Forrester-Kony: The State of Mobile Commerce for Retailers Today

Methodology Annually, Shop.org and Forrester Research execute a survey with online retailers regarding key metrics and areas of focus; this years survey was entirely focused on mobile commerce and mobile retail execution. This survey was fielded in April 2012 and included questions pertaining to mobile strategy, investment and mobile marketing. The Shop.org/Forrester mobile survey resulted in 59 complete and partial responses across a variety of industries, including apparel, footwear, general merchandise, home furnishings, and personal care. – 75% of participating companies were multichannel retailers; 8% were web-based/pureplay retailers; 17% of respondents were manufacturers selling direct to consumer – 40% of respondents generated more than $100 million in direct sales from their web channels in 2011 – 63% of respondents have been selling online for more than 10 years. The information for this study was also supplemented by data (anecdotal and empirical) from the Retail Advertising and Marketing Association (RAMA) as well as vendor interviews, which provided some additional information about the role of mobile marketing for multichannel retailers. Where relevant we also supplemented the data with information from consumer surveys taken from Forrester’s partnership with Bizrate Insights.2 © 2012 Forrester Research, Inc. Reproduction Prohibited

Respondents profile Company type Multichannel retailers 75% Web-based/pureplay retailers 8% Manufacturers 17% Annual online sales Less than $10 million 17% $10 - $100 million 43% More than $100 million 40% Online Tenure 1-4 years 12% 4-10 years 25% More than 10 years 63%3 © 2012 Forrester Research, Inc. Reproduction Prohibited

Key data points captured in this report  Smartphone and tablet device strategy: – KPIs/metrics used – Sales metrics – How metrics compare to web site metrics – State of mobile app implementation and strategy – Areas of retailer focus and investment  Mobile commerce: – Where traffic originates – Mobile web and app traffic – Site features used – Mobile usage in store  Mobile marketing: – General mobile marketing spend – Mobile marketing tactics4 © 2012 Forrester Research, Inc. Reproduction Prohibited

Perspective: key findings from last year (2011) The majority of retailers (91% of those surveyed) reported having some mobile strategy in place; this includes all retailers planning to dedicate some resources to mobile Many retailers still had not optimized their mobile presence – 44% of retailers surveyed said that they had "nothing special" about their mobile sites There is little differentiation in objectives for smartphones versus tablets – Most retailers agreed on a key priorities for their mobile efforts (both tablets and phones) were direct revenue and sales Mobile sales were a small single-digit percent of overall web revenue for most retailers Source: The State of Retailing Online, 20115 © 2012 Forrester Research, Inc. Reproduction Prohibited

Forrester expects US smartphone commerce to grow to $31 billion by 2016 +40% +67% Source: Forrester Research Mobile Commerce Forecast, 2011 to 2016 (US)Note: eCommerce does not include mobile ring tones, mobile gaming and mobile video. Tablet sales are excluded from this forecast. 6 © 2012 Forrester Research, Inc. Reproduction Prohibited

Key findings from 2012 Tablet and mobile sales continue to constitute a fraction of total web sales; tablets are coming to represent a significant portion of "mobile" revenue Site conversion and order value on tablets tend to replicate if not exceed comparable "desktop" rates The majority of site traffic to mobile originates from search, email and organic load The majority of mobile marketing investments go into paid search, email and display campaigns Objectives for smartphones and tablets are different (e.g. smartphone objectives focus more on multichannel goals) but investments in functionalities are similar For retailers who offer customer-facing apps, the majority of their mobile sessions still happen through their mobile-enable website – These retailers typically find that apps are nonetheless critical to providing a premium service to their best customers7 © 2012 Forrester Research, Inc. Reproduction Prohibited

Overview of research Covered in this deck Partially covered in this deck Customers browsing Customers browsing Store usage of and buying outside and buying in stores mobile devices of storesLocation Home, on the go, outside In stores In stores stores Users Customers Customers Store associates, customers Resources Shop.org, Bizrate Insights, Forrester Technographics, Shop.org, NRF Research NRF Research NRF RAMA 8 © 2012 Forrester Research, Inc. Reproduction Prohibited

The top objective for smartphones is driving traffic to other channels. The top objective for tablets is being a source for product and price information.* 9 © 2012 Forrester Research, Inc. Reproduction Prohibited*Base: RAMA retailer interviews

