10 top takeaways from day 3 of magic 2017 august 16 2017-df€¦ · 10 top takeaways from day 3 of...

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DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

10 Top Takeaways from Day 3 of Magic 2017

TheFGRTteamisinLasVegasthisweekattendingtheMagicconference,whichcoversthemen’s,women’sandchildren’sapparel,accessoriesandfootwearmarkets.Here,weshareour10toptakeawaysfromday3oftheevent.

1) Athleisure2.0ismovingbeyondmaterialstofocusonfashionandcomfort.

2) Datafromsocialmediacanhelpretailersmakebetterandfasterdecisions,includingtrendandinventoryforecasting.

3) Storewindowsandlayoutarestillanessentialdriverforstoretrafficandsalesinphysicalstores.

4) Robots,overtime,canbetaughttomanufactureapparel,anddomesticproductioncanbemadeeconomicalusingleanmanufacturingandmanagement.

5) Fashionisseasonlessandmorecasual,creatingopportunitiesforfashioninnovation.

6) Theproductdevelopmentcyclemustbeshortenedinordertoremaincompetitive.

7) Emergingmarketswilldominatetheworld’stop10economiesby2050.

8) Chinaisnolongeraone-stopshopforsourcing;thingsaremorecomplicatednow.

9) Retailersneedtobecomerelentlessaroundthecustomerexperiencetodriveengagementandretention.

10) ThefinaltakeawayconsistsofcommentstheFGRTteampickedupwhileattendingseminarsandmeetingsatMagic2017.

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1.Athleisure2.0IsMovingBeyondMaterialstoFocusonFashionandComfortThepanelistsincludedownersofshoeandathleticretailersandonemarketanalyst.Weareinthefifthyearofverystrongathleticandsportswearsales.Previously,thefocushadbeenonperformance,andthentheindustrymovedintoathleisure.Wearenowinthesecondphaseofathleisure,orAthleisure2.0,whichtakeswhatwaslearnedintermsofcomfort,variety,colorandfashion,andbringsitfullcircle.

Atthebeginning,shoemanufacturerslookedatmaterialsandtechnicalaspects,nowtheyarelookingatfashion.Everythingthatwasoldisnewagain.Athleticsisnotgoingaway.Oneofthetrendsweareseeingisalotofshoeswithknituppers.

Oneretailercommentedthatthehip-hopandstreetwearmovementseemstobemovingtowardcontemporary.Otherthanbrands,theretailerisfocusedonwherethebuzzisandchasingthenextreleaseandthenextlaunch,whichusedtohappeneverymonth.Nowtherearefiveofsixnewproductlauncheseveryweek.Thecustomerbaseis16to25,andtheyknowwhattheywant,oftenevenbeforetheretailerdoes.

Intermsofcategories,runningcontinuestoperform;basketball,canvasandskatehavesloweddown;andathleisureformencontinuestogainmomentum.

Athleisureisheretostayishowthepanelistssummarizedthecurrentoutlook.

2.DatafromSocialMediaCanHelpRetailersMakeBetterandFasterDecisions,IncludingTrendandInventoryForecastingThespeaker,WendyK.Bendoni,AssistantProfessorandChairoftheFashionMarketingDepartmentintheSchoolofBusinessatWoodburyUniversityandaninternationalretailtrendforecaster,discussedconsumerbehaviorinrelationtosocialmedia,andhowthedatacanbeusedfortrendforecastingformakingbusinessdecisions.Driversofconsumerbehaviorintheonlineworldincludesocialconfirmation,visualconsumption,instantgratification,thesharingeconomy,insta-fashionanduber-connectedconsumers.BendonicommentedthattheaverageAmericanspendsfivehoursadayontheirsmartphone(uponehourfrom2016).Onlinecontributorsstartedasbloggers,andnowconsumersofdigitalcontentcanbeanalyzedas“tribes.”Theyseeksocialconfirmationonline,aremoreaccustomedtosearchingforthingsvisuallyandbenefitfromthepowerofacollectivevoice.

