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This document discusses trends in online and mobile retail. Key points: 1) E-commerce is growing rapidly in the US, reaching $44.3 billion in Q1 2012 and expected to grow at 13.3% CAGR to $361 billion by 2016. Online sales are becoming increasingly important for traditional retailers. 2) Larger retailers tend to have higher digital IQ scores, and the relationship is stronger when looking at the size of their online businesses specifically. 3) Department stores like Macy's and Nordstrom topped the 2012 Digital IQ Index for specialty retail, showing department stores can succeed by building strong digital presences. 4) Amazon remains the dominant online force and threat to

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September 6, 2012 SCOTT GALLOWAY NYU Stern In partnership with: Specialty Retail © L2 2012 L2ThinkTank.com Reproductions Prohibited
Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com What’s Old Is New Again The brave new world of social media has simmered as it CAGR, reaching $361 billion in the U.S. by 2016.2 With brick appears that (thus far) hype has trumped impact. Meanwhile, and mortar retail flat or declining, the percentage of sales (and 15+ years on, e-commerce has become the disruptive force first growth) traditional retailers register online could become the envisioned in the late 1990s. In the first quarter of 2012, online arbiter sorting winners from losers. Many traditional retailers now retail spending in the United States reached $44.3 billion, up 17 register more than a quarter of their sales online. percent YoY.1 E-commerce is expected to grow at a 13.3 percent Size Matters Scale is beginning to translate online. For the first time, there is a significant relationship Specialty Retail Video Click to Play between the size of a retailer’s business and Digital IQ. The relationship strengthens when looking at the size of retailers’ online businesses. Department Stores: Rumors of Our Death Are Greatly Exaggerated Department stores have found sanctuary in the digital domain. Building on the successes from 2011 for the first time, the average Digital IQ for the category outpaced children of the medium, the e-tailers. The top two spots in the 2012 Digital IQ Index®: Specialty Retail were (decisively) captured by Macy’s and Nordstrom, respectively. Amazon.com: The Great White Shark of Retail A peerless e-commerce experience coupled with a 37 percent share of U.S. m-commerce3 make Amazon.com the force reshaping retail. The most recent victims are other e-tailers who can’t compete. Amazon now has brick and mortar peers squarely in its cross hairs. As Amazon reinvests cheap capital in a supply chain marching to same day delivery, it eats away at one of the few remaining advantages 1. “comScore Reports $44.3 Billion in Q1 2012 U.S. Retail E-Commerce Spending, Up 17 Percent vs. Year Ago,” comScore Press Release, May 9, 2012. of terrestrial retail—immediacy. Amazon is the retail ocean’s lone Great White Shark, 2. “Apparel Drives US Retail Ecommerce Sales Growth,” eMarketer Press Release, April 5, 2012. broadening its prey from slow fat seals to … everything that swims. 3. “Amazon To Book $2 Billion In M-Commerce This Year,” Steve Smith, Media Post, September 29, 2011. © L2 2012 L2ThinkTank.com Reproductions Prohibited 2
Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com 2012 Digital IQ vs. 2011 Overall Revenue n=65 Danger Zone Role Models Mobile: “I Can’t Believe How Much You’ve Grown!” 50,000 What was supposed to take ten years took three. Everyone, including Facebook, Macy’s H&M JCPenney has been caught flat-footed by the adoption rate of smartphones, which has ZARA Nordstrom 2011 Overall Revenue reached 165 million users in the U.S. alone.4 M-commerce is now the fastest Log Scale, millions UNIQLO growing retail channel in history, and mobile devices are likely influencing more Victoria’s Secret on- and offline purchases than traditional broadcast, let alone an in-store 5,000 Sephora salesperson. E-commerce is now m-commerce. Social media is now consumed Lindt Source: Capital IQ, Yahoo Finance, Bloomingdale’s via mobile app. Digital marketing is now centered on mobile search and mobile- optimized email. Crate & Barrel Digital IQ = Shareholder Value 500 French Connection Tumi Blue Nile This study attempts to quantify the digital competence of 76 global retail brands. Harry & David Annual Reports Harry & David Our aim is to provide a robust tool to diagnose digital strengths and weaknesses Rugby and help brands achieve greater return on incremental investment. We have Under Resourced Bluefly Scrappy 50 modified our methodology, increasing the weighting of a brand’s site from 30 50 70 90 110 130 150 percent to 40 percent and decreasing the weighting of social media from 20 2012 Digital IQ percent to 10 percent. In addition, with the help of partner STELLAService, we Log Scale measured each retailers order and return fundamentals, purchasing and tracking from three distinct locations. Similar to the medium we are assessing, our 2012 Digital IQ vs. 2011 Online Sales methodology is dynamic and we hope you will reach out to us with comments n=41 2,500 that improve our methodology, investigation, and findings. You can reach me at scott@stern.nyu.edu. Macy’s 2,000 JCPenney Victoria’s Secret 1,500 2011 Online Sales Scott Galloway 0.67 Correlation Clinical Professor of Marketing, NYU Stern millions r2= 0.45 Founder, L2 1,000 Source: Internet Retailer Saks Fifth Avenue Nordstrom Neiman Marcus 500 Crate & Barrel Restoration Hardware American Eagle Sephora BCBG 0 50 70 90 110 130 150 170 2012 Digital IQ 4. “Smartphone Adoption Rate Fastest in Tech History,” Stephanie Miot, PC Magazine, August 27, 2012. -500 © L2 2012 L2ThinkTank.com Reproductions Prohibited 3
Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com ABOUT THE RANKING The Methodology 20% Mobile 40% Site Effectiveness of Brand Site & E-commerce Operations Functionality & Content – 90% Brand Translation – 10% Compatibility, Optimization, & • Technology
 • Aesthetics
 Marketing on Smartphones, Tablets, & Other Mobile Devices • Navigation & Product/Site Search • Messaging & Visuals • Social Media Integration
   Provided by SapientNitro Mobile Site Android • Customer Service & Store Locator • Compatibility • Availability • Functionality • Popularity • Product Page
 • Transaction Capability • Functionality • Checkout • Account/Registry iOS Applications Innovation • Order/Return Timing & Logistics (iPhone & iPad) • SMS Provided by STELLAService • Availability • Geolocal • Popularity • Recent Brand Initiatives • Functionality 0% • iPad Differentiation 
 ti ng rke 3 Search, Display, & Email Marketing Efforts 10% Social Media YouTube Views, Number of Uploads, Subscriber Growth, Viral Videos, YouTube Search ig ita l Ma Search • Traffic • SEM Blog & Other User-Generated Content • Mentions • Sentiment Brand Presence, Community Size, Content, & Engagement Emerging Social Media D • SEO • Web Authority Email Instagram, Google+, • Frequency Facebook “Likes”, Growth, Tabs & Pinterest, Tumblr Advertising & Innovation • Content Apps, Responsiveness, Interaction Rate Twitter Customer Service • Display • Social Media Integration Twitter Followers, Growth, Frequency, Responsiveness • Retargeting • Promotions Provided by STELLAService • Brand Initiatives Online Voice
