August 18, 2016 Fung Global Retail Technology Conference Las... · Snapchat to direct followers to...

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DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

InLasVegasthisweek,FungGlobalRetail&Technologyattendedthe Magic conference, which covers the men’s, women’s andchildren’s apparel, accessories and footwear markets. Here, weshareour10keytakeawaysfromtheevent.

1) Influencers Are Enhancing the Buy-Now, Wear-Now FashionCycle

2) SnapchatIstheNewInstagram

3) ThePowerStruggleBetweenBrandsandRetailersIsShifting

4) DepartmentStoresAreFocusingonQuality,NotQuantity

5) UnderArmourIsattheForefrontofAutomatedManufacturingandSmartFabrics

6) RetailersContinuetoSeekCelebrityPartnerships;KatyPerrytoLaunchShoeLine

7) 3D Printing, Design and Scanning: The New Roadmap to theFootwearoftheFuture

8) LoyaltyProgramsandCustomerServiceAreKeyinChangingtheRetailEnvironment

9) Returns and Reverse Logistics Are Increasingly Becoming anIssueforRetailers

10) ConsumersAreWillingtoBuyMoreatFullPrice

Fung Global Retail & Technology at PROJECT Las Vegas: 10 Key Takeaways

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1. Influencers Are Enhancing the Buy-Now, Wear-Now FashionCycle

Influencersarebecomingevenmoreimportanttobrands’marketingstrategies. As the fashion cycle shortens, consumers are seekingalternative sources for style inspiration. Parker York Smith, SeniorEditor atGQ and a menswear blogger, explained that he gets hisinspirationfromamultitudeofplaces,includingtherunways,streetstyle photography and people watching. Beauty and lifestyleinfluencer and vlogger Linda Vuong said that the value of fashioninfluencers lies in their ability to curate and show their audiencehow they can incorporate trends in ways that fit their individualbodiesandstyles.

Retailers and brands must partner with influencers who canincorporate the product or message seamlessly into their ownbranding,saidStephanieJenkins,aPRexpertandtheentrepreneurbehind e-commerce site Styled byNoir. Smith said he foresees aneven more collaborative future, with influencers working closelywithbrandsandretailersinthedesignprocess.

Smith, Vuong and Jenkins said they like to stay current whenplanningtheircontent.Smithexplainedthatthiswasbecauseitissoeasytoshop in themoment.Whenconsumerscanshoponline forsomething towear toanevent just a fewdaysaway, theyarenotmotivatedtobuyasweateraseasoninadvance.Thisstrategyalignswiththebuy-now,wear-nowattitudeandfurthercontributestotheauthenticitythatmakesinfluencerssuchapowerfulmarketingtool.

2. SnapchatIstheNewInstagram

SocialmediawasahottopicattheMagicconference.Instagramhaslong been touted as the best social media platform for fashionbrands and retailers. However, WWDMAGIC panelists—includingSmith, Vuong and Aimee Santos, a designer and influencer—outlined the importance of Snapchat and Instagram Stories forbrands and influencers. While Instagram Stories is essentially a

Source:Shutterstock

Retailersandbrandsmustpartnerwithinfluencerswhocanincorporatetheproductormessageseamlesslyintotheirownbranding,Smithsaidheforeseesanevenmorecollaborativefuture,withinfluencersworkingcloselywithbrandsandretailersinthedesignprocess.

Asthefashioncycleshortens,consumersareseekingalternativesourcesforstyleinspiration.

WWDMAGICpanelistsoutlinedtheimportanceofSnapchatandInstagramStoriesforbrandsandinfluencers.

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Snapchat copycat, the panelists agreed that Snapchat is innatelymoreinformalthanInstagramStoriesis,andthatthelatterstillhasto have a sense of curation. The panelists said they often useSnapchat to direct followers to other content, including blogs,YouTubevideosandInstagramposts.

