brands and retailers in the golden age of cheap gas cool stuff · uberfication ! disruption of...
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Brands and Retailers in the Golden Age of Cheap Gas & Cool Stuff
DEBORAH WEINSWIG Executive Director – Head Global Retail Research and Intelligence
Fung Business Intelligence Center Global [email protected]
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Brands and Retailers in the Golden Age ü Revenge of the Bricks — A Focus on C-stores ü Cheaper Energy to Boost Consumer Spending ü What’s Being Spent? ü Wearable Tech ü Digital Marketing ü Restructured Economy ü Uberfication ü Disruption of Grocery ü Holiday Comps at Amazon and eBay
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Brick & Mortar Investing in Tech Where are they spending?
• Cyber Security
• Personalization
• Big Data/Prescriptive & Predictive Analytics
• Beacons (Tracking Consumers)
• Wearables
More than 40% used a smartphone or tablet for Black Friday activities (NRF)
Because mobile now accounts for more than 50% of all ecommerce traffic, it's absolutely essential that stores is optimized for mobile customers.
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Retailer Tech Spending Capex was approximately 3.6% of sales in 2013
Technology Capex: • Walmart: 30% of capex in 2013; spending $1.2-1.5B
on e-commerce in FY2016 (= 9-13% of total)
• Nordstrom: “Technology investments account for over 30% of our plan, up from roughly 20% historically”
• Home Depot: “Tilting investments towards interconnected retail and technology”
0%
2%
4%
6%
8%
JCPe
nney
Nordstrom
Target
TJ M
axx
Kohl's
Macy's
Walmart
Home De
pot
CVS
Sears
Capex/Sales Average
Capex/Sales for Selected Retailers
Average = 3.6%
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Revenge of the Bricks – A Focus on C-stores
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Expanding the C-store Offer Evolving C-stores into a hybrid format with
• Expanded Home Meal Replacement (HMR)
• Click-and-collect services
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Expanding the C-store Offer 7‑Eleven, Inc. is the world’s largest convenience store chain with more than 54,200 stores in 16 countries
• 10,400 are in North America
• More outlets than any other retailer or food service provider
• 7‑Eleven adds another store worldwide every 2.5 hours
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Strong Growth on Tap for C-stores
66.2 82.8
116.9
0
20
40
60
80
100
120
140
2008 2013 2018
Sales ($B
il.)
North America
71.3 77.8
103.2
0
20
40
60
80
100
120
2008 2013 2018
Sales ($B
il.)
Western Europe
4.0
6.1
9.9
0
2
4
6
8
10
12
2008 2013 2018
Sales ($B
il.)
Central & Eastern Europe
5.8
9.9
16.3
0
5
10
15
20
2008 2013 2018
Sales ($B
il.)
LaKn America
1.9 2.8
4.2
0
2
4
6
8
2008 2013 2018
Sales ($B
il.)
Middle East & Africa
96.4
143.3
186.2
0
50
100
150
200
250
2008 2013 2018
Sales ($B
il.)
Asia & Oceania
7.1% 5.8% 10.3%
10.6% 7.9% 5.3%
CAGR 2013-‐2018 Source: PlanetRetail
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132,424 130,659
138,205
140,655
145,119 146,294
144,875 144,541 146,341
148,126 149,220
151,282
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
US Convenience Store Count
Expanding the C-store Offer Evolving C-Stores in the U.S.
• Over 150,000 stores (Y/E 2013), up 1.4% YoY • Fastest store growth since 2008 recession • Nearly 84% sell gas, up 2.7% YoY • Single-store operators account for 63% of sales (not consolidated)
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Cheaper Energy to Boost Consumer Spending
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Falling Gas Prices = Windfall for U.S. Consumers Gas prices are down 40% since June and headed lower, one of the steepest drops since the 2008 financial crisis. Adds an extra $750 into consumer wallets on an annualized basis.
Sources: Energy Informa7on Agency, Interna7onal Monetary Fund and Rhodium Group
2.60
2.80
3.00
3.20
3.40
3.60
3.80
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Retail Gasoline Price ($/Gallon) Through December 1, 2104
2013 2014
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Falling Gas Prices = Windfall for US Consumers The IMF raised its 2015 forecast for US GDP growth to 3.5% from its prior 3.1% estimate, in part due to lower energy costs
2.4%
1.8%
1.2%
0.8%
0.8%
0.5%
-4.7%
-5.4%
-8.6%
-10.2%
-13.6%
-15.8%
-18.1%
-20% -15% -10% -5% 0% 5%
South Korea
India
Japan
Germany
China
U.S.
Russia
Nigeria
United Arab Emirates
Venezuela
Iraq
Saudi Arabia
Kuwait
Falling Gas Prices = Windfall for US Consumers
Sources: Energy Informa7on Agency, Interna7onal Monetary Fund, and Rhodium Group
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U.S. GDP Forecast
U.S. Real GDP Growth
2013 (Actual) 2.2%
2014 (Forecast) 2.2%
2015 (Forecast) 3.5%
Source: Interna7onal Monetary Fund
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Why Oil Has Plunged Too Little Demand
• Stalled recoveries in Europe and Japan
• Slower demand growth in developing countries, notably in China
• Americans are driving less and doing so in more fuel-efficient cars
Sources: Energy Informa7on Agency, US Federal Highway Administra7on
(4)
(2)
0
2
4
6
8
0
5
10
15
20
25
1971 1977 1983 1989 1995 2001 2007 2013
Passenger Car Fuel Efficiency Million of Vehicle Miles Traveled YoY % Change
Miles p
er Gallon
Growth in M
iles Driven
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Why Oil Has Plunged Too Much Supply
• Shale-oil boom has increased US daily oil production by nearly 50% since 2007
Figure shown for 2014 is an es7mate Sources: Energy Informa7on Agency, US Federal Highway Administra7on
US Overtakes Saudi Arabia in Petroleum Products
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8
10
12
14
16
14 12 10 08 06 04 02 00 98 96 94 92 90
Petroleum and other Liquids Production Millions of Barrels per Day
Saudi Arabia United States
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Dining & Home Goods to Benefit Most • Lower gasoline prices should
continue to spur spending on casual dining and entertainment
• Cheaper energy should also bolster furniture and home-goods sales, as lower fuel bills makes owning a home more affordable
• Discount chains are best positioned to benefit from the extra spending power of value-conscious lower-income families Through October 31, 2014
YoY Seasonally adjusted; YTD unadjusted Source: US Department of Commerce
Retail Sales YTD 2014
(1.7)
1.6
1.7
2.1
2.8
5.5
Clothing and Accessories
General Merchandise
Electronics & Appliances
Furniture & Home Goods
Restaurants & Bars
Total Sales (ex Auto) +3.3% YoY
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What’s Being Spent?
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Consumer Spending Breakdown
Source: Consumer Expenditure Survey, U.S. Bureau of Labor Statistics, September, 2014
Average Annual Income Before Taxes $63,784 AVERAGE ANNUAL EXPENDITURE
TOTAL $51,100 Food 11.7%
Housing 30.4%
Utilities, Fuels and Public Services 6.6%
Cellular phone services 1.6%
Footwear 1.0%
Apparel and Services 2.8%
Beauty 0.7%
Other 35.1%
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Xiaomi is Now the Third-Largest Smartphone Brand in the World
3Q 2014 Market Share
3Q 2013 Market Share
3Q 2014 / 3Q 2013 Growth
Samsung 23.8% 32.5% (-8.2%)
Apple 12.0% 12.9% 16.1%
Xiaomi 5.3% 2.1% 211.3%
Lenovo 5.2% 4.7% 38.0%
LG 5.1% 4.6% 39.8%
Others 48.6% 43.2% 40.8%
Total 100% 100% 25.2%
Source: Interna7onal Data Corpora7on (IDC)
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Wearable Tech—Disruption on the Horizon
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Apple Watch Top 3 brands have 31% of $64B market
Apple Watch expected to do $3.8 billion in the first year
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Who Is the Hardest Hit?
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Who Else Does it Hurt?
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Digital Marketing
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Digital Advertising to Dominate in 2016 Digital receiving new money because marketers can prove that digital works (Forrester)
Sources: Forrester, PWC, and eMarketer.com
0
20
40
60
80
100
120
2012 2013 2014 2015 2016 2017 2018 2019
Radio Digital TV
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Facebook vs. TV Networks
58%
73%
83% 89%
63% 68%
63%
42%
0%
20%
40%
60%
80%
100%
18-24 35-34 35-54 55+
Daily Reach: Facebook vs. Network Television, Nov. 2013
Big-4 TV Networks Facebook Source: L2
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Restructured Economy
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It’s a Subscription Economy Subscription-based and recurring revenue business models are in vogue, for practically every type of product
• It’s actually not that new: Businesses have been selling monthly subscriptions for all sorts of goods and services for years, But the real news is that more and more industries are dipping their toes—a rare few even jumping in head-first—to a subscription-based, recurring revenue model.
• Pijon:
• Zuora unveiled the latest version of what it calls “relationship business management” software—a suite that lets companies transition and maintain a shift from a traditional to a subscription-based revenue model
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It’s a Rental Economy Convenience is the way of the future, and people have never been more receptive to products and services that make their lives run more smoothly.
Highly innovative rental services that capitalize on both cost-efficiency and ease of use
• Luxury fashion accessible to more people
• Peer-to-peer network for vehicle sharing
• Zipcar
• Rent the Runway
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It’s a Freelance Economy 34% of workforce are freelancers (53 million): How non-traditional jobs add up in a survey of U.S. workers, here is how it breaks down
2.8 M, 5% 5.5 M,
10%
9.3 M, 18%
14.3 M, 27%
21.1 M, 40%
Freelance Business Owners
Temporary Workers
Diversified Workers
Moonlighters
Independent contractors
Sources: Edelman Berland, as commissioned by the Freelancers Union and Elance-‐oDesk
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Uberification
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$0.2 $1.5 $12.5 $49.5
$307.5
$1,507.5
$2,707.5
Aug 2009 Oct 2010 Feb 2011 Dec 2011 Aug 2013 Jun 2014 Dec 2014
Uberification Growth of UberNow in 52 countries
Valuation from $18 billion in June to $40 billion in December — doubling in just six months
Uber also wants to be your “delivery guy” • UberFresh
• Uber Corner Store
Uber’s Funding History (CumulaKve, in Millions)
Source: CrunchBase
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Uberification The Uber logic: The sharing and on-demand economy
• Millennials less willing to “own” stuff
• “Convenient tech”—power in the pocket
• Quick service
• Consumers are going to demand faster turnaround times on everything at the convenience levels they have become accustomed to
78%
52% 54%
68%
81%
43% 44%
66%
Asia-‐Pacific North America Europe Global Average
Willing to share own assets Wiling to share from others
The Rise of the Sharing Economy
Source: Nielsen
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Disruption of Grocery
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Disruption of the Grocery Industry Global Grocery Market: $4 Trillion
U.S. Grocery Market: $600B • Percent Online: 1.2%
Approx. 12% of Internet users have bought grocery items online
Leading Players • Fresh Direct
• Google Express
• Instacart
• Ocado
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Ocado Ocado is an online supermarket and the world’s largest online food retailer.
• Sales rose by 14.9% YoY to $500 M (£311.4 M) in the 16 weeks to November 30 as more people switched to buying groceries online.
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Disruption of the Grocery Industry What’s different in Home Delivery 2.0:
• Leverage existing infrastructure • Focus on delivery and customer service • Use clever pricing
– Instacart marks up products, rather than charging a large delivery fee
• Make clever acquisitions – Amazon hired people from Webvan and
bought Kiva
Mistakes learned from Webvan (TechCrunch):
• Wrong target audience segmentation and pricing
• Complex infrastructure model
• Too much money, expanded too fast
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Holiday Comps and 3Q Earnings
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Holiday Comps at Amazon and eBay
Amazon +20.7% vs. eBay +14.7% for Holiday YTD
2014 2013 Channel Cyber Five Holiday YTD Dec. Week 1 Cyber Five
Total YoY 20.6% 15.9% 14.8% NA Amazon 23.8% 20.7% 20.8% 34.9%
eBay 20.5% 14.7% 14.0% 29.7%
Comparison Search Engines (-1.2%) (-8.8%) (-8.2%) 17.7%
Google Search 5.8% 2.7% (-0.2%) 125.8%
Search 19.1% 13.3% 7.9% 11.6%
Other Third-Party Mktng 54.4% 45.7% 44.0% NA
Source: ChannelAdvisor
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Several Retailers Report a Strong Q3 Walmart: In-line Q3, comp of +0.5% (first positive comp in 7 quarters), raised guidance
• “The highlights for the quarter include the positive comp in Walmart U.S. … [and] the 21 percent increase in e-commerce sales globally”
Target: Beat in Q3, comps of +1.2% (ahead of expectations of comps +0-1%), raised guidance
• “We’re encouraged by the improving trend we’ve seen in our U.S. business throughout the year … and we are looking forward to delivering an outstanding store and digital experience to our guests.” ”
G-III: Record Q3, comps +12%, sharply raised guidance
• “Our sportswear and dress businesses also contributed to our increased sales and earnings … We are expecting a good holiday season for both our wholesale and retail businesses.”
Restoration Hardware: Beat in Q3, comps +22%, raised guidance
• “Our ability to curate and integrate new products, categories and businesses, then test and rapidly scale them across our multi-channel platform, is at the core of our ability to gain significant share and outperform our peers in the home furnishings marketplace”
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Gamification
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Gamification For many, shopping has become an unpleasant experience
We are increasingly using our mobile devices for everything
• Mobile traffic accounted for 52.1% of all online traffic on Thanksgiving 2014, the first time mobile traffic has outpaced PC traffic
Gamification uses elements from computer and video games
We seek desire, rewards, and visibility by our peers
Zipline’s Slots Tycoon
Trivver’s Aback on Titan
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ZIPLINE Direct and real-time top to bottom communication
Real time results
Incentivizing through gamification • Three key stores have 500 surplus units of a blue sweater. Top
management can send real-time data directly to managers and associates with a two-hour sale window, incentivized by a financial or bonus reward given to the associate who is able to sell the largest number of units.
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The Future
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Toilet Hackathon A child dies due to poor sanitation every 20 seconds
Funded by the ever-present Gates Foundation: a $1.50 latrine pan that cuts down on sanitation-related disease transmission by sealing off pit toilets.
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THANK YOU!
Deborah Weinswig Executive Director – Head Global Retail Research and Intelligence Fung Business Intelligence Center Global [email protected]