ICSC Heartland- January 28, 2016.

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THE FUTURE OF DIGITAL RETAIL
Deborah Weinswig
Executive Director, FBIC Global Retail & Technology
deborahweinswig@fung1937.com
US: 917-655-6790
HK: 852.6119.1779
CHN: 86.186.1420.3016
@debweinswig

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Agenda
• About Fung Business Intelligence Centre (FBIC)
• Top 16 Emerging Global Technology Trends for 2016

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Fung Business Intelligence Centre
• Established in 2000 and headquartered in Hong Kong
• FBIC serves as the knowledge bank and think tank for the Fung Group
– Collects and analyzes market data on sourcing, supply chains,
distribution and retail
– Provides thought leadership on technology and other key issues
• New York–based Global Retail & Technology team
– Follows broader retail and technology trends
– Provides advice and consultancy services to colleagues and
business partners of the Fung Group
– Builds collaborative knowledge communities
• Creating a database of technology-based startups
• Disruptors Breakfasts: introduce startups focusing on disruptive technologies
that are changing the ways we think and act today

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Futureproofing
• Anticipate future trends and
developments
• Plan for future value and avoid
obsolescence
– What problem are you trying to solve?
– How will solution be used?
– How robust does it need to be?
• Ensure flexibility to manage changing
formats and deployment patterns

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Our Partnerships With International Accelerators
Alchemist Accelerator is an accelerator exclusively for startups whose
revenue comes from enterprises, not consumers.
Entrepreneurs Roundtable Accelerator (ERA) provides participant
companies with an intensive four-month program, with the goal of helping
early-stage companies progress rapidly into exciting, viable businesses.
New York Fashion Tech Lab is an accelerator that is a result of a
collaboration between the Partnership Fund for New York City,
Springboard Enterprises and major fashion retailers. It focuses on early-
and growth-stage companies.
Plug and Play is a global innovation platform. It connects startups to
corporations, and invests in over 100 companies every year. Its 360°
ecosystem allows for remarkable innovation to take shape on an
international scale.
Techstars is a global ecosystem that empowers entrepreneurs to bring
new technologies to market wherever they choose to build their business.

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Collaborations With the HK Startup Ecosystem
Disruptors Event Series : we host networking events that showcase startups focusing on disruptive technologies
that are changing the ways we think and act today
Research Coverage: we publish research covering the Hong Kong startup ecosystem, Hong Kong-based startups
and major startup events
Speaking engagements: we take part in startup forums as speakers and panelists
Mentorship & Angel Investing: we mentor startups and provide funding to startups as angel investors
Knowledge sharing: we partner with stakeholders in the ecosystem in sharing knowledge and information to grow
and improve Hong Kong’s startup ecosystem

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Fung Capital/FBIC Commerce Technology Landscape

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TOP 16 RETAIL TECH TRENDS FOR 2016
1. Additive Technology: Intelligent Clothing
2. 3D Printing
3. Robotics/Artificial Intelligence
4. Drone Delivery
5. Smart Malls
6. IoT-Driven Partnerships
7. Wearables
8. Gamification
9. Voice and Facial Recognition
10. Virtual Reality
11. Augmented Reality
12. IoT
13. Mobile Health
14. Mobile Payments
15. Caring Economy
16. Sharing Economy

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1. Additive Technology: Intelligent Clothing
• Application of nanotechnology in smart fabrics offers potential for development of new
textile materials
– Kuraray has developed a way to harness attributes of liquid-crystalline polymers, resulting in extraordinarily
strong fibers that can hold the weight of four SUVs
– Threadsmiths introduced the Cavalier T-shirt, which uses
“hydrophobic” nanotech woven into the fabric to make it
water and stain resistant
• Visijax embeds LEDs in both the front and rear of jackets
– Machine washable and powered by
a USB-rechargeable battery that
lasts up to 20 hours between charges
– Commuter and City Ace models have
motion-sensing, self-canceling turn signals
embedded into the sleeves of the garment

