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Club Change Drivers & Supplier Responses: Where’s the Work? Presented by: Sara Altukhaim Director Club Change Drivers & Supplier Responses: Where’s the Work? Presented by: Sara Altukhaim Director US Club Channel Webinar

Copyright © 2014 Kantar Retail. All Rights Reserved. 501 Boylston Street, Suite 6101, Boston, Copyright © 2014 Kantar Retail. All Rights Reserved. 501 Boylston Street, Suite 6101, Boston, MA 02116 (617) 912 - 2828 howard. [email protected] com No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photography, recording, or any information storage and retrieval system now known or to be invented, without the express written permission of Kantar Retail. The printing of any copies for back up is also strictly prohibited. Disclaimers The analyses and conclusions presented in this seminar represent the opinions of Kantar Retail. The views expressed do not necessarily reflect the views of the management of the retailer(s) under discussion. This seminar is not endorsed or otherwise supported by the management of any of the companies covered during the course of the workshop or within the following slides. © Copyright 2014 Kantar Retail

Agenda • Club Suppliers: Benchmarks & Best Practices • Club Shoppers: The Online Club Agenda • Club Suppliers: Benchmarks & Best Practices • Club Shoppers: The Online Club Shopper © Copyright 2014 Kantar Retail 3

Overview: Online Survey of 52 Club Suppliers Fielded Feb – Mar 2014 Company’s Annual Overview: Online Survey of 52 Club Suppliers Fielded Feb – Mar 2014 Company’s Annual Global Sales Volume (USD) Total = 52 23% 15% 0 m $1 0 8% < i $5 llion $10 00 0 t m o < mi lli $ illi on 500 on $1 m b to > i illi $5 on $1 ll. . . b illi to billi $1 < o o 0 n t $5 n o bi b llio <$ illio $2 0 n t 10 n o bi b llio <$ illio 2 n n to 0 b < i $5 llio 0 n >$ billi 50 on b illi on 4% 6% 15% 14% Club Product Departments Edible Dry Grocery Health and Beauty Care (HBC) General Merchandise Frozen Non-edible Dry Grocery Pharmacy Baby/toddler Dairy Pet Toy Behind the Counter OTC Deli Meats Beer/Wine/Spirits Consumer Electronics Non-Alcoholic Beverages Produce Other Total Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) 43% 25% 21% 18% 16% 14% 11% 7% 5% 5% 5% 2% 2% 2% 44 © Copyright 2014 Kantar Retail 4

Overall Growing Importance Attributed to Club How has club importance to your company changed Overall Growing Importance Attributed to Club How has club importance to your company changed over the last year? Less Important No Change More Important 34% 63% 59% 57% 35% 2% Club channel 35% 6% 7% 9% Costco Sam's Club BJ's Wholesale Total=52 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 5

Clubs Rank #2 – Up from Last Year Most Important = 8 Channels Ranked Clubs Rank #2 – Up from Last Year Most Important = 8 Channels Ranked by Order of Importance to Company's Business Volume Rating Average 7. 4 Mass Warehouse Club 6. 1 Grocery 6. 0 4. 8 Value Discounters 4. 5 Chain Drug 4. 0 Convenience Online (Non-Store) Retailers Category Specialists 3. 8 3. 2 Least Important = 1 Total=52 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 6

Club Team Structures: Who Does Your Club Team Report Into? Costco Sam's Club BJ's Club Team Structures: Who Does Your Club Team Report Into? Costco Sam's Club BJ's Wholesale 22% 36% 43% 57% 64% 35% Total=39 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 7

More Resources Overall Devoted to Costco Of the staff dedicated to your company's [Club] More Resources Overall Devoted to Costco Of the staff dedicated to your company's [Club] team, which of the following roles are represented? (select all that apply) 100% Sales/Customer Management Finance 50% Marketing Supply Chain 60% 73% 70% 65% 60% 53% 65% 40% Consumer/Shopper Insights Other 77% 53% Category Management Data Management/IT 70% 47% 42% 7% BJ's Wholesale Sam's Club Costco 67% 30% 19% 8% Costco=26, Sam’s Club=15, BJ’s Wholesale=10 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 8

Club Team Investments Vary Widely by Retailer Internal resources added versus prior year Team Club Team Investments Vary Widely by Retailer Internal resources added versus prior year Team Head Count 83% New Positions 81% Funding/Financial Resources 74% Product Development 72% Senior Management Buy-In 38% Senior Management Buy-In 72% New Capabilities 24% Funding/Financial Senior Management Resources 71% Buy-In 72% New Capabilities 71% Product Team Head Count 33% Development 69% New Capabilities 65% New Positions 25% No Resources Gained 53% Gained 58% Funding/Financial Resources 23% Product Development 21% Team Head Count 8% New Positions 6% No Resources Gained 68% Total=43 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 9

Satisfaction with Club Business How satisfied are you with the success of your [Club] Satisfaction with Club Business How satisfied are you with the success of your [Club] business within your company today? 74% 18% e b es al lu W ho l Strongly decreased Somewhat decreased Stayed the same Somewhat increased Strongly increased BJ 's es al Extremely satisfied 27% 13% 4% W ho l Somewhat satisfied 's 69% 50% 52% BJ Sa m 's C os t lu e b co 18% 13% co 19% 18% 27% Somewhat unsatisfied 69% C Not at all Satisfied 9% 's C 56% 33% Sa m 73% 13% 19% os t 7% 4% 7% 9% 13% C 19% Compared to last year, how has your satisfaction with your company’s business at [Club Retailer] changed? 91% 56% 63% 46% Costco=27, Sam’s Club=16, BJ’s Wholesale=11 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 10

The Internal Club Sell: You Are Not Alone What are your company’s biggest internal The Internal Club Sell: You Are Not Alone What are your company’s biggest internal obstacles to effectively selling club today? (select all that apply) Cost of customization is difficult to rationalize 65% Club is not effectively embedded into product innovation and development Concerns about diluting the integrity of our brand(s) in a club environment 58% 37% True profitability is hard to explain or difficult to measure 35% Lack of shopper insights support 33% Key constituents lack necessary understanding of the club model 33% Lack of club-specific P&Ls 28% Existing supply chain does not support logistics necessary for effective club items 23% Lack of marketing support Club team(s) are not effectively structured Other 21% 19% 14% Total=43 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 11

Private Brand Growth: Helping or Hurting? How has the number of [Club Private Brand] Private Brand Growth: Helping or Hurting? How has the number of [Club Private Brand] items changed over the past year in your category(ies)? 9% 4% 12% 27% 29% 8% How has the presence of [Club Private Brand(s)] affected your performance? N/A 9% 14% 39% Increased a lot 55% 43% 57% Stayed the same le Decreased a lot Not at all Somewhat negatively 10% 17% le sa C lu 10% 14% Sam's Club Very negatively BJ's Wholesale Costco BJ 's W ho 's Sa m Somewhat positively 30% b o Depends on the category Very positively 60% Somewhat decreased tc 29% 39% Somewhat increased 4% C os 10% 9% 14% 39% 10% Costco=26, Sam’s Club=14, BJ’s Wholesale=11 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 12

Main Club Concerns Moving Forward* Costco Sam’s Club BJ’s Wholesale • Push for exclusivity/ Main Club Concerns Moving Forward* Costco Sam’s Club BJ’s Wholesale • Push for exclusivity/ • Loss of strategic focus with innovation without guarantee of reduced growth and more oneplacement or commitment way supplier partnership • Lack of strategy overall given the change in leadership • Less space for national brands • Overall direction as a company: Not knowing who it wants to be in 5 -10 years keeps others from committing • Very slow decision making • No interest in insights/research • Interaction with suppliers: “Beating up" over price but failing to "collaborate" and/or make insights-based decisions • Lack of items supported for full • Price: being competitive distribution across regions • Increasing focus on the • Global pricing demands that Advantage Member (via disrupt brand local P&L in assortment, messaging, promo [international] markets items, etc. ) to detriment of Business members • Fewer SKUs in the category • Demands for differentiation • Kirkland Signature depreciating versus the marketplace and other club retailers national brand value • Changing strategy resulting in • Regional buying structure no way to participate in ISB inefficient • Business member decline • Globalization commanding more time and influence beyond scope of responsibilities • Inconsistent strategy • [Lack of] level playing field on competing items (i. e. , different levels of what is deemed successful depending on brand what buyer wants) • More collaboration needed for overall strategic growth initiative • Decreasing or delayed seasonal traffic and shopper footsteps in clubs • Logistical system incongruencies • Central/South Am. strategy resulting in selling at/below cost; • Volume and Pricing Walmart promoting club packs *Per qualitative feedback from suppliers of each club Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 13

