Mag Sell Conference 2006 The Changing Retail Consumer

1. MagSell Conference 2006The Changing Retail Consumer Sian Davies September 2006

2. The Future Retail Consumer • Aging and ageless • Optimising resources • Trading up/Trading down • Connected and creative • Ethically motivated • Increasingly diverse

3. Ageing and Ageless

4. 50 45 40 Population aged 50+ Millions Millions 35 250 30 61% 116% 2000 2015 2025 25 20 200 15 10 5 150 0 21% USA Russia Germany UK China 600 31% 29% 100 140 500 120 50 400 100 Millions Millions Population aged 15-24 21% 300 0 -10% 80 2000 2015 2025 200 60 -47% 100 40 20 -13% 0 -4% 0 China USA Russia Germany UK Ageing populations are a UK and global reality By 2015 there will be 21 million people aged 50+ in the UK (35% of the total population) Source: UN Population Division

5. As old as you feel, not as you are

6. Experiential Society Experiential Power and Identity Older consumers tend to grow less interested in material possessions as they age, choosing new experiences that allow them to keep growing Time Countdown Last opportunities for financial fixes and dream fulfilment flash past as retirement and ill health loom

7. Navigating Health & Wellbeing Age Identity Continuity Looking and feeling good keeps 50+ in touch with the young person they feel inside, so age disguise & denial (from self and others) is a rising priority Proactive Health Identity Personal identity is contingent on good health, illness is the new definer of old age, so 50+ are applying new health knowledge to maximise health-full life time

8. Making A Difference Life Legacy A process of personal reflection, resulting in action which reflects 50+ desire to make a difference and be respected for it Social Engagement 50+ like to feel plugged in to local and global issues by tracking multiple media and intergenerational channels

9. Implications for magazines • 50+ is an underserved market • Opportunities to promote mental and physical fitness • Provide the opportunity to make a difference • Facilitate social engagement • Improve in store access in terms of design and layout

10. Optimising Resources

11. TIME and ENERGY are now more valuable to us than money Which one of the resources is most/least valuable to you in everyday life? Least valuable Most valuable 5 41 Time Energy 4 27 11 18 Money 33 9 Information 47 5 Space % 60 50 40 30 20 10 0 10 20 30 40 50 Source: Henley Centre Planning for Consumer Change 2005 Base: Total population. Rebased for any agree; excluding Don’t Know/Not Stated

12. Energy management Moovitz – caffeine sweets: “Enough caffeine to wire a small cow”

13. Consumers balance time and energy by ‘streamlining’ and ‘elaborating’ Streamlining Elaboration Save time / energy Invest time / energy Consumers look to save time and energy resources where they can to allow investment when it matters Added extras Enjoying the moment High emotional engagement Special experiences Bare minimum Quick and fuss free Low emotional engagement Chores

14. Implications for magazines • Differentiate between streamlined ‘rush and grab’ and elaborated ‘slow browse’ consumer needs • Elaborated consumer experiences: • Enriched, deeper, more specialised content • ‘Slow me’ time in store – café, wireless hotspots – encouraging browsing • Personalised recommendations, e.g. based on shopper profiles • Streamlined consumer experiences: • Simple messages, simple products • Short reads will have continuing appeal • Saving consumers’ time – calling them, not them calling you

15. Trading Up/Trading Down

16. ‘Death of the middle’ High-end Luxury for all Low-end Bargain-hunting for all

17. High-end: a re-emergence of ‘pure luxury’

18. www.billionaire500.com

19. High end: limited edition Remy Martin Louis XIII cognac £1,200 per bottle Visionaire magazine Limited-edition runs of 1,000 to 6,000 copies. Annual subscription costs $675.