Therearenewtoolsonthemarket,suchasAffinioandEdited,thatempowerresearcherstosiftthroughtheenormousamountofsocialmediadata,forexampleanalyzingattendeesofmusicfestivalssuchasCoachella.Inparticular,thereareatotalof32millionfestivalattendees,ofwhich15millionaremillennials,and“thefestivallook”hashardlychangedin12years,whichoffersanopportunityfornewfashions.Bigdatacanbeusedtopredicttrends,determinewhichproductsaresellingoutanddeterminetheoptimaltimetointroducenewproducts.

Source:affinio.com

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Fashwireisanotherdigitalplatformthatprovidesaninteractivelinkbetweenfashiondesignersandconsumers,anddrivesuserparticipationwithacurateduserexperienceandrobustrewardsprogram.Usersgivetheirpreferencesviaa“swiperight,swipeleft”model,andarerewardedwithdiscountsfrome-tailers,independentspecialtystoresandlargerretailers.Designersgetreal-timefeedbackonuserpreferences.

TheFashwireplatformalsoservesasacommunitywhereusersarefreetoexploreanddiscoverstylesfromthedesigners'collectionsaswellasinspireotherswiththeirownpersonalstyles.SimilartoInstagram,usersofFashwirecanfollowotherFashwireusersanddesigners,likeandcommentontheiroutfits,linkingeveryonetogetherthroughoneapp.

3.StoreWindowsandLayoutAreStillanEssentialDriverofStoreTrafficandSalesinPhysicalStoresSpeakerMichaelNiemtzow,CofounderandPresidentofretailconsultantWindowsWear,beganhistalkwithremarksaboutwell-knownstorewindowdesignersofthepastsuchasGeneMooreofTiffany’sandartistSalvadorDalí.Hedescribedwindowdesign—i.e.,visualmerchandising(VM)—asbothanartandascience.Theartportionissupposedtomakeshoppingfunandeasy,andcreateorderfromthechaosofamultitudeofproducts.VMisthemomentoftruth,atactile3Drepresentationofanythingtoldtoconsumersinamarketingcampaign.Acompany’ssellingstrategyconsistsofthestorewindowandinteriordisplaysthatsupporttheadvertisinggoalsandprofessionalsignageaspartofthecompany’sin-storestrategy,thestore’sdepartmentlayoutsandinteriordécor,themerchandisefixturelayoutsandtheplacementandpresentationofmerchandise.

Niemtzowcontinuedbyanalyzingthephysicalstoreandhumanperception.Thehumaneyeseesclearlyinthecenterandlessclearlyintheperipheralareas,basicallyfromeyeleveltothefloor(theheightofaman’ssuit).Interestingly,mostconsumersturnrightwhentheyenterastore,somerchandiseplacedontherightismoreimportant.Healsodiscussedthearenaeffect,inwhichmerchandiseisplacedhigherattheedgesofthestoresothatvisitorshaveaclearoverviewofthemerchandise.HisanalysisofaRag&Bone(best-in-class)storecoveredtheexterior,useofaudio,theinteriorincludingfixtures,signage,displaysandcashregister,aswellaslightingandsurfacetreatments.Heconcludedbycommentingthattoday,theartofwindowdisplaysisaliveandwell—greatwindowsareelegant,clever,brilliant,playful,artful,resourceful(everydayobjects),whimsicalandintegrateartintotheirdesignsolutions.

4.Robots,OverTime,CanBeTaughttoManufactureApparel,andDomesticProductionCanBeMadeEconomicalUsingLeanManufacturingandManagementThissessionconsistedoftwopresentationstitled,“Robots,Automation:MadeinUSASourcing.”ThefirstpresentationwasgivenbyDr.MikeFralix,PresidentandCEOandTechnologyEvangelistatSoftWearAutomation,whichmakesautomatedsewingrobots.Dr.FralixdiscussedIndustry4.0,whichfollowedIndustry1.0(mechanizationandsteampower),Industry2.0(massproductionandtheuseofelectricity)andIndustry3.0(theuseofcomputersandautomation.)Industry4.0employstheInternetofThings(IoT),thesmartfactoryandmachinesthatcantalktoothermachines(andalsotohumans.)Hediscusseddisruptivetechnologiessuchas3Dprintinganddriverlesscars.Heclosedwithapredictionthatin18months,machineswillbeabletoassembleanentireT-shirt(whichisoneofthemostdifficultgarmentstomanage).

