Retailers have invested in a variety of digital store technologies ranging from interactive displays and virtual dressing rooms to in-store customization and smart shelves. As consumers increasingly turn to e-commerce, retailers must create a unique in-store experience to maintain footfall. This presentation will address the following questions: What will be the overall potential impact of implementing these technologies? What are the challenges of implementing such technologies? And what is the impact on customer experiences in both the short and long term?

1. 1
IN-STORE
TECHNOLOGY AS
RETAILTAINMENT
BRIGHT SHINY OBJECT OR
THE NEW NORMAL?
DEBORAH WEINSWIG
MANAGING DIRECTOR
FUNG GLOBAL RETAIL & TECHNOLOGY
SEPTEMBER 23, 2016

2. 2
• ABOUT FUNG GROUP
- Fung Global Retail & Technology
- Fung Explorium in Shanghai
• 2016 YTD RETAIL ENVIRONMENT OVERVIEW
• TOP 12 RETAIL TECH TRENDS
WHAT’S IN MY CART TODAY

3. 3
FUNG GROUP
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
Toys “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

4. 4
• The knowledge bank for the Fung Group
• Consultancy for clients within and outside Fung Group
• Focuses on emerging retail and technology trends
• Based in New York with research teams in London and
Hong Kong
• 20+ analysts specializing in retail and technology
• Publishes thematic and global market research on
topics such as the Internet of Things (IOT), digital
payments, omnichannel retail, fashion retail trends and
disruptive technologies
FUNG GLOBAL RETAIL & TECHNOLOGY
HONG KONG NEW YORK LONDON
RETAIL
TECH
MICRO
MACRO
RETAIL
REAL
ESTATE
THEMATIC
RESEARCHVR
AI
IOT
DIGITAL
DIGITAL
DIGITAL
DIGITAL

5. 5
• Fung Global Retail & Technology publishes research, freely available on www.fgrt.com
• We advise 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
A UNIQUE COMBINATION OF RETAIL, FASHION AND TEC
RETAIL FASHION TECH

6. 6
FUNG GLOBAL & FUNG CAPITAL RETAIL TECHNOLOGY LANDSCAPE

7. 7
• Continued gas dividends
• Strong housing starts and rising house prices
• Strong job market
• Inflation still below target expectations
• Global uncertainty weights in on Fed action, business investment
MACRO ENVIRONMENT OVERVIEW

8. 8
US MACRO OVERVIEW: FAVORABLE BACKDROP
Indicator Period 2016 2015 YoY Change
Impact on
Consumption
GDP Growth Q2 1.1% 2.6% (1.5%) −
Gas Price ($ per gallon) Sep $2.23 $2.44 (8.8%) +
Unemployment Rate Jul 4.9% 5.3% (40) Bps +
The S&P/Case-Shiller
20-City Composite Home Price Index
Jun 189.9 180.6 +5.1% +
Consumer Price Inflation Jul 0.8% 0.2% 60 bps +
Savings Rate Jul 5.7% 5.8% (10 bps) +
Wage Growth Aug 2.4% 2.3% 10 bps +
University of Michigan Consumer Sentiment Aug 89.8 91.9 (2.1%) −
Sources: Energy Information Agency, Bureau of Economic Analysis, Bureau of Labor Statistics, McGraw Hill Financial, University of Michigan Survey of Consumers

9. 9
• GDP annualized growth rate was
1.1% in Q2, following lackluster
growth of 0.8% in the first quarter
and 0.9% in the last quarter of 2015.
• Downward revisions to growth in
prior periods were in government
spending, inventories and net
exports.
GDP GROWTH GREW BELOW EXPECTATIONS AT 1.1% IN Q2
Source: Bureau of Economic Analysis/Fung Global Retail & Technology
US GDP GROWTH RATE
Q4 2015Q3 2015Q2 2015Q1 2015Q4 2014Q3 2014Q2 2014
4%
0.9% 0.8%
Q1 2016 Q2 2016
2.6%
2%
2.3%
2%
5%
1.1%