Length of Strategic Plans: Majority Are 1 -3 Years To the best of your Length of Strategic Plans: Majority Are 1 -3 Years To the best of your knowledge, what is the length of the strategic plan that you have in place with [Club] today? 70% 60% 50% 40% 30% 20% 10% 0% Less than 1 -year a year Costco 7% 30% Sam's Club 19% 31% BJ's Wholesale 9% 64% 2 -year 3 -year 5 -year 19% 25% 0% 22% 13% 9% 11% 6% 9% 6 -plus years 0% 6% 0% None 11% 0% 9% Note: No four-year plans reported by respondents Costco=27, Sam’s Club=16, BJ’s Wholesale=11 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 14

Globalization Increasingly Key to Strategic Alignment with Costco “We will continue to sell to Globalization Increasingly Key to Strategic Alignment with Costco “We will continue to sell to Costco's global markets through our inmarket representatives. ” Other 8% Globalizing with Costco is not currently a priority 35% A strategic plan to expand our global penetration with Costco is already in place 19% We are in the process of formalizing a global expansion strategy 38% Costco=26 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 15

Highest % in Individual Club Highest % Across All Clubs Notable YOY Change Club Highest % in Individual Club Highest % Across All Clubs Notable YOY Change Club Receptivity to Key Initiatives Which club has been most receptive to your involvement in the following activities? Expanding offer(s) beyond US to global markets Customizing exclusive packs Launching product(s) not yet available elsewhere Integrating Health & Wellness Co-branding with club private brand(s) Producing private label club product(s) Improving sustainability of packaging Improving sourcing of product ingredients Acquiring new members Appealing to Gen Y Developing multi-vendor packs Increasing product pricing Sharing consumer insights data Analyzing membership data from the club Conducting in-club research Appealing to businesses Participating in club mobile app Incorporating mobile codes on packs Participating in club Facebook initiatives Engaging consumers via non-retailer blogs Participating in club Twitter initiatives Participating in club Pinterest initiatives Costco Sam's Club BJ's Wholesale 62% 2% 29% 15% 24% 7% 10% 22% 5% 29% 15% 17% 12% 0% 7% 7% 7% 5% 0% 2% 0% 0% 5% 51% 21% 40% 43% 48% 18% 7% 20% 17% 15% 10% 12% 5% 0% 3% 5% 7% 2% 57% 44% 41% 40% 38% 37% 35% 29% 22% 20% 17% 16% 14% 12% 10% 7% 7% 5% 0% 0% Total=44 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 16

Participation in Costco Initiatives Instant Savings coupon in MVM Exclusive item development In-club demo/sampling Participation in Costco Initiatives Instant Savings coupon in MVM Exclusive item development In-club demo/sampling Stand-alone Instant Savings MVM (Multi-Vendor Mailer) coupon Member insights Tie-in with Kirkland Signature Member emails through Costco Sustainability messaging Prospective member Insights Costco Online Co-branding or private brand production General price reduction Business member appeals Endcap Tie-in with other national brands Online samples Free online delivery Road Show The Costco Connection Tie-in with Costco Service(s) Costco-relevant social media Mobile text alerts/offers through Costco Fence (cart rail) program 46% 44% 4% 4% 28% 27% 24% 20% 4% 17% 8% 16% 4% 12% 4% 8% 4% 8% 8% 12% Less Involved 4% 4% 8% 8% Instant Savings, Exclusives, Demos, Coupons & Insights on rise More Involved Less Involved Costco=26 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 17