Thesecondspeaker,WillDuncan,CEOofapparelprocessimprovementconsultancyWillDuncan&AssociatesandExecutiveDirectorofSEAMSAssociation,discussedthegoalof

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the“lights-out”factory,whichwillrequirenohumanworkers.Hecontinued,comparingatraditionalgarmentfactorywithoneusingleanmanufacturing,whichusesflexibleworkstationsandworkers,lessinventoryandlessfloorspace,resultinginhigherquality,betteremployeeinvolvementand,ofcourse,lowercosts.Leanmanufacturingtechniquescanbeappliedtomanagementandaswellasadministration.

HeintroducedtheReshoringFashionInitiative,whichaimstoreintroduceleanmanufacturingandbringmanufacturingandassociatedjobsbacktotheUSfromoverseas.HecitedanarticleestimatingChina’scostadvantageatjust4%,duetohigherproductivityintheUS,whichisasmalladvantage.Duncanconcludedhisremarkswith“Ifallowedtodevelopandsucceed,theReshoringFashionInitiativewillcontributetobrands’andretailers’bottomline,whilebringinghigh-qualitymanufacturingtoareashardhitbythelossofjobsinrecentdecades.”

5.FashionIsSeasonlessandMoreCasual,CreatingOpportunitiesforFashionInnovationWeheardfromseveraldifferentretailersandcompaniesinvolvedintheretailspacethattheseasonsarebecomingblurredandthatconsumersarenolongerfollowingfashionrules.Someexamplesincludeseasonlessclothingwheretherearenolimitationsintermsofstyle,colorandmaterials.EdGribbin,President,Alvanon,aretail,apparelandfashionconsultingfirm,suggestedthatwithfastfashion,therearenoseasons,withproductflowingintostoreseverytwoweeks,ratherthanthetypical,fall,winter,springandsummer.Forexample,bootsareworninthesummerwithdresses,traditionalwintermaterialssuchasvelvetandbrocadearenowfeaturedinsummerstyles,andpastelcolorsarewornallyearround.

AccordingtomarketresearchfirmtheNPDGroup,themostsuccessfulshoebrandshaveseasonlesssilhouettes,includingsneakers,mules,strappysandalsandankleboots.Forexample,thetopgrowthsilhouettesyear-to-dateJune2017includesneakers,comprising63%ofgrowth,fashionsportslides(18%),strappysandals(11%),ankleboots(9%)andmules/clogs(4%).

Source:TheNPDGroup

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Seasonlessdressingisalsocreatinginnovationinthefashionspace.AccordingtotheNPDGroup,thereisinnovationinfootwearwithhybridsincluding“EspadrilleSneakers,”NikeAirHuaracheGladiators,”andpeep-toeboots,tonameafew.

Consumersarealsoincreasinglymorecasualandareseekingeaseandcomfortintheirwardrobe.Thistrendisevidencedeverywhere—withMen’sFashionfeaturinganarticleon“10waystowearsneakerswithsuits”andthesneaker-with-everythingtrend.PanelistSteveHawkins,SVPofSalesforAmericanTextile&ApparelofGrupoKarim’s,alsohighlightedthatthetrendintheUSismorecasualthanever.Hesaid“Billionairesaregoingtoworkwithhoodiesandflip-flopson.Itisn’twhatitusedtobe.”

