weekly insights by fbic global retail tech dec 25...•...

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December 25, 2015

DEBORAH WEINSWIG, EXECUTIVE DIRECTOR–HEAD OF GLOBAL RETAIL & TECHNOLOGY [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2015 The Fung Group. All rights reserved.

D E B O R A H W E I N S W I G Executive Director – Head of Global Retail & Technology

Fung Business Intelligence Centre [email protected]

US: 646.839.7017 HK: 852.6119.1779

CN: 86.186.1420.3016

December 25, 2015

+5.4% CHART OF THE WEEK

STAT OF THE WEEK

STAT OF THE WEEK

• Fully 88% of US online retail purchases qualified for free

shipping on Cyber Monday, Demandware’s Rick Kenney said in a December 21 webinar with FBIC Global Retail &

Technology.

• In our December 18 webinar, comScore executives noted that free shipping is becoming “the norm,” and

that the proportion of US desktop e-‐commerce purchases that qualified for free shipping increased year

over year in 2015.

• See our new report, Holiday 2015 Shipping Trends, too!

Star Wars Revenues 88%

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Movies Video Games Other Books

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• The Star Wars franchise is a multibillion-‐dollar business and revenue generator, with nearly three times as much spent on Star Wars themed toys as on movie tickets.

• Free shipping is the new normal -‐-‐ a whopping 88% of US online retail purchases qualified for free shipping on Cyber Monday, according to Demandware.

• Amazon is seeking alternative delivery routes and easing its ties with UPS, citing rising package volumes and costs.

• Google is reportedly in talks with Ford regarding the development of Google’s autonomous car. An announcement is expected the first week of January 2016.

• China’s production of mobile phones is up year over year, to 1.6 billion. By the end of 2015, China will have produce about as many mobile phones as the total number sold across the globe in 2014.

• Apple Pay will be available in Mainland China in early 2016, according to a statement released by Apple. Apple has partnered with China Union Pay, the main card company used by Chinese banks.

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December 25, 2015


FROM THE DESK OF DEBORAH WEINSWIG

This week, we stood in line to see the film Star Wars: The Force Awakens, which generated an estimated $48 million in ticket presales and another $248 million in US ticket sales, along with $279 million in international sales, over just its opening weekend. Ticket presales began October 20, and opening night tickets quickly sold out. On opening night, December 17, many theaters offered showings all night long to accommodate the hordes of fans eagerly awaiting the return of Luke, Leia, Han Solo and Chewbacca, as well as the next generation of Star Wars characters and droids.

The Star Wars franchise is big business: it is a multibillion-‐dollar revenue opportunity that generates much-‐welcomed revenue for cinemas, toymakers, DVD factories, retailers, book publishers and, of course, Disney, which purchased Lucasfilm, the studio behind the franchise, for $4 billion in 2012. Disney’s purchase was a clear winner: US box-‐office receipts for The Force Awakens bumped Jurassic World from its position as the record holder for a film debut, and estimates of total revenue for the former are running as high as $4 billion. Recall that The Force Awakens is just Episode VII in the series—there are two more episodes in the works, following George Lucas’s original plan for a total of nine episodes.

In the run-‐up to the movie debut, the Star Wars brand appeared to be everywhere, and it still does. Its marketing droids are operating at full efficiency, and we are saturated with advertisements for Star Wars–themed products, including Dodge and Jeep cars, CoverGirl makeup, Verizon telecom services, Crocs shoes and even credit cards featuring images of Yoda, the droids and Darth Vader.

The Star Wars galaxy, including presales for The Force Awakens, extends across $28 billion of revenue, comprising not just the movies, but sales of DVDs and other formats, books, toys, and other products. Dividing this figure by the six major preceding movies results in an average of more than $4 billion per film.

The biggest hyperdrive in the Star Wars universe is, surprisingly, toys, which account for $12 billion of the $28 billion in revenue. Only $4.3 billion of the total derives from box office receipts for the movies. Moreover, Star Wars action figures can have significant investment value—one private collection of items recently sold for $500,000 at auction, and one rare Luke Skywalker figure sold for $25,000.

