Billion Dollar Babies: Trends and Opportunities in the New E-Commerce World

A Word from Gridley & Company, LLC The e-commerce industry has undergone massive transformations since the launches of early industry leaders Amazon and eBay that created the backbone of the industry as we know it today. Although Amazon and eBay are still dominant players in the industry, major forces of disruption have taken place in the last few years that took e-commerce to an entirely new level. Social networks like Facebook and Twitter have been spreading like wildfire – the term “social commerce” was coined and the networks became huge drivers of a new e-commerce wave. The daily deal site Groupon launched in November 2008 and infamously turned down Google‟s $6 billion offer in December 2010. The e-commerce industry was never the same again with over 100 similar companies launched, attempting to share a slice of the pie. Private sales companies like Gilt Groupe and GSI- owned Rue La La started offering deeply discounted luxury clothing via flash sale in the midst of one of the worst recessions ever and successfully built an empire of online sample sales – there are more than 80 of such companies to date. In addition, new technologies like tablets and 3G/4G smartphones have become an enormous catalyst of mobile commerce. In this comprehensive study, we focus on the major disruptions that are changing the course of the e-commerce industry. More importantly, we have identified the opportunities necessary to capitalize on these trends. We hope you enjoy the industry overview and our perspectives. Please give us a call to discuss the content of this presentation. Linda Gridley President & CEO Karen Yau Smith linda.gridley@gridleyco.com Pratik Patel Vice President 212-400-9710 Vice President karen.smith@gridleyco.com pratik.patel@gridleyco.com 212-400-9718 212-400-9712 2© 2011 Gridley & Company LLC

Table of Contents I. Overview of the E-Commerce Industry II. New Emerging Business Models and Disruptive Subsectors A. Private Sales Model B. Group Buying / Local E-Commerce C. Mobile Commerce III. Overview of the E-Commerce Service Providers IV. Summary of Opportunities Appendix A. Summary Data on Public E-Commerce Companies B. Gridley & Company LLC Overview 3© 2011 Gridley & Company LLC

Evolution of the E-Commerce Industry Mobile E-Commerce Daily Deals / Local E-Commerce U.S. Broadband Posted First Reached 200mm Ever Profits Users Adwords Backbone of Launched for Surpassed $21bn $177bn in E-Commerce College in Revenues E-Commerce Sales, Formed Students +13% from 2009 1995 2003 2007 2010 2000 1994 1997 1998 2002 2006 2009 Teamed Up with Acquired Acquired First Company Google Netscape to Reach Launched Launched To Compete $1mm in For $1.5 bn with Google Online Sales For $1.65 bn USPS Private Sales Traffic Surpasses Launched Model e-Stamps SSL Encryption iTunes became Enabled Online largest digital Social Traffic Shopping music retailer E-Commerce (>1 bn downloads) 5© 2011 Gridley & Company LLC

E-Commerce is Growing at 5x Traditional Retail • Online sales are expected to overtake traditional sales in less than 10 years • The U.S. was the 2010 leader in global e-commerce sales at 27% of worldwide volume; U.S. e- commerce retail sales totaled about $177 billion in 2010, up an average of 13% from 2009 • New avenues for e-commerce, e.g. daily deals, private sales, etc. boosted the sector‟s momentum in 2010 and will contribute an increasingly larger share of the e-commerce market in the next few years 10 Years of Acceleration: Online Dollar Growth to Eclipse Offline by 2019 year-over-year change in sales by channel ($ billions) $80 $70 $60 $50 $40 $30 $20 $10 $0 E E E E E E E E E E E 10 11 12 13 14 15 16 17 18 19 20 20 20 20 20 20 20 20 20 20 20 20 On-Line Growth Off-Line Growth Source: Goldman Sachs Research and International Data Corp. estimates. 6© 2011 Gridley & Company LLC

Summary of E-Commerce Landscape Today Traditional E-Commerce Emerging E-Commerce(1) Third Party Seller eRetailers -- Brands eRetailers -- Stores Daily Deals Mobile Platforms(1) Private Sales Commerce LOCAL BUSINESS MODELS Push Shopping Penny Auctions Infrastructure(1) Marketing(1) Execution / Integration(1) Processing / Fulfillment(1) PROVIDERS SERVICE Note: (1) These lists reflect only some of the companies in the categories; the detail lists of companies are in section II and III. 7© 2011 Gridley & Company LLC

Convergence Themes • E-commerce models are converging as different marketplaces and disruptive business models are springing up and growing fast – investment in – „s rejected offer for – acquisition of • E-commerce is no longer just a distribution channel but a way for brands and merchants to reach consumers in a targeted manner – Convergence of e-commerce distribution and services with full marketing – E.g. has much success with its custom recommendations for customers • E-commerce is converging with content and social to create strong audience relationships and enable sophisticated audience segmentation and targeting – E.g. – Higher content engagement, greater content stickiness – Higher consumer yield and customer lifetime value – Greater audience reach and segmentation through social mechanisms 8© 2011 Gridley & Company LLC

Ten Key Trends in E-Commerce • Social media driving consumption • Continued consolidation among private sales companies • Evolvement of daily deals / local e-commerce sector • Emergence of industry leaders in private sales and daily deals • Mobile commerce catching up to traditional e-commerce • Emerging new business models: push shopping and penny auctions • Expansion of virtual goods and currencies • Online merchandising becoming increasingly sophisticated • Focus on high return initiatives • Proliferation of third party seller platforms 9© 2011 Gridley & Company LLC

Billion Dollar Babies: Trends and Opportunities in the New E-Commerce World

by Gridley & Co. LLC on Apr 10, 2011

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Billion Dollar Babies: Trends and Opportunities in the New E-Commerce World — Presentation Transcript