march 23, 2015 wrapup - fung business intelligence · fung business intelligence centre global...

1 Fung business intelligence centre global retail & technology flash report: SXSW Interactive 2015 Wrapup Copyright © 2015 The Fung Group, All rights reserved.

March 23, 2015

Retail and Tech Notes from SXSW Interactive 2015 Key Points

• There are many opportunities for the fashion and apparel industry to “do good while doing well,” including helping the disabled, the poor, victims of epidemics and the environment.

• Consumers’ desire for personalized fashion combined with advances in 3-‐D printing technologies could dramatically change the supply chain.

• Many retailers are interested in beacon technology. However, much work needs to be done to make its use frictionless and appealing.

• There was much discussion of privacy and the art of approaching consumers without annoying them or invading personal boundaries.

• There are a l imited number of tasteful things on the Internet that can be curated and there are operational challenges to supplying the popular ones.

• The mobile phone has become the remote control of our l ives

• We saw several innovative, exciting startups, some located in the US and some overseas.

About SXSW

Last week, we attended several presentations (all were panel discussions) during the Interactive segment of the 2015 South by Southwest (SXSW) festival in Austin, Texas. SXSW aims to be a place where music, fi lm and emerging technologies converge. The Interactive segment ran from March 13–17 , the Music segment

ran from March 17–21 and the Film segment overlapped the two, running from March 13–21. At the same time as these segments were running, accelerators were working with startups, and a gaming expo, a trade show and a job market were under way.

Here are the key points from the sessions we attended, organized by theme. Separately, we are publishing a report on RetailLoco , a daylong conference focusing on location-‐based technology for retail.

WRAPUP


Wearable Tech: “Fashion as we know it is dead.”

We attended a panel discussion on wearable tech, but it wasn’t the typical presentation applauding new technologies on the horizon. The panelists made an ad hoc change to the title of the panel, to “(Wearables) Are the Answer. But What Was the Question?” from “Will Wearables Bring New Purpose to Fashion?” This was one of the first of several panels that took on a highly intellectual tone, rather than just promoting the industry or technology under discussion. One panelist proclaimed, “Fashion as we know it is dead,” meaning that the industry dynamics and economics have to change. At one point, the discussion took a bit of a political turn, with some asking how people can spend $349–$17,000 for an Apple Watch when half the world’s population lives on under $2.50 a day.

Keeping with the altruistic tone, the panelists noted that there are numerous opportunities to use wearable tech to help the disabled , which they estimated to number 1 bill ion people. Examples include the United Nations’ use of wearable patches to measure malnutrition; finger-‐worn readers for the visually impaired; patches for epilepsy; a bra that detects breast cancer; and necklaces that collect data as children grow. In short, the panelists imagined a fashion industry focused on invention, rather than on consumption.

Stil l , it’s possible that we will consume fashion differently in the near future. With technologies such as 3-‐D printing, design is becoming accessible to the rest of us, rather than to just the avant-‐garde elite. Designers can share their patterns online, and panelists claimed that “fashion is about to get napsterized” (which is a reference to the il legal music-‐sharing app popular during the dot-‐com bubble that ultimately led to changes in the way music is sold and distributed). Thus, the apparel industry could change from focusing on mass production to localized production. Consumers are increasingly seeking personalized products, and some type of localized 3-‐D printing could fit the bill.

There are also other technologies under development for manufacturing sustainable garments. Panelists spoke of bacteria that are being used to grow clothing, as well as to provide pigments for coloring that are organic and sustainable .


Digital Health Communication

With the explosion in digital health, the communication aspect is becoming a booming subindustry. Digital health communication refers to the creation and electronic exchange of health messages and data by individuals . It has three components:

1. Personalization

2. Social media

3. Mobile—text messages have proven to be the most effective method.

One great example is the ALS Ice Bucket Challenge. Every 90 seconds, someone is diagnosed or dies from ALS, and care for a patient with ALS can cost as much as $250,000 per year. The challenge prompted the largest amount of activity Facebook has ever recorded for a single initiative, and the outreach raised $120 million , which is only about 10% of the cost of developing a new ALS drug.

The US government is heavily involved in digital health communications and developing wearable tech devices . During the Ebola crisis in Africa, the US Agency for International Development (USAID) developed a Band-‐Aid-‐like disposable health monitor that was used to monitor patients when few doctors were available.

Finally, Cisco Systems is positioned squarely in the middle of digital health communications, as its routers form the central nervous system of the Internet and as it has been a big advocate of the Internet of Things. Cisco estimates that by 2020, there will be 50 billion connections to the Internet, transmitting a zettabyte of data per year (that’s 1021, or 1,000,000,000,000,000,000,000 bytes). The company envisions a future where big data and predictive modeling can be used to create individual health treatment based on our individual genetics.

Beacons: To the Lighthouse

This panel started with a slightly off-‐topic discussion of showrooming (i.e., examining a product in a store and then buying it more cheaply online), which frightened retailers. The reality turned out to be much less gloomy than they thought, as many consumers practice reverse showrooming (called “webrooming”), where they evaluate a product or read reviews online, then visit a brick-‐and-‐mortar store to buy. One panelist cited a statistic that 70% of

shoppers go online before shopping, and 36% even go online while in a store . Yet challenges remain, as only about 3% of store entrants have a given retailers’ app on their device.

Retailers are stil l testing and evaluating beacon and e-‐payment technologies. One panelist commented, “If you make it frictionless, it will stick ,” meaning that the process of receiving data from a beacon needs to be made extremely easy for it to work. Apple Pay is largely regarded as simple to use, and in January 2015, Whole


Foods was the largest retailer using Apple Pay, in terms of both dollar value and number of transactions. The average sale value in its partnership with Instacart is two and a half times that of the average transaction. Both of these are considered technology successes.

Then the conversation turned to the topic of privacy versus the appropriate number of communications with a consumer. The consensus was that one communication per store visit is the correct number. Retailers can collect an enormous amount of data on us and can generate personalized and appropriate offers with it. However, too many or the wrong kind of offers could irritate us or be seen as “creepy.” The panelists cited the well-‐publicized example of Target using purchase history to focus communications to expectant mothers. That led to a teenage daughter receiving ads for diapers and maternal vitamins, which outraged her father (though the girl was, in fact, pregnant). Ultimately, retailers have to become storytellers in order to entice and entertain consumers.

Curation: “There are many people with good taste, but we’re running out of product.”

Panelists at this session (two of whom work for eBay) said they have noticed a sea change over the last several years in the essence of curation on the Internet, and they gave it a thorough review. While our dictionaries say that curation means “to select, organize and present for exhibition,” the panelists think that curation also has the goal of eliciting an emotional response .

They classify the last 10 years as follows:

• 2004–2009: The Tyranny of the Majors (such as Amazon)

• 2009–2013: The Rise of the Young Turks: The Land Grab Begins

• 2014–Present: Fin de Siècle, World Weariness, Search for Meaning

One panelist commented that curation is commonly called “merchandising.”

The panelists’ criticism of curation today included the following:

• Now everything looks curated and is monotonous.

• Curation reduces the thril l when you serendipitously find something.

• No algorithm can duplicate the expert power of the human eye.

Moreover, there are operational challenges in running a curated website, including:

• Many people have exceedingly good taste, but we're running out of product.

• The challenge is to scale product and make it available. With the scale of Internet retail, it’s nearly impossible to keep up with demand.

Mobile Apps

We listened to a panel discussion on successful mobile apps that was attended by an executive of Dunkin’ Donuts, which is considered to have one of the best consumer apps. The executive summed up the mobile experience very well. He said, “We use info to learn about what our guests want and provide information based on what’s relevant for them. Today it’s very much a mobile-‐driven world.”


The exec offered some additional advice based on Dunkin’s own experience:

• Focus on the consumer as best you can.

• Don’t spend too much time [analyzing data] searching for the silver bullet.

• Do a lot of testing, and the customer will tell you what you need to know.

• Things are changing fast.

• Regarding ROI—there are no good metrics to compare digital and nondigital marketing.

• [Retailers] are armed with much data on the consumer in these emerging spaces.

• The mobile phone is the remote control of your life.

Finally, the discussion turned to our private data. One panelist said that all parties must approve of the use of the data, and that retailers really need to rely on legal counsel for guidance and to protect themselves. There exists a bond of trust between the consumer and a brand, and that is the strongest feature of a brand.

Israel Innovation Showcase

At an offsite venue, we had the opportunity to hear pitches from several Israeli startups and talk to their management. The following companies are among the ones we met:

CheerZ—This company works with small retailers in conjunction with an app that enables users to send small presents (as thank-‐yous) in a quick and easy way. Retailers benefit from the exposure and introduction to new customers.

Glide—Users can use their app to send real-‐time video messages to other users. These messages are saved in the cloud and use no space on the user’s phone.

Homage Technology —This company has a technology for doing green-‐screen video that enables consumers to be the star of short video clips or video emoticons.

Qork—This service offers localized, community news.

Seat Serve—This company has an app that consumers use to order and have food and drink delivered directly to their seats during sporting events.

Stylit—This company uses data analytics to make style recommendations based on a user questionnaire.

Talkitt—This company has a voice-‐recognition app that makes the speech of people with motor, speech and language difficulties more understandable.

Looking ahead, we plan to establish relationships with these and other relevant relevance to retail and technology.


Deborah Weinswig, CPA Executive Director – Head Global Retail & Technology Fung Business Intelligence Centre New York: 917.655.6790 Hong Kong: +852 6119 1779 [email protected] Marie Driscoll, CFA [email protected]

John Harmon, CFA [email protected] Amy Hedrick [email protected] Aragorn Ho [email protected] John Mercer [email protected] Stephanie Reilly [email protected]

Lan Rosengard [email protected] Jing Wang [email protected]

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