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DEBORAH WEINSWIGMANCHESTER 1
FBIC TOP IDEAS ON GLOBAL RETAIL & TECH
Deborah Weinswig
Executive Director – Head of Global Retail & Technology
Fung Business Intelligence Centre—Global Retail & Technology
DEBORAH WEINSWIGMANCHESTER 2
DEBORAH WEINSWIG • Executive Director and Head of Global Retail & Technology for the Fung Business Intelligence Centre
• Award-winning global retail analyst and a specialist in retail innovation and technology
• Mentor to Silicon Valley accelerators including Alchemist and Plug & Play and New York-based accelerator ERA (Entrepreneurship Roundtable Accelerator)
DEBORAH WEINSWIGMANCHESTER 3
What is FUNG BUSINESS INTELLIGENCE
CENTRE (FBIC)
• Established in 2000 and headquartered in Hong Kong
• FBIC has served as the knowledge bank and think tank for the Fung Group
• Collects and analyzes market data on sourcing, supply chains, distribution and retail
• Provides thought leadership on technology and other key issues
• New York-based Global Retail & Technology Team
• Follows broader retail and technology trends
• Provides advice and consultancy services to colleagues and business partners of the Fung Group
• London-based Research Team
DEBORAH WEINSWIGMANCHESTER 4
AGENDA • Retail Tech Ecosystem
• FBIC Top 10 Retail & Tech Trends
• The State of Global Apparel Retail
• Digital Commerce and Retail in the US
DEBORAH WEINSWIGMANCHESTER
INNOVATION ECOSYSTEMS
Universities, Military (Israel), High-tech companies
Source: Adapted from work done by Christian Hernandez
Supply of Talent
Culture and Role Models
Early-‐stage funding & Mentorship
Growth Funding
Ac?ve Exit Markets
Venture Capital Funding
Seed and Angel Investing / Government Programs
Successful Entrepreneurs = Aspirational Role Models
M&A and IPO Activity
Building Blocks of an Ecosystem
DEBORAH WEINSWIGMANCHESTER
ACCELERATORS
!
Entrepreneurs Roundtable Accelerator in NY
TechStars in Colorado.
TrueStart in London
Cocoon in HK
!
!
The New York Fashion Tech Lab is an accelerator that is a result of a collaboration between the Partnership Fund for New York City, Springboard Enterprises, and major fashion retailers focused on targeting early and growth-stage companies that have developed innovations at the intersection of fashion, retail, and technology. Li & Fung’s PMD Program included startups under NYFTL (Laurianne Listo). GBG also mentored a startup.
7
Growing communities of accelerators and VC firms in the
US, the UK and Hong Kong
DEBORAH WEINSWIGMANCHESTER 9
FBIC TOP 15 RETAIL & TECH TRENDS
1. GAMIFICATION reaches fast adoption
2. The RENTING ECONOMY– now an option even for apparel
3. The SHARING ECONOMY – UBERIFICATION of services
4. The SUBSCRIPTION ECONOMY – chipping away at brick-and-mortar stores
5. SOCIAL MEDIA becomes a source of consumer data
6. SMARTPHONES are becoming the hub for digital beauty
7. WEARABLE TECH is already here for early adopters
8. BEACONS and location-based marketing
9. NANOTECHNOLOGY
10. 3D PRINTING
DEBORAH WEINSWIGMANCHESTER 10
1. GAMIFICATIONREACHES FAST
ADOPTION
Source: BI Intelligence/*Annual Ranking of top 2000 Global Public Companies by Forbes Magazine
• According to M2, the market for gamification apps and services rose more than $700 million to $1.7 billion in 2014
• The market is expected to reach $2.8 billion in 2016
• Consumer goods and retail verticals are the largest adopters of gamification solutions
Gamification is the use of elements from video games such as badges,
levels, and leaderboards and can be used to enhance consumer loyalty
Global Mkt. Size and Growth Rate: $2.3 Bil. (2015) @ 35%
20%
70%
0%
20%
40%
60%
80%
2012 2014
Global 2000* Organizations with At Least One Gamification App
DEBORAH WEINSWIGMANCHESTER
2. THE RENTING ECONOMY: NOW AN OPTION FOR APPAREL…AND LEGO
“Netflix for Fashion”
• Designer brand rentals: Rent The Runway has raised $116 million in funding and expects to grow revenues by two-thirds in 2015.
• Midmarket rentals: Le Tote revenues “grew 600%” in 2014.
• Gwynnie Bee and Bag, Borrow or Steal also offering fashion rental options.