 Digital IQ Classes Genius 140+ Gifted 110–139 Average 90–109 Challenged 70–89 Feeble < 70 Digital competence is a point of Brands are experimenting and innovating across Digital presence is functional yet Inconsistent adoption of digital Investment does not match differentiation for these retailers. Brands their site, mobile, and both traditional and predictable. Uninspired efforts are platforms and a lack of vision. opportunity. Losing ground. have user-friendly sites, m-commerce, emerging social media platforms. Digital presence often siloed across platforms and Platforms lacks inspiration robust social campaigns, and strong SEO/ is strong, complementing brand image and larger not always consistent. Middle of and utility. On the outskirts. SEM. Digital is built to last. marketing efforts. Primed to make a move. the pack. © L2 2012 L2ThinkTank.com Reproductions Prohibited 4
Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s rankings. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com GENIUS Macy’s Nordstrom GIFTED Victoria’s Secret Sephora American Eagle Outfitters DIGITAL IQ RANKING JCPenney Bloomingdale’s Crate & Barrel Gap Saks Fifth Avenue Williams-Sonoma Banana Republic Ralph Lauren lululemon athletica Anthropologie Urban Outfitters Steve Madden Tiffany & Co. Rank Brand Digital IQ Rank Brand Digital IQ Rank Brand Digital IQ AVERAGE Nine West 1 Macy's 146 16 Tiffany & Co. 110 35 Neiman Marcus 101 Express Coach GENIUS NET-A-PORTER 2 Nordstrom 145 19 Nine West 109 35 Shopbop 101 Lacoste White House | Black Market Pottery Barn 3 Victoria's Secret 136 20 Express 108 37 Aeropostale 100 Barneys New York Blue Nile GUESS 4 20 37 A|X Armani Exchange Sephora 134 Coach 108 J.Crew 100 west elm H&M Swatch 5 American Eagle Outfitters 130 20 NET-A-PORTER 108 39 L'OCCITANE en Provence 99 Abercrombie & Fitch Juicy Couture Neiman Marcus 6 JCPenney 127 20 Lacoste 108 39 Chico's 99 Shopbop Aeropostale J.Crew White House | Black 7 Bloomingdale's 125 20 Market 108 39 Bluefly 99 L’OCCITANE en Provence Chico’s Bluefly 7 20 39 LUSH Crate & Barrel 125 Pottery Barn 108 LUSH 99 ALDO AVERAGE bebe Bath & Body Works 9 26 43 AVERAGE Gap 123 Barneys New York 107 ALDO 98 Cartier Brooks Brothers GIFTED 7 for All Mankind 10 Saks Fifth Avenue 121 26 Blue Nile 107 44 bebe 97 Tumi Talbots Rugby 11 Williams-Sonoma 114 28 Guess 106 44 Bath & Body Works 97 Harry & David Swarovski Bergdorf Goodman 12 Banana Republic 112 29 A|X Armani Exchange 105 46 Cartier 96 CHALLENGED Zales Gymboree 12 Ralph Lauren 112 29 West Elm 105 46 Brooks Brothers 96 Lucky Brand American Apparel Ann Taylor 12 lululemon athletica 112 31 H&M 103 46 7 for All Mankind 96 Club Monaco Dean & Deluca Cole Haan 15 Anthropologie 111 31 Swatch 103 49 Tumi 95 Diesel Tourneau Restoration Hardware 33 Lord & Taylor 16 Urban Outfitters 110 Abercrombie & Fitch 102 50 Talbots 94 The Body Shop Godiva Chocolatier ZARA 16 Steve Madden 110 33 Juicy Couture 102 50 Rugby 94 French Connection Stuart Weitzman UNIQLO Intermix BCBG FEEBLE Lindt Ethan Allen © L2 2012 L2ThinkTank.com Reproductions Prohibited 5
Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s rankings. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com GENIUS Macy’s Nordstrom GIFTED Victoria’s Secret Sephora American Eagle Outfitters DIGITAL IQ RANKING JCPenney Bloomingdale’s Crate & Barrel Gap Saks Fifth Avenue Williams-Sonoma Banana Republic Ralph Lauren lululemon athletica Anthropologie Urban Outfitters Steve Madden Tiffany & Co. Rank Brand Digital IQ Rank Brand Digital IQ AVERAGE Nine West 50 Harry & David 94 69 ZARA 76 Express Coach NET-A-PORTER 53 70 AVERAGE Swarovski 93 French Connection 75 Lacoste White House | Black Market CHALLENGED Pottery Barn 54 Bergdorf Goodman 92 71 Stuart Weitzman 74 Barneys New York Blue Nile GUESS 55 72 A|X Armani Exchange Zales 91 UNIQLO 73 west elm H&M Swatch 56 Gymboree 89 73 Intermix 71 Abercrombie & Fitch Juicy Couture Neiman Marcus 56 Lucky Brand 89 73 BCBG 71 Shopbop Aeropostale J.Crew 58 American Apparel 88 75 Lindt 67 L’OCCITANE en Provence FEEBLE Chico’s Bluefly 58 76 LUSH Ann Taylor 88 Ethan Allen 64 ALDO bebe Bath & Body Works 60 Club Monaco 87 Cartier Brooks Brothers 7 for All Mankind 61 Dean & Deluca 85 CHALLENGED Tumi Talbots Rugby 61 Cole Haan 85 Harry & David Swarovski Bergdorf Goodman 63 Diesel 84 CHALLENGED Zales Gymboree 63 Tourneau 84 Lucky Brand American Apparel Ann Taylor 65 Restoration Hardware 82 Club Monaco Dean & Deluca Cole Haan 66 Diesel Lord & Taylor 79 Tourneau Restoration Hardware Lord & Taylor 66 The Body Shop 79 The Body Shop Godiva Chocolatier ZARA 68 Godiva Chocolatier 78 French Connection Stuart Weitzman UNIQLO Intermix BCBG FEEBLE Lindt Ethan Allen © L2 2012 L2ThinkTank.com Reproductions Prohibited 6
Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Site Feature Adoption % of Sites with the Following Tools Key Findings July 2010–2012 2010 n=84 2011 n=64 2012 n=76 The Return of E-commerce Brand sites continue to be the primary revenue-generation engine online, however significant low-hanging fruit remains. Only 50 percent of brands incorporate conversion- enhancing user reviews. Similarly, the Facebook “Like” API, 26% 28% 23% a valuable source of incremental traffic, is employed by 31% 65% 37% only 65 percent of retailers. Most notably, adoption of live chat fell to 26 percent, bucking the nationwide trend5 and 48% 44% 56% suggesting that prestige retail brands are not seeing ROI on the technology. However, brands are investing more on their Product Facebook “Like” User Reviews Live Chat sites than in mobile or social platforms.6 Site investments appear to pay off—Genius brands keep users on their sites two and a half minutes longer than Site Visit Duration Feeble brands do. 3-Month Average Time on Site per User by Digital IQ Class Minutes, July 2012, n=76 brands Time 1:00 2:00 3:00 4:00 5:00 6:00 7:00 Genius 6:02 Digital IQ Class Gifted 5:11 Average 4:43 Challenged 4:44 “Straight e-commerce sites serve a purpose, Feeble 3:23 but to compete in a digital space a brand’s web presence needs to be more than pictures and a shopping cart. To compete in today’s Where Retailers Are Investing6 retail world, the brand needs to create that % of Retail Executives Prioritizing Investments personalized, one-of-kind, unique online experience, presenting in the Following Media n=100 consumers with options they didn’t know they had.” – bill kanarick 59% 35% 22%   worldwide cmo, SapientNitro 5. “Live Chat Effectiveness- A Survey of Internet Shoppers 2012,” Bold Chat Research Report. 6. “Website investment still key for online retailers despite the rise of social and mobile,” Maria Wasing, Econsultancy, September 3, 2012. Site Mobile Social Networks © L2 2012 L2ThinkTank.com Reproductions Prohibited 7
Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Key Findings Referral and Destination Sites for Specialty Retail Sites Upstream and Downstream Traffic to and from the Following Sources July 2012 Red Light, Green Light % of Upstream Traffic % of Downstream Traffic While Facebook’s stock price may be down, the platform is not necessarily losing importance. Once again Facebook Average % of traffic to brand Average % of traffic from sites from the following brand sites forwarding to is a key traffic driver of users to retailer sites, representing the following destinations: sources: 10 percent of upstream traffic. Conversely, Twitter does not represent any reportable upstream traffic, suggesting the medium is not a major e-commerce driver. Pinterest 53% 49% has emerged as a notable source of both upstream and Google Google downstream traffic. Analysis of traffic to and from Amazon.com and other third 10% 14% party e-commerce sites reveals higher rates of downstream traffic than upstream, reinforcing the threat of the e-tailer. Facebook Facebook Facebook and Amazon together is an even bigger challenge to retailers. Last year, 14.5 percent of Amazon.com’s 22.3 3% 3% million hits7 on Black Friday came from social sites, up from Competitors Competitors 9.0 percent in 20108—a powerful force. Overall traffic to retailers fell 7.1 percent year over year while Amazon.com’s already massive traffic rose 13 percent, suggesting it feasts on the traffic cookie while everyone else fights over 2% Brand Site 3% Amazon Amazon increasingly small crumbs. 1.6% 2% Pinterest Pinterest 0.8% 2% Other E-commerce Other E-commerce 0% 0.05% Twitter Twitter 7. “Retail traffic on Black Friday up 2%,” Experian Hitwise Blog, November 26, 2011. 8. “Social media helps big retailers drive traffic during the holidays,” internet Retailer, January 30, 2012. © L2 2012 L2ThinkTank.com Reproductions Prohibited 8
Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Key Findings Weekly Email Frequency by Category Average Number of Emails per Week July 2012 Back to Basics Email enjoys the highest conversion to traffic (4.25 percent in Q2 vs. 2.49 percent from search and 0.59 percent from social media)9, reinforcing its role as a crucial element of the marketing mix. 4.8 Although email open rates have fallen on PCs, the number of Department Store emails from retailers opened using a mobile device doubled between the fourth quarter of 2010 and the second half of 2.9 Apparel (34) (10) 2011. While almost 70 percent of mobile users delete emails 2.8 E-tailer (4) that do not render well, but only 42 percent of brands sent 10 emails optimized for mobile. Email frequency actually fell year over year in our research, suggesting that retailers are getting better at segmenting their customers. 1.9 Home & Gift (10) 2.3 Beauty & Skincare (5) Just 16 percent of brands have a pop-up soliciting email signup on their sites, and only 36 percent are sending 0.3 Watches & Jewelry (6) 2.2 Accessories & Shoes (7) abandoned-cart emails (a powerful conversion enhancing tactic). Some brands, including Juicy Couture, have taken the abandoned cart email a step further, and include product suggestions. French Connection offers free delivery in its Advanced Email Functionality abandoned-cart communications to entice purchase. % of Brands Implementing July 2012, n=76 With Without 42% 36% 16% 58% 64% 84% Email Viewable Sending Abandoned Email Signup 9. “Social still can’t beat search in online shopping,” Donna Tam, CNET, August 10, 2012. on Mobile Shopping Cart Emails Popup 10. “Email Marketing Benchmarks: Key Data, Trends and Metrics,” Lauren Fisher, eMarketer, August 2012. © L2 2012 L2ThinkTank.com Reproductions Prohibited 9
Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Brand Responsiveness on Twitter % of Tweets Replied to Within Specified Time Periods Key Findings July 2012 Twitter Service StellaService sent one tweet to each retailer every day during the month of July, totaling 2,294 tweets. Each tweet asked a customer service question that required a response from the retailer. 8% < 1 hour 10.8% 3.7% >1– 8 hours >8 –24 hours 77.5% > 24 hours Best Practices: 1 “In comparison, during July the country’s largest 25 retailers responded to 47.3 percent of tweets Respond Quickly. within 24 hours and 28.1 percent within one hour. Specialty retailers that have a presence on Shoppers who ask a question over Twitter expect a Twitter should ensure adequate engagement with shoppers. It’s interesting to note that Amazon response 100 percent of the time. Prioritize the response has made a conscious decision to not use Twitter as a service medium.” to these shoppers over others who may be making – John Ernsberger | Co-founder & vp of business developement | stellaService a statement about your brand. 2 Brand Responsiveness on Twitter Provide Recommendations. % of Brands that Replied Within Specified Go the extra mile by recommending items to your Time Periods July 2012, n=75 shoppers and provide relevant links. 3 Recommend Connecting Over the Phone. Shoppers like when their issues are elevated. Suggesting a phone conversation makes a customer feel more important 3% <0–3 hours 28% >8 –24 hours 69% > 24 hours © L2 2012 L2ThinkTank.com Reproductions Prohibited 10
Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Key Findings Social Media Penetration—Emerging Platforms The New Girl % of Brands on the Following Platforms Pinterest reached 10 million unique visitors faster than July 2012, n=76 any platform in history11 and 86 percent of brands now have a presence on the visual site. Although Pinterest has yet to monetize this traffic, 32 percent of online shoppers have made a purchase based on what they’ve seen on Pinterest and other image-sharing sites.12 In addition, the incorporation of the platform appears to increase email open and click rates.13 Purchases by Pinterest users average $80, twice what Facebook users spend.14 73% 71% 42% Although presence on Pinterest is strong, utilization and strategy still lag. Only 23 percent maintain a board featuring 86% Google+ Instagram Tumblr Pinterest user-generated content, and only 14 percent display prices on pins. This may soon change with New York City-based competitor The Fancy on the horizon. Having already surpassed a million members,15 this startup unites the visual elements of Pinterest with an upfront flash-sale Pinterest e-commerce model. % of Pinterest Pages with the Following Features July 2012, n=69 23% 14% 77% Product Prices 96% Board(s) Dedicated to on Pins 11. “Pinterest Hits 10 Million U.S. Monthly Uniques Faster Than Any Standalone Site Ever,” Josh Constine, User Generated Content TechCrunch, February 7, 2012. Links to Other Links to Website 12. “Pinterest leads to sales,” Zac Stambor, internet Retailer, April 25, 2012. Social Properties 13. “Pinterest Functionality Significantly Increases Email Open and Click Rates,” Cynthia Boris, Marketing Pilgrim, June 26, 2012. 14. “How Pinterest Drives Ecommerce Sales,” Mark Hayes, shopify, May 16, 2012. 15. “Can The Fancy Fulfill the Dreams of Pinners?,” Scott Gillum, Forbes, August 7, 2012. © L2 2012 L2ThinkTank.com Reproductions Prohibited 11
Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Key Findings Mobile Site Features % of Mobile Sites with the Following Features Movin’ On Up July 2012, n=59 Smartphone penetration is almost 40 percent,16 and tablet 5% adoption skyrocketed from zero to 25 percent in only two years.17 69 percent of mobile users have used their device 44% 41% 25% to get product information, and 82 percent of smartphone owners use devices to help with shopping in-store.18 All signs point to a future built around mobile. Seventy eight percent of brands in the 2012 index have a mobile- 56% 59% 75% 95% optimized site, up from a quarter two years ago. Product Social Mobile Site Customer Service M-Commerce Brands are building apps for iOS and Android, however Sharing Search iPad app adoption dropped from 39 percent in 2011 to 29 percent this year. Many retailers demonstrate higher conversion from their site on the tablet and likely don’t want to obfuscate sales by having an app in the equation. Nine brands removed their 2011 iPad applications: Abercrombie Mobile Application Platform Adoption Rates & Fitch, Banana Republic, Bath & Body Works, bebe, 2010 –2012 Bergdorf Goodman, Bluefly, Diesel, Tiffany & Co., & Williams-Sonoma. 2010 (n=81) 2011 (n=64) 2012 (n=76) 60 Mobile Site Adoption 50 51% Percent of Retailers 2010 – 2012 45% 40 2010 (n=81) 2011 (n=64) 2012 (n=76) 39% 30 28% 29% 20 21% 10 3% 6% 6% 0 25% 67% 78% 16. “Smartphone penetration in the U.S. from 2010 to 2016,” Statista, 2012. iPhone iPad Android 17. “Tablet Shopping Growing, but Retailers Must Keep Up,” eMarketer, June 15, 2012. 18. “The Retailers Definitive Guide to m-Commerce Success,” Cheryl Sansonetti, 5th Finger, May 2012. © L2 2012 L2ThinkTank.com Reproductions Prohibited 12
Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com insights Insights 2013 Research Findings Selected Highlights from SapientNitro Insights Report: L2 partner, SapientNitro, conducted an adjacent study (“In-Store Digital Retail: The Quest for Omnichannel”) on the Digital In-store Displays Are Powerful Tools—But state of in-store digital retail, and if/how brands are building Often Poorly Executed. links between digital and physical stores. Visiting one 40 of the 71 retailers evaluated had location at each of the 71 retailers, SapientNitro gathered no visible digital displays. Most focused 500 data points across categories such as cross-channel solely on branded content, lacking inventory fulfillment, digital in-store marketing touch points, interactivity. mobile in-store experience, and cross-channel sharing integration. They found in-store digital experiences (when The Right Tools Generate they exist) often do not support in-store goals and activities. Positive ROI. While the capital costs of implementing in- store digital are significant, those who have “Over the past decade, retailers of all sizes report a significant increase in ROI—on have been driven by disruptive technologies the order of 10 to 40 percent additional and the changing consumer to make major in-store sales—relative to other stores. investments in digital channels: eCommerce, smartphones and digital in-store. The Retailers Should Focus On connected consumer’s push for an omnichannel experience Supporting User Tasks is inspiring retailers to introduce new ways to extend aisles, Well-designed, task-based tools emerged create adaptive environments, and deliver augmented as being few and far between. 43 percent packaging experiences.” of brands had some sort of functionality – Hilding anderson supporting in-store tasks. However, often   director of research, SapientNitro these efforts were anemic—static iPad kiosks and broken mobile apps. Download the full SapientNitro Insights 2013 report: sapientnitro.com/insights © L2 2012 L2ThinkTank.com Reproductions Prohibited 13
Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com TABLE OF CONTENTS 5 Methodology 32 Google+ and Foursquare: A Social Media Graveyard 6 Digital iq rankings 33 Mobile Site: Movin’ On Up 6 Genius 34 Mobile Apps: App and About 7 Gifted 35 SapientNitro: Insights 2013 Research Findings 8 Average 36 flash of genius 1 1 Challenged 36 Showrooming App (Amazon) 1 2 Feeble 37 Sizing It Up (Macy’s, Nordstrom, and Crate & Barrel) 13 Key findings 38 True Love in Pictures (Tiffany & Co.) 1 3 IQ Distribution: Competition Heats Up 39 Social Gaming in a Shoe Paradise (ALDO) 1 4 Category Winner: Department Stores Dominate 40 Shoppable Video (Barneys, Saks Fifth Avenue, LUSH, and Nine West) 1 5 2012: Biggest Winners and Losers 41 The Death of the Cash Register 1 6 Site: The Return of E-commerce (JCPenney, Nordstrom, Coach, and Urban Outfitters) 1 7 E-commerce: Shipping & Returns (STELLAService) 42 Avatars in Style (Diesel) 1 9 Traffic Sources: Red Light, Green Light 43 Etsy / Pinterest Partnership (West Elm) 2 0 SEO/SEM: In Search of Search 44 View It Maybe (Abercrombie & Fitch) 2 1 Email: Back to Basics 45 Welcome to the Jungle (GUESS) 2 2 Facebook: It’s Not Business—It’s Personal 46 Shipping Upgrade Is the New Sale (Bergdorf Goodman, 2 3 Facebook: Interact Your Part NET-A-PORTER, and Urban Outfitters) 2 4 Facebook: Overachievers vs. Underachievers 47 Abandoned Cart! Abandoned Cart! 2 5 Twitter: Are You For Real? (French Connection, Lucky Brand and Juicy Couture) 2 6 Twitter: Customer Service (STELLAService) 48 A Lush Connect (LUSH) 2 7 YouTube: The Other Search Engine 49 L2 T eam & collaborators 2 9 Pinterest: The New Girl 50 AB O U T L 2 3 1 Instagram: A Picture Is Worth 80 Million Users © L2 2012 L 2 ThinkTank.com Reproductions Prohibited L2 is a membership-based think tank serving luxury and prestige brands, and agency, product, and platform partners. Our proprietary research provides benchmarking, analysis, and case studies on digital innovation. To obtain the full report and learn more about L2 Membership benefits, contact membership@L2ThinkTank.com. © L2 2012 L2ThinkTank.com Reproductions Prohibited 14
Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Upcoming Events L2 is a think tank for digital innovation. L2 CLINIC: COMMERCE We are a membership organization that brings together thought leadership from September 13, 2012 · Paris academia and industry to drive digital marketing innovation. September 27, 2012 · New York City L 2 L unch :   S P ortswear R esearch September 25, 2012 · New York City Digital IQ Index®: The definitive benchmark for online competence, Digital IQ Index® reports score brands L 2 L U N C H :   BE A U TY against peers on more than 350 quantitative and qualitative data points, diagnosing their digital strengths and weaknesses. October 4, 2012 · New York City L2 Collective®: Series of benchmarking reports designed to help member brands better understand resources, L 2 lunch :   S pecialty R etail & S portswear human capital, budgets, and priorities supporting digital strategies. October 18, 2012 · San Francisco L 2 F O R U M :   I N N O VATI O N 2 0 1 2 EVEN T S Forums: Big-picture thinking and game-changing innovations meet education and entertainment. November 6 &7, 2012 · New York City The largest gatherings of prestige executives in North America. 300+ attendees Clinics: Executive education in a classroom setting with a balance of theory, tactics, Upcoming Research and case studies. D igital I Q I nde x ® R eports : 120 –180 attendees Sportswear Beauty Working Lunches: Members-only lunches led by digital thought leaders and academics. Fashion Automotive Topic immersion in a relaxed environment that encourages open discussion. Watches & Jewelry 40–80 attendees L 2 1 0 0 ® R eports : consulting China IQ Advisory Services: L2 works with brands to garner greater return on investment in digital initiatives. Asia Pacific IQ Advisory work includes Digital Roadmaps, Social Media Strategy, and Organizational Strategy engagements. L 2 C ollective ® R eports : MEMBE RSHIP Media Mix Social Media For membership info and inquiries: membership@L2ThinkTank.com Omni-Channel Commerce © L2 2012 L2ThinkTank.com Reproductions Prohibited 15
A Think Tank for DIGITAL INNOVATION 51 East 12th Street, 2nd Floor New York, NY 10003 © L 2 2012 L 2 ThinkTank.com Reproductions Prohibited L2ThinkTank.com This report is the property of L2 Think Tank. As always, L2 Members may use this report for internal business purposes. Beyond the L2 info@L2ThinkTank.com Membership, no copyrighted materials by L2 Think Tank may be reproduced, re-distributed or transferred without prior consent by L2.

