The Golden Seeds Presentation Mar. 23, 2016
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Transcript of The Golden Seeds Presentation Mar. 23, 2016
Deborah Weinswig
Managing Director of Fung Global Retail & Technology
US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
March 23, 2016
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 2
ABOUT THE FUNG GROUP
ABOUT FUNG GLOBAL RETAIL & TECHNOLOGY
MACRO AND RETAIL LANDSCAPE OVERVIEW
24 DISRUPTORS
AGENDA
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 3
ABOUT THE FUNG GROUP
ABOUT FUNG GLOBAL RETAIL & TECHNOLOGY
MACRO AND RETAIL LANDSCAPE OVERVIEW
24 DISRUPTORS
AGENDA
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 4
TRADING LOGISTICS DISTRIBUTION RETAILING
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
Fung Holdings (1937) Ltd. A privately held entity and major shareholder of the Fung Group
ABOUT FUNG GROUP
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 5
ABOUT THE FUNG GROUP
ABOUT FUNG GLOBAL RETAIL & TECHNOLOGY
MACRO AND RETAIL LANDSCAPE OVERVIEW
24 DISRUPTORS
AGENDA
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 6
• 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 GLOBAL RETAIL & TECHNOLOGY
MICRO MACRO
VR IOT
RETAIL TECH
RETAIL REAL
ESTATE
DIGITAL DIGITAL DIGITAL DIGITAL
AI
THEMATIC RESEARCH
HONG KONG NEW YORK LONDON
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 7
• Fung Global Retail & Technology advises retailers, real estate developers and tech companies on projects situated at the intersection of retail, tech and/or fashion
• Our team offers a robust knowledge bank and significant experience in the retail, fashion and tech fields. We are involved in many areas of the business and believe this allows us to offer a unique perspective by focusing on the future
and where the sector is heading
A UNIQUE COMBINATION OF RETAIL, FASHION AND TECH OUR EXPERTISE
FASHION TECH RETAIL
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 8
• Global macroeconomic trends
• Demographic trends (milennials vs boomers vs silvers)
• Retail sales
• Same store sales
• Square footage/real estate analysis
• Travel retail
• Market share analysis by category
• Inventory analysis
• Margin dissection and analysis
• Expertise in subsectors of retail, including fast fashion, e-commerce, department stores, specialty stores, off-price and home improvement
• Experience following the tech space across hardware and software
• Partner and mentor accelerators and startups in retail and tech
• Coverage includes North America, Latin America, Europe, the Middle East and Asia
• Offices in New York, London and Hong Kong
• The Fung Retail & Technology team includes 20 analysts, each specialized in specific areas of the world, working together to offer a global perspective
• We leverage the Fung Group’s participation in 40 markets around the world
• We have industry contacts in the U.S., Europe and Asia
A DIFFERENTIATED PERSPECTIVE A BROAD KNOWLEDGE BASE COMBINED WITH SPECIALIZED EXPERTISE AND OUR GLOBAL NETWORK
Broad Knowledge Base Specialized Expertise Global Network
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 9
COMPREHENSIVE RESOURCES RESEARCH PROCESS
RESEARCH
Contacts
News
Databases
On the Ground
Partners
Internal
• Fung colleagues • L&F colleagues in the
US, Europe and Asia
• Planalytics • RetailNext • Prosper Analytics • Bloomberg
• S&P Capital IQ • Euromonitor International • Haver Analytics • Statista
• Analyst days • Industry conferences • Store tours
• Financial reports • Financial and industry news