Car rental replaces ownership in cities:
• Zipcar has 900,000 members with access to more than 10,000 vehicles in seven countries.
• Rent artwork: Turning Play
• Rent workspace: LiquidSpace
• Even rent Lego: Pley
11
Source: eMarketer/StaDsta
The “Netflix” economy extends into new categories
Rent The Runway Revenue and Growth Rate: $80 Mil. (2015) @ 67%
DEBORAH WEINSWIGMANCHESTER 12
3. THE SHARING ECONOMY:
UBERFICATION OF SERVICES
• Uber is the most visible player (and driver) of the “sharing economy”
• Changing consumer mindsets will challenge retailers
• Opportunities for retailers: How much is convenience worth?
Uber Revenue and Growth Rate: $10 Bil. (2015) @ 300%
DEBORAH WEINSWIGMANCHESTER
4. THE SUBSCRIPTION ECONOMY:
CHIPPING AWAY AT BRICK-AND-MORTAR
• Consumers love the convenience and dependability of the service
• Retailers love subscription models as a source of recurring revenue
• Consumers find value in avoiding the drudgery of shopping for everyday commodity items
• Birchbox opened first store in New York’s SoHo in July 2014
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Global Mkt. Size and Growth Rate: $3 Bil. (2015) @ 30%
Due to their convenience, value, and variety, subscription
businesses are slowly nibbling away at retailers’ businesses
DEBORAH WEINSWIGMANCHESTER 14
5. SOCIAL MEDIA BECOMES A SOURCE OF CONSUMER DATA
Source: eMarketer/StaDsta
Two Billion Social Network Users Worldwide and Counting
Data from social media can be mined for valuable market
intelligence
Plus opportunities in “social commerce”—retailers in China experimenting with selling via
WeChat.
Global Social Media Advertising Mkt. Size and Growth Rate:
$23.7 Bil. (2015) @ 33%
1.0$1.2$
1.4$1.6$
1.8$2.0$
2.1$2.3$
2.4$
0.0$$
0.5$$
1.0$$
1.5$$
2.0$$
2.5$$
3.0$$
2010$ 2011$ 2012$ 2013$ 2014E$ 2015F$ 2016F$ 2017F$ 2018F$Billion
&Users&
DEBORAH WEINSWIGMANCHESTER 15
6. SMARTPHONES ARE BECOMING THE HUB FOR DIGITAL BEAUTY
Several digital technologies are being applied to beauty, including:
• Facial recognition and mapping
• Color matching
• Augmented reality
• Smartphone appsSmartphones are becoming for digital hub for digitally trying on and visualizing beauty products
Tapping the growing, $400 billion global beauty market (2014).
Global Digital Beauty Mkt. Size and Growth Rate:
$50 Bil. (2015) @ 20%
DEBORAH WEINSWIGMANCHESTER
7.WEARABLE TECH IS ALREADY HERE FOR
EARLY ADOPTERS
• Wearable tech has existed for centuries: wristwatches, hearing aids, pacemakers, and headphones
• Advances in electronics, miniaturization, and sensors are making these devices wearable and inexpensive
• Smartwatches are here today … for early adopters
• Health and wellness as well as industrial are huge future applications for wearables
• "Moore's law" is the observation that, over the history of computing hardware, the number of transistors in a dense integrated circuit doubles approximately every two years.
Moore’s Law and advances in sensors and manufacturing are
putting intelligent networked devices into the consumer arena
Global Mkt. Size and Growth Rate: $2 Bil. (2015) @ 40%
16
DEBORAH WEINSWIGMANCHESTER 17
8. BEACONS AND LOCATION-BASED
MARKETING
• What is a beacon?
