From Wall Street to Main Street

FUNG GLOBAL RETAIL & TECHNOLOGY Staples Inc. MARCH 26, 2016

From Wall Street to Main Street


Wall Street Career

• 17 years covering Wall Street

• Went through Regulation FD

• Global Recession• Market crash

• Thought they would lock the doors

• Citigroup Tremors

• Compliance Focused


Disruption on Wall Street Post the Great Recession

• A black cloud hovers over financial services profession.

• Wall Street no longer the career of choice

• Fundamentals of research have changed

• Heavy compliance requirements saps talent from research to legal

• Passion for research drained 7600

7700

7800

7900

8000

8100

8200

8300

8400

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

All Financial Activities Employees (Thousands)

Source: Bureau of Labor Statistics


MBAs Migrate

• New talent gravitating towards tech and entrepreneurial pursuits not financial service


Personal Crisis

• Leave Wall Street

• Passion for Tech remains• Tradestone

• Profitect

• And Fashion• Rubin Singer


Creating New Career

• CCO at Profitect

• Research and analytic skill set focused on entrepreneurial models disrupting traditional retail

• Less financial statement analysis

• Focused on next solution for consumer need at the intersection of technology and the broad categories of apparel beauty and home


And Loving it!

• IoT

• Connected consumers

• 3D Printing

• Robots and retail

• Avatars and holograms

• New ways to discover everything!


Top Trends

1. Experiential Retail

2. Smart Malls

3. Social Shopping

4. Resale economy

5. Sharing economy

6. Loyalty

7. Digital Smarts

8. Silver Economy

9. Evolving Pure Plays

10. Millennial car ownership

11. Healthy eating

12. Retail store openings and closings

13. Amazon growth

14. 3D Printing

15. Store Traffic

16. Subscription Economy

17. RFID Adoption

18. Wearables

19. Tech Investments

20. Social commerce in China

21. Online auction apps in Asia

22. Line Launches Debit Card

23. Walmart Lags in E-commerce


Urban Outfitters acquired

Vetri Family group of restaurants

in 2015

Club Monaco and Kohl’s are also

opening food and beverage shops in

their stores

Rebecca Minkoff offers interactive

mirrors as well as virtual reality headsets

Tommy Hilfiger stores have virtual

reality headsets to allow consumers to

experience runway shows

Lowe’s Holoroom allows customers to

see merchandise in different color

combinations and as they would appear

in a home

Proliferation of mobile apps to improve

in-store experiences,

such as: customizable shopping lists,

location-relevant promotions, and

product and inventory information

Food & Beverages

Virtual Reality

Technology

1. Experiential Retail Brings Shoppers Back to Stores


Data enabled

personalized and

timely promotions

Track movements,

behavior and

preferences

Beacon enabled

location-based

advertising

2. Smart Malls: Reshaping the Physical Shopping Experience


• HGTV partnered with Macerich shopping malls to launch virtual and

hand-on technology-based experiences

1

1

• RetailNext formed strategic alliance with StepsAway, an in-mall

mobile retail solution provider offering shoppers smartphone access

to hyperlocal in-store deals

• A Silicon Valley-based unit which designs and experiments with

innovations to improve the retail experience

2. Smart Malls: Reshaping the Physical Shopping Experience


• Buy on social media platforms without switch apps or

websites

• Easy to curate content on social media

• “Buy button” helps prevent shopping cart

abandonment

• Youtube, Pinterest , Twitter and Google already have

buy buttons

• Wechat is a pioneer in social shopping

45%

44%

30%

25%

22%

20%

16%

Reading reviews, comments and feedback

Receiving promotional offerings

Viewing advertisements

Staying on top of current fashion and producttrends

Writing reviews, comments and feedback

Associating with particular brands and retailers

Purchasing products directly via a social mediachannel

How Social Media Influences Shopping Behavior

Source:PWC

3. Social Shopping is Made Simpler


Disruptors: thredUP, Tradesy, The RealReal, Poshmark, VestiaireCollective

• VC backed online consignment at $300 million and growing

• Sustainable consumption trend

• Impacting apparel, luxury accessories, fine art, objets d’art, and jewelry & watches

4. Explosion in Resale


• Next big industry to be disrupted is healthcare, via startups such as Doctor on Demand, Pager, Studio Dental and MedZed

• Sector is maturing and becoming more sophisticated

• Challenges: customer safety and regulation battles

• Expanding scale in tandem with Millennials and GenZ reaching maturity

• 2016 may see the first big sharing economy IPO Source: Company Reports/Analyst

Estimates

*

*

*Retail company

5. Sharing Economy

FUNG GLOBAL RETAIL & TECHNOLOGY Staples Inc. MARCH 26, 2016 15

• Retailers will refocus on loyalty, which has become

increasingly difficult to generate and maintain in the

omni-channel world.

• Walmart launched Savings Catcher in 2014 to give

customers the difference in price if product is cheaper

elsewhere

• Retailers frequently use clubs, memberships and

elements of gamification to help increase customer

loyalty in addition to personalize offering

• Currently, only 37% of retailers use internal and

external data to gain insights on their customers

• Smartphone apps are becoming more prominent in

loyalty programs – the days of a “card” may be

numbered.

More retailers will facilitate personalized experiences for customers via loyalty programs6. Loyalty Programs: Keep Them Coming Back


• Smarter choices possible for everythingeating exercising shopping

• Let your fingers do the walking and sharing

• Retail investments focused on technology that touches consumers from apps to payment, data security to fulfillment capability

• Mobile growing influence. A genius in my handbag.

7. Digital Smarts


• Silvers 60-85

• Super Silvers 85+

• More services, more experiences, more fun

• Senior population is growing across the globe

• US has the largest market for seniors: 2.2 trillion in 2014

• Older Consumers Are Increasingly Digitally Connected:

Increasing mobile device usage: Greatcall

• Boom of healthcare tech industry: UnaliWear

• Smart Home: healthcare and assisted living system

Source: UN Department of Economic and Social Affairs

7 10 15

12.3%13.5%

16.5%17.0%

19.0%

23.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0

2

4

6

8

10

12

14

16

2015 2020 2030

Estimated Senior Population and Spending, 2020 & 2030

Consumer spending by senior population(USD trillion)

Senior population as a % of total population

% of total worldwide spending

8. Silver Economy: Aging Population Creates An Opportunity


8

AMAZON

BONOBOS

ATHLETA

CASPER

AYR

YOGIBO

HARRY’S INDOCHINO



Millennials prefer mono-brand brick-and-mortar stores, and they shift between online and offline along the shopping journey

1

9

Retailer # of Stores

1

2

3

20

26



• A recent survey found that 20% of Millennials take public transit

once a week or more, compared with just 7% of Generation Xers

and 10% of Baby Boomers

• 35% of millennials indicated that they plan to purchase a vehicle

in the next 12 months compared to 25% of total U.S. adults.

• Millennials lease more than any other generation and are leasing

50% more often today than they were five years ago

10. Millennials Aspire to Car Ownership but Also Like Sharing Plans


• Millennials believe that eating right

is the most important aspect to achieving

well-being

• Millennials are more concerned

with nutrition food labels regularly

Millennials Boomersversus

24% 12%

Exercise and

Eating Healthy

40% 33%

Artificial Ingredients

Source: Company Report

11. Active Pursuit for Healthy Eating Lift Organic Grocers’ Sales


• Multi-cultural cuisines

• Gluten-free baked goods

• Organics

• Avoid additives

• Less swayed by traditional nutritional markers such as calorie

count and health claims

• Buy frozen or prepared ‘healthy’ foods, adding fresh ingredients

and seasonings

• In 2015, Whole Foods Market revealed perhaps the first major

millennial-focused store format

• Prepared food departments are cooking to order, offering greater

variety, and healthier customized meals

11. Active Pursuit for Healthy Eating Lift Organic Grocers’ Sales


Retailer # of Announced Store Closings

Walmart 269

Mens’ Wearhouse 250

Sports Authority 140

Sears 50

Macy’s 40

Kohl’s 18

Retailer # of Announced Store Openings

Dollar General 900

Forever 21 600

Under Armour 200

Dick's Sporting Goods 135-150

Ulta 100

ALDI 45

Costco 32

Dollar Tree 13

Stein Mart 12

Target 11

Source: ICSC Research and PNC Research

2015

• There was a 7% increase YoY in store closure

announcements

• There was 29% less square footage associated with

announced store closures in 2015 versus 2014

2016

• Off-price/discount retailers are expected to see major

growth in 2016

• Foreign discount grocers Aldi and Lidl plan to push US

expansion

• E-commerce pure plays opening stores

12. Retail Store Closings and Openings Continue


• Accounted for $0.51 of every $1.00 of growth in US e-commerce in 2015

• Also generated 24% of total retail growth in the United States

(10%)

5%

20%

35%

50%

2003 2005 2007 2009 2011 2013 2015

Amazon Sales Growth US Total Retail Sales Growth

Source: Bloomberg and US Census Bureau

Amazon Annual Sales Growth

13. Amazon Sales Growth Far Outpaces US Retail Sales Growth


AS A SERVICE:

• UPS launched in-store 3D-printing services in 2013

• Staples has offered 3D-printing services in stores since 2014

• The new millennial floor at the Macy’s NYC flagship store has a

3D-printing shop

14. 3D Printing: Retail (Make in the Store)


APPAREL, FOOTWEAR, CONSUMER ELECTRONICS

• 80/20 products:

- 80% of product mass produced

- 20% customized

• Shoes of Prey

- Design your own perfect shoes

• Mink Makeup Printer

- A sub-$200 desktop printer can print makeup

• Normal Headphones

- Custom-fit 3D-printed earphones

14. 3D Printing: Enterprises


• US store traffic is down 6.9% in February 2016

• US mall traffic has declined for 37 consecutive

months and continues to be challenging

• Malls have seen an average drop in traffic of

9.3% YoY

- High-end malls appear less affected

- GGP traffic up 2% in 2015

- Simon traffic up 1.5% in 2015

- Taubman traffic up in 2015

Source: RetailNext

Monthly US Store Traffic: YoY% Change

27

15. With Store Traffic Down, In Store Experience is Key


• Disrupters: 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

16. Subscription Economy: Opportunity for Office Suppliers


• Radio-frequency identification (RFID) uses radio

waves to identify and track items

• RFID will supplement or replace barcodes

• Distributed Order Management is necessary for

Omni-channel operations

• Revenue Benefits:

- Eliminating out-of-stock situations

- Sales Lift from Inventory Management

- Better Inventory Management

• Adoption is speeding up:

- The number of retailers adopting RFID

increased by 23% in 2015

Global Market for RFID Tags (USD Bil.)

Source: Statista

17. RFID Adoption Gaining Momentum


• Fitbit: 22.2% share (#1) of the wearables market as of 3Q 15 (IDC)

• Apple Watch: 18.6% (#2) share of the wearables market as of 3Q 15 (IDC)

• iFit ecosystem provides a game plan for exercising, activity, nutrition and sleep

• Under Armour’s $400 HealthBox uses a wristband, heart rate monitor and scale to track fitness, sleep and nutrition

• Withings has a smart wristband heart monitor, scale, sleep monitor and blood pressure monitor

18.Wearables


• In 2015, growth in online channel outpaced

growth in brick-and-mortar sales, spurring many

retailers to increase investments in digital

capabilities

• Target has announced $3.8 billion in technology

spending over the next 2 years

• Home Depot increased online presence with

initiatives such as buy online, pick up in store.

Walmart strong mobile growth was driven by

improving its app and simplify the checkout

process

• Spending areas will likely be mobile app

improvement, fulfillment capability, and payment

systems and data security

Source: Company reports

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

CVS

HomeDepot

JCPenney

Kohl's

Macy's

Nordstrom

Sears

Target

TJXCompanies

Walmart

Cap

ex/Sale

s

USD

Bil.

2014TechCapex 2015TechCapex 2014Capex/Sales(RightScale)

Tech Spending at Major Retailers 2014 / 2015

19. Tech Investments: Help Feed the Digital Shopping Habit


• $672.01 Billion e-commerce sales 2015

• eMarketer predicts m-commerce accounting for 49.9% on online retail sales

• 70% of Singles Day sales from mobile

32

0

100

200

300

400

500

600

700

Q1 2

01

2

Q2 2

01

2

Q3 2

01

2

Q4 2

01

2

Q1 2

01

3

Q2 2

01

3

Q3 2

01

3

Q4 2

01

3

Q1

20

14

Q2 2

01

4

Q3 2

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Q4 2

01

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Q1 2

01

5

Q2 2

01

5

Q3 2

01

5

WeChat Monthly Active Users (Millions)

20. Social Commerce Takes Off in China


21. Asia Based Auction Apps

• P2P shopping apps• Shopee, Mercari,

Carousell

• List items for sale within minutes

• Built in services:• GPS

• Chat

• Payment

• Delivery


22.Line App Launches Pre-Paid Card

• Line has 68 Million Japanese Users

• Credit Cards under-utilized in Japan

• Card ties into spin-off Line Pay app

• Linked to rewards service: Line Points

• Add money or view transactions from within app

34


23.Walmart Lags in E-Commerce

• 40 million customers per month

• 15th largest e-commerce destination

• $2 Billion investment in e-commerce

• 10% of overall capex

• Online traffic 7% of weekly store traffic

• 2% of total sales

35

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

E-Commerce Sales YoY

Walmart.com US E-Commerce Market