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Perspectives on
retail and
consumer goods
Editor
Monica Toriello
Contributing Editors
Norah Ferry, Caitlin Gallagher,
Eileen Hannigan
Art Direction and Design
Shoili Kanungo
Editorial Production
McKinsey.com
professional advisers.
Managing Editors
Michael T. Borruso,
Venetia Simcock
Cover Illustration
Keiko Morimoto
McKinsey Practice Publications
Editor-in-Chief
Lucia Rahilly
Executive Editors
Allan Gold, Bill Javetski,
Mark Staples
Perspectives on
retail and consumer goods
12
22
28
Foreword
In need of a retail
turnaround?
How to know and what
to do
Building capabilities
in digital marketing
and sales:
Imperatives for consumer
companies
36
42
48
52
59
A multifaceted future:
The jewelry industry
in 2020
The retailer as
technology company
How to mobilize
20,000 people
About McKinsey
capabilities
The design-to-value
approach can help
consumer-goods companies boost sales and
profitabilitybut rolling
it out across an entire
product portfolio is no
easy task.
72
74
Contributors
Regional contacts
Foreword
of this journal.
Peter Child
Director, London
Sandrine Devillard
Director, Paris
More than 50 retailers in Europe, the Middle East, and Africa have been in
distress since the global financial crisis, and many are in distress today. Some are
in denial about their situation; others are busy fixing the wrong problems.
Peter Breuer,
Thierry Elmalem, and
Chris Wigley
to as a distressed turnaround.
and taxes.
Keiko Morimoto
Exhibit 1
Stage 1: Wake up
People
Customer focus
Colleague
engagement
Customer
insights
People
leadership
Marketing
and digital
Range, pricing,
and promotions
Information
technology
Customer proposition
Private-label
development
Supply
chain
Infrastructure
Network
and property
management
Supplier
management
Multichannel
operations
Store operations
and organization
Operations
Merchandising
Exhibit 2
4
1
2
3
Wake up
t Examine total return to shareholders and
business performance
t Bear in mind that 15% of large companies
are in distress at any given time
Make it stick
t Appoint a chief restructuring ofcer
t Create a "control tower"
all.3
and eort.
do a diagnostic.
nothing changes.
sitting in meetings.
couple of levels.
Property costs
As sales migrate online, a legacy store network
Supplier funding
(Exhibit 3).
Exhibit 3
rst place.
Ease of
lease exit
Hard
High
Low
Protability (multiyear view)
10
11
beyonda turnaround.
The authors would like to thank Graham Biggart and Agnes Krygier for their contributions to this article.
Peter Breuer is a director in McKinseys Cologne office, and Thierry Elmalem is a principal in the London office,
where Chris Wigley is an associate principal. Copyright 2013 McKinsey & Company. All rights reserved.
12
Nicol Galante,
Cdric Moret, and
Remi Said
13
Keiko Morimoto
Exhibit 1
overall strategy
Digital media can affect every part of the consumer decision journey.
t Shop
t Catalog
sales
t Telesales
t Web
sales
sales
t Merchandising
t Mobile
Brand touchpoints
Active evaluation
Information gathering/shopping
Initial
consideration
set
Television
Radio
t Print
t Coupons
t Sampling
t Display/banners
t E-coupons
t Viral videos
t
Loyalty loop
Trigger
t Telephone
t Subscriptions
Moment of consumption
response.
2E-customer-relationship
t Newsletters
t E-CRM2
t Digital
Brand touchpoints
Social media
1Quick
Moment of
purchase
management.
help lines
14
of digital activities.
Hire experts to oversee strategic activities
Integrating digital activities into the broader
in-house
new skills
in-house.
Building capabilities in digital marketing and sales: Imperatives for consumer companies
15
to outsource.
should be creative about building digital capabilities more broadly among current sta. An
are organized
advertising spender.1
or clickstream tracking).
16
Exhibit 2
Local teams
t Centralteamperformsdigital
t$FOUSBMUFBNEJTTFNJOBUFTCFTU
t Localmarketsarefully
Structure
Roles
tasksonthegrounE
Pros and
cons
tDeepknowledgedevelopment
Examples
tSearcIFOHJOFNBSLFUJOH
QSBDUJDFTBOEHVJEFMJOFT
t-PDBMTUBGGJTSFTQPOTJCMF
GPSFYFDVUJPO
responsibleforactions
tobedone
tCombinationofcentralexpertise
t Closeandfasttomarket,
andguidelineswithlocal
execution,butenforcementof
guidelinesremainsachallenge
(blendedresponsibility)
butunevendeliverydue
tolittlecoordination
withincenterofexcellence,
butonlyapplicablewhenlocal
differencescanbeignoreE
tSocialmedia
t CustomerTFSWJDF
each brand.
2 The Consequences of
Building capabilities in digital marketing and sales: Imperatives for consumer companies
go as planned.3
17
organizational readiness.
distinct ways.
1
of Gatorades websites.
Building capabilities in digital marketing and sales: Imperatives for consumer companies
19
performance
least semiannually.
and learning
value of social-media
buzz.5
Modeled on the
20
Exhibit 3
Dene measurable
digital metrics
Display
advertising
Search
Social
1Based
2Gross
Ad impressions
1%
Clicks
3%
Search volume
5%
Search visibility
3%
Impressions
4%
Clicks
5%
Number of friends/followers
0%
Buzz volume
2%
Engagement
2%
Sentiment
4%
Social GRP2
6%
on marketing-mix modeling.
rating points.
Statistical
signicance1
High
Selected for dashboard
Building capabilities in digital marketing and sales: Imperatives for consumer companies
21
Nicol Galante is a director in McKinseys Paris office, where Remi Said is an associate principal; Cdric Moret
is a principal in the Geneva office. Copyright 2013 McKinsey & Company. All rights reserved.
22
23
Toko Ohmori
Smart sourcing
Exhibit 1
1. Value proposition
Fruits
and
vegetables
Meat
and
poultry
Baked
goods
Dairy
Fish
2. Merchandising
4. Store processes
Cold cuts
and
cooked meat
24
25
Exhibit 2
Price of banana
Supplier 1
Supplier 4
Supplier 7
Supplier 2
Supplier 5
Supplier 8
Supplier 3
Supplier 6
Supplier 9
Market price
(without transport)
1.4
24%
1.2
35%
1.0
27%
0.8
0.6
0
8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52
Week of purchase
26
Shrinking shrinkage
of shelf space.
Fact-based ordering
current stock levels in the store. Some freshdepartment managers place orders for the next
27
shrink levels.
The authors thank Yvonne Fahy, Daniel Lubli, Laura Meyer, and Andreas Moosdorf for their contributions to this article.
Raphael Buck is a principal in McKinseys Zurich office, and Arnaud Minvielle is a principal in the Paris office.
Copyright 2013 McKinsey & Company. All rights reserved.
28
Kasper Rorsted has been head of the global manufacturing company since 2008.
Here, he discusses Henkels growth plans, what it takes to hire good people,
and how he fosters dialogue with customers and employees.
Klaus Behrenbeck
15 billion
McKinsey: $VDQRQ*HUPDQDQGWKHUVW
that change?
29
Keiko Morimoto
our production capacity in one of our fastestgrowing emerging markets :e will continue to
number to be 0 percent
emerging markets?
of Henkels sales.
30
mature markets?
product line.