• Finance • Retail • Tech
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 10
ENTREPRENEURS ROUNDTABLE
ACCELERATOR
OUR PARTNERSHIPS WITH ACCELERATORS
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 11
• Warehouse Clubs
• Department Stores
• Discount Stores
• Drug Stores / Pharmacy
• Consumer Electronics Stores
• Home Improvement
• Hypermarkets/Supercenters
• Supermarkets
• Specialty Retailers
• E-commerce Retailers
• Convenience Stores
• Global Retail Market
• Global Consumer Economics
• Emerging Retail Technologies
• New Retail Business Models
• Retail Channel Studies
• Startups, Accelerators in Retail
• Retail Real Estate
• Retail Business Strategy
• Disruptive Technologies
• Future Proofing
• North America
• Europe
• Latin America
• Asia Pacific
• Middle East and North Africa
OUR RESEARCH PROCESS BROAD COVERAGE
Sector Coverage Thematic Coverage Geographic Coverage
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 12
ABOUT THE FUNG GROUP
ABOUT FUNG GLOBAL RETAIL & TECHNOLOGY
MACRO AND RETAIL LANDSCAPE OVERVIEW
24 DISRUPTORS
AGENDA
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 13
US: SHOWS CONTINUOUS IMPROVEMENT Weak consumer sentiment reflecting lower expectations for growth
Strong vehicle sales and housing
starts
Unemployment rate fell to 4.9%
in February
Low gas price stimulates consumer spending
Consumer sentiment index
dropped from 93.0 in 2015
to 90.0 in 2016
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 14
US: SHOWS CONTINUOUS IMPROVEMENT
Major Economic Indicators
Indicator 2016 2015 YoY Change Meaning
Unemployment Rate 4.9% 5.5% (60) bps
The S&P/Case-Shiller 20-City Composite Home Price Index N/A 184.2 5.8%
Housing Starts (Mil.) 1.2 0.90 30.9%
Total Vehicle Sales (Mil. Units) 17.9 16.8 6.5%
Gas Price (USD/Gal.) $1.94 $2.35 (18.8)%
Savings Rate 5.2% 5.3% (10) bps
University of Michigan Consumer Sentiment Index 90.0 93.0 (3.2)%
CPI: Apparel Prices 127.5 126.4 (0.9)%
Sources: Bureau of Labor Statistics, US Census Bureau, St. Louis Fed, University of Michigan, US Energy Information Administration
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 15
CONSUMERS PREFER DINING OUT Spending at restaurants and bars outpaced grocery stores for the first time in 2015
Source: US Census Bureau, data in billions USD
0%
5%
10%
15%
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Grocery Dining Out
Groceries and Dining Out as a Percentage of Total PCE
$15
$33
$52
$70
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Grocery Stores Dining Out
Spending at Grocery Stores vs. Dining Out
Source: US Census Bureau, data in billions USD
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 16
US: BUDGET & INTERNET SHOPPING DRIVE RETAIL GROWTH
BRICK & MORTAR: Traffic continues to drop Digital influence
continues to grow
ONLINE:
DEPT STORES & BIG BOX RETAILERS
Face price competition
OFFICE-PRICE RETAILERS & FAST FASHION RETAILERS
Ride the off-price/value boom
Led the group of top 19 apparel companies with growth of 26% in 2015
Source: Company Reports
ANNUAL SALES GROWTH BY COMPANY – 2015
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 17
In contrast to biggest US retailers, a number of European apparel names continue to see striking success
EUROPE: STRONG PERFORMANCE CONTINUES
• These factors underpin global expansion opportunities
• Plus, European shoppers remain more willing to spend on apparel than US shoppers; and a European economic recovery
+15.4% FY15
+17.7% FY15
(+9% in local currencies)
+8% 1Q16
Why?
Implications
More fashionable products
Better stores
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 18
FASTEST GROWING EUROPEAN RETAILERS NOW AND THEN
Retailer 2005 Total Revenue (Millions)
5 Year Retail Sales
CAGR%
Baugur Group 12,549 106.2%
Dirk Rossmann GmbH 3,363 28.3%
WM Morrison Supermarkets Plc 21,840 28.1%
Mercadona, S.A. 11,958 25.2%
Inditex S.A 8,250 22.1%
Phones4U 2,754 18.9%
The Carphone Warehouse Group PLC 2,821 18.3%
Luxottica Group 4,108 18.0%
Musgrave Group 5,417 16.7%
Next plc 5,325 15.3%
Retailer 2014 Total Revenue (Millions)
5 Year Retail Sales
CAGR%
Axel Johnson AB 9,733 49.3%
Jumbo Groep Holding 7,269 30.1%
PRADA Group 4,662 24.6%
Compagnie Financiere Richemont 13,217 17.9%
Hermes 5,475 17.6%
Primark 21,447 16.4%
Sports Direct International 4,529 15.6%
LVMH 40,727 14.6%
Casino Guichard-Perrachon 64,462 13.1%
HTM-Group 3,714 13.1%
Source: NRF, Deloitte, Company Reports
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 19
FASTEST GROWING US RETAILERS NOW AND THEN
Source: NRF, Deloitte, Company Reports
Retailer 2005 Total Revenue (Millions)
5 Year Retail Sales CAGR%
GameStop 3,092 37.5%
Amazon.com 8,490 25.2%
Dick’s Sporting Goods 2,625 24.1%
Wawa, Inc. 2,790 23.8%
Pathmark Stores, Inc. 3,977 21.6%
Whole Foods Market, Inc. 4,701 20.7%
Bed Bath and Beyond 5,810 19.4%
Lowe’s 43,243 18.2%
Abercrombie & Fitch 2,785 17.6%
Kohl’s 13,402 16.9%
Retailer 2014 Total Revenue (Millions)
5 Year Retail Sales CAGR%
Albertsons Companies 27,199 45.3%
Southeastern Grocers 11,500 36%
Apple 182,795 26.4%
Ascena Retail Group 4,791 26.2%
Amazon.com 88,988 25.8%
Under Armour 3,084 23.7%
Nike 30,601 21.8%
Forever 21 4,500 14.3%
Advance Auto Parts 9,844 12.7%
Whole Foods Market 14,194 12.1%
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 20
FASTEST GROWING ASIAN RETAILERS NOW AND THEN
Source: NRF, Deloi0e, Company Reports
Retailer 2005 Total Revenue (Millions)
5 Year Retail Sales
CAGR%
Kintetsu Department Store Japan $2691
Tokyu Corporation Japan $6,002
AS Watson & Company Ltd. Hong Kong $11,416
GS Retail Co Ltd. S. Korea $2,936
Yamada Denki Co., Ltd. Japan $11,363
Shinsegae Co., Ltd. S. Korea $7,352
Bic Camera, Inc. Japan $4,046
Beisia Group Hong Kong $6,505.32
AEON Co., Ltd. Japan $13,529.15
Lotte Shopping Co., Ltd S. Korea $8,005
Retailer 2014 Total Revenue (Millions)
5 Year Retail Sales
CAGR%
Vipshop China $3,701.18
JD.COM China $17,671.82
Yonghui Superstores China $5,719.18
Chongqing Department Stores China $4,712.00
CP ALL Public Company Thailand $11,436.07
China Resources Enterprise Hong Kong $14,110.28
Chow Tai Fook Jewelry Group Hong Kong $8,285.28
Central Group Thailand $6,800.00
Belle International Hong Kong $6,505.32
Fast Retailing Co. Ltd. Japan $13,529.15
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 21
ABOUT THE FUNG GROUP
ABOUT FUNG GLOBAL RETAIL & TECHNOLOGY
MACRO AND RETAIL LANDSCAPE OVERVIEW
24 DISRUPTORS
AGENDA
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 22
1. Millennials Are Becoming The Trend Setter For The Consumer Market
2. Home Furnishings Market Disrupted By E-commerce
3. ACTIVE PURSUIT For Healthy Eating Lift Organic Grocers’ Sales
4. Last-mile Delivery Drives Online Grocery Sales
5. Ready-to-cook / Eat Economy Gains Popularity
6. Millennials Aspire To CAR OWNERSHIP But Also Like Sharing PLANS
7. Experiences Trump “Things”
8. Caring Economy Promotes Startups For Social Good
9. Subscription Economy Is Nibbling Away At Traditional Retailers’ Sales
10. Silver Economy: Aging Population Creates An Opportunity
11. Apps Become The Primary Way Of Communication
12. Social Shopping Is Made Simpler
LIST OF DISRUPTORS
13. Mobile Aggregators Create A One-stop Shopping Cart
14. Influencer Marketing Word-of-mouth Marketing Gains Upthrust
15. SEARCH Engines Seek OPPORTUNITIES IN RETAIL
16. Retail Store Closings And Openings Continue
17. Experiential Retail Brings Shoppers Back To Stores
18. Smart Malls: Reshaping The Physical Shopping Experience
19. Evolving Pure Plays
20. Online Fashion Resale Marketplaces Show Explosive Growth
21. E-commerce Disruptors In High-end Market
22. AMAZON LEADS FASHION Apparel Market
23. A Tale Of Two Retailers: Innovation Drives Growth
24. The Fall Of Disruptors: DEATH OF THE UNICORN?
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 23
• 80 million in US, biggest demographic group
• $1.3 Trillion buying power in US (BCG)
• Nearly half of workforce by 2020
• 5/6 Millennials in the US connect with companies on social media (SDL)
• Millennials are more into access over ownership- “The Renter Generation”
MILLENNIALS ARE BECOMING THE TREND SETTER FOR THE CONSUMER MARKET 1
Source: Pew Research Center
31% 34%
49% 34%
18% 29%
2% 2%
1%
1995 Q1 2015
Boomers
Gen Xers
Millennials
Post-Millennials
Silents Greatest
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 24
• Founded in 2009, Houzz is aiming to disrupt the home furnishings space
• Houzz is an online home-remodeling community that connects homeowners with design inspirations
and home professionals
• Its business model is driven by community, content
and commerce
• Houzz has already attracted 35 million users across
200 countries
2 HOME FURNISHINGS MARKET DISRUPTED BY E-COMMERCE
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 25
2 HOME FURNISHINGS MARKET DISRUPTED BY E-COMMERCE
+15%
+20%
+44% Source: Company Report
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 26
2 HOME FURNISHINGS MARKET DISRUPTED BY E-COMMERCE
• Startups like CIMAGINE are appealing to millennials’ tech savviness with augmented reality to visualize furniture
products in their space
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 27
• Millennials believe that eating right is the most important aspect to
achieving well-being
• Millennials are more concerned
with nutrition food labels regularly
3 ACTIVE PURSUIT FOR HEALTHY EATING LIFT ORGANIC GROCERS’ SALES Millennials Boomers versus
24% 12%
Exercise and Eating Healthy
40% 33%
Artificial Ingredients
Source: Company Report
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 28
• Multi-cultural cuisines
• Gluten-free baked goods
• Organics
• Avoid additives
• Less swayed by traditional nutritional markers such as calorie count and health claims
• Buy frozen or prepared ‘healthy’ foods, adding fresh ingredients and seasonings
• In 2015, Whole Foods Market revealed perhaps the first major millennial-focused store format
• Prepared food departments are cooking to order, offering greater variety, and healthier customized meals
3 ACTIVE PURSUIT FOR HEALTHY EATING LIFT ORGANIC GROCERS’ SALES
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 29
4 LAST-MILE DELIVERY DRIVES ONLINE GROCERY SALES The on-demand economy has driven growth of delivery start-ups that provide innovative ways for consumers to ship or receive goods
Company Latest Funding
Round
curbside $25 Million
deliv $28 Million
Doordash $40 Million
drizly $13Million
Instacart $220 Million
munchery $85 Million
nestdrop $150K
postmates $80 Million
roadie $10 Million
shyp $50 Million
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 30
Disruptors: Blue Apron, Munchery, Plated, HelloFresh
• Blue Apron was the fastest-growing US e-tailer
in 2014, with sales growing 550%, to $65 million
• Healthier and cheaper than eating out
and takeout
• Convenience: ready-to-cook boxes and
curated grocery according to menus, delivered to your doorstep
• US food market
• $1.2 trillion, with $600 billion in restaurants
• Millennial focused
5 READY-TO-COOK / EAT ECONOMY GAINS POPULARITY
Up
300% 2015
Source: Forbes
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 31
• A recent survey found that 20% of Millennials take public transit once a week or more, compared with just 7% of
Generation Xers and 10% of Baby Boomers
• 35% of millennials indicated that they plan to purchase a
vehicle in the next 12 months compared to 25% of total U.S. adults.
• Millennials lease more than any other generation and are leasing 50% more often today than they were five years ago
6 MILLENNIALS ASPIRE TO CAR OWNERSHIP BUT ALSO LIKE SHARING PLANS
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 32
• More than 3 in 4 millennials would choose to spend money on a desirable experience
• 60% of Millennials have shared their experiences online versus 34% of Gen Xers and 18% of
Boomers
• Since 1987, the share of consumer spending on
live events has increased 70% largely on the back of millennial spending.
