Exploring Non Traditional Revenue Opportunities in Retail

1. Exploring Non Traditional Revenue Opportunities in Retail

2. MEET THE TEAM Ramona Govender (Mr Price) Saber Manjoo (Edcon) Obakeng Motlhodiemang (Pick n Pay) Nathan Pillay (Spar) Kevin Chetty (Capi International) Precious Onwukwe (JD Group)

3. AGENDA • Introduction • Overview • Research Methodology & Journey • Business insights • Immersions • Customer insights • Customer journey • Recommendations – Approach • Recommendations – Opportunities • Implementation Plan & Financial Overview • Conclusion • Appendix

4. WHAT IS NON TRADITIONAL REVENUE? Any income that is generated from non-core business activity, that can contribute up to 30% of total revenue.

5. SOCIAL MEDIA OUR PROBLEM OUR OBJECTIVES To explore non traditional revenue streams • Business profits and revenue are under threat due to changes in buying behaviour • Understand the retailers perspective • Understand the customers perspective • Analyse current non traditional models • Present findings • Recommend an approach

6. RESEARCH JOURNEY RESEARCH METHODOLOGY • Limited availability of information • Difficult to stay on track with topic Challenges • Bottom line to profits • Defined as value added to customers Assumptions

7. RESEARCH JOURNEY

8. RESEARCH JOURNEY BUSINESS INSIGHTS Company background Strategy & Execution • Lack of Board/CEO support • Execution becomes a challenge • Change management critical Non traditional income streams Technology • Inability in IT systems to accommodate new requirements • Leverage IP that exists within the business Specialised areas People • Job security – impact of the introduction of unknown models • Skills shortfall is an issue. Long term objectives Financials & Compliance • ROI’s not justified (significant capital outlay) • Current business compliance to regulatory standards • Environmentally friendly products Challenges/Barriers

9. IMMERSIONS IMMERSIONS Quick implementation on retail and marketing concepts •Retailers focused on traditional business models •Subscription membership model with local suppliers – Metro Cash and Carry Fasting growing economy in the world •Focus on convenience and quality products •Opportunities lie in this sector using the Jingteng model, similar to JD CHINA RUSSIA Retail sector has grown in the recent years •Most retailers are just focusing on their traditional business model •Opportunities - loyalty rewards programme according to Prof Andrew Akolaa (GIMPA) Most advanced economy in Africa •Established traditional models, formal & informal •Businesses need to improve on non traditional revenue streams GHANA SOUTH AFRICA

10. RESEARCH JOURNEY CUSTOMER INSIGHTS Customer background Benefits • Price • Discounts • Loyalty / Rewards Top retailersAverage spend Online shopping Value Shopping patterns • Services • Convenience • Experience Shopping requirements

11. SOCIAL MEDIA FEEDBACK CUSTOMER JOURNEY What is a Customer Journey? A customer journey map refers to the visualisation of a customer’s objectives, needs, feelings and barriers throughout the path to purchase a product or service.

12. SOCIAL MEDIA FEEDBACK CUSTOMER JOURNEY MAP MAXIMISE the TOUCH POINT with the CUSTOMER

13. RESEARCH JOURNEY KEY FINDINGS CUSTOMERS RETAILERS • All respondents utilised retailers for other services (convenience is key) • One stop shop experience • Customers utilised money market/cash transfers/cash withdrawal services • Increase in online shopping however also prefer bricks and mortar shopping experience • Critical that businesses consider non traditional revenue opportunities • Changing customer needs –understand customer behavior patterns (data mining) • Consider IP within the business and how this can be leveraged (Ocado) • Customers are becoming more • eco-friendly

14. RESEARCH JOURNEY KEY OPPORTUNITIES Recycling Leverage existing platforms Money market transfers • Create a platform for consumers to recycle more easily – possibly within a FMCG retailer • Combine with loyalty programme • Customer perception of retailer improves • Introduce money market transfers at a value clothing retailer • Link to business model – incentive for customer • Need for convenience • Create a market for IP that exists within businesses by selling/renting to fellow retailers • Capitalise on investments made • Sharing competitor growth • Indication that markets support innovators and disruptors

15. RESEARCH JOURNEY RECOMMENDATION : MONEY MARKET TRANSFERS Process • Transfer cash at R9.99 per transaction – capitalise on store locations (urban and rural locations) Options available to customer • Transfer cash onto gift card. No service charges. Greater than R200 will attract a 10% bonus top up • Part store redemption, part cash redemption – reduced service fee Benefits to Retailer • Increased foot traffic • Ability to convert transfers to revenue • Obtain additional customer data (previously predominantly cash paying customer) • Lower cash deposit fees • Interest on deposited funds

16. RESEARCH JOURNEY RECOMMENDATION : MONEY MARKET TRANSFERS Challenges Implementation • Creation of long queues • Traditional customers being deterred • Increase risk of holding high volumes of cash • May not be in line with operating model of business • Maximise trading space • Increase in other operating costs (insurance, security) • Lose focus from core business • Test in a limited number of stores – combine with cellphone offerings • Standalone counters • Additional security over cash • Adequate change management principles. • Market through customer base (debtors) • Ensure systems capability is addressed • Comply with legal requirements

17. RESEARCH JOURNEY RECOMMENDATION : FINANCIAL IMPACT 50 % cash redemption • No impact on retail sales • Total service fee earned – R500 • Interest revenue on banked deposits not quantified 50 % store credit redemption • Additional R1 000 bonus top up given to customers • Total revenue generated R11 000 • Reduced GP% (31%) however retailer gains from additional sales • Insight into cash customer • Assumptions • 100 transactions per day • Average value – R200 per transaction • Retailer GP – 40% Financial model demonstrates potential for return on investment

18. BUSINESS RECOMENDATIONS CONCLUSION Addressing the threats that businesses are currently facing STRATEGY CULTURE Blue Ocean Strategy Board/CEO Support Structure & Resources Customer Journey Lewins 3 Step Model High Performance Organisation High Performance People McKinsey 7S IMPLEMENTATION Re-order the organisation to embrace change

19. Thank you

20. RESEARCH JOURNEY RECOMMENDATION 2: RECYCLING Process • Deposit waste into recycling waste machines set up in grocery stores Options available to customer • Customer earns loyalty points – linked to their store loyalty cards • Loyalty points can be converted to cash and utilised as savings on purchases Benefits to Retailer • Increased foot traffic • Ability to drive sales when customers utilize loyalty points • Improving perception of retailer • No significant bottom line impact however creates greater awareness of the retailer

21. RESEARCH JOURNEY RECOMMENDATION 3: LEVERAGING PLATFORMS Process • Create a market out of platforms that have been developed – lease/sell to other retailers with the objective of earning perpetual revenue Options available to customer • Leverage of capital investments already made • Provide business with good head start (competively ready) Benefits to Retailer • Do not deter from key business focus • Create a separate business unit • High ability to sell IP that exists within businesses • Gain on growth of competitors • Maintain their competitive edge