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IN-STORE TECHNOLOGY: Jing WangResearch AssociateFUNG GLOBAL RETAIL & TECHNOLOGY

BRIGHT SHINY OBJECT OR THE NEW NORMAL?

Good morning, my name is Jing Wang. I am a research analyst with Fung Global Retail & Technology. I am very honored to be here today. 1

About US Global Retail Innovation Ecosystem TOP 15 In-store Innovation Trends

Agenda

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In todays session, I will briefly introduce what we do, talk about the global retail innovation ecosystem as we see it, and highlight the top 15 in-store innovation trends. 2

FUNG GROUPTRADINGLOGISTICS

DISTRIBUTIONLi & 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

RETAILING

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We are the Fung Group, the parent company of global sourcing company Li & Fung.Under the Fung Group, we have Li & Fung, Global Brands Group and Fung Retail, together we have over 50,000 employees worldwide.

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HONG KONG NEW YORK LONDON

RETAILTECHmicro macroretail real estatethematic researchVRAIIOTDIGITALDIGITALDIGITALDIGITAL

The knowledge bank for the Fung GroupConsultancy for clients within and outside Fung GroupFocuses on emerging retail and technology trendsBased 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, omnichannel retail, fashion retail trends and disruptive technologies

FUNG GLOBAL RETAIL & TECHNOLOGY

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Fung Global Retail & Technology is the think tank for the Fung Group with a focus on retail & TechnologyWe serve Fung Group companies I just mentioned (LF, Global Brands Group and Fung Retailing), as well as Fung Groups clients in the industry. We have over 20 analysts based in New York, Hong Kong and London.

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Fung Global Retail & Technology publishes research, freely available on www.fgrt.com We advise retailers, real estate developers and tech companies on projects situated at the intersection of retail, tech and/or fashionOur team posesses a robust knowledge bank and significant experience in the retail, fashion and tech fieldsA UNIQUE COMBINATION OF RETAIL, FASHION AND TECH

RETAILFASHIONTECH

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Our expertise is at the intersection of fashion and retail & technology. 5

FUNG GLOBAL & FUNG CAPITAL RETAIL TECHNOLOGY LANDSCAPE

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We spend a lot of time with startups and accelerators around the world. Here is retail & technology startup landscape we developed for Fung Capital, our investment arm. On the far left, we have a lot of technology companies for brick & mortar stores. In todays presentation, I will talk about some of the startups here.

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Global Retail Innovation Ecosystem Retail-Accelerator Partnerships Retail-Tech Company Partnerships 3. Innovation Outposts

Stores of the FutureThe Explorium

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JLab is the dedicated accelerator for British department store John Lewis based in London. Macys and Kate Spade are founding mentor companies to New York Fashion Tech Lab. Target announced hosting Techstars startups in Minneapolis in June 2016.1Retailer-Accelerator Partnerships Retailers are seeking out innovation by partners with accelerators

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We are seeing increasing participation of global retailers in accelerator programs. Quickest and most cost efficient way to access innovation and test out new ideas for a big retailer like Target. The startups focused on many important areas of business like big data, experiential retail, the IoT, bots, machine learning, and AI. It started as being sponsors and mentors in certain programs. Like the New York Fashion Tech lab hosted had Macys and Kade Spade mentor fashion tech startups. Develop one-on-one relationships with fashion startups. New more retailers are creating accelerators of their own. Jlab is the in-house accelerator program for British department store John Lewis, which started in 2014. We were just at Target+ Techstars demo day first graduation class demo day last month. The ten selected startups work closely with Target corporate office, and test out their ideas at Target stores.

Techstars:Techstars RetailTechstars Retail, in partnership with Target is a three-month intensive startup accelerator focused on bringing new technology, experiences, products, and solutions to retail. Ten companies will be selected and work with mentors from the Techstars network and within Target. If you want to experience the proven methodology of Techstars and disrupt retail with Target as it embarks on a new phase on innovation in its stores and online, this is the program for you.September Last week, we had the opportunity to attend the first Target + Techstars Demo Day in Minneapolis. When the Target + Techstars Retail Accelerator was initially announced last fall, more than 500 startups applied for the program, but only 10 were accepted back in June, one of which was an in-house Target team. Jlab is the in-house accelerator program for British department store John Lewis, which started in 2014.