7 EXPERIENCES TRUMP “THINGS”
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 33
Disruptors: Gigzolo, Zaptravel, OpenTable, Beautified
• Consumers are spending less on apparel and
more on experience
• 78% of millennials prefer to spend money on an
experience rather than buying something desirable
• Gigzolo: curated network of musicians and DJs available for hire for events
• Zaptravel:
• Digital travel agent
• Uses a semantic search engine to scroll through its database
7 EXPERIENCES TRUMP “THINGS”
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 34
Disruptors: TOMS, Reformation, Warby Parker, NOURI, SoapBox Soaps, Zady, GoodXChange
• Social activism over self-indulgence
• Consumers, especially Gen Z, are
increasingly demanding integrity from brands and retailers
• Startups for social good 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, sourcing sustainable
fabrics and vintage garments
8 CARING ECONOMY PROMOTES STARTUPS FOR SOCIAL GOOD
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 35
SUBSCRIPTION ECONOMY IS NIBBLING AWAY AT TRADITIONAL RETAILERS’ SALES 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
9
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 36
SILVER ECONOMY: AGING POPULATION CREATES AN OPPORTUNITY
• Senior population is growing across the globe
• US has the largest market for seniors: 2.2 trillion in 2014
• Older Consumers Are Increasingly Digitally Connected: Increasing mobile device usage: Greatcall
• Boom of healthcare tech industry: UnaliWear
• Smart Home: healthcare and assisted living system
Source: UN Department of Economic and Social Affairs
10
7 10 15
12.3% 13.5%
16.5% 17.0% 19.0%
23.5%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
0
2
4
6
8
10
12
14
16
2015 2020 2030
Estimated Senior Population and Spending, 2020 & 2030
Consumer spending by senior population(USD trillion)
Senior population as a % of total population
% of total worldwide spending
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 37
APPS BECOME THE PRIMARY WAY OF COMMUNICATION
57% 53%
45%
37% 37%
29% 27% 22%
19%
LINE Facebook Messenger
Snapchat WhatsApp WeChat Viber Skype Vine Kakaotalk
Source: Globalwebindex as of Q1 2015
Messenger App User Growth YoY% 11
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 38
App Millions of Monthly Active Users
WhatsApp 900 million
QQ Mobile 860 million
FB Messenger 800 million
WeChat 650 million
Skype 300 million
Viber 249 million
LINE 212 million
Snapchat 100 million
APPS BECOME THE PRIMARY WAY OF COMMUNICATION 11
Source: Globalwebindex as of Q1 2015
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 39
12 SOCIAL SHOPPING IS MADE SIMPLER
• Buy on social media platforms without switch apps or websites
• Easy to curate content on social media
• “Buy button” helps prevent shopping cart abandonment
• Youtube, Pinterest , Twitter and Google already have buy buttons
• Wechat is a pioneer in social shopping
45%
44%
30%
25%
22%
20%
16%
Reading reviews, comments and feedback
Receiving promotional offerings
Viewing advertisements
Staying on top of current fashion and product trends
Writing reviews, comments and feedback
Associating with particular brands and retailers
Purchasing products directly via a social media channel
How Social Media Influences Shopping Behavior
Source:PWC
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 40
13 MOBILE AGGREGATORS CREATE A ONE-STOP SHOPPING CART
• Aggregate and curate online content
• Attempting to create a universal shopping cart
• The Keep app allows shoppers to buy products from any online stores and check out from one single cart on Keep
• Shopspring.com: shop over 800 brands from one location, purchasing directly from the brand
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 41
14 INFLUENCER MARKETING WORD-OF-MOUTH MARKETING GAINS UPTHRUST • 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
• E-Marketer: YouTube has the highest ROI on
influencer marketing
Social Media Users in Jan. 2016
Facebook 1.5 billion
YouTube 1 billion
Instagram 400 million
Twitter 320 million
Snapchat 200 million
Pinterest 100 million
Sources: Statista
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 42
14 INFLUENCER MARKETING WORD-OF-MOUTH MARKETING GAINS UPTHRUST
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
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 43
15 SEARCH ENGINES SEEK OPPORTUNITIES IN RETAIL
Who They Are Biggest search engine in China Most popular search engine in the world
Public Company Listed on NASDAQ Shell company in Cayman Island Listed on NASDAQ
Pay-per-click Marketing Baidu Tuiguang Google AdWords
Third-Party Payment Baidu Wallet Google Wallet
E-commerce Business Baidu Mall Google Shopping
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 44
15 SEARCH ENGINES SEEK OPPORTUNITIES IN RETAIL
Online Search • Chinese market focused • 82% of China online search queries • 1% of global searches share
• Expanding globally • 90% share of global searches • 10% share in China
Mobile Search • 80% of China’s mobile search market • In Dec 2015, mobile search users reached 657million. 21%
YoY increase
• A starter in mobile search: early collaboration with Android operating system
• 78% of global mobile search market share; 1% in China
Online Marketing
• Revenue was $9.9 billion, 96% of total revenue
• 1,049,000 active online marketing customers in 2015
• Advertising revenue reached $67.35 billion in 2015 • 90% of total revenue
Third-Party Payment
• Limited Presence: Market Share: Alipay: 61.9%; Tenpay: 14.5%; Baidu Wallet: 2.3%
• Rapid expansion: reached 53 million in 4Q15; 180% YoY
• Google’s payment (Android Pay/ Google Wallet) is stronger than Baidu wallet
• Paypal accounted for 78% of the digital payment
• Apple and Google compete for the 2nd
E-commerce
• Dominance of Alibaba group(Tmall, Taobao) • Baidu Mall (2015): sell foreign branded and imported
goods to middle and high-end consumers • “Top Revenue Vertical”
• Google shopping vs. Amazon: shoppers directly click into the Amazon website that diverts Google search traffic away
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 45
16 RETAIL STORE CLOSINGS AND OPENINGS CONTINUE
Retailer # of Announced Store Closings
Walmart 269
Mens’ Wearhouse 250
Sports Authority 140
Sears 50
Macy’s 40
Kohl’s 18
Retailer # of Announced Store Openings
Dollar General 900
Forever 21 600
Under Armour 200
Dick's Sporting Goods 135-150
Ulta 100
ALDI 45
Costco 32
Dollar Tree 13
Stein Mart 12
Target 11 Source: ICSC Research and PNC Research
2015
• There was a 7% increase YoY in store closure announcements
• There was 29% less square footage associated with announced store closures in 2015 versus 2014
2016
• Off-price/discount retailers are expected to see major growth in 2016
• Foreign discount grocers Aldi and Lidl plan to push US expansion
• E-commerce pure plays opening stores
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 46
17 EXPERIENTIAL RETAIL BRINGS SHOPPERS BACK TO STORES
Urban Outfitters acquired Vetri Family group of restaurants in 2015
Club Monaco and Kohl’s are also opening food and beverage shops in their stores
Rebecca Minkoff offers interactive mirrors as well as virtual reality headsets
Tommy Hilfiger stores have virtual reality headsets to allow consumers to experience runway shows
Lowe’s Holoroom allows customers to see merchandise in different color combinations and as they would appear in a home
Proliferation of mobile apps to improve in-store experiences, such as: customizable shopping lists, location-relevant promotions, and product and inventory information
Food & Beverages
Virtual Reality Technology
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 47
Data enabled personalized and timely promotions
Track movements, behavior and preferences
Beacon enabled location-based
advertising
SMART MALLS: RESHAPING THE PHYSICAL SHOPPING EXPERIENCE 18
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 48
• HGTV partnered with Macerich shopping malls to launch virtual and hand-on technology-based experiences
48
• RetailNext formed strategic alliance with StepsAway, an in-mall mobile retail solution provider offering shoppers smartphone access to hyperlocal in-store deals
• A Silicon Valley-based unit which designs and experiments with innovations to improve the retail experience
SMART MALLS: RESHAPING THE PHYSICAL SHOPPING EXPERIENCE 18
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 49 49
AMAZON
BONOBOS
