The Compete Online Retail 2011 Q1 Review

Retail Spring Update
May 2011

Today’s presenters
Damian Roskill, Managing Director, Marketing at Compete
Jason Caine, Director, Retail practice at Compete

Webinar logistics
Today’s webinar will be recorded. You will be emailed a link.
Please enter your questions in the Questions box. We will answer as many as possible at the end.
If you have technical difficulties, try loggingback in or use a different browser
The Twitter hashtag for today’s webinar is #competeretail

Founded in 2000, joined WPP/Kantar in 2008
Passionate about understanding consumers to inspire great marketing
Largest integrated online consumer behavior and survey panel in industry.
Expertise in the automotive, consumer goods, financial services, media, mobile, online, retail, telecom and travel markets.
Strategic partnerships within the WPP and Kantar family of companies that enable marketing optimization and more holistic view of consumers.
Compete connects the dots from online insights to marketing ROI
About Compete
Advertising and promotion effectiveness
Shopper quality and brand consideration
Website effectiveness
Segmentation and targeting
Search marketing performance
Customer satisfaction and loyalty
Competitive tracking and benchmarking

What is the Compete Retail Update?
Quarterly update to provide an update on key industry trends
Follow 2-3 standard metrics to monitor industry health using Compete behavioral data
Review performance of new and emerging retail trends using Compete Online Shopper Intelligence survey

Today’s agenda
We will highlight some of the key trends in Retail using Compete’s panel of 2M consumers and our Online Shopper Intelligence quarterly survey.
Ship to Store
Facebook Effect on Retail
Online Sales Tax Impact

Retailers have made some decisions that could signal next evolution in online retail business model.
LL Bean announces free shipping on all orders…is this the beginning of the end of shipping charges?
Walmart begins home-delivery pilot in San Jose market…will home grocery delivery finally go mainstream?
Best Buy is latest retailer to announce plans to reduce its store square footage…could a day come when a retailer moves its business entirely online?

The Numbers

Retail segments that offer essential household items and “one-stop” shopping experienced the largest traffic increases.
Total Online Visits – by Retailer Segment
(in millions)
Largest YOY Declines
Largest YOY growth

Office supply and department store retailers both experienced healthy YOY gains in conversion rates.
Online Conversion Rates – by Retailer Segment
Largest YOY Growth
Largest YOY Declines

Consumer intent to purchase online appears strong during the next 6 months.
What categories do you intend to buy online in next 6 months? (n = 3269)
Source: Compete Online Shopper Intelligence – Q1 2011 Survey

Looking ahead
Traffic healthy across majority of online retail segments during the winter
Trends indicate home improvement retailers primed for success during their peak spring and summer seasons
Increased focus on monitoring and stealing market share from competitors
Traditional mass-merchants need to identify ways to differentiate themselves from Amazon’s growing online reach

Ship to Store

One of the ways traditional retailers are trying to differentiate themselves is by offering to ship to store.
What is Ship to Store?
Retailer delivers order or pulls from shelf
Consumer picks up order at store
2
Consumer places order on Retailer site
3
1
Select Retailers That Offer

Ship to store has become an increasingly popular shipping option for shoppers in the last year.
% of visits that ship-to-store is selected during checkout

Consumers choose ship to store because it is cheaper than paying shipping costs.
Why do you choose the ‘in store pick up’ or ‘ship to store’ option? (n=1611)

The main reason consumers do not select ship to store is due to the inconvenience of picking up the order.
Why don’t you choose the ‘in store pick up’ or ‘ship to store’ option? (n=1357)

Looking ahead
Ship to store growth likely as more retailers decrease store footprint and shift inventory online
Will be counteracted by online retailers who offer free shipping and eliminate inconvenience of visiting store
“Buy online, pick up in store” marketing likely to become more focused on instant pickup of in-store products
What about applying this concept to grocery?
Consumer orders non-perishables online
Comes to store to pick out their own produce / meats (categories they are more protective of)

Facebook’s Effect on Retail

The profile of retailer and brand Facebook pages continues to rise.
Super Bowl Ads
Many household brands called out Facebook pages in Super Bowl ads
Facebook Marketing Campaigns
Target ran a campaign to give away $1M during February 2011
Facebooks fans voted on charity to donate money to

Interest in retailer Facebook pages is still fairly low despite all of the buzz surrounding Facebook as a marketing tool.
Facebook Fan Page UVs – February 2011
76K
78K
86K
223K
952K

About 26% of people visit an official retail or consumer product Facebook page at least once a month.
How often do you visit official Facebook pages of retail and/or consumer product companies? (n = 3269)

Consumers are treating retailer Facebook pages like an online circular.
Why do you visit a retailer Facebook page? (n = 1627)

Consumers still do not consider Facebook retailer pages as being very influential to making a purchasing decision.
How influential have Facebook pages been on your decision to purchase those products or from those retailers? (n = 1627)
Influence
Not at all influential
Extremely influential

Looking ahead
Facebook pages are a great low-cost marketing tool
Main purpose will likely be to:
Deliver information where consumers are spending time
Develop deeper relationships with consumers
Marketing campaigns drive short-term awareness, but long term ROI is unclear
Look for more of an emphasis on integrating commerce on Facebook pages

Online Sales Tax

Online retailers are required to collect sales tax in any state they have a “physical presence.”
Recent debate over “physical presence”
Texas: Amazon has threatened to close an Irving, TX, distribution center if the state passes legislation that defines such structures as having a physical presence.
Illinois: Amazon’s Illinois affiliates were terminated when the state passed legislation requiring sales tax be collected because the affiliates constituted “physical presence” by Amazon in the state.

About 1 in 2 consumers are likely to shift online spending if an online sales tax is enacted.
How would paying sales tax on your purchases from online-only retailers impact your online shopping habits? (n=1357)
48.9% would change online spending habits

Product categories that you can ‘touch and feel’ would most likely be negatively impacted by an online sales tax.
Categories that consumers would decrease online spending (n=1357)
Least likely to decrease spend
Most likely to decrease online spend

A potential online sales tax would cause consumers to be more price sensitive and maybe spend more offline.
Reasons spending would shift from online-only to offline retailers (n=1092)

What could be next?
Impact will depend on how many states elect to follow Illinois and Texas
100% free shipping will likely be a defense that online retailers will need to consider if legislation expands
Opportunity for traditional big-box mass merchants like Target and Walmart to make a value/price play

Questions?Damian RoskillManaging Director, Marketingdroskill@compete.comJason CaineDirector, Retailjcaine@compete.com

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