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Digital iq-specialty-retail-excerpt

  • 1.
    September 6, 2012 SCOTTGALLOWAY NYU Stern In partnership with: Specialty Retail © L2 2012 L2ThinkTank.com Reproductions Prohibited
  • 2.
    Excerpt from the2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com What’s Old Is New Again The brave new world of social media has simmered as it CAGR, reaching $361 billion in the U.S. by 2016.2 With brick appears that (thus far) hype has trumped impact. Meanwhile, and mortar retail flat or declining, the percentage of sales (and 15+ years on, e-commerce has become the disruptive force first growth) traditional retailers register online could become the envisioned in the late 1990s. In the first quarter of 2012, online arbiter sorting winners from losers. Many traditional retailers now retail spending in the United States reached $44.3 billion, up 17 register more than a quarter of their sales online. percent YoY.1 E-commerce is expected to grow at a 13.3 percent Size Matters Scale is beginning to translate online. For the first time, there is a significant relationship Specialty Retail Video Click to Play between the size of a retailer’s business and Digital IQ. The relationship strengthens when looking at the size of retailers’ online businesses. Department Stores: Rumors of Our Death Are Greatly Exaggerated Department stores have found sanctuary in the digital domain. Building on the successes from 2011 for the first time, the average Digital IQ for the category outpaced children of the medium, the e-tailers. The top two spots in the 2012 Digital IQ Index®: Specialty Retail were (decisively) captured by Macy’s and Nordstrom, respectively. Amazon.com: The Great White Shark of Retail A peerless e-commerce experience coupled with a 37 percent share of U.S. m-commerce3 make Amazon.com the force reshaping retail. The most recent victims are other e-tailers who can’t compete. Amazon now has brick and mortar peers squarely in its cross hairs. As Amazon reinvests cheap capital in a supply chain marching to same day delivery, it eats away at one of the few remaining advantages 1. “comScore Reports $44.3 Billion in Q1 2012 U.S. Retail E-Commerce Spending, Up 17 Percent vs. Year Ago,” comScore Press Release, May 9, 2012. of terrestrial retail—immediacy. Amazon is the retail ocean’s lone Great White Shark, 2. “Apparel Drives US Retail Ecommerce Sales Growth,” eMarketer Press Release, April 5, 2012. broadening its prey from slow fat seals to … everything that swims. 3. “Amazon To Book $2 Billion In M-Commerce This Year,” Steve Smith, Media Post, September 29, 2011. © L2 2012 L2ThinkTank.com Reproductions Prohibited 2
  • 3.
    Excerpt from the2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com 2012 Digital IQ vs. 2011 Overall Revenue n=65 Danger Zone Role Models Mobile: “I Can’t Believe How Much You’ve Grown!” 50,000 What was supposed to take ten years took three. Everyone, including Facebook, Macy’s H&M JCPenney has been caught flat-footed by the adoption rate of smartphones, which has ZARA Nordstrom 2011 Overall Revenue reached 165 million users in the U.S. alone.4 M-commerce is now the fastest Log Scale, millions UNIQLO growing retail channel in history, and mobile devices are likely influencing more Victoria’s Secret on- and offline purchases than traditional broadcast, let alone an in-store 5,000 Sephora salesperson. E-commerce is now m-commerce. Social media is now consumed Lindt Source: Capital IQ, Yahoo Finance, Bloomingdale’s via mobile app. Digital marketing is now centered on mobile search and mobile- optimized email. Crate & Barrel Digital IQ = Shareholder Value 500 French Connection Tumi Blue Nile This study attempts to quantify the digital competence of 76 global retail brands. Harry & David Annual Reports Harry & David Our aim is to provide a robust tool to diagnose digital strengths and weaknesses Rugby and help brands achieve greater return on incremental investment. We have Under Resourced Bluefly Scrappy 50 modified our methodology, increasing the weighting of a brand’s site from 30 50 70 90 110 130 150 percent to 40 percent and decreasing the weighting of social media from 20 2012 Digital IQ percent to 10 percent. In addition, with the help of partner STELLAService, we Log Scale measured each retailers order and return fundamentals, purchasing and tracking from three distinct locations. Similar to the medium we are assessing, our 2012 Digital IQ vs. 2011 Online Sales methodology is dynamic and we hope you will reach out to us with comments n=41 2,500 that improve our methodology, investigation, and findings. You can reach me at scott@stern.nyu.edu. Macy’s 2,000 JCPenney Victoria’s Secret 1,500 2011 Online Sales Scott Galloway 0.67 Correlation Clinical Professor of Marketing, NYU Stern millions r2= 0.45 Founder, L2 1,000 Source: Internet Retailer Saks Fifth Avenue Nordstrom Neiman Marcus 500 Crate & Barrel Restoration Hardware American Eagle Sephora BCBG 0 50 70 90 110 130 150 170 2012 Digital IQ 4. “Smartphone Adoption Rate Fastest in Tech History,” Stephanie Miot, PC Magazine, August 27, 2012. -500 © L2 2012 L2ThinkTank.com Reproductions Prohibited 3
  • 4.
    Excerpt from the2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com ABOUT THE RANKING The Methodology 20% Mobile 40% Site Effectiveness of Brand Site & E-commerce Operations Functionality & Content – 90% Brand Translation – 10% Compatibility, Optimization, & • Technology
 • Aesthetics
 Marketing on Smartphones, Tablets, & Other Mobile Devices • Navigation & Product/Site Search • Messaging & Visuals • Social Media Integration
   Provided by SapientNitro Mobile Site Android • Customer Service & Store Locator • Compatibility • Availability • Functionality • Popularity • Product Page
 • Transaction Capability • Functionality • Checkout • Account/Registry iOS Applications Innovation • Order/Return Timing & Logistics (iPhone & iPad) • SMS Provided by STELLAService • Availability • Geolocal • Popularity • Recent Brand Initiatives • Functionality 0% • iPad Differentiation 
 ti ng rke 3 Search, Display, & Email Marketing Efforts 10% Social Media YouTube Views, Number of Uploads, Subscriber Growth, Viral Videos, YouTube Search ig ita l Ma Search • Traffic • SEM Blog & Other User-Generated Content • Mentions • Sentiment Brand Presence, Community Size, Content, & Engagement Emerging Social Media D • SEO • Web Authority Email Instagram, Google+, • Frequency Facebook “Likes”, Growth, Tabs & Pinterest, Tumblr Advertising & Innovation • Content Apps, Responsiveness, Interaction Rate Twitter Customer Service • Display • Social Media Integration Twitter Followers, Growth, Frequency, Responsiveness • Retargeting • Promotions Provided by STELLAService • Brand Initiatives Online Voice
 Digital IQ Classes Genius 140+ Gifted 110–139 Average 90–109 Challenged 70–89 Feeble < 70 Digital competence is a point of Brands are experimenting and innovating across Digital presence is functional yet Inconsistent adoption of digital Investment does not match differentiation for these retailers. Brands their site, mobile, and both traditional and predictable. Uninspired efforts are platforms and a lack of vision. opportunity. Losing ground. have user-friendly sites, m-commerce, emerging social media platforms. Digital presence often siloed across platforms and Platforms lacks inspiration robust social campaigns, and strong SEO/ is strong, complementing brand image and larger not always consistent. Middle of and utility. On the outskirts. SEM. Digital is built to last. marketing efforts. Primed to make a move. the pack. © L2 2012 L2ThinkTank.com Reproductions Prohibited 4
  • 5.