Satisfaction with ROI of Costco Efforts Instant Savings coupon in MVM (Multi-Vendor Mailer) coupon Satisfaction with ROI of Costco Efforts Instant Savings coupon in MVM (Multi-Vendor Mailer) coupon Stand-alone Instant Savings Exclusive item development Endcap In-club demo/sampling Member insights Sustainability messaging General price reduction Costco Online Co-branding or private brand production Tie-in with Kirkland Signature Business member appeals The Costco Connection Fence (cart rail) program Tie-in with other national brands Member emails through Costco Road Show Prospective member Insights Costco-relevant social media involvement Free online delivery Tie-in with Costco Service(s) Mobile text alerts/offers through Costco Online samples 75% 67% 57% 13% 54% 8% 54% 21% 54% 17% 42% 4% 33% 4% 30% 4% 26% 9% 26% 4% 25% 29% 25% 8% 21% 4% 17% 13% 4% 8% 4% 4% Somewhat/Very Satisfied Not at all/Not too Satisfied Costco=24 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 18

Participation in Sam’s Club Initiatives Member insights Sam’s Instant Savings Book (ISB) Exclusive item Participation in Sam’s Club Initiatives Member insights Sam’s Instant Savings Book (ISB) Exclusive item development General price reduction Stand-alone Instant Savings Joint Business Planning Sam’s Club Online Sustainability messaging Member emails through Sam’s Club Endcap(s) Co-branding or private brand production Tie-in with other national brands Prospective member insights Business member appeals Tie-in with Sam’s Club Service(s) Mobile text alerts/offers Free online delivery In-club demo/sampling Healthy Living Made Simple Magazine Cart Rail/WOW wall program Road shows 50% 43% 29% 7% 25% 21% 21% 7% 15% 14% 14% 7% 7% 7% Insights, ISB, Exclusives, Pricing Reductions, among others, on rise More Involved Less Involved 7% Sam’s Club =14 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 19

Satisfaction with ROI of Sam’s Club Efforts Endcap(s) Tie-in with other national brands Cart Satisfaction with ROI of Sam’s Club Efforts Endcap(s) Tie-in with other national brands Cart Rail/WOW wall program Joint Business Planning (JBP) Sam’s Instant Savings Book (ISB) Member insights Business member appeals General price reduction In-club demo/sampling, excluding. . . Stand-alone Instant Savings Sustainability messaging Prospective member insights Exclusive item development Member emails through Sam’s Club Healthy Living Made Simple Magazine Free online delivery Sam’s Club Online Co-branding or private brand production Sam’s-relevant social media involvement Mobile text alerts/offers Road shows Freeosk Simply Delicious Meals Tie-in with Sam’s Club Service(s) Tie-in with Sam’s Club private brand(s) Online samples 15% 23% 8% 8% 9% 9% 8% 8% 54% 50% 45% 38% 15% 38% 33% 25% 33% 33% 23% 31% 38% 31% 17% 25% 23% 36% 18% 17% 25% 17% 17% Not at all/Not too Satisfied Somewhat/Very Satisfied Sam’s Club =13 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 20

Participation in BJ’s Wholesale Initiatives In-club coupons or instant savings 40% 10% 40% BJ’s Participation in BJ’s Wholesale Initiatives In-club coupons or instant savings 40% 10% 40% BJ’s Big Brand Mailer (BBM) 30% In-club demo/sampling 22% General price reduction 20% Endcap(s) Exclusive item development 11% Tie-in with other national brands 11% Tie-in with BJ’s private brand(s) 11% BJ’s-relevant social media 11% BJ’s Member Journal 11% Prospective member insights 11% Member insights More Involved Less Involved 22% 10% BJ’s Wholesale=10 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 21

