1. Apparel Retailing Webinar Series Hot Topics: Amazon and Activewear
Presented by:
Tiffany Hogan, Analyst
Mary Brett Whitfield, Senior Vice President
May 23, 2014

2. Copyright © 2014 Kantar Retail. All Rights Reserved.
501 Boylston Street, Suite 6101, Boston, MA (617) No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photography, recording, or any information storage and retrieval system now known or to be invented, without the express written permission of Kantar Retail. The printing of any copies for back up is also strictly prohibited. Disclaimers The analyses and conclusions presented in this seminar represent the opinions of Kantar Retail. The views expressed do not necessarily reflect the views of the management of the retailer(s) under discussion. This seminar is not endorsed or otherwise supported by the management of any of the companies covered during the course of the workshop or within the following slides.

3. Agenda
Activewear Activity
“Amazon Fashion Is Booming”

4. Activewear, What’s the Big Deal?
USD14 billion+ industry
Among the fastest-growing segments of U.S. apparel industry
Function: ShopperScape® has consistently shown that women are more likely to be making an effort to live an active lifestyle (i.e., eating healthier and exercising more)
Fashion: Gen Y is more likely than other cohorts to cite athletic shoes and activewear as top categories where they are currently trading up
Source: Kantar Retail ShopperScape®, Feb 2013, NPD, research, analysis

5. Activewear Is Everyday Wear
Nearly six in 10 wear it at least once a week
Frequency of Wearing Activewear
(among all female primary household shoppers)
Incidence of Wearing Activewear
at Least Once a Week, by Cohort
(among all female primary household shoppers)
58% of women wear active wear at least once a week
Source: Kantar Retail ShopperScape®, March 2014

6. Activewear Part of Everyday Routines
At home and while out and about
Shopper cohorts at least 10% more likely to wear activewear for activity
Where and When Shoppers Wear Activewear
(among all female primary household shoppers who wear activewear at least once a week
Seniors
At home
Boomers, Seniors
Exercise
Gen Y, Gen X
Gen Y
Out & About
Seniors
Going Out
Seniors
Gen Y
Source: Kantar Retail ShopperScape®, March 2014

7. In Aggregate, Function Trumps Fashion
Value (price) comes in third
What’s Important When Buying Activewear
(shoppers rating factor 4 or 5 on 5-point scale among all female primary
household shoppers who wear activewear at least once a week)
Source: Kantar Retail ShopperScape®, March 2014

8. Gen Y Places Premium on Fashion
All fashion-related aspects of activewear features more important to Gen Y
What’s Important When Buying Activewear: Fashion
(shoppers rating factor 4 or 5 on 5-point scale among all female primary
household shoppers who wear activewear at least once a week)
Source: Kantar Retail ShopperScape®, March 2014

9. Gen Y also Spends More on Activewear
Activewear also takes a bigger chunk of the apparel budget
Self-Reported Past 6-Month Spending on Activewear
(among all female primary household shoppers who wear activewear at least once a week)
Activewear Spending as Percent of Total Apparel Spending
(among all female primary household shoppers who wear activewear at least once a week)
Source: Kantar Retail ShopperScape®, March 2014

10. Mass Retailers Have Largest Share of Preference
Apparel specialists challenge mass among younger cohorts
Where: Most Recent Activewear Purchase
(among all female primary household shoppers who wear activewear at least once a week)
All Female Shoppers
Gen Y
Gen X
Boomers
Seniors
Mass Retailers (net)
32%
35%
28%
34%
Apparel Specialty Retailers (net)
19%
27%
21%
13%
11%
Department Stores (net)
18%
10%
24%
14%
Sporting Goods Retailers (net) 8% 6% 5%
Amazon.com 3% 2%
Mass: This skews toward Walmart … but close to evenly split between Walmart and Target for Gen Y
Apparel Specialty: Just 3–4% of this is the activewear specialists; largest portion of share held by off-price specialists
Department Stores: Large Boomer share driven by Kohl’s
Source: Kantar Retail ShopperScape®, March 2014

