icsc nartf meeting tech talk
TRANSCRIPT
ICSC NARTF Meeting Tech Talk
Deborah Weinswig
Managing Director
Fung Global Retail & Technology July 15, 2016
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Agenda
• About Us
• Retail Environment Overview
• Top 10 Retail & Technology Trends
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About Us
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Fung Holdings (1937) Ltd.
A privately held entity and major shareholder of the Fung Group
About Fung Group
Li & Fung Limited Listed on SEHK
Global Brands Group Listed on SEHK
Fung Retailing Limited Privately Held Entity
Convenience Retail Asia Limited
Listed on SEHK
Trinity Limited Listed on SEHK
Branded Lifestyle Holdings Limited
LiFung Kids (Holdings) Limited
Toyrs “R” Us (Asia)
Suhyang Networks
UCCAL Fashion Group Privately Held Entities
DISTRIBUTION RETAILING LOGISTICS TRADING
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Retail, Tech and Fashion
• Fung Global Retail & Technology advises retailers, real estate developers, tech companies, and others on projects situated at the intersection of retail, tech and/or fashion.
• Our team offers a robust knowledge bank and deep-rooted experience across the retail, fashion, and tech industries. We are involved in many areas of the business, which allows us to offer a unique perspective on the future and where the sector is heading.
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About Fung Global Retail & Technology
• The knowledge bank for the Fung Group
• Focuses on emerging retail and tech trends, specializing in retail and technology intersections, and building collaborative communities.
• Based in New York, London and Hong Kong
• Publishes thematic and global market research on topics such as the Internet of Things, digital payments, omnichannel retail, luxury and fashion trends and disruptive technologies.
FUNG THINK TANK
RETAIL
TECH
MICRO
MACRO
RETAIL
REAL
ESTATE
THEMATIC
RESEARCH VR
AI
IOT
DIGITAL
DIGITAL
DIGITAL
DIGITAL
HONG KONG NEW YORK LONDON
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Retail Environment Overview
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US Macro Overview: Favorable Backdrop, but Uncertainty Looming
Sources: Energy Information Agency, Bureau of Economic Analysis, Bureau of Labor Statistics, McGraw Hill Financial, University of Michigan Survey of Consumers
Continued Gas Dividends
Strong Job Market
Strong housing starts
and rising house prices
Inflation still below target expectations
Global uncertainty
weights in on Fed action,
business investment
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US Macro Overview: Favorable Backdrop
Indicator Period 2016 2015 YoY
Change Impact on
Consumption
GDP Growth Q1 1.1% 0.6% 50 bps +
Gas Price ($ per gallon) Jul. $2.25 $2.83 (20.5%) +
Unemployment Rate* Jun. 4.9% 5.3% (40) bps +
The S&P/Case-Shiller 20-City Composite Home Price Index Apr. 186.6 180.6 +3.3% +
Consumer Price Inflation May 1.0% 0.0% 100 bps +
Savings Rate May 5.3% 4.8% 50 bps −
Wage Growth May 4.6% 5.3% (70 bps) −
University of Michigan Consumer Sentiment Jun. 93.5 96.1 (2.7%) −
Sources: Energy Information Agency, Bureau of Economic Analysis, Bureau of Labor Statistics, McGraw Hill Financial, University of Michigan Survey of Consumers 9
GDP Expected to Grow Over 2% in Q2
• GDP annualized growth slowed to 1.1% in Q1, down from 1.4% in Q4 2015, but strongest Q1 in three years
• The upward revision was due to increasing US exports and growing investment, and offset by decreasing PCE.
