fbic global retail tech research weekly insights apr. … · kunal! bahl,! coafounder of snapdeal,!...

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April 10, 2015

Fung Business Intelligence Centre (FBIC) Publication: Retail Research Weekly Insights Copyright © 2015 Fung Group. All rights reserved.

April 10, 2015 Weekly Insights

D E B O R A H W E I N S W I G E x e c u t i v e D i r e c t o r — H e a d o f G l o b a l R e t a i l & T e c h n o l o g y F u n g B u s i n e s s I n t e l l i g e n c e C e n t r e d e b o r a h w e i n s w i g @ f u n g 1 9 3 7 . c o m N e w Y o r k : 6 4 6 . 8 3 9 . 7 0 1 7

l Technology is playing an increasingly significant role in the beauty industry, where it can improve conversion and drive volume

l Snapdeal acquires FreeCharge in India’s largest acquisition

l Macy’s uses Google AdWords to calculate that every $1 of online-‐ad investment returns $6 in in-‐store sales

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April 10, 2015


FROM THE DESK OF DEBORAH WEINSWIG Making consumers smarter as they shop is the prevailing benefit that underpins much of retail technology. We are seeing technology play an increasingly significant role in the beauty industry, where it has the potential to improve conversion and drive incremental volume. For instance, something as simple as an LCD screen interface provides functionality that ranges from delivering the latest advertisement to teaching makeup application techniques to calling for sales assistance. Brand-‐agnostic point-‐of-‐purchase technology suggests the best foundation for a shopper’s skin. It won’t be long before consumers will be able to 3D print cosmetics at home that can complement the color of their favorite dress.

Sephora has teamed up with color specialist Pantone to create Color IQ, a device that captures color-‐pitch intensity. By focusing on skin physiology, Color IQ eliminates several variables that distort shade selection. The Pantone Color Institute mapped out 110 skin tones to build the Color IQ library. Capturing skin tones and undertones, Color IQ supports improved foundation matching. This is an example of a smarter choice driven by technology, and it’s only a matter of time before this functionality is applied to create colored cosmetics that complement skin tones and apparel choices.

Makeup Genius from L’Oréal Paris uses new visualization and facial-‐mapping technologies to allow shoppers to turn the front-‐facing camera of a mobile device into a virtual mirror, so they can “try on” products—including eyeliner and lipstick—in real time. The smartphone as beauty consultant! The algorithm captures 64 data points on the face, and allows the virtual makeup to move with the user as she turns her head or changes her facial expression. The same technology was used in the movie The Curious Case of Benjamin Button to help Brad Pitt age in reverse, and the movie won Oscars for makeup and visual effects.

Makeup has long been a category that brings out the adventurer in consumers. Facial mapping is providing beauty brands and retailers with digital tools to better understand the skin and market beauty products to consumers. Magic mirrors allow shoppers to experiment with different hairstyles and makeup looks and to digitally apply cosmetics using state-‐of-‐the-‐art facial-‐recognition technology. They’re fun to use and can lead to multiple selling opportunities.

In terms of product presentation, technology has brought beauty marketing and communications to a new level. Responsiveness is key, and gamification adds an element of fun. In August 2014, DKNY launched a new fragrance in London’s Debenhams: DKNY MYNY. Incorporating a full street of windows, the store installed an interactive digital screen with motion detectors and an integrated camera that snapped photos as passersby stopped and played a game. The campaign resulted in the brand reaching top-‐seller status during the marketing period, while also driving social media attention.

Beauty tech provides the personalized experience that most women desire when purchasing cosmetics and other beauty products—an experience that even an in-‐store beauty advisor may not always be able to deliver.

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April 10, 2015


US Job Growth for Educated Millennials Going Strong Despite Overall Slowed Pace Figure 1. US Unemployment Rate: YoY % Change

Source: Bureau of Labor Statistics Seasonally adjusted Through March 31, 2015

• The March unemployment rate in the US was stable at 5.5%, which reflects job growth below recent trends. Only 126,000 jobs were added in March, the lowest figure since December 2013.

• The unusually cold March was a factor, as were weak exports due to the strong dollar.

• One highlight in March’s disappointing job growth was the low unemployment rate for those above age 25 who had bachelor’s degrees or higher. The unemployment rate for this group, the educated millennials, plunged to 2.5%, almost to its prerecession level of 2%.

• Alibaba is eyeing US commerce, and $79 is the price of an annual membership for two-‐day shipping service at ShopRunner, an e-‐commerce startup backed by Alibaba. Amazon currently charges $99 for its Amazon Prime service.