The companies that completed the 14-week program were diversemore than half had a female founder or co-founder and two were from outside the U.S. One of the startups was run by three brothers, another by two sisters, and another by a husband and wife team. The startups are focused on some of the most important areas of business today: big data, experiential retail, the Internet of Things, bots, SaaS, machine learning, artificial intelligence and healthy foods. Readers can find our full report detailing each of the startups that presentedhere.Our five key takeaways from Demo Day were:1. Big retailers need to think like startups.Several of the Target mentors stated this throughout the day, and Target CEO Brian Cornell made the same point in anarticle he wrotefor Recode following the event. The startup concepts that big retailers need to focus on include not crushing seedling ideas, the need for speed, and not asking Is this right for my company? but rather Is this right for the world? In his Recode piece, Cornell said that one of the biggest lessons [the startups in the program] taught me was speed. The juxtaposition of our operation and theirs was stark.2. Experiential products and retailing continues to be the trend.Three of the companies that presented at Demo DayItsbyu,MakerBloksandMakersKitshowed off products that provide an experience for customers and that use technology seamlessly. Itsbyu provides DIY flower kits that include how-to video links with a 7-day expiration, to ensure freshness. MakerBloks are magnetic toy blocks that make the play experience interactive with digital books that are available via a downloadable app. MakersKit provides DIY artisanal box subscriptions, and also sells its most popular kits at Urban Outfitters and other stores.

JLAB:JLAB is the startup accelerator from John Lewis and Innovation Partner L Marks designed to fast track the growth of startup companies in the retail space.2016 marks the third year of JLAB, which will see John Lewis once again open its doors to companies that can help the retail behemoth shake up and improve its operations.Each year, we invite five startups to join John Lewis on a 12 week journey that will help take their businesses to the next level and allows them to build a deep relationship with the UKs leading omni-channel retailer.

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2Retail-Tech Company Partnerships Partnerships between retail and technology companies becoming a necessity Levis partnering with Google to create smart fabric with Project Jacquard Intel and new balance partnering to create customized 3D insoles

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Retailers also partner with tech companies for product innovation. A lot of the partnerships centerd around IoTs, especially wearables and 3D printing.2) That hero could come in the shape ofGoogle and Levi's Project Jacquard. The connected denim jacket that will let urban cyclists interact with their phones hands-free from their jacket sleeve is landing in Spring 2017 with a limited beta launching in Fall 2016.Paul Dillinger, vice president of global product innovation at Levi's is leading the Jacquard project charge from the American clothing giant's side and says it's still all on track to deliver its first connected garment. "We committed to introducing a product this year and we're excited to have working production samples that developers can use to help build on our initial prototypes," he told us.

New Balance:New Digital Sport Division To Develop Innovative Digital Experiences and Wearable Technologies,Launching With Smartwatch in 2016BOSTON, January 5, 2016 Global athletic leader New Balance announced today at the International Consumer Electronics Show (CES) in Las Vegas a new division dedicated exclusively to connecting consumers with the technology they desire to improve their athletic performance. New Balance Digital Sport will focus on understanding, motivating and improving the lives of athletes through digital experiences and wearable technologies. The first consumer product to launch from the new division will be a smartwatch, expected to begin retailing in the 2016 holiday season.New Balance has a 110-year heritage of product development and innovation in the running category, and, our new Digital Sport division represents our newest commitment to invest in athletes and runners around the world in their pursuit of extraordinary physical feats, said Rob DeMartini, President and CEO of New Balance. Digital technology has truly revolutionized, very quickly, this industry and New Balance wants to continue to be a brand on the forefront, arming our athletes with the cutting-edge products that will help them reach peak performance.New Balance Digital Sport will develop a comprehensive athlete-focused digital ecosystem featuring innovative New Balance-branded wearable technology products designed to improve physical performance. The company will partner with leading digital, hardware and software companies, including Intel, Google, Strava and Zepp, to incorporate smart technologies, optimized for wearable consumer products, into footwear and apparel lines across a variety of sports.Digital Sport will initially focus on three product categories: devices, including the smart-watch; embedded technology, such as intelligent sensors integrated into New Balance footwear and apparel; and performance sport, including sports equipment micro-fob that senses, analyzes and provides feedback on the athletes performance.The divisions inaugural product will be a smartwatch that will enable athletes to work out while untethered from their smart phones. Specifically designed for runners by runners, the watch will track runners routes via GPS and also enable them to run with music, all without carrying their smartphones. Google and Intel will be providing the athlete focused smartwatch platform powered by Android WearTM.Technology has tremendous power to make the amazing possible, and nowhere is that more apparent than in sports and fitness, said Brian Krzanich, CEO, Intel Corporation. As an avid runner, I look forward to seeing how our collaboration with New Balance and their deep intelligence about the running experience can unlock the performance potential for runners everywhere.Following the smartwatch launch at Holiday 2016, New Balance will market other devices throughout 2017 and 2018. To complement the wearable consumer products it is developing, New Balance Digital Sport will also create digital experiences, the first of which will be New Balance Run Club. This digital and physical community of runners will be powered by Strava and utilize its platform to bring more New Balance runners together, online and offline. Run Club runners will use Strava to connect with each other, track performance, share their favorite routes and celebrate accomplishments. Run Club athletes will also participate in group and individual virtual training programs for key races and running events, as well as virtual races between individuals and clubs. Additionally, physical Run Club activity will be centered in New Balance stores and includes local runs, group training, alternative training and classes. The first Run Club will launch in Boulder, CO in early 2016; others will launch in key running markets in the U.S., Europe and Asia in 2016.For more information please www.newbalance.com/digitalsport, media please visit the New Balance Press Box to download images http://newbalance.newsmarket.com/.