-0.9%
4.6% 4.3%
2.1%
0.6%
3.9%
2.0%
1.4% 1.1%
2.3%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
US GDP Growth Rate
Source: Bureau of Economic Analysis/Fung Global Retail & Technology 10
Home Prices and Residential Investment Also Positive
Source: S&P Dow Jones Indices /US Bureau of Census
S&P Case Shiller 20-City Housing Index Housing Starts YoY Growth (%)
9.5
(10.0)
0.0
10.0
20.0
30.0
40.0
May-14 May-15 May-16
0.5
5.4
(10.0)
(5.0)
0.0
5.0
10.0
15.0
20.0
(1.0)
(0.5)
0.0
0.5
1.0
1.5
2.0
Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16
%
%
MoM% (left) YoY% (right)
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Consumer Spending is Supporting GDP Growth
Sources: Bureau of Labor Statistics/University of Michigan/Conference Board
93.5
40.0
60.0
80.0
100.0
120.0
Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16
Consumer Sentiment & Consumer Confidence
3.7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
May-10 May-11 May-12 May-13 May-14 May-15 May-16
Total PCE YoY Growth (%)
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The Labor Market is Supporting Consumer Spending
Sources: Bureau of Labor Statistics/ Bureau of Economic Analysis
Real Wage Growth (%) Unemployment Rate (%)
4.9
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16
3.5
1.0
2.0
3.0
4.0
May-10 May-11 May-12 May-13 May-14 May-15 May-16
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Inflation Pace Still Modest
US Gasoline Price CPI YoY Change (%)
Source: US. Bureau of Labor Statistics/EIA
$2.25
$1.50
$1.75
$2.00
$2.25
$2.50
$2.75
$3.00
Jul-15 Nov-15 Mar-16 Jul-16
2.2
1.1
(0.5)
0.0
0.5
1.0
1.5
2.0
2.5
May-12 May-13 May-14 May-15 May-16
CPI-U Less Food and Energy CPI-U
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1Q Retail Wrap-Up: Winners and Losers
Company Actual Consensus
Burlington 4.3% 3.2%
Dollar Tree 2.3% 2.1%
Five Below 4.9% 4.2%
Michael Kors 0.3% 0.2%
TJX 7.0% 3.2%
ULTA 15.2% 10.7%
Urban Outfitters 1.0% (0.4%)
Wal-Mart 1.0% 0.5%
1Q Comps/Sales Actual vs. Consensus Results
Company Actual Consensus
Abercrombie&Fitch (4.0%) 1.5%
Chico’s (4.2%) 0.0%
Costco 0.0% 0.9%
Dillard’s (5.0%) (2.3%)
Dollar General 2.2% 2.4%
Foot Locker 2.9% 4.5%
Guess (4,2%) (1.6%)
H&M 5.0% 9.0%
JCPenney (0.4%) 3.2%
Kohl’s (3.9%) 0.2%
Macy’s (6.1%) (3.4%)
Nike 11.0% 12.0%
Restoration Hardware 4.0% 6.1%
Ross Stores 2.0% 2.5%
Target 1.2% 1.7%
Source: StreetAccount 15
Brexit: Declining Consumer Confidence
Metric Before Brexit
After Brexit
Likely Outcome
GDP YoY (%) 2.3% 1.5% −
Consumer Price Inflation
0.3% 3.0%* +
GFK’s Consumer Confidence Index
-1 -9 −
Prime Central London House Price YoY (%)
0.5% -0.6% −
FTSE 250 Index 17,330 14,670 −
FX Rate (USD/GBP) 1.49 1.32* −
Interest Rate 0.5% 0.5%* −
*JP Morgan Estimate *FTSE 250 Index: Market closed on Jun 23rd vs. Market closed at Jun 27th *FTSE: Market closed on Jun 23rd vs. Jun 27th *MPC’s decision on interest rate: As of Jul 11th Source: OCED/S&P/Knight Frank/GFK/ONS/FTSE/Thompson Reuters/Bank of England
• Affluent Consumers are expected to take a greater hit
• Younger Consumers without mortgage or stock market exposure are less affected
• Middle-Aged & Retired Consumers are the most cautious and anxious group, with the most exposure to the consumer finance metrics
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Brexit Reinforces Existing Retail Trends in the UK
Low-Price Positioning Internet Pure Play Young-Shopper Base
Grocery discounters are likely to gain from heightened consumer caution, particularly among family-
life-stage and older shoppers
Ecommerce will grow even faster, as digitally savvy younger consumers prove a resilient segment and other age groups switch channels to pursue
bargains
Young-fashion retailers that combine value with style are
likely continue to make headway
We believe grocery discount channels, young-fashion brands and E-retailers will stand strong after Brexit