Retailers use their website, emails and social media to promote their mobile offering Top ways to promote mobile offerings to customers Rank Top ways to promote mobile offerings to customers 1 On website 2 Emails 3 Social media In-store signage offering QR-type codes + In-store signage 4 promotes smart phone app(s) 5 Paper catalogue 6 Print advertising Base: 4 online retailers Source: RAMA survey with retail marketers10 © 2012 Forrester Research, Inc. Reproduction Prohibited

The majority of mobile marketing is dedicated to smartphone and store mobile marketing Do you currently use any of the following mobile marketing tools? Smartphone marketing Tablet marketing Store mobile marketingQR codes or other barcode scanning 75%Smartphone paid search campaigns 55% Mobile email optimization 52% Mobile display ad campaigns 41% Tablet paid search campaigns 39% Other location based marketing 27% Check-in campaigns 25% SMS campaigns 23% Tablet display ad campaigns 20% Identifying device IDs 18% Base: 56 online retailers Source: “The State of Retailing Online 2012”, a Shop.org study conducted by Forrester Research 11 © 2012 Forrester Research, Inc. Reproduction Prohibited

Mobile advertising budgets are in single digit numbers Percentage of interactive marketing budget dedicated to mobile advertising By total online sales $10 Million to Less All Less than $10 million than $100 Million $100 Million or More 3.9% 3% 4.1% 3.6% By type of retailer All Multichannel Pureplay 3.9% 4.2% 3.6% On average, less than 4% of total interactive marketing budgets are dedicated to mobile advertising. 4 out of 5 retailers surveyed have increased their budgets compared to last year.* Base: 56 online retailers Source: “The State of Retailing Online 2012”, a Shop.org study conducted by Forrester Research *Base: 5 online retailers Source: RAMA survey with retail marketers12 © 2012 Forrester Research, Inc. Reproduction Prohibited

QR codes are popular with retailers of all sizes because of the ease of dissemination 15% of web buyers with mobile phones Top mobile marketing tools by size of total sales have ever scanned a 2-D barcode. $10 Million to Less than Rank Less than $10 million $100 Million $100 Million or More QR codes or other QR codes or other 1 Mobile email optimization barcode scanning barcode scanning Smartphone paid search QR codes or other Smartphone paid search 2 campaigns barcode scanning campaigns Other location based Smartphone and tablet Tablet paid search 3 marketing paid search campaigns Base: 56 online retailers Source: “The State of Retailing Online 2012”, a Shop.org study conducted by Forrester Research13 © 2012 Forrester Research, Inc. Reproduction Prohibited

The majority of site traffic on mobile originates from search, email and direct typing Top 3 places where traffic to retailers’ websites on mobile devices originates Smartphone Tablet 1. Search engines (84%) 1. Search engines(85%) 2. Email (80%) 2. Email (81%) 3. Direct (Typing in the mobile 3. Direct (Typing in the mobile site site URL) (76%) URL) (79%) 20% of emails in given campaign are opened on a mobile device! Few retailers reported SMS/text to be a top-3 driver of mobile traffic but SMS list sizes ranged from <10k to up to 1MM Base: 55 online retailers Source: “The State of Retailing Online 2012”, a Shop.org study conducted by Forrester Research14 © 2012 Forrester Research, Inc. Reproduction Prohibited

When retailers have apps, the majority of mobile sessions are Web sessions Of your total mobile device browser sessions, how do your mobile browser sessions break out? (among retailers who have tablets and smartphone apps) *Web* sessions *App* sessions *Web* sessions *App* sessions (smartphone) (smartphone) (tablet) (tablet) 45% 17% 28% 11% Base: 4 online retailers Source: “The State of Retailing Online 2012”, a Shop.org study conducted by Forrester Research16 © 2012 Forrester Research, Inc. Reproduction Prohibited

Many retailers surveyed offer mobile apps  45% of online retailers have implemented mobile apps.  Retailers have on average 500,000 downloads for their smartphone apps and 100,500 for their iPad apps.  When retailers have apps on different devices, 70% of smartphone app downloads are on iPhones. Base: 51 online retailers Source: “The State of Retailing Online 2012”, a Shop.org study conducted by Forrester Research17 © 2012 Forrester Research, Inc. Reproduction Prohibited