Levis and Google:Levi's: Project Jacquard and the mission to bring fashion and tech closer

2016 was supposed to be the year that smart clothing really took off, but as we wrote recently, it's still very muchholding out for a hero to take it mainstream.Read this:The biggest benefits of smart clothingDillinger, who has 16 years of experience at fashion houses like Calvin Klein and DKNY give us a sense how the company feels with this new venture. "This is invisible technology and discrete, intuitive gestures that have the potential to change our relationship with clothing. Of course, I'm very excited for our consumers to try this out; to see how they respond to this new form of wearable technology. But there's also a certain level of anxiety."Google did not want to tackle clothing, they wanted to partner with experts in the fieldDillinger gave us an insight on why it decided now was the right time to take the leap into the world of connected clothing. "Our Levi's Commuter line has always been about purpose-driven design and solving real world problems," Dillinger said. "Our goal is always to create clothes that perform as great as they look. We've gone from concept to product in less than one year which we weren't sure was possible."

While Levi's has collaborated in the past with other major fashion labels, partnering with a tech brand was an entirely different proposition. Dillinger believes both companies are bringing something special to the table, talking up Levi's innovative, creative and pioneering spirit that's helped the two work so well together.

"When Google called on Levi's to be their first partner for the Jacquard interactive fabric, they knew they could count on us for our expertise," Dillinger explained. "As the inventors of the blue jean we have more than 140 years of experience and built-in supply chains. Google did not want to tackle clothing, they wanted to partner with experts in the field."

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3Innovation OutpostsMajor retailers have set up Silicon Valley-style innovation labs to incubate businesses and tap into tech talent

Westfield Labs San Francisco, CA Lowes Innovation LabLos Angeles, CAWalmarts Tech Innovation Center San Bruno, CA

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Retailers and mall operators also have estabilished their own innovation center, tailoring to their own need. Walmart has a 3,500 people team in Calnifornia, Brazil and India to develop e-commerce related innovation.

Home improvement store Lowes Innovation Labs that focuses on AR/VR Visualization, robotics, 3D on-demand manufacturing Westfield has had a lab since 2012. bespoke shoppable screens and food court delivery

PROJECTSRoboticsLowe's has pioneered autonomous retail service robots in select stores to enhance and improve in-store experiences and operations for customers and employees.PROJECTSOn-Demand Manufacturing3D scanning and printing technology puts on-demand customization and manufacturing in reach for Lowe's customer's - in stores and in outer space.PROJECTSInnovating for ImpactPrograms such as the Clean Water Challenge, developed in partnership with Singularity University,demonstrate Lowe's commitment to using innovation for sustainable, global impact.PROJECTS

Westfield Labs:WESTFIELD LABS LAUNCHED IN OCTOBER 2012 AS AN ENTITY OFWESTFIELD CORP, SERVING AS AGLOBAL DIGITAL LABFOCUSED ON REMOVING THE FRICTION FROMPHYSICAL COMMERCE.Westfield Labs is committed to transforming emerging ideas and technologies into viable businesses that move the retail industry forward.The team develops and pilots new technologies that converge the digital shopper with the physical world. Over time, new products, partnerships and services will be commercialized globally.http://www.westfieldlabs.com/about

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4Store of the Future Retailers Incorporate Technology in Future Store Concepts Targets Open House tests out smart home concepts

Lowes Holoroom creates a 3D virtual reality shopping experience

American Girls Manhattan location experiments with experiential retail with media studios

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Concept stores: Some of the innovation ideas are being tested out in certain concept stores so they can get feedback from the customer, in Lowes case with the Holoroom. Or to showcase futuristic concepts like Targets smart home store in downtown San Francisco.

American Girl:isiting an American Girl Doll store is an amazing bit of experiential retail, which is a thing that people actually say. The stores offer a historical fiction and a highly customizable world designed around school-age girls. The companys flagship store in Manhattan is at the end of its lease, and is moving to a space in Rockefeller Center that will be even more easily found by tourists. It will include a media studio, massive party rooms, and other features for an immersive brand-centric experience.All of this is in addition tothe things that you expect to find in an American Girl store, which include a restaurant where your doll can sit at the table with you (you can borrow a doll to hang out with if you didnt bring yours), beautifully arranged and lit displays, outfit-designing tablets, and lots of retail space where you can buy all of those custom-designed outfits and beautifully arranged and lit items. Oh, yes, and a salon. In the new store, they will experiment with having hair stylists for girls as well as dolls.The company plans to use the newly designed New York store as a lab for new store features. It really is our store of the future, the companys senior VP of global retail explained toRacked, and from this one, we will evolve our other stores over time.I wondered how the designing outfits using a tablet part works, and found a video of it on YouTube.

Lowes Lowe's HoloRoomThe Lowe's Holoroom is a virtual reality home improvement design and visualization tool that empowers homeowners with an immersive, intuitive experience in the room of their dreams. Visualizing a home improvement project is hard - the Holoroom is here to help.The Lowe's Holoroom was introduced in 2014 as the first concept from Lowe's Innovation Labs, and was available for six months in two Toronto stores. The next iteration of the Holoroom was available in 19 stores across the U.S. beginning in November 2015. Lowe's Innovation Labs will continue to refine and evolve the experiences as technology continues to evolve and we gather real-time feedback from customers and employees.

http://openhouse.target.com/app/#/

TECHTarget opens up a new store in San Francisco to try out smart devicesbyStacey Higginbotham@gigastaceyJULY 9, 2015, 7:24 PM EDTE-mailTweetFacebookLinkedinShare iconsTarget gets into the connected home with a new retail concept and an experimental store.Target has opened a new retail space at the base of its Metreon City Target near San Franciscos Moscone Center, and if youre a fan of the smart home, clear acrylic furniture, or grand retail experiments then this is the place to be. The Minneapolis retailer is calling this Targets Open House and it is the big box chains lab to figure out the challenge that is selling the smart home to the mainstream consumer.The concept of a smart home has gathered a lot of hype and generated some amazing (and insane) new productsmany of them designed by venture-based startups. Big box retailers such as Lowes andStapleshave launched theirown line of home automationand connected home products, whileHome Depot signed a partnership with Wink, while also promoting products such as the Nest thermostat, Rachio sprinklers, and products from other startups.Best Buy has an agreement with SmartHome Venturesthat makes a home automation hub and software called Peq, but Target had mostly stayed out of the frenzy. It sold the Wink home hub and few connected products such as Sonos speakers, but it wasnt adding consumer education workshops or building dedicated displays to show consumers how the smart home works as some of the other retailers did.But with the Open House concept store, which opens tomorrow, Target may have done one better than the physical retailers and evenAmazons own home automation channel. It has built an entire home that rivals the demos that many of these smart home companies roll out for large trade shows such as CES and conveys a similar depth of information that Amazon can provide about products. Inside Open House youll find connected light bulbs, baby monitors, sprinklers, doorbells, and more. They are displayed in rooms featuring the clear plastic furniture, which is actually an amazing showcase for the color-changing Hue light bulbs from Philips and on interactive tables that are new to the retailer.Image courtesy of TargetDavid Newman, director of enterprise growth initiatives and head of Targets San Francisco office, says that the Open House concept has products from about 50 vendors. But the Open House isnt a traditional retail environment in many ways. The products it stocks can be complicated. The promise of the connected home is that the devices connect. But today, figuring out how to do that and which devices work together requires more research than many consumers would even put into buying a car. The other challenge is that consumers have no idea what they want in a smart house, because everyones use cases are different.A parent of an infant might be excited to have theMimo baby monitorlinked to a Sonos speaker so when a baby cries the Sonos automatically starts generating soothing white noise. Meanwhile, the parent of a toddler might want a Hue bulb so they can use the lights color as a way to show the child when its okay to wake up mommy or daddy in the morning. A fitness fanatic might be pumped to link her Jawbone to a Nest thermostat so when she gets home from a run, the house is a more comfortable temperature.The options are endless, but most people wont spend hundreds of dollars on connected devices until they have a good reason. So far retailers and marketers at product companies have struggled to convey those reasons. With Open House Target has shown off both the creative use cases and found a way to show consumers how to bring their new devices together to make them work. Newman also toldFortunethat the company plans to offer a generous return policy at the Open House because its a chance to get consumer feedback on the product and the experience.Image courtesy of TargetIf something came back and wasnt working for someone thats an amazing opportunity to conduct consumer research, Newman said. Because were working closely with our manufacturers we have the opportunity to take very obvious issues like we sold 12 of these and nine of them have come back, and we can take it off the shelves and work with them to figure out whats wrong.Startups will benefit from this feedback as will Target. And it takes a lot of the risk away from consumers who wont be worried about a device that fails after two months in the field or faces a restocking fee for a product that just didnt work as advertised when it came home. However, Newman is very clear that startups working with Open House arent necessarily on a path to shelf space at all Target stores nationwide.We are not Target in terms of the core daily operations at Target stores. We are not the merchants. Our team is here to try to look at the thing that are most emergent and have a single location where we can do fast and quick partnerships, said Newman. Yes, they have the benefit of working with Target. However this is not step one in getting to the five, ten, 50-store pilot.Image courtesy of TargetThe upside of this is that consumers might pop into the Open House at Target and meet the CEO of the next hot consumer products company showing off a prototype gadget in search of consumer research and see gadgets in real life that they just crowdfunded on Kickstarter a few months before. That also gives Target some cachet among consumers who are interested in the hot new thing, especially as technology becomes an integral part of more products. Additionally, for Target the Open House isnt just a way to explore the connected home, its also a place to test out new ways of retailing in general.First and foremost its about IoT [the Internet of things] but any team can come in and test things for the broader Target stores, Newman said.Newman didnt go into too many details, but he said that the interactive tables are new to the store and tests here might mean they pop up elsewhere in the chain. The store will also be a proving ground for new types of retail analytics. Right now the company is measuring where people tap on the interactive surfaces and in apps, but it could eventually place sensors on devices or the device mounts to see what products are most interesting to users. In that way, this store isnt just about the smart homeits also a pioneering smart store.Subscribe to Data Sheet, Fortunes daily newsletter on the business of technology.

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An experimental learning laboratoryfor business model innovation in Shanghai

5Store of the Future Experiments: the Explorium

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Explorium is a 60,000 sqrt retail omni-platform lab we have in Shanghai.

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A playground for the future of retail and a platform for accelerated experimental learning.

Interactive Exhibition SpaceWe offer consumers a dynamic mall for them to discover new shopping experiences both online and offline.Data & Analytics HubUnderneath the surface we capture interactions between consumers and the physical and digital space.Research and Learning LabExperiments are designed, prototyped, and tested with the public with learning supported by data.

Explorium is strategically located in Shanghai, and explores the leading edge of tomorrows shopping behaviors.5Store of the Future Experiments: the Explorium Explorium is

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1) Its mission is to test out omnichannel concepts for foreign brands who are interesting in China or already in China and who are interested in targeting Chinese middle class consumers 2) It is open to 12,000 members will come participate in various events at the space and shop on weekends. 13

An interactive exhibition space and dynamic physical platform.

Explorium is5Store of the Future Experiments: the Explorium

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35 brands have joined Stride Rite, Build a bear and ToysRs have joined. 14

A data and analytics hub with an all-encompassing digital platform and an analytics dashboard in partnership with .

iBeacon Bracelet App

Explorium is5Store of the Future Experiments: the Explorium

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We partner with IBM to do the analytics. Everyone wears a iBeacon bracelent that tracks shoppers behaviours. 15

TOP 15 IN-STORE INNOVATION TRENDS

Experiential RetailSmart MallsAugmented Reality + Virtual RealityFacial RecognitionInteractive Displays Smart MirrorsRobotics3D printing

Evolving Pure PlayClick & Collect Reverse Logistics Self Checkout Mobile PaymentsMall-based Loyalty Programs Gamification

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Why People are Leaving the Stores? Getting HungryNeed to Go to Bathroom Long Checkout LinesLousy Dressing Rooms

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1Experiential RetailBEAUTYSephora: Play, learn and shop at its 400th stores BEAUTY TIP (Teach, Inspire, Play) WORKSHOP in Chicago.

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Concept of experiential retail: In the US store traffic down year over year for 44 consecutive months. Retailers and mall operators have to think about what they can offer that online shopping cannot. My answer is experience.Customers have to stores and feel engaged and entertained, either through events, food, or beauty services, you name it. The idea of can stores be something other than stores?

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1Experiential RetailBEAUTYOrigins: free, walk-in mini facials available at Origins stores.Lush: in-store Hair Lab to try productsbefore purchase.

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Can stores be a facial bar or hair salon? 19

1Experiential RetailBEAUTYBloomingdales: Drybar opened its first Soho store on the 1st floor within Bloomingdales in 2015.

ULTA: offer hair and skin care consultations in the in-store Style Bar.

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Bloomingdales has a drybar. Ulta is a beauty retailers in the US that are beating estimates every quarter. They have unique hair and make services at their stores. 20

1Experiential RetailWELLNESSNike, Lululemon, Athleta, Rebecca Minkoff: free in-store fitness classes like yoga and HIIT available for sign-up.

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Traffic goes up/ Rebecca Minkoff + 25% 21

1Experiential RetailWELLNESSSingapore: health promoting malls like the Star Vista partner with professional instructors to organize weekly workout session.

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The Singaporean shopping mall is more than a place selling basic necessities and food or simply a venue for meeting and leisure. It's also a place we can get healthy - together!22

1Experiential RetailFOOD

Old Navy: tee & ice-cream giveaway truck popped up in NYC.Urban Outfitters: launched UO caf in Herald Square, NYC.

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F&B is becoming key traffic driver as many of the speakers noted yesterday. Popup food trunks and cafes also draw traffic into the stores. 23

1Experiential RetailENTERTAINMENT

The Dubai Mall: has one of the largest indoor aquariums in the world. American Dream Meadowlands: first indoor skiing facility in the US, projected to launch in spring 2017.Mall of America: indoor entertainment facilities include roller coasters.

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Can stores become amusement parks or even charge admission fees? 24

2Smart MallReshaping The Physical Shopping ExperienceData-enabled personalized and timely promotions.Track movement, behavior and preferences.Beacon-enabled, location-based advertising.

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Smart malls. How do you define that. 1) First needs to have total and stable wifi network for tenants and customer. 2) It is about adding a digital touch to the in-store experience, by offering personalized promotions based on where shoppers are in the store. Or provide details about products when tapping your smartphone at the product.

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2Smart MallReshaping The Physical Shopping Experience

An in-mall mobile retail solutions provider to offer shoppers smartphone access to hyperlocal in-store deals.Silicon Valley based unit that designs and develops innovations to improve the retail experience.Partnered with HGTV to launch virtual and hands-on technology-based experiences.

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The final part is total visibility. Do you know what is going on at your property, traffic, demographic of your customer, sales, conversion, even building temperatures.

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3Augmented Reality + Virtual RealityCombined AR and VR markets will reach $151 bn by 2022

Lowes Holoroom allows customers to see different merchandise and color combinations as they would appear in a home.Tommy Hilfiger, Top Shop and many other retailer stores have virtual reality headsets that allow visitors to experience runway shows.Pokemon Go: augmented reality, the game is driving traffic to stores.

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AR and VR are also ways to provide an immersive experience that merges physical with digital. The combined market is estimated to be 151 billion by 2022. Pokemon Go was a genuis game as you may know to drive traffic. As you see some brands are experimenting with virtual fashion show or virtual home configuration, like the Lowes holo room.

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3Augmented Reality + Virtual RealityVR Shopping: the Future of Virtual Shopping Will your store be featured in VR shopping?

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1) But this is the future of VR. Imagine your flagship stores in Paris and New York are featured in VR at your local store. 2) Enables shoppers to visit stores all over the world without traveling the distance. 3) Alibaba is experimenting VR online shopping.

https://www.internetretailer.com/2016/07/08/alibaba-will-let-consumers-shop-globally-virtual-realityhinese e-commerce giant Alibaba plans to open a demonstration shop this month and could roll out the technology broadly by the end of the year.Alibaba Group Holding Ltdis working on introducing virtual reality technology, or simply VR, into online shopping. The ecommerce giants 400 million customers will soon be able to buy products from stores all over the world, by wearing a VR helmet or glasses designed to simulate being in a physical store.Alibaba says it plans to launch a demonstration VR store by the end of this month and could launch a large-scale rollout by the end of this year.At a press briefing in Shanghai last week, an Alibaba representative wearing a Vive VR helmet from HTC Corp. of Taiwan showed how a shopper could take a tour of a three-dimensional digital store. The demonstration showed a robotic store associate talking to the visitor and recommending new products. Shoppers can rotate products they see in the virtual store by moving the controller that connects to the Vive helmet and even ask for a model to show how the product works or is worn. Users can also use the controller to click the buy button to purchase the item in the digital store.VR is a great way to demonstrate products or services, especially for some categories, like furniture and travel products. Zhuang Zhuoran, senior director of mobile at Alibaba, said at the briefing. It also adds more fun to shopping.Alibaba has set up a facility, its Gnome Magic Lab, in March, to develop software that would enable merchants to build virtual stores more easily.Converting a real product to its digital, three-dimensional equivalent today may cost several hundred yuan (about $50). The cost is high, and we hope to reduce it to several yuan (about $1) in the future. Zhuang says.A shopper who wants to test the virtual reality will need VR gear, which ranges in price from $20 to $1,000. VR products are hot at the moment, with consumers buying 300,000 units of VR gear on Alibabas Chinese online marketplaces each month, Alibaba says.Zhuang says in the future Alibaba may send consumers VR gear for free so that they can try out the new way of shopping.Alibaba also has invested in VR technology startups. For example, earlier this year Alibaba led the $794 million funding round for U.S.-based startup Magic Leap Inc.

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4Facial RecognitionThe global Facial Recognition market is forecasted to grow from $2.77 bn in 2015 to $6.19 bn by 2020, at a CAGR of 17.4%Source: MARKETSANDMARKETS

Walmart tested with FaceFirst to spot shop lifters.actiMirror is an in-store, mirror-like display that identify the customers demographics and make instant personalized product.Applications are expanding from health, wellness, beauty and advertising into theft prevention.

