Top 10 Takeaways from Day 2 of MAGIC 2017

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1 Top 10 Takeaways from Day 2 of MAGIC 2017 The Fung Global Retail & Technology team is in Las Vegas this week to attend MAGIC 2017, which covers the men s, women s and children s apparel, accessories and footwear markets. Here, we share our 10 key takeaways from Day 2 of the event. 1) Drop-Shipping: An Emerging Trend With Significant Potential 2) Amazon: The Largest Mall in the World 3) Brands Balance the Benefits of Selling on Amazon with Managing Their Brand Equity 4) 3D Printing Becoming More Mainstream in Apparel 5) Product is Always King 6) P1VOT Showcases Technology for Retailers 7) The World is Increasingly Becoming More Connected 8) is the Most Effective Way to Reach Consumers 9) Consumers Want to Know What Companies Stand For 10) Top Beauty Trends: The Red Lip is an Accessory 1. Drop-shipping: An Emerging Trend With Significant Potential Drop-shipping is a retail fulfillment method where manufacturers ship products directly to consumers, allowing retailers to operate without the related inventory. This is particularly common with marketplace sites. RevCascade partnered with Crate and Barrel on the launch of its marketplace, and the advantage is that it allows products sold at crateandbarrel.com to be drop-shipped to consumers from selected Crate and Barrel brands. The retailer marketplaces are a win for both retailers and participating brands because they can generate additional revenue. Crate and Barrel items can be sold to a wider audience, and the company can hold less inventory. 1

2 2. Amazon: The Largest Mall in the World Several retailers and brands have compared Amazon to more traditional mall operators such as Westfield and Simon Properties. Amazon essentially offers retail space online for retailers to sell their products. That said, it is an open mall with less regulation than a more traditional mall. In addition, Amazon has become a search engine unto itself where consumers have replaced Google in many cases and go directly to Amazon to search. 3. Brands Balance the Benefits of Selling on Amazon with Managing their Brand Equity Several brands have recently made the decision not to sell on Amazon and several more we spoke with are rethinking their strategy of selling on Amazon. Birkenstock is a notable example of a company that no longer sells on the site. The company talked about managing its brand equity and the requirements Amazon has and balanced that against the benefits. Benefits include being able to offer the full breadth of an assortment in one place and having access to a customer the company may not have reached otherwise. There have also been cases of counterfeiting on Amazon as well as on other sites. In terms of managing brand equity, brands do not have total control of the customer experience, nor do they have control of the other products that are sold on Amazon, amongst other things. Selling on Amazon is an opportunity for many brands, but we are also starting to hear about why it may not make sense for all brands, and ultimately each brand has to make the decision for what is best for its own brand. 4. 3D Printing Becoming More Mainstream in Apparel We attended a presentation by Airwolf 3D, a company that manufactures 3D printers for various uses including classrooms, as well as for manufacturing shoes, clothing and accessories. One of the manufacturers Airwolf 3D works with is Feetz, a shoe manufacturer that makes all its custom shoes with 3D printers based on scans of its customers feet that are done using an iphone. DSW now features Feetz 3D printers in its stores so shoppers can see how the process works. In addition, Nike, Adidas and Under Armour have all made shoes with components that were made via a 3D printer. Nike has also said that SLS 2

3 (selective laser sintering) 3D printing has reduced sampling time from weeks to days and provides its designers with immediate feedback. 5. Product is Always King Barry Miguel, former President of 7 For All Mankind, spoke about innovation in retail and creating innovative products. Miguel reiterated the view that product is the most important part of the retail experience; without compelling, interesting product there is no transaction and no commerce. He also said that innovation is the key to creating great product. And the consumer is boss in terms of determining what they want and retailers need to cater to them. Innovation can take many different forms. It can come in the way of re-invention, as Gucci has done with its new head of design in recent years, and it can also be in culture, as with Patagonia, a company with strong values and a strong culture that meshes with its product offering. Innovation can also be in transparency, as Everlane does with transparent pricing, and it can also be with speed, which allows retailers to react to trends and offer their customers the most current trends. 6. P1VOT Showcases Technologies for Retail The Fung Global Retail & Technology team had the opportunity to visit P1VOT, a show floor area at MAGIC dedicated to tech-based solutions in design, product development, merchandising and selling, presented by PROJECT. P1VOT first launched in August 2016 in Las Vegas to positive reviews from the participants. This year, participating companies included BestRetail, Cranberri, Fashion for Globe, Fashwire, First Insight, Livby, Netsuite, Spin My Planet, StitchLabs, Yotpo and Zeekit. In addition, P1VOT hosted sessions on the Maker Movement and Customer Experience and Activation that included P1VOT participants, as well as cosponsored, along with Fung Global Retail & Technology, Cocktails with the Disruptors, a panel of retail leaders moderated by Deborah Weinswig, Managing Director at Fung Global Retail & Technology. 3

4 We sat with Luis Fernandez, cofounder of P1VOT, and Erik Ulin, President of Men s at UBM Fashion Group, and had the opportunity to understand the thought behind creating P1VOT. We decided to create P1VOT based on a shared belief that new technology-based solutions can help propel the industry forward from design development and the way in which we make clothes more efficient, sustainable and unique, to the way in which we learn from and interact with the consumer, said Fernandez. He continued, From design tools that facilitate quicker experimentation and development to omnichannel strategies, data providers and app-based solutions, P1VOT innovators are some of the most dynamic entrepreneurs in fashion. In speaking with the participants, everyone seemed universally pleased about having the opportunity to speak to thousands of retailers and brands all in one place. While MAGIC has been traditionally a fashion trade show, e-tailing and technology are clearly playing a more significant role, and brands are receptive to understanding these emerging technologies while at the event. Gretchen Jezerc, of First Insight, one of the inaugural participants, commented P1VOT gave us direct access to exciting, growing brands and manufacturers, and a forum to enter into meaningful dialogue with them. It created buzz and curiosity, while increasing awareness of the importance of technology in retail. 7. The World is Increasingly Becoming More Connected It is estimated that by 2020, the global population will reach 8 billion and there will be 50 billion connected devices in use. Up to 20% of all apparel will be electronically enabled by that point, and 90% of the world s population over the age of six will have a mobile phone. By 2025, the number of connected devices is expected to surpass 1 trillion. Consumer data will become even more valuable. Amazon is a leader in this arena, as is a company called Stitch Fix, which is expected to be the biggest net aggregator of consumer data, and eventually expected to exceed Amazon. Wearables are a gateway drug to connected apparel. The technology is increasingly becoming more affordable. Tech tattoos are now $9.99 for a pack of ten, which unlock your phone. 4

5 8. is the Most Effective way to Reach Consumers According to digital marketing icon Ron Cates, marketing is the most effective way to reach consumers, because consumers can forget about brands if they do not receive frequent, action-oriented s as reminders. Consumers expect all marketing and engagement to be authentic and professional. Cates reported that 67% of consumers will provide their addresses to retailers, yet only 34% of retailers ask consumers. An with a photo gets eight times more engagement, and in terms of content, consumers want things simple. Providing one link in an gets the most clicks from a consumer. Cates also highlighted that nearly 74% of shoppers use social media to guide purchases, and 43% of consumers will purchase a product that was shared by a friend. The average person has 350 friends on Facebook, so social sharing can be very powerful for a retailer. 9. Consumers Want to Know What Companies Stand For The prevalence of online shopping and social media has brought more transparency to retail than ever before. In addition to having information about price, consumers have much more visibility into retailers supply chains and processes, and they are more interested in what retailers stand for and what their values are as a company. 10. Top Beauty Trends: The Red Lip is an Accessory Charlie Riddle, Creative Director and Makeup Artist for Stila Cosmetics, presented the top-five makeup trends from New York Fashion Week (NYFW) in the panel discussion, "How Integrative Influencer Marketing Impacts Retail. Riddle works with top designers to help execute their collection s inspiration, mood board and vision through makeup colors. Makeup evokes a feeling and brand emotion, and Riddle said the red lip is an accessory. Fuchsia and red worn both on the eyes and the lip; the key to wearing this look is to keep the wardrobe colors simple. 5

6 Color blocking with strong, dramatic color on the eyes. Pick a favorite color, sweep on eyelid and pair it with heavy mascara. Glossy skin the look is fresh, dewy and sexy. Pat oil on skin lightly with pads of fingers to achieve this glowy look. Rock and kohl this next-day look is achieved with an eye pencil and a lot of mascara. Burgundy eyes/lips this is a deep, romantic look for fall. The trick to achieving it is to start light and go darker. Riddle suggested experimenting with the power pout. 6

7 Deborah Weinswig, CPA Managing Director Fung Global Retail & Technology New York: Hong Kong: China: Shoshana Pollack Senior Research Associate Erin Schmidt Research Associate Hong Kong: 8th Floor, LiFung Tower 888 Cheung Sha Wan Road, Kowloon Hong Kong Tel: London: Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0) New York: 1359 Broadway, 9th Floor New York, NY Tel: FungGlobalRetailTech.com 7