America and Caribbean 178 204 255 Middle East and Africa 135 173 241 Total 1,632 1,964 2,321 Source: Forrester Research Inc. and Internetworldstats.com, June 2010 While Internet penetration growth does not show a direct relationship with online retail market growth, online retail market dynamics will change as the global Internet penetration changes, boosting international expansion for most retailers. Also, the level of adoption of online shopping does not always reflect the level of online spending. For example, North America has one of the highest online spending rates per person, while the overall penetration of online buyers is relatively low compared with other markets. Along similar lines, Asian e-commerce giants such as Japan and South Korea are climbing the levels in online spending because of improved access through technology and wider selection of online stores. Altogether, the market potential is huge with increasing Internet penetration levels. Along with penetration, localization strategy also supports online retail Traditionally, there was a tendency among online retailers in terms of not changing content according to local requirements and languages. This strategy had its disadvantages in terms of repelling customers who were not comfortable with the English language and standard layout across the globe. It catered largely to English-speaking markets. Today, however, online retailers are adopting the strategy of "localization", 1 Forrester Research, September 2010 i.e. Web sites with local languages along with regional customs — even if with a small amount of content at first. These retailers are better equipped to take the advantage of an increasingly diverse global online user base than their counterparts with English-only Web sites. It is worth noting that there is a strong preference for locallanguage content in European markets such as France, while more than 95 percent of online users indicate a preference for local-language content in Asian markets such as Japan and Korea 2 . Even though localization strategy is being adopted by the global retailers, a lot still needs to be done. For example, while 5 percent of the global population speaks Arabic, just 1 percent of online content is estimated to be available in the language. Similar to local language preference, customer behavior and expectations also vary across countries. More customized online strategy is required for the regions such as the Middle East or Latin America. Indeed, companies have started operating localization initiatives such as IP mapping techniques to localize prices, directing customers to local stores with products on display in the local language and having a local office in the country. Strategies of localizing content and understanding online customer behavior and preference are likely to boost online sales. With all these inhibitors, in the long run, the keen interest in the Web in the post-recession economy and the growth spurt in Web-related technology will continue to drive the growth of the online retail segment, subject to the online business innovations by e-retailers. With its clear price advantage over the bricks-and-mortar channel, online retail will become more attractive to recession-hit shoppers. By 2014, global online retail sales are expected to be $778.6 billion USD 3 , increasing at a CAGR of 22.2 percent. The major regions such as US and Western Europe are forecast to reach $248.7 billion USD and $158.5 billion USD by 2014, respectively 4 . 2 Asia Pacific Technographics Survey, Q4 2009 3 Data monitor, July 2010 4 Forrester Research, March 2010 IMAP’s Retail Industry Global Report — 2010: Page 4
Transformation in online retail Post recession, online retail industry has undergone a fundamental shift in the way it performs and operates. Developments such as smart shopping and smart store, multichannel retail, financial analytics in e-commerce, cross-border online purchases, influence of social media on retailers and globalization in non-US markets have all changed online retail. New Developments in E-commerce Social Computing Globalization Multiple Devices Multiple Business Models User-generated Content Multiple Channels Enterprise Integration Today’s E-commerce Solutions More & Rich Content Personalization Product Discovery Saas Point Solutions RIAs Data, More Data Optimization Post recession, consumers believe in smart shopping and smart-store theme Since the recession, consumers have changed their buying habits dramatically. According to a survey on US consumers 1 , 76 percent have changed their spending style due to the recession and 43 percent report that their spending style will remain unchanged post recession. Customers are making informed purchasing decisions, keeping retailers on their toes to provide enhanced shopping facilities and precise information. As a matter of process, customers collect all sufficient information about product features, prices, warranties, availability and environmental impact and then compare these with competitors’ products, before purchasing. More time is spent researching on the internet about the products they wish to purchase. To boost sales and enhance customer satisfaction, retailers are coming up with innovative techniques—revamping stores, establishing new retail formats and adopting online and social media to promote/sell products. To address this, Banana Republic opened a concept store in 2009. Further, Marsh’s efforts to revamp its store formats over the past two years is a significant move away from the chain’s traditional approach, where all stores sported similar layouts and displayed the same basic product mix. Using psychographic, demographic and transactional data, Marsh teams adjusted foot traffic patterns to give shoppers more options on how to navigate the stores. With this, most categories saw 7-10 percent growth. Retailers are also becoming more technologically sophisticated with in-house (possible competitive advantage) and outsourced (lower price) solutions. Some retailers are 1 Survey conducted by comScore, July 2010 Source: IEA and IPCC, IMAP IMAP’s Retail Industry Global Report 2010: Page 5 also tapping into emerging technologies such as radio frequency identification (RFID) tags and virtual shopping, in which consumers "shop" in a simulated store online and record displays that capture their attention. The combination of traditional and emerging research approaches is giving companies a better perspective of shoppers’ behavior. Multi-channel retail emerging — bricks, clicks and catalogs are creating synergies Along with the smart-store concept, on the retail format front, most retailers have started adopting multi-format strategies, i.e., along with traditional retail stores, establishing online stores, catalogs, mobile stores and convenience stores to gain a competitive edge and expand their customer base. With slowing demand, retailers are inevitably finding themselves having to compete much harder against their rivals to achieve previously accustomed levels of growth. With the market maturing and customer penetration level saturating, targeting the right customer becomes essential. Also, new players such as Gap, Zara and H&M in the market will further increase the competition. At present, multi-channel retailers are outperforming their pure-play rivals, as they are able to provide greater convenience through services such as "click & collect" along with strong brand affiliation. Multi-channel Retail Strategy Catalog Store Online Mobile Another factor that is promoting multi-channel retailing is consumer tendencies to mix channels during their purchasing drive with a very particular way of choosing the product they want, where they want it, how they want it and with a variety of delivery options. According to a consumer survey 2 , 78 percent of respondents in the US have used two or more retailing channels and 30 percent have used three or more channels to research and then finally make their purchases. Thus, the demand for an excellent customer experience across channels is compelling retailers to integrate their multi-channel operations. Retailers need to work on preventing a fragmented shopping experience and allow shoppers to both research and 2 Survey by commerce solution provider ATG, December 2009 Browse Buy Buy Return Source: Ovum Research, IMAP
Page 1 and 2: An IMAP RETAIL Report Retail Indust
Page 3 and 4: Contents R E T A I L I N D U S T R
Page 5: Global recession hit retail hard Th
Page 9 and 10: Social media takes retailers to soc
Page 11 and 12: HOT Investment Opportunities Change
Page 13 and 14: Appendix A: Global overview of reta
Page 15 and 16: Thumbnail summaries of top 50 retai
Page 17 and 18: 12: Rewe-Zentral AG. (Germany)** Br
Page 19 and 20: 23: Centres distribeutrs E. Leclerc
Page 21 and 22: 34: Casino Guichard-Perrachon S.A.
Page 23 and 24: 45: Migros-Genossenschafts Bund. (S
Page 25 and 26: Thumbnail summaries of retail activ
Page 27 and 28: 12: The Netherlands Online Penetrat
Page 29 and 30: Summary of transactions 1 in the re
Page 31 and 32: 6: Dufry AG / Dufry South America A
Page 33 and 34: Appendix D: Niche focus areas M-Com
Page 35 and 36: Cross-border M&A requires local kno

Retail Industry Global Report — 2010 - Ascendant Capital Advisors

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