• ShopRunner is Alibaba’s single biggest US e-‐commerce investment. It showcases a wide range of brands and stores, from Brooks Brothers to Neiman Marcus, and has a membership base of 2.5 million.

$79 Source: Women’s Wear Daily

CHART OF THE WEEK

STAT OF THE WEEK

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04 05 06 07 08 09 10 11 12 13 14 15

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April 10, 2015


US RETAIL TRAFFIC US Store Traffic Surged Due to Spring Shopping Figure 2. US Weekly Store Traffic: YoY % Change

Through April 1, 2015 Source: ShopperTrak

• Easter weekend and spring shopping boosted US store traffic for the week ending April 1.

• The US store traffic growth rate surged by 13.7%, the biggest gain in 17 months.

• Apparel store traffic jumped by 23.7 %, while electronics store traffic declined again, this time by 5.5%, which was a slight improvement from last week’s 7.6% decline.

US REGULAR GASOLINE PRICES

Figure 3. US Regular Gasoline Prices (USD per Gallon)

Change from

03/23/15 03/30/15 04/06/15 Week Ago Year Ago

US 2.457 2.448 2.413 (0.035) (1.183)

East Coast 2.361 2.371 2.352

(0.019) (1.226)

Midwest 2.391 2.378 2.312 (0.066) (1.266)

Gulf Coast 2.191 2.187 2.183 (0.004) (1.209)

West Coast 3.116 3.000 2.954 (0.046) (0.926)

(15)

(10)

(5)

0

5

10

15

10/03

10/10

10/17

10/24

10/31

11/07

11/14

11/21

11/28

12/05

12/12

12/19

12/26

01/02

01/09

01/16

01/24

01/31

02/07

02/14

02/21

02/28

03/06

03/13

03/21

03/28

04/01

Source: US Energy Information Administration

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April 10, 2015


RRRETAIL EARNINGS

Company

Revenues ($ Mil.) Change

Gross Margin (%) Change

Net Income ($ Mil.)

Change YoY

Store Fleet EOP

2014 2013 (%) 2014 2013 (BP) 2014 2013 (%) 2014 2013

Hudson's Bay* 8,169

5,223 56.4 40.1 38.4 170 238 -‐259 NM 322 320

Fast Retailing** 950 764 24.2 50.5 49.4 110 105 67 56.3 2,872 2,596

Rite Aid*** 6,848 6,597 3.8 28.6 28.6 (2) 1835*** 55 NM 4,570 4,587

Walgreens Boots 26,573 19,605 35.5 25.9 28.8 (292) 2,060 716 187.7 8,238 8,681

Source: Company reports. *in CAD; **in billion JP¥; ***4Q15 includes $1.7 billion income tax benefit

US RETAIL HEADLINES Saks Fifth Avenue Named New President and Announced New York Flagship Renovation Plan (April 2 and April 7) The New York Times and Women’s Wear Daily

• Saks Fifth Avenue announced the departure of its president, Marigay McKee, who spent 15 months in the role. Marc Metrick, an executive at Saks parent company Hudson’s Bay, is replacing McKee.

• Hudson’s Bay reported a net income jump to $111 million and a 9% sales increase as it continues to integrate Saks Fifth Avenue’s business. A two-‐year renovation of the Saks flagship in Manhattan will start this summer. The flagship was independently appraised at $3.7 billion in 2013 and accounts for 25% of the luxury chain’s overall volume.

Uniqlo Announced US Expansion Plans (April 6) PR Newswire

• Uniqlo, Fast Retailing’s global apparel brand, announced its next stage of expansion in the US, which will include new stores in Seattle, Denver and the DC metro area.

• It will open its first store at Tysons Corner Center in the DC metro area and a store at the Bellevue Collection in Seattle. There are currently 39 Uniqlo stores in New York, New Jersey, Connecticut, Philadelphia, Boston, San Francisco and Los Angeles.

Patagonia Invests in Swiss Chemical Company Beyond Surface Technologies (April 7) Women’s Wear Daily

• The strategic investment comes out of Patagonia’s commitment to sustainability. The company noted that chemicals are big components of manufacturing performance and outdoor garments. Beyond Surface Technologies has more than 40 years of experience in making textile treatments based on natural raw materials, without sacrificing textile performance.

• The investment was made through Patagonia’s $20 Million and Change fund, which launched in 2013. The company did not disclose the size of the investment.

Google Records In-‐Store Traffic to Online Ads (April 8) Women’s Wear Daily • Google released data from its yearlong AdWords program that tracked consumers’ store visits

(with their consent) and their online-‐ad browsing records. The idea is to help stores assess off-‐line returns from digital marketing.