ATHLETA
CASPER
AYR
YOGIBO
HARRY’S INDOCHINO
EVOLVING PURE PLAYS 19
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 50
Millennials prefer mono-brand brick-and-mortar stores, and they shift between online and offline along the shopping journey
50
Retailer # of Stores
1
2
3
20
26
EVOLVING PURE PLAYS 19
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 51
20 ONLINE FASHION RESALE MARKETPLACES SHOW EXPLOSIVE GROWTH Disruptors: thredUP, Tradesy, The RealReal, Poshmark, Vestiaire Collective
• Online resale industry is worth $34 billion in the US
• Mobile is hot in resale; over 45% of thredUP’s sales come
from mobile devices
• Patagonia, Eileen Fisher and H&M launched resale
programs
2011
2012
2013
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 52
20 ONLINE FASHION RESALE MARKETPLACES SHOW EXPLOSIVE GROWTH Disruptors: thredUP, Tradesy, The RealReal, Poshmark, Vestiaire Collective
Why Online Resale Marketplaces Took Off
• Heavy venture capital investment in online
consignment industry (over $300 million)
• Retail brands’ resale programs encouraged
consumers’ sustainable consumption habits
• Consumers are convinced by great quality of
secondhand apparel bought via online platforms
• Societal shift toward less ownership—
the art of decluttering
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 53
21 E-COMMERCE DISRUPTORS IN HIGH-END MARKET
• High-end consignment jewelry platform
• Merchandise, appraise, photograph and serve
• Partnered with E-bay valet
• On-demand personal shopping and styling subscription service
• Professional stylist bringing store inventory directly to customers
• Quinn has a built-in style school that ensures a talent pool
• Curates emerging artists
• “Democratize" the process of selling artwork
• Connecting artists directly with collectors
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 54
22 AMAZON LEADS FASHION APPAREL MARKET
• Winner: Amazon led the group of top 19 apparel
companies with growth of 26% in 2015
• Runner Up: Fast Fashion
Top 5 include Inditex and H&M
• Declining Players:
Walmart’s apparel, Gap, Macy’s and Isetan Mitsukoshi each posted sales
declines for the year -5%
0%
5%
10%
15%
20%
25%
30%
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2015 Annual Sales Growth by Company
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 55
23 A TALE OF TWO RETAILERS: INNOVATION DRIVES GROWTH
-20%
-10%
0%
10%
20%
30%
40%
50%
Q2
2009
Q4
2009
Q2
2010
Q4
2010
Q2
2011
Q4
2011
Q2
2012
Q4
2012
Q2
2013
Q4
2013
Q2
2014
Q4
2014
Q2
2015
Q4
2015
YoY Revenue Growth
UA ARO
$0
$20
$40
$60
$80
$100
$120
2009 2010 2011 2012 2013 2014 2015 2016
Historical Stock Prices
UA ARO
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 56
23 A TALE OF TWO RETAILERS: INNOVATION DRIVES GROWTH
Under Armour is Innovative
• From sports clothing retailer to major player
in fitness technology
• Introduced UA Healthbox along with HTC
• Created “cognitive coaching system,” with IBM’s Watson
• Teams up with influencers such as Dwayne Johnson or Muhammed Ali to promote the
brand
Aeropostale is Stale
• Share prices have fallen close to 98% over the
past 5 year
• Considering strategic alternatives including a
sale or restructuring
• Failed to adapt to changing consumer tastes
• Failed to drop large logos and identify trends
• Missed the fast fashion boat
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 57
24 THE FALL OF DISRUPTORS: DEATH OF THE UNICORN?
• 146 privately held startups with valuations of $1billion or higher, or the “unicorns” in the US, 35 in China
• Gilt Groupe once valued at $1.1 billion, was sold at $250 million
• Good Technology, valued at $ 1billion, was sold at $425 million
• Square was valued at $6 billion when private. Market cap at $3billion now
• Current market can’t absorb existing unicorns and they are unwilling to go public
• At risk: Snapchat, Uber, Evernote, Vancl
FUNG GLOBAL RETAIL & TECHNOLOGY GOLDEN SEEDS MARCH 23, 2016 58
Q&A Deborah Weinswig
Managing Director of Fung Global Retail & Technology
US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
March 23, 2016
Deborah Weinswig
Managing Director of Fung Global Retail & Technology
US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016
March 23, 2016