Star Wars toys are among the hot sellers this holiday season, and we featured two of them in our Holiday Price Tracker: the Star Wars Bladebuilders Jedi Master Lightsaber and the LEGO Star Wars 75097 Advent Calendar Developmental Building Kit. Retailers say that Star Wars toys are flying off the shelves, and one estimate calls for $3 to $5 billion in merchandise sales this holiday season, surpassing the total for Cars 2 merchandise, which took in $3 billion, and Frozen merchandise, which took in $1 billion. In one survey, 31% of shoppers said they planned to buy Star Wars gifts for 6-‐ to 10-‐year-‐olds. While royalties of 10%–12% are typical, one expert speculated that Disney will likely receive 20% of product sales in licensing fees.

The empire of Star Wars product marketing has struck back, and it appears to be on track for huge commercial success for all stakeholders, including studios, cinemas, cable channels, toymakers and retailers. Although the three preceding films (Episodes I–III) were a commercial success, fans were unimpressed with their plots. The new film, however, is likely to please old fans and engage new ones in the franchise. With at least two more films to come, The Force Awakens is likely to enable Star Wars to generate billions of dollars for participants over the next decade.

May the Force be with us!

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December 25, 2015


Star Wars Revenues Figure 1. Revenues from Star Wars–Related Products and Services

Source: Statisticbrain.com

• Star Wars: The Force Awakens smashed box-‐office records for a movie debut last weekend, taking

in worldwide ticket sales of $529 million. But according to researchers at Statistic Brain, nearly three times as much is spent on Star Wars–themed toys as on cinema tickets.

• In total, $28 billion has been spent on Star Wars–themed products and services, but only $4.3 billion of that was spent on watching the movies (excluding DVDs and digital).

• For more, see our new report, The Star Wars Economy.

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FBIC HAPPENINGS & WEINSWIG’S WATCH ING

CHART OF THE WEEK

STAT OF THE WEEK

• Fully 88% of US online retail purchases qualified for free

shipping on Cyber Monday, Rick Kenney of Demandware said at our December 22 FBIC Global Retail & Technology webinar.

• In our webinar on December 18, comScore executives noted that free shipping is becoming “the norm,” and that the proportion of US desktop e-‐commerce purchases that qualified for free shipping increased year over year in 2015.

• See our new report, Holiday 2015 Shipping Trends, too!

88%

Source: Demandware/comScore

• This week the FBIC team hosted a webinar with Demandware.

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December 25, 2015


US RETAIL HEADLINES Amazon Seeks to Ease Ties with UPS (December 22) The Wall Street Journal

• Rising package volumes and costs have Amazon seeking alternative delivery routes—shifting its role from one of UPS’s key allies to a potentially disruptive competitor. Amazon has held talks with air-‐cargo companies to lease airplanes and build its own freight operation. The goal is to reduce its reliance on carriers like UPS, according to people familiar with the matter. Amazon is already using its own trucks, drivers and a fleet of couriers for the final and most-‐expensive leg of an order’s trip. Eventually, it hopes to get drones to drop packages into backyards. Such steps are part of a much broader plan at Amazon, which counts shipping costs as one of its fastest-‐growing expenses, totaling 11.7% of revenue in the third quarter, up from 10.4% a year ago.

Ford in Talks with Google to Build Self-‐Driving Cars (December 22) Reuters

• Automotive News, citing a person with knowledge of the project, reported that Google is talking with automaker Ford regarding the former’s autonomous car development. The contract manufacturing deal, if finalized, is expected to come during the annual Consumer Electronics Show in Las Vegas during the first week of January.

• Earlier this year, Google began discussions with most of the world’s top automakers, and assembled a team of traditional and nontraditional suppliers to speed its efforts to bring self-‐driving cars to the market by 2020. In June, it began testing tiny, self-‐driving prototype vehicles of its own design on public roads around Mountain View, California. The company has also started testing self-‐driving prototypes in Austin, Texas.

Nike Plans to Boost Its E-‐Commerce Sales from $1 Billion Today to $7 Billion in 2020 (December 23) Business Insider

• Nike currently makes just over a billion dollars annually through its e-‐commerce channels. The company expects investments over the next four years to push that total to $7 billion.

• By 2020, Nike expects 4 billion people with a mobile device and disposable income to live in an area where there is a Nike store. The company’s aggressive expansion plan includes more successfully linking its stores with online inventory and providing a larger web sales offering in more markets.