• Macy’s was able to use information from Google to quantify that every dollar of online-‐ad investment returns $6 in in-‐store sales. Sephora, Macy’s, PetSmart, REI, Sears Outlet, Ulta and Famous Footwear are currently working with Google.

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April 10, 2015


ASIA TECH HEADLINES Snapdeal Acquires FreeCharge: Here’s Everything You Need to Know About India’s Biggest Acquisition (April 8) Tech in Asia

• E-‐commerce marketplace Snapdeal and mobile top-‐up site FreeCharge together have 40 million mobile transactors, and their apps have been downloaded by 30 million users across India.

• The bulk of the FreeCharge users are ages 18 to 25, whereas Snapdeal’s are in the 25 to 35 bracket. Kunal Bahl, co-‐founder of Snapdeal, did not reveal how much Snapdeal paid for FreeCharge, which raised US$80 million just two months ago.

Baidu Says Hospital Chain Is Threatening Its Clients as Advertising Spat Gets Uglier (April 8) Tech in Asia

• Putian, an industry group that represents thousands of hospitals in China, is in a public conflict with Baidu. Baidu announced that it’s cracking down on medical advertisements, while Putian announced a boycott of Baidu that could significantly cut into the company’s revenue in the short term.

• Threats from Putian mainly suggest that it has hired an army of online workers to click on the Baidu ads of hospitals that haven’t joined the boycott, driving their advertising costs through the roof without generating any revenue.

From OMFG to LOL: Come Hear Ray Chan Tell Us His 9GAG Story so Far (April 7) Tech in Asia

• 9GAG is one of Asia’s most popular startups, though most of its users probably don’t realize it was born in Hong Kong. With 80 million unique monthly visitors, it’s a viral media powerhouse that’s now embracing mobile gaming.

• It started out as a fun side project in 2008, but it’s still going strong. Co-‐founder Ray Chan has taken his startup through 500 Startups and Y Combinator, and raised almost US$3 million in funding.

SoftBank Places $120 Million Bet on Indonesia’s Trikomsel on Eve of Major E-‐Commerce Launch (April 7) Tech in Asia

• The Indonesia e-‐commerce joint venture between postal service SingPost and mobile device retailer Trikomsel will go live sometime in May, and will start with selling smartphones, clothing and sports gear.

• SingPost and Trikomsel are both publicly traded companies. SingPost, through its subsidiary SP eCommerce, will take a 33% stake for US$1.1 million. Trikomsel will have the remaining 67% stake.

Singtel Acquires Chicago-‐Based Cybersecurity Firm Trustwave for $810 Million (April 8) TechCrunch

• Singtel, the biggest telecommunications firm in Southeast Asia, with over 500 million mobile customers, will acquire Chicago-‐based cybersecurity company Trustwave in a deal worth $810 million.

• Singtel Group CEO Chua Sock Koong said that Trustwave will help Singtel become “a global player in cybersecurity” by growing its existing portfolio of cloud services and its managed-‐security-‐services business, which provides network security software for startups and large businesses.

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April 10, 2015


EUROPEAN RETAIL HEADLINES Marks & Spencer Reverses 14 Quarters of Decline in General Merchandise (April 2) Marks & Spencer Press Release

• UK department store Marks & Spencer reported a general merchandise sales increase of 1.3% during the quarter ending March 28. In the same period, the retailer’s comparable sales grew by 0.7%.

• The company’s food sector also performed strongly, with a sales increase of 3.7% and comparable sales up by 0.7%.

John Lewis Expands to Singapore and the Philippines (April 7) Retail-‐Week.com

• UK retailer John Lewis has announced further plans to expand its stores internationally. After confirming plans to open outlets in Singapore department store Robinsons, the retailer has revealed it will also move into the Philippines, with branches in SM Retail and Our Home department stores.

• The 11 shops will be opened this summer and are reported to be 300 to 1,000 square feet.

Doddle Goes to University (April 7) RetailTimes.co.uk

• Click-‐and-‐collect company Doddle has launched at universities throughout the UK. The new service enables students and staff to have their parcels delivered to Doddle from any retailer. Customers can have their parcels delivered to Doddle free and use its returns service to send back unsuitable items.

• Additionally, the company has introduced an international delivery service alongside its range of next-‐day UK delivery options. The first store, in the University of Salford Student Village, has now opened, and 100 more Doddle stores are expected to open at various universities by the end of 2015.

