november 4, 2016€¦ · 04/11/2016 · 1 november 4, 2016 deborah weinswig, managing director,...

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November 4, 2016

DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

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D E B O R A H W EI N S W I G M A N A G I N G D I R E C T O R

F U N G G L O B A L R E T A I L & T E C H N O L O G Y 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

U S : 6 4 6 . 8 3 9 . 7 0 1 7 H K : 8 5 2 . 6 1 1 9 . 1 7 7 9

C N : 8 6 . 1 8 6 . 1 4 2 0 . 3 0 1 6

November 4, 2016

52Days• Amazon has announced 52 days of Black Friday

deals that start on November 1 and run untilDecember22.

• Consumers can shop the deals on Amazon’swebsiteandmobileapp,andPrimememberscanshopexclusivedealsthroughtheEchodevice.

• Customers canalsouseAmazon’smobileapp toscan packages and seewhat is inside, or use itscamera feature to look for similar items on thewebsite.

1) This week’s note “From the Desk of Deborah Weinswig”discusses the likelihood of Amazon becoming a majoritymarketplace, in terms of share of unit sales, in the fourthquarter.

2) Black Friday deals have not variedmuch in the past severalyears.Adsandcirculars forretailers suchasTarget,Walmartand Best Buy look almost identical this year to how theylooked inpast years, featuringnearly the same discountsonthesameproducts.

3) German grocer Lidl is set to sell online in Spain, followingsimilar moves in Belgium, Germany and the Netherlands. Acompany representative stated that Lidl will not be able toneglect thedigitalizationtrend,but that itwill alwaysaimto“guaranteequalityatthelowestprice.”

4) WalmartisrelaunchingitshypermarketconceptinBrazil,withthe opening of Walmart Tamboré in São Paulo and therebranding of BigNovoHamburgo in RioGrande do Sul andBig Santa Felicidade in Parana as Walmart outlets. Thecompany is investing R$1 billion (US$309 million) over thenext three years in the rebranding of the Big supermarketsandintherelaunchofthehypermarketconcept.

Source:Amazon

UK:Top10Retailers,byNumberofStoreOpeningsinthePast12Months

34

36

39

43

43

54

58

65

112

258

Sainsbury’sLocal

Toolstahon

CarphoneWarehouse

OneStop

CardFactory

Marks&SpencerSimplyFood

ScrewfixDirect

McColl’s

Spar

Poundland

Source:LocalDataCompany

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November 4, 2016


FROMTHEDESKOFDEBORAHWEINSWIG

AmazonSettoBecomeaMajorityMarketplace

WhenAmazonannounceditsthird-quarter2016resultsonOctober27,mostmediacoveragefocusedonitssubstantialmissonbottom-lineexpectations.Butwewerealsolookingcloselyatanothermetric:theshareof unit sales generated by third-party sellers. Andwe sawwhatwewere expecting. In the third quarter,Amazonannouncedthatfullyhalfof itsunitsalesweremadebythird-partysellerson itsmarketplace,uponepercentagepointfromthepreviousquarter.

Giventhisshare’ssteadygrowthtrend,weexpectAmazontobecomeamajoritymarketplace,byshareofunit sales, in the fourth quarter. In the kind of definitional detail that only analysts really worry about,Amazonwouldthereafterceasetobeclassifiedasaretailer.

Amazon:ShareofUnitSalesMadebyThird-PartySellers

Source:Companyreports

AmazonMarketplaceLikelytoOvertakeeBay

AmazonMarketplace’sstronggrowthisputtingitoncoursetoovertakeeBayintermsofannualglobalgrossmerchandise volume (GMV) in 2016; GMV is the value of all goods sold, nomatterwho sells them.WeestimatethatAmazonMarketplacegeneratedGMVofaround$69billionin2015versuseBay’s$78billion—butAmazonMarketplaceisgrowingmuchfasterand,so,shouldleapfrogeBaythisyear.(IntermsoftotalGMVincludingdirectretailing,AmazonisalreadyfaraheadofeBay.)

