Lessons, limitations and opportunities for multi-channel merchants

Lessons, Limitations and Opportunities for Multi-channel Merchants A look back at the Holiday ’07 Season Presented by Lauren Freedman February 2008

About the e-tailing group 13 years e-commerce consulting Author, “It’s Just Shopping” 50+ years traditional retail and catalog experience Fortune 500 client projects ranging from strategic planning, merchandising, marketing, to technology development and messaging Proprietary research studies on mystery shopping and merchandising, marketing and EMC (Evolving Multi-Channel Consumer), In-Store Pickup and Gift Registry E-commerce expert and frequent speaker at industry events, trade associations © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 2

2007 Holiday Performance • Ecommerce spending for the holiday season (11/1-12/31) was $29.2B, marking a 19% gain versus the same period in 2006 1 • Traditional holiday sales, which combine November and December sales, rose 3% to $469.9 billion, weaker than NRF's projected 4% holiday forecast • Video games, consoles and accessories was the fastest growing online retail category (29%) followed by furniture, appliances and equipment (67%), consumer electronics (23%), apparel (18%) sporting goods (16%) and toys (16%) 1 • Deals dominated the season with free shipping and a plethora of promotions to maintain momentum • Gift cards were projected to reach $35 billion with January spending fueling much needed early 2008 sales 2 • Amazon.com, reported its best holiday selling season noting popular items that included the Nintendo Wii game console, DVD players, digital cameras and G.P.S. devices. Customers had ordered more than 5.4 million items, which was 62.5 items a second on its busiest day 3 • 82% of online shoppers reported being very satisfied or somewhat satisfied with the customer support available during their online holiday shopping experience this year 4 • Merchants sent out 45% more email during the holiday season averaging 2.8 emails per week 5 • Amazon, Wal-mart, Target, Best Buy, Half.com, Yahoo Shopping, Circuit City, Sears and JCPenney were the top online shopping sites this holiday season 6 1) comScore 2) NRF 3) NY Times 4) Nielsen Online 5) Email Experience Council 6) Hitwise—All 2008 © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 3

Trends – Page 1 • Basics are in place where categories dictate merchandising techniques and requisite sophistication of selling tools • The web is certainly a “certified” channel for gifting despite the category with more features being added in support of gift giver needs • Temptation takes the form of the traditional but more importantly drove from a promotional perspective this holiday season • The product page solidifies its importance where an increased use of rich media is observed leveraging video, alternative views and shop by outfit/view in a room tools to bolster customer confidence • User-generated content steps up where ratings and reviews are exponentially present given customer passion for peer-based participation • Customers are in the driver seat with opportunity to find, edit, sort and prioritize their site search/navigation given current traffic flow © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 4

Trends – Page 2 • Tools that emphasize convenience, expedite the shopping process, and offer cross-channel immediacy meet the demands of today’s time-starved shoppers • Email continues to be a merchant favorite to drive sales showcasing free shipping offers and other promotional tactics where frequent reminders and looming deadlines are reinforced • Technology allows merchants to move beyond self-service with live chat and click to call making inroads • Customer service saw some disappointment where merchants either fail to respond to queries or provide inadequate and/or untimely responses • The evolving cross-channel customer encounters obstacles from a store returns’ perspective yet opportunities from a product locator perspective grow © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 5

E-tailing group mystery shopping • Annually the e-tailing group mystery shops 100 e-commerce websites representing a cross-section of merchants selling leading consumer product categories online • Each of the sites is scanned to locate over 150 features and functions within merchandising and customer service tool sets • Percentages are calculated off a subset of relevant merchants based on existing metric, channel presence or prior penetration of related feature (see *) SEARCH MEMBERSHIP SEASONAL MARKETING INVENTORY ESTABLISHED MERCHANDISING SHOPPING CART PROMOTIONAL MERCHANDISING SHIPPING CUSTOM CONTENT ORDER CONFIRMATION MULTI-CHANNEL TOOLS UP-SELLS/CROSS-SELLS GIFTING EMAIL PROFILING LIVE HELP PRODUCT ENHANCEMENT RETURNS CUSTOMER SERVICE INFORMATION MEASUREMENT © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 6

The Merchants: the e-tailing group 100 4Q07 1-800-flowers Crate & Barrel Lands’ End Saks Fifth Avenue A&F CRUTCHFIELD Lego Sears Amazon DELL Levenger Sephora.com American Girl Dick’s Sporting Goods Linens ‘N Things Sharper Image Ann Taylor Discovery Channel Liz Claiborne Shop NBC Apple Drs Foster & Smith Lowe’s Shop NFL Armani Exchange Drugstore.com Lucy Smartbargains.com Baby Center eBags Macy’s Solutions Ballard Designs Eddie Bauer Neiman Marcus Sony Style Bare Necessities eToys Nine West STAPLES Barnes & Noble Famous Footwear Nordstrom Sundance Bath & Body Works Fossil Office Depot TARGET BED BATH & BEYOND Frontgate Omaha Steaks The Avenue BEST BUY Gap Online Shoes The Children’s Place Bliss World Gardener’s Supply Origins The Container Store Blue Nile Godiva ORVIS The Home Depot bluefly Golfsmith Overstock.com Toys ‘R Us Brooks Brothers Harry & David PBS VICTORIA’S SECRET Brookstone Home Decorators Petsmart Vitamin Shoppe Build-A Bear Workshop hpshopping Polo Walgreen’s Buy.com HSN Pottery Barn Wal-Mart Cabela’s J.Crew QVC WILLIAMS-SONOMA Circuit City JC Penney redENVELOPE wine.com Coach L.L. Bean REI ZALES Cooking.com Lancome USA Road Runner Sports Zappos.com © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 7

Sizing up the season • Rich Tools • Efficiencies and Conveniences • Customer-Centricity • Tactical Execution • Mixed Customer Service Signals © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 8

A robust product page performs The product page is today’s most important site destination becoming comprehensive and compelling to serve the shopper 52% of shoppers spend 6 minutes or more on the product page when purchasing online ARS eCommerce /e-tailing group Online Content Impact Survey; 2007 © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 11

Rich media onsite and via email engenders consumer confidence Tactics that extend the experience make it richer for shoppers while reducing return rates for merchants Feature 4Q07 4Q06 Streaming Video 45% 38% Audio 47% 41% Zoom 86% 81% Alternate views 66% 57% Shop by outfit 40% * 24% * * Subset of 100 merchants © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 12

Viewability Merchants allow shoppers to view products in formats that mirror current purchasing patterns Feature 4Q07 4Q06 Shop by outfit 40% * 24% * View in a Room 5% * 11% * Neiman Marcus: 10/24/07 © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 13

Supporting category information Educating shoppers cuts across categories to foster future decision-making 65% of shoppers will research products online before making gift purchases Feature 4Q07 4Q06 Guides/How To 58% 67% Tips/ Glossaries 54% 48% Source: Mindset of the Multi-channel Shopper; 2007 © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 14

Strategic upselling and cross-selling Increasing average order value is imperative as merchants seek new and innovative ways to boost overall revenues Feature 4Q07 4Q06 Product page Up-sells/ Cross-sells 96% 90% Shopping Cart Merchandising 79% 72% Order Confirmation Merchandising 46% * 44% * * Subset of 100 merchants Shipping Confirmation Merchandising 37% * 35% * J.Crew Harry and David © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 15

Express buying Tools that expedite shopping saves time for today’s multi-tasking customer Feature 4Q07 4Q06 One Click Setting 18% 42% Fast Buy/ Direct to Cart Buying 17% N/A © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 17

Time-savings tactics From quick buy to EZ replenishment tools savvy merchants simplify and promote these powerful capabilities © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 18

Great gifting opportunities The convenience of gifting online along with inspiring merchandising has led to year-round growth FEATURE 4Q07 4Q06 Gift Certificate/Card 95% 85% Gift Center (Beyond Gift Suggestions) 91% 87% Gift Suggestions 83% 85% © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 19

Enhanced giftability From multi-ship to’s to shop and hold capabilities merchants look for differentiators to solidify the channel’s gift giving value Feature 4Q07 4Q06 Can Gifts be Held To Ship at a Later Date 6% 11% Multiple Ship-to Addresses Available 54% 38% Godiva © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 20

Sophisticated shopping cart Savvy merchants wisely divvy up shopping cart real estate mixing efficiency tools and customer service messaging to minimize cart abandonment while still securing the sale FEATURE 4Q07 4Q06 800 #/Toll Free Customer Service 99% 100% Phone Number Visible on Home Page 63% N/A List Customer Service Hours Onsite 73% 75% Guarantee 71% 62% FAQ’s 83% 74% © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 21

Creative payment options extended An exploration of alternative payment options is put forth to reach a broader audience FEATURE 4Q07 4Q06 Deferred Payment Plans/ Bill Me Later 37% 35% Paypal 22% N/A Google Checkout 12% 7% Oriental Trading: 12/04/07 © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 22

User-generated content 65 percent of the time customer reviews are read “always” or “most of the time” prior to making a decision to purchase a product. FEATURE 4Q07 4Q06 Ratings/ Reviews 50% 38% Home Depot: 11/05/07 Power Reviews/the e-tailing group “Social Shopping Study 2007” © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 24