    Excerpt from the2012 Digital IQ Index : Specialty Retail Inquire about your brand’s rankings. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com GENIUS Macy’s Nordstrom GIFTED Victoria’s Secret Sephora American Eagle Outfitters DIGITAL IQ RANKING JCPenney Bloomingdale’s Crate & Barrel Gap Saks Fifth Avenue Williams-Sonoma Banana Republic Ralph Lauren lululemon athletica Anthropologie Urban Outfitters Steve Madden Tiffany & Co. Rank Brand Digital IQ Rank Brand Digital IQ Rank Brand Digital IQ AVERAGE Nine West 1 Macy's 146 16 Tiffany & Co. 110 35 Neiman Marcus 101 Express Coach GENIUS NET-A-PORTER 2 Nordstrom 145 19 Nine West 109 35 Shopbop 101 Lacoste White House | Black Market Pottery Barn 3 Victoria's Secret 136 20 Express 108 37 Aeropostale 100 Barneys New York Blue Nile GUESS 4 20 37 A|X Armani Exchange Sephora 134 Coach 108 J.Crew 100 west elm H&M Swatch 5 American Eagle Outfitters 130 20 NET-A-PORTER 108 39 L'OCCITANE en Provence 99 Abercrombie & Fitch Juicy Couture Neiman Marcus 6 JCPenney 127 20 Lacoste 108 39 Chico's 99 Shopbop Aeropostale J.Crew White House | Black 7 Bloomingdale's 125 20 Market 108 39 Bluefly 99 L’OCCITANE en Provence Chico’s Bluefly 7 20 39 LUSH Crate & Barrel 125 Pottery Barn 108 LUSH 99 ALDO AVERAGE bebe Bath & Body Works 9 26 43 AVERAGE Gap 123 Barneys New York 107 ALDO 98 Cartier Brooks Brothers GIFTED 7 for All Mankind 10 Saks Fifth Avenue 121 26 Blue Nile 107 44 bebe 97 Tumi Talbots Rugby 11 Williams-Sonoma 114 28 Guess 106 44 Bath & Body Works 97 Harry & David Swarovski Bergdorf Goodman 12 Banana Republic 112 29 A|X Armani Exchange 105 46 Cartier 96 CHALLENGED Zales Gymboree 12 Ralph Lauren 112 29 West Elm 105 46 Brooks Brothers 96 Lucky Brand American Apparel Ann Taylor 12 lululemon athletica 112 31 H&M 103 46 7 for All Mankind 96 Club Monaco Dean & Deluca Cole Haan 15 Anthropologie 111 31 Swatch 103 49 Tumi 95 Diesel Tourneau Restoration Hardware 33 Lord & Taylor 16 Urban Outfitters 110 Abercrombie & Fitch 102 50 Talbots 94 The Body Shop Godiva Chocolatier ZARA 16 Steve Madden 110 33 Juicy Couture 102 50 Rugby 94 French Connection Stuart Weitzman UNIQLO Intermix BCBG FEEBLE Lindt Ethan Allen © L2 2012 L2ThinkTank.com Reproductions Prohibited 5
  • 6.
    Excerpt from the2012 Digital IQ Index : Specialty Retail Inquire about your brand’s rankings. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com GENIUS Macy’s Nordstrom GIFTED Victoria’s Secret Sephora American Eagle Outfitters DIGITAL IQ RANKING JCPenney Bloomingdale’s Crate & Barrel Gap Saks Fifth Avenue Williams-Sonoma Banana Republic Ralph Lauren lululemon athletica Anthropologie Urban Outfitters Steve Madden Tiffany & Co. Rank Brand Digital IQ Rank Brand Digital IQ AVERAGE Nine West 50 Harry & David 94 69 ZARA 76 Express Coach NET-A-PORTER 53 70 AVERAGE Swarovski 93 French Connection 75 Lacoste White House | Black Market CHALLENGED Pottery Barn 54 Bergdorf Goodman 92 71 Stuart Weitzman 74 Barneys New York Blue Nile GUESS 55 72 A|X Armani Exchange Zales 91 UNIQLO 73 west elm H&M Swatch 56 Gymboree 89 73 Intermix 71 Abercrombie & Fitch Juicy Couture Neiman Marcus 56 Lucky Brand 89 73 BCBG 71 Shopbop Aeropostale J.Crew 58 American Apparel 88 75 Lindt 67 L’OCCITANE en Provence FEEBLE Chico’s Bluefly 58 76 LUSH Ann Taylor 88 Ethan Allen 64 ALDO bebe Bath & Body Works 60 Club Monaco 87 Cartier Brooks Brothers 7 for All Mankind 61 Dean & Deluca 85 CHALLENGED Tumi Talbots Rugby 61 Cole Haan 85 Harry & David Swarovski Bergdorf Goodman 63 Diesel 84 CHALLENGED Zales Gymboree 63 Tourneau 84 Lucky Brand American Apparel Ann Taylor 65 Restoration Hardware 82 Club Monaco Dean & Deluca Cole Haan 66 Diesel Lord & Taylor 79 Tourneau Restoration Hardware Lord & Taylor 66 The Body Shop 79 The Body Shop Godiva Chocolatier ZARA 68 Godiva Chocolatier 78 French Connection Stuart Weitzman UNIQLO Intermix BCBG FEEBLE Lindt Ethan Allen © L2 2012 L2ThinkTank.com Reproductions Prohibited 6
  • 7.
    Excerpt from the2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Site Feature Adoption % of Sites with the Following Tools Key Findings July 2010–2012 2010 n=84 2011 n=64 2012 n=76 The Return of E-commerce Brand sites continue to be the primary revenue-generation engine online, however significant low-hanging fruit remains. Only 50 percent of brands incorporate conversion- enhancing user reviews. Similarly, the Facebook “Like” API, 26% 28% 23% a valuable source of incremental traffic, is employed by 31% 65% 37% only 65 percent of retailers. Most notably, adoption of live chat fell to 26 percent, bucking the nationwide trend5 and 48% 44% 56% suggesting that prestige retail brands are not seeing ROI on the technology. However, brands are investing more on their Product Facebook “Like” User Reviews Live Chat sites than in mobile or social platforms.6 Site investments appear to pay off—Genius brands keep users on their sites two and a half minutes longer than Site Visit Duration Feeble brands do. 3-Month Average Time on Site per User by Digital IQ Class Minutes, July 2012, n=76 brands Time 1:00 2:00 3:00 4:00 5:00 6:00 7:00 Genius 6:02 Digital IQ Class Gifted 5:11 Average 4:43 Challenged 4:44 “Straight e-commerce sites serve a purpose, Feeble 3:23 but to compete in a digital space a brand’s web presence needs to be more than pictures and a shopping cart. To compete in today’s Where Retailers Are Investing6 retail world, the brand needs to create that % of Retail Executives Prioritizing Investments personalized, one-of-kind, unique online experience, presenting in the Following Media n=100 consumers with options they didn’t know they had.” – bill kanarick 59% 35% 22%   worldwide cmo, SapientNitro 5. “Live Chat Effectiveness- A Survey of Internet Shoppers 2012,” Bold Chat Research Report. 6. “Website investment still key for online retailers despite the rise of social and mobile,” Maria Wasing, Econsultancy, September 3, 2012. Site Mobile Social Networks © L2 2012 L2ThinkTank.com Reproductions Prohibited 7
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    Excerpt from the2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Key Findings Referral and Destination Sites for Specialty Retail Sites Upstream and Downstream Traffic to and from the Following Sources July 2012 Red Light, Green Light % of Upstream Traffic % of Downstream Traffic While Facebook’s stock price may be down, the platform is not necessarily losing importance. Once again Facebook Average % of traffic to brand Average % of traffic from sites from the following brand sites forwarding to is a key traffic driver of users to retailer sites, representing the following destinations: sources: 10 percent of upstream traffic. Conversely, Twitter does not represent any reportable upstream traffic, suggesting the medium is not a major e-commerce driver. Pinterest 53% 49% has emerged as a notable source of both upstream and Google Google downstream traffic. Analysis of traffic to and from Amazon.com and other third 10% 14% party e-commerce sites reveals higher rates of downstream traffic than upstream, reinforcing the threat of the e-tailer. Facebook Facebook Facebook and Amazon together is an even bigger challenge to retailers. Last year, 14.5 percent of Amazon.com’s 22.3 3% 3% million hits7 on Black Friday came from social sites, up from Competitors Competitors 9.0 percent in 20108—a powerful force. Overall traffic to retailers fell 7.1 percent year over year while Amazon.com’s already massive traffic rose 13 percent, suggesting it feasts on the traffic cookie while everyone else fights over 2% Brand Site 3% Amazon Amazon increasingly small crumbs. 1.6% 2% Pinterest Pinterest 0.8% 2% Other E-commerce Other E-commerce 0% 0.05% Twitter Twitter 7. “Retail traffic on Black Friday up 2%,” Experian Hitwise Blog, November 26, 2011. 8. “Social media helps big retailers drive traffic during the holidays,” internet Retailer, January 30, 2012. © L2 2012 L2ThinkTank.com Reproductions Prohibited 8