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Prime Day vs. Singles’ Day
Prime Day Singles’ Day
Date 07/15, debuted in 2015
07/12, 2016
Every 11/11, debuted in 2009
Channel Amazon’s global sites Alibaba, JD.com, Suning, Gome, Haier
Market US, UK, Spain, Italy, Germany,
France, Canada, Australia China, US
Sales $525M* Blockbuster record of $14.3B for Alibaba
Growth 26%* 236%
Compared with Cyber Monday
0.14 X 4.7 X
Disappointment vs. Record-Breaking Sales
*FGRT Estimate 18
Selfie Culture Has Resulted in a Shift to Beauty Spending Over Apparel
• The beneficiaries of the shift in culture are the emergence
and ubiquity of hair salons (Drybar), makeup application
services (Blushington) and skin services (Skin Laundry)
• Sephora and Ulta have also reported stellar results of late
“Selfie culture, if you take a photo 10 times today... the result is people are using more makeup and more instant skin care.”
Fabrizio Freda, CEO of Estée Lauder
Social media has made millennials more physically aware of their appearance
Industry Global Revenue 2015 Annual Growth
10−15
Cosmetics $276bn 3.2%
Apparel $618bn 0.6%
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Store Traffic Continues to Decline
• US mall traffic has decreased for 43
consecutive months and continues to
be challenging
• Malls have seen an average 9.1% YoY
decrease in traffic since January 2015
– High-end malls appear less affected
– General Growth Properties: traffic up 2% in 2015
– Simon Malls: traffic up 1.5% in 2015
– Taubman Centers: traffic up in 2015 -30%
-25%
-20%
-15%
-10%
-5%
0%
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Monthly US In-store Traffic and Sales YoY%
Traffic Sales
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Source: RetailNext
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
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Monthly US In-store Traffic and Conversion Rate YoY%
Conversion Traffic
But Conversion is Up: Shoppers are More Purposeful
• YoY % for conversion rate has stayed positive despite the continuous drop in traffic
• A greater portion of store traffic are converted into real dollar sales, indicating fewer window shoppers
Source: RetailNext
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Direct DC
Store DC
Your Store
Different Store
Vendor
Where Received Fulfilled By Order From
All-Channel Universe
Source: Hudson’s Bay
Home
Elsewhere
Your Store
Different Store
Home
Elsewhere
Your Store
Different Store
Mobile
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Why People are Leaving the Stores
Getting Hungry Need to Go to Bathroom Long Checkout Lines
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Lousy Dressing Rooms
Consumers Buy More Services, Less Goods
0%
1%
2%
3%
4%
5%
6%
7%
8%
% of Total Personal Consumption Expenditure by Category
Clothing and footwear Recreation services Food and accommodations
Source: Bureau of Economic Analysis 24
Experiences Trump “Things”
Experiences are what people
use to define themselves across
social channels
Over the next 5 years US consumer
spending is forecasted to grow by 22%;
non-essential categories, including
vacations and dining out, will see the
fastest growth, about 27% (Mintel)
More than 3 in 4 millennials would
choose to spend money on a
desirable experience
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The Instagram Effect: Never Be Photographed in the Same Dress Twice
26
Back To School 2016: Anticipate Savvy Parents
• Customer Growth Partners forecasts a 3.3% ‘Sluggish’ Growth for the 2016 Back-to-School Season, a marked slowdown from the 4+% growth seen in both 2014 and 2015
• But parents are getting savvy about how they will complete their shopping list: with more coupons and online shopping, according to NRF’s latest survey
38%
26%
28%
17%
18%
27%
37%
28%
26%
20%
20%
27%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Shopping for sales more often
Using coupons more
Buying more store brand products