31
Get the strategy and the team right: An interview with the CEO of Henkel
Kasper Rorsted
Vital statistics
Born February 24, 1962,
in Aarhus, Denmark
Career highlights
Henkel
(2008present)
CEO
Compaq
(200102)
Vice president and general
manager, EMEA
(200708)
Vice chairman of the
management board
(19952001)
Various management
positions, including head
of EMEA enterprise
business group
(200507)
Executive vice president
of HR, purchasing, IT, and
infrastructure services
Hewlett-Packard
(200204)
Senior vice president and
general manager,
Europe, Middle East,
and Africa (EMEA)
Fast facts
Serves on the boards of
international media
conglomerate Bertelsmann
and Denmark-based
industrial company Danfoss
consumer insights?
in their stores
more deeply
32
business partners
visit households
Get the strategy and the team right: An interview with the CEO of Henkel
33
uniTue opportunities
series of workshops
home countries
attractive employer
34
our strategy
Get the strategy and the team right: An interview with the CEO of Henkel
35
for implementation
Klaus Behrenbeck is the leader of McKinseys Retail and Consumer Packaged Goods practices in Europe, the Middle
East, and Africa. He is a director in the Cologne office. Copyright 2013 McKinsey & Company. All rights reserved.
36
A multifaceted future:
The jewelry industry in 2020
The trends that have unfolded in the apparel sector over the last three decades
appear to be playing out in the jewelry sector, but at a much faster pace.
Linda Dauriz,
Nathalie Remy, and
Thomas Tochtermann
each year, totaling 250 billion by 2020. Consumer interviewed 20 executives at global ne-jewelry
appetite for jewelry, which was dampened by the
than ever.
agile competitors.
to prepare.
Toko Ohmori
37
industry consolidation
global business.
Growth of branded jewelry
We expect jewelry to follow a similar path. Today,
38
Exhibit 1
10
Branded
Unbranded
13
19
19
20
30
40
90
87
81
81
80
60
70
2003
2005
2007
2009
2011
2020E
coming designers.
39
Exhibit 2
The channels that are gaining share in jewelry are also winning
in apparel.
Jewelry trends, 201320
Multibrand
boutiques
Department
stores
Online
shops
Other
40
wear yellow.
per year.
41
logistics providers.
The authors wish to thank Ewa Sikora for her contributions to this article.
Linda Dauriz is a principal in McKinseys Munich office, Nathalie Remy is a principal in the Paris office, and
Thomas Tochtermann is a director in the Hamburg office and the leader of McKinseys Apparel, Fashion,
and Luxury Group in Europe. Copyright 2013 McKinsey & Company. All rights reserved.
42
The design-to-value approach can help consumer-goods companies boost sales and
profitabilitybut rolling it out across an entire product portfolio is no easy task.
Sren Fritzen,
Heiko Nick, and
Jan Wllenweber
percentage points.
43
Keiko Morimoto
at scale
Cross-functional governance
program goals are set; it can also hinder implementation. Without an overarching agenda or
be implemented.
44
45
on photographs.
product positioning.
to work on DTV.
46
selected products.
47
previous year.
sequentially or in parallel.
daily activities.
The authors wish to thank Guido Baier and Daniel Rexhausen for their contributions to this article.
Sren Fritzen is a director in McKinseys Copenhagen office, and Heiko Nick is an associate principal in the
Cologne office, where Jan Wllenweber is a director. Copyright 2013 McKinsey & Company. All rights reserved.
48
In this article, adapted from their recently published book, Reshaping Retail, the
authors assert that digital technology must be at the center of every retail organization.
Marco Catena,
Stefan Niemeier, and
Andrea Zocchi
4
Toko Ohmori
50
5
This article is adapted from the introduction of the authors book, Reshaping Retail: Why Technology is Transforming
the Industry and How to Win in the New Consumer-Driven World (John Wiley & Sons, August 2013).
Marco Catena is an associate principal in McKinseys Milan office, where Andrea Zocchi is a director; Stefan
Niemeier is a director in the Hamburg office. Copyright 2013 McKinsey & Company. All rights reserved.
52
Retailers that lean out their store operations often find that store employees soon
revert to oldand less efficientprocesses. Heres how to make new behaviors stick.
Stefan Grgens,
Steffen Greubel, and
Andreas Moosdorf
to percent of storetransformation
Toko Ohmori
53
them entirely.
to eect change.