One quarter of consumers prefer the same experience on both mobile devices and the PC Do you shop (i.e. browse, research, or If you have interacted purchase) online via your mobile with [MerchantName] on a mobile device, device(s) with any online retailer? then which experience do you prefer? Accessing the standard website (i.e. the same view you would 28 % Yes, including see on your computer) purchases 26% Using the mobile version of the site (i.e. the site may have less 7% content but is optimized to look… No, 45% Using an app (if this retailer has one available for download) 9% Yes, excluding I dont have a preference 14 % purchases 29% I have never interacted with [Merchant] from a mobile device 43 % Base: 3,035 recent online shoppers Base: 1,627 recent online shoppers with web-enabled mobile phones with web-enabled mobile phones Source: Bizrate Insights/Forrester Research Mobile Flash October 201118 © 2012 Forrester Research, Inc. Reproduction Prohibited

Page load times and page navigation are leading consumer challenges on mobile devices When shopping online using your mobile device, do you ever experience any of the following problems? I dont ever experience a problem 33 % Pages load slowly 31 % It is difficult to click on exactly what I want 28 % It is difficult to enter information 22 % Graphics and information are not sized correctly 18 % It is difficult to tell if my data is secure 16 % It is difficult to clearly read the content 16 % I am unable to find what I am looking for, but it is … 15 % There isnt enough text information available 10 % There arent enough pictures/graphics 9% Base: 622 recent online buyers with multiple mobile devices Source: Bizrate Insights/Forrester Research Mobile Flash October 201119 © 2012 Forrester Research, Inc. Reproduction Prohibited

Unique content and service to customers drive app development – but maintenance remains a challenge What describes your companys views about apps? Enable barcode scanning 57% Give us the ability to provide 57% functions that the site won’t easily… Are good for one’s best customers 57% Are hard to maintain 48% Are critical to our business 19% Apps are a premium service but also hard Will become obsolete with HTML 5 19% to maintain Enable other benefits like games 14% Allow us to tap into 3rd party 10% developers Base: 21 online retailers Source: “The State of Retailing Online 2012”, a Shop.org study conducted by Forrester Research20 © 2012 Forrester Research, Inc. Reproduction Prohibited

Tablet and mobile sales are still a fraction of total sales Tablet/mobile sales as percentage of web sales in 2011 137MM 61MM consumers consumers with with tablets smartphones in the US in in the US in 2012 2012 1.5% 3.2% Base: 43 online retailers Source: “The State of Retailing Online 2012”, a Shop.org study conducted by Forrester Research21 © 2012 Forrester Research, Inc. Reproduction Prohibited

Tablet sales though look more promising than smartphone sales 1.0% 2.4% Site conversion rate $134.37 $159.28 Average order value 29% 29% Repeat customer rate 69% 62%Shopping cart abandonment rate Base: 55 online retailers Source: “The State of Retailing Online 2012”, a Shop.org study conducted by Forrester Research 22 © 2012 Forrester Research, Inc. Reproduction Prohibited

Half of retailers surveyed reap higher average order value on tablets than on PCs Higher than my Web About the same as my Lower than my Web site Web site site Site conversion rate on smart phone 6% 7% 87% Average order value on smart phone 8% 28% 64% Site conversion rate on tablet device 13% 33% 54% Average order value on tablet device 49% 28% 23% Base: 55 online retailers Source: “The State of Retailing Online 2012”, a Shop.org study conducted by Forrester Research23 © 2012 Forrester Research, Inc. Reproduction Prohibited

Retailers are missing metrics that more accurately reflect where mobile fits into the shopping process Which KPIs/metrics do you use to measure the success/progress of your mobile strategy and business? Revenue transacted directly via mobile devices 96% Mobile site traffic (sessions) 94% Site conversion 91% Average order value 87% Number of QR code downloads 43% Shopping cart abandonment 37% Leading metrics mirror those for the Product searches via mobile devices 33% web. Number of mobile app downloads 31% Repeat visits/log-ins 24% Base: 54 online retailers Source: “The State of Retailing Online 2012”, a Shop.org study conducted by Forrester Research24 © 2012 Forrester Research, Inc. Reproduction Prohibited