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2. 3D Printing
• Examples in consumer goods:
• Orbitrec: world’s first 3D-printed bike unveiled at CES
• Normal
– Custom-fit 3D-printed earphones
– Partnered with Rebecca Minkoff on limited-edition products
– More sustainable
• Shoes of Prey
– Design your own perfect shoes
– Design studios in 6 Nordstrom stores
• Mink Makeup Printer
– Sub-$200 desktop printer
can print makeup

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3. Robotics/Artificial Intelligence
• SoftBank is partnering with IBM’s Watson to
provide new functionality to Pepper, its voice
recognition robot
• In Japan, hundreds of Pepper robots have been
deployed at Nestlé retail stores
• Target is planning to deploy robots in
a concept store in 2016
• Lowe’s OSHbot already being tested

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3. Robotics/Artificial Intelligence
• About 1.2 million additional robots are expected to be
deployed in the US by 2025 (BCG)
• Amazon had 30,000 Kiva robots working at 13
fulfillment centers by September 2015, double the
number from a year earlier
• Robots created for corporate boardrooms
– Allow users to interact remotely from home
(or wherever they are)
– In the Suitable Technologies showroom, salespeople appear
through telepresence robots
• Advise on how to repair parts and do training sessions

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3. Robotics/Artificial Intelligence
• Stitch Fix
– Subscription service that uses AI and human
judgment to recommend apparel to shoppers
– Subscribers receive a curated box with items
personally chosen by a combination of
machine and human stylists
• Used for generating recommendations;
key driver across industries
– 35% of Amazon sales, 50% of LinkedIn
connections and 75% of Netflix views are
driven by recommendations

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4. Drone Delivery
• Amazon is the leader in drone delivery technology
• Drone company Flytrex forecasts that delivery drones
could be in use in London within five years
• Estimated 1 million drones sold during holiday season (FAA)
• New drones introduced at CES that can follow a moving
object and carry a person
• QuiQui is a drone delivery service based in San Francisco
• The FAA lost a recent lawsuit, paving the way for commercial
drone use

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5. Smart Malls
• Beacons enable location-based advertisements
– Shoppers who are nearby receive mobile notification, such as coupons and directions
– ShopAdvisor & Levi Strauss study: recipients visited stores at a rate that was 2.6 times greater than those who
did not receive notifications
• Malls can track movements, behaviors and preferences
– Data collected from connected kiosks, apps, motion-sensing
technology, beacons, wi-fi networks
– Primarily collected from wi-fi networks
• Data enables personalized and timely promotions
– Build shopper profiles, including visitation frequency
and movement inside malls
– If data shows that shoppers frequent healthy food outlets,
it can drive the opening of health-food restaurants
in a mall’s food court

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6. IoT-Driven Partnerships
• Unprecedented cross-industry partnerships being
formed
• Samsung and Microsoft developing IoT devices
based on Windows 10
• Panasonic is partnering with Denver to transform it
into the first smart city
– Create an energy-efficient hub
– Solar technology, tele-medicine tech, traffic management
and security
• Audi and Qualcomm are partnering to integrate
Qualcomm’s Snapdragon 602A to provide cutting-
edge connectivity technology
– Infotainment, advanced smartphone connectivity,
navigation, voice quality and control features

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6. IoT-Driven Partnerships
• Ford is partnering with Amazon to integrate vehicles
with Echo, Amazon’s smart-home device
• Intel is working with New Balance on an Android
Wear fitness watch that is due out next holiday
season
• IBM and Under Armour are integrating the Watson
supercomputer with the Connected Fitness network
to analyze data and provide real-time coaching on
health and fitness
• Volvo pursued a partnership with Microsoft to
enhance connected-car strategies
– The Microsoft Band can be pressed and told to start the
car heater, for example

