Retail: Electrical Goods Trends

May 2011Adam GoodmanVertical Insight

Manager

Contents

Market Trends

E-Retail Market

The chart here shows the UK online shopping sales from May 2000 to March 2011

Mark

et

Trends

“The UK online retail sector grew 14% year-on-year in March,

with Britons spending an estimated £5.1bn

shopping online” (Source: IMRG, April 2011)

“The UK online retail sector grew 14% year-on-year in March,

with Britons spending an estimated £5.1bn

shopping online” (Source: IMRG, April 2011)“Online continues to be the beacon for the UK retail market during these tough economic conditions, with the high street suffering its worst drop in sales for 15 years during the same period. The 18% annual growth recorded in the first quarter of 2011 is in line with our prediction for the year”. “IMRG’s recent online confidence survey revealed that over 70% of UK retailers expect online sales to remain healthy for the remainder of the year which, when combined with the solid growth recorded by the Index, indicates that the outlook for 2011 remains positive for the UK e-retail industry”

Tina Spooner, Director of Information at IMRG

Electricals Market Size and ForecastAccording to Mintel:

•Spending on electricals was £28.9 billion (incl. VAT) in 2010, a figure which has hardly changed in five years. The figure includes all spending – brown goods, kitchen appliances and PCs. It does not include software.

•Sales by electrical retailers were £12.9 billion (incl. VAT) for the same year, down by 21% over the last five years. The sector is made up of electrical retailers (such as Currys, Comet or Richer Sounds), where sales were 11% down, and PC and telecoms specialists where sales were down by 34%.

According to IMRG:•The electricals sector has grown 996% since February 2002 and continues to show consistently strong growth, especially during the last 3–4 years

Source: Mintel

ELECTRICALS RETAILERS SALES, 2005-15 (F)

Electrical SectorM

ark

et

Trends

Source: IMRG, April 2011

The Electrical Index, year-on-year – the values are displayed from

January to December

This chart shows the growth of the Electrical Sector between April

2002 and April 2011

Source: IMRG, April 2011

“Over the past 11 years Britons have spent an estimated total of £300bn shopping on the internet, rising from a yearly total of £0.8bn in 2000 to an estimated £58.8bn in 2010… In the year to April 2011 UK consumers spent an estimated £62bn shopping online, with 22% of this being spent between May and July 2010, 23% between August and October 2010, 30% between November 2010 and January 2011 and 25% between February and April 2011.The electricals sector has grown 996% since February 2002 and continues to show consistently strong growth, especially during the last 3–4 years”

Advertising Market

‘Electronic Goods’ Search Traffic KPIs

Traffic• Searches for electronic goods generics increased by +4% between

2009 and 2010 (April to December timeframe)

• Searches for electronic goods generic keywords increased by +9% between October to December 2010 v 2009 – the key Christmas period.

• Searches for electronic goods generics increased by +14% between January to May 2011 v 2010.

Insights: • The electricals sector has grown 996% since February 2002 and

continues to show consistently strong growth, especially during the last 3–4 years (Source: IMRG, April 2011)

• Kinect for the Xbox 360 is the Fastest-Selling Consumer Electronics Device ever according to Guiness World Records. Kinect sold 133,333 units per day, for a total of 8 million units in its first 60 days on sale from 4 November 2010 to 3 January 2011 (Source: Guinness World Records)

Searc

h T

rends

Source: Microsoft Advertising Intelligence Tool ( MAIT)

Electronic Goods Daily and Demographics Trends

Daily

• Mondays have been the largest traffic driving day over the last 2 months with 17%, with Tuesday and Wednesday closely following with 16% each. The lowest day has seen Saturday (11%) and Sunday (12%) at lower levels. Friday (13%) is the lowest traffic driving day out of the days during the working week.

• Potential incremental targeting opportunities would include up-weighting between Monday to Thursday

Demographics• The 35-49 age brackets are the main age groups for traffic

with 32%. 25-34 year olds are slightly less with 24%

• The key searcher demographics with 53% are males, with females having 44% share. Unknown gender accounted for 2% of searches

Searc

h T

rends

Source: Microsoft Advertising Intelligence Tool (MAIT)

Network Demographics Trends

• The majority of the impressions and clicks occur in the age groups of 18 to 24 year olds, slightly more female in audience.

• Conversions are almost identical however between the age groups of 18-24 and 25-34 year olds.

• Clicks in the earlier age groups are more by females, however this trend changes in the later age groups of 25 year olds plus.

Mic

roso

ft M

ed

ia N

etw

ork

Source: Microsoft Media Network : Oct 09 : April 2011 - % of all IMP/CLK/Con

Network Daily TrendsM

icro

soft

Med

ia N

etw

ork

Source: Microsoft Media Network : Oct 09 : April 2011 - % of all IMP/CLK/Con

Retail related impressions increase strongly in the very

late evening, peaking towards the very last few hours.

The % of Actions related to consumer electronics network

activity peak from 4pm – 10pm.

The majority of the impressions & clicks occur during

the week with peaks on Mondays to Wednesdays. This

replicates the earlier finding from Search results

through Bing (suggested on slide 9) with a low point

on Saturdays.

Advertisement Publisher LocationTotal Ad Impressions and Advertising Exposed Unique Visitors

• Microsoft sites had the second highest exposure of UK Unique Visitors throughout Jan – March 2011 for the Retail category in comScore

• Microsoft Sites delivered the second most impressions across some of the major publishers

• This allows branding campaigns to reach the large set of consumers through Microsoft Advertising properties and deliver high advertising exposed unique visitors.

Dis

pla

y

Source: ComScore AdMetrix – January to March 2011

Advertisement Publisher LocationShare of Impressions and Frequency

• Microsoft sites also had a very competitive share of Retailers ad impressions during January to March, slightly less than eBay yet delivered more Unique users than eBay did during this time.

• Although Microsoft sites received less Ad impressions it’s interesting to see the Microsoft Advertising average frequency is less than eBay, Yahoo!, Glam Media, Trader Media and AOL.

Dis

pla

y

Source: ComScore AdMetrix – January to March 2011

Industry & 3rd Party Resources

New Shopper Journeys Study

Microsoft and Carat have conducted a European New Shopper Journey study.

To learn more about this study and the findings across European markets for Home Electronics market, please speak to your Microsoft sales representative.

Mic

roso

ft &

Cara

t R

ese

arc

h S

tud

y

You can find out more information at:

www.MicrosoftAdvertising.com/UK

At the start of the consumer journey only 6% of consumers had decided on a sum to spend, 3% on the

retailer and 4% on a specific brand. Digital media has a big role to play…

Touchpoints play an important role in influencing the initial decision

Mic

roso

ft &

Cara

t R

ese

arc

h S

tudy

38%

AD

VER

TISEM

EN

TS

33%

SOMETHING SEEN

WHEN SHOPPING

33%

WORD OF

MOUTH

32%

SOMETHING SEEN

OR READ

25%

NEW

SLE

TTER

S/

EM

AIL

S/

CO

UPO

NS

• 12% internet

• 8% TV

• 4% magazines

• 9% promotion

• 22% friends/

colleagues

• 11% expert reviews

online

• 10% online

• 7% print article

• 7% email

• 6% brochure

• 2% coupons

Source: New Shopper Journeys Europe 2010

Home Electronics n=2557

Electrical Market Strengths and WeaknessesIn

dust

ry &

3rd P

art

y

• Technology: Benefits from the most

rapidly changing technology with near

constant flow of must-have new gadgets.

• Convergence: New products become

more powerful and incorporate features

of other gadgets.

• New stores formats, such as megastores

are driving demand.

• Electricals products are now essential to

the way we run our lives.Source: Mintel, 2011

• Spending will remain under pressure

throughout 2011 and perhaps into 2012.

• Convergence – as new products combine

the features of many older ones people

will need fewer of them.

• Product gap – there seems to be little to

provide a boost to the sector after the

iPad.

• Price: competition is driving prices down

and even new products don’t retain

premium status for long.

• Commodities: The emphasis on price ends

up commoditising electrical products.

Channels of DistributionIn

du

stry

& 3

rd P

art

y

(a) Internet specialists, mail order, direct sellers

(b) Department stores and mixed goods retailers such as Argos

(c) Includes DIY/home/kitchen specialists as well as office

equipment specialists

• Electrical specialist stores such as Dixons, Currys

and Comet agree on the importance of a multi-

channel offer and both are integrating their online

and stores based formats.

• Furthest ahead in multi-channel is Argos and is a

major player in many parts of the sector,

particularly at the cheaper end of the sector. John

Lewis is believed to be the most significant

department store player in terms of electrical

goods sales.

• Home shopping is being driven by the internet.

Trading statements from some of the most

successful players have shown some of the

strongest rates of growth throughout the downturn.

• Electricals is particularly well-suited to selling

online given the ease for consumers to compare

specifications and price from impartial sources.