Over Half a Million New Customers Choose Aldi (April 8) Kantar Worldpanel Press Release

• German grocery retailer Aldi increased its market share to 5.3% in the quarter ending March 29, making it Britain’s sixth-‐largest supermarket. According to newly released figures from Kantar Worldpanel, Aldi achieved sales growth of 16.8% while its upmarket rival Waitrose reported a rise of 2.9% in the same period.

• Waitrose, however, still holds 5.1% market share and has consistently grown sales since March 2009. Lidl was the only other retailer to grow its market share and sales, which increased by 3.7% and 12.1%, respectively.

• Tesco’s sales increased by 0.3%, followed closely by Sainsbury’s figure of 0.2%. Morrisons’ sales fell by 0.7% while Asda suffered a drop of 1.1%.

Very.co.uk Increases Fashion Brand Offering (April 2) Shop Direct Press Release

• Pure play e-‐tailer Very.co.uk has joined with well-‐known high-‐street names to offer more branded fashion to its customers. Miss Selfridge went live earlier this week, and Coast and Warehouse will follow next month.

• With over 900 brands already available on its website, Very.co.uk, owned by Shop Direct, is a prominent multibrand retailer. The company aims to make its site a one-‐stop shop for consumers and to provide access to all the brands they would visit on the high street.

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April 10, 2015


Unilever and Beiersdorf See Red over Blue (April 3) RetailDetail.eu

• Unilever Group, owner of the Dove cosmetics brand, and Nivea owner Beiersdorf are locked in debate over which brand can use the well-‐known Nivea blue color. Beiersdorf argues that the color is brand-‐specific to Nivea, and it registered it as so in 2007. This decision was later overruled, prompting Beiersdorf to now return the case to court in the hope that it will be able to stop its competitors from using the color.

• The company claims that Dove’s use of the color could cause confusion about products after a study found that nearly 60% of consumers link the color to Nivea.

Global Fashion Group Announces Future Expansion Plans (April 8) Wgsn.com

• Global Fashion Group (GFG), the European parent company of numerous online fashion startups, has announced it will receive €32 million (US$34.7 million) in new financing from Tengelmann Ventures and Verlinvest. Following its recent ventures in Belarus, Ukraine, Lebanon and Brunei, GFG will use the investment to continue growth in 27 other countries.

• Along with its expansion plans, GFG has appointed former Amazon France president Romain Voog as its new CEO.

Volume of Retail Trade Falls by 0.2% in Euro Area (April 8) Eurostat

• Retail sales volumes grew by 3.0% year over year in the eurozone and by 3.6% year over year in the wider European region in February 2015, according to Eurostat.

• In the eurozone, non-‐food retailers grew sales volumes by 3.4% year over year in February, and food retailers’ volumes were up just 1.0%. Automotive fuel sales were up 4.2% year over year in the eurozone.

LATAM RETAIL HEADLINES Chile: Jumbo Supermarkets Hit by Strike (April 6) Reuters

• Workers at Chile’s Jumbo supermarket chain began strike action on Monday (April 6) to support demands for higher pay. Staff, including cashiers and sales staff, are demanding a wage increase of at least 8.5%, versus the 2.7% offered by the company. Inflation in Chile is running at 4.4%.

• Jumbo is owned by Cencosud, one of Latin America’s largest retailers.

American Eagle Outfitters Plans Latin America Expansion (April 8) Seeking Alpha

• US apparel chain American Eagle Outfitters is to expand operations into Chile and Peru under a partnership with Eurofashion Limitada, a Chilean firm focused on international fashion brands.

• The first Chilean store will open later this year, with the inaugural opening in Peru following in 2016.

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April 10, 2015


Kim Kardashian Heads for Brazil (April 2) Forbes

• TV favorite Kim Kardashian is set to unleash her personal style on Brazilian shoppers under a deal struck with clothing retailer C&A. The K Kardashian Kollection will go on sale in Brazil next month, reports say.

• C&A said Kardashian will be part of its new ad campaign launching on Brazilian Valentine’s Day (Dia dos Namorados) which is on June 12.

Brazilian Retail Activity Flat at Easter (April 6) Reuters

• Brazilian retail activity was flat year over year in the week leading up to Easter, according to credit research firm Serasa Experian. This would be the weakest performance for Brazilian retail over Easter for at least nine years.

• A burst of promotional activity over the Easter weekend helped save the sector from worse performance. In São Paulo, retail activity fell by 3.7% for the full week year over year. Serasa Experian’s methodology is based on checks of its credit database.

Peru: Retail Sales Soared 9% in 2014 (April 6) Andina.com

• Peruvian retail sales boomed by 9% in 2014, according to data released this week by Apoyo Consulting.