11. Activewear Retailing Trends
Lululemon Effect
Lifestyle Brands Creating the Activewear “Experience”

12. The “Lululemon” Effect …
The brand has elevated the status of “workout clothes”
Wearability has grown to include activities beyond just the gym
Source: Kantar Retail Analysis

13. … Is Having a “Trickle Up” Effect
“Low” Fashion Influences “High” Fashion
Activewear influences were highly visible on the runways for Fall 14.
Marc by Marc Jacobs DKNY Tommy Hilfiger
Ralph Lauren J Crew
Source: Kantar Retail Analysis

14. … And a “Trickle Over” into Specialty Retailing
Trend having a strong effect on specialty and mass retailing.
Lululemon developed its own “&go” line of non-workout gear.
Creating a new category of “athleisure”
- Activewear is becoming a staple instead of a commodity
- Has multiple end uses to the customer; increases in value
- Becoming more valuable to retailers
Source: Kantar Retail Analysis

15. Activewear in Lifestyle Brands
Product Differentiation and Customer Experience
Many lifestyle apparel brands have extended their assortments to include activewear, broadening the occasions shoppers have to connect with the brand.
Product differentiation and creating a customer experience around the category are key for lifestyle retailers.
Source: Kantar Retail Analysis

16. Activewear in Lifestyle Brands
Product Differentiation
Urban Outfitters recently launched Without Walls, a private label shop-in-shop activewear brand.
Aesthetic very much in line with core assortment
Line focuses on four categories: surf, trail, cycle and general fitness.
Source: Kantar Retail Analysis

17. Extend the experience beyond the product.
Activewear in Lifestyle Brands
Customer Experience
Merchandising:
- Separate tab
- Offering extended assortment
Non-Transactional Interaction:
- A dedicated blog
- Partner Athletes
In Store Experience
- “Grand Opening” celebrations
- Shop-in-Shop set up
Extend the experience beyond the product.
Source: Kantar Retail Analysis

18. Activewear in Lifestyle Brands
Product Differentiation
Expanding into a “4 seasons business”
Saw 14% global revenue growth in Q1
Extending the offer with Mountain Athletics line, specifically designed for cross training and crossfit.
Catering to an emerging trend in the market
Expanding offering in shoes as well to cater to year-round athletics
Sources: Kantar Retail Analysis & VF Corp. Q1 Earnings Call

19. Activewear in Lifestyle Brands
Customer Experience
Engaging customers through online training program
Using athlete partnerships to create a motivating environment
Mobile app available in June
Like the macro trends in retail, activewear is becoming more about the experience for lifestyle retailers
Successful retailers will need to create an environment for the consumer as well as tailored products
Source: Kantar Retail Analysis

20. Key Takeaways
Playing in activewear requires positioning with the customer in mind
Strategic Positioning
Create differentiation and cohesive brand platform
How does this category complement or supplement?
Position to drive performance among core/target audience and lift KPIs
Value $
Align with shopper requirements
Find appropriate mix of product, price, in-store experience
Source: Kantar Retail research, analysis

21. Agenda
Activewear Activity
“Amazon Fashion Is Booming”

22. Apparel as Growth Category at Amazon
Amazon Fashion is booming. Premium brands are recognizing that they can use Amazon to reach fashion conscious, high-demo customers, and customers are enjoying the selection, free returns, detailed photos, and video clips that let them see how clothes move and drape as the models walk and turn.
Jeff Bezos
Founder and CEO,
Amazon.com
April 2014
Source: Amazon.com

23. Amazon Has Second-Largest Apparel Shopper Base
Monthly Shopping Incidence for Apparel at Key Retailers*,
Among All Female Primary Household Shoppers
*Inclusive of shopping at stores and website as applicable.
Source: Kantar Retail ShopperScape®, March 2014

24. Monthly Amazon Shopping Incidence for Apparel,
Shoppers in the “Amazon Ecosystem” Even More Likely to Be Regular Apparel Shoppers
Monthly Amazon Shopping Incidence for Apparel,
(among all female primary household shoppers)
All Shoppers: 24%
Gen Y
Gen X
Boomers
Seniors
Amazon
Prime
Members
Monthly
Amazon
Shoppers
Source: Kantar Retail ShopperScape®, March 2014