InfluencersandbrandsarestillfiguringouthowtobestpartnerforSnapchatcampaigns.Whilemarketersknowthat theplatformsarepowerful tools, it isoftendifficult tomeasure theROIofa specificcampaign.However,retailerscanuseinfluencerstoofferone-time-only promo codes to their audience via Snapchat, and then trackhoweffectiveeachcampaignwas.

Consumers are continuing to reject traditional marketingtechniques,andsocialmediahasbecomeakeymarketingchannel.Retailers need to focus on developing content and followers onSnapchat and Instagram Stories as shoppers seek out moreauthenticcontentfrombrands.

3. ThePowerStruggleBetweenBrandsandRetailersIsShifting

Thefactthatanumberofbrands,particularlyinthehandbagspace,haverecentlydisclosedthattheyarereducingtheirexposuretothedepartment-storechannelpromptedmuchdiscussionatMagic thisweek.E-commerceisgivingbrandsmorecontroloftheirdistributionandmorebrandsareoperating theirown stores,whichputsmorepressureondepartmentstores toofferacompellingexperience toconsumers. Department stores must do something different.Consumersnolongershopinsilos,theyarelessbrandloyalthaninthepastandtheyaremoreinterestedinseeingacuratedselectionofcompellingproduct.

Source:Shutterstock

InstagramStoriesisessentiallyaSnapchatcopycat,thepanelistsagreedthatSnapchatisinnatelymoreinformalthanInstagramStoriesis,andthatthelatterstillhastohaveasenseofcuration.

E-commerceisgivingbrandsmorecontroloftheirdistributionandmorebrandsareoperatingtheirownstores,whichputsmorepressureondepartmentstorestoofferacompellingexperiencetoconsumers.

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4. DepartmentStoresAreFocusingonQuality,NotQuantity

Macy’s recentlyannounced that itwill close100of its675 full-linestores at the end of the current fiscal year, after already havingclosed 41 stores last year. The planned closures represent 12% ofthe current store base, and will total more closures than thecompany has made in the last six years combined. Kohl’s hadpreviouslyannounceditwouldbeclosing100ofits1,015stores,andthatitplanstoreducesquarefootageinlargestoresasleasesexpireorotheropportunitiesarise.Thesechangeswillallowthecompaniestofocusmoreoftheirtimeandenergyonfewerstoresandtomakeamoredramaticimpactwiththeiroveralloffering.Wewouldnotbesurprised to hear of other retailers executing aggressive storeclosureplans.

5. UnderArmourIsattheForefrontofAutomatedManufacturingandSmartFabrics

UnderArmourisattheforefrontofanumberofnewtechnologies,particularlyrelatedtomanufacturingautomationandsmartfabrics.The company sees the future of retail as reliant on its ability torespond to customers’ needs andwants bymanufacturing in localmarkets.Thathasimplicationsacrosstheentireproductionprocess.

InvestmentsinAutomationandRobotics

Under Armour is working to address the long lead times that areprevalentacrosstheindustry.Fastfashionhasemergedasastrongareaofgrowth,drivenin largepartbyadvancedsupplychainsthatenableshort leadtimes.Thesehaveallowedfast-fashionbrandstoreact to actual consumer demand nearly in real time and to giveconsumerswhattheywantratherthangivingthemproductsbasedonprojectionsthatweremademonthsinadvance.

Low-costlaborisnolongerthelinchpinofanefficientsupplychain,according to Under Armour. The cyclical search for low-cost laborstarted in China, thenmoved to Taiwan and then to South Korea.

Source:Shutterstock

Thesechangeswillallowthecompaniestofocusmoreoftheirtimeandenergyonfewerstoresandtomakeamoredramaticimpactwiththeiroveralloffering.

Thecompanyseesthefutureofretailasreliantonitsabilitytorespondtocustomers’needsandwantsbymanufacturinginlocalmarkets.

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Changing conditions have made the 20th century modeleconomicallyunsustainable.Labor’scostisnolongerlowenoughtomakeupfordistance.

