2. Table of contents
Overview of Virtual Reality (VR)
-‐ What is VR ?
-‐ Difference between VR, AR and MR
-‐ The different VR headsets
-‐ VR market at a glance
-‐ Investment in AR/VR companies
Online shopping market overview
-‐ The Millennials wave
-‐ Mobile and global
-‐ Offline needs to reinvent itself
-‐ FMCG category is promising
VR in China
-‐ Enormous market potenKal
-‐ Public authoriKes pushing
-‐ Private players heavily invesKng
-‐ Going forward
3. OVERVIEW OF VIRTUAL REALITY (VR)
Virtual Reality holds the promise to be even more transforma6ve than the flat Web
4. Overview of Virtual Reality (VR): What is VR ?
Oxford dicSonary: “VR is a computer-‐generated simula4on of a three-‐dimensional image or environment that
can be interacted with in a seemingly real or physical way by a person using special electronic equipment, such as a
helmet with a screen inside or hands tracking sensors.”
VR immerses a user in an imagined or replicated world, like
videogames, movies, or flight simulaKon; or simulates
presence in the real world.
Dior Fashion Show SS2016
Source: nowfashion.com
Ikea VR Experience – Pilot VR mobile
app launched in April 2016
Source: The verge
immersion
imaginaKon
interacKon
VR has 3 Is: immersion, imaginaKon
and interacKon.
Source: “Profiles in innovaKon: Virtual & Augmented Reality – Understanding the race for the next compuKng plaaorm” January 2016. Goldman Sachs
and "White paper of VR industry development" April 2016. Ministry of InformaKon and Technology, China.
5. Overview of Virtual Reality (VR): Difference between VR, AR, MR
Virtual reality (VR) Augmented Reality (AR) Mixed Reality (MR)
What is it?
A complete immersion in the
virtual world
An overlay of digital imagery
onto the real world
An overlay of digital imagery
onto the real world; objects can
be viewed from different angles
and distances; do not offer any
physical resistance when
touched or pushed because
they do not have any mass
Users’ experience
More on immersion
More on real Kme interacKvity
More on real Kme interacKvity
Examples of HMD
HTC Vive, Samsung Gear VR,
Oculus Rih
Google glass
Microsoh HoloLens, Magic
Leap and Canon MREAL System
6. Overview of Virtual Reality (VR): The different VR headsets
To experience VR, users need to put on a head-‐mounted display (HMD) or a pair of 3D glasses to view the projected 3D
image. They can visit virtual places and experience different types of 3D content.
Currently, there are two major types of VR gears on the market and one AR/MR one:
Source: “Profiles in innovaKon: Virtual & Augmented Reality – Understanding the race for the next compuKng plaaorm” January 2016. Goldman Sachs
and "White paper of VR industry development" April 2016. Ministry of InformaKon and Technology, China.
1) VR Mobile Headset 2) VR PC-‐powered / Console Headset 3) MR Headset
SAMSUNG
CARDBOARD
HTC FACEBOOK SONY
MICROSOFT
7. Overview of Virtual Reality (VR): The market at a glance
0
20
40
60
80
100
120
140
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Sohware
Hardware
Revenue (bns$)
The progression of hardware and
so]ware forecasts worldwide.
Source: Goldman Sachs Global Report VR/AR Jan 2016 – Bloomberg Technology May 2016 -‐ CiK GPS: Global PerspecKves & SoluKons Oct 2016
Video games
Live event
Video (entertainment)
Real Estate
E-‐Commerce
Retail
EducaKon
Healthcare
Engineering
Military
2025 VR/AR so]ware
assumpSons by use case
8bns$
Reality Shih
Commerce
E-‐commerce and Retail will be key industries
disrupted by the reality shih aher video
game, represenKng a cumulated potenKal
market of $11 billion in 2025.
8. Overview of Virtual Reality (VR): The market at a glance
Source: Deutsche Bank Markets Research -‐ Virtual Reality -‐ 3 March 2016
Oculus
HTC Vive
Sony PSVR
Mobile VR
0
20
40
60
80
100
120
140
2016
2017
2018
2019
2020
Total VR User (Millions)
Oculus HTC Vive Sony PSVR Mobile VR
The Mobile VR market reached
20m users in 2016 and will grow
to 140m by 2020 as many
compeKtors including HTC, LG,
and many Chinese players
(Huawei, Xiaomi, Tencent..)
introduce compeKng products to
GearVR.
Cradle VR is the most popular on mobile VR
currently (80% of usage Vs light mobile VR
like cardboard). They are very easy and
comfortable to use on top of smartphones.
The incremental cost of buying one
of these devices for the consumer is
approaching ZERO. While the experience is
sub-‐par compared to Desktop VR, Cradle
HMDs offer the best immersive experience
on mobile VR currently.
90% of user will adopt Mobile VR Versus Desktop/console equipment.
9. “The adopKon of VR and AR technologies will revoluKonize the high-‐end
retail market, which has tradiKonally been challenging for the internet to
penetrate […] With such technology, a consumer could use VR/AR to shop
around in virtual stores using VR devices and pick items in the VR
environment without physically visiKng the malls/stores .”
Goldman Sachs -‐ February 28, 2017 -‐ China technology report
Overview of Virtual Reality (VR): The market at a glance
11. ONLINE SHOPPING MARKET OVERVIEW
China's digital market is a story of scale, innova6on and raw energy
12. 0%
20%
40%
60%
80%
100%
Online shopping market overview: The Millennials wave
1/5 world internet users
1/2 world E-‐commerce Sales
China’s 467mn online shoppers: mostly
young and urban
older Rural
Millennial Urban
About 75% of China’s online shoppers are Millennials; the generaKon
aged 18-‐37. In parKcular, neSzens living in Ker 1 ciKes were early
adopters; we esKmate that c.80% of adults in Ker-‐1 ciKes aged 15-‐64 are
now already shopping online.
200mn more shoppers will shih online by 2020, with 71% of new users
coming from lower Ker cites.
By 2020 China will have 700mn online shoppers.
BUT
China is the world’s largest retail
ecommerce market, with $899.09
billion sales in 2016.
Source: Goldman Sachs – Feb 2017
13. “From 500 million online shoppers racking up Rmb5.2 trillion (US
$750 billion) in sales in 2016, China will get 700 million in 2020
reaching Rmb11.7 trillion (US$1.7 trillion).”
Online shopping market overview: The Millennials wave
14. 0%
20%
40%
60%
80%
100%
2015
2016
2017
2018
2019
2020
PC
Mobile
Online shopping market overview: Mobile and global
65% of the online shopping transacKons were made on mobile
devices in 2016 and it should be more than 85% in 2020.
Mobile-‐based online shopping
conSnues its growth momentum with
85% of transacSons planned for 2020.
With China having the most developed ecommerce markets in
the world, it is expected that purchases made digitally will
represent a globe-‐topping 25% of the country’s total retail sales
in 2020 Vs 18% in 2016.
Ecommerce in US was represenKng only 9% of its total retail
sales in 2016 and 15% for Europe.
Ecommerce will count for ¼ of total
retail sales in China in 2020.
Source: Goldman Sachs – Feb 2017
0% 10% 20% 30%
2015
2016
2017
2018
2019
2020
China
Europe
US
15. Online shopping market overview: Offline needs to reinvent itself
The rapid growth of e-‐commerce has posed an imminent threat to department store
operators and big retailers as they conKnue to lose market share to online sales
channel over recent years. Online retailing offers customers the advantage of wider
selecKons, compeKKve pricing, and easier comparison.
Source: “China’s Department Stores Report 2015 – March 2016 – Fung Group”
As consumers nowadays are becoming more discerning and looking for beyer shopping experience, department store operators which
sKll operate in a tradiKonal and single format manner will fail to meet their needs. On the contrary, department store operators which
diversify their retail business by operaKng mulKple formats have a higher chance to succeed. They have to turn from tradiKonal
retailers into lifestyle-‐concept retail businesses and focus more on selling a lifestyle rather than merely products, so as to ayract
consumers’ ayenKon and appeal to their increasingly sophisKcated demands.
“Facing the tough retail environment, the sector has witnessed a trend of store
closures for both local and foreign players over the past few years.”
“In the next five years in China, increasing numbers of dynamic retailer operators will start to adopt
innova6ve technologies to beGer engage with their customers and enhance customer experience.”
Faced with losing customers to online retailers, an
increasing number of department store players have
stepped into the e-‐commerce space – either by
launching their own standalone transacKonal website
or opening online store on third-‐party plaaorms.
16. 0
2
4
6
8
10
12
14
16
18
2015 2016 2017 2018 2019 2020
FMCG Total
FMCG Online
the overall (offline + online) FMCG
(including grocery) market to reach
Rmb14 trillion (US$2 trillion) by 2020
Rmb bn
2020E: US$2trn
13%
According to Goldman Sachs the biggest opportunity as one of the fastest
growing segments in online retail is Fast Moving Consumer Goods (FMCG)
and groceries – a US$2 trillion market in China by 2020E, which is 37% of all
retail spending today. FMCG and groceries include fresh food, packaged food,
personal care, beverages, healthcare, infant/maternity (ex. fashion) etc — that
is, all the items that one would expect to find in a typical supermarket.
Source: Goldman Sachs – Feb 2017
Fresh Food
Packaged food
beverage
Household &
personal care
Other FMCG
And online penetraSon to rise to 13% by
2020E from 4% in 2016 driven by packaged
food, personal care, beverages, infant etc.
Online penetraKon by FMCG categories (2016)
Online shopping market overview: FMCG category is promising
4%
Online
penetraKon
2%
Online
penetraKon
3%
Online
penetraKon
31%
Online
penetraKon
Online penetraKon for FMCG
will be X3 in 4 years.
17. “The biggest opportunity we see for the next 5 years as one of
the fastest growing segments in online retail in China is Fast
Moving Consumer Goods (FMCG) and groceries…all the items
that one would expect to find in a typical supermarket .”
Goldman Sachs -‐ February 28, 2017 -‐ China technology report
Online shopping market overview: FMCG category is promising
18. VR IN CHINA
Chinese Internet companies and e-‐commerce players jump on the VR bandwagon
19. VR in China: Enormous market potenSal
0
20
40
60
80
100
120
140
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Sohware World
(Ex.China)
Hardware World
(Ex.China)
Sohware CHINA
Hardware CHINA
Revenue (bns$)
The progression of hardware and
so]ware forecasts in China Vs worldwide.
Source: Goldman Sachs Global Investment Research – Bloomberg Technology
China represents 30% of
the worldwide VR market in
term of revenue and will be
worth $8.5 billion in 2020.
Sohware revenue will be
more important than
hardware from 2020
represenKng 4.5 billions at
that Kme going up to $20
billions in 2025.
20. Overview of Virtual Reality (VR): The market at a glance
Source: Deutsche Bank Markets Research -‐ Virtual Reality -‐ 3 March 2016 // CANALYSIS -‐ Jason Low -‐ Chinese VR vendors dominate the floor at CES Asia 2016
Oculus
HTC Vive
Sony PSVR
Mobile VR
0
10
20
30
40
50
60
70
2016
2017
2018
2019
2020
Total VR User (Millions)
Oculus HTC Vive Sony PSVR Mobile VR
The Mobile VR market reached
9m Chinese users in 2016 and
will grow to 65m by 2020 thanks
to the high penetraKon of mobile
(85% in 2020), the fierce
compeKKon among
manufacturers (Deepon, Pico,
Tencent, Huawei..) and the
government support.
VR has the potenKal to thrive in China.
Barriers to enter the VR market have been
lowered. Local vendors are releasing VR
headsets that overcome the quality and
performance issues of simple viewers.
Canalys Analyst Jason Low said, ‘The
compeKKon is around the user experience,
hardware quality and content. Currently,
there isn’t a clear leader for VR content in
China.
China accounts for 40% of virtual reality headset shipments in 2016 and by
consequence represents almost half of the worldwide VR users market.
21. VR in China: Public authoriSes pushing
The Chinese government and other official enSSes are supporSve towards the development of VR in China.
Source: “China to set standards for VR and AR technology.” All China Tech. 9 May, 2016 and "White paper of VR industry development" April 2016.
Chinese government: VR is coined as one of the newly
emerging technologies in China’s 13th Five-‐year Plan.
The government will issue a series of regulaKons on
content producKon, terminal displays and plaaorm
development.
The Ministry of Industry and InformaKon Technology
(MIIT) issued a White paper on VR in April 2016, outlining
the development of VR in China. It covers the
characterisKcs and features of VR technology, current
usage of VR in different industries, future developments
and suggesKons on government policies to support VR
development.
Apart from that, the plan also listed 5G network as a
priority. According to the plan, 5G network development
and tesKng will be ready by 2018 and IPv6 will in large
scale deployment and commercialize stage. By 2020, 5G
network will complete its research and begin to
commercialize while the whole internet will upgrade to
IPv6. Also, there will be major breakthroughs in future
network structure and key technologies.
White Paper on VR, issued by MIIT in April 2016
22. VR in China: Public authoriSes pushing
Source: “China to set standards for VR and AR technology.” All China Tech. 9 May, 2016 and "White paper of VR industry development" April 2016
HTC Signs Strategic Partnership with Shenzhen Municipal
Government.
Both parKes are se}ng up a joint China VR Research
InsKtute and create a 10 billion RMB Shenzhen VR
Investment Fund to accelerate the development of the VR
industry in China.
Shenzhen is extremely globally compeKKve in terms of
R&D, commercializaKon and internaKonal expansion.
Within the VR industry alone, Shenzhen boasts many
homegrown companies along various parts of the industry
chain, from device manufacturing to content generaKon
and distribuKon to applicaKon
SHENZHEN Hardware capital of the world and new Silicon valley of
China (WIRED Magazine) might also become the VR worldwide capital.
