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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
RETAIL TECH ECOSYSTEM
5
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 8
FBIC TOP 10 RETAIL & TECH TRENDS
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. GAMIFICATION

REACHES 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
13
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 2025MillionUnits
DEBORAH WEINSWIGMANCHESTER
THE STATE OF GLOBAL APPAREL RETAIL
21
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”.
27
DEBORAH WEINSWIGMANCHESTER 28
DIGITAL COMMERCE AND RETAIL IN THE US
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
Ÿ Webrooming is researching
online and buying in a store	
  
Ÿ Amazon remains the top
destination for webrooming
and showrooming	
  
Ÿ 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
Ÿ 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.
36
DEBORAH WEINSWIGMANCHESTER 37
THANK YOU

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Top Ideas on Global Retail & Tech June, 2015

  • 1. 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
  • 2. 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)
  • 3. 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
  • 4. 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
  • 6. 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
  • 7. 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
  • 8. DEBORAH WEINSWIGMANCHESTER 8 FBIC TOP 10 RETAIL & TECH TRENDS
  • 9. 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
  • 10. DEBORAH WEINSWIGMANCHESTER 10 1. GAMIFICATION
 REACHES 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
  • 11. 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%
  • 12. 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%
  • 13. 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 13 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
  • 14. 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&
  • 15. 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%
  • 16. 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
  • 17. 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)
  • 18. 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
  • 19. 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
  • 20. 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 2025MillionUnits
  • 21. DEBORAH WEINSWIGMANCHESTER THE STATE OF GLOBAL APPAREL RETAIL 21
  • 22. DEBORAH WEINSWIGMANCHESTER 22 GLOBAL 
 APPAREL SPENDING 
 ON THE RISE $0 $450 $900 $1,350 $1,800 Australia Canada Japan EU-27United StatesRussia Brazil China India 2012 2025 Per Capita Expenditure on Apparel Worldwide 
 In 2012 and 2025, by Region Source:  Wazir  Management  Consultant Global spending on apparel is on the rise, driven by both developed and emerging economies
  • 23. DEBORAH WEINSWIGMANCHESTER  Company   Sales   Growth   YoY Total  Sales  
 ($  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
  • 24. 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.”
  • 25. 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)
  • 26. 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
  • 27. 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”. 27
  • 28. DEBORAH WEINSWIGMANCHESTER 28 DIGITAL COMMERCE AND RETAIL IN THE US
  • 29. 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
  • 30. 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
  • 31. 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
  • 32. DEBORAH WEINSWIGMANCHESTER 32 … AND SHOPPERS ARE WEBROOMING MORE Source:  PWC Ÿ Webrooming is researching online and buying in a store   Ÿ Amazon remains the top destination for webrooming and showrooming   Ÿ Millennials generally prefer webrooming
  • 33. 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%)
  • 34. DEBORAH WEINSWIGMANCHESTER 34 BIG E-RETAILERS CONTINUE TO EXPAND MARKET SHARES Source:  Internet  Retailer,  2015 Ÿ 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
  • 35. 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
  • 36. 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. 36