Newmanufacturingtechnologiesandprocessescreatenewbusinessopportunities. Under Armour is working to automate themanufacturing process to eliminate drudge labor and inefficiencyinsteadofexportingit.

ReadytoGrabSmartFabricsIf/WhenTheyEmerge

Thefabricswewearhavenotchangedmuchforthousandsofyears.But recent developments in technology and manufacturing willenable the production of smart fabrics that can see, hear, sense,communicate,storeandregulatetemperature,monitorhealth,andchangecolor.Thesewillbethebeginningofafabricrevolution.

Oncethefabricsare invented,UnderArmourandothercompanieswillbeabletoevolvetheirproductofferingsandmakeproductsandclothes that can enhance the lives of consumers. Revolutionaryfibersandtextilesareafast-growingsegmentwithawiderangeofcommercialanddefenseapplications,accordingtoUnderArmour.

Criticalmass for smart fabrics isdependentonsignificantadoptioninapparel.Militaryandgovernmentapplicationsare likelytobeasimportant as sports apparel applications. Currently, apparel thatincorporates smart fabrics represents only 0.004%of total apparelsalesgloballybasisand0.006%ofsalesintheUS.

6. Retailers Continue to Seek Celebrity Partnerships; Katy PerrytoLaunchShoeLine

At FN Platform, the footwear expo at Magic, pop star Katy Perrydebutedhernewshoe linewithGlobalBrandsGroup.Launching inspring 2017, Katy Perry Footwear will include sandals, sneakers,stilettosandpumps ranging from$59 to$299.The shoecollectionwillreflectPerry’sbold,whimsicalstyle.SketchesreleasedbyPerryand Global Brands Group show designs featuring automobile-inspiredelements,colorfulstarsandatassel-embellishedheel.

Global Brands Group is not new to celebrity collaborations. Thelicensing company has also worked with Jennifer Lopez, DavidBeckhamandRachelZoe.

Thefabricswewearhavenotchangedmuchforthousandsofyears.Butrecentdevelopmentsintechnologyandmanufacturingwillenabletheproductionofsmartfabricsthatcansee,hear,sense,communicate,storeandregulatetemperature,monitorhealth,andchangecolor.

AtFNPlatform,thefootwearexpoatMagic,popstarKatyPerrydebutedhernewshoelinewithGlobalBrandsGroup.TheshoecollectionwillreflectPerry’sbold,whimsicalstyle.

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7. 3D Printing, Design and Scanning: The New Roadmap to theFootwearoftheFuture

Thefootwearindustryisinnovatingusing3Dprinting,3Ddesignand3Dscanning.Printedfashionisbecominglessfuturisticandmoreofa reality. Caleres, a multibrand retailer whose brands includeNaturalizer, Sam Edelman and Rykä, has used 3D technology tocreateacustomized,3D-printedorthotic forathletic footwear.Thecustomer takes three simple photos of their foot, and receives acustomized, personalized, 3D-printed orthotic within 10 days. Thecustomer simply downloads an app to begin the process at homethroughasmartphone;nodoctorvisitisrequired.

Indesign,the3Dprocessisfasterthanthetraditionaldesignprocessand involves less physical material. In digital manufacturing, nomolds are required and there is no waste, which allows themanufacturer to print asmany or as few items as needed, and tofullycustomizeproducts.

8. Loyalty Programs and Customer Service Are Key in ChangingtheRetailEnvironment

Creatingcustomerloyaltyprogramsandofferingexquisitecustomerservice can drive revenue, as 10% of loyal store traffic represents50%of revenue,while45%ofnonloyal store trafficgeneratesonly5%ofrevenue.Affluentcustomersarethebiggestusersofrewardsprograms. Restoration Hardware and Neiman Marcus are tworetailers that have built very strong loyalty programs. WithRestorationHardware’s store card, customers receive 25%off full-priced merchandise and an additional 10% off sale merchandise.NeimanMarcus’sInCircleprogramhasmorethan150,000membersandrepresentsmorethan40%ofthecompany’srevenue.