Exhibit 1
Phase
0
26
Members of
project team
Duration
(weeks)
Description
Setup of project
16
In-store diagnostics
Validation of observations
through workshops
51
~200
27
74
12
Development of target
concept and rollout strategy
t Structured review with
key stakeholders
t Proof of concept
~2,400
74
~24,000 74
35
Preparation of implementation
Training of coaches
Project kickoffs with all levels
of organization
54
55
Exhibit 2
1
Reinforce with formal
mechanisms
Mind-set
and behavior
change
Invest in capability
building
56
predened targets?).
not only what the new processes are but also why
5
Exhibit 3
4
Does it look
correct?
Storage
other stores.
Additionally, assessment and evaluation are an
7raining sessions should be fairly small to allow
58
Some of these practices may sound timeconsuming, but in our experience, rolling out
lean operations to a network of hundreds of
Stefan Grgens and Andreas Moosdorf are associate principals in McKinseys Cologne office; Steffen Greubel
is a principal in the Berlin office. Copyright 2013 McKinsey & Company. All rights reserved.
59
59
60
Exhibit
Ready-made meals
20
So Paulo
12
Rio de Janeiro
Belo Horizonte
Porto Alegre
<1
110
42
115
63
125
80
35
Brazil
Source: Brazil Cityscope Navigator
90
180
120
Western
Europe
75
Brazil
160
Western
Europe
61
61
Brazil is divided into more than 500 microregions, which are legally defined administrative areas made up of groups of municipalities. Our Brazil Cityscope Navigator database
contains information on these microregions as well as on more than 5,500 cities in Brazil.
Advanced analytics and commercialperformance solutions can help consumergoods manufacturers and retailers capture
and sustainhigher returns through better
pricing, promotions, and assortment.
Data-driven promotions
Many companies promotional strategies
are based on theories rather than data.
Its therefore not surprising that despite
CPG companies aggressive spending on
promotions (now generally between 15 to 25
percent of net sales), sales volume has grown
at a lower rate than promotional spend. Using
big data effectively, especially in promotiondriven categories, can help companies boost
returns on their trade investment.
A leading beverage company historically
launched intense promotions every holiday
season, even though there was little evidence
that they worked. The company couldnt accurately measure promotion effectiveness, in
part because many of its promotional activities
were conducted over a short time period or
overlapped with one another, making it difficult
to isolate the impact of any single activity.
McKinsey Solutions are packages of data, analytics, tools, and services that channel McKinsey knowledge and provide a clear view of complex business problems. For more, visit
solutions.mckinsey.com.
63
63
65
65
Exhibit
A heat map can inform the sales teams growth plans and priorities.
LOMEX
X Sales Advisor sample output (illustrative)
Market potential
Very high
Medium
High
Low
Zip codes
Zip-code info
Zip-code group
POS
Other types off POS
Shopping malls
Airports
Train stations
Seaports
Large companies
Automobile clubs
Car rentals
Motor-bike traders
Truck dealers
Bus terminals
Exhibition centers
Parking
67
67
Exhibit
In 2nd quartile
Below median
Filling-line speed
Maximum output (thousand production
units) per lling line and year
45
OEE1 (lling line)
%
69
75
28
22
28
26 30
31
29
80
69
60
40
54
40
28
42
40
22
20
643
591
38
388
282
253
355
422
276
nt
nt
Pla
Pla
D
nt
Pla
nt
Pla
nt
Pla
ile
nt
nt
D
Pla
nt
E
Pla
nt
F
nt
Pla
nt
Pla
A
nt
art
28 28
To
p
qu
22
21
20
Pla
19
dia
art
35
32
Me
Pla
Line manning
Production staff per lling line per day
qu
50
Me
dia
71
55
Me
dia
n
To
pq
ua
rtile
Pla
nt
A
Pla
nt
B
Pla
nt
C
Pla
nt
D
Pla
nt
E
Pla
nt
F
51
To
p
70
41
Pla
77
ile
62
1Overall
equipment efficiency.
68
What is COBI?
The Consumer Operations Benchmarking Initiative (COBI) is a proprietary database and
methodology that consumer-packaged-goods companies can use to benchmark their production
processes and facilities against those of direct and indirect competitors. The COBI database contains
data on more than 120 plants worldwide, operated by both brand-name manufacturers and
private-label producers. Data on each plant include metrics on cost, capital, productivity, quality,
and flexibilityin total, more than 100 key performance indicators. Currently, COBI covers five
product categories: home and personal-care liquids, laundry detergent, skin-care products, milk
powder, and milk (including condensed milk). By 2014, COBI categories will include pasta, sauces,
drinks, rice, and confectionery.
70
70
Exhibit 1
SEO1/SEA2
SEO
Traditional retailer
SEA
Brand
Pure Internet
12
52.3
40
42
18
July/Aug
Shows market attractiveness
via volume off trafc
24
Online services
6
58
Market maturity
Number off new players
in top 100
SEO
Top 10
SEA
22
July/
Aug
July/
Aug
Displays appeal
off market entry
Search-trafc share,
%
Top 3
SEO
SEA
2 pp
0 pp
44
42
42
42
May/
June
July/
Aug
May/
June
July/
Aug
SEO
SEO
0 pp
24
May/
June
0 pp
0 pp
24
23
23
2.4
July/
Aug
May/
June
July/
Aug
May/
June
2Search-engine
optimization.
advertising.
2.4
July/
Aug
Illustrates market
maturity via price level
SEA
SEA
71
71
Exhibit 2
Search-traffic share3
%
Search-traffic share3
%
14
14
12
12
10
10
Amazon
Otto
Baur
IKEA
6
eBay
Otto
IKEA
6
Amazon
bonprix
2
Heine
bonprix
Living 24
0
25 20 15 10 5
Zalando
Schwab
10
15
20
25
40
20
Search-traffic growth
%, vs. previous periods share
20
40
60
80
100
Search-traffic growth
%, vs. previous periods share
1Search-engine
optimization.
advertising.
of search traffic among top 100 players; partial list of the top 10.
2Search-engine
3Share
72
Contributors
Editorial-board member
External contributor
Thomas Bauer
Senior expert
Munich
Klaus Behrenbeck
Director
Cologne
Peter Breuer
Director
Cologne
Raphael Buck
Principal
Zurich
Marco Catena
Associate principal
Milan
Peter Child
Director
London
Linda Dauriz
Principal
Munich
Sandrine Devillard
Director
Paris
Karel Drner
Principal
Munich
Brian Elliott
CEO, Periscope
New Jersey
Thierry Elmalem
Principal
London
Sren Fritzen
Director
Copenhagen
Nicol Galante
Director
Paris
Stefan Grgens
Associate principal
Cologne
Steffen Greubel
Principal
Berlin
Carina Kauter
Associate principal
Frankfurt
Udo Kopka
Director
Hamburg and Shanghai
Shruti Lal
Specialist
Chicago
Arnaud Minvielle
Principal
Paris
73
Andreas Moosdorf
Associate principal
Cologne
Cdric Moret
Principal
Geneva
Heiko Nick
Associate principal
Cologne
Stefan Niemeier
Director
Hamburg
Jesko Perrey
Director
Dsseldorf
Nathalie Remy
Principal
Paris
Daniel Rexhausen
Associate principal
Stuttgart
Stefan Rickert
Principal
Hamburg
Kasper Rorsted
CEO
Henkel
Jrgen Rugholm
Director
Copenhagen
Remi Said
Associate principal
Paris
Frank Snger
Principal
Cologne
Markus Schmid
Principal
Munich
Dennis Spillecke
Principal
Cologne
Thomas Tochtermann
Director
Hamburg
Tobias Wachinger
Principal
Munich
Anja Weissgerber
Specialist
Berlin
Chris Wigley
Associate principal
London
Jan Wllenweber
Director
Cologne
Andrea Zocchi
Director
Milan
74
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