10. 10
HOME PRICES AND RESIDENTIAL INVESTMENT ALSO POSITIVE
Source: S&P Dow Jones Indices /US Bureau of Census
S&P Case Shiller 20-City Housing IndexHousing Starts YoY Growth (%)
5.6%
(20.0)
(10.0)
0.0
10.0
20.0
30.0
40.0
Jul 14 Jul 15 Jul 16
(10.0)
(5.0)
0.0
5.0
10.0
15.0
20.0
(1.0)
(0.5)
0.0
0.5
1.0
1.5
2.0
Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16
%
MoM% (left) YoY% (right)
5.1%
-0.1

11. 11
40.0
60.0
80.0
100.0
120.0
Aug 11 Aug 12 Aug 13 Aug 14 Aug 15 Aug 16
CONSUMER SPENDING IS SUPPORTING GDP GROWTH
Sources: Bureau of Labor Statistics/University of Michigan/Conference Board
Consumer Sentiment & Consumer ConfidenceTotal PCE YoY Growth (%)
0.0
1.0
2.0
3.0
4.0
5.0
Jun 10 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16
%
2.9%
89.8

12. 12
THE LABOR MARKET IS SUPPORTING CONSUMER SPENDING
Sources: Bureau of Labor Statistics/ Bureau of Economic Analysis
Average Hourly Earnings YoY Growth (%)Unemployment Rate (%)
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Aug 11 Aug 12 Aug 13 Aug 14 Aug 15 Aug 16
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
Aug 10 Aug 11 Aug 12 Aug 13 Aug 14 Aug 15 Aug 16
4.9%
2.4%

13. 13
INFLATION PACE STILL MODEST
US Gasoline PriceCPI YoY Change (%)
Source: US. Bureau of Labor Statistics/EIA
(1.0)
0.0
1.0
2.0
3.0
4.0
5.0
Jul 11 Jul 12 Jul 13 Jul 14 Jul 15 Jul 16
CPI-U CPI-U Less Food and Energy
$1.50
$1.75
$2.00
$2.25
$2.50
$2.75
$3.00
Sep 15 Mar 16 Sep 16
$2.223
0.8%
2.2%

14. 14
• The experiential consumer drives change in retail
• Store traffic down, but shopping is more digital and purposeful
• Retailers are adjusting and performance is improving
• Promotions are here to stay: a view of shopping events and our
2016 holiday outlook
RETAIL ENVIRONMENT OVERVIEW

15. 15
CONSUMERS BUY MORE SERVICES, LESS GOODS
2%
3%
4%
5%
6%
7%
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Source: Bureau of Economic Analysis
6.58%
3.86%
3.07% CLOTHING & FOOTWEAR
% of Total Personal Consumption Expenditure by Category
FOOD &
ACCOMMODATIONS
RECREATION SERVICES

16. 16
Experiences Trump “Things”
Experiences are what people use to define
themselves across social media channels.
Non-essential categories, including
vacations and dining out, will see the
fastest growth, about 27%.
More than 3 in 4 millennials would choose
to spend money on a desirable experience.
Over the next 5 years US consumer spending is forecasted to grow by 22%
Source: MINTEL

17. 17
Why People are Leaving the Stores
17
Getting Hungry Need to Go to BathroomLong Checkout Lines Lousy Dressing Rooms

18. 18
The Instagram Effect:
Never be photographed in the same dress twice

19. 19
Selfie Culture Has Resulted in a Shift to Beauty Spending Over Apparel
Industry Global Revenue 2015 Annual Growth 10-15
Cosmetics $276bn 3.2%
Apparel $618bn 0.6%
Source: IBISWorld
The Beauty Category Outperforms Apparel
“Selfie culture, if you take a photo 10 times today...the result is people
are using more makeup and more instant skin care.”
- Fabrizio Freda, CEO of Estée Lauder, commenting on 11% growth in makeup sales in 1Q16

20. 20
RETAILERS REBALANCING FOOTPRINT
Source: Bloomberg, Company Reports, Fung Global Retail & Technology
-70% -60% -50% -40% -30% -20% -10% 0%
Sears
aerie
Christopher and Banks
Abercrombie & Fitch
Pacific Sunwear
Kmart
Restoration Hardware
Office Max/Office Depot
Aéropostale
Saks Fifth Avenue
Bebe Stores
Hollister US
Lands' End
Staples
Barnes & Noble
New York & Company
Williams-Sonoma
JCPenney
Dillard's
Rite Aid Corp
Gap
Teen retailers account for most of
the store closings between
2010 and 2015

21. 21
… WHILE THE NUMBER OF MALLS REACHES A PLATEAU
Source: ICSC, Fung Global Retail & Technology
967
1,027
1,097
1,161
1,211 1,222 1,221
1990 1995 2000 2005 2010 2015 2016
Number of Malls in the US
Note: Regional & Super Regional Malls (400,000 - >800,000 sq.ft)

22. 22
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
Aug14
Sep14
Oct14
Nov14
Dec14
Jan15
Feb15
Mar15
Apr15
May15
Jun15
Jul15
Aug15
Sep15
Oct15
Nov15
Dec15
Jan16
Feb16
Mar16
Apr16
May16
Jun16
Jul16
Aug16
Sales Traffic
• US mall traffic has decreased for 43
consecutive months and continues to
be challenging
• Malls have seen an average 9.0% 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
STORE TRAFFIC CONTINUES TO DECLINE
Source: RetailNext
Monthly US In-store Traffic and Sales YoY%
-7%
-6%

23. 23
• YoY % for conversion rate has stayed
positive despite the continuous drop in
traffic
• A greater portion of store traffic are
converted into real dollar sales,
indicating fewer window shoppers
• Digital part of the cause:
- 31% of all US retail sales in 2015 were
digital are digitally influenced (Forrester)
- 39% of in-store buyers read online reviews
before making a purchase (Bazaarvoice
Global Consumer Behavior Research)
BUT CONVERSION IS UP: SHOPPERS ARE MORE PURPOSEFUL
Source: RetailNext
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
Aug14
Sep14
Oct14
Nov14
Dec14
Jan15
Feb15
Mar15
Apr15
May15
Jun15
Jul15
Aug15
Sep15
Oct15
Nov15
Dec15
Jan16
Feb16
Mar16
Apr16
May16
Jun16
Jul16
Aug16
Conversion Traffic
Monthly US In-store Traffic and Conversion Rate YoY%
-7%
0.3%

24. 24
Where ReceivedFulfilled ByOrder From
All-Channel Universe
Source: Hudson’s Bay
Direct DC
Store DC
Your Store
Different Store
Vendor
Home
Elsewhere
Your Store
Different Store
Home
Elsewhere
Your Store
Different Store
Mobile

25. 25
RETAIL WRAP-UP: Sector Performance
Source: Bloomberg, Company Reports,
US Equites By Sector 2Q 2016
Earnings Per Share Beat Miss
Apparel, Accessories and Footwear 71% 29%
Big Box, Discount, Dollar and Convenience Stores 67% 33%
Consumer Packaged Goods and Beauty 100% 0%
Department Stores 100% 0%
Luxury and Accessible Luxury 67% 33%
Sporting Goods and Athletic Wear 86% 14%
Home and Home Improvement 75% 25%
Supermarkets and Drug Stores 75% 25%
Technology-internet Retail 13% 88%
Real Estate and REITS 80% 20%
Note: International equities included in analysis: Inditex, Prada, Hudson Bay Combany, Adidas

26. 26
RETAIL WRAP-UP: Winners and Losers
Source: Bloomberg
Company Actual Consensus
Vera Bradley (10.6%) (1.8%)
Dick's Sporting Goods (0.2%) 2.7%
Children's Place 0.4% 2.5%
Gap (4.0%) (2.0%)
Burlington Store 2.1% 3.2%
Finish Line 1.8% 2.9%
Stein Mart 1.0% 2.0%
Ascena Retail (5.0%) (4.0%)
Ulta Salon Cosmetics & Fragrance 11.8% 12.6%
lululemon athletica 5.0% 5.8%
Wal-Mart Stores 0.3% 1.1%
Guess? (3.6%) (3.1%)
Company Actual Consensus
Restoration Hardware 11.0% (12.3%)
Express 6.0% (8.6%)
Hudson's Bay 12.1% 0.8%
Steven Madden 11.2% 4.3%
Skechers USA 10.5% 4.3%
Kate Spade & Co 13.0% 7.3%
L Brands 5.0% 0.4%
Whole Foods Market 2.5% (1.9%)
American Eagle Outfitters 7.0% 3.0%
Foot Locker 8.5% 4.8%
Kroger 5.0% 1.4%
Tiffany & Co 0.0% (3.2%)
Comps/Same Store Sales Actual vs. Consensus Results
Note: Most recent quarter

27. 27
Prime Day Singles’ Day
Date
07/15, debuted in 2015
07/12, 2016
Every 11/11, debuted in 2009
Channel Amazon’s global sites Alibaba, JD.com, Suning, Gome, Haier
Market
US, UK, Spain, Italy, Germany,
France, Canada, Australia
China, US
Sales $525M* Blockbuster record of $14.3B for Alibaba
Growth 26%* 236%
Compared with
Cyber Monday 0.14 X 4.7 X
Prime Day vs. Singles’ Day
*FGRT Estimate
Disappointment vs. Record-Breaking Sales

28. 28
Holiday 2016 Preview
28

29. 29
TOP 12 IN-STORE TECHNOLOGY TRENDS
Experiences
In-store
Technologies
Customer
Engagements
1. Experiential Retail
2. Smart Malls
3. AR + VR
4. Facial Recognition
5. Interactive Displays
6. Robotics
7. Evolving Pure Play
8. Reverse Logistics
9. Mobile Payments
10. Gamification
11. Tech Empowered Store Associates
12. Natural Language Processing

30. 30
1Experiential Retail
Origins: free, walk-in mini facials available at Origins stores.
BEAUTY
Lush: in-store Hair Lab to try products before purchase.

31. 31
1Experiential Retail
Sephora: Play, learn and shop at its 400th store’s BEAUTY TIP (Teach, Inspire, Play) WORKSHOP in Chicago.
BEAUTY

32. 32
1Experiential Retail
Facial & Spas
Bloomingdales: Drybar opened its first Soho store on the 1st floor
within Bloomingdales in 2015.
BEAUTY
ULTA: offer hair and skin care consultations in the in-store Style Bar.

33. 33
1Experiential Retail
Nike, Lululemon, Athleta, Rebecca Minkoff: free in-store fitness classes like yoga and HIIT available for sign-up.
WELLNESS

34. 34
1Experiential Retail
Singapore: health promoting malls like the Star Vista partner with professional instructors to organize weekly workout session.
WELLNESS

35. 35
1Experiential Retail
FOOD
Old Navy: tee & ice-cream giveaway truck popped up in NYC.Urban Outfitters: launched UO café in Herald Square, NYC.

36. 36
1Experiential Retail
ENTERTAINMENT
The Dubai Mall: has one of the largest
indoor aquariums in the world.
American Dream Meadowlands: first indoor
skiing facility in the U.S., projected to launch in
spring 2017.
Mall of America: indoor entertainment
facilities include roller coasters.

37. 37
2Smart Mall
Data-enabled personalized and timely promotions.Track movement, behavior and preferences.Beacon-enabled, location-based advertising.
Reshaping the physical shopping experience

38. 38
2Smart Mall
Reshaping the physical shopping experience
An in-mall mobile retail solutions provider to offer
shoppers smartphone access to hyperlocal in-store
deals.
Silicon Valley based unit that designs and
develops innovations to improve the retail
experience.
Partnered with HGTV to launch virtual
and hands-on technology-based
experiences.

39. 39
Lowe’s Holoroom allows customers to see
different merchandise and color combinations
as they would appear in a home.
Tommy Hilfiger, Top Shop and many other
retailer stores have virtual reality headsets that
allow visitors to experience runway shows.
Pokemon Go: augmented reality, the
game is driving traffic to stores.
3Augmented Reality + Virtual Reality
Combined AR and VR markets will reach $151 bn by 2022

40. 40
4Facial Recognition
The global Facial Recognition market is forecasted to grow from $2.77 bn
in 2015 to $6.19 bn by 2020, at a CAGR of 17.4%
Source: MARKETSANDMARKETS
Walmart tested with FaceFirst to spot
shop lifters.
actiMirror is an in-store, mirror-like display that identify
the customer’s demographics and make instant
personalized product.
Applications are expanding from health,
wellness, beauty and advertising into theft
prevention.

41. 41
5Interactive Display
Interactive display uses online or offline interactive media to present and
promote products, brands and services to consumers
PERCH is a digital platform that responds with
dynamic digital media as customers touch and pick
up products.
FrankMayer specializes in designing
and producing interactive point-of-
purchase displays and kiosks. GE light
display for customer testing of bulb
hues in different lighting settings.
TUKU is a tap-to-learn in-store information
tool that presents information in an easily
digestible manner.

42. 42
6Robotics
The global robot market is growing rapidly at a CAGR of 17%, expected to
reach $135 billion by 2019.
SoftBank: Pepper acts as a sales assistant to
engage with customers in-store.
Henn-na Hotel: robots are replacing the human
servers in the Henn-na Hotel Nagasaki from front
desk to kitchen.
Amazon Robotics: Founded in 2003,
Amazon robotics has automated the entire
fulfilment center operations with
autonomous mobile robots.

43. 43
7Evolving Pure Plays
Number of Actual/Planned Physical Stores
AMAZON ATHLETA
CASPER
AYR
YOGIBO
HARRY’S
2 120 1 1 2
3 26 3 1 9
5 39 25 11 2

44. 44
7Evolving Pure Plays
Gilt now has two physical presence Amazon strives to provide the similar
services in store as online
Birchbox’s Soho Store in New York City

45. 45
8Reverse Logistics
In-store returns from e-commerce companies can increase traffic to malls
and decrease fraudulent returns
Gilt customers can now make returns at
any Saks Fifth Avenue/OFF 5th locations .
Happy Returns offers return kiosks in high-traffic
areas (e.g., shopping malls) that takes returns for
retailers and repackages them, reducing return
costs for retailers.
Retail Industry has $260.5 billion worth
of merchandise returned or 8% of total
sales.

46. 46
9Mobile Payments Are Changing The Landscapes
# of
Accepted
Locations
>2,000,000 > 30 million > 2,000,000 > 300,000 >200,000
+
Apple Watch is compatible
Secure – Unique security
code for each transaction
Compatibility with existing
terminals
No additional investment
for retailers
Works on any Android
device
Support from major
retailers: Staples,
Walgreens, Wholegoods
Works on both iOS and Android
Connect to a platform to invest in
financial product
Widely supported within China,
eg. repay credit card, utility bills,
online purchases, or QR-codes for
offline payment
Part of the Alibaba’s
ecosystem
Provides users with
additional wealth
management tools
and services
Only works with NFC-
enabled registers
NFC terminal cost retailer
$500 or more
Not accepted by major
retailers: Walmart, Target,
Best Buy
Limited device options −
Samsung Galaxy S6
Magnetic strip reader
requires tricky position for
phone
Support NFC technology-
enabled Android
smartphones only.
Few stores outside of Asia
support WeChat Pay but catching
up.
Lack of third-party
regulations

47. 47
9Mobile Payments Are Changing The Landscapes
P2P payments explode on WeChat
32.1 billion
red envelopes
516million
Users *
~74% of all
WeChat users
903%
YoY growth since introduction
of red envelopes
* Over 92% of those senders were reportedly between the ages of 20 & 29
Chinese New Year Celebration
Feb. 7 – 12, 2016

48. 48
10Gamification
The global gamification market will worth $10.02 billion by 2020 with
a CAGR of 42.4%
Source: Mind Commerce
CocaCola: customers in Japan can get free drinks
with 15 digital stamps from the CocaCola app
Sears in-store scavenger game.Starbucks let customers accumulate
points to win game pieces to win
different levels of prizes.

49. 49
10Gamification:
A gamified solution to increase store traffic via promotion rewards
Helps retailers increase store foot traffic
and sales.
Geo-location engages
customers at venues.
Injects relevant retailer content and promotions and engage
the customer with games.

50. 50
Branch Messenger: an application that helps retailers
reduce absences and increase productivity
11Store Associate Tech
Tech empowered store assonates are can be a differentiating factor
Tulip Retail: mobile CRM platform for store associates

51. 51
12Natural Language Processing
The next frontier of human/computer interface can revolutionize digital
product search: Google and Amazon actively acquiring AI startups
AddStructure Conversational platform
for search, recommendation, and
personalization.
A.I. POWERED
CONVERSATIONAL
COMMERCE
Angel.ai (acquired by Amazon in Sep 2016):
Language search for commerce with 40+
commercial categories, from flights and hotels to
entertainment and deliveries
Api.ai (acquired by Google in Sep 2016):
conversational user experience platform for
developers

52. 52
TOP 12 IN-STORE TECHNOLOGY TRENDS
Experiences
In-store
Technologies
Customer
Engagements
1. Experiential Retail
2. Smart Malls
3. AR + VR
4. Facial Recognition
5. Interactive Displays
6. Robotics
7. Evolving Pure Play
8. Reverse Logistics
9. Mobile Payments
10. Gamification
11. Tech Empowered Store Associates
12. Natural Language Processing

53. 53
An experimental
learning laboratory
for business model
innovation

54. 54
A playground for the future of
retail and a platform for
accelerated experimental learning.
Explorium is…
Interactive Exhibition Space
To consumers we are a dynamic mall for them to
discover new shopping experiences both online
and offline.
Data & Analytics Hub
Underneath the surface we are capturing
interactions between consumers and the physical
and digital space.
Research and
Learning Lab
Experiments are
designed, prototyped,
and tested with the
public with learnings
supported by data.
Explorium is strategically
located in Shanghai, the
leading edge of tomorrow’s
shopping behaviors.
上海

55. 55
An interactive exhibition space and dynamic physical platform.
Explorium is…

56. 56
A data and analytics hub in partnership with IBM with an all-encompassing digital platform and
analytics dashboard.
Explorium is…
iBeacon Bracelet App

57. 57
An experimentation platform through which the Fung Group provides the expertise, tools, network, and
targeted consumers to maximize the efficiency of retail experiments.
Explorium is…
Research Experiments
to Explore Future Potential
Strategic pilot experiments focused
on high-potential Group opportunities
at leading edges of the future of
retail.
Learning Experiments
to Maximize Today’s Potential
Business-driven experiments at
Explorium aiming to optimize current
retail models for their businesses.
COMPETITIVE
POSITION
GROWTH
RATE

58. 58
Q & A
DEBORAH WEINSWIG
MANAGING DIRECTOR
FUNG GLOBAL RETAIL & TECHNOLOGY
deborahweinswig@fung1937.com
https://fungglobalretailtech.com