Spending less overall
Shopping more online
Back-to-school plans will not change 2016
2015
Source: NRF Back-To-School Spending Survey, conducted by Prosper Insights 27
Top 10 Retail & Tech Trends for Mall Operators
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Top 10 Retail & Tech Trends for Mall Operators
1. Experiential Retail
2. Smart Malls
3. Augmented Reality+Virtual Reality
4. Facial Recognition
5. Interactive Displays
6. Robotics
7. Evolving Pure Play
8. Reverse Logistics
9. Mobile Payments
10. Gamification
Experiences, In-store technologies, and Customer Engagements Are Key
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1. Experiential Retail: Beauty
Facial & Spas Makeup Parlors Salons
Bloomingdales: Drybar opened its first Soho store on the 1st floor within Bloomingdales in 2015
ULTA: offer one-to-one hair style consultations in the in-store salon bar
Lush: in-store Hair Lab to try products before purchase
Origins: free, walk-in mini facials available at Origins stores
Anastasia: opened its brow studio inside Sephora’s 5th Ave location in Mar. 2015
Sephora: in-store beauty bar and touchup service
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Urban Outfitters: launched UO café in Herald Square, NYC
Club Monaco: features Toby’s Estate Coffee in its flagship store on 5th Ave
1. Experiential Retail: Food
Independent Cafes Pop-Up Food Truck
Macy’s: Chef Street food truck court offering all-day dining services at its Herald Square location
Old Navy: tee & ice-cream giveaway truck popped up in NYC, 2016
In-Store Food Treat
LOFT: caters cupcakes from Magnolia Bakery NYC to celebrate National Cupcake Day
Anthropologie: pop-up market in Soho featuring Brooklyn-based Gimme Coffee and local-sourced bakeries
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1. Experiential Retail: Health & Wellness
Workout at Mall
CoCo-Mat’s: in-store “Nap Chambers” available for free-booking and napping
Nike, Lululemon, Athleta, Rebecca Minkoff: free in-store fitness classes like yoga and HIIT available for sign-up
Free Fitness Classes Nap Lounge
Singapore: health promoting malls like the Star Vista partner with professional instructors to organize weekly workout session
2.
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1. Experiential Retail: Entertainment
The Dubai Mall: has one of the largest indoor aquariums in the world.
American Dream Meadolands: first indoor skiing facility in the U.S., projected to launch in spring 2017
Indoor Skiing Facility Aquarium In The Mall
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Mall of America: indoor entertainment facilities include roller coasters
Indoor Amusement Park
2. Smart Mall: Reshaping the Physical Shopping Experience
Data-enabled personalized and timely promotions
Track movement, behavior and preferences
Beacon-enabled, location-based advertising
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2. Smart Malls: Reshaping the Physical Shopping Experience
RETAILNEXT: works with stepsaway, an in-mall mobile retail solutions provider to offer shoppers smartphone access to hyperlocal in-store deals
WESTFIELD LABS: Silicon Valley based unit that designs and develops innovations to improve the retail experience
MACERICH: partnered with HGTV to launch virtual and hands-on technology-based experiences
35
Rebecca Minkoff Connected Store Demo
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Lowe’s Holoroom allows customers to see different merchandise and color combinations as they would appear in a home
Tommy Hilfiger stores have virtual reality headsets that allow visitors to experience runway shows
3. Augmented Reality+Virtual Reality
Research firm MarketsandMarkets forecasts that the combined AR and VR markets will reach $151 billion by 2022, and the retail applications of AR and VR are nearly limitless.
Source: Digital Trends/Ad Age
Pokemon Go: augmented reality, the game is driving traffic to stores.