Smartphones are better suited for cross channel activities such as in-store online research Site features used frequently (high and medium use) smartphone tablet Product detail info 84% 80% Customer ratings and reviews 59% 64% Store maps 49% 38% Easy check out 35% 46% Coupons 29% The difference in the 29% use of store maps Alerts for specials and sales 26% 26% shows that 20% smartphones Request for help / questions… 28% support store visits In-store inventory availability… 18% more frequently 16% Bar codes 13% 4% Base: 51 online retailers Source: “The State of Retailing Online 2012”, a Shop.org study conducted by Forrester Research25 © 2012 Forrester Research, Inc. Reproduction Prohibited

Retailers plan to invest in similar features for mobileand tablets, but levels vary for QR codes and paymentoptionsHigh investment in features smartphone tabletProduct and price information 76% 84%Customer ratings and reviews 71% 71%Easy payment options 56% 45%Store information 53% 50%Alerts for online specials or sales 49% 45%Scanning a QR code with a mobile device 49% 37%Coupons 47% 47%Shipping notification 33% 26%Storing a shopping list on a mobile device 33% 26%Alerts for in-store events, specials, or sales 29% 21%In-store product availability 29% 32%Store maps / layouts 27% 24% Base: 45 online retailers Source: “The State of Retailing Online 2012”, a Shop.org study conducted by Forrester Research26 © 2012 Forrester Research, Inc. Reproduction Prohibited

The list of less popular investments reflects moreaccurately what retailers should invest in by device typeLess popular investments in features smartphone tabletCheck out and payment in a store 24% 16%Scanning a bar code 24% 11%Sharing a shopping list on a mobile device 20% 16%Access to the loyalty program 18% 8%Alerts for in-store pick up orders placed online 16% 8%Expert reviews 11% 16%Gift registries for friends and family members 11% 16%In-store navigation 11% 8%Real-time coupons while customers are shoppingin a store 11% 13%User manuals or other product information andinstructions 11% 16%Gift registry creation capabilities on a mobile device 9% 8%Price comparison information 7% 8% Base: 45 online retailers Source: “The State of Retailing Online 2012”, a Shop.org study conducted by Forrester Research27 © 2012 Forrester Research, Inc. Reproduction Prohibited

Topics to be tackled…stay tuned  Wi-fi implementations in store  Store associate usage and other store deployments of mobile devices  Mobile payments  Mobile investment levels28 © 2012 Forrester Research, Inc. Reproduction Prohibited

Kony Overview 2007: 2008: 2010: Cash Flow 2011: 400% 2015: $1BCompany Founded Launch Positive Topline Growth CompanyMilestones KonyOne: B2C + B2E Releasing in Next Six Months Single Code Base Multiple Deployment Multiple Channels - One API - Mobile Web (HTML, - Smartphones Standards Javascript for Native - One IDE HTML5, SPA) - Feature Phones developmentPlatform - One Platform - Native – all channels - Tablets Multi-Channel Desktop Web support - One Language - Hybrid - Kiosks - Mixed-Mode - Desktop BYOD MAM & Sync Server Open, Standards-Based, Unified Business to Consumer (B2C): Business to Employee (B2E): Kony Mobile Airlines Kony Mobile CRM Kony Mobile Automotive Kony Mobile HR Kony Mobile Retail Kony Mobile Insurance Agent* Kony Mobile Hospitality Kony Mobile Wealth Management*Apps Kony Mobile Healthcare Kony Mobile Field Service* Kony Mobile Media Kony Mobile Enterprise Asset Management* Kony Mobile Retail Banking Kony Mobile Retail Brokerage Kony Mobile Insurance * Coming soon Customers Volume Industry AwardsMarket • 2 of the 3 largest U.S. banks • 900M mobile sessions annually • Gartner Visionary • 3 of the top 5 U.S. airlines • Across millions of consumers & employees • Gartner Cool VendorImpact • • 3 of the top 6 U.S. auto brands • In 25 countries RIM Wireless Achievement Award • 3 of the top 5 largest insurance co’s • American Business Awards Most Innovative Company of the Year Copyright © 2012 Kony Solutions, Inc. CONFIDENTIAL Copyright © 2010 Kony Solutions, Inc. CONFIDENTIAL 32

“Change Once, Change Everywhere” Alternative solutionsEffort New FunctionalityLevel Add Security Launch Add Languages Custom App + Mobile Web Update Features 40% – 70% TCO Savings OS Update Time Copyright © 2012 Kony Solutions, Inc. CONFIDENTIAL Copyright © 2010 Kony Solutions, Inc. CONFIDENTIAL 33