6.TheProductDevelopmentCycleMustBeShortenedinOrdertoRemainCompetitiveInapanelpresentationtitled,“YouWantFasterFashion?You’reCloserThanYouThink:SourcingfromTheAmericas,”EdGribbin,PresidentofAlvanon,suggestedthatthereasonthatretailersarestrugglingandthattherehavebeenmorebankruptciesin2017thansincetheglobalfinancialcrisis,isthattheproductdevelopmentcycleisbroken.Today’sprocurementprocesshaschangedbasedonconsumershifts;consumersaretechnology-drivenandunpredictable,andassoonasatrendhits,theywanttobeabletopurchaseitimmediately.Today,retailersareoperatingonacycletryingtopredictwhataconsumerwantstobuy18monthsfromtoday,whereasaresponsivesupplychaincanrespondwithin2–3weekstocapturethatdesire.

Source:FGRT

Gribbindescribedfast-fashionretailerZara’svalueproposition,whichisnewnessandscarcity;onceitsproductisgonefromthestores,itisgone.GribbinhighlightedasurveyperformedbytheNPDGroupthatfoundthattheaverageshopperthatisbrandloyalvisitsthestore4.1timesperyear,whereastheaverageZarashoppervisitsaZarastore17timesperyearbecausetheyareafraidtheyaregoingtomisssomething.AccordingtoGribbin,65%ofZara’sproductionisbasedonproximity—allofitsproductscanbedeliveredfromthefactorybyairwithinonedaytoanyofits4,400stores.Zarahasthehighestinventoryturninthebusiness,andGribbinemphasizedthattakingalessonandshorteningthefront-endtimeacompanytakes“fromdesigntoontheback”willsavemoneyonmarkdownsinthelongrun.

Retailerswillhavetotransformthemselvesinordertobecompetitive.SteveHawkins,SVPofAmericanTextile&ApparelofGrupoKarim’ssaidthatreducingturnaroundtimestakesalotofcollaborationandcommunicationbetweentheretailersandfactoriesbecausethefactorieshavetoplanforequipment,staffingandoverallinfrastructureneeds.

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7.EmergingMarketsWillDominatetheWorld’sTop10Economiesby2050Inthepresentation,“2050:KeyApparelSourcingCountries—FutureView,”RonKlein,DirectorofRetail&ConsumerManagementatmanagementconsultancyfirmPwC,presentedmegatrendsthatareshapingtheworldtoday.Lifeexpectancyislonger,thereisincreasedurbanization,anemergingmiddleclass,increasesinglobalsupplychainsandcompetitionforglobaltalent.Intermsofenvironmentalconditions,thereisanemphasisonsustainabilityandenvironmentalprotection,coupledwithresourcescarcity.Insocietyandculture,therearechangingeconomicalliances,consumersophisticationanddiversity,andtransformingfamilystructuresincludingwomenintheworkforce.

Source:PwC,2050:KeyApparelSourcingCountries—FutureView

AccordingtoaPwCstudy,Chinawillbecomethelargestglobaleconomyby2050,intermsofbothpurchasingpowerparity(PPP)andmarketexchangerate(MER).ChinawilltoptheGDPrankings,increasingtoapproximately20%globally.IndiawillalsoovertaketheUSinPPPtobecomethesecond-largesteconomy,nearlydoublingitsworldGDPsharetoreachapproximately15%.TheUSwillfalltothirdplaceintheglobalGDPranking,withitsshareofworldGDPdroppingtoapproximately12%.Emergingmarketswilldominatetheworld’stop10economiesby2050.Indonesia,Brazil,RussiaandMexicowillovertakeJapanandGermanyby2050,accordingtothestudy.

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8.ChinaIsNoLongeraOne-StopShopforSourcing;ThingsareMoreComplicatedNowApparelretailershavedecreasedtheirrelianceonChinaandincreasedtheirrelianceonotherpartsofAsiaformanufacturing.TherearefourchallengesintheChinabusinessenvironmentthataremakingsourcingmoreexpensive,accordingtoaPwCstudy:

1) Wageincreases:WageratesinChinaare2x–8xhigherthaninSoutheastAsia.Therehavebeenincreasesofapproximately8%inrecentyears,andgovernmentpoliciesconcerningminimumwageandsocialwelfarearebecomingstronger.

2) Realestateappreciation:Realestatevaluationshaveincreasedinthepastdecade,withrentalratesrisingasmuchas11%yearoveryear.

3) Renminbiappreciation:TheChinesecurrencyhasappreciatedbyapproximately25%relativetotheUSdollarinthepast10years.

4) Stricterenvironmentalregulations:Weareseeingincreasedgovernmentalregulationsbeingimposedonhigh-pollutionindustries.

TheresultofthesefourchallengesisthatthecostofsourcingfromChinaisgoingup.WeareseeingfashionmanufacturingmovingoutofChinatoSoutheastAsiancountries,includingThailand,VietnamandIndonesia.AccordingtoKlein,manufacturersarefollowinglowerwagesandloweroperatingcosts.ThechallengesthatneedtobeovercomebymovingoutofChinaincludelowerworkerproductivity,underdevelopedinfrastructureandculturaldifferences.Thefigurebelowwasbasedona2015benchmarkingsurveybytheUnitedStatesFashionIndustryAssociation(USFIS),whichshowsthetrendofretailersdecreasedrelianceonChinaandincreasedsourcingfromotherpartsofAsia.

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9.RetailersNeedtoBecomeRelentlessAroundtheCustomerExperiencetoDriveEngagementandRetentionCustomercentricityiscreatingapositivecustomerexperiencebothatthepointofsaleandpost-sale,throughouttheentiree-commercejourney.Acustomer-centricapproachcanaddvaluetoacompanybyenablingittodifferentiateitselffromcompetitorswhodonotofferthesameexperience.

Inhispresentation,“CreatingASearch+SocialStrategy:DriveCustomerAcquisition,Engagement&Retention,”LewisBrannon,SeniorPaidSearchManageratCPCStrategy,aretail-focuseddigitaladagency,saidthattherearefivecoreelementsofcustomercentricitytodriveengagementandretention:

1) Experience:Thisinvolvesensuringthebrand’svalueisconveyedonthewebsite,thecheckoutprocessissmooth,thereturnspolicyisfreeandtheadexperienceistargeted.

2) Selection:AccordingtoBrannon,itisveryimportantforacompanytostrivetoofferitsfullcollectiononitswebsite,includingpartnerproducts.Onceyouloseane-commercecustomer,itisdifficulttogetthemback.Merchandisingonthewebsiteisveryimportant.Ifyouhaveanoffer,displayitprominentlyonthehomepage,whichhelpstodriveconversionratesup.Brannonrecommendedusing

Source:FGRT

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GoogleAnalyticstodiscovertheitemsthatcustomersaresearchingmostfrequentlyfor,andmerchandiseyourwebsitebasedonthesearchengineresults.

3) Price:Customersappreciateafairprice.Brannondiscusseddiscounting,andalthoughthereiscontroversyaboutwhetherthiscancausebranddilution,discountingonthewebsitedrivesconversionrates,upto50%higher.

4) Communication:Thebenefitofhavingadirecttoconsumer(DTC)strategyisthatbrandscanspeakdirectlytothecustomer.WithDTC,themiddlemanisremovedandbrandscontrolthemessage,andalsohavetheabilitytocollectfirst-partyuserdata.Forexample,byusinganalyticssuchasFacebookAudienceInsightsandGoogleAnalytics,retailersareabletocollectcustomere-maildata,trackpixels,(adwords,Facebook,e-mailplatforms)andpurchasehistory,andthencustomizewebsitesbasedonthatdata.

5) Relationship:BrandscancreateVIPsasawaytostrategicallytargetthebestcustomerswhobuymultipletimes.OnewaytobuildVIPsisthroughloyaltyprograms,suchasthoseofSephora,StarbucksandAmazon.AnotherwaytobuildupVIPstatusistocreateaninfluencerprogram,wherecustomersreceiveasneakpeekintonewproductsbeforetheylaunch.Specialpromotionsandcommunicationswithpastpurchasestocreatelifetimevaluearekeytoincludeinmarketing.Facebookhasa“lifetimevaluetool”builtintoittotrackhowyourbrandisdoing.

