FROM THE DESK OF DEBORAH WEINSWIG

There Are Tech Titans Among Us

Technology appears to be one of those industries that feature a couple of healthy leaders that are bathed in prosperity, with the rest of the companies doomed to drag themselves behind in eternal, profitless misery. Size and scale bring obvious benefits to companies, but for tech companies, size really matters. First, there are the clear economic benefits, or operating leverage, that size brings: once companies have covered their fixed costs, as they grow and generate more revenue, more of that drops to the bottom line to become profits. Many Internet businesses have very low fixed costs, and profits grow much faster than revenues. Here, first movers that grab market share have a huge advantage over late entrants. Moreover, with greater revenue, companies have greater ability to fund research and development, which results in new, advanced products that further widen their lead over their competition—which inevitably falls even farther behind. We recently published a deep dive report titled Eight Fast-Growing Tech Titans, in which we outlined eight fast-growing, global technology companies that we label as titans due to their superior size versus their peers. The list was highly subjective, as there are many large global technology companies, such as AT&T, Cisco Systems, Huawei, IBM, Microsoft, Samsung and Verizon, to name a few. However, it was also based on the level of these companies’ interactions with consumers. Below, we list the titans and offer a brief explanation of why we have labeled them as such. Alibaba is the world’s largest online and mobile commerce company in terms of gross merchandise volume. The company operates several online businesses, including Taobao, Tmall, Juhuasuan, Alibaba.com and AliExpress, and it launched the Singles’ Day global shopping festival in China. Alphabet is the parent company of Google, the leading global Internet search engine, whose free services also include email, YouTube and the Android smartphone OS, which powers more than 85% of the world’s smartphones. Amazon is the world’s largest e-retailer, dominating the markets for books, CDs and DVDs. The company is expanding into selling everything imaginable, including apparel, food and other items, via its marketplace. Amazon Web Services is a leader in cloud-computing services. Apple is a global technology leader, launched in founder Steve Jobs’s legendary garage. The company first developed the Apple II home computer and then the iconic Macintosh. The company has created completely new product categories with the advent of the iPod, iPhone, iPad and, most recently, the Apple Watch. Baidu is the leading Chinese language Internet search provider and offers other services such as transactions and online video platform iQiyi. Baidu Tieba, the company’s message platform, ranks 10th globally. eBay is a global commerce leader and operates an online marketplace at eBay.com, along with local versions and mobile apps. The company also operates the eBay Marketplace, StubHub and eBay Classifieds platforms. Facebook, famously founded in a college dorm room, went on to become a social media powerhouse. The company’s flagship Facebook portal, its WhatsApp message service and its Messenger platform each have more than 1 billion global users. Tencent operates three of the top 10 global social networks—QQ, WeChat and Qzone—as well as online platforms offering various functions and types of content. The company’s WeChat Pay offering is the second-biggest mobile payment platform in China, with more than 300 million accounts connected to bank cards. The team at Fung Global Retail & Technology looks forward to publishing future reports on retail and technology based on the tech titans theme. 

US RETAIL & TECH HEADLINES

How Fashion Rental Companies Help Designers Reach New Customers (October 11) Glossy

• Luxury fashion rental companies such as Rent the Runway help introduce new customers to luxury brands, offering collections and pieces designed and curated specifically for sharing-economy platforms. Since customers will not be renting their entire wardrobes, these services act as a platform to introduce them to new brands.
• The platforms provide brands with valuable information about users. For example, after items have been rented and reviewed, Rent the Runway reports back to designers to give them customer feedback on preferences such as fit and style.

Holiday Shopping Season Poll Reveals Importance of Retail Websites—and Stores (October 12) WWD.com

• In a survey from digital marketing firm Fluent, 36% of respondents said they would research products online when holiday shopping, but nearly 50% said they would conduct research in stores. Meanwhile, 18% said they would research products primarily using mobile devices.
• The survey also revealed that shoppers would begin earlier this year—with 34% of respondents saying they had done some holiday shopping before September. Many of those polled will focus on Cyber Monday: 40% said they would participate in the online shopping holiday, with 26% planning to spend less than they did last year and 53% the same amount.

Retailers Are Targeting Gen Z All Wrong (October 12) Sourcing Journal

• Gen Zers have grown up with smartphones and social media. The group wants to be unique and bold, and to make their own decisions. According to David Shah, CEO of Tuesday, Gen Zers want to be treated like small adults, so retailers should stop making “children’s clothes” for them.
• Gen Z is also more global—thanks to the Internet—and thriftier than previous generations. These factors are important to consider because although the children’s market accounts for only 12% of the apparel market, it grew by 6% last year, outpacing the 4% growth seen in men’s and women’s apparel.

We Are Getting Closer to Clothing Made Entirely by Robots (October 9) Quartz

• While much of the garment production process is automated, dexterous human hands are still superior to rigid robot arms when it comes to stitching together complex garments. Machines can spin yarn, cut fabric and sew buttons, but no commercial robot has been able to piece together all the components of a garment.
• Sewbo, a Seattle-based startup, has claimed a breakthrough in this area. The company said it has figured out how to have robots work with weak, flexible fabrics to successfully sew together a T-shirt by stiffening the fabric with a water-soluble thermoplastic.

EUROPE RETAIL EARNINGS

Source: Company reports

EUROPE RETAIL HEADLINES

New Look to Launch Further Stand-Alone Menswear Stores (October 7) Drapers.com

• British fashion retailer New Look is planning to open a raft of new stand-alone menswear stores in the UK. The company opened its first New Look Men stores in September 2015.
• The chain will reportedly open stores in Shrewsbury, Exeter, Maidstone, Derby and Nottingham before Christmas. The retailer is also launching activewear and grooming ranges.