Mobile Web vs. Native – Industry Avgs  More channels = more customers  Mobile web represents half of all traffic  Native apps together also represent half of traffic  Adding any channel permanently increases visits – some customers will still only interact with you in a particular channel  Conversion rates vary by channel  iPhone native apps 30% more than mobile web  Rates likely to dramatically change with short notice Copyright © 2012 Kony Solutions, Inc. CONFIDENTIALCopyright © 2010 Kony Solutions, Inc. CONFIDENTIAL 35 35

Mistakes in Mobile Retail • Not solving pain points for the consumer • Starbucks, for example, was reducing in-store POS times, not maximizing loyalty card adoption with its app • Siloed mobile efforts • Consumers – loyalty or not – want a ‘joined-up’ experience across channels, and want to interact with you the way they want, not the way you want • Under-resourced team • Mobile isn’t going anywhere. ‘Well, let’s try it and if it doesn’t work at least we tried’ is not a strategy • Transactional or Informational ? • Driving consumers to transact is often incompatible design-wise with a brand awareness/informational app Copyright © 2012 Kony Solutions, Inc. CONFIDENTIALCopyright © 2010 Kony Solutions, Inc. CONFIDENTIAL 36 36

Mistakes in Mobile Retail (cont’d) • Poor Design • Apps are important but are currently being designed and deployed poorly by a many retailers • Reasons for regular and ‘sticky’ engagement are few • Gamification elements missing • Loyalty programs are chunky • Basic, Intermediate, Advanced ‘tickles’ and rewards • Few mobile-specific, well integrated campaigns • Consuming campaigns and offers should be seamless across all digital channels • Disconnected experiences across channels • Consistent information, experiences and ‘remember me’ lacking. Apps different device-to-device Copyright © 2012 Kony Solutions, Inc. CONFIDENTIALCopyright © 2010 Kony Solutions, Inc. CONFIDENTIAL 37

Gamification & The Changing face of Apps How long to reach 1 million users ? AOL took 9 years Facebook took 9 months DrawSomething took 9 days Copyright © 2012 Kony Solutions, Inc. CONFIDENTIALCopyright © 2010 Kony Solutions, Inc. CONFIDENTIAL 38

Design Principles for Personalization  Look-and-feel – 70/30 rule  Implement visual appeal  Color coding, visual clues, icon usage and branding  Homogenous design principles  Keep it simple - Less text, single way to do things, intuitive navigation/flow  User awareness – Maintain context ; remember me, minimize user entry  Preferences  Let user create customized experience  Template preferences based on user type – defaults  Temporal/Spatial/User awareness – Date ; Time ; Location ; User ; User type ; User’s process step  Local data storage Copyright © 2012 Kony Solutions, Inc. CONFIDENTIALCopyright © 2010 Kony Solutions, Inc. CONFIDENTIAL 39 39

Release Options and Challenges  Big Bang – mobilize all or most desktop web features at launch  Market changing during development  Complexity risks delays  Risk releasing nothing  Agile – quickly release a ‘table stakes’ mobile version  Initial release risks becoming the only release  Maintenance challenges cannibalize innovation  Device variations increase complexity  Offering could fall behind  Wait and See – watch and learn from your competitors prior to investment  “Fast followers” difficult to catch up  Difficult to leapfrog the competition  Hard to gain experience  Make similar mistakes as early movers  Lose customers Copyright © 2012 Kony Solutions, Inc. CONFIDENTIALCopyright © 2010 Kony Solutions, Inc. CONFIDENTIAL 40 40

Kony Mobile Retail Complete Secure Retail Solution  Fully Functional, pre-built Feature Set  Highly Brand-able  Social Media Integration  Configurable and Extensible  Universal Integration  Internationalization Ready Full Channel Support  Native Mobile Devices  Mobile Web  Tablets Reach All Your Customers Copyright © 2012 Kony Solutions, Inc. CONFIDENTIALCopyright © 2010 Kony Solutions, Inc. CONFIDENTIAL 42 42

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Forrester-Kony: The State of Mobile Commerce for Retailers Today

by Kony Solutions Inc. on Jul 09, 2012

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