Elon Musk’s SpaceX Returns to Flight; Pulls Off Dramatic, Historic Landing (December 22) The Washington Post

• Elon Musk’s SpaceX successfully landed the first stage of its Falcon 9 rocket on Monday evening. It was the company’s first flight since its rocket exploded six months ago and the first time a rocket had launched a payload into orbit and then returned safely to Earth. The news was cheered as a sign that SpaceX has gotten its momentum back.

• Monday’s flight, initially delayed because of technical concerns, was the second time in a month that a billionaire-‐backed venture launched a rocket into space and recovered it. And it represents yet another significant step forward in the quest to open up the cosmos to the masses.

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December 25, 2015


EUROPE RETAIL HEADLINES UK Store Traffic Falls on Super Saturday (December 21) Cityam.com

• Footfall slumped across UK high streets and shopping centers on “Super Saturday,” the final Saturday before Christmas. Total footfall was down by 4.5% year over year, according to analysts at Springboard. Shopping center traffic was down by 8.9% year over year and high-‐street footfall was down by 5.5%, although retail park traffic was up by 3.3%.

• Research from rival retail intelligence firm FootFall found a 4.3% decline in footfall on Super Saturday. However, FootFall predicts a rebound in the final week before Christmas. The company says it saw a similar pattern in 2009, when Christmas also fell on a Friday, and that stores saw a flurry of last-‐minute shopping.

More Strikes at Amazon Germany (December 21) Retaildetail.eu

• German trade union Verdi this week called for further strikes at Amazon Germany ahead of Christmas Day. Six out of the company’s nine distribution centers are expected to be hit by strikes.

• Strikes have long been a feature at Amazon Germany’s distribution centers, as unions demand that workers be recognized as retail employees, not logistics-‐industry workers; the two sectors have different compensation standards.

Casino to Exit Vietnam (December 15 and 17) Company press releases and Ft.com

• French supermarket retailer Casino Group announced plans this week to exit the Vietnamese market and undertake real estate transactions in Thailand and Colombia that are aimed at “externalizing the value” of its real estate. Collectively, the moves will form a €2 billion deleveraging plan.

• Two days after the plans were announced, short seller and research firm Muddy Waters Research blasted Casino Group as “one of the most overvalued and misunderstood companies” it had ever come across. Muddy Waters said Casino Group’s financial statements are “literally meaningless” because they fully consolidate results from companies in which Casino Group has a minority share. Casino Group responded by saying that the Muddy Waters report contained “grossly erroneous allegations.”

Carrefour to Acquire Billa Romania (December 22) Company press release

• French grocery giant Carrefour has announced an agreement to acquire the Billa supermarket chain in Romania from Germany’s Rewe Group. The chain consists of 86 supermarkets with a total sales area of 83,000 square meters.

• Carrefour said the acquisition would make it “the leading supermarket operator in Romania,” and that the chain would strengthen its “multiformat offer.” Billa’s smaller-‐store format is distinct from the large hypermarkets for which Carrefour is best known.

Lagardère Brings Robots to Travel Retail (December 21) Eprretailnews.com

• France’s Lagardère Travel Retail has introduced a robot to serve customers at Auckland Airport in New Zealand, the Automated Collection Experience (ACE). The ACE robot serves customers who have preordered duty-‐free goods, selecting the relevant box of goods from a bank of crates and delivering it to the customer.

• The robotic-‐arm-‐style device is four meters high and operates behind glass, so shoppers can view the order retrieval process. The robot is in operation at the Aelia Duty Free store in Auckland.

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December 25, 2015


ASIA TECH HEADLINES China Has Made a Ridiculous Number of Phones So Far This Year (December 22) TechinAsia

• According to new data released by China’s Ministry of Industry and Information Technology, China’s production of mobile phones is up year over year, to 1.6 billion in the first 11 months of 2015.

• According to Gartner data, global mobile phone sales in 2014 totaled about 1.8 billion. By the end of 2015, China will have produced about as many mobile phones as the total number sold across the globe in 2014.

Sanrio Probes Reported “Hello Kitty” Hack Exposing 3.3 Million Users (December 22) Channel NewsAsia

• On Monday, Sanrio, the Japanese owner of the Hello Kitty brand, said it was investigating a report that its database had been hacked and that private information on 3.3 million users had been exposed.

• The data came from the Japanese toy company’s fan site and includes information such as users’ full names, email addresses and encrypted passwords, according to a report by security website CSOonline.com.

