Geoff O’Neill

Woolworths
Retail Week Conference
Achieving Multi-channel Integration in Retail

22nd June 2006

1 Winner of 2006 Best Customer Touchpoint System in the World. © Copyright IBM Corporation 2006

Agenda

ƒ Introduction and background

ƒ Why Multi Channel Retailing?

ƒ Yesterday, today and tomorrow….

ƒ Woolworths approach

ƒ Challenges

ƒ Next steps & summary

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Background

ƒ UK based retailer focused on the

Home, Family and Entertainment

ƒ 821 stores across UK

ƒ 2005 Turnover £2.25bn

ƒ Average 6,500,000 transactions per

week

ƒ Appeals to value conscious

customers

ƒ Making families smile

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Background

ƒ FWW’s principles still apply

ƒ Offer a great range

ƒ Price it clearly

ƒ Keep it available

ƒ Give quick service

ƒ Keep things simple

ƒ www.woolworths.co.uk in 1999

ƒ Relaunched 2004 with full general

merchandise range

ƒ Fulfilment outsourced to Zendor

ƒ 400,000 products online...CD’s,

DVD’s, Toys, Home, Clothing,
Electricals………cars!!!!

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Sofa………so good……..

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What is Multi Channel Retailing?

ƒ Driving the business to deliver greater value to customers

………..giving customers what they want…how and when they want it

ƒ MCR is a competitive imperative…..

……...but few companies are fully realising the potential opportunity

ƒ The primary goal is to drive greater and more profitable revenue growth
……...and to meet customers every changing needs

ƒ The true benefits of come from cross-channel optimisation

ƒ Requires changes to the customer experience and the operating model

ƒ Must address organisational, process & technology issues

ƒ It is a long journey

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 Why MCR?

ƒ Have easy access to product information, cost and price

Customers ƒ Less loyal to any given retailer
ƒ Want to buy when and how it is convenient to them
ƒ Cash-rich, time-poor

ƒ Competitors are rapidly developing new channel solutions

ƒ Responding to customer demands
Competitors
ƒ Demands are changing and increasing
ƒ Use faster channels to test new products

ƒ Without a cohesive multi-channel offer sales and profit

opportunities will be missed
Profit & Revenue
ƒ Customers who buy across all channels spend substantially
more, are more loyal and spend more frequently

Multi-channel retailing is about exposing your product

to the risk of sale in ways that suit the customer

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Multi-Channel Retailing Drives Additional Revenues

Increased Improved Greater

Better Cross-
Customer Conversion Share of
sell & Up-sell
Loyalty Rate Wallet

Purchase Frequency Level of Cross-Buying Total Spent Over Relationship

5 5 $35
Avg. Revenue ($K)

$30
# of Occasions

4
# of Categories

4
$25
3 3 $20

2 2 $15
$10
1 1
$5
0 0 $0
R C I R C I R C I
R+C
R+C
R+C

R+C+I
R+C+I

R+C+I
C+I
R+I

R+I
C+I
R+I
C+I

Single Dual Tri Single Dual Tri Single Dual Tri

Channel Channel Channel Channel Channel Channel Channel Channel Channel

$75-90 Additional spend by REI’s online buyers when they collect orders in-store
$900 JC Penney’s annual revenue from a tri-channel customer
- $150 for single channel and $450 for dual-channel customers
25-30% Sales lift in Williams-Sonoma stores for catalogs mailouts

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Why MCR is right for Woolworths

We have only begun to scratch the

surface….

ƒ2003 market test

ƒ2004 Call Centre and Web sales only
ƒ2005 Digital download service launched
ƒ2005 Offshore solution for entertainment
products
ƒ2005 Introduced In Store Ordering
ƒ2006 introduced Kiosks including the first
non- Woolworths site
ƒ2007…………in store collection?

2003 2004 2005 2006 plan

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Woolworths approach

Stage 4:
Optimise
Operating
Stage 3: Model
Leverage
Across ƒ Optimise resource
Channels allocation at
Stage 2: enterprise level
Achieve ƒ Exploit
Proficiency channel-specific ƒ Achieve permanent
Stage 1: capabilities and repeatable cross-
Align ƒ Become adept channel processes
Fundamentals ƒ Drive
at foundational cross-channel
Stage 0: activities
Create ƒ Ensure basic collaboration
Presence value propositions ƒ Integrate key
are in sync (e.g., customer-facing
ƒ Get up and assortment, processes
running in new pricing)
channel (s)
Woolworths
beginning to see
benefits of
leverage

