The Veloc i ty of Change:To t a l p r i c i n g t r a n s f o r m a t i o n i n a

d a t a - d r i v e n d i g i t a l r e t a i l e r

Who is Shop Direct?

Who is Shop Direct?T h e h o m e o f Ve r y, L i t t l e w o o d s a n d L i t t l e w o o d s I r e l a n d

Our flagship brand with a range that includes Fashion, Electrical and Furniture plus over 1,800 of the

worlds biggest brands

This is where it all began as a catalogue retailer way back in 1932

Ireland’s leading online department store, delivering over 2 million parcels in the Republic of Ireland each year

Our s tory to dateWe ’ v e e v o l v e d o v e r t h e l a s t 1 5 y e a r s

SURVIVAL-LED BUSINESS-LED CUSTOMER-LED

2003-07Integration and consolidation

2007-12Catalogue to etail capabilities

2013 onwardsVery – explosive growth 20%

100% digital

54%

64%

69%

77%

82%87%

91%94%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012 2013 2014 2015 2016

% of Online Orders

Product proposi t ionT h e h o m e o f b i g b r a n d s a c r o s s f a s h i o n , s p o r t s & b e a u t y

Product proposi t ionT h e h o m e o f b i g b r a n d s a c r o s s t e c h n o l o g y a n d t o y s

Product proposi t ionT h e h o m e o f b i g b r a n d s a c r o s s h o m e a n d a p p l i a n c e s

Our credi t proposi t ionT h e h o m e o f b i g b r a n d s a c r o s s h o m e , f a s h i o n a n d t e c h n o l o g y

A Choice of ways to pay so you can get the most out of

every day

Spread the cost when you don’t want to pay all in one go

A Range of flexible payment options designed to suit you

Split the Cost into three easy payments

BUY NOW, PAY LATER

Delay payments for up to a year depending on

offer

FLEXIBLE PAYMENTS

A choice to pay the minimum payment or

more, when it suits you

Our miss ion

Case StudyT h i s i s e v e r y t h i n g Ve r y. c o . u k k n o w s a b o u t S t e v e

SteveRecruited: 15/01/04Date first order: 27/03/10 for £169Credit limit when account opened: £150Current credit limit: £7700Date last missed a payment: 05/12/15Life time: £28,483 + £24 Admin + £35 InterestWebsite visits: 3748 visits

0%10%20%30%40%50%60%70%

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Where does Steve spend his money? What is his returns rate?

020406080

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J A J O J A J O J A J O J A J O J A J O J A J O J A J O J A J O J A J O

2011 2012 2013 2014 2015 2016 2017 2018 2019

0

100

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2011 2012 2013 2014 2015 2016 2017 2018 2019

Desktop Mobile App

Which device does Steve use?

HOME APPS

TECHMENSWEAR

SPORTS & LEISURE

OTHER FASHION

GIFTS TOYSHOME

£-

£1,000

£2,000

£3,000

£4,000

£5,000

£6,000

2011 2012 2013 2014 2015 2016 2017 2018 2019

BNPL Take 3

Spend per yearVisits per month

How we ’ re go ing to ach ieve a seamless shopp ing exper ience fo r our cus tomers

Transform the fundamentals of our business to create a world class shopping experience

Modernise our tech, infrastructure that is core to our business

Draw on our data asset and cutting-edge technology to deliver the best personalized and relevant offers that combine brands and credit

Develop Very into a brand that our target customers feel a real emotional connection to

Our Pricing Journey: Think big and start small

Think b ig and star t smal l

The new rules of business fuel innovation

Power comes from sharingEmpower your teamsHow fun!Fail fast to learn fast

W h e r e w e ’ r e h e a d e d

Think b ig and star t smal lD e v e l o p i n g a n d r e f i n i n g o u r p r i c i n g c a p a b i l i t i e s

Think b ig and star t smal lD e v e l o p i n g a n d r e f i n i n g o u r p r i c i n g c a p a b i l i t i e s

2015Adopt

consistent Pricing

Principles

2016Adapt Pricing Capabilities by business area

2017Introduce

Pricing Governance

2018Groundwork for

Revionics

2019Launch

Revionics Base and Promo

Our pricing journey so far

The core components of our pr ic ing p lan

Policy & RulesSetting pricing policies in a collaborative way working

closely with the category teams

ProcessCreating new processes in an

agile way that can be adapted to suit varying business needs

Financial DeliveryMeasuring the success of

price changes

TeamCreating a New pricing team with

people with an array of Skill

DataCollecting, Creating and

Storing the required pricing data

Creating a world class approach to

pricing that profitably improves

price perception

The core components of our pr ic ing p lan

• Internal team members with a background in Analytics and Merchandising • Worked with industry experts to be upskilled in pricing principles • Collaborate with the business / tech • “Adopt & Adapt” operating model to cater for the complexities of a department