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7. Wearables
• Fitbit: 22.2% share (#1) of the wearables market
as of 3Q 15 (IDC)
• Apple Watch: 18.6% (#2) share of the wearables
market as of 3Q 15 (IDC)
• iFit ecosystem provides a game plan for
exercising, activity, nutrition and sleep
• Under Armour’s $400 HealthBox uses a
wristband, heart rate monitor and scale to track
fitness, sleep and nutrition
• Withings has a smart wristband heart monitor,
scale, sleep monitor and blood pressure monitor

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7. Wearables (Wellness)
• AromaCare (mindfulness)
– Connected oil diffuser for personal aromatherapy
sessions
– Aroma capsules have RFID tag to enable
launching of specific program
• Emfit QS (sleep)
– Monitors heart rate levels and then matches
them to specific moments and interactions
throughout a user’s day
• it Smart Bed (sleep)
– Features biometric sensors that track heart rate,
movement and breathing
– ActiveComfort technology collects a customer’s
ideal level
of firmness, comfort and support of mattress
– Support for sleep apnea

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8. Gamification
• Gamification is the use of elements from computer and
video games in real-world or other activities
• Examples include badges, levels and leader boards
that can be used to enhance consumer loyalty
• In a tiered rewards program, customers must perform
certain actions in order to pass milestones; each time
a milestone is passed there are new rewards
• Starbucks Rewards gives loyal customers stars and
has tiered levels of rewards, based on purchases

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8. Gamification
• Under Armour and HTC: first connected-fitness
product portfolio, the Under Armour HealthBox
– Based on your height, weight, age and workout
tendencies, the Under Armour Record App pairs you
with other users
– You can “challenge” family, friends or co-workers
• Zipline: incentivizing through gamification
– Three key stores have 500 surplus units of a blue
sweater. Top management can send real-time data
directly to managers and associates, incentivizing
them with a contest: whichever associate sells the
largest number of units within a two-hour sale window
will receive a financial or bonus reward

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9. Facial Recognition
• The global advanced Facial Recognition market expected growth: $2.77 Bil. in 2015 to
$6.19 Bil. in 2020 (CAGR 17.4%)
• 30% of retailers are using facial recognition technology to track customers in stores
(CSC)
• Applications are increasing: health, wellness, beauty and advertising
– Determine the thickness and application of makeup
– Analyze in-store shopper data
• In 2015, Walmart tested with FaceFirst:
– Cameras check you in at location
– Smartphone receives customized deals based on demographic
• Intel released RealSense facial recognition technology in 2015
– Consumer grade 3D cameras
– Home usage: camera recognizes face to unlock front door
• Challenges: Consumers are not especially comfortable with technology use in retail

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10. Virtual Reality
• Google Cardboard viewer was provided
free to New York Times subscribers
• The CTA expects VR unit sales to increase to 1.2 million,
a 500% increase from last year
• VR—Oculus Rift headset ($599) available in
April 2016
• Samsung Gear VR headset ($99)
• Vitrio VR system provides a 360-degree
VR view of properties

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10. Virtual Reality (Retail Applications)
• Widespread adoption of VR in the retail space is expected in as little as three years
• Video of VR application at Tommy Hilfiger store

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11. Augmented Reality
• Augmented reality enables consumers to visualize products in their homes in 3D while they are in
the store
• Cimagine
– Markerless augmented-reality system that can be integrated across multiple channels

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11. Augmented Reality (Retail Applications)

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12. IoT (Connected Home)
• A multitude of connected-home “smart” products are on the market:
cameras, doors, locks, thermostats and light bulbs
• Samsung Smart Home
– Samsung Family Hub Refrigerator
– Highlights: maintains grocery lists and schedules, and even sends photos of
the refrigerator’s contents to smartphones
• Lowe’s and Staples have launched their own lines of home
automation and connected-home products
• LG’s value has dramatically increased via its openness and
inclusion of partners in other industries, such as software,
automobiles, materials and even real estate
• Nest Learning Thermostat learns what temperatures the user likes
most and turns down the temperature when the user is away to save
money