MoreRetailersAreCompetingintheMarketplaceWars

Other retailers are following Amazon’s lead by pushing intomarketplace formats. In the US,Walmart isramping up its marketplace by bringing new sellers on board. It has also acquired Jet.com and madeinvestments in JD.com. In Europe, apparel pure play Zalando has launched amarketplacemodel for bigfashionbrands.

Whyareretailerspilingin?Weseefourmajorbenefitstothemarketplacemodeloverdirectretailing.First,themodelishighlyprofitable,becausethesitescanchargedouble-digitcommissionsforsimplyactingasaportal.Second,marketplacesareprotectedfromtherisksassociatedwithowningstock.Third,shoppersarelesslikelytowalkawayunsatisfied,asthelongtailofproductdemandcanbesatisfiedwithlittleeffortfromtheretailer.Fourth,themodelisaflexible,asset-lightwayofenteringnewmarkets.

• We analyze the marketplace segment in more detail in our forthcoming report, OnlineMarketplaces:DisruptingRetail.KeepaneyeoutforitonFungGlobalRetailTech.com.

4243

4445

4647

4849

50

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16

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November 4, 2016


USRETAILEARNINGS

Company

Revenues(USDMil.)

YoY%Change

GrossMargin(%)

Change(bps)

NetIncome(USDMil.)

YoY%Change StoreFleetEOP

Period 2016 2015

2016 2015

2016 2015

2016 2015

Carter’s 3Q16 901 850 6.1 41.7 40.9 77 81 79 1.9 1,059 949

Coach 1Q17 1,038 1,030 0.7 68.9 67.6 128 117 96 21.8 1,029 1,029

SteveMadden 3Q16 408 413 (1.2) 37.8 36.0 185 44 43 2.1 186 165

Source:Companyreports

USRETAIL&TECHHEADLINESBlackFriday’sInsideSecret:SameDealsEveryYear(November1)TheWallStreetJournal

• Black Friday deals have not varied much in the past several years. Ads and circulars forretailerssuchasTarget,WalmartandBestBuy lookalmost identical thisyear tohowtheylookedinpastyears,featuringnearlythesamediscountsonthesameproducts.

• Retailersclaimtheyarecateringtoconsumers’preferences,butexecutivessaythatpartofthe samenesshas todowithminimizing risks for a key shoppingholiday. Thatplay-it-safestrategycould,however,beturningoffholidayshoppers,whowillcontinuetoturnonlineifphysicalstoresoffernothingnew.

ConsumersPreferHolidayShoppingonMarketplaces(November1)InternetRetailer

• Holiday shoppersprefer tobuygifts fromonlinemarketplaces rather than from individualretailers’ websites, according to a survey by search marketing firm NetElixir. Of 1,000consumers surveyed, 42% said theyweremost likely to buy a holiday gift from an onlinemarketplace,suchasAmazonoreBay,while43%saidtheywouldstillbepurchasinggiftsinstores.Only15%saidtheywerelikelytobuyfromaretailer’swebsite.

• NetElixir says Amazon will have a big holiday season as a result. The firm estimates thatAmazonwillgrowitsshareofonlineholidaysalesto28%thisyear,upfrom26%lastyear.Thatwouldtranslateinto$21.5billioninsales,comparedwith$18.0billionlastyear.

InstagramWantstoEaseItsUsersintoShopping(November1)Bloomberg

• Thisweek,Instagramannounceditwillbeginintroducingshoppingviaitsplatformbylettingbrandsexperimentwithtaggingtheirproductsinphotos.Thechallengethecompanyfacesisavoidingturningtheplatformintojustasnazzycatalog.

• Afterthisfirsttest,Instagramplanstousethedatagatheredtofigureoutwhattodonext.Ideasforadjustmentsincludeaddingawaytocomparisonshop,addingawaytosearchforproductselsewhereontheappandaddingaPinterest-likefeaturethatallowsuserstosavepoststhatinspirethem.

WEINSWIG’SWATCHING

Thisweek, theFungGlobalRetail&TechnologyUS teamattendedaroundtableevent calledOmni-Channel:CompletingtheIntegratedExperiencePuzzleattheMassachusettsInstituteofTechnologyinCambridge,MA, and also attended Kroger’s investor conference in Cincinnati, OH.Our Hong KongteamattendedtheCantonFair,aChineseimportandexporteventinGuangzhou,China.

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November 4, 2016


Rochambeau’sSmartJacketLookstoTurnLuxuryCustomersontoTech(November1)Glossy

• NewYork–based luxury brandRochambeauhas created a designer, connected jacket thattakesexclusivity toawholenew level.Only15BrightBmbr jacketswillbeproduced foralimited-editionrun.

• ThegarmentfeaturesasmartchipthatgiveswearersrewardssuchasVIPentrytocertainclubsandexclusivemenu tastings atpartner restaurants.Buyerswhowear their jacket toThe New Stand—an experiential retail store where the first 15 jackets will be sold—willunlockpersonalized gifts such asmusic videosor signedpiecesof art. The jacketwill alsoserveasaninvitationtoRochambeau’s2017runwayshow.

EUROPERETAILEARNINGS

Company

Revenues(USDMil.)ChangeinUSD(%)

ChangeinReporting

Currency(%) GrossMargin(%)Change(bps)

NetIncome(USDMil.)

YoY%Change StoreFleetEOP

Period 2016 2015

2016 2015

2016 2015

2016 2015

Debenhams FYESep3* 3,378 3,610 (6.4) 0.8 12.5 12.9 (35) 123.9 145.3 (14.7) 250 248*FY16resultswerereportedfor53weeks,whileFY15resultswerefor52weeks.Source:Companyreports

EUROPEANRETAILHEADLINESPandora’s3Q16SalesGrowby18%YearoverYear(November1)Companypressrelease

• Danish jewelry retailer Pandora reported third-quarter 2016 sales of DKK 4,612 million(US$683.5million),ayear-over-yearincreaseof18%.Yearoveryear,salesgrewby6%intheAmericasregion,by18%intheEMEAregionandby46%intheAsia-Pacificregion.

• Sales at Pandora’s concept stores grew by 26% year over year and contributed 62% ofrevenue.NetprofitwasDKK1,405million(US$208.3million),upnearly40%yearoveryear.The company reiterated its financial guidance and confirmed that it expects full-yearrevenuestobeinexcessofDKK20billion(US$2.9billion).

LidlSpaintoBeginSellingOnline(October31)EuropeanSupermarketMagazine

• GermangrocerLidlissettosellonlineinSpain,followingsimilarmovesinBelgium,Germanyand the Netherlands. Lidl Spain’s General Director, Michael Aranda, confirmed that thecompany has staff working on the online launch, but he did not confirm the date of therollout,accordingtoSpanishnewssiteEfeagro.com.

• Aranda stated that Lidlwill not be able toneglect the digitalization trend, but that itwillalwaysaimto“guaranteequalityatthelowestprice.”

CardReadersMayBeNecessaryforOnlinePaymentsover€10(US$12)(October31)Retaildetail.eu

• In order to fight fraud, the EuropeanBankingAuthority intends tomake itmandatory foreveryone to use a card reader while making online payments in excess of €10 (US$12).However,banksandonlinemerchantsfeelthismovemaybeunnecessary.

• Emota, a European interest group forweb shops, believes that customerswho frequentlyshop with an online retailer should be able to make payments more easily, and thatfraudulentpurchasesusuallyoccurinsmallamounts,sothisrulemaynotserveitspurpose.

HMVOutpacesAmazoninPhysicalEntertainmentMarket(October28)KantarWorldpanel

• BritishretailerHMVhasreestablished itselfas theUK’s largestmusic retailerbyovertakingAmazon in physical entertainment sales in the 12 weeks ended September 25, 2016,accordingtoKantarWorldpanel.Duringtheperiod,HMVattracted41,000newshoppersandincreaseditsshareofthephysicalentertainmentmarketby3.1percentagepoints.

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November 4, 2016


• KantarnotedthatAmazonlostabout14%ofitscustomersinthephysicalmusicmarketandthat thecompanyexpects thedecline toaccelerate in thecomingmonthsas it focusesonpromotingitsAmazonMusicUnlimitedstreamingservicethatlaunchesinearly2017.

Marks&SpencerReportedlytoCloseParisStore(October26)Bloomberg.com

• BritishretailerMarks&SpencerreportedlyplanstocloseitsflagshipChamps-ÉlyséesstoreinParisaspartofCEOSteveRowe’sstrategytocutcostsandspurarecoveryinperformance.The company declined to comment on the matter, but is expected to make anannouncementduringastrategyreviewconferencewithinvestorsonNovember8.

• Former CEOMarc Bolland opened the 15,000-square-foot store in Paris as one of his firstmoves when he took the helm in 2010. Since Rowe assumed office earlier this year, thecompany has undertaken severalmeasures to curb costs, including eliminating about 525headofficejobsandcuttingpremiumpayfornonregularhoursworkedbystorestaff.

ASIATECHHEADLINESAlibabaBoostsEntertainmentBusinesswith¥10BillionFund(October31)Reuters• Alibaba has announced a plan to form a new digital media group by reorganizing its

entertainmentassets.A¥10billion(US$1.48billion)fundwillbesetasidefornewprojects.• ThemovemarksatotalconsolidationofAlibaba’smediabusinesses,includingYoukuTudou,

UCWebandAlibabaPictures,aswellasthecompany’ssports,games, literature,musicanddigitalentertainmentdivisions.

Japan’sMana.boRaisesUS$2.4MillionasItShakesUpJapan’sCramSchools(November1)TechinAsia• Japaneseonline tutoring startupMana.bohas raisedUS$2.4million in fundsas it plans to

expanditsreachbeyondonlineclasses.Withservicesremainingonline,thecompanywillbecollaboratingcloselywithcramschoolstoprovidemorecomprehensivesupport.

• ThestartupwasestablishedtoshakeupJapan’sUS$10billioncramschoolindustry.IthelpshighschoolstudentsprepareforJapan’scollegeentranceexamsbyofferingreal-timehelptouserswithproblemssuchasmathequations.

China’sMobiketoExpandintoSingapore(October31)e27.co• Chinesebike-sharing startupMobike has set its eyes on Singapore’s cycling community by

announcing its plan to trial its bike-sharing service in the country. The trial marks thestartup’sfirstforayintoanoverseasmarket.

• Mobike, founded in2015, allowsusers to locatebikes through its appusingabuilt-inGPSsystem.Userscanthenbookabike15minutesbeforepickingitupandunlockitusingaQRcode.

HondatoOpenArtificialIntelligenceCenterinTokyo(October31)TechWireAsia• Japanese carmaker HondaMotor has chosen to headquarter its artificial intelligence (AI)

researchhub inTokyo. Themovewillconsolidateall thecompany’s currentAI teams fromSiliconValley,EuropeandTokyo.

• Hondasays locatingthecenteron itshomegroundwillenablecloser interactionsbetweenscientistsandresearchersthanlocatingitinSiliconValleywould.

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November 4, 2016


LATAMRETAILHEADLINESGrupoIguatemiEyesGrowth,Acquisitions(October28)WWD.com

• BrazilianluxurymalloperatorGrupoIguatemiexpectsthatitsrevenueswillbegintooutpacethose of its rivals beginning this year. The company is analyzing acquisitions within thestrugglingretailsectorinBrazil.

• Despite the downturn of the Brazilian economy, Grupo Iguatemi has been resilient, asBrazilians have turned to buyingmore in Brazil and brands have reduced theirmargins inordertostaycompetitive.

WalmartTransformsHypermarketConceptinBrazil(November1)EuropeanSupermarketMagazine

• Walmart is relaunching its hypermarket concept in Brazil, with the opening of WalmartTamboréinSãoPauloandtherebrandingofBigNovoHamburgoinRioGrandedoSulandBigSantaFelicidadeinParanaasWalmartoutlets.

• WalmartisinvestingR$1billion(US$309million)overthenextthreeyearsintherebrandingoftheBigsupermarkets(whichitacquiredin2005)andHiperBompreço(whichitacquiredin2004),andintherelaunchofthehypermarketconcept.Therelaunchwillincludechangestostorelayouts,assortments,servicesofferedandequipmentinsalesareas.

ConstellationBrandstoBuyObregonBreweryfromGrupoModelo(October31)Reuters

• Constellation Brands, owner of Corona andModelo beer, said it would buy a brewery inMexicofromGrupoModelo,asubsidiaryofAnheuser-BuschInBev,forUS$600million.ThebreweryisexpectedtoserviceConstellation’sbiggestmarketsontheUSWestCoast.

• The Obregon brewery is expected to produce 4 million hectoliters after the deal goesthrough. Constellation is building another brewery in the region, which will produce anadditional5millionhectolitersbyDecember2019.

TheWorld’sHungerforAvocadosIsHavingaDevastatingEffectonMexico(November1)BusinessInsider

• Deforestationcausedby theexpansionofavocadoorchards isproving tobemuchgreaterthanpreviouslythought.AnenvironmentalprotectionagencyinMexicosaidalmost50,000acres of forestland are converted to agricultural uses each year in the western state ofMichoacán,whichistheworld’stopproducerofavocados.

• Between30%and40%ofannualforestlossinMichoacánisduetoavocados,andamatureavocado orchard uses almost twice asmuchwater as a dense forest does, causing issueswithinthesurroundingecosystems.