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Facial recognition. The technology has been used to provide personalized shopping experince and for theft prevention. Actimirror is a HK based company that uses facial recognition to detect customers demographics such as age, gender, mood and ethnicity With the combined information, the mirror make personalized product recommendations. Walmart deployed facial technology for theft prevention. 29

5Interactive DisplayInteractive displayusesonlineor offline interactive media to present and promote products, brands and services to consumers

PERCH is a digital platform that responds with dynamic digital media as customers touch and pick up products.FrankMayer specializes in designing and producing interactive point-of-purchase displays andkiosks. GE light display for customer testing of bulb hues in different lighting settings.TUKU is a tap-to-learn in-store information tool that presents information in an easily digestible manner.

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Not just the gimeeking experience: Helps with conversion,by provide the crucial information you need for the products. Without searching around. 30

Perch & Sunglass Hut :

Attracting customers with visual suggestions and options Expediting the fitting-room process 6Smart Mirrors

Attracting customers with visual suggestions and options Expediting the fitting-room process

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Neiman Marcus is piloting a smart mirror at three stores across the nation, including one in North Texas, with the goal of future rollout.The MemoMi memory mirror is currently deployed at Neiman's Walnut Creek store in California. The store was stocked with two mirrors in October that allow customers to take 7-second videos of themselves wearing a garment and compare it side-by-side as they try on another garment.EnlargeIntel showed off the MemoMi mirror, which allows customers to digitally compare andmoreJIM SULLEY"When I saw the technology for the first time it was love at first sight," saidScott Emmons, enterprise architect at Neiman wholeads the company's innovation lab. "I knew this was an experience our customers would love."Two more mirrors are slated to pilot in San Francisco in the next several days and another two will be placed at Neiman's store at The Shops at Willow Bend in Plano in February.The mirrors come equipped with an Intel Core i7 processor and allow customers to view outfits, digitally change colors of the garments and share their choices with friends via social media. Every shopper who chooses to use the mirror can set up their own personal account, where they can securely store their videos and garments, which they can later remotely access via their mobile devices.MemoMi uses Amazon Web Services and the Amazon Cloud Drive to store the encrypted data.Neiman Marcus,which has been working to increase its in-store technology, has been working with MemoMi for about 14 months, Emmons said. The companies have been taking customer feedback and tweaking the product to fit the preferences of Neiman Marcus customers."Neiman Marcus is our first customer and the first to throw out the technology in stores," saidSalvador Nissi Vilcovsky, founder of Palo Alto-based MemoMi.The deal is exclusive, meaning that Neiman Marcus will be the only luxury brand to make the MemoMi mirrors available to its customers, Emmons said.Neiman Marcus plans to evaluate the product during the pilot period and determine whether the product will rollout in stores at that time.

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Rebecca Minkoff

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7RoboticsThe global robot market is growing rapidly at a CGAR of 17%, expected to reach $135 billion by 2019.

SoftBank: Pepper acts as a sales assistant to engage with customers in-store.Henn-na Hotel: robots are replacing the human servers in the Henn-na Hotel Nagasaki from front desk to kitchen.Amazon Robotics: Founded in 2003, Amazon robotics has automated the entire fulfilment center operations with autonomous mobile robots.

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83D Printing: All about Customization The 3D printing industry was valued at $11 billion in 2015, and is expected to grow to $26.7 billion by 2019, a CAGR of 27%.

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More purposeful shoppers.Provides compelling reasons for shoppers go into the stores: having your personalized items made. A great in-store experience to watch how your headphones, and phone cases are made. While you wait around, you may pick up more items. 35

9Evolving Pure PlaysNumber of Actual/Planned Physical Stores

AYR

HARRYS

1 40012013232711743725122

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9Evolving Pure PlaysNumber of Actual/Planned Physical Stores

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Source: U.S. Seamless Retail Survey Results 2015 Accenture, November 2014

95%43%

89%78%

42%33%Department Stores: Online Purchase, In-Store Follow-upPercentage of Brands Utilizing Omnichannel by Region - July 2015North America, n=21Europe, n=18APAC, n=1210Click & Collect EUROPE LEADS THE WAYIn-Store ReturnIn-Store Pick Up2x as many shoppers are ordering online and picking up at store this year compared to last.

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Click & collect is quite popular in the UK and likely to become more popular in the USAmazon launched lockers in 2011Walmart began testing drive-through grocery pickup OCT 2014

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11Reverse LogisticsIn-store returns from e-commerce companies can increase traffic to malls and decrease fraudulent returns

Gilt customers can now make returns at any Saks Fifth Avenue/OFF 5th locations .Happy Returns offers return kiosks in high-traffic areas (e.g., shopping malls) that takes returns for retailers and repackages them, reducing return costs for retailers.Retail Industry has $260.5 billion worth of merchandise returned or 8% of total sales.

