1 DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

April24,2017

Uniqlo Moves into the Fast Lane with Convenience Store Pick-Up in Korea

1) UniqloannouncedthatcustomersinSouthKoreawillbeabletopickuptheir

onlinepurchasesat7-Elevenstoresacrossthecountry.UniqlohasalreadylaunchedsimilarinitiativesinJapanandTaiwan,andunveiledanewuniqlo.comsiteinMarch2017.

2) Forretailers,thekeyadvantagesofconveniencestorepick-upincludelowerlast-miledeliverycost,amoreintegratedomnichannelofferingandhighercustomersatisfaction.Fromthecustomers’standpoint,onlineshoppingwillnowbecomeevenmoreconvenient.

3) Inthisreport,wealsolookatthefuturegrowthprospectsoftheconvenienceretailingindustry.Wearepositiveontheindustry’sfuturegrowth,drivenbyitsdiversifiedserviceofferingandalignmentwithconsumers’preferenceforconvenience.

4) Lookingahead,webelieveprivatelabelcollaborationbetweenbrandsandconveniencestoresrepresentsahugeopportunity,andgivesbrandsexposuretothestrongdistributioncapabilitiesandstronggrowthmomentumofconvenience-storechains.

UniqloLaunches7-ElevenPick-UpinSouthKoreaStartinginJuly2017,onlinepurchasesfromJapanesefashionbrandUniqlocanbepickedupat7-ElevenstoresacrossSouthKorea.Onceapurchaseismadeonthecompany’sofficialwebsite,thecustomercanopttopickuptheorderatthenearest7-Elevenstore;atextmessagewillbesentinformingthecustomerwheretopayandpickuptheproduct.

KoreaisthelatestmarketinwhichUniqlohaslaunchedthisconveniencestorepick-upservice,followinglaunchesinJapanandTaiwan.

• Japan:UniqlofirstlaunchedtheconveniencestorecollectionserviceinJapaninFebruary2016;onlinepurchasescanbecollectedat5,7007-ElevenstoresacrossJapan.In1Q17,thecompanyextendedtheservicetoincludeotherconveniencestores,FamilyMartandLawson,bringingthepick-upnetworktoapproximately43,000stores.

X

Source:uniqlo.com/jp/delivary

2 DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

April24,2017

• Taiwan:InMarch2017,Uniqlolaunchedthepick-upserviceat7-ElevenstoresinTaiwan,wherethereareover5,0007-Elevenstores.

WeviewthisinitiativeaspositiveforUniqlo,itscustomersandtheconveniencestoresitiscooperatingwith.

• BenefitforUniqlo—alignswithcompany’sonlinestrategy:Uniqlohasapositiveviewofonlineshopping.Theconveniencestorepick-upserviceshouldhelptoeffectivelyreducedeliverycostsforUniqlo.

• Benefitforcustomers—makesitevenmoreconvenienttoshoponline:Customerswillbeabletoplaceanorderonlinethenpickuptheirorderatthenearestconveniencestore—anytime,anydayandfreeofcharge—eliminatingmisseddeliverieswhentheyareatwork.

• Benefitforconveniencestores—increasesfoottraffic:CooperatingwithUniqloandaddingthispick-upservicehelpstofurtherdiversifytheirservicesand,ultimately,helpincreasetraffictotheirstores.

Uniqlo’sOnlineStrategy:Comprehensive,Enjoyable,ConvenientOnlinesales,whichcompriseover20%ofrevenuefromtheUSandover10%fromChina,arecriticaltoUniqlo’sstrategy.InordertoincreasetheproportionofonlinesalesinJapanfromjust6.2%(asoffirsthalfoffiscal2017),thecompanyhasbeenaggressiveinenhancingtheonlinecustomerexperienceanddeliveryservices.

InMarch2017,Uniqloannouncedthatithadupgradeditsuniqlo.comonlinestoreforJapanesecustomers,withtheaimofstreamliningtheonlineshoppingexperiencebymakingitmorecomprehensive,enjoyableandconvenient:

• Comprehensive:Thenewonlinesitehasawiderproductselectionthananyofitsphysicalstores.Thereareover22,000itemsinsizesfromXSto4XLandexclusivedesignsthatarenotavailableinstoresinJapan.

• Enjoyable:Thesiteadoptsanintuitiveandthumb-baseduserinterfacewhichprovidesanenjoyableandconvenientshoppingexperience.Thesiteoffersadditionalfeatures,suchasShopbyLookforeasymixing-and-matchingofitems,andimagesearchforfindingsimilardesigns/looksfoundinmagazines,etc.

• Convenience:Customerscanoptforhomedeliveryorpick-upfromaUniqlostoreorconveniencestore.