Personalization From recently viewed to overarching strategies merchants are looking to personalization to increase conversion and deliver more targeted customer experiences FEATURE 4Q07 4Q06 Back In Stock Emails 7% N/A Recently Viewed 34% 27% 6th Annual E-tailing Group Merchant Survey; 2007 © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 25

Customization Today’s “individualist” culture demands “do-it-your-way solutions in support of the drive for unique product FEATURE 4Q07 4Q06 Create Your Own Product 22% 29% NFL Shop: 10/30/07 © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 26

Configurability Manipulating content to meet customer needs through traditional and Web 2.0 technology optimizes the shopping experience FEATURE 4Q07 4Q06 Product Comparison 28% 28% Interactive Tools (my virtual model, profilers) 32% 30% © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 27

Community Tapping into social networking will likely become more important as customer adoption escalates FEATURE 4Q07 4Q06 Blog 10% 8% Community Boards 16% 11% eBags: 11/08/07 © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 28

Convenience driven-tactics The web’s ability to access current inventory status averts customer frustration while store pickup ensures a smooth transition to their store visit FEATURE 4Q07 4Q06 Store Pick up 19% * 18% * Store Returns 71% * 81% * Store Product Locator 20% * 15% * © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 29

Efficient navigation and sort are the initial essentials The search mindset of online shoppers demands a functional and well- merchandised search results page that can be sorted based on consumer preference FEATURE 4Q07 4Q06 View All 59% 36% Merchandised Search Results Page 22% * 21% * Landing Page Sorts 81% * 78% © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 31

Holistic merchandising Integrating an array of traditional tactics inspires shoppers leading to impulse purchases FEATURE 4Q07 4Q06 Top Sellers 61% 59% Channel/Merchant Exclusives 54% 45% What’s New 75% 80% Gap: 10/09/07 © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 32

Free shipping dominates FEATURE 4Q07 4Q06 Offer Free Shipping on all Products 8% 2% Offer Conditional Free Shipping on All Products 34% * 35% * Offer Conditional Free Shipping on Certain Products 29% * 31% * Conditional Free Shipping to a store 15% * 13% * © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 33

Friends and family everyday, every way Today, most customers share in the wealth extended by these programs Sharper Image: 11/29/07 © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 34

Creative promotional arsenal Outlets are emphasized to efficiently liquidate product while limited time offers are more prominent across merchants FEATURE 4Q07 4Q06 Sales & Specials 88% 89% Limited hour specials 18% 25% Online Outlet 72% 73% Dell: 10/02/07 Bath&BodyWorks: 11/29/07 © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 35

As seen on The media’s influence is emphasized to drive desired sales FEATURE 4Q07 4Q06 As Advertised/ As Seen on TV 37% 32% © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 36

Last minute factor Merchants wisely use email to encourage last minute shopping that frequently includes additional savings and services extended throughout the season 1-800 Flowers: 12/22/07 © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 37

Customer service disparity Conscious merchant choices coupled with inherent cultural beliefs surrounding customer service can be seen in contact centers and email response patterns Top Performing B2C Sites for Online Customer Service in 2007 (Alphabetical order, * indicates prior-year winners) Blue Nile Container Store Crutchfield* Discovery Channel Store Fossil Golfsmith* Lands’ End Polo Pottery Barn REI Zappos © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 39

Retention is top of mind Merchants continue to look for ways to engender loyalty from members-only emails to more traditional loyalty programs FEATURE 4Q07 4Q06 Frequent Buyer Program 43% 40% © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 40

Personalized customer service From personal services to taking advantage of technologies from click to call to live chat there are opportunities to merchandise services most effectively FEATURE 4Q07 4Q06 Live Help Available 32% 29% Click 2 Call 16% * 3% * © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 41

Return to sender can be painless Convenience is played out in returns which can be an important reason why customers don’t buy more online FEATURE 4Q07 4Q06 Return Authorization Required 15% 14% Online Return Forms 13% 17% Prepaid Return Labels Provided 29% 22% Smart Label 8% 5% © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 42

Set strategic merchandising and customer service goals to drive personal and industry growth in ‘08 • Taking search/sort capabilities to the next level • Promotional creativity and continued free shipping offers • Richer rich media • User-generated content with inroads regarding community and social networking • Personalization and segmentation • Configurability, view-ability and customizable options among niche players • Manufacturers inspiring bolstered branding and brand presence online • Focus on service by select savvy merchants © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 43

Q&A The e-tailing group, inc. Lauren Freedman President, 1444 W Altgeld Street Chicago, IL 60614 p. 773-975-7280 lf@e-tailing.com www.e-tailing.com © 2008. All rights reserved. DoubleClick Performics Inc. Proprietary and Confidential. 44

Lessons, limitations and opportunities for multi-channel merchants

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