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260 billion in return, 8% in total, online returns are 30-40% in apparel and accessory categories. How do you make the experience seamless.

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12Self-CheckoutNon-food industry loses $14 billion from abandoned purchases due to long checkout73% of customers say the checkout process is the largest pain point at grocery stores Traditional self-checkout experiences are not satisfactory for shoppers; New technologies include Scan-Bag-Go by KrogerMost self-checkout solutions are focused on grocery stores. Yet studies suggest that many other retail environments may be conducive to innovative self-checkouts *Motorola Research

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Kroger says its shoppers are waiting an average of just 26 seconds to start in the checkout lane.

(Using sensors, stores can predict when more checkout lanes will be needed

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Focuses on small basket item sizes at drug stores, convenience stores and toy stores Can be integrated into retailers own appNotifies users about special deals or discounts

4112Self-Checkout - Shopicis a QR-code empowered express self-checkout app

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Shopic is a white-label self-check out solution for small basket items at non-grocery stores. QR code, scanning to check out. 41

13Mobile Payments Are Changing The Landscapes

# of Accepted Locations>2,000,000> 30 million> 2,000,000> 300,000>200,000+Apple Watch is compatibleSecure Unique security code for each transaction Compatibility with existing terminals No additional investment for retailers Works on any Android device Support from major retailers: Staples, Walgreens, WholegoodsWorks on both iOS and Android Connect to a platform to invest in financial productWidely supported within China, eg. repay credit card, utility bills, online purchases, or QR-codes for offline paymentPart of the Alibabas ecosystem Provides users with additional wealth management tools and services Only works with NFC-enabled registers NFC terminal cost retailer $500 or moreNot accepted by major retailers: Walmart, Target, Best BuyLimited device options Samsung Galaxy S6Magnetic strip reader requires tricky position for phoneSupport NFC technology-enabled Android smartphones only.Few stores outside of Asia support WeChat Pay but catching up.Lack of third-party regulations

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Mobile payment is the future, but who has it figured out?Wechat Pay is the fastest growing. There are so many ways you can use Wechat to pay for, QR code, CtoC, BtoC, all within one app. The best part of it is: everyone is on it; 630 million users.It also plugs into all sorts of functions, within the app. Samsung Pay, has the hardware part figure out, dont have to change POS system. Apple Pay has less users than Starbucks app, I think enough said. 42

13Mobile Payments Are Changing The Landscapes P2P Payments Explode on WeChat

32.1 billionred envelopes516 millionUsers * 903% Chinese New Year CelebrationFeb. 7 12, 2016~74% of all WeChat usersYoY growth since introduction of red envelopes* Over 92% of those senders were reportedly between the ages of 20 & 29

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Last-generation LoyaltyTomorrows LoyaltyTodaysLoyalty14Mall-based Loyalty ProgramsSmartphone-basedIntegration of tracking status, payment, gift cards, etc.Cards with bar codes, reward programsUse of gamification (membership levels, points, leaderboards)Coupons, membership cards

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1) More than 25 percent of transactions at company-owned U.S. stores now come through the app.2) The customer data that the app collects feeds back into developing better personalized promotions. One of the largest digital wallet in the US, 12 million users on starbucks. 44

Capitastar a mall-based loyalty program that covers 15 malls and over 2000 stores in Singapore. Spring is a personalized in-store shopping awards program in the US

Mall-Connect is a app based loyalty program that awards shoppers for visiting malls, making a purchase and sharing content on social media based in the Netherlands 14Mall-based Loyalty Programs

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It is common for brands, drug stores, coffee shops to have established programs Mall-based loyalty programs are not as established. Shoppers should be rewarded for visiting malls, sharing social media content, such as Mall connect Spring is a mall-based loyalty program that covers 80% of malls in the US. The sends personalized in-store coupons based on prior purchase and cash rewards are automatically added to customers credit card statement.

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15GamificationThe global gamification market will worth $10.02 billion by 2020 with a CAGR of 42.4%Source: Mind Commerce

CocaCola: customers in Japan can get free drinks with 15 digital stamps from the CocaCola appSears in-store scavenger game.Starbucks let customers accumulate points to win game pieces to win different levels of prizes.

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What is gamification. It is a great way to keep customers engaged on retail loyalty programs. How does it relate to In-store related games, like Sears, drive traffic into stores.

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15GamificationA gamified solution to increase store traffic via promotion rewards

Helps retailers increase store foot traffic and sales.Geo-location engages customers at venues.Injects relevant retailer content and promotions and engage the customer with games.

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What is skrowngeMulti-brand/Drive store traffic and sales Brings together the entertainment piece of retail 47

Q & AJing WangResearch AssociateFUNG GLOBAL RETAIL & TECHNOLOGYjingwang@fung1937.comhttps://fungglobalretailtech.com