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Coke Cola tested 50 interactive fridges across Australia which could detect customer’s demographic information and change displays
actiMirror is an in-store, mirror-like display that identify the customer’s demographics and make instant personalized product
4. Facial Recognition
Applications are expanding from health, wellness, beauty and advertising into theft prevention
The global Facial Recognition market is forecasted to grow from $2.77 Billion in 2015 to $6.19 Billion by 2020, at a CAGR of 17.4%, according to MarketsandMarkets.
Source: Digital Trends/Ad Age 38
5. Interactive Display
PERCH is a digital platform that responds with dynamic digital media as customers touch and pick up products
FRANKMAYER specializes in designing and producing interactive point-of-purchase displays and kiosks. GE light display for customer testing of bulb hues in different lighting settings
TUKU is a tap-to-learn in-store information tool that presents information in an easily digestible manner.
Interactive display uses online or offline interactive media to communicate with consumers and to present and promote products, brands and services
39
SoftBank: Pepper acts as a sales assistant to engage with customers in-store
6. Robotics
Henn-na Hotel: robots are replacing the human servers in the Henn-na Hotel Nagasaki from front desk to kitchen
The global robot market is growing rapidly at a CGAR of 17%, expected to reach $135 billion by 2019
40
Amazon Robotics: Founded in 2003, Amazon robotics has automated the entire fulfilment center operations with autonomous mobile robots
7. Evolving Pure Plays
4 22 2 1 8 150
1 400 122 1 3 3
5 32 25 12 2
Number of Actual/Planned Physical Stores
41
Gilt customers can now make returns at any Saks Fifth Avenue/OFF 5th locations
Happy Returns offers return kiosks in high-traffic areas (e.g., shopping malls) that takes returns for retailers and repackages them, reducing return costs for retailers
8. Reverse Logistics
Retail Industry has $260.5 billion worth of merchandise returned or 8% of total sales
In-store returns from e-commerce companies can increase traffic to malls and decrease fraudulent returns
Source: Digital Trends/Ad Age 42
9. Mobile Payments are Changing the Landscapes
# of Accepted Locations
>2,000,000 > 30 million > 700,000 > 300,000 >200,000
+ Apple Watch is
compatible
Secure – Unique
security code for
each transaction
Compatibility with
existing terminals
No additional
investment for
retailers
Works on any
Android device
Support from major
retailers: Staples,
Walgreens,
Wholegoods
Users need QR-
codes only
Works on all
operating systems
Part of the
Alibaba’s
ecosystem
Provides users with
additional wealth
management tools
and services
Only works with
NFC-enabled
registers
NFC terminal cost
retailer $500 or
more
Not accepted by
major retailers:
Walmart, Target,
Best Buy
Limited device
options − Samsung
Galaxy S6
Magnetic strip
reader requires
tricky position for
phone
Uses NFC
technology
Few stores outside
of Asia support
WeChat Pay
Vulnerable in the
face of frauds and
hackers’ attacks
Lack of third-party
regulations
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32.1 billion red envelopes
516 million Users *
Chinese Lunar New Year 2016
~74% of all WeChat users
903% Y-o-Y growth since
introduction of
red envelopes
* Over 92% of those senders were reportedly between the ages of 20 and 29
9. Mobile Payments: P2P Payments Explode on WeChat
44
• The global gamification market will worth
$10.02 billion by 2020 with a CAGR of
42.4%, according to Mind Commerce
• North America is currently leading the
market, followed by Europe
• By 2020, North America market will have
a value of $6.9 billion followed by Europe
with $1.9 billion
Source: Mind Commerce
10. Gamification
1.7
3.0
4.0
5.5
7.5
10.0
2015 2016 2017 2018 2019 2020
Global Gamification Market Forecast in $ Billion 2015−2020
45
Geo-location engages customers at venues
Injects relevant retailer content and promotions
Helps retailers increase store foot traffic and sales
The average consumer attention span is 8 seconds
10. Gamification: Skrownge Skrownge is a gamified solution to increase store traffic via promotion rewards
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