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    Excerpt from the2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Key Findings Weekly Email Frequency by Category Average Number of Emails per Week July 2012 Back to Basics Email enjoys the highest conversion to traffic (4.25 percent in Q2 vs. 2.49 percent from search and 0.59 percent from social media)9, reinforcing its role as a crucial element of the marketing mix. 4.8 Although email open rates have fallen on PCs, the number of Department Store emails from retailers opened using a mobile device doubled between the fourth quarter of 2010 and the second half of 2.9 Apparel (34) (10) 2011. While almost 70 percent of mobile users delete emails 2.8 E-tailer (4) that do not render well, but only 42 percent of brands sent 10 emails optimized for mobile. Email frequency actually fell year over year in our research, suggesting that retailers are getting better at segmenting their customers. 1.9 Home & Gift (10) 2.3 Beauty & Skincare (5) Just 16 percent of brands have a pop-up soliciting email signup on their sites, and only 36 percent are sending 0.3 Watches & Jewelry (6) 2.2 Accessories & Shoes (7) abandoned-cart emails (a powerful conversion enhancing tactic). Some brands, including Juicy Couture, have taken the abandoned cart email a step further, and include product suggestions. French Connection offers free delivery in its Advanced Email Functionality abandoned-cart communications to entice purchase. % of Brands Implementing July 2012, n=76 With Without 42% 36% 16% 58% 64% 84% Email Viewable Sending Abandoned Email Signup 9. “Social still can’t beat search in online shopping,” Donna Tam, CNET, August 10, 2012. on Mobile Shopping Cart Emails Popup 10. “Email Marketing Benchmarks: Key Data, Trends and Metrics,” Lauren Fisher, eMarketer, August 2012. © L2 2012 L2ThinkTank.com Reproductions Prohibited 9
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    Excerpt from the2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Brand Responsiveness on Twitter % of Tweets Replied to Within Specified Time Periods Key Findings July 2012 Twitter Service StellaService sent one tweet to each retailer every day during the month of July, totaling 2,294 tweets. Each tweet asked a customer service question that required a response from the retailer. 8% < 1 hour 10.8% 3.7% >1– 8 hours >8 –24 hours 77.5% > 24 hours Best Practices: 1 “In comparison, during July the country’s largest 25 retailers responded to 47.3 percent of tweets Respond Quickly. within 24 hours and 28.1 percent within one hour. Specialty retailers that have a presence on Shoppers who ask a question over Twitter expect a Twitter should ensure adequate engagement with shoppers. It’s interesting to note that Amazon response 100 percent of the time. Prioritize the response has made a conscious decision to not use Twitter as a service medium.” to these shoppers over others who may be making – John Ernsberger | Co-founder & vp of business developement | stellaService a statement about your brand. 2 Brand Responsiveness on Twitter Provide Recommendations. % of Brands that Replied Within Specified Go the extra mile by recommending items to your Time Periods July 2012, n=75 shoppers and provide relevant links. 3 Recommend Connecting Over the Phone. Shoppers like when their issues are elevated. Suggesting a phone conversation makes a customer feel more important 3% <0–3 hours 28% >8 –24 hours 69% > 24 hours © L2 2012 L2ThinkTank.com Reproductions Prohibited 10
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    Excerpt from the2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Key Findings Social Media Penetration—Emerging Platforms The New Girl % of Brands on the Following Platforms Pinterest reached 10 million unique visitors faster than July 2012, n=76 any platform in history11 and 86 percent of brands now have a presence on the visual site. Although Pinterest has yet to monetize this traffic, 32 percent of online shoppers have made a purchase based on what they’ve seen on Pinterest and other image-sharing sites.12 In addition, the incorporation of the platform appears to increase email open and click rates.13 Purchases by Pinterest users average $80, twice what Facebook users spend.14 73% 71% 42% Although presence on Pinterest is strong, utilization and strategy still lag. Only 23 percent maintain a board featuring 86% Google+ Instagram Tumblr Pinterest user-generated content, and only 14 percent display prices on pins. This may soon change with New York City-based competitor The Fancy on the horizon. Having already surpassed a million members,15 this startup unites the visual elements of Pinterest with an upfront flash-sale Pinterest e-commerce model. % of Pinterest Pages with the Following Features July 2012, n=69 23% 14% 77% Product Prices 96% Board(s) Dedicated to on Pins 11. “Pinterest Hits 10 Million U.S. Monthly Uniques Faster Than Any Standalone Site Ever,” Josh Constine, User Generated Content TechCrunch, February 7, 2012. Links to Other Links to Website 12. “Pinterest leads to sales,” Zac Stambor, internet Retailer, April 25, 2012. Social Properties 13. “Pinterest Functionality Significantly Increases Email Open and Click Rates,” Cynthia Boris, Marketing Pilgrim, June 26, 2012. 14. “How Pinterest Drives Ecommerce Sales,” Mark Hayes, shopify, May 16, 2012. 15. “Can The Fancy Fulfill the Dreams of Pinners?,” Scott Gillum, Forbes, August 7, 2012. © L2 2012 L2ThinkTank.com Reproductions Prohibited 11
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    Excerpt from the2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Key Findings Mobile Site Features % of Mobile Sites with the Following Features Movin’ On Up July 2012, n=59 Smartphone penetration is almost 40 percent,16 and tablet 5% adoption skyrocketed from zero to 25 percent in only two years.17 69 percent of mobile users have used their device 44% 41% 25% to get product information, and 82 percent of smartphone owners use devices to help with shopping in-store.18 All signs point to a future built around mobile. Seventy eight percent of brands in the 2012 index have a mobile- 56% 59% 75% 95% optimized site, up from a quarter two years ago. Product Social Mobile Site Customer Service M-Commerce Brands are building apps for iOS and Android, however Sharing Search iPad app adoption dropped from 39 percent in 2011 to 29 percent this year. Many retailers demonstrate higher conversion from their site on the tablet and likely don’t want to obfuscate sales by having an app in the equation. Nine brands removed their 2011 iPad applications: Abercrombie Mobile Application Platform Adoption Rates & Fitch, Banana Republic, Bath & Body Works, bebe, 2010 –2012 Bergdorf Goodman, Bluefly, Diesel, Tiffany & Co., & Williams-Sonoma. 2010 (n=81) 2011 (n=64) 2012 (n=76) 60 Mobile Site Adoption 50 51% Percent of Retailers 2010 – 2012 45% 40 2010 (n=81) 2011 (n=64) 2012 (n=76) 39% 30 28% 29% 20 21% 10 3% 6% 6% 0 25% 67% 78% 16. “Smartphone penetration in the U.S. from 2010 to 2016,” Statista, 2012. iPhone iPad Android 17. “Tablet Shopping Growing, but Retailers Must Keep Up,” eMarketer, June 15, 2012. 18. “The Retailers Definitive Guide to m-Commerce Success,” Cheryl Sansonetti, 5th Finger, May 2012. © L2 2012 L2ThinkTank.com Reproductions Prohibited 12