“Shenzhen is leading China in VR development. Some may argue that VR is the highest poten6al market in today’s
world economy. Judging by the exis6ng infrastructure inclina6on, Shenzhen will take ownership of the market and
Silicon Valley will trail in a distant second.” Sean Konieczny -‐ Technode / TechCrunch China -‐ Jan 2017
23. VR in China: Private players heavily invesSng
Major players in China such as Baidu, Alibaba and Tencent are fighSng with tech startups for a piece of the nascent market.
Recently, some Internet giants and e-‐commerce players (BAT) have put more
focus on VR/ AR technologies and come up with related iniKaKves or
strategies. They are eager to push VR beyond entertainment and gaming.
Source: Goldman Sachs Global Investment Research – Bloomberg Technology
24. VR in China: Private players heavily invesSng
ALIBABA reality shi] ecosystem is already
established.
VR PLATFORM: BUY+
Later on in November 16, just ahead of "Single's
Day" (a Chinese fesKval where people literally buy
themselves presents for being single) e-‐commerce
giant Alibaba introduced Buy+, a virtual reality universe
where you can peruse familiar shopping desKnaKons
like Macy's and Target.
Source: Goldman Sachs Global Investment Research – Bloomberg Technology
RESEARCH & DEV: GM Lab
Alibaba set up Gnome Magic Lab (GM Lab) for VR/ AR
technology development in March this year. The Lab
works on VR and AR technologies to help sellers on
Alibaba plaaorms to build their own 3D product
inventories, with a long-‐term goal of helping businesses
set up VR stores.
M&A/ INVESTMENT:
Alibaba led a new funding round of US$793.5 million
for Magic Leap, a U.S.-‐based MR startup in February
2016. Magic Leap was valued at US$4.5 billion.
FIRST VR PAYMENT METHOD:
Ant Financial, Alibaba’s financial service affiliate
announced that it will launch a VR-‐ based payment
services (VR Pay) in late September. VR Pay will allow
users to complete transacKons without removing their
HMD. When users place an order, VR Pay will present
them with a 3D Alipay checkout counter.
25. VR in China: Private players heavily invesSng
TENCENT reality shi] ecosystem is coming.
FUTURE CHINESE LEADER FOR HMD ?
Tencent is preparing to launch its long-‐awaited virtual
reality headset later this year… in a bid to dominate
China’s fast-‐growing VR market. An internal research
team at Shenzhen-‐based Tencent has been developing
both PC-‐based VR systems, similar to Facebook owned
Oculus Rih, and mobile headsets, akin to Samsung’s
Gear VR or Google’s Daydream
Source: Goldman Sachs Global Investment Research – Bloomberg Technology
LEADER IN MOBILE GAMING
Tencent first signaled its interest
in VR in 2015, when it launched
its Android-‐powered MiniStaKon
gaming system, which it said
would be compaKble with a
future VR headset.
VR SOCIAL NETWORK & PAYMENT ?
A sign-‐up page for developers interested in creaKng
games for the plaaorm suggested Tencent planned to
create a one-‐stop shop for VR, using its WeChat and QQ
services for social networking, as well as providing a “fast
and smooth” in-‐app payment system.
The miniSta4on, developed in partnership
with Lenovo, is an Android-‐powered cube
and the more powerful version of the system
is said to connect to a VR headset.
26. VR in China: Going forward
Governmental support will
conSnue to help drive the
development of VR industry in
China.
– With the emphasis of VR in the
13th Five-‐year Plan and the
publicaKon of the VR White Paper,
more enterprises are expected to
venture into the sector.
Source: What does virtual reality do to your body and mind?” January 2016. Wall Street Journal.
Technological advancement will create more
sophisScated users; and VR content
development is the key differenSator for
winning consumers’ heart.
– Developers are sKll at the stage of improving
the hardware, i.e. the HMD. Once the technology
becomes more mature, that is when the HMD can
become lighter (on average the glasses weight
around 250g now) , and users no longer need to
experience that much physical challenges such as
headaches, nausea and eye strain occur while
experiencing VR, users can focus more on the VR
content they are seeing instead.
MOBILE VR USAGE GOVERNMENT SUPPORT TECH DEVELOPMENT
Mobile VR is set to dominate VR usage.
– Currently, no mayer whether it is PC-‐ or
mobile-‐ driven VR, there are certain
requirements on the hardware, such as the
screen for mobile-‐driven VR and the
configuraKon of PC. These will make VR less
easy to reach out to general consumers.
– Yet, with the high penetraKon of mobile
phone, it will be much easier for people to try
out the technology using mobile phones
instead of PC-‐connected ones.