World Retail Congress 2017 Day 3: Digitalizing Supply Chains, … · 2017. 4. 7. · World Retail...
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1 April 7, 2017 Deborah Weinswig, Managing Director, Fung Global Retail & Technology [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2017 The Fung Group. All rights reserved. World Retail Congress 2017 Day 3: Digitalizing Supply Chains, Serving Chinese Consumers and Making Apparel Production More Sustainable The Fung Global Retail & Technology team attended World Retail Congress 2017 in Dubai this week. Here are our top takeaways from the third and final day of the conference: 1) Retail has been digitalized, but the supply chain remains largely analog, according to Li & Fung Honorary Chairman Dr. Victor Fung. Li & Fung is taking the lead on digitalizing the supply chain. 2) The Chinese consumer is becoming the most discerning and discriminating shopper in the world, according to Dr. Fung. Alibaba Group is catering to this consumer with its “new retail” model, which combines online retail, offline retail, data and logistics. 3) Two major impacts on apparel brands and retailers are price parity between geographic markets and shopper expectations of discounts, according to Norman Jaskolka, President of Aldo Group International. 4) Manufacturers and retailers are facing increasing pressure to ensure greater sustainability in apparel production. Last year, garments produced from closed- loop recycling accounted for 5% of Zara’s total sales. World Retail Congress 2017 concluded on April 6 in Dubai. Here, we feature our top takeaways from the final day of the conference. Readers can find our reports on days one and two of the event at WRC 2017 Day 1 Takeaways and WRC 2017 Day 2 Takeaways.
Transcript of World Retail Congress 2017 Day 3: Digitalizing Supply Chains, … · 2017. 4. 7. · World Retail...
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April7,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
World Retail Congress 2017 Day 3: Digitalizing Supply Chains, Serving Chinese Consumers and Making Apparel Production More Sustainable
TheFungGlobalRetail&TechnologyteamattendedWorldRetailCongress2017inDubaithisweek.Hereareourtoptakeawaysfromthethirdandfinaldayoftheconference:
1) Retailhasbeendigitalized,butthesupplychainremainslargelyanalog,accordingtoLi&FungHonoraryChairmanDr.VictorFung.Li&Fungistakingtheleadondigitalizingthesupplychain.
2) TheChineseconsumerisbecomingthemostdiscerninganddiscriminatingshopperintheworld,accordingtoDr.Fung.AlibabaGroupiscateringtothisconsumerwithits“newretail”model,whichcombinesonlineretail,offlineretail,dataandlogistics.
3) Twomajorimpactsonapparelbrandsandretailersarepriceparitybetweengeographicmarketsandshopperexpectationsofdiscounts,accordingtoNormanJaskolka,PresidentofAldoGroupInternational.
4) Manufacturersandretailersarefacingincreasingpressuretoensuregreatersustainabilityinapparelproduction.Lastyear,garmentsproducedfromclosed-looprecyclingaccountedfor5%ofZara’stotalsales.
WorldRetailCongress2017concludedonApril6inDubai.Here,wefeatureourtoptakeawaysfromthefinaldayoftheconference.ReaderscanfindourreportsondaysoneandtwooftheeventatWRC2017Day1TakeawaysandWRC2017Day2Takeaways.
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April7,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
DigitalSupplyChainsandChineseConsumersDr.VictorFung,HonoraryChairmanofLi&Fung,undertheFungGroup,returnedtotheconferenceforasecondannual“firesidechat”withStephenLaughlin,IBM’sVicePresidentandGeneralManager,GlobalConsumerIndustry.Theconversationrangedfromomnichannelretailingtodigitalsupplychainstoglobaltradechallenges.HerearesomekeythoughtsfromDr.Fung:
• Retailhasbeendigitalized,butthesupplychainremainslargelyanalog.Li&Fungisfocusingondigitalizingthesupplychain,whichcouldresultinthedeploymentoftechnologiessuchas3Dprinting,blockchainandtheInternetofThings(IoT).
• Thesupplychainismovingawayfromsegmentedblockstoamorefluidmodel.Retailers’supplychainswillreachallthewaytotheconsumer,enablingfirmstoreactrapidlytoshopperdemand—forinstance,bymakingswiftadjustmentstoaproductinitssecondmanufacturingrun.Digitalizationandamorefluidsupplychainmeanwecouldseeproductsmovefromideatoconsumersaleinaslittleas10daystotwoweeks.
• TheChineseconsumerisbecomingthemostdiscerninganddiscriminatingshopperintheworld.TheimpactofChineseconsumersonretailingisshapedbythreefactors:First,theChineseconsumerswhoarespendingmoneyare,onaverage,10yearsyoungerthantheircounterpartsintheWest.Second,Chineseshoppersarehighlytechenabledandwebenabled.Third,China’shighoutboundtouristnumbersmeantheimpactofChineseconsumersextendstoretailersworldwide.
• NewomnichannelretailmodelscouldemergefromChina,andtheFungGroupisleadingtheexplorationofnewmodels,strategiesandtechnologiesinitsExploriumlaboratoryinShanghai.Exploriumisnowaccommodatingincubatorstonurtureretail-relatedstartups.
JD.comandAlibabaGrouponServingChineseConsumers
Source:FungGlobalRetail&Technology
Wealsoheardfromexecutivesate-commercegiantsJD.comandAlibabaGroupaboutcateringtoChineseconsumers.LauraXiong,SeniorVicePresidentatJD.com,outlinedhowhercompanyisservingshoppersandhowithasencouragedthemtoconvertfromofflineshoppingtoonlineshopping:
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
• CounterfeitsareachallengeforonlineretailinChinaandJD.comhasastrictno-counterfeitpolicy.ThisiscentralforbrandsinChina,Xiongsaid.
• Uniquely,JD.comcontrolsthefulfillmentprocess,endtoend:ithasinvestedinsevenlogisticshubs,256warehouses,and6,900deliveryandpickupstations.Thisdeliveryserviceisprovidedfreetocustomers.
XiongconcludedthattheseelementsincombinationgiveJD.comauniquepositioningintheChinesemarket.
GuruGowrappan,GlobalManagingDirectoratAlibabaGroup,alsonotedsomecharacteristicsofthemarketandhowhiscompanyisservingshoppers:
• By2020,morethan50%ofChina’surbanpopulationwillbeintheuppermiddleclass.Currently,themedianageofChineseonlineshoppersisjust29.
• SalesonAlibaba’ssitesonSingles’Day(November11)grewmorethantenfoldfrom2010to2016,from$14.5millionto$17.8billion.
• Alibabaisaimingtoserveyouthful,tech-enabledChineseconsumerswith“newretail,”amodelthatcombinesonlineandofflineretail,dataandlogistics.
ReaderscanlearnmoreaboutAlibabaGroup’s“newretail”modelbyreadingourreportonthetopic.
ApparelBrandsandtheChangingRetailLandscapeOndaytwooftheconference,weheardfromMannyChirico,CEOofPVHCorp.,onthechallengesapparelbrandownersarefacing.Chiriconotedthattheseretailersareoperatingwithinachangingretaillandscapeastheyattempttobalancetheirownbrick-and-mortarstores,theirowne-commercesites,wholesalingtotraditionalbrick-and-mortarplayersandwholesalingtonewere-commerceretailers.
Source:FungGlobalRetail&Technology
Ondaythreeoftheconference,weheardmoreaboutthesechallengesfromNormanJaskolka,PresidentoffootwearcompanyAldoGroupInternational.Jaskolkanotedtwoshiftsthathavealreadyoccurredinthemarketandthreeconceptsforthefuture,particularlywithregardtoapparelbrandssuchasthosesoldbyhiscompany.Hesaidthattwomajorchangesimpactingapparelbrandsandretailersare:
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
1. Itisnolongerviabletosetsubstantiallydifferentpricesindifferentregionalmarkets,eveniftherearedifferentcosts.Shopperslookandbuyacrossbordersandwillnotaccepthigherpricesinonemarketthaninanother.
2. Evenoncepricesarestandardized,shoppersthenexpectadiscount.Theyareunwillingtopayfullprice.
Intheory,thesetwoshiftscouldresultinaproductthatwasoncepricedat,say,$130,droppingfirstto$100(duetostandardization)andthendownto$80(asaresultofdiscounting).Suchachangeclearlycannotbemadewithoutsubstantialcompressionofmargins.
Jaskolka’sthreethemesforapparelbrandsinthecomingyearsare:
1. Brick-and-mortarretailingisnolongerdrivenbybrandsandmarketing,butbyexperience.(Thisemphasisonexperienceinstoreswasechoedbyanumberofcommentatorsacrossthethreedaysoftheconference.)
2. Profitsinthevaluechainwillfall,andthosemostimmunetomargincompressionwillbethoseaddingthemostvalue.
3. Retailisnotdead,andonline-onlyretailersmaybejealousofsomeaspectsofbrick-and-mortarretailers,suchastheabilitytoprovideavaluableexperiencetocustomers.
SustainabilityPressuresinApparelProduction
Source:FungGlobalRetail&Technology
Brandsarenotonlybeingforcedtoslashmarginsandadjusttheirdistributionstrategies,butalsoarebeingpressuredtoincreasetheirsustainabilityeffortswhenproducingapparel.WeheardfromThomasTochtermann,AdvisoratrestaurantchainVapianoandSupervisoryBoardMemberatDanskSupermarked,onsustainability,aswellasfromAlfredVernis,SustainabilityAcademicDirectoratInditex.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Tochtermannnotedthesubstantialimpactofapparelproduction:
• Some400billionsquaremetersoffabricwasusedinapparelproductionin2015,andthisannualvolumewillgrowby60%by2030.
• Producingjustonekilogramofcottonrequires2,000–3,500litersofwater.
• Evenwhenapparelisrecycled,itistypicallynotrecycledinaclosed-loopprocesswherebyitisusedtocreatenewapparel.
• By2030,thegapbetweenwaterdemandandwatersupplywillbearound40%,i.e.,therewillbea40%shortfallinwatersupply.
Vernisalsodiscussedthescaleoftheissue:
• Intheory,sustainabilitymeansmeetingtheneedsofthepresentgenerationwithoutcompromisingtheneedsoffuturegenerations.Inpractice,profitandsustainabilityaretwosidesofthesamecoin.
• Garmentsproducedfromclosed-looprecyclingaccountedforsome5%ofZara’ssaleslastyear.Whilethatisasmallpercentage,itequatedtomorethan40millionrecycledgarments.
• ThetopconcernforChineseconsumers—acrosscategories—isclimatechange.
TheImpactofChangingShopperDemandsArecurringthemeacrossthethreedaysoftheconferencewastheimpactofchangingshopperdemands,andparticularlymillennials’expectationsofqualitybrandexperiences.Toconcludeourwrapupofthisyear’sconference,wefeaturesomefurtherone-linetakeawaysonthistheme:
“Consumersdon’tthinkaboutchannels.So,don’tthinkchannelfirst;thinkshopperfirst.”
–RosieO’Neill,Cofounder,Sugarfina
“Createcompellingcontentandexperiences.Customerswillforgetwhatyousaid,butnothowyoumadethemfeel.”
–LanaHopkins,FounderandCEO,MonPurse
“Ina‘horizontal’world,thebasisofconsumertrustisemotionalconnection.”
–CédricDucrocq,CEO,Dia-MartConsulting
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April7,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comJohnMercerSeniorAnalyst
HongKong:8thFloor,LiFungTower888CheungShaWanRoad,KowloonHongKongTel:85223004406London:242–246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NewYork:1359Broadway,9thFloorNewYork,NY10018Tel:6468397017
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