Do or Die: Retail Imperatives for Globalization, Personalization and Localization

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Transcript of Do or Die: Retail Imperatives for Globalization, Personalization and Localization

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DEBORAH WEINSWIGMANAGING DIRECTORFUNG GLOBAL RETAIL & TECHNOLOGYOctober 18, 2016

Do or Die: Retail Imperatives for Globalization, Personalization and Localization

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Today, Well Talk About: Consumers

Retailers

Technology

The economy

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FUNG GROUP

TRADING

LOGISTICS

DISTRIBUTION

RETAILINGLi & Fung LimitedListed on SEHKGlobal Brands GroupListed on SEHKFung Retailing LimitedPrivately Held EntityConvenience RetailAsia LimitedListed on SEHKTrinity LimitedListed on SEHKBranded Lifestyle Holdings LimitedLiFung Kids (Holdings) LimitedToys R Us (Asia)Suhyang NetworksUCCAL Fashion GroupPrivately Held EntitiesFung Holdings (1937) Ltd. A privately held entity and major shareholder of the Fung Group

#Fung Global Retail & Technology publishes research that is available at www.FungGlobalRetailTech.com We advise retailers, real estate developers and tech companies on projects situated at the intersection of retail, tech and/or fashionOur team possesses deep knowledge of and significant experience in the retail, fashion and tech fieldsA UNIQUE COMBINATION OF RETAIL, FASHION AND TECH

RETAILFASHIONTECH

#The knowledge bank for the Fung GroupConsultancy for clients within and outside the Fung GroupFocuses on emerging retail and technology trendsEstablished in 2014Based in New York, with research teams in London and Hong Kong20+ analysts specializing in retail and technologyPublishes thematic and global market research on topics such as the Internet of Things (IoT), digital payments, omni-channel retail, fashion retail trends and disruptive technologies

FUNG GLOBAL RETAIL & TECHNOLOGYHONG KONG NEW YORK LONDON

RETAILTECHmicro macroretail real estatethematic researchVRAIIOTDIGITALDIGITALDIGITALDIGITAL

#1. Macro Environment

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The US GDP annualized growth rate was 1.4% in 2Q16, following lackluster growth of 0.8% in 1Q16 and 0.9% in 4Q15.Downward revisions to growth in prior periods were in government spending, inventories and net exports.

US GDP GREW BY 1.4% IN 2Q16, BELOW EXPECTATIONS Source: US Bureau of Economic Analysis/Fung Global Retail & Technology US GDP Growth Rate

4Q153Q152Q151Q154Q143Q142Q14

4%

0.9%

0.8%

1Q162Q16

2.6%

2%

2.3%

2%

5%

1.4%

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US INFLATION PACE STILL MODEST US Gasoline PriceUS CPI: YoY % ChangeSource: US Bureau of Labor Statistics/Energy Information Administration$2.2721.1%2.3%

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US FOOD-PRICE DEFLATION IMPACTING GROCERY RETAIL Consumer Prices: Selected Food Categories YoY % Change in Six Months Ended July 2016Source: US Bureau of Labor StatisticsUS food prices have fallen, impacting revenues in all grocery channels.Declining US exports have pushed down domestic prices of fresh-food categories such as beef and poultry, while a surplus has depressed dairy prices.

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RESTAURANTS VS. GROCERY: A WIDENING GAPUS restaurant sales weakened in the second quarter, and many restaurant operators posted disappointing earnings results.During the first seven months of 2016, the cost of eating at home declined, but restaurant operators raised their menu prices consistently, increasing the price gap between buying groceries and dining out.

Monthly Retail Sales, YoY % ChangeSource: US Census Bureau

#2. Increased Price Competition; Online Grocery Set to Boom

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Across mature grocery markets, we see two growth areas:E-commerceDiscountersThere is little overlap between the two segments: hard discounters avoid e-commerce.Both fuel the trend for little-and-often shopping in smaller stores.E-commerce and discounters both generate a need for top-up shops from other channels.

COMMON GLOBAL THEMES IN GROCERY

#US GROCERY SEGMENT OVERVIEW

SALES FORECAST (USD Mil.)

Hypermarkets: >25,000 sq. ft.; supermarkets: