2017 in review: the retail turning point

Welcome!

Todd HarrisDirector of Marketing

Celect

Deborah WeinswigManaging Director

Fung Global Retail & Tech

José ChanVP of Business Dev

Celect

© 2017 Celect, Inc. All Rights Reserved.

• Introduction to Celect & FGRT • Major Retail Trends• 7 Surprises of 2017• 2018 – The Breakout Year for AI?


WHAT WE WILL COVER TODAY

Celect Background

• Predictive analytics SaaS platform to help retailers optimize inventories through data-driven decisions.

• We leverage a groundbreaking advance in Machine Learning and Optimization.

• An MIT Artificial Intelligence Lab Top 50 Technology Innovation


5DeborahWeinswig [email protected]

AbouttheFungGroup

PRODUCTS SERVICES DISTRIBUTION RETAILING

Li&FungLimitedListedontheSEHK

GlobalBrandsGroupListedontheSEHK

FungRetailingLimitedPrivatelyHeldEntity

ConvenienceRetailAsiaLimited

ListedontheSEHK

TrinityLimitedListedontheSEHK

BrandedLifestyleHoldingsLimitedLiFungKids(Holdings)Limited

Toys“R”Us(Asia)SuhyangNetworks

UCCALFashionGroupPrivatelyHeldEntities

FungHoldings(1937)Ltd.AprivatelyheldentityandmajorshareholderoftheFungGroup

KNOWLEDGE

FGRTFungBusinessIntelligence

FungAcademy


• TheknowledgebankfortheFungGroup

• Focusesonemergingretailandtechnologytrends

• Establishedin2014

• BasedinNewYork,withresearchteamsinLondon,HongKong, Israel and India

• Publishesthematicresearchandresearchwithaglobalscopeontopicssuchasomnichannelretail,fashionandretailtrends,anddisruptivetechnologies

• CompilestheFGRTRetailIntelligenceIndex

AboutFGRT


MajorRetailTrends


TECH

Experiences&

EntertainmentShortenedCustomer

journeys

ConnectwiththeConsumer

...andconsumerstodayarecallingfordifferentretailexperiences,bothonlineandoffline.

Shoppers’ExpectationsAreConstantlyEvolving…


Retailersmustrethinkhowtheyengageandretaintheirvisitors.

PersonalizedServices

TheConnectedCustomer

Conversations

Community

ReinventingtheRelationshipwiththeConsumer


Deliveringarelevant,personalizedexperience

RedefiningConvenience

mobileinteractionandproduct-

browsinghistory

Analyzetargetconsumer

audience

Identify productsand

services

Personalize andcontinuetrend-driveninnovation

Execute


IntheAll-ChannelUniverse,CustomerIsNowtheChannel

OrderFrom FulfilledBy WhereReceived

Home

Elsewhere

YourStore

DifferentStore

Mobile

DirectDC

StoreDC

YourStore

DifferentStore

Vendor

Home

Elsewhere

YourStore

DifferentStore

Source:Hudson’sBayCompany


TheRetailerasaHubforOne-StopShoppingRetailersserveasahubforconsumerstoarrangetravel,havetheirclothesdrycleaned,bookappointmentsforhaircuts,andpayforservices.

1.Shopping

2.ClothingStorage 3.DryCleaning

4.Haircut

5.Shave6.Teeth-Whitening


GlobalTrendsthatCanImpactUSRetailO2OMarketingandDirectSelling:InfluencersandLivestreaming

Line KaokaoFacebook Instagram Snapchat WeChat

2,000

700

255

963

169 49 111

0

500

1000

1500

2000

2500

SuperBowlViewership

MajorSocialMediaPlatforms:MonthlyActiveUsers(Mil.)

Global China Japan Japan Comparison

• Socialmediaplatformsprovideenormousreachformarketingandadvertising• Differentregionshavetheirownuniquesocialplatforms• PlatformssuchasWeChatprovidespaceforbrandstoruntheirownserviceaccountwithintheapp,sotheycanpromoteandsellproducts


Robotics Augmented Reality

Artificial Intelligence

Virtual Reality

TheNextWaveofDisruptorsinRetail


• Weforecastthatthecompany’sgrossmerchandisevolumewillreach$50billion in2020(growingataCAGRof16%).

