The document summarizes several key retail trends for 2016, including: - Store traffic continuing to decline, making in-store experience more important. - Growth of virtual reality (VR) and its potential impact on retail through VR experiences. - Evolution of pure online retailers to open some physical stores. - Influencer marketing gaining momentum as brands partner with popular social media figures. - Secondary markets and resale platforms growing in popularity among consumers. - Subscription models emerging in categories like beauty and fashion.

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PhilaU Fashion Immersion Program at Li & Fung
Jing Wang
Fung Global Retail & Technology
September 9, 2016
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• Fung Global Retail & Technology advises retailers, real estate developers, tech companies, and others on
projects situated at the intersection of retail, tech and/or fashion
• Our team offers a robust knowledge bank and deep-rooted experience across the retail, fashion. and tech
industries. We are involved in many areas of the business, which allows us to offer a unique perspective on
the future and where the sector is heading.
Retail, Tech, and Fashion
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3. © 2015Planalytics, Inc. AllRights Reserved.Proprietaryand Confidential.
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Source: Energy Information Agency
Bureau of Economic Analysis
Bureau of Labor Statistics
Indicator Period 2016 2015 YoY change
Impact on
Consumption
GDP Growth Q2 1.2% 3.9% (270 bps) -
Gas Price ($ per gallon) Aug. $2.15 $2.63 (18.2%) +
Consumer Price Inflation Jun. 1.1% 0.2% 90 bps +
Savings Rate Jun. 5.3% 5.8% (50 bps) +
Unemployment rate Jul. 4.9% 5.3% (40) bps +
Wage Growth Jun. 3.6% 3.2% 40 bps +
The S&P/Case-Shiller 20-City Composite Home
Price Index
May 188.3 178.9 +5.2% +
University of Michigan Consumer Sentiment Jul. 90.0 93.1 (3.3%) -
Tax-Free Shopping Days Q2/Q3 54 63 (14.2%)
-
Overview: Favorable Macro Backdrop;
Spending Remains Steady
McGraw Hill Financial
University of Michigan Survey of Consumers

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• The top half and bottom half are doing better,
with outperformance at the bottom
• The “consumer hourglass” phenomenon
generates opportunities in the value-for-
money segment
The Consumer Hourglass
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Squeeze in the Middle Segment
Neiman Marcus
Saks
Nordstrom
Bloomingdale’s
Dillard’s
Macy’s
Kohl’s
Sears
JCPenney
Target
Walmart
Costco
TJ Maxx/Off-Price
Primark
Aldi / Trader Joe’s
Dollar Stores

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Five Ways That Amazon Is Disrupting Retail Industry

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• Accounted for $0.51 of every $1.00 of
growth in US e-commerce in 2015
• Generated 24% of total retail growth in
the United States
• New Amazon services are changing
consumer preferences
Is It Amazon or a Change in Customer Preferences?
Amazon Annual Sales Growth
Source: Bloomberg and US Census Bureau
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-24.8% -18.1%
175.7%
-13.5%
124.6%
-50.0%
0.0%
50.0%
100.0%
150.0%
200.0%
Apple Samsung Amazon Lenovo Huawei
AMAZON PRIME IS TAKING OFF IN WAYS THAT
PERHAPS AMAZON DIDN’T EVEN EXPECT
• Amazon now has at least 54 million prime members,
and growing at 50%+ the last 2 years. By contrast,
Costco has 44.6 million paid members
• Amazon’s video strategy with Twitch, Hollywood, and
with original content producers is helping to drive
prime membership more than originally expected.
AMZN’s Cloud leadership also enables this.
• The Fire – originally panned by critics – is the fastest
growing tablet - $50 changed the tablet game and is
allowing Prime content to be consumed easily.
• Originally thought of as an April Fool’s joke, Dash, a
button to order a specific product, now has 100
products at a push of a button for Prime members.
Source: IDC Quarterly Tablet Tracker
Amazon Annual Tablet Growth, Q4 2015
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AMAZON IS COMPLETELY REDEFINING
LOGISTICS WITH PRIME NOW
• Dubbed “Prime Now,” Amazon has recently expanded its same day
delivery service to 24 US cities and London.
• Cowen estimates that 25% of Prime Members have used Prime
Now. Previously only on apps, now also available on the web as
well.
• Competing with grocery delivery services like FreshDirect, but also
Google Express, UberEats, and Instacart.
• Amazon looking to tap into the $77 billion digital ad spend market
with this service, especially CPG brands.
• Also announced plans to lease 20 Boeings, are actively lobbying for
drones for Prime Now Air, and have other experiments in Europe, all
of which put FedEx, UPS and DHL on their heels.
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AMAZON HOME SERVICES MIGHT SHAKE UP A
NUMBER OF INDUSTRIES, INCLUDING FURNITURE
AND APPLIANCES
• Amazon is combining delivery of larger products with seamless
assembly.
• Over 85 million U.S. customers shop for products that need
additional services including installation
• Orders are growing at 20% a month since launch
• Home Services offers 36 million pre-packed services on the
site, compared to the 2 million it offered when it first began
offering local services last year
• Affects markets of Home Depot, Best Buy, Ikea
and others that are also developing
“DIFM vs DIY” strategies
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ECHO IS A SLEEPER HIT ALONG WITH ALEXA
• Paired with Alexa, Echo allows for “always on” AI in your home –
without needing your phone or pushing a button.
• Echo becomes the central nervous system of the connected home.
• When first launched in 2014, purpose was not entirely clear, and
panned by critics. Now even Apple’s Co-founder is a fan.
• Advertising tie ups with Capital One and other finance firms are in the
works.
• Tie ins with Amazon Prime Now and other Amazon
retail services are natural extensions.
• Echo is on back order, prompting other device
makers like Google's Nest to work on their own
look-alike services.
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AMAZON WILL DISRUPT THE
CORPORATE AND SME OFFICE SUPPLY MARKET
• About 300,000 businesses had opened accounts with
Amazon in the first 11 months of its Amazon Business
service.
• Amazon is rumored to be buying Office Depot’s corporate
accounts business.
• The corporate business was required to be divested as a
part of the FTC regulations regarding the Staples purchase
of Office Depot.
• But now Staples is having second thoughts about being left
with just the brick and mortar footprint if the FTC wins its
case against the Office Depot / Staples merger.
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Top 10 Retail Trends for 2016
1. Store Traffic
2. Evolving Pure Plays
3. Virtual Reality
4. Influencers
5. Consignment
6. Subscription Economy
7. Sharing Economy
8. Rental Economy
9. Caring Economy
10. Silver Economy

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With Store Traffic Down, In-Store Experience Is Key
• US mall traffic has decreased for 44
consecutive months and continues to be
challenging
• Malls have seen an average 9.1% YoY
decrease in traffic since January 2015
– High-end malls appear less affected
– General Growth Properties: traffic up 2%
in 2015
– Simon Malls: traffic up 1.5% in 2015
– Taubman Centers: traffic up in 2015
Source: RetailNext
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Virtual reality (VR) means presenting the senses with a computer-
generated virtual environment
• VR—Oculus Rift headset
• Samsung’s Gear VR headset to be priced at $99 and to hit stores
next year
• 360-degree video technology allows consumers to learn more
about products before going to the store
• Widespread adoption of VR in the retail space is expected in as
little as three years
• Industry even has a new term for selling via VR:
v-commerce
Source: Digital Trends/Ad Age
Market Size & Growth Rate:
$3 Billion @ 80% (2016)
Virtual Reality2

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Evolving Pure Plays (Number of Actual/Planned Physical Stores)
AMAZON ATHLETA
CASPER
AYR
YOGIBO
HARRY’S
1 400 120 1 3 2
3 21 1 1 7
4 27 25 12 2
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Influencer Word-of-Mouth Marketing Gains Momentum4
• Brand influencers: advocates on social media
platforms and review sites to support brands they
love
• Influencer marketing:
- 81% of marketers found IM effective in 2015
- 59% of marketers will increase IM budgets in 2016
• Influencer marketing agency is now a booming
industry
• Each month over 50 million people watch over
1.6 billion minutes of fashion and beauty videos
in more than 45,000 YouTube channels

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4 INFLUENCER MARKETING WORD-OF-MOUTH MARKETING
GAINS MOMENTUM
Target collaborates with
Joy Cho, a popular designer and
blogger. They also launched Oh Joy
for Target collection, an exclusive
party-inspired Home line
Emily Schuman a much-followed
fashion blogger, author and designer
launched her Cupcakes and
Cashmere collection in collaboration
with Nordstrom
Blogger star and entrepreneur
Michelle Phan launched her
own makeup line, Em, with
L’Oreal

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Owns data from 5,000
retailers and 130 million
products
Makes a perfect match
between retailers and the
right influencers
Helps minimize overhead
costs
is a data-driven influencer marketplace
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Influencers: A Marketplace - Shopography4

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Why Online Secondary Marketplaces Took Off:
• Online resale industry is worth $34 billion in the US
• Rise of retail brands’ resale programs
• Consumers are convinced by the great quality of the
secondhand apparel bought via online platforms
• Societal shift toward less ownership — the art of
decluttering
• Creating communities where the customers can share
experiences about shopping + more…
5 Online Fashion Consignment Takes off
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Subscription Economy: Beauty and Fashion Are Growing
• Disruptors: Le Tote, Birchbox, BarkBox, Pijon, Stitch Fix
• Convenience and curated products for consumers
• Recurring revenue model for retailers
• Element of self-gifting
• Beauty is the biggest category
• Fashion-styling subscriptions are becoming popular
• Office supplies present an opportunity
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Sharing Economy: “Uberifying” Virtually Every Industry
Disruptors: Uber, Airbnb, Lending Club, WeWork
• Valuations of sharing-economy companies have
skyrocketed
• Revenues are projected to catch up to aggressive
valuations
• Sharing-economy market:
$15 Billion
2013
$335 Billion
2025
CAGR: 29.5%
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Rental Economy: Fashion Rental Leading
Following Rent the Runway, a new generation of fashion-rental companies has emerged
Disruptors: Style Lend, VillageLuxe, Le Tote, Lena the Fashion Library and Borrow For Your Bump
(maternity)
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Caring Economy Promotes Startups for Social Good
Disruptors: TOMS, Reformation, Warby Parker,
NOURI, SoapBox Soaps, Zady, GoodXChange
• Promotes social activism over self-indulgence
– Consumers, especially Gen Z, demand
integrity from brands and retailers
• Startups with social missions apply market-
based strategies to achieve a social goal
– TOMS, the shoe company, has a “one for
one” business model
– Reformation designs and manufactures
sustainable apparel; sources sustainable
fabrics and vintage garments
– Kohl’s Cares gives back to communities with
Salina Yoon children’s books
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Silver Economy: Demographics Create Opportunities
• “The Grey Market” : older consumers may be
an engine of growth in the sluggish global
economy
• Silvers are those aged 65–85 years old, while
super silvers are 85+
• The United Nations forecasts that the 60+ age
group will grow from 12.3% of the global
population in 2015 to 16.5% in 2030
• In 2015, consumers aged 65+ accounted for
around $7 trillion, or approximately 17%, of
total worldwide consumer spending
• Spending by silvers is expected to grow 114%,
2015 – 2030, outpacing population growth of
56% Source: UN Department of Economic and Social Affairs, Population Division, World
Population Prospects: The 2015 Revision/International Labour Organization,
World Social Protection Report 2014–15/Euromonitor International/Fung Global
Retail & Technology
56%
114%
Population Spending
Estimated Growth in Senior Population and
Spending by Seniors, 2015–2030
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Partnership with IBM and
Pico
35 Participating Brands 12,000 Employees as
Shoppers
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Bonus: Fung Group’s Explorium Project in Shanghai
Explorium a retail “omni-platform lab” consisting of a 60,000 sqrt space in
Shanghai that has an interconnected digital network of services, including
a mobile shopping application, an i-beacon tracking solution and a data
analytics platform.