Forrester: the state of retailing online (presentation Monaco oct 2009)

The State of Retailing Online: The Bright Side of Retail Sucharita Mulpuru Principal Analyst Forrester Research October 27, 2009

And many individual retailers are doing very well Average YOY growth rate of retailers surveyed Source: State of Retailing Online 2009 Survey; Shop.org/Forrester Quarterly Flash Surveys 10 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

Web retailers driving growth… Multichannel retailers who reported… Large web retailers who reported… Base: 56 multichannel retailers and branded manufacturers; 24 retailers doing more than $100MM (€67MM) in online sales 12 Source: © 2009 Forrester Research, Inc. Q3 2009 Quarterly Flash Report Entire contents Shop.org/Forrester All rights reserved.

More Web shoppers around the world Europe Asia 79% UK South 91% 73% Korea 90% 72% Sweden 75% 65% Japan 70% 75% Germany 66% 66% Australia 67% 60% France 56% 29% China 70% 24% Netherlands 57% 12% 33% Hong Kong Italy 12% 29% Q2 2008 Q2 2009 Q2 2006 Q2 2008 31% 5% Spain India 24% 4% Base: At least 22,102 European net users (16+) Source: Forrester's Consumer Technology Adoption Study, 2006 to 2008 17 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

Convenience trumps all reasons for shopping online “Thinking about any online shopping you have done, please indicate how much you agree with each of the following statement?” (4 or 5 on a scale from 1 [Strongly disagree] to 5 [Strongly agree]) Base: 10,269 European online buyers Source: European Technographics® Retail, Customer Experience, And Travel Online Survey, Q3 2008 19 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

VP, Product Creative VP, Strategy, Development Director Insights & EVP, HR Innovation President CFO And IT…not in the picture! CEO SVP, Marketing EVP, Marketing 35 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

Web retailers invest heavily in IT IT Budget Spend as a % of Revenue in 2008 Innovation Blocking and tackling Source: Forrester’s US IT Spending Benchmark 2008; State of Retailing Online 2009 Survey 36 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

4. Reinforced our partners “To what degree does competition between branded and private label goods challenge your company’s ability to collaborate with its trading partners?” Base: 89 retailers and 80 manufacturers 38 Entire contents © 2009 Forrester Research, Inc. All rights reserved. Source: 2006 Shared Strategy Study by Forrester Research, Consumer Goods, Technology and RIS News

Many consumers are very brand loyal “When I find a brand I like, I stick to it.” % who responded 4 or 5 on a scale of 1 (strongly disagree) to 5 (strongly agree) Base: online consumers 39 Source: Asia Pacific Technographics Survey, Q4 2008; European Technographics Benchmark Survey, Q2 2009; Entire contents © 2009 Forrester Research, Inc. All rights reserved. ® North American Technographics Benchmark Survey, 2009

Visitors to manufacturer sites have high intent to purchase "I am going to buy this product . . ." Immediately 26% 71% Within the next 48 hours 17% intend to buy! Within the next week 15% Within the next 30 days 13% I am just researching 24% I already bought the product 5% Base: 13,313 visitors to manufacturer Web sites Source: Channel Intelligence 2008 Referral Site Survey 41 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

Social web activity is a global phenomenon Visit social networking sites at least monthly Asia Europe North America Base: online adults (18+) Source:Asia Pacific Technographics Survey, Q2 2009, European Technographics Benchmark Survey, Q2 2009, 45 North American Technographics Benchmark Survey, 2009 (US, Canada) Entire contents © 2009 Forrester Research, Inc. All rights reserved.

The reasons why are less defined • 66% say the return on social marketing initiatives is unclear • 50% are pursuing social marketing strategies because there is tremendous buzz about them • 34% say social marketing strategies have helped grow their business to date Source: The State of Retailing Online 2009 47 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

That’s not to say that no one makes money 10%+ of traffic and revenue comes from social network sources, mainly Facebook and Twitter 50 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

The mobile internet is growing Asia-Pacific North Europe America Base: online adults (18+) who currently own a mobile phone Source:Asia Pacific Technographics Survey, Q2 2009, European Technographics Benchmark Survey, Q2 2009, 52 North American Technographics Benchmark Survey, 2009 (US, Canada) Entire contents © 2009 Forrester Research, Inc. All rights reserved.