• The consulting firm said strong growth in consumer credit and more shopping centers in provincial areas helped boost retail sales last year.

Rocket Internet Consolidates Sites (April 8) TechCrunch

• Latin American pure play Dafiti.com is among those benefiting from $35 million in new funding and a new CEO.

• Rocket Internet’s Global Fashion Group, which is a cluster of five pure-‐play apparel retailers, raised $34.7 million from investors Tengelmann Ventures and Verlinvest. The group has appointed Romain Voog as CEO; Voog formerly led Amazon’s operations in France.

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April 10, 2015


Earnings Calendar Company Event Date

Family Dollar 2Q15 Earnings Call/Earnings Release Apr. 10

Etam Développement FY14 Earnings Call/Earnings Release Apr. 16

Google 1Q15 Earnings Call/Earnings Release Apr. 16

Debenhams 1H15 Earnings Call/Earnings Release Apr. 16

Associated British Foods 1H15 Earnings Call/Earnings Release Apr. 21

eBay 1Q15 Earnings Call/Earnings Release Apr. 22

Tesco FY15 Earnings Call/Earnings Release Apr. 22

Tractor Supply 1Q15 Earnings Call/Earnings Release Apr. 22

Facebook 1Q15 Earnings Call/Earnings Release Apr. 23

Procter & Gamble 3Q15 Earnings Call/Earnings Release Apr. 23

Brunswick 1Q15 Earnings Call/Earnings Release Apr. 24

VF 1Q15 Earnings Call/Earnings Release Apr. 24

Simon Property 1Q15 Earnings Call/Earnings Release Apr. 24

Amazon 1Q15 Earnings Call/Earnings Release Apr. 24

Overstock.com 1Q15 Earnings Call/Earnings Release Apr. 24

Baidu 1Q15 Earnings Call/Earnings Release Apr. 24

Under Armour 1Q15 Earnings Call/Earnings Release Apr. 24

Apple 2Q15 Earnings Call/Earnings Release Apr. 27

General Growth Properties 1Q15 Earnings Call/Earnings Release Apr. 27

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April 10, 2015


Event Calendar

Event Location Date(s) FBIC Presentation

Strategic Sourcing, Customs, and Logistics Integration Conference Washington, DC Apr. 13–15

Digital Velocity San Diego, CA Apr. 14–16

Startup Weekend Hong Kong Hong Kong Apr. 17–19

The 13th China Department Store Summit Jinjiang, China Apr. 18–20 Deborah Weinswig

Wearable Technology: Adoption and Monetization Summit 2015 San Francisco, CA Apr. 21–22

Condé Nast International Luxury Conference Florence, Italy Apr. 22–23

Global Retailing Conference Tucson, AZ Apr. 23–24

Wearable Technologies Conference Milan, Italy Apr. 29

Retail and Consumer Goods Analytics Summit Chicago, IL Apr. 29–May 1 Deborah Weinswig

LF Beauty Summit New Brunswick, NJ Apr. 30–May 1 Deborah Weinswig

Disrupt NY New York, NY May 4–6

RetailNext Executive Forum Monterey, CA May 6–8

Vanity Capital BAML Conference Singapore May 12–13 Deborah Weinswig

Internet of Things World San Francisco, CA May 12–13

RECon Las Vegas, NV May 17–20

CES Asia Shanghai, China May 25–27

Planalytics 2015 Hurricane Outlook Webinar May 28

MIT Technology Review EmTech Digital San Francisco, CA Jun. 1–2

Internet Retailer Conference Exhibition Chicago, IL Jun. 2–5

WWD Beauty Summit New York, NY Jun. 9–10

New York Fashion Tech Lab Demo Day New York, NY Jun. 18

NRF PROTECT Long Beach, CA Jun. 23–25

ICSC Next Generation Conference Miami, FL Jul. 26–28

NACDS Total Store Expo Denver, CO Aug. 22–25 Deborah Weinswig

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April 10, 2015


Deborah Weinswig, CPA Executive Director—Head of Global Retail & Technology Fung Business Intelligence Centre New York: 917.655.6790 Hong Kong: +852 6119 1779 [email protected] Marie Driscoll, CFA [email protected] John Harmon, CFA [email protected] Amy Hedrick [email protected] Aragorn Ho [email protected] John Mercer [email protected] Stephanie Reilly [email protected] Lan Rosengard [email protected] Jing Wang [email protected]

fbic global retail tech research weekly insights apr. … · kunal! bahl,! coafounder of snapdeal,!...

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