Retailing—theBiggerPictureWebelieveUniqlo’sconveniencestorepick-upserviceispartofabroadertrendwherebyretailersaregravitatingtogreaterchannelintegrationinordertoappealtotheircustomers.

Inresponsetostructuralchangesinconsumerdemographics—anagingpopulationandconsumers’desireformoreconvenienceandon-demandservices—retailershavegravitatedtosmaller-storeformatsinurbanareas,steppedupintegrationacrossmultiplechannelsandofferedexpeditedlast-miledeliveryservices.

US• Amazonhasbeentestingbrick-and-mortarconceptswithacashier-less

conveniencestoreandgrocerypick-upstores.AmazonFreshPickup,launchedinMarch2017,letscustomersplaceordersontheAmazonapp,andpickupatdrive-instores.

3 DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

April24,2017

• WalmartannouncedaplaninApril2017toprovidediscountsforcustomerswhopurchaseonlineandpickuptheirgoodsinstore.

• Seven&Iacquired1,110conveniencestoresunderthetradenamesAPlusandStripesfromSunoco.Theoperatorof7-ElevenstoreshasbeenaggressiveinexpandingintheUS.

Asia• JD.com,China’ssecond-largestB2Cplatformannouncedthatitwillopenmore

than1millionconveniencestoresinChinaoverthenextfiveyears.CustomerswhopurchaseonJD.comwillbeabletopickuptheirpurchasesatthesestores.Priortotheannouncement,JD.comhadbeenexpandingitsphysicalpresenceinChinawithaphysicalnetworkoffranchisedstorescalledJingdongBang.

• CU,thelargestconveniencestorebrandinKoreaoperatedbyBGFRetail,withover10,000stores,definesaconveniencestoreasa‘dailylifeplatform’andusesbigdatatoanalyzeconsumptiontrends.ThechainopenedthefirstkaraokeconveniencestorewithaCUstoreonthegroundfloorandhasdiscoballsinstalledwithK-popmusic.Overthepastfiveyears,thenumberofconveniencestoresinKoreahasmorethandoubledtoreach32,000in2016,accordingtotheKoreaAssociationofConvenienceStoreIndustry.

• Lawsonand7-EleveninJapanhavelaunchedfooddeliveryservicestotargetseniors.

• Fashione-tailerZaloracooperateswithconveniencestoresinHongKongtoprovidepickupandreturnservices,whileASOSletsconsumersreturnmerchandiseatconveniencestores.

Figure1.CUKaraokeConvenienceStore

Source:InsideRetail

PrivateLabelaSignificantGrowthOpportunityConveniencestoresandconsumergoodsmanufacturerscouldcollaboratetocreateawidevarietyofproductsfortheirconsumers.Brandscanleveragetheirmarketingeffortsthroughconveniencestores’vastdistributionalchannels,andconveniencestorescanleverageonthebrands’existingfranchises.

4 DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

April24,2017

• 7-Elevenderives50%ofitsnetsalesfromprivate-labelproducts,accordingtotheAssociationforConvenience&FuelRetailing.

• E-mart,oneSouthKorea’leadingconveniencestorechains,togetherwithSMEntertainment,oneofKorea’smostinfluentialshowbizagencies,haslaunchedprivate-labelproductssuchasK-popartists’brandedinstantnoodles,snacksandsoda.

• CU’sprivate-labelproductscompriseroughly25%ofallproductssoldatitsstores.

Figure2.E-mart:Private-labelcollaborationwithSMEntertainment

Source:Allkpop

ImplicationstoRetailersWeseethefollowingtrendsplayingoutintheconvenienceretailingandbroaderretailindustryinthenearterm:

• Retailerswillincreasinglyshiftfrombigstoretoconvenienceretailformatsinurbanareas.

• Retailwillcontinuetobeamulti-functionalplatformcollaboratingwithotherindustries.

• Thestrengthofconvenienceretailingwillcontinue,giventheirextensivedistributionchannels.

• ConvenienceretailinginChinawillenterarapidgrowthphase,primarilydrivenbychangesinconsumptionpatternsinurbanareasandexpansionplansofconveniencestorechainssuchas7-ElevenandLawson.Theratioofconveniencestoretosupermarketsis8:92inChina,below54:46inJapan,accordingtoebrun,ane-commercemediasiteinChina.

• ThedistributionalcapabilitiesofconveniencestoresdifferacrossAsianmarkets,withJapan,KoreaandTaiwanoutperformingChina.DespitetherapidgrowthofconvenienceretailinginChina,thedistributionofthecountry’sconveniencestoresisfragmented.Brandswillhavedifficultyfindingasuitablepartnertoimplementconveniencestorepick-upservices,duetotheabsenceofaconvenience-storechainwithaclose-knitnationwidestorefootprint.

5 DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

April24,2017

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

ZaneYangResearchAssistant

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