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12. IoT (Connected Pets)
• Consumers will spend $60.6 billion on their
pets in 2015, the American Pet Products
Association says
• Tracking pets’ location and activities
• Video and treats
• Video games

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13. Mobile Health
• The global mobile health market is expected
to top $49 billion by 2020. A large aging
population and rising rates of chronic
conditions, including cancer, heart disease
and diabetes, will drive the market
• The US senior care service market is
forecast to reach $400 billion by 2018,
advancing by 6.3% annually
• Smartphone ownership among those ages
65 and older increased from 5% in 2012
to 27% in 2015
0.44
0.70
1.12
1.78
2.83
4.50
0.00
1.00
2.00
3.00
4.00
5.00
2013 2014 2015 2016F 2017F 2018F
$Bil.
Global Revenue –
Tele-health Devices and Services
Source: Convenient Care Association/Merchant Medicine

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13. Mobile Health
• Tele-health technology delivers virtual
medical and health services to the
growing aging population. CVS has
over 1,000 walk-in clinics, many of
which use tele-health technology
• The average tele-health service cost
is $45 compared to $136 –$176 for
in-person visits

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14. Mobile Payments
• Apple and Android pay require near-filed communications (NFC)
chips for payment
– Negative: Require retailers to install new equipment
• Samsung uses magnetic stripe capability (MST) chips for payment
– MST compatible with new and older credit card terminals –
no additional invest required
– Most-widely accepted mobile wallet in the US
– Consumers can enlist loyalty cards into Samsung Pay
– Receive coupons and discounts directly to Samsung account
– In 2016: Expanding to China, lower-priced handsets and online transactions
• Customer adoption remains hurdle, shoppers need incentive

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14. Mobile Payments
# of Accepted
Locations 700,000 > 30 million > 700,000
+
• Apple Watch is compatible
• Secure – Unique security
code for each transaction
• Compatibility with existing
terminals
• No additional investment for
retailers
• Works any Android device
• Support from major retailers:
Staples, Walgreens,
Wholegoods
–
• Only works with NFC-enabled
registers
• NFC terminal cost retailer
$500 or more
• Not accepted by major
retailers: Walmart, Target,
Best Buy
• Limited device options -
Samsung Galaxy S6
• Magnetic strip reader
requires tricky position for
phone
• Uses NFC technology

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15. Caring Economy
• Disruptors: TOMS, Reformation, Warby Parker, NOURI,
SoapBox Soaps, Zady, GoodXChange
• Social activism over self-indulgence
– Consumers, especially Gen Z, are increasingly demanding
integrity from brands and retailers
• Startups for social good apply market-based strategies to
achieve a social goal
– TOMS
– Reformation
• Social innovation hubs—The Good Lab in Hong Kong

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16. Sharing Economy
• Next big industry to be disrupted is healthcare,
via startups such as Doctor on Demand, Pager,
Studio Dental and MedZed
• Sector is maturing and becoming more
sophisticated; Airbnb and Uber have launched
separate apps for business
• Challenges: customer safety and regulation
battles
• 2016 may see the first big sharing economy IPO
Source: Company Reports
As of January 10, 2016
Valuations: Selected Sharing Economy Startups
Startup Industry Valuation
Uber Car Sharing $62.5B
Airbnb Peer-to-Peer Accommodation $25.5B
Didi Kuaidi Car Sharing $16.5B
WeWork Office Sharing $10.0B
OLA Car Sharing $5.0B
HomeAway Peer-to-Peer Accommodation $3.0B
Lyft Car Sharing $4.0B
Instacart Logistics/Delivery $2.0B
Prosper Peer-to-Peer Lending $1.9B
TransferWise Finance $1.0B
Funding Circle Finance $1.0B

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THANK YOU!
Deborah Weinswig
Executive Director, FBIC Global Retail & Technology
deborahweinswig@fung1937.com
US: 917-655-6790
HK: 852.6119.1779
CHN: 86.186.1420.3016
@debweinswig