Legendarycustomerservicecanboostrevenuebyasmuchas14%.Poorcustomerservice is thenumberonecustomercomplaint,andcustomersjudgetheirretailexperiencerelativetoalltheirotherin-

Source:footwearnews.com

Caleres,amultibrandretailerwhosebrandsincludeNaturalizer,SamEdelmanandRykä,hasused3Dtechnologytocreateacustomized,3D-printedorthoticforathleticfootwear.

Indigitalmanufacturing,nomoldsarerequiredandthereisnowaste,whichallowsthemanufacturertoprintasmanyorasfewitemsasneeded,andtofullycustomizeproducts.

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storeexperiences.Whatdocustomerswant?Threethings:service;informationaboutproducts, including reviews; andpeaceofmind,suchasguaranteesandliberalreturnpoliciesprovide.Studiesshowthataliberalreturnpolicyisbetterforbusinesslongterm.

9. Returns and Reverse Logistics Are Increasingly Becoming anIssueforRetailers

In-store and online returns hit an all-time high of $284 billion lastyear andwere up 6.2%. E-commerce returns totaled 33%, apparelreturnstotaled60%andbrick-and-mortarreturnsremainedsteady.

Supply.AI is an applied artificial intelligence platform that helpsretailersderivemaximumcostefficiencies from theirorder-to-cashcycle by minimizing returns of online purchases. According to theNationalRetailFederation’sannualReturnFraudSurvey,theaveragein-store return rate was 8% in 2015. According to Supply.AI’sanalysis,thatratehasincreasedtoover20%in2016.

A new study revealed that lenient return policies led to increasedpurchases and decreased returns. Customers love guarantees andliberal return policies because theywould rather avoid a loss thangainawin.

10. ConsumersAreWillingtoBuyMoreatFullPrice

Consumers are willing to spend more on classic, timeless piecesbecausetheybelievetheywillgetmorewearoutofthem,accordingtopanelistsatWWDMagic.AtaBreakfastwithTheDisruptorseventwecohostedwithFirstInsight,MatthewSebraofGQsaidthatmenchoose items based on cost per wear. The magazine createsstrategies around men’s lifestyle zones, taking into considerationhowdifferentgroupsenjoyspendingtheir freetime.When lookingatcostperuse,therationaleisthataconsumercangetabasicitemanywhere,but if the item isagreatclassic thathewill geta lotofuse from,thenhemaybemore likely tobuy itandtospendmore

Source:Shutterstock

10%ofloyalstoretrafficrepresents50%ofrevenue,while45%ofnonloyalstoretrafficgeneratesonly5%ofrevenue.Legendarycustomerservicecanboostrevenuebyasmuchas14%.

E-commercereturnstotaled33%,apparelreturnstotaled60%andbrick-and-mortarreturnsremainedsteady.Anewstudyrevealedthatlenientreturnpoliciesledtoincreasedpurchasesanddecreasedreturns.

Consumersarewillingtospendmoreonclassic,timelesspiecesbecausetheybelievetheywillgetmorewearoutofthem,accordingtopanelistsatWWDMagic.

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forit.GregPetro,CEOofFirstInsight,acompanythattestsproductsin themarket, said that Petro said that 11% of all items that FirstInsight tests can actually carry a higher price, and thatunderstanding the customer at a microsegment level is critical tofiguringoutwhatthecustomeriswillingtopay.

Paul Erickson of RMSA emphasized that retailers should nevercompeteonpricebecauseitbecomesaracetothebottom.Instead,hesaid,retailersshouldplayuptheirproductdifferentiations,cross-marketwithotherstoresandholdpromotionalevents.

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DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:[email protected]

AmandaByrneMarketingAssociateShoshanaPollackSeniorResearchAssociateErinSchmidtResearchAssociateHONGKONG:10thFloor,LiFungTower888CheungShaWanRoad,KowloonHongKongTel:85223002470LONDON:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NEWYORK:1359Broadway,9thFloorNewYork,NY10018Tel:6468397017FBICGROUP.COM

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