store business

Te a m

The core components of our pr ic ing p lan

We have 4 pricing teams at Shop Direct

Te a m

Pricing Capability Centre3 FTEs

Focus on improving our pricing capability using data

and tech

Category Pricing Managers4 FTEs – 1 for each division

Focus on selling Very & Littlewoods price

recommendations to the Category Managers

Pricing Operations10 FTEs

Technical processing of all price changes

Littlewoods Ireland Pricing3 FTEs

Ownership of E2E pricing process for Littlewoods

Ireland brand

The core components of our pr ic ing p lanD a t a

Data held on every customer who has ordered from our stores

All information stored in our data lakes

Analytical support from our Data Scientist team

The core components of our pr ic ing p lanS t r a t e g y, p o l i c y a n d r u l e s

Setting Base Prices

• How do we decide on the Base price?

Policy for Price & Promotions

• How do we decide when to change price and in what way?

Execution

• How do we deliver these price changes effectively?

Strategic Goals for Price & Promotions• What does each

category want to be famous for with regards to the target customer?

• How price sensitive are my customers?

Case Study

Weekly meeting with leadership team to escalate pricing issues

• Attendees: Merchandising Director, Heads of Category, Pricing Team• Weekly tracking of price index vs key competitors• Products / brands that are driving the index up/down• Discuss competitor’s pricing on KVIs• Address outliers and escalate changes to the pricing policy for monthly review• Update on market trends

C h a n g i n g o u r p r i c i n g p o l i c i e s f r o m o u r g o v e r n a n c e p r o c e s s e s

Implementing Revionics

Implement ing Revionics

SS17

SS17Short list and view various demos from

various Software vendors from

around the world

SS18

AW17

AW17Detailed Product

review, Discovery & Future State workshops for

Revionics Software Solution

SS18Revionics Super

user training

Initial System Configuration

UAT and Data Validation

Team pre-engagement

AW18Go Live in Very & Littlewoods with Regular Pricing

on x4 ‘Hot House Categories’

AW18Go Live with Regular

Pricing for the Littlewoods Ireland

brand

SS19Re-org results in

change of ownership of price changes

Implement centralisedLittlewoods pricing

AW19End user

re-engagement

SS19Stabilisation and

Exploration Phase

AW19Revionics Regular

pricing fully utiliseddaily

Case StudyH o w w e e n g a g e d t h e t e a m s

Introduction to Revionics

• Introducing the concept of price optimisation

• How it aligns to strategy• How will Revionics make

things easier for our colleagues

Intro to Rules based pricing

• A session dedicated to the rules that are configured into Revionics

Setting up Product Relationships

• The importance of PLGs and Price Families

• How to set up relationships in our In-house systems

Revionics UI Training

• How to use Revionics UI

Case StudyI T i n t e g r a t i o n

Data LakeNew Cloud Infrastructure

Lessons LearntClear CommunicationWell Documented Processes

Post Go Live Support

How easy is it to make changes / Defect fixing

Adopt then Adapt

Data Validation and User acceptance Testing

Agile ways of working

Implement ing RevionicsS h o p D i r e c t a n d R e v i o n i c s c o l l a b o r a t i o n

Dynamic Zone Index

Pricing

Up to Promotion

Promotion Import

Functionality

Seasonal and Time Based

Forecasting in Scenario 1

Revionics Pricing Improvements

In Flight Promotions

Dynamic PLG Lock Alignment

Future Development

Case Study

Implementation• Categories launched over a couple of

weeks• Most price recommendations were

accepted

Stabilisation• 6 week stabilisation period after launch• No changes to pricing policies made• Anomalies tested and re-configured

Exploration• PE engine turned on• Boundaries widened several times to

allow more price movements• Scenario planning used to model

implications

= + UPLIFT ORPRICED COMPETIVE TO LOCAL MARKET

price

Case Study

Initial resultsImproved sales and units

Improved profit for PE driven recommendationsReduced profit for lines where a more aggressive competitive strategy was introduced

Other lessons learned• Need to understand why the Very price has changed before changing the Ireland price

(reacting to market, investment in price, temporary price reductions)• Clearly defining the difference between pricing policies (our configurations) and pricing

recommendations (Revionics) • When trading is challenging, Revionics can be used to test if price is a contributing factor

Pricing Governance• Pricing Manager feeds into Ireland Trading

Meetings• Performance monitored on a weekly basis• Revionics enables quick reaction to boost

demand and/or margin (narrowing and widening the boundaries, reducing the uplifts)

We are proud of our par tnership wi th Revionics

3 Key Takeaway Messages

Work at the right pace

• Roll-out category-by-category and don’t be afraid to adapt

• Constantly evolve the plan and keep the leadership team engaged

Data, Data, Data

• Use implementation as an opportunity to review current pricing policies

• Use data to agree on the right configurations for each category

We all need to work together

• Team collaboration and innovation is key

• Have hackathons – think outside of the box