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    Excerpt from the2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com insights Insights 2013 Research Findings Selected Highlights from SapientNitro Insights Report: L2 partner, SapientNitro, conducted an adjacent study (“In-Store Digital Retail: The Quest for Omnichannel”) on the Digital In-store Displays Are Powerful Tools—But state of in-store digital retail, and if/how brands are building Often Poorly Executed. links between digital and physical stores. Visiting one 40 of the 71 retailers evaluated had location at each of the 71 retailers, SapientNitro gathered no visible digital displays. Most focused 500 data points across categories such as cross-channel solely on branded content, lacking inventory fulfillment, digital in-store marketing touch points, interactivity. mobile in-store experience, and cross-channel sharing integration. They found in-store digital experiences (when The Right Tools Generate they exist) often do not support in-store goals and activities. Positive ROI. While the capital costs of implementing in- store digital are significant, those who have “Over the past decade, retailers of all sizes report a significant increase in ROI—on have been driven by disruptive technologies the order of 10 to 40 percent additional and the changing consumer to make major in-store sales—relative to other stores. investments in digital channels: eCommerce, smartphones and digital in-store. The Retailers Should Focus On connected consumer’s push for an omnichannel experience Supporting User Tasks is inspiring retailers to introduce new ways to extend aisles, Well-designed, task-based tools emerged create adaptive environments, and deliver augmented as being few and far between. 43 percent packaging experiences.” of brands had some sort of functionality – Hilding anderson supporting in-store tasks. However, often   director of research, SapientNitro these efforts were anemic—static iPad kiosks and broken mobile apps. Download the full SapientNitro Insights 2013 report: sapientnitro.com/insights © L2 2012 L2ThinkTank.com Reproductions Prohibited 13
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    Excerpt from the2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com TABLE OF CONTENTS 5 Methodology 32 Google+ and Foursquare: A Social Media Graveyard 6 Digital iq rankings 33 Mobile Site: Movin’ On Up 6 Genius 34 Mobile Apps: App and About 7 Gifted 35 SapientNitro: Insights 2013 Research Findings 8 Average 36 flash of genius 1 1 Challenged 36 Showrooming App (Amazon) 1 2 Feeble 37 Sizing It Up (Macy’s, Nordstrom, and Crate & Barrel) 13 Key findings 38 True Love in Pictures (Tiffany & Co.) 1 3 IQ Distribution: Competition Heats Up 39 Social Gaming in a Shoe Paradise (ALDO) 1 4 Category Winner: Department Stores Dominate 40 Shoppable Video (Barneys, Saks Fifth Avenue, LUSH, and Nine West) 1 5 2012: Biggest Winners and Losers 41 The Death of the Cash Register 1 6 Site: The Return of E-commerce (JCPenney, Nordstrom, Coach, and Urban Outfitters) 1 7 E-commerce: Shipping & Returns (STELLAService) 42 Avatars in Style (Diesel) 1 9 Traffic Sources: Red Light, Green Light 43 Etsy / Pinterest Partnership (West Elm) 2 0 SEO/SEM: In Search of Search 44 View It Maybe (Abercrombie & Fitch) 2 1 Email: Back to Basics 45 Welcome to the Jungle (GUESS) 2 2 Facebook: It’s Not Business—It’s Personal 46 Shipping Upgrade Is the New Sale (Bergdorf Goodman, 2 3 Facebook: Interact Your Part NET-A-PORTER, and Urban Outfitters) 2 4 Facebook: Overachievers vs. Underachievers 47 Abandoned Cart! Abandoned Cart! 2 5 Twitter: Are You For Real? (French Connection, Lucky Brand and Juicy Couture) 2 6 Twitter: Customer Service (STELLAService) 48 A Lush Connect (LUSH) 2 7 YouTube: The Other Search Engine 49 L2 T eam & collaborators 2 9 Pinterest: The New Girl 50 AB O U T L 2 3 1 Instagram: A Picture Is Worth 80 Million Users © L2 2012 L 2 ThinkTank.com Reproductions Prohibited L2 is a membership-based think tank serving luxury and prestige brands, and agency, product, and platform partners. Our proprietary research provides benchmarking, analysis, and case studies on digital innovation. To obtain the full report and learn more about L2 Membership benefits, contact membership@L2ThinkTank.com. © L2 2012 L2ThinkTank.com Reproductions Prohibited 14
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    Excerpt from the2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Upcoming Events L2 is a think tank for digital innovation. L2 CLINIC: COMMERCE We are a membership organization that brings together thought leadership from September 13, 2012 · Paris academia and industry to drive digital marketing innovation. September 27, 2012 · New York City L 2 L unch :   S P ortswear R esearch September 25, 2012 · New York City Digital IQ Index®: The definitive benchmark for online competence, Digital IQ Index® reports score brands L 2 L U N C H :   BE A U TY against peers on more than 350 quantitative and qualitative data points, diagnosing their digital strengths and weaknesses. October 4, 2012 · New York City L2 Collective®: Series of benchmarking reports designed to help member brands better understand resources, L 2 lunch :   S pecialty R etail & S portswear human capital, budgets, and priorities supporting digital strategies. October 18, 2012 · San Francisco L 2 F O R U M :   I N N O VATI O N 2 0 1 2 EVEN T S Forums: Big-picture thinking and game-changing innovations meet education and entertainment. November 6 &7, 2012 · New York City The largest gatherings of prestige executives in North America. 300+ attendees Clinics: Executive education in a classroom setting with a balance of theory, tactics, Upcoming Research and case studies. D igital I Q I nde x ® R eports : 120 –180 attendees Sportswear Beauty Working Lunches: Members-only lunches led by digital thought leaders and academics. Fashion Automotive Topic immersion in a relaxed environment that encourages open discussion. Watches & Jewelry 40–80 attendees L 2 1 0 0 ® R eports : consulting China IQ Advisory Services: L2 works with brands to garner greater return on investment in digital initiatives. Asia Pacific IQ Advisory work includes Digital Roadmaps, Social Media Strategy, and Organizational Strategy engagements. L 2 C ollective ® R eports : MEMBE RSHIP Media Mix Social Media For membership info and inquiries: membership@L2ThinkTank.com Omni-Channel Commerce © L2 2012 L2ThinkTank.com Reproductions Prohibited 15
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    A Think Tank for DIGITAL INNOVATION 51 East 12th Street, 2nd Floor New York, NY 10003 © L 2 2012 L 2 ThinkTank.com Reproductions Prohibited L2ThinkTank.com This report is the property of L2 Think Tank. As always, L2 Members may use this report for internal business purposes. Beyond the L2 info@L2ThinkTank.com Membership, no copyrighted materials by L2 Think Tank may be reproduced, re-distributed or transferred without prior consent by L2.