25. Amazon Apparel Shoppers Are Younger, More Affluent
*Female apparel shoppers
Source: Kantar Retail ShopperScape®, March 2014

26. Amazon Draws Apparel Shoppers from Top Apparel Destinations
Cross-Shopping:
Monthly Amazon Shopping Incidence for Apparel,
Among Monthly Apparel Shoppers at Key Retailers
(among all female primary household shoppers)
*Read as: 44% of all female shoppers who shop at Walmart at least once a month also shop for apparel at Amazon at least once a month
Source: Kantar Retail ShopperScape®, March 2014

27. The Future of Amazon.com/Fashion
Adopting improved visual merchandising
Source: Amazon.com, Kantar Retail analysis

28. The Future of Amazon.com/Fashion
Adopting improved visual merchandising
Bringing a portfolio of concepts into the “ecosystem”
Source: Amazon.com, Kantar Retail analysis

29. The Future of Amazon.com/Fashion
Adopting improved visual merchandising
Bringing a portfolio of concepts into the “ecosystem”
Testing and learning with platinum partners
Source: Amazon.com, Kantar Retail analysis

30. The Future of Amazon.com/Fashion
Adopting improved visual merchandising
Bringing a portfolio of concepts into the “ecosystem”
Testing and learning with platinum partners
Leveraging social media
Source: Amazon.com, Kantar Retail analysis

31. Amazon Exceeds 244M Customer Base
Third party growth remains strong
+17% vs. Q1 2013
Active Customer Accounts = customers who have purchased products on Amazon at least once in the last 12 months
Y-o-Y growth >60%
Active Customer Accounts have exceeded 244M for Q Expanding digital content and services, and continued focus on selection, price, and convenience will accelerate this growth into Third-party units as a percentage of total units was 40%, consistent with Q
Source: Kantar Retail analysis; Company reports

32. Amazon Continuing to Innovate Supply Chain/ Fulfillment
Making the revolutionary, routine—New Sunday Delivery Markets
Austin, TX
Cincinnati, OH
College Station, TX
Columbus, OH
Dallas, TX
Houston, TX
Indianapolis, IN
Lexington, KY
Los Angeles, CA
Louisville, KY
New Orleans, LA
New York, NY
Oklahoma City, OK
Philadelphia, PA
San Antonio, TX
Shreveport, LA
Waco, TX
In the U.K.: London, Birmingham, Milton Keynes, Oxford, Nottingham, Manchester and Leeds

33. Amazon Rolling Out Same-Day Delivery
Spreading across United States, Germany and UK
Baltimore 11:00 a.m. local time
Boston 11:00 a.m. local time
Chicago 7 a.m. local time
Dallas 12:15 p.m. local time
Indianapolis 11:30 a.m. local time
Los Angeles 12:15 p.m. local time
New York City (and parts of New Jersey) 8:00 a.m. local time
Philadelphia 8:30 a.m. local time
Phoenix 12:15 p.m. local time
San Francisco 12:15 p.m. local time
Seattle12:15 p.m. local time
Washington, D.C.11:00 a.m. local time
Orders are generally delivered in the evening from 6-9pm, although more flexible choices may come online soon
Prime members pay $5.99 and non-Prime members pay a minimum of $ $0.99 per extra item.
Cutoff times vary by distance from Fulfillment Centre and only include ≈ top 10,000 SKU’s.
Kantar Retail Analysis, Amazon.com

34. The Future of Online-Only Apparel Retailing
Which model will prevail?
Demand creation vs. demand fulfillment
Content
Curation
Experience
Assortment
Execution
Fulfilment
Source: Amazon.com, Kantar Retail analysis

35. Multi-Channel Retailers Not Standing Still
Introducing new tools, new functionality and organizing to better compete
Nordstrom adds “Search & Send” functionality for full Nordstrom Rack inventory, and Rack Alerts app lets shoppers make merchandise requests
Neiman Marcus organizes for more efficient cross-channel operations
Gap expands Reserve in Store
Source: Company websites, Kantar Retail analysis

36. Questions?
Activewear Activity
“Amazon Fashion Is Booming”

37. Tiffany Hogan
Analyst T:
Mary Brett Whitfield
Senior Vice President T: