Download - World Retail Congress 2017 Day 3: Digitalizing Supply Chains, … · 2017. 4. 7. · World Retail Congress 2017 Day 3: Digitalizing Supply Chains, Serving Chinese Consumers and Making

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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.

https://fungglobalretailtech.com/news/world-retail-congress-2017-day-1-terry-lundgren-sir-ian-cheshire-jo-malone-offer-thoughts-retail-revolution/

https://fungglobalretailtech.com/news/world-retail-congress-2017-day-2-thoughts-department-stores-plus-discounters-may-topple-grocery-e-commerce/

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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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• 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.


Ondaythreeoftheconference,weheardmoreaboutthesechallengesfromNormanJaskolka,PresidentoffootwearcompanyAldoGroupInternational.Jaskolkanotedtwoshiftsthathavealreadyoccurredinthemarketandthreeconceptsforthefuture,particularlywithregardtoapparelbrandssuchasthosesoldbyhiscompany.Hesaidthattwomajorchangesimpactingapparelbrandsandretailersare:

https://fungglobalretailtech.com/research/deep-dive-new-retail%E2%80%95the-key-unlocking-pent-chinese-consumer-demand/

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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


Brandsarenotonlybeingforcedtoslashmarginsandadjusttheirdistributionstrategies,butalsoarebeingpressuredtoincreasetheirsustainabilityeffortswhenproducingapparel.WeheardfromThomasTochtermann,AdvisoratrestaurantchainVapianoandSupervisoryBoardMemberatDanskSupermarked,onsustainability,aswellasfromAlfredVernis,SustainabilityAcademicDirectoratInditex.

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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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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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