Satisfaction with ROI of BJ’s Efforts 78% BJ’s Big Brand Mailer (BBM) 70% In-club Satisfaction with ROI of BJ’s Efforts 78% BJ’s Big Brand Mailer (BBM) 70% In-club coupons or instant savings 50% Endcap(s) BJ’s Member Journal In-club demo/sampling 11% Member insights 11% 40% 33% 33% 22% 11% 13% Somewhat/Very Satisfied Exclusive item development 11% Not all/Not too Satisfied General price reduction Tie-in with other national brands 11% 11% Tie-in with BJ’s private brand(s) 11% Cart Rail program 11% Member emails through BJ’s 10% Free online delivery 10% BJ’s-relevant social media 11% Prospective member insights Sustainability Messaging BJ’s Wholesale=10 Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 22

Implications: Use This Data to Elevate and Empower Your Club Teams • Build more Implications: Use This Data to Elevate and Empower Your Club Teams • Build more club buy-in among company leadership. If club importance isn’t growing at your company, what’s the hold up? • Make the case for more resources. What investments are your peers making that you’re not? • Get past the “alternative” mindset. Are your club teams still reporting to an “alternative” channel head? • Approach each club with a long-term plan. Do your Costco, Sam’s, and BJ’s teams still lack a formal, forwardlooking strategy? • Get global with Costco (at least consider it). Why wait until its too late? You will get left behind. • Provide direction and differentiation. Sam’s and BJ’s need some guidance. Why not step up before one of your competitors does? Source: Kantar Retail analysis of Kantar Retail's Annual Club Vendor Benchmarking Survey (March 2014) © Copyright 2014 Kantar Retail 23

Agenda • Club Suppliers: Benchmarks & Best Practices • Club Shoppers: The Online Club Agenda • Club Suppliers: Benchmarks & Best Practices • Club Shoppers: The Online Club Shopper © Copyright 2014 Kantar Retail 24

 Top 20 Retailer Web Sites Shopped BJ's Wholesale Amazon. com e. Bay. com Top 20 Retailer Web Sites Shopped BJ's Wholesale Amazon. com e. Bay. com Walmart/Walmart Supercenter Best Buy Kohl's JCPenney Barnes & Noble Target/Super. Target Macy's The Home Depot Lowe's Apple Toys "R" Us/Babies "R" Us Sears Old Navy Bed Bath & Beyond Staples Bath & Body Works QVC TV or QVC. com Zappos. com Nordstrom Costco Sam's Club BJ's Wholesale Club All Shoppers % shopped Web site 50% 20% 12% 9% 8% 8% 7% 6% 6% 5% 5% 5% 4% 4% 4% 2% 2% 2% 0% 60% 23% 13% 12% 11% 10% 9% 8% 8% 9% 7% 6% 8% 9% 6% 8% 7% 4% 3% 2% 7% Costco Sam's Club Rank % shopped Web site Rank 1 2 4 3 5 8 6 7 9 12 14 16 11 17 21 15 10 20 13 19 18 62% 25% 12% 13% 11% 9% 11% 12% 9% 8% 10% 7% 6% 6% 7% 6% 5% 6% 8% 6% 13% 2% 1% 1 2 6 4 9 11 8 7 5 12 14 10 15 21 20 16 18 24 17 13 19 3 57% 26% 18% 12% 12% 10% 9% 8% 9% 7% 8% 7% 6% 6% 7% 6% 3% 2% 10% 1% 1 2 3 4 6 5 9 8 10 12 11 16 13 15 19 17 21 18 14 20 7 *Read as: Among the 6000 shoppers surveyed in 2013 who said they usually shop at Sam's Club every month, 57% had shopped at Amazon. com during the past four weeks. All Shoppers=48224, monthly BJ’s shoppers=2056, monthly Costco shoppers=6410, monthly Sam’s Club shoppers=6000 Source: Kantar Retail Shopper. Scape®, January-December 2013 © Copyright 2014 Kantar Retail 25

Members Prefer Online for “Hunt, ” Convenience Preference for In-Store vs. Online Shopping, by Members Prefer Online for “Hunt, ” Convenience Preference for In-Store vs. Online Shopping, by Shopping Mode (among monthly warehouse club shoppers) Prefer in-store Prefer online Hunting for unique bargains Buying goods in the fastest and most convenient way Shopping at a retailer to discover new things Looking to a retailer for advice on how to do things or get help solving problems 46% 54% 50% 64% 68% 36% 32% Shopping at a retailer because it reflects how I express myself and my lifestyle 72% 28% Shopping for products that need to be replaced on a routine basis 74% 26% Note: Arrows indicate significant difference vs. all shoppers (95% confidence level) All shoppers=4049, Club shoppers=1161 Source: Kantar Retail Shopper. Scape®, July 2013 © Copyright 2014 Kantar Retail 26

Though Preference for Online Shopping Varies by Monthly Club Shopper Segment Gen Y Gen Though Preference for Online Shopping Varies by Monthly Club Shopper Segment Gen Y Gen X Boomers Seniors 63% 57% 52% 46% 57% 48% 49% 37% 40% 37% 36% 30% 37% 35% 31% 24% 30% 27% 19% 28% 25% 21% Hunting for unique Buying goods in Shopping at a Looking to a Shopping at a Shopping for bargains the fastest and retailer to discover retailer for advice retailer because it products that need most convenient new things on how to do reflects how I to be replaced on a way things or get help express myself and routine basis solving problems my lifestyle Note: Arrows indicate significant difference vs. all shoppers (95% confidence level) Gen Y=170, Gen X=377, Boomers=431, Seniors=183 Source: Kantar Retail Shopper. Scape®, July 2013 © Copyright 2014 Kantar Retail 27

One Thing Is Clear: Online Shopping Is Influencing and Will Continue to Impact Trips One Thing Is Clear: Online Shopping Is Influencing and Will Continue to Impact Trips Note: Arrows indicate significant difference vs. all shoppers (95% confidence level) All shoppers=4004, Club shoppers=1043 Source: Kantar Retail Shopper. Scape®, October 2013 © Copyright 2014 Kantar Retail 28

Changes in Club Shoppers Behavior Due to Online Significant differences by Segment 90% (% Changes in Club Shoppers Behavior Due to Online Significant differences by Segment 90% (% who say statement describes them "quite well" or "somewhat") 80% 70% 67% 60% 50% 80% 79% 76% 57% 51% 62% 51% 67% 63% 76% 54% Monthly Club Shoppers Gen Y Gen X 40% 30% Vs. all club shoppers 37% Boomers Seniors 20% Have Nots 10% Haves 0% What I am trying to accomplish Online shopping has replaced on shopping trips to stores has some of the shopping trips I changed because of the kinds used to make to stores of online shopping I am doing Note: Arrows indicate significant difference vs. all monthly club shoppers (95% confidence level) Club shoppers=1043, Gen Y=131, Gen X=349, Boomers=398, Seniors=165, Have Nots=448, Haves=595 Source: Kantar Retail Shopper. Scape®, October 2013 © Copyright 2014 Kantar Retail 29

Meanwhile, the Club Trip Is In Flux Costco Sam's Club 8% 7% 5% 3% Meanwhile, the Club Trip Is In Flux Costco Sam's Club 8% 7% 5% 3% 4% 8% 7% 8% 5% 3% 2% 4% 5% 4% 7% 7% 14% 8% 8% 19% 17% 28% 44% 17% 18% 7% 4% 4% 6% 6% 4% 3% 9% 10% 21% 52% BJ's 55% 46% 15% Buy Coupon Items Buy Sale Items Browsing Special Occasion Immediate Use Trip 53% 46% Fill-in Trip Stock-up Trip 2010 2013 YTD Total club shoppers 2013 YTD=675; 2012=945; 2011=912; 2010=674 Source: Kantar Retail Shopper. Scape®, May/Aug/Nov 2010, Feb/May/Aug/Nov 2011 & 2012, Feb/May/Aug 2013 © Copyright 2014 Kantar Retail 30