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November 4, 2016


EARNINGSCALENDAR

Sales(Mil.) EPS

Company

EarningsReleasePeriod Date

ConsensusTY LYActual

ConsensusTY LYActual Currency

Richemont(CFR.VX) 1H17 Nov4 5,050 5,821 N/A 2.11 EUR

AssociatedBritishFoods(ABF.LN) FY16 Nov8 13,102 12,800 1.04 0.94 GBP

CVSHealth(CVS) 3Q16 Nov8 45,293 38,644 1.57 1.20 USD

IconixBrandGroup(ICON) 3Q16 Nov8 89 91 0.16 (0.11) USD

Marks&Spencer(MKS.LN) 1H17 Nov8 4,972 4,951 0.10 0.14 GBP

Wayfair(W) 3Q16 Nov8 849 594 (0.59) (0.21) USD

Burberry(BRBY.LN) 1H17 Nov9 1,165 1,105 0.25 0.25 GBP

Coty(COTY) 1Q17 Nov9 1,135 1,112 0.33 0.19 USD

JSainsbury(SBRY.LN) 1H17 Nov9 12,374 12,414 0.10 0.09 GBP

YooxNet-A-Porter(YNAP.MI) 3Q16 Nov9 436 155 N/A 0.00 EUR

Dillard’s(DDS) 3Q17 Nov10(E) 1,421 1,473 0.78 1.03 USD

Kohl’s(KSS) 3Q17 Nov10 4,337 4,427 0.70 0.75 USD

Macy’s(M) 3Q17 Nov10 5,650 5,874 (0.41) (0.56) USD

MichaelKors(KORS) 2Q17 Nov10 1,087 1,130 0.88 1.01 USD

Nordstrom(JWN) 3Q17 Nov10 3,480 3,328 0.52 0.42 USD

RalphLauren(RL) 2Q17 Nov10 1,812 1,970 1.71 2.15 USD

SallyBeauty(SBH) 4Q16 Nov10(E) 990 964 0.42 0.38 USD

Zalando(ZAL.DE) 3Q16 Nov10 858 713 (0.04) (0.12) EUR

JCPenney(JCP) 3Q17 Nov11 2,963 2,897 (0.20) (0.41) USD

SalvatoreFerragamo(SFER.MI) 3Q16 Nov14 302 299 0.17 0.14 EUR

B&MEuropeanValueRetail(BME.LN) 1H17 Nov15 1,109 930 0.06 0.05 GBP

Dick’sSportingGoods(DKS) 3Q17 Nov15(E) 1,759 1,643 0.42 0.45 USD

HomeDepot(HD) 3Q17 Nov15 23,079 21,819 1.58 1.36 USD

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November 4, 2016


EVENTCALENDAR

Event Location Date(s)

FungGlobalPresenting/Attending

WIRED2016 London,UK Nov3–4 WIRED2016:NextGeneration London,UK Nov5 JDAFocusConnect2016 London,UK Nov7–9 WebSummit Lisbon,Portugal Nov7–10 CustomerEngagementSummit2016 London,UK Nov8 ICSCLatinAmericaLawConference Santiago,Chile Nov8–9 PlugandPlayAgriFoodLaunchEvent Sunnyvale,CA Nov9 CTHallofFameDinner NewYork,NY Nov9 ICSCSouthAmericanShoppingCenterandRetailWorkshop Santiago,Chile Nov9–10 L2Beauty2016 NewYork,NY Nov10 CohnReznickRetailandConsumerProductsDinner NewYork,NY Nov10 CESUnveiledNewYork NewYork,NY Nov10 FashionDigitalNY NewYork,NY Nov11 TechweekLosAngeles2016 LosAngeles,CA Nov14–20 InsideRetailAcademy:Retail’sNextRevolution HongKong Nov15 WWDDigitalForumLA2016 LosAngeles,CA Nov15 WIREDRetail2016 London,UK Nov16 √RetailWorld Berlin,Germany Nov16–17 MAPIC2016 Cannes,France Nov16–18 Procter&GambleAnalystMeeting Cincinnati,OH Nov18 L2ConsumerBehavior2016 NewYork,NY Nov18 √Women’sEntrepreneurshipDay NewYork,NY Nov19 SleepConference London,UK Nov22–23 BigData&AnalyticsInnovationSummit Beijing,China Nov23–24 FungGlobalRetail&Technology’sBreakfastwiththeDisruptors:SupplyChainStartups NewYork,NY Nov29 √AAPA25thLatinAmericanCongressofPorts Merida,Mexico Nov29–Dec2 ICSCNewYorkNationalDealMaking NewYork,NY Dec5–6 √ILTM(InternationalLuxuryTravelMarket) Cannes,France Dec5–8 ElevateNYC:ACloudInnovationForum NewYork,NY Dec6 Lowe’sAnalystandInvestorConference Mooresville,NC Dec7 √CVSHealthAnnualAnalystDay NewYork,NY Dec15 √PlanalyticsHolidayHomestretchWebcast Webcast Dec15 CESUnveiledLasVegas LasVegas,NV Jan3 √CES2017 LasVegas,NV Jan5–8 √

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November 4, 2016


DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comAmandaByrneMarketingAssociate

KirilPopovSeniorAnalyst

JohnHarmon,CFASeniorAnalyst

JohnMercerSeniorAnalyst

RachaelDimitResearchAssociate

StevenWinnickResearchAssociate

CharliePoonResearchAssistant

HONGKONG:8thFloor,LiFungTower888CheungShaWanRoad,KowloonHongKongTel:85223004406LONDON:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NEWYORK:1359Broadway,9thFloorNewYork,NY10018Tel:6468397017FungGlobalRetailTech.com

november 4, 2016€¦ · 04/11/2016 · 1 november 4, 2016 deborah weinswig, managing director,...

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