20. Home Depot’s Ridgid Power tools - previously only sold to professionals Standard products raised to a luxury level Braun's Oral B Professional Care 7000 series power toothbrushes – “Brush like a professional” Siemens Surpresso – coffee at restaurant standards

21. Record circulation ABC Jan-Jun 2006: 97,414

22. Personalisation: accessible to all Put your name on M&Ms, US Create your own stamps, Netherlands Anya Hindmarch handbags

23. At the same time,consumers are seeking value Subscribe to Bliss this month and get a fab gift worth over £20

24. Implications for magazines • Caught in the discounting/promotion trap? • Is the market missing out on consumers wanting to ‘Trade Up’? • Personalised magazines • Limited editions • Novelty formats • Can retailers offer more of a ‘luxury experience’? Back Rubs at Selfridges

25. Connected and Creative

26. Techno-savvy society Mobile Penetration • DTV/Home Internet penetration 79%, including 67% of 65+ • 16m e-shoppers spending £14.5b • SMS/MMS volumes growing at 50% p.a. since 2001 • 4.6m legal MP3 downloads in Q1 2005: as much as all of 2004 50 82% 81% 80% 80% 79% 48 78% 78% 77% 46 76% 75% 44 74% 42 72% 2004 2005 2006 2007 2008 2009 Consumers of all ages using mobile phones (millions) Percent of consumers of all ages using mobile phones Internet & Broadband Penetration 70% 60% 22% 25% 50% 27% 30% 33% 37% 40% 38% 43% 30% 43% 42% 20% 40% 36% 32% 28% 23% 10% 19% 10% 5% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 UK households with broadband UK online households Source: Forrester Research 2004, TGI 2005, PCC 2005, Sky, MDA, Osco

27. Online sources of information are trusted % who believe the following information sources are honest and fair Personal recommendations 90 Price comparison websites 73 Websites of well known retailers 73 Websites of well known brands 68 Search engines 67 Customer opinions/reviews on websites 61 60 Product information in shops 60 Reviews/opinions on the internet written by experts 53 Content provided by your Internet Service Provider 44 Newspapers/magazines 37 Advertising on the internet 35 Television % 31 Salespeople in shops 0 10 20 30 40 50 60 70 80 90 100 Base: excl. don’t know Source: Henley Centre / AOL 2004

28. The rise and rise of digital media • The Sony® Portable Reader System • PRS-500:

29. Evolving commercial models represent an open door for innovation • Editorial product increasingly multi-channel • Publishers extending brands across formats • Back/extended catalogue increasingly available on-line/on-demand

30. Reaching teenage girls

31. Implications for magazines • Traditional printformatfighting harder and harder for key audiences – teens and younger men • Critical to use new channels to deepenrelationships - internet, mobile, events, TV etc. • Need to sell total brand reach – not just ABCs

32. Ethically Motivated

33. We are caring more about the environment There are indications that both environmental awareness and feelings of responsibility have increased for the majority 91% Britons now recycle 79% of the UK population believe human beings are primarily responsible for climate change 36% of people agree ‘I would be prepared to pay more for environmentally friendly products’ Source: ICM / Observer poll, June 2005, Eurobarometer, Europeans on Smoking and the Environment, 2002

34. Most consumers think ethical issues are important People agreeing the following are important to them personally 91 89 90 80 73 70 70 66 66 60 49 48 2004 50 45 2005 40 30 20 10 0 Being able to buy ethicallyproduced goods Reducing thepackaging on the products you buy Being able to buy locally produced goods Being able to recycle your rubbish Avoiding fresh fruit and vegetables that have been importedand transported from thousands of miles away Source: Henley Centre Planning for Consumer Change 2005 Base: Total population. Rebased for very/fairly important; excluding Don’t Know/Not Stated

35. 54%of SUV drivers agree: “I am worried about pollution and congestion caused by cars” There are contradictions between our attitudesand behaviour “We’ve been trying self-enforced abstinence for about 30 years and we’ve got nowhere. Even the environmentalists I know, myself included, are a bunch of complete hypocrites. I know people who pride themselves on buying ecologically friendly washing-up liquid and then go on holiday snorkelling on the Great Barrier Reef and they haven’t got there by bicycle”. George Monbiot The UK government predicts a rise in British aircraft passengers from 180 million to 476 million over the next 25 years Source: BMRB, TGI 2005 (UK population)