Consumers are already buying mobile content and services “Which of the following content/services have you paid for on your mobile phone in the past six months (including ring/ringback tones, games, graphics, mapping/navigation, applications, single music track, monthly music/video subscription)?” Base: 35,872 US online adults with a mobile phone; 5,611 Asian online adults with a mobile phone Source: Asia Pacific Technographics® Survey, Q2 2009; European Technographics Benchmark Survey, Q2 2009; North American Technographics Benchmark Survey, 2009 (US) 53 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

“When Yoox put up a test site in April without any announcement, 710 customers placed orders over their cell phones in the first month.” WWD, July 14, 2009 54 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

The six things that worked for web retailers 1 Recognized the global Exploited the inherent web opportunity advantages of the web 2 Redefined the competition Outplayed our offline 3 Respected IT peers 4 Reinforced partners Embraced game- 5 Reacted to people power changers 6 Realized there is a mobility revolution 57 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

What worked in the past What we need to do now Web retailers… Web retailers need to… Exploited the inherent Chip away at the small advantages of the web wins Outplayed our offline peers Embraced game- changers 58 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

August 2009 “The State Of Retailing Online 2009: Merchandising And Web Optimization” Top Site Priorities Vary By Retailer Size And Channel 59 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

Distribution of Web Site Review scores since 1999 Number of sites Source: Forrester’s 1,224 Web Site Reviews, versions 2-7 All external uses of this deliverable are subject to Forrester's prior approval. This is consistent with our Citation Policy which can be found on Forrester's Web site, www.forrester.com. 62 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

Many effective tactics are underused Tactic % that use the % that find the tactic tactic effective Color swatching 49% 100% Usability testing 42% 97% Live chat 20% 93% Expert reviews 13% 90% Saved searches 8% 83% Color matching 4% 67% Base: 75 online retailers Source: State of Retailing Online 2009 63 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

It is the biggest part of web marketing spend All figures in €000s Large Medium Small (N=18) (N=24) (N=20) Total interactive marketing budget €9688 €2925 €246 Pay for performance search €3993 €2419 €135 Email €1739 €77 €28 Source: The State of Retailing Online 2009 Large web retailers had more than €67MM in sales; medium web retailers had between €7-67MM; small web retailers had less than €7MM in sales 65 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

But search is challenged • “Conversion is going down” • “It’s getting more competitive for primary terms” • “Keywords are getting more expensive.” • “Expenses rising; ROI falling.” Source: Forrester/Shop.org Flash Surveys 66 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

What worked in the past What we need to do now Web retailers… Web retailers need to… Exploited the inherent Chip away at the small advantages of the web wins Outplayed our offline Figure out ways to peers support other channels Embraced game- changers 67 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

Ebay is tops in most markets “Which of the following Web sites did you use to buy products/services in the past three months?” U UK France Germany Spain Italy Base: 13,007 European online adults 69 Entire contents © 2009 Forrester Research, Inc. All ® Retail, Customer Experience, And Travel Online Survey, Q3 2008 Source: European Technographics rights reserved.

Search’s impact on local store sales JCPenney Women's Apparel JCPenney Women’s Apparel Buy Women's Clothing For Work & 36 Specials Starting at $7.99, Play Affordably At JCPenney Online Thru Jan 17 in Indianapolis JCPenney.com JCPenney.Weeklyad.com 71 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

What worked in the past What we need to do now Web retailers… Web retailers need to… Exploited the inherent Chip away at the small advantages of the web wins Outplayed our offline Figure out ways to peers support other channels Embraced game- Like social, but love changers mobile 76 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

The iPhone is only part of the story Ranking of smartphone device manufacturers globally (total units shipped) 1. Nokia 2. RIM/Blackberry 3. Apple 78 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

PayPal is an emerging channel for mobile payments Europe Asia-Pacific Base: online adults (18+) who have purchased products/services online during the past 3 months Source: Asia Pacific Technographics Survey, Q2 2007, European Technographics Retail, Customer Experience, And Travel Online Survey, Q3 2009, North American Technographics Retail Online Survey, Q1 2009 (US) 81 Entire contents © 2009 Forrester Research, Inc. All rights reserved.

Forrester: the state of retailing online (presentation Monaco oct 2009)

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