Relaunched BHS.com to Extend Its Product Categories (October 7) Retail-Week.com

• BHS, which relaunched in September as an online-only retailer, is extending its offerings beyond lighting, bedroom and bathroom items. On October 14, kitchen and dining categories will be added on the website, and fashion ranges will be added on October 28.
• According to BHS International Managing Director David Anderson, the relaunch was received well and the company plans to build on its early success.

Iceland to Modernize Existing Stores and Open More Warehouse Shops (October 7) Retail-Week.com

• British supermarket chain Iceland is planning to focus on modernizing its existing stores instead of opening any more stores in its core Iceland chain, according to the company’s CEO, Malcolm Walker.
• However, the retailer is looking to open new Food Warehouse stores, which are twice the size of regular Iceland stores and are located in retail parks rather than on high streets. The Food Warehouse chain was launched in 2014, and there are currently more than 30 stores in operation.

Vivienne Westwood Opens Its First Store in Paris (October 6) Retail Gazette

• British fashion brand Vivienne Westwood has opened its first stand-alone store in Paris. The store is the company’s third in continental Europe; the other two are in Milan and Vienna.
• The brand, which already has concessions in many leading department stores, is also planning to expand further internationally by opening its second US stand-alone store, in New York.

Carrefour Introducing Smartphone Checkout Apps (October 11) European Supermarket Magazine

• French retailer Carrefour has partnered with a selection of startup companies to introduce three smartphone apps that can be used at its stores. The apps are set to be tested in its French stores in October and November.
• The apps are designed to increase supermarket checkout speeds by providing services such as digital queues.

Maybelline to Open Its First Brick-and-Mortar Store (October 10) Fashion Network

• L’Oréal-owned cosmetics brand Maybelline will open its first brick-and-mortar store, in the French city of Orléans, on October 14. The store will showcase products previously available only in the US.
• The brand’s parent company opened its first-ever L’Oréal Paris store in the French capital on September 29.

ASIA TECH HEADLINES

Alibaba Pictures Group in Partnership with Amblin (October 10) WSJ.com

• Jack Ma, owner of Alibaba Pictures Group, is teaming up with Hollywood’s highest-grossing director, Steven Spielberg, owner of Amblin Partners, in a partnership that will help Amblin produce, finance and distribute movies.
• The partnership will help Alibaba become a bigger part of Hollywood’s production and distribution scene.

India’s Bitcoin Startup Zebpay to Secure New Fund (October 11) e27.co

• Zebpay, a bitcoin wallet provider based in India, is raising a new funding round of US$4–US$5 million. The company plans to make use of the funds to promote bitcoins as a reliable currency and investment option.
• Zebpay is integrating bitcoins into mobile payment services for customers of Flipkart, Amazon and MakeMyTrip in India, where many residents do not have bank accounts.

Vietnam’s Hiip Uses Algorithms to Match Brands with the Right Social Media Influencers (October 10) TechinAsia

• Vietnamese startup Hiip uses social data and algorithms to provide analysis and recommendation services to brands regarding which social media influencers are right for them.
• Last week, the startup raised an undisclosed amount of preseed funding, which will be used to further develop the company’s product and expand to other markets.

India’s Tax Reformation Likely to Benefit Tech Startups (October 10) TechinAsia

• The Indian government, which used to levy many small categories of taxes based on different rates across different states, is reforming the country’s tax system. The new system will collapse all of the smaller taxes and present a single rate for all goods and taxes.
• The Indian government awarded Infosys a US$207 million contract to create and manage the tech backbone of the tax network for five years. However, the new system is expected to open the door to startups developing solutions for filing taxes using the new technology.

LATAM RETAIL HEADLINES

Citigroup Sells Brazil Retail Unit to Itaú for US$220 Million (October 8) Bloomberg

• Itaú Unibanco, Latin America’s largest bank by market value, bought Citigroup’s retail-banking business in Brazil for R$710 million (US$220 million). Itaú will take over operations that Citi has been running in Brazil for more than 100 years.
• Citigroup announced plans to exit Brazil and Argentina in February, following a 2014 announcement that it would drop consumer banking in 11 markets, including Peru, Costa Rica, and four other countries in Central and South America.

Startup Backed by Skype Cofounder Aims to Undercut Mexican Telcos (October 12) Reuters

• Skype-backed US wireless startup FreedomPop has teamed up with the Mexican pay-TV provider Dish Mexico in order to lure subscribers with free calls and data plans in Mexico’s fast-growing mobile market.
• The company is attempting to bring competition into a market that has been tightly controlled by Mexican billionaire Carlos Slim, the President of América Móvil, which currently controls 70% of the cellular market.

Piel de Toro Launches Online Store in Mexico (October 12) América Retail

• After arriving in Mexico three years ago, Spanish apparel retailer Piel de Toro is continuing its expansion in the country by launching an e-commerce site. The online store will sell all of the brand’s merchandise.
• Piel de Toro was founded in 1995, and this will be the company’s first e-commerce presence in Latin America. The company operates 65 stores globally and has stores all across Mexico.

Mexican Industrial Output Falls in August (October 12) WSJ.com

• Mexico’s industrial production struggled in August, with any gains made in manufacturing offset by declines in mining output and construction. Mexico has been faced with weak export demand, particularly from the US, though production rose by 3.7% year over year in August.
• An anticipated uptick in US industrial output will help contribute to a more balanced economic recovery in Mexico by increasing demand for Mexican manufactured goods, thus increasing the country’s exports.