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Today: Web

ƒ Website offer across multiple

categories

ƒ 400,000+ Entertainment SKUs

ƒ Half of which Digital
ƒ Core WW range of c5000 items

ƒ Further c5000 Direct range

extensions from c50 Direct suppliers

ƒ Supported by Call Centre and order

taking

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Today: In Store Ordering

ƒ Colleague assisted sale

ƒ All tills touch-screen
ƒ Browser interface
connecting over WAN to
web-servers
ƒ Really simple for 10,000s
of staff, many of whom
are temps
ƒ Big buttons for fat
fingers!
ƒ Payment by cash or
credit card
ƒ Staff discount –
encourages ‘evangelism’

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Today: In Store Ordering…continued

ƒ Product information detail

page

ƒ Highlights key offers

ƒ Availability info as per web

ƒ Till screens can be ‘swivelled’

at this point to allow
customer to see

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Today: ISO…continued

ƒ Promoted by in store signage

ƒ Catalogues
ƒ And product teasers…

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Using ISO to optimise availability

ƒ Widespread availability of high

ticket merchandise without the
stock risk
ƒ All stores have access to smaller
buys
ƒ Stores have access to ranges
not ranged for their store
ƒ First store in stock….last store
out of stock

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Tomorrow: Kiosk

ƒ Brand new! In process of being

rolled out to stores
ƒ 1st non- Woolworths “off-site” store
ƒ Browser based, so again using
same technology as web/ISO
ƒ Integrated card swipe
ƒ Cash option to follow
ƒ Order acknowledgement slip
printed

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Kiosks

POS inserts ƒ Touch screen operated

ƒ Plays video to attract people
ƒ Explains the offer and range
ƒ Touch the screen to activate

Touch
•Scanner ƒ Three ways to shop
screen
•Card slot ƒ Hot deals and offers
•Printer ƒ Search by name or product number
ƒ Browse by department

ƒ Accepts payment by card and prints a

receipt
Kick bar
ƒ Cash option to follow
(protector)

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What we’ve got right…….

ƒ Build once, use many times
ƒ common tools for the till (ISO), kiosk and web
ƒ browser based approach

ƒ Common business platform for all channels

ƒ product catalogue
ƒ payment processing/fraud management
ƒ customer services & fulfilment

ƒ Cash as a payment method important

ƒ about 30% of ISO sales cash- mostly incremental

ƒ Set & manage customers’ expectations

ƒ provide clear guidance about expected delivery dates
ƒ communicate via calls/SMS/email

ƒ Allow simple customer service actions in store

ƒ Where’s my order look-up (any channel)
ƒ Accept web returns in store

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Multiple ways to order….one view of the Product

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Multiple ways to order….one view of the customer

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 Multiple Channel Retailing….Store is the Key to it all

21 Winner of 2006 Best Customer Touchpoint System in the World. © Copyright IBM Corporation 2006
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How Can You Achieve an MCR Offer?

Key Success Factors
ƒLeverage your brand
Optimised Model ƒBuild around your store proposition
Maturity Level ƒIntegrated MCR
Current Retail ƒThe Digital supply chain
Maturity Level Stage 4:
Optimize
Operating
ƒExplaining the range proposition
Stage 3: Model
Leverage
Across
– Find the categories that work well
Channels
Stage 2:
Achieve
– Economics do not work on low price
Proficiency
Stage 1: items
Align

Stage 0:
Fundamentals
ƒ Optimize resource
ƒ Cultural and organisational change
Create
ƒ Exploit allocation at
Presence
ƒ Become adept channel-specific enterprise level – internal resistance Integrated teams
ƒ Ensure basic at foundational capabilities ƒ Achieve permanent
ƒ Get up and value propositions activities ƒ Drive and repeatable cross-
channel processes
– all functional, commercial teams thinking
running in new are in sync (e.g., ƒ Integrate key cross-channel
channel(s) assortment,
pricing)
customer-facing collaboration multi-channel
processes
– no separate channel teams / P&Ls

22 Winner of 2006 Best Customer Touchpoint System in the World. © Copyright IBM Corporation 2006

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Summary

We have showed you a very quick view of current direct activity

ƒ web
ƒ ISO till ordering
ƒ kiosk

We’ve been successful

ƒ significant (incremental) sales
ƒ growing very fast

Full integration with core business was our biggest challenge (and still is)

Making combined MCR proposition work for customers, shareholders and staff

We’re nearer the beginning of the journey than the end

23 Winner of 2006 Best Customer Touchpoint System in the World. © Copyright IBM Corporation 2006

Thank you for listening

Geoff O’Neill

Many thanks to
and

for their assistance in preparing this presentation

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