• Ideal solution for improving in-store retail experience
• 2016 is expected to be the Year of the Beacon
• US installed base expanding rapidly, but consumer response is key to further penetration
Beacon-Influenced Retail Sales Mkt. Size and Growth Rate:
$41 Bil. (2015) @ 100+% Source: Bi Intelligence, Feb. 9, 2015
$41.0
$444.0
2015 2016
Beacon-Influenced In-Store Retail Sales ($ Billion)
DEBORAH WEINSWIGMANCHESTER
9. NANOTECH …IN TEXTILES
• Nanotechnology can make textiles multifunctional and enable the manufacture of smart fabrics
• Nanomaterials give textiles properties such as windproofing and waterproofing, wrinkle and stain prevention, electrostatic protection, and odor resistance
Global Mkt. Size and Growth Rate: $568 Mil. (2015) @ 25%
Nanotech gives textiles increased performance and additional
properties such as wind- and waterproofing
18
DEBORAH WEINSWIGMANCHESTER
… AND IN BEAUTY• Nanotechnology and nanomaterials are used in moisturizers, hair-care
products, make-up and sunscreen
MAIN USES:
• UV filters—some nanoparticles act as UV filters; some particles transmit light, and consumes equate clear products with being natural and clean
• Delivery vehicles—liposomes and niosomes are used for cosmetic delivery
• Encapsulation—polymer capsules used to transport vitamins
Global Mkt. Size and Growth Rate: $270 Mil. (2015) @ 20%
Nanomaterials are used in cosmetics, haircare, sunscreen,
and anti-aging products
19
DEBORAH WEINSWIGMANCHESTER
10. 3D Printing Projected Number of Global Households Owning a 3D Printer
• 60 million households worldwide could have a 3D printer within ten years.
• Coupled with 3D printshops, consumers will be able to print “anything and everything,” further pushing down in-store retail demand.
• The consumer market will not take off for a couple of years—printers need to be easier to use.
Source: FBIC Global Retail & Technology
20
Global Mkt. Size and Growth Rate: $5.2 Bil. (2015) @ 56%
60
0
10
20
30
40
50
60
70
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 M
illio
n U
nits
DEBORAH WEINSWIGMANCHESTER 22
GLOBAL APPAREL SPENDING
ON THE RISE
$0
$450
$900
$1,350
$1,800
Australia Canada Japan EU-27United StatesRussia Brazil China India
2012 2025
Per Capita Expenditure on Apparel Worldwide In 2012 and 2025, by Region
Source: Wazir Management Consultant
Global spending on apparel is on the rise, driven by both developed
and emerging economies
DEBORAH WEINSWIGMANCHESTER
Company
Sales Growth YoY
Total Sales ($ Mil.) *
Gross Margin
US Store Count 2014
US % of Total Stores 2014
Total Global Stores 2014
Total Global Stores 2013
Store # Growth
H&M 18% 20,352 58.8% 356 10% 3,511 3,132 12%
Inditex 11% 21,066 58.3% 55 0.8% 6,683 6,340 5%
17% 8,067 N/A O NM 278 253 10%
Uniqlo 21% 10,043 50.6% 42 1.4% 3,015 2,449 23%
INTERNATIONAL INVADERS SET TO
THRIVE IN US
23
Selected International Brands (FY2014)
• H&M focuses store expansion in US and China markets
• Primark plans 8 US stores by 2016
• Uniqlo will open 5 US stores in spring/summer 2015
Source: Company reports * Sales translated to USD from reporting currency according to EOP FX rates
DEBORAH WEINSWIGMANCHESTER
PRIMARK ARRIVES AT DOWNTOWN CROSSING,
BOSTON THIS FALL
24
• Primark has secured a total of eight properties with the equivalent of 500,000 sq. ft. of retail space (about equal to Zara’s US exposure).
• The semi-disposable clothing with a convincing fashion edge drives weekly visits by Primark’s loyal shoppers—it doesn’t sell online.
• TJX Companies CEO Carol Meyrowitz, on TJX May 19 conference call:
“So I've said it many times. We love being next to Primark and fast fashion because it really just drives the traffic along with the other off-pricers, so it just creates a mecca for us.”
DEBORAH WEINSWIGMANCHESTER
A TWO-TIERED ECONOMY
A widening bifurcation between low and high income households
drives the success of value retailers, fast fashion and off-price retailers as well as luxury brands
while mid-tier retailers suffer.
25
Neiman Marcus Saks
Nordstrom Bloomingdale’s
Macy’s Dillard’s
SVU (former Albertsons Stores) Kroger Kohl’s
Safeway JCPenny
Drugstores (CVS/WAG) Clubs (BJ/COST/Sam’s Club)
Target Walmart
Kmart/Sears Dollar Stores
SVU (Sav-A-Lot)
DEBORAH WEINSWIGMANCHESTER
... AND DEPARTMENT STORES TESTING
OFF-PRICE FORMAT
• Kohl’s will open a single store selling returned items in Cherry Hill, NJ in early June 2015
• Macy’s discount chain “Macy’s Backstage” will open four stores in greater New York City area in fall 2015
26
!
Department stores are offering below-retail prices through off-price chains
Both Kohl’s and Macy’s are opening off-price stores this year
DEBORAH WEINSWIGMANCHESTER
AND INTERNET PURE PLAYS ARE BOOMING
• Zalando: 26% sales growth to €2.2 billion in 2014.
• ASOS: 27% sales growth to £976 million in 2014.
• Zulily: 73% sales growth to $1.2 billion in 2014.
• Amazon 1Q sales up another 15%. Amazon now growing its offer in fashion, its “fastest-growing category”.
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DEBORAH WEINSWIGMANCHESTER 29
US STORE TRAFFIC DECLINED 54%
DURING 2010 – 2014...
According to Google, US store traffic (in footsteps) declined 54% during
2010–2014, a CAGR of (-17.6%)
!39!!
!18!!
2010! 2014!
US#Store#Traffic#(Billion#Footsteps)##
Source: Google
DEBORAH WEINSWIGMANCHESTER 30
... HOWEVER THE CONVERSION RATE IMPROVED DURING
THE SAME PERIOD
!$641!!
!$737!!
2010! 2014!
US#Store#Revenue#($#Billion)##
According to the same Google report, US store revenue increased 15%%
during 2010–2014, a CAGR of +3.6%
Source: Google
DEBORAH WEINSWIGMANCHESTER 31
THERE IS AN INCREDIBLE DIGITAL
OPPORTUNITY …
93%
Sales will be Offline
70%
Sales will be digitally influenced
Source: Google
Retailers need to embrace the Internet and digital in the future, as nearly all sales will be offline
and the vast majority will be digitally influenced
DEBORAH WEINSWIGMANCHESTER 32
… AND SHOPPERS ARE WEBROOMING MORE
Source: PWC
� Webrooming is researching online and buying in a store
� Amazon remains the top destination for webrooming and showrooming
� Millennials generally prefer webrooming
DEBORAH WEINSWIGMANCHESTER 33
LUXURY CONTINUES TO
UNDERPERFORM
Source:SpendingPulse/Mastercard Advisors
WHY IS LUXURY UNDEPERFORMING?
• Strong USD hurting tourism
• Shoppers want experiences, not products
• US consumers still cautious, even at high end
Retail Sales Performance by Sector
Sector YoY Mar 15
Leading
Hardware 8.3%
Grocery 8.0%
Restaurant 7.4%
Lagging
Department Stores 1.0%
Luxury ex. Jewelry (-3.0%)
DEBORAH WEINSWIGMANCHESTER 34
BIG E-RETAILERS CONTINUE TO EXPAND
MARKET SHARES
Source: Internet Retailer, 2015
� North America’s top 500-etailers account for 84% of online sales
• The fastest-growing web merchants are ranked 301– 400
• Blue Apron was the fastest-growing, with sales growing 550% to $65 million
Rank E-tailer Merchandising Category
1 Amazon Mass merchant
2 Apple Technology/books/music/video
3 Walmart Mass merchant
4 Staples Office supplies
5 Sears Mass merchant
6 Netflix Books/music/video
7 Macy's Mass merchant
8 Office Depot Office supplies
9 CDW Technology products/services
10 Home Depot Home improvement/construction services
550% in 2014
Top 10 Largest E-tailers
DEBORAH WEINSWIGMANCHESTER
RETAIL REAL ESTATE SUPPLY CONDITIONS
1Q ANNOUNCED STORE CLOSURES
Store closures concentrated in home entertainment and apparel, which were 96% of 1Q announcements.
Space associated with 3,558 announced closings represents 0.1% of
total inventory of US retail space.
Retailer Segment No. of Closings
RadioShack Home Entertainment 1,784
Wet Seal Apparel 338
Deb Shops Apparel 287
Body Central Apparel 256
Cache Apparel 153
Jones NY Apparel 127
The Children’s Place Apparel 125
Chico’s Apparel 120
Izod Apparel 120
Fresh & Easy Grocery Stores 50
Selected Store Closures 1Q2015
Source: : ICSC Research PNC Real Estate Research
35
DEBORAH WEINSWIGMANCHESTER
GAP PLANS FURTHER NORTH AMERICAN STORE
RATIONALIZATION FOR GAP BRAND
• Another 175 North American Gap stores are scheduled to close, 140 in 2015, representing approximately $300 million in sales.
• Gap’s North American Store fleet will consist of approximately 800 stores upon completion
• Full price locations will decline to about 500 stores and the remainder Gap Factory and Gap Outlets.
• its June 16 Analyst Day, management’s focus on driving product acceptance doesn’t comport with the structural competitive environment.
• The real threat to Gap is the rise of deep value retailers using more efficient supply chains and store models that is driving industry prices and profits lower.
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