PhilaU Immersion Program
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The document summarizes several key retail trends for 2016, including: - Store traffic continuing to decline, making in-store experience more important. - Growth of virtual reality (VR) and its potential impact on retail through VR experiences. - Evolution of pure online retailers to open some physical stores. - Influencer marketing gaining momentum as brands partner with popular social media figures. - Secondary markets and resale platforms growing in popularity among consumers. - Subscription models emerging in categories like beauty and fashion.
PhilaU Immersion Program
- 1. 1 PhilaU Fashion Immersion Program at Li & Fung Jing Wang Fung Global Retail & Technology September 9, 2016 1
- 2. 2 2 • 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. Retail, Tech, and Fashion 2
- 3. © 2015Planalytics, Inc. AllRights Reserved.Proprietaryand Confidential. 3 Source: Energy Information Agency Bureau of Economic Analysis Bureau of Labor Statistics Indicator Period 2016 2015 YoY change Impact on Consumption GDP Growth Q2 1.2% 3.9% (270 bps) - Gas Price ($ per gallon) Aug. $2.15 $2.63 (18.2%) + Consumer Price Inflation Jun. 1.1% 0.2% 90 bps + Savings Rate Jun. 5.3% 5.8% (50 bps) + Unemployment rate Jul. 4.9% 5.3% (40) bps + Wage Growth Jun. 3.6% 3.2% 40 bps + The S&P/Case-Shiller 20-City Composite Home Price Index May 188.3 178.9 +5.2% + University of Michigan Consumer Sentiment Jul. 90.0 93.1 (3.3%) - Tax-Free Shopping Days Q2/Q3 54 63 (14.2%) - Overview: Favorable Macro Backdrop; Spending Remains Steady McGraw Hill Financial University of Michigan Survey of Consumers
- 4. 4 4 • The top half and bottom half are doing better, with outperformance at the bottom • The “consumer hourglass” phenomenon generates opportunities in the value-for- money segment The Consumer Hourglass 4 Squeeze in the Middle Segment Neiman Marcus Saks Nordstrom Bloomingdale’s Dillard’s Macy’s Kohl’s Sears JCPenney Target Walmart Costco TJ Maxx/Off-Price Primark Aldi / Trader Joe’s Dollar Stores
- 5. 5 5 Five Ways That Amazon Is Disrupting Retail Industry
- 6. 6 6 • Accounted for $0.51 of every $1.00 of growth in US e-commerce in 2015 • Generated 24% of total retail growth in the United States • New Amazon services are changing consumer preferences Is It Amazon or a Change in Customer Preferences? Amazon Annual Sales Growth Source: Bloomberg and US Census Bureau 6
- 7. 7 -24.8% -18.1% 175.7% -13.5% 124.6% -50.0% 0.0% 50.0% 100.0% 150.0% 200.0% Apple Samsung Amazon Lenovo Huawei AMAZON PRIME IS TAKING OFF IN WAYS THAT PERHAPS AMAZON DIDN’T EVEN EXPECT • Amazon now has at least 54 million prime members, and growing at 50%+ the last 2 years. By contrast, Costco has 44.6 million paid members • Amazon’s video strategy with Twitch, Hollywood, and with original content producers is helping to drive prime membership more than originally expected. AMZN’s Cloud leadership also enables this. • The Fire – originally panned by critics – is the fastest growing tablet - $50 changed the tablet game and is allowing Prime content to be consumed easily. • Originally thought of as an April Fool’s joke, Dash, a button to order a specific product, now has 100 products at a push of a button for Prime members. Source: IDC Quarterly Tablet Tracker Amazon Annual Tablet Growth, Q4 2015 1
- 8. 8 AMAZON IS COMPLETELY REDEFINING LOGISTICS WITH PRIME NOW • Dubbed “Prime Now,” Amazon has recently expanded its same day delivery service to 24 US cities and London. • Cowen estimates that 25% of Prime Members have used Prime Now. Previously only on apps, now also available on the web as well. • Competing with grocery delivery services like FreshDirect, but also Google Express, UberEats, and Instacart. • Amazon looking to tap into the $77 billion digital ad spend market with this service, especially CPG brands. • Also announced plans to lease 20 Boeings, are actively lobbying for drones for Prime Now Air, and have other experiments in Europe, all of which put FedEx, UPS and DHL on their heels. 2
- 9. 9 AMAZON HOME SERVICES MIGHT SHAKE UP A NUMBER OF INDUSTRIES, INCLUDING FURNITURE AND APPLIANCES • Amazon is combining delivery of larger products with seamless assembly. • Over 85 million U.S. customers shop for products that need additional services including installation • Orders are growing at 20% a month since launch • Home Services offers 36 million pre-packed services on the site, compared to the 2 million it offered when it first began offering local services last year • Affects markets of Home Depot, Best Buy, Ikea and others that are also developing “DIFM vs DIY” strategies 3