36. Growth in chocolate category 2004: 2% Growth in Green and Black’s products: 70% Ethics can make all the difference to the consumer’s choice “Consumers want something that is produced in a responsible manner and I want to show there is cash in it” Richard Reed. Marketing Director for Innocent Sainsbury's re-launched their corn fed chicken range as Freedom Food approved Source: Henley Centre interview 2005

37. Increasing numbers are voting with their feet % of consumers who claim they have done in the past year 2003 2005 Stop buying from companies you feel are supplyingunhealthy products 31 40 Stop buying from suppliers you feel are acting unethically 29 33 Stop buying from companies you feel are damaging the environment 25 28 0 5 10 15 20 25 30 35 40 45 Source: Henley Centre Planning for Consumer Change 2003 & 2005

38. Positive Consumption Fairtrade On The Waist Jeans £35.00

39. Implications for magazines “Instead of seeing money as a means to buying status, luxury goods or an improved quality of life, we also need to consider our money as a vote which we use every time we go shopping.” The Independent, 13 October 2005 • Consumers will increasingly spend their money ‘politically’ • Increasing numbers will be interested in information that informs their values and provides a point of view • Consumers may turn againstcompanies who are not seen to be ‘doing their bit’ In November 2005, PPA, on behalf of the industry, signed up to targets aiming to increase recycling levels to 50 per cent by the end of 2007, 60 per cent by 2010 and 70 per cent by 2013.

40. Increasingly Diverse

41. +100,000 20,000 -100,000 - 20,000 +100,000 20,000 -100,000 - 20,000 Immigration equal to emigration No data Migration is a certainty of modern life Net migration flows Net emigration-countries: Annual average no of migrants (1995 - 2000) Net immigration-countries: Annual average no of migrants (1995 - 2000) Source: United Nations, 2002

42. 0.4 2.2 0.4 4.4 1.6 1.1 1.3 10.9 12.1 3.2 91.3 71.2 The ethnic make-up of the UK is increasingly diverse Distribution of ethnic groups in London (%) Distribution of ethnic groups in England and Wales (%) • Greater diversity in cities: 29% of Londoners belong to an ethnic minority • A majority of today’s black and Asian people are born in the UK and are increasingly second, or third generation White Mixed Asian or Asian British Black or Black British Chinese Other Source: ONS, Ethnic Minorities and the Labour Market 2003; Region in Figures, Census 2001, Population and Migration

43. Some areas of Britain have particular minority concentrations • Bedford is home to the largest concentration of Italian families in the UK - 14,000 people from a total population of around 100,000 • There are 4,000-10,000 Somalis in Cardiff • There are 3,000-5,000 Filipinos in Cambridge, mostly in the small village of Cherry Hinton • There are 5,000 Portuguese in Boston, Lincolnshire http://www.guardian.co.uk/britain/

44. Attractive audiences 72% of the UK South Asian population live in pay TV homes compared to only 39% of the population as a whole. 70% own a computer, vs. 50% of the population as a whole African Asian, Chinese and Indian households have higher average incomes than white households Source: Continental Research Asian TV Study & Continental Research Reports 2003; London Research Centre/Policy Studies Institute

45. “Monopoly UK Desi Edition is a landmark, an historic idea that has never been done before. It is a unique spin on the world’s top selling board game.” Indian entrepreneur Creator of the game “We did some independent research and found that there is in fact a niche in the market for such a version. This game will reflect South Asian culture”. Hasbro spokesman

46. Implications for magazines • Is there sufficient focus on the incoming population? • Eastern Europeans • Africans • Chinese • Is the industry aware of the opportunities to cater for the changing British population? • What proportion of those working in the industry are of non-UK origin?

47. Creating better futures 11-33 St John Street, London EC1M 4PJT +44 (0) 20 7955 1800 F +44 (0) 20 7955 1900 6¦5E betterfutures@hchlv.com W www.hchlv.comLondon New York Delhi Mumbai