Source: Mintel

Why people use the internet to shop for Electricals

Most popular statements about using the internet for Electricals shopping. (March 2011)

Ind

ust

ry &

3rd P

art

y

Base: 1,916 internet users aged 16+ all who have bought electrical products in the last 3 years

A quarter of consumers preferred to research online rather than seek help from store staff.

“

“

In the Microsoft and Carat New Shopper Journey study we found that 74% of home electronics shoppers research their

potential buy. In this vertical, buyers are open-minded, and are prepared to take their time. Out of the study, 79% of home

electronics shoppers used the internet to perform this research.Source: New Shopper Journeys Europe 2010 , Home Electronics. Base: Researchers n=1739

Consumer purchase behaviourIn

du

stry

& 3

rd P

art

y

Generally consumers only buy electrical products when they are looking for replacements. Although this maybe the case products like Kinect, iPod and iPad have bucked this trend as major new products grasp consumers imagination and entice purchase.

Other key attitudes to buying electicals include:

Source: GMI/Mintel

Consumer purchase behaviour cont…In

du

stry

& 3

rd P

art

y

This was backed up by further research carried out by Friends Life. Almost 70% of the survey respondents were asked to respond to the statement:

“I am keeping household goods (e.g. furniture, electrical goods) for longer before I replace them”

Source: Friends Life/The Future Foundation/nVision, 2011

Base: 1,000 online respondents aged 16+, GB

% who agree or agree strongly, by gender, age and social grade

The young buy Hi-tech, everyone has to buy white goods

The young lead the market• Already PCs are mass market products bought by everyone• Mobiles are approaching the same status

Ind

ust

ry &

3rd P

art

y

Note:

The white goods clustered around the average

lines are:

vc - vacuum cleaners

m - microwave

ff - fridge/freezer

c - cooker

White goods are Small Kitchen Appliances,

Vacuum cleaner, Washing machine, Microwave,

Fridge/Freezer, Cooker

Source: GMI/Mintel

Affluen

ce

Age

MP3 player etc

Games console

Computer

Hi-tech Brown goods White goods

Mobilephone

Dishwasher

Hi-Fi

DVD player

Camera

TV Small kitchen appl

Washing machine

c

ff

vc

m

Energy Efficiency losing it’s influence on consumers choice?

Survey respondents indicate that consumers who stated in 2009 that Energy Efficiency influenced the potential to spend more money on Electrical goods, are now less likely to take this into consideration in 2011. 1 in 3 people agree they would spend more if the electrical good would not harm the environment

Ind

ust

ry &

3rd P

art

y

“I would be prepared to pay up to 5% more for energy efficient electronic goods if I could be sure that they would

not harm the environment”% who agree strongly or agree, by gender, age and social grade

Source: EDF Energy/GreenAware/The Future Foundation, 2011 Survey Base: 1,000-1,500 online respondents aged 16+, GB

Consumers Save for Electrical goods

Survey respondents indicate that consumers save in order to afford the latest and great electronic goods used within the home. More 20% of respondents said they save to buy new home electronics equipment – more than people who said they saved for events, buying a house and those who are saving for their children’s education

Ind

ust

ry &

3rd P

art

y

Source: EDF Energy/GreenAware/The Future Foundation, 2011

Survey Base: 1,000-1,500 online respondents aged 16+, GB

“For which, if any, of the following reasons are you saving or borrowing money?

Saving”% who are saving for the following reasons

Consumer Target groups

Quality seekers:• Younger and more affluent• Prepared to pay up for quality• Tend to buy for replacement but are doing so more

frequently

Bargain hunters:• Also younger and more affluent• Wait for special offers• Research and buy online• Not interested in after sales service

Replacers:• Older and less affluent• Buy when they have to• Not confident, want help

Apathetics:• Younger less affluent• Many still living at home• Like Argos, especially online

Ind

ust

ry &

3rd P

art

y

Source: GMI/Mintel

The key markets are the bargain hunters and the quality seekers. They have similar demographics, though radically different attitudes to buying electricals, as their names suggest.

Electronic Retailer Opportunities

Seasonal PeaksTake advantage of seasonal peaks for products where possible. Positioning of your products, sales and remember to include call to actions where possible. Including delivery charges, delivery times and price points will enable consumers the ability to compare prices and purchase easily.

Demographic/Mosiac The users and searches for electronics index well in demographic sectors and can be targeted with our Mosiac offering. Find out more information on our Display Ad Targeting and Search targeting options. You can also use our Microsoft Advertising Intelligence Tool to learn more about audiences by keyword.