Hong Kong’s Popmap Lets You Shop Like a Local (December 21) e27.co

• Popmap connects independent shops and niche brands around the world with online shoppers looking to purchase something unique. It features items from local and boutique stores on its site and app. Customers can purchase items from these shops from anywhere around the world.

• Launched in mid-‐2015, Popmap is currently working with over 700 shops in 53 cities worldwide, a figure that Co-‐Founder and CEO Idris Sersoub plans to double in the next six months. Vendors are charged 15% under Popmap’s business model.

Gadgets from “Japan’s Xiaomi” Now Available in Singapore (December 19) TechinAsia

• Tokyo-‐based UPQ burst onto the Asian startup scene last summer when it came out of stealth mode to reveal more than a dozen original consumer electronics products, ranging from a budget Android phone to a 4K monitor.

• The full product range is available online and at brick-‐and-‐mortar electronics stores in Tokyo, but now two of its gadgets are also available in Singapore via e-‐commerce giant Lazada. UPQ Founder Yuko Nakazawa is planning to add more UPQ products to Lazada, and extend availability to additional Asian countries in 2016.

Apply Pay Coming to China Next Year (December 18) TechinAsia

• Apply Pay will be available in Mainland China in early 2016, according to a statement released by Apple. The company has partnered with China UnionPay, the main card company used by Chinese banks.

• It will chase after WeChat and Alipay: the former’s WeChat Wallet grew through peer-‐to-‐peer transfers and in-‐app purchases, while the latter was fueled by its use on Taobao.

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December 25, 2015


LATAM RETAIL HEADLINES Krispy Kreme Expands Further in Latin America with Shops in Panama (December 21) Winston-‐Salem Journal

• Krispy Kreme Doughnuts, in partnership with Barcenas Group International, plans to expand further in Central America, opening 16 franchises in Panama by the end of 2020.

• The company currently has franchises in Guatemala, as well as shops in Colombia, Puerto Rico and the Dominican Republic. In September, Krispy Kreme announced plans for 24 franchisee shops in Peru and 12 in Bolivia.

El Palacio Plans to Double Private-‐Label Business (December 18) WWD.com

• Mexico’s El Palacio de Hierro plans to increase its private-‐label clothing revenues by nearly 50%, to MXN 650 million (US$39.3 million) by 2019.

• The company plans to accomplish this by growing its Chester & Peck, Epsilon and Pertegaz brands and by operating 100 points of sale by 2019.

Brazil Lifts Temporary Ban on WhatsApp (December 17) The Wall Street Journal

• On December 17, a Brazilian judge lifted a ban on Facebook’s WhatsApp app, which had been blocked for 48 hours following complaints by Brazilian telecom service providers.

• WhatsApp is extremely popular in Brazil, and approximately half of its 200 million people—including many lower-‐income Brazilians—regularly use its free texting and voice messaging functions. WhatsApp was the most downloaded app in the country last year, and Brazil is the world’s fourth-‐largest smartphone market.

Weakening Latin American Economies May Slow Growth in South Florida (December 18 and 20) Miami Herald

• The key industries in South Florida—construction, retail, tourism and trade—are showing early signs of slowing due to weakening overseas economies.

• Many Latin American economies are currently in recession, and Argentina’s peso dropped by 30% last Thursday after the government removed capital controls. Brazil’s credit rating was recently reduced to below investment grade by two rating agencies. Venezuela, with its struggling economy, also has strong economic ties to South Florida.