Overall Visits Down for Most Recent Grocery Trips down in 2013 as shoppers consolidate Overall Visits Down for Most Recent Grocery Trips down in 2013 as shoppers consolidate retailers shopped Average Trips per Month Self-reported # of trips per month for groceries/HH essentials/HBC 2010* 2011 4. 2 3. 6 3. 5 2. 9 Costco Trips 2013 4. 1 3. 8 3. 0 2012 2. 9 BJ's Trips 2. 7 2. 6 Sam's Club Trips Note that average number of trips per month is based on self-reported shopping frequency for select months and for most recent grocery trip *2010 consists of data from May, August and November only Note: 2013 Samples Sizes: BJs=150; Costco=500; Sam’s Club=274 Source: Kantar Retail Shopper. Scape®, May/Aug/Nov 2010 and Feb/May/Aug/Nov 2011, 2012, and 2013 © Copyright 2014 Kantar Retail 31

Ticket Is Also Softening… Source: Kantar Retail research, analysis; company reports, presentations (March 2014) Ticket Is Also Softening… Source: Kantar Retail research, analysis; company reports, presentations (March 2014) © Copyright 2014 Kantar Retail 32

The Core Threat: Amazon Percentage of shoppers who are Prime members, by club Source: The Core Threat: Amazon Percentage of shoppers who are Prime members, by club Source: Kantar Retail Shopper. Scape®, December 2011, December 2012, and December 2013 © Copyright 2014 Kantar Retail 33

Percentage of Monthly Club Shoppers Who Are Amazon Prime Members, by Segment Source: Kantar Percentage of Monthly Club Shoppers Who Are Amazon Prime Members, by Segment Source: Kantar Retail Shopper. Scape®, December 2011, December 2012, and December 2013 © Copyright 2014 Kantar Retail 34

Prime Changes Club Shopper Behavior Even More Than Typical Shoppers! All Shoppers All Monthy Prime Changes Club Shopper Behavior Even More Than Typical Shoppers! All Shoppers All Monthy Club Shoppers Tend to check Amazon first before shopping anywhere else 49% 53% 30% Shop some retail stores less often 29% Buy from a wider assortment of categories at Amazon 27% Buy from a wider assortment of brands at Amazon Started/added items to Amazon "Subscribe & Save" program 32% 10% 13% 9% 11% Stopped shopping some retail stores altogether Shopping patterns have not changed since joining Amazon Prime 35% 13% 16% Shop some online shopping sites less often Stopped shopping some online shopping sites altogether 39% 4% 5% 21% 29% Note: Arrow indicates significant difference between all shoppers and monthly club shoppers (95% confidence level) Source: Kantar Retail Shopper. Scape®, December 2013 © Copyright 2014 Kantar Retail 35

So, How Are the Clubs Competing? Sam’s Club is taking the lead – how So, How Are the Clubs Competing? Sam’s Club is taking the lead – how are you aligning? Online Subscription Service: In-Club In-Between Scan & Go: MEP: PROSPECTING Freeosk: Value, Personalization: TRUST Prioritizing Investments to Guide Acquisition ENGAGEMENT Creating Emotional Connections RENEWAL Customized Renewal Communication, Reinforcing Value Source: Kantar Retail research, analysis (March 2014) © Copyright 2014 Kantar Retail 36

So, How Are the Clubs Competing? Costco makes small strides – where can you So, How Are the Clubs Competing? Costco makes small strides – where can you influence strategy? Online Delivery Partners: In-Club Food & Fresh: Experience & Exclusivity: “We want our members to buy everything at Costco, whether it’s instore or online, and we’ll keep trying some new things. ” – Richard Galanti, CFO, Costco (Dec. 2013) Online-Only UK Membership: Source: Kantar Retail research, analysis (March 2014) In-Between ü Broaching data mining ü Growing receptivity to insights ü Ongoing IT modernization project ü “Rewriting the membership system” (ongoing) ü Increasing digital access to MVM ü Emphasis on services across channels © Copyright 2014 Kantar Retail 37

So, How Are the Clubs Competing? BJ’s lacks a cohesive focus – how can So, How Are the Clubs Competing? BJ’s lacks a cohesive focus – how can you help? Online In-Club Digital Integration: Instacart Delivery Platform: In-Between Current & Prospective Member Insights, Drivers: Online Solutions: Exclusivity & Custom: Social Media Engagement: Source: Kantar Retail research, analysis (March 2014) Engagement & Experience: © Copyright 2014 Kantar Retail 38

New Demands for Value Will Continue to Emerge This will come with rethinking the New Demands for Value Will Continue to Emerge This will come with rethinking the physical & virtual club space Greater receptivity to and integration of insights (i. e. , shopper, Big Data, data analytics, predictive modeling); enhanced abilities to leverage member, prospect data Greater emphasis on best/unique price relative to conveniences/ transparencies of online; more discipline around volume thresholds; more customization to counteract price comparisons Products Insights Prices Bigger role of online, mobile; improved item visibility across platforms; more opportunity around autoreplenishment models and conveniences/speed of delivery More solutions, H&W oriented, increasingly localized, personalized to fit different member types and life stage/style preferences; tighter, more disciplined sell-out dates Services New Digitally Driven Club Value Framework Experiences Platforms More services in the box and online; greater positioning of club services as value and traffic drivers; more innovative approaches to services and greater overall integration with broader assortment More exciting pallets, more integrated packaging and “billboarding”; greater attention to the sensory experience in a club environment where the “senses” are often left out Shoppers’ growing digital behaviors, preferences, and interactions will continue to impact club value perceptions – in turn, clubs and their suppliers must evolve their strategies to account for this. Source: Kantar Retail research, analysis (March 2014) © Copyright 2014 Kantar Retail 39

For Long-Term Success, Clubs Will Need Direction KR Expectations Supplier Implications More competition from For Long-Term Success, Clubs Will Need Direction KR Expectations Supplier Implications More competition from Amazon and online shopping in general • How are you factoring in Amazon (and specifically Prime) as a club competitor? • How in touch is your club team with your Amazon counterparts? • How are you helping the clubs compete with Amazon as a destination, point of comparison, and club? More shifts in members’ club trip • How do category roles evolve along with the club trip? missions and uses • How do the clubs contend with the convenience of online? • What is your multi-channel plan for each club and how are you More overlap between online and building this into your strategic club plans? in-club assortments • What role are you playing in driving traffic online, to the box, and via mobile? More integration with, and more innovative approaches to, services • What broader solutions and services make sense for your brands as the clubs look across the box, their platforms, and their services to drive basket and value? • How might this alter the use of space in the box? • How are you speaking to and evolving with club members based More pressure to differentiate will on key life stages and changing preferences and shopping demand stronger reliance and behaviors? • How are you really leveraging data to maximize the club offers and collaboration on data analytics innovations that you are bringing to the table? Source: Kantar Retail research, analysis (March 2014) © Copyright 2014 Kantar Retail 40

A Look Ahead: Kantar Retail’s Club Insights What’s in the queue for you? • A Look Ahead: Kantar Retail’s Club Insights What’s in the queue for you? • Sam’s Club: No More Business as Usual (4/16) – Half-day intensive session examining what Sam’s will look like in the years ahead, how its strategy and shoppers are transforming, and what it will take to adapt and succeed. • Now or Never: Full Steam Ahead for Costco (5/6 -7) – Two-day workshop that will provide a deep dive on Costco including fundamentals of the club model, a forward-looking strategic analysis, and discussion of three key themes of evolution at Costco – Global, Shopper, and Digital. • BJ's : Finding Its Way or Floundering at Sea? – http: //kriq. com/Retailer/Summary. Slide. Details. aspx? Retailer=48&id=616822 • “Boxed”: The Next Generation of Club Retail? – http: //kriq. com/Retailer/Article. Details. aspx? Retailer=48&id=620090 • Assessing the Club Trip: What Drives Purchasing? – http: //kriq. com/Retailer/Shopper. Article. Details. aspx? Retailer=48&id=622694 Source: Kantar Retail research, analysis (March 2014) © Copyright 2014 Kantar Retail 41

Contact: Sara Altukhaim Director Sara. Altukhaim@Kantar. Retail. com T: +1 617 912 2859 www. Contact: Sara Altukhaim Director Sara. [email protected] Retail. com T: +1 617 912 2859 www. kantarretail. com © Copyright 2014 Kantar Retail