- 10. 10 ECHO IS A SLEEPER HIT ALONG WITH ALEXA • Paired with Alexa, Echo allows for “always on” AI in your home – without needing your phone or pushing a button. • Echo becomes the central nervous system of the connected home. • When first launched in 2014, purpose was not entirely clear, and panned by critics. Now even Apple’s Co-founder is a fan. • Advertising tie ups with Capital One and other finance firms are in the works. • Tie ins with Amazon Prime Now and other Amazon retail services are natural extensions. • Echo is on back order, prompting other device makers like Google's Nest to work on their own look-alike services. 4
- 11. 11 AMAZON WILL DISRUPT THE CORPORATE AND SME OFFICE SUPPLY MARKET • About 300,000 businesses had opened accounts with Amazon in the first 11 months of its Amazon Business service. • Amazon is rumored to be buying Office Depot’s corporate accounts business. • The corporate business was required to be divested as a part of the FTC regulations regarding the Staples purchase of Office Depot. • But now Staples is having second thoughts about being left with just the brick and mortar footprint if the FTC wins its case against the Office Depot / Staples merger. 5
- 12. 12 Top 10 Retail Trends for 2016 1. Store Traffic 2. Evolving Pure Plays 3. Virtual Reality 4. Influencers 5. Consignment 6. Subscription Economy 7. Sharing Economy 8. Rental Economy 9. Caring Economy 10. Silver Economy
- 13. 13 13 With Store Traffic Down, In-Store Experience Is Key • US mall traffic has decreased for 44 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 Source: RetailNext 1
- 14. 14 14 Virtual reality (VR) means presenting the senses with a computer- generated virtual environment • VR—Oculus Rift headset • Samsung’s Gear VR headset to be priced at $99 and to hit stores next year • 360-degree video technology allows consumers to learn more about products before going to the store • Widespread adoption of VR in the retail space is expected in as little as three years • Industry even has a new term for selling via VR: v-commerce Source: Digital Trends/Ad Age Market Size & Growth Rate: $3 Billion @ 80% (2016) Virtual Reality2
- 15. 15 15 Evolving Pure Plays (Number of Actual/Planned Physical Stores) AMAZON ATHLETA CASPER AYR YOGIBO HARRY’S 1 400 120 1 3 2 3 21 1 1 7 4 27 25 12 2 3
- 16. 16 16 Influencer Word-of-Mouth Marketing Gains Momentum4 • Brand influencers: advocates on social media platforms and review sites to support brands they love • Influencer marketing: - 81% of marketers found IM effective in 2015 - 59% of marketers will increase IM budgets in 2016 • Influencer marketing agency is now a booming industry • Each month over 50 million people watch over 1.6 billion minutes of fashion and beauty videos in more than 45,000 YouTube channels
- 17. 17 4 INFLUENCER MARKETING WORD-OF-MOUTH MARKETING GAINS MOMENTUM Target collaborates with Joy Cho, a popular designer and blogger. They also launched Oh Joy for Target collection, an exclusive party-inspired Home line Emily Schuman a much-followed fashion blogger, author and designer launched her Cupcakes and Cashmere collection in collaboration with Nordstrom Blogger star and entrepreneur Michelle Phan launched her own makeup line, Em, with L’Oreal
- 18. 18 18 Owns data from 5,000 retailers and 130 million products Makes a perfect match between retailers and the right influencers Helps minimize overhead costs is a data-driven influencer marketplace 18 Influencers: A Marketplace - Shopography4
- 19. 19 19 Why Online Secondary Marketplaces Took Off: • Online resale industry is worth $34 billion in the US • Rise of retail brands’ resale programs • Consumers are convinced by the great quality of the secondhand apparel bought via online platforms • Societal shift toward less ownership — the art of decluttering • Creating communities where the customers can share experiences about shopping + more… 5 Online Fashion Consignment Takes off 19
- 20. 20 20 Subscription Economy: Beauty and Fashion Are Growing • Disruptors: Le Tote, Birchbox, BarkBox, Pijon, Stitch Fix • Convenience and curated products for consumers • Recurring revenue model for retailers • Element of self-gifting • Beauty is the biggest category • Fashion-styling subscriptions are becoming popular • Office supplies present an opportunity 6