Search & Display – Better TogetherUtilise the combined efforts of both your Search and Display campaigns to help boost your ROI. We have seen good increases in traffic throughout 2010 and into 2011 – so make the most of our enormous reach. Through Microsoft Advertising we reach almost 92% of the Internet population. Read our Display & Search Case study

Op

port

un

itie

s

Retail: Video and M-Commerce

Video and Retailers V

ideo

According to recent research by ForeSee Results, e-tailers making extensive use of video were among the top-

rated in customer satisfaction during the 2010 holiday shopping season. (Limelight Networks, Online Retail Trends 2011)

The video trend is evident just by looking at

some of the largest online retailers today.

Amazon, for example, incorporates both

manufacturer videos and video reviews from

consumers in its product pages

The video trend is evident just by looking at

some of the largest online retailers today.

Amazon, for example, incorporates both

manufacturer videos and video reviews from

consumers in its product pages

The Limelight Networks survey the results indicated that video product demonstrations and video reviews from customers were listed as

extremely or very important features. This finding seems to be proving correct as we see from comScore the increase Unique Users of Video on

Retail sites.

Retail M-Commerce

“The evolution of mobile technology has given rise to the empowered consumer: at the touch of a button, almost anywhere, consumers can research products, companies, and even make purchases.” (ForseeResults)

Forsee study of 10,000 UK visitors to the biggest e-retail sites in the UK (according to IMRG) stated:

Mobile

Key findings:

•Shoppers are using mobile phones to access websites and apps

more than ever before – “32% of respondents have used their phone to

access a retailer website, and an additional 32% indicated they plan to

access retailer websites or mobile apps by phone in the future”

•Purchase behaviour is exploding – “8% of UK made purchase via

mobile at Christmas 2010”

•Shoppers use their phones for a variety of tasks – “47% of shoppers

used phone for price comparison reasons”

•Good experiences with mobile sites and apps have critical cross-

channel impact - “Shoppers who are highly satisfied with a mobile

experience say they are 32% more likely to buy from that retailer online and

31% more likely to buy offline”

Source: Foresee Results, Jan 2011.

UK Retailers & Mobile AppsM

obile

41% of retailers expect to have a transactional site/app within the next year

Source: IMRG, AIME & IAB B2B M-Commerce Study

Base: Sector 1, Retailers & Brands (42) , Do you offer an application / mobile specific website which is fully transactional with credit, debit or alternative payments?

41%

Examples of some Windows Phone 7 shopping apps

"51% of consumers say they are more likely to buy

from retailers that have a mobile site, but fewer than

5% of retailers have such a site" eMarketer Nov 2010

Retail M-CommerceM

obile

In which of the following ways did you use your

phone while shopping in a store?

Source: Forseestudy of nearly 10,000 visitors to the biggest e-retail websites in the United Kingdom

accessed that

store’s website

on their phone

accessed a

competitor’s website

on their phone“Applications and websites tailored to mobile shoppers are a must-have for

retailers. As smartphone use increases, more customers will turn to the

mobile channel to find price and product information before making a

purchase.” (ForeseeResults)

67%

26%

UK Shoppers – Mobile & ConsolesM

obile

& C

onso

les

UK shoppers are using mobile phones to validate product attributes and compare prices:

Source: RichRelevance & BazaarVoice ‘New Rules of Engagement or Todays Empowered UK

Shopper, WhitePaper. (BazaarVoice)

Shopping With Mobile Phones

“60% of phones sold today being smartphones, and more users likely to connect to the internet via

mobile devices…retailers are rushing into m-commerce with alacrity. Apps have been big news −

Tesco’s Grocery app has been downloaded by 350,000 people, and the Argos app has achieved

800,000 downloads. Many in the industry see mobile websites as the future, most likely operated in

conjunction with specialist apps” (RetailWeek, Nov 2010)

“20% to 30% of all transactions will

be made from smartphones within

the next three years”

Nick Robertson, ASOS

“20% to 30% of all transactions will

be made from smartphones within

the next three years”

Nick Robertson, ASOS

Shop Direct chief executive Mark

Newton-Jones said the multi channel

retailer was also starting to get

orders through web-connected

games consoles such as the Xbox

360

Shop Direct chief executive Mark

Newton-Jones said the multi channel

retailer was also starting to get

orders through web-connected

games consoles such as the Xbox

360

Summary of M-Commerce Usage M

obile

Source: IAB Consumer M-Commerce Study October 2010 Base All UK Mobile Users (1039)

Smartphone users are

63% more likely to engage in

M-Commerce

Top e-Retail FactsA

ppendix

Source: IMRG, 2011