w w w . c o m p e t e . c o m

Retail Spring Update

May 2011

w w w . c o m p e t e . c o m2

Today’s presenters

• Damian Roskill, Managing Director, Marketing at Compete

• Jason Caine, Director, Retail practice at Compete

w w w . c o m p e t e . c o m3

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

w w w . c o m p e t e . c o m4

• 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 ROIAbout 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

w w w . c o m p e t e . c o m5

What is the Compete Retail Update?

Quarterly update to provide an update on key industry trends

Review performance of new and emerging retail trends using Compete Online Shopper Intelligence survey

Follow 2-3 standard metrics to monitor industry health using Compete behavioral data

w w w . c o m p e t e . c o m6

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

Online Sales Tax Impact

Facebook Effect on Retail

w w w . c o m p e t e . c o m7

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?

w w w . c o m p e t e . c o m8

The Numbers

w w w . c o m p e t e . c o m9

Retail segments that offer essential household items and “one-stop” shopping experienced the largest traffic increases.

Total Online Visits – by Retailer Segment(in millions)

1,482,896,900

149,070,753

327,336,088

141,090,660

409,052,556

22,363,090

122,398,050

522,846,439

133,893,766

1,618,231,352

182,714,110

346,432,517

158,115,608

420,983,196

23,371,848112,463,201

510,007,817

117,854,384

Largest YOY growth Largest YOY Declines

w w w . c o m p e t e . c o m10

Office supply and department store retailers both experienced healthy YOY gains in conversion rates.

Online Conversion Rates – by Retailer Segment

Health & Beauty

Pets

Home Improvement

Electronics

Sporting Goods

Apparel

Mass Merchants

Department Stores

Office Supplies

7.3%

4.8%

1.0%

1.4%

3.7%

5.0%

3.7%

3.0%

5.6%

5.3%

3.8%

0.7%

1.4%

3.8%

5.0%

3.7%

3.2%

6.1%

Largest YOY Growth

Largest YOY Declines

w w w . c o m p e t e . c o m11

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)

Garden supplies

Groceries

Kitchenware & household appliances

Baby, children & toys

Health & beauty products

Apparel

Books

10.0%

12.2%

13.0%

13.6%

16.3%

21.4%

23.4%

29.5%

30.8%

35.6%

46.8%

52.6%

53.0%

Source: Compete Online Shopper Intelligence – Q1 2011 Survey

w w w . c o m p e t e . c o m12

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

w w w . c o m p e t e . c o m13

Ship to Store

w w w . c o m p e t e . c o m14

One of the ways traditional retailers are trying to differentiate themselves is by offering to ship to store.

1 Consumer places order on Retailer site

2 Retailer delivers order or pulls from shelf

3 Consumer picks up order at store

What is Ship to Store?

Select Retailers That Offer

w w w . c o m p e t e . c o m15

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

12%16%

44%

30%

24%

45%

Q1 2010 Q1 2011

w w w . c o m p e t e . c o m16

Consumers choose ship to store because it is cheaper than paying shipping costs.

Source: Compete Online Shopper Intelligence – Q1 2011 Survey

Why do you choose the ‘in store pick up’ or ‘ship to store’ option? (n=1611)

Cheap

er th

an p

ayin

g sh

ippi

ng co

sts

Wan

ted

the

prod

uct im

med

iate

ly

Plann

ing

to vi

sit th

e sto

re a

nyway

Only w

ay to

ord

er p

rodu

ct

Had b

ad o

nlin

e sh

ippi

ng e

xper

ienc

eOth

er

70.4%

31.1% 29.0%

18.1%

3.8% 1.2%

w w w . c o m p e t e . c o m17

The main reason consumers do not select ship to store is due to the inconvenience of picking up the order.

Source: Compete Online Shopper Intelligence – Q1 2011 Survey

Why don’t you choose the ‘in store pick up’ or ‘ship to store’ option? (n=1357)

55.0%

27.8% 25.0%

4.6%14.8%

w w w . c o m p e t e . c o m18

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)

w w w . c o m p e t e . c o m19

Facebook’s Effect on Retail

w w w . c o m p e t e . c o m20

The profile of retailer and brand Facebook pages continues to rise.

Source: Compete Online Shopper Intelligence – Q1 2011 Survey

Super Bowl Ads

Facebook Marketing Campaigns

• Many household brands called out Facebook pages in Super Bowl ads

• Target ran a campaign to give away $1M during February 2011

• Facebooks fans voted on charity to donate money to

w w w . c o m p e t e . c o m21

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

w w w . c o m p e t e . c o m22

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)

Source: Compete Online Shopper Intelligence – Q1 2011 Survey

Daily 6.6%

Weekly 11.0%

Monthly 8.9%

Less than once month 23.1%

Never 27.8%

Not member of Facebook

22.4%

w w w . c o m p e t e . c o m23

Consumers are treating retailer Facebook pages like an online circular.

Why do you visit a retailer Facebook page? (n = 1627)

Source: Compete Online Shopper Intelligence – Q1 2011 Survey

Connect with other people who like the retailer

Let others know why I like a specific retailer

Appears in my news feed b/c a friend "likes" it

Learn more about a specific retailer

Keep up to date on sales and promotions

13.6%

13.7%

26.4%

29.0%

56.2%

w w w . c o m p e t e . c o m24

Consumers still do not consider Facebook retailer pages as being very influential to making a purchasing decision.

Source: Compete Online Shopper Intelligence – Q1 2011 Survey

Influence Extremely influential

How influential have Facebook pages been on your decision to purchase those products or from those retailers? (n = 1627)

22.5% 21.7%

32.9%

16.7%

6.2%

Not at all influential

w w w . c o m p e t e . c o m25

Looking ahead

• Facebook pages are a great low-cost marketing tool

• Main purpose will likely be to:1. Deliver information where consumers are

spending time2. 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

w w w . c o m p e t e . c o m26

Online Sales Tax

w w w . c o m p e t e . c o m27

Online retailers are required to collect sales tax in any state they have a “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.

Recent debate over “physical presence”

w w w . c o m p e t e . c o m28

51.1%

13.3% 10.0% 10.8% 10.6%4.2%

About 1 in 2 consumers are likely to shift online spending if an online sales tax is enacted.

Source: Compete Online Shopper Intelligence – Q1 2011 Survey

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

w w w . c o m p e t e . c o m29

Product categories that you can ‘touch and feel’ would most likely be negatively impacted by an online sales tax.

Source: Compete Online Shopper Intelligence – Q1 2011 Survey

Categories that consumers would decrease online spending (n=1357)

Shoes

Books (excludes e-books)

Movies, music & video games

Apparel

Electronics

38.0%

42.3%

44.3%

47.1%

48.8%

Sporting goods

Groceries

Garden supplies

Household essentials

Baby, children, toys

19.2%

19.5%

19.8%

20.6%

21.5%

Most likely to decrease online spend Least likely to decrease spend

w w w . c o m p e t e . c o m30

A potential online sales tax would cause consumers to be more price sensitive and maybe spend more offline.

Source: Compete Online Shopper Intelligence – Q1 2011 Survey

Reasons spending would shift from online-only to offline retailers (n=1092)

More price senstive if sales tax is collected

46.7%

Prefer to have in-store re-turn option

44.6%

Prefer in-store pickup op-tion

27.8%

Other2.4%

w w w . c o m p e t e . c o m31

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

w w w . c o m p e t e . c o m32

Questions?

Damian RoskillManaging Director, Marketingdroskill@compete.com

Jason CaineDirector, Retailjcaine@compete.com