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December 25, 2015


EARNINGS CALENDAR

Company

Earnings Release Period Date

Sales (USD Mil.) EPS

Currency Consensus TY LY Actual

Consensus TY LY Actual

Walgreens Boots Alliance 1Q 16 Jan 7 29,252 19,554

0.96 0.97 USD

Fast Retailing 1Q 16 Jan 7 532 480

N/A N/A JPY

Unilever FY 15 Jan 19 53,163 48,436

1.80 1.82 EUR

SuperValu 3Q 16 Jan 20 4,177 4,204

0.16 0.04 USD

eBay 4Q 15 Jan 20 2,317 4,921

0.50 0.77 USD

Kimberly-‐Clark 4Q 15 Jan 25 4,580 4,828

1.43 1.35 USD

Procter & Gamble 2Q 16 Jan 26 16,968 20,161

0.98 1.06 USD

Apple 1Q 16 Jan 26 77,348 74,599

3.26 3.06 USD

Coach 2Q 16 Jan 26 1,273 1,219

0.67 0.72 USD

Metro 1Q 16 Jan 27 2,929 2,841

0.53 0.45 CAD

Facebook 4Q 15 Jan 27 5,358 3,851

0.68 0.25 USD

Colgate-‐Palmolive 4Q 15 Jan 28 3,941 4,221

0.73 0.76 USD General Growth Properties 4Q 15 Jan 28 683 673

0.42 0.38 USD

H&M FY 15 Jan 28 181,712 151,419

12.96 12.07 SEK

Deckers Outdoor 3Q 16 Jan 28 847 785

4.93 4.50 USD

Amazon 4Q 15 Jan 28 35,993 29,328

2.79 0.45 USD

Hanesbrands 4Q 15 Jan 28 1,532 1,523

0.46 0.37 USD

Alphabet 4Q 15 Jan 28 16,892 18,103

8.10 5.47 USD

Clorox 2Q 16 Jan 29 1,349 1,345

1.04 0.97 USD

Unicharm FY 15 Jan 29 751 600

63.11 64.10 JPY

Simon Property Group 4Q 15 Jan 29 1,380 1,297

2.66 2.47 USD

Alibaba 3Q 16 Jan 29 32,885 26,179

5.73 3.10 CNY

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December 25, 2015


EVENT CALENDAR

Event Location Date(s) FBIC Presenting China-‐Israel Technology, Innovation & Investment Summit Beijing, China January 4–6

Pepcom Digital Experience Las Vegas, NV January 5

ShellyPalmer Israel Dealmakers Dinner @ CES Las Vegas, NV January 5

Credit Suisse 5th Annual Macro Conference Singapore January 6

ShowStoppers @ CES Las Vegas, NV January 6 Credit Suisse Greater China Technology & Internet Conference Hong Kong January 6–8 Israel Export & International Cooperation Institute Redefining Innovation @ CES Las Vegas, NV January 6–9

CES 2016 Las Vegas, NV January 6–9

ICR Conference Orlando, FL January 11–13

UJA i3: A Summit for Women New York, NY January 12

Brand Innovators Game Changers Detroit, MI January 13

Fashion Digital London London, UK January 14

XRC Investor Demo Day New York, NY January 14

ROI SuperSaturday New York, NY January 16

RISE Retail Innovation & Shopper Expertise Symposium New York, NY January 16 Deborah Weinswig

NRF Foundation Gala New York, NY January 17

Digital Life & Design Conference Munich, Germany January 17–19

NRF Retail’s Big Show New York, NY January 17–20 Deborah Weinswig

Planalytics Retail Strategy Breakfast New York, NY January 18 Brands Innovators Future of Consumer Engagement & Retail New York, NY January 19 Credit Suisse 2016 Latin America Investment Conference São Paulo, Brazil January 19–20

Mercedes-‐Benz Fashion Week Berlin Berlin, Germany January 19–22

Avon Products Investor Day New York, NY January 21

Brand Innovators Content Marketing Denver, CO January 22

MAGIC Project NY New York, NY January 24–26

ICSC Texas Retail Forecast Dallas, TX January 25

OurCrowd Global Investor Summit 2016 Jerusalem, Israel January 25–26

2016 Fintech Finals Hong Kong January 25–26

Wearable Technologies Conference Munich, Germany January 26–27

Brand Innovators Consumer Engagement San Francisco, CA January 28

ICSC Heartland Omaha, NE January 28–29 Deborah Weinswig

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December 25, 2015


Deborah Weinswig, CPA Executive Director—Head of Global Retail & Technology Fung Business Intelligence Centre New York: 917.655.6790 Hong Kong: 852 6119 1779 China: 86 186 1420 3016 [email protected] Filippo Battaini [email protected]

John Harmon, CFA [email protected]

Aragorn Ho [email protected]

John Mercer [email protected]

Shoshana Pollack [email protected]

Kiril Popov [email protected]

Jing Wang [email protected]

Steven Winnick [email protected]

Eddie Wong [email protected]

HONG KONG: 10th Floor, LiFung Tower 888 Cheung Sha Wan Road, Kowloon Hong Kong Tel: 852 2300 2470 NEW YORK: 1359 Broadway, 9th Floor New York, NY 10018 Tel: 646 839 7017 LONDON: 242-‐246 Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0)20 7616 8988 FBICGROUP.COM

weekly insights by fbic global retail tech dec 25...•...

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