- 21. 21 21 Sharing Economy: “Uberifying” Virtually Every Industry Disruptors: Uber, Airbnb, Lending Club, WeWork • Valuations of sharing-economy companies have skyrocketed • Revenues are projected to catch up to aggressive valuations • Sharing-economy market: $15 Billion 2013 $335 Billion 2025 CAGR: 29.5% 7
- 22. 22 22 Rental Economy: Fashion Rental Leading Following Rent the Runway, a new generation of fashion-rental companies has emerged Disruptors: Style Lend, VillageLuxe, Le Tote, Lena the Fashion Library and Borrow For Your Bump (maternity) 8
- 23. 23 23 Caring Economy Promotes Startups for Social Good Disruptors: TOMS, Reformation, Warby Parker, NOURI, SoapBox Soaps, Zady, GoodXChange • Promotes social activism over self-indulgence – Consumers, especially Gen Z, demand integrity from brands and retailers • Startups with social missions apply market- based strategies to achieve a social goal – TOMS, the shoe company, has a “one for one” business model – Reformation designs and manufactures sustainable apparel; sources sustainable fabrics and vintage garments – Kohl’s Cares gives back to communities with Salina Yoon children’s books 9
- 24. 24 24 Silver Economy: Demographics Create Opportunities • “The Grey Market” : older consumers may be an engine of growth in the sluggish global economy • Silvers are those aged 65–85 years old, while super silvers are 85+ • The United Nations forecasts that the 60+ age group will grow from 12.3% of the global population in 2015 to 16.5% in 2030 • In 2015, consumers aged 65+ accounted for around $7 trillion, or approximately 17%, of total worldwide consumer spending • Spending by silvers is expected to grow 114%, 2015 – 2030, outpacing population growth of 56% Source: UN Department of Economic and Social Affairs, Population Division, World Population Prospects: The 2015 Revision/International Labour Organization, World Social Protection Report 2014–15/Euromonitor International/Fung Global Retail & Technology 56% 114% Population Spending Estimated Growth in Senior Population and Spending by Seniors, 2015–2030 10
- 25. 25 25 Partnership with IBM and Pico 35 Participating Brands 12,000 Employees as Shoppers 25 Bonus: Fung Group’s Explorium Project in Shanghai Explorium a retail “omni-platform lab” consisting of a 60,000 sqrt space in Shanghai that has an interconnected digital network of services, including a mobile shopping application, an i-beacon tracking solution and a data analytics platform.
Editor's Notes
- #4: Red items are waiting for the latest release.
- #16: Amazon The online giant has opened its first Brick & Mortar store in Seattle and has been considering opening more. Athleta The Gap brand now has retail stores of its own. AYR The online women’s clothing line opened a “Guideshop,” a studio, showroom, and retail store in one. Bauble Bar The jewelry website has begun wholesaling and getting its brand into physical locations. Blank Label The custom menswear site has opened up physical locations in the Boston and DC areas. Blue Nile The jewelry website partnered with Nordstrom’s to open “webrooms” in stores Bonobos The men’s e-tailer has opened up stand-alone guideshops while also partnering with Nordstrom. Casper The online mattress startup has showrooms in NYC and LA to let customers take a test nap. Harry’s The shaving supply company has opened its own neighborhood barbershop in NY. Indochino The online seller of custom menswear has opened a NYC showroom. Rent the Runway The online dress and accessories rental company now has 4 stores. Warby Parker The glasses e-tailer has created multiple experiential showrooms. Yogibo The beanbag company has gone from online only to 24 physical locations YogaSmoga The online Yoga outfitter now has 2 retail stores and 2 R&D locations. Gilt Groupe After being acquired by Hudson’s Bay, Gilt Groupe will start being integrated with Saks off 5th.
- #18: http://www.adweek.com/socialtimes/report-75-of-marketers-are-using-influencer-marketing/628211 https://www.ion.co/article/11-essential-stats-for-influencer-marketing-in-201.html On July 6, we’re launching a Cupcakes and Cashmere clothing line, selling exclusively at Nordstrom and ShopBop.
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