10.CommentstheFGRTTeamPickedUpWhileAttendingSeminarsandMeetingsatMagic2017(SortedAlphabeticallybyCategory)

Apparel• “Thereisahugeopportunityindressyathleisurewear.”

• “HowdowethinkaboutthemoveofNiketoAmazon?”

• “WewanttoworkwiththesupplierthatsuppliesAmazon(privatelabel).”

Consumers• “Weareusingabarbellstrategywithourcustomers.TheyareeitheraVIPorwe

letthemservethemselves.Itisdrivingthetoplineandmargins.”

• “Consumershavemoneytospend—wejusthavetomakeiteasyforthem.”

• “HowaboutChineseconsumersshoppingintheUS(fromChina)?Howdoweservethembetter?”

• “Wheredowegetthebestbangforourmarketingbuck?”

• “ThinkabouttheBonobosin-storeexperience—howcanretailadoptmoreofthat?”

E-Commerce• “Anonlineexperienceinthestoreiswhatconsumersdesire.”

• “Howdowedecreasereturns?”

• “Itisabigchangeintrendtopresentbyclassificationversusbrand.Presentingbyclassificationandbybrandisgettingdoubleexposure.”

• “Howdoweknowwhichinfluencerstopartnerwith?”

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• “Incertaincategories,wearenowat30%–40%e-commerce.Ithasfarexceededourexpectations.”

Innovation• “Manyoftheseteststoresarestillretoolingatagreatexpense.”

Magic• “Ijustgotanewbuyer,”wasthemostfrustratingsentenceheardatMagic.

• “Iamtheanti-MarthaStewart.Weallhaveourimperfections,”saidonecelebrity!

RealEstate• “Shoppingcenterrealestateinvestmenttrusts(REIT)arejustgettingstartedin

turningthingsaround.”

Retail/PhysicalStores• “Whentheseretailersarecompingnegative5%eachyear,theirstoresareactually

getting5%biggereachyear.”

• “Whycan’tsomethingbedonewithalloftheemptyshopwindows?”

• “Weneedmoresee-now,buy-nowtodrivethetopline.”

• “Wethinkthereisstillalotofopportunityforpop-upstores.”

• “Whatpercentageofshoeswerenotondisplayandavailableforsale—Iaskedseverallargebrandswhentheyvisitedretailerstheyworkedwith.Theanswer:Atleast33%.”

• “Thereismoreopportunitytosupportretailersinthestockroomtodriveavailabilityofproduct.”

• “Thereisamovetoself-service,eveninhigh-enddepartmentstores.Theconsumerdoesnotseemtomind.”

• “Experientialretailisthefuture.”

Technology• “Mirrorsthatarepoweredbyartificialintelligence(AI)thatcanhelpyouchoose

yourwardrobeanddetermineyoursizearewhateveryretailer,brandandconsumerisstilldreamingofonalargescale.”

• “Weneedstandardsforshoppablevideobecausewhathappenswhenalloftheseappscomeoutatthesametimethatarenotcompatible?”

• “Thereisahugeopportunityforradio-frequencyidentification(RFID)infootwear.”

• “Beaconsarelessofafocus.”

• “Howcanwereallyuseaugmentedreality(AR)?”

• “Thefutureistrulyomnichannel.”

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DeborahWeinswig,CPAManagingDirectorFGRTNewYork:917.655.6790HongKong:852.6119.1779China:[email protected],CFASeniorAnalyst

ErinSchmidtResearchAssociate

HongKong:2ndFloor,HongKongSpinnersIndustrialBuildingPhase1&2800CheungShaWanRoad,KowloonHongKongTel:85223004406London:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NewYork:1359Broadway,18thFloorNewYork,NY10018Tel:6468397017FungGlobalRetailTech.com

10 top takeaways from day 3 of magic 2017 august 16 2017-df€¦ · 10 top takeaways from day 3 of...

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