Source:FGRT

Amazonlaunches Acquired

2002Expansionintoapparel

2015Apparel

privatelabellaunched

Amazonapparelgenerates$16.3billioninsales

20167more

Private labelslaunched

Intimatesprivatelabelin1Q

1995 2006Acquired2011 2015 2017

2009

Acquired

AmazonCapturestheMajorityofE-commerceGrowth


7Surprisesof2017


• Thelistkeepsgrowing,mostlyduetodepartmentstoreandspecialtystoreclosures.

1.StoreClosingsContinuetoExceedStoreOpenings

Total: 6,985 announced store closures

229% year over year


Asidefromtheannounceddeals,therehasbeenmuchotherM&Achatter:

• Nordstrom announceditisexploringa“goingprivate”transaction(June8,companypressrelease)

• AmericanEagleOutfittersisreportedtobebiddingforAbercrombie&FitchwithprivateequityfirmCerberusCapitalManagement(May25,Reuters.com)

• DeckersBrandsannouncedthatitisreviewingstrategicalternatives(April25,companypressrelease)

• BJ'sWholesaleClubputitselfupforsaleinApril(April14,NewYorkPost)

2.SurgeinRetailM&AActivity


2.SurgeinRetailM&AActivityNotableAnnouncedRetailM&AintheUS,YTD

Date Company Target Value

Dec-13 Target Shipt $550 millionDec-4 CVSHealth Aetna $69billionNov-21 Walmart Parcel UndisclosedNov-17 Williams-Sonoma Outward $112millionOct-4 OfficeDepot CompuCom Approp.$1billionOct-3 AceHardware TheGrommet UndisclosedSep-22 Albertsons Plated UndisclosedJul-17 MichaelKors JimmyChoo $1.2billionJun-17 Sycamore Partners Staples $6.9billionJun-17 Amazon WholeFoods $13.7billionJun-17 Walmart Bonobos $310 millionMay-17 Coach KateSpade $2.4billionApr-17 Petsmart Chewy.com $3.35billionMar-17 Walmart ModCloth Lessthan$75millionFeb-17 Walmart MooseJaw $50millionJan-17 Walmart Shoebuy $70million

Source:Companyreports


3.WalmartAcquisitionSpree• Afteracquiringanumberofonlineapparelcompanies,WalmartwillhostaLord&TaylorstorefrontonWalmart.comstartinginthespringof2018.

• Theintentistocreateapremiumfashiondestination onWalmart.com.

• Wal-Martisbeginningtobuildout"elementsofdiscoveryandinspiration"withinthefashionportionofitswebsite.


• Thegrowthofe-commercerevenuehastakenofffollowingtheacquisitionofJet.com.

4.WalmartExplosiveE-commerceGrowth

7.0% 11.8%

20.6% 29.0%

63.0% 60.0%

50.0%

7.5% 13.0% 16.8%

31.0%

69.0% 67.0%

54.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3

GrowthinWalmartE-commerceSalesandGMV

Sales GMV


AcquisitionofJet.com(9/19/16)


• Alibabaguidedforrobust45%–49%revenuegrowthinitsfiscal2018(endedJune)atits2017InvestorDay.

5.Alibaba’s50%RevenueGuidance

33%

56% 45%–49%

0%

10%

20%

30%

40%

50%

60%

FY16 FY17 FY18E

AlibabaAnnualRevenueGrowth



• Fore-commerceretailers,physicalstoresaremarketingassetsthatsupporttheironlinebusinessmodels.Examplesinclude:

• Amazon

• Bonobos

• Birchbox

• Everlane

• RenttheRunway

• WarbyParker

6.OnlineGoingOffline

Source:Amazon


13 + 67 popups

1 + 1popup

48

16 + 1 popup

52

StoresandPop-Ups

StoreCollaborations/Acquisition

s

133

1 5

1 19

61 30 6

PhysicalStores

456

Source: Company Reports, October 2017

24

1

6.OnlineGoingOffline


• OnJune16,AmazonannounceditsplantoacquireWholeFoodsfor$13.7billionincash.

• AmazonclosedtheacquisitiononAugust28,andAmazonelectronicswereavailablethatsameday.

• Amazonreducedpricesasmuchas43%onthedayofcloseandagainonNov.15.

7.AmazonAcquiresWholeFoods

Source:GeekWire


Bonus:WalmartLaunchedtheStoreNo.8Incubator• StoreNo.8isatechnology-startupincubatorinSiliconValleyoperatingunderMarcLore.

• StoreNo.8aimstoidentifychangesthatwillreshapetheretailexperience,includingvirtualreality,autonomousvehicleanddronedeliveryandpersonalizedshopping.

• InAugust,StoreNo.8hiredJenniferFleiss,co-founderofRent-the-Runway,tooverseecodeeight,theincubator’sfirstportfoliocompany.


2018—TheBreakoutYearforAI?


• Inretail,AIcanhelpwithpersonalization,customization andlocalization.

• AIcanhelpretailersanalyzelargevolumesofdatatocomeupwithproductandservicerecommendations.

WhyDoesAIMattertoRetail?


AIMeansPersonalizationandHigherConversion

Source:Alizila.com

Alibaba saw a surge in mobile engagement during the first quarter of 2017 due to AI-powered personalization.

Its shopping app reached 529 million users in June, an increase of 22 million in three months.

6.7 billionPersonalized shopping pages were generated by merchants on Taobao

and Tmall during the 2016 11.11 Shopping Festival

20% higher conversion rate

on personalized landing pages during 11.11 in 2016 compared to non-

personalized ones.


Source:Nvidia

ABitofHistory:AIisNotNew


WhyAIisImportantToday• AIisnotnew,butnowwehavetheabilitytocollectandstorelargeamountsofdatatotrainalgorithmsinacost-efficientway.

• Dataisthekey:moredatabeatbetteralgorithms.

Data

Algorithm

Interface

Action


DisruptiveTechnologiesApproachingaTippingPoint

Source:Gartner

21%

16%

17%

25%

36%

12%

10%

10%

20%

ConversationalInterfaces

SmartRobotics

3DPrinting

AI

IoT

2015 2018

80%

% growth 2015-2018

150%

70%

35%

-

AccordingtoGartner’sCIOsurveys,disruptivetechnologiesareincreasinglygainingadoption. % of Respondents That Have Deployed A Technology

or are in Short-term Planning of Deployment


NewRetailIsPoweredbyAI

Rolling Out O2O Services on Mobile Devices and Social Networks

Pure Plays Opening Experiential Stores

Offering New Pickup OptionsSuch as Click-and-Collect

Using QR Codes In-Store to Encourage Customers to Buy Online; Driving Online Traffic toPhysical Stores

Enhancing Mobile PaymentServices In-Store

Forming Strategic Alliances with Internet Companies to Drive Synergies

NewRetail,aninitiativeadvocatedbyAlibaba,referstotheintegrationofonline,offline,logisticsanddataacrossasinglevaluechain


AIandSingles’Day2017Applications:Alibaba

LanguageProcessing

TmallSmartSelection,anAI-poweredrecommendationalgorithm,helpsbuyersmakedecisionswhilescrollingonline.

CustomerservicechatbotDianXiaomicanunderstandmorethan90%ofcustomerinquiriesandservealmost3.5millionusersaday,accordingtoAlibaba.

UsingdeepQ- networks,Alibabacandeterminethebestfitforproductsinapackage,whichhassaved5%ofoverallpackagingcosts,accordingtothecompany.

DataAnalytics


ThredUpOfferingAI-Powered‘GoodyBoxes’• GoodyBoxes–anon-subscription,nocommitmentboxfilledwithdiscounteditemsforpurchase.

• For$20,thecustomerreceives10–20secondhanditemsandkeepsandreturnsdesireditems.

• StitchFix’smachine-learningalgorithmlearnsthecustomers’tastesandpreferencesovertime.

Source:AdWeek

ThredUP’sGoodyBoxes

KEY TAKEAWAYS:

1. Retail is being disrupted because consumers expectations have evolved: Convenience, Personalization and Speed

2. 2017 produced many eyebrow raising moments including: Store closings, acquisitions, bankruptcies with more to come in 2018

3. AI is at a tipping point, where both new and existing retailers will more readily adopt AI into their business models



SeeDeborahatNRFBIGShow2018inJanuary!

Monday,January15th

THANK YOU!


Deborah [email protected]

José [email protected]

Todd [email protected]