Technology to enable gifts shopping – an opportunit y to disruptVijay TalwarJune, 2015

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Brief Introduction: Vijay Talwar

Current Role:� President of Gifts and Celebrations at Sears Holdings Corporation

Responsibilities: � Leading and executing member-centric business strategy and driving financial

results around gift purchases including Gift cards, Greeting cards and Gift registry

� Leading Gifts, Fine Jewelry and Watch businesses across Sears and Kmart

Background:� COO for Central Europe, Middle East and Africa at Nike

� CEO of The William J. Clinton Foundation’s India office

� CEO, CFO and President, International and Global Customer Care for Blue Nile

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Executive Summary

Gifting represents $160B US market, which peaks in Nov/Dec; however, gifting is an ALL year round opportunity

o Thanksgiving and Christmas remain top gift giving occasion for customers with gifts accounting for approx. 37% of total

household spend during major holidays

o Apart from Thanksgiving and Christmas, Mother’s day is one of the most important gift giving occasions with over $17B

spent on gifts during 2013

o Gift Cards continue to evolve as a gift of choice for both gift giver and recipient, and accounts for $39B in gifts shopping

Technology enabled gifts shopping solution could ca use disruption and result in sustainable competitive advantage

o Gift cards evolved as a key gifting product as customers are not sure about gift recipient preferences, however gift cards

are perceived as impersonal

o Gifts shopping is challenging and existing shopping experience (online and In-store) is not designed for buying gifts

o Gift it by Email: An ideal gift shopping experience that provide flexibility to both gift giver and gift recipient

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Gifting represents $160B US market and is driven by both major calendar

driven holidays and key life celebrations such as birthday, wedding and anniversary

-

10

20

30

40

50

60

70

March April May June July August September October November December January February

Gif

ts I

nd

ust

ry S

ize

($

B)

Gifting Industry In USA

Special Occasions Major Holidays

Xmas And New Year

Thanksgiving

Black Friday

Cyber Monday

Mother’s Day Father’s Day

Valentine’s DaySpecial Occasions such as

Birthday, Wedding, Baby,

Retirement etc.

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Thanksgiving and Christmas remain top gift giving occasion for

customers with gifts accounting for approx. 37% of total household spend

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Holiday sales is showing a positive trend with improving economic outlook

and digital channels continue to drive growth

• Holiday sales increased by 3.9% to $602.1B in 2013 despite shorter Holiday Season and adverse weather conditions

• In-store foot traffic declined by 6.5%

• Online sales grew 18% YOY and accounted for 9.5% of total retail sales

• Mobile channel accounted for approx. 15% of total online sales

Holiday Retail Sales Trends Holiday Online Sales Trends

2007 2008 2009 2010 2011 2012 2013

Total Holiday Sales ($B) 527 504 506 532 560 580 602

Online (% of total) 5.5% 5.6% 5.7% 6.4% 7.3% 8.3% 9.5%

Online Sale ($B) 29 28 29 34 41 48 57

YOY Online Growth 16% -3.4% 3.6% 17.25 20.6% 17.1% 18.7%

Mobile as a % of total online 3% 9% 13% 14.8%

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Apart from Thanksgiving and Christmas, Mother’s day is one of the most

important gift giving occasions with over $17B spent on gifts during 2013

$17B

-14.50%

4.80%

1.50%

6.50%

0.20%

-20%

-15%

-10%

-5%

0%

5%

10%

14.5

15

15.5

16

16.5

17

17.5

2008 2009 2010 2011 2012 2013 2014

$ B

illi

on

Mother's Day Retail Sales Trend – Industry

Revenue YOY Change

Clothing

9%

Jewelry

16%

Flowers

15%

Books or CDs

4%Greting Cards

5%

Gift Certificates

11%

Electronics

6%

Houseware

and

Gardening

4%

Personal Services

8%

Special

Outings

16%

Other

6%

Category Contribution - Industry

• Approx. $17B were spent on Mother’s day in 2013

• Spending on Mother’s day is trending up since 2009

• Jewelry and Flowers are top selling categories for Mother’s day

• Gift cards and greeting cards combined contribute approx. 16% to

overall Mother’s day sales

• Apparel accounts for approx. 9% overall mother’s day spend

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Gift Cards continue to evolve as a gift of choice for both gift giver and recipient, and

accounts for $39B in gifts shopping

GC Market is poised for growth:• GC market size - $118 B. in 2013, growth of 8% from 2012

• Closed loop/hybrid GCs growth outpacing open loop GCs

• E-gifting, through digital and mobile channels is showing robust growth, an 8 fold increase to approx. $3.5 B. in 2013

• In 2013, GC of over $43 B. exchanged hands during holiday season

Factors driving growth:• Favorable legal environment (no expiration, low fees etc.)

• GC spillage is at historic low levels (less than 1%) and is expected to decline further

• Change in consumer behavior (Over 50% of US shoppers prefer receiving GC over specific gifts)

• Innovation (Mobile apps, e-gifting, virtual gifts etc.)

• Invent of secondary market for gift cards incentivizing value conscious shoppers

0 10 20 30 40 50

Open (e.g. VISA)

Merchant

Restaurant

Other

Gift card Sales in 2013 ($ Billions)

28 30 3233

36 3941 43 43

0

20

40

60

80

100

120

140

160

2008 2009 2010 2011 2012 2013 2014 2015 2016

$ B

il.

Estimated Gift card spending by segments

Universal Restaurants Misc. Retail E-gifting

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Gift cards evolved as a key gifting product as customers are not sure about gift recipient

preferences, however gift cards are perceived as impersonal

Gifts

Personalized Solution

We need to provide a shopping solution

to customers that combines the

thoughtfulness of a gift with the

conveniences of a gift card to materially

expand the market size for gifts and gift

cards

Personal but

inconvenient

Impersonal but

convenient

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Gifts shopping is challenging and existing shopping experience (online and In-store) is

not designed for buying gifts

What shall I buy?

Will he like this color? What’s her shoe size? What’s their shipping address?

Buying a gift last minute?Would be a real hassle to

exchange?How can I include a personalized

greeting card?

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Gift it by Email

Technology enabled gifts shopping solution such as Gift it by Email could cause disruption

and result in sustainable competitive advantage

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Gift it by Email: An ideal gift shopping experience that provide flexibility to both gift giver

and gift recipient

Gift giver just needs Gift recipient’s email addres s for gifting

Gift Giver

Customers can identify, buy and send any product in the store as a gift

• No need to guess size, color or shipping address

• Last minute gifting with instant delivery or in-store pickup

• Gift it by Email button on every product page

• The price of the gift remains hidden

• Ability to add personal (custom) message and include an e-greeting

card with the purchase

• Ability to opt for gift wrapping at the time of order placement

Gift Recipients

Recipients arrive at our stores to get the gift they want

• Delightful and personal gift redemption experience

• Recipients select the color they like and size that fits

• Hassle free and discreet exchange before the gift ships

• Flexible store credit options

• Option to send a thank you note to gift giver at the end

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Technology to enable gifts shopping: Gift it by Email

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Technology to enable gifts shopping: Gift giver user experience

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3 4

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Technology to enable gifts shopping: Gift it by Email

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3 4

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Member feedback on this functionality is overwhelmingly positive with a few areas for

improvements

0%

5%

10%

15%

20%

25%

30%

35%

40%

1 (Very

unlikely)

2 3 4 5 6 7 (Very

likely)

How likely are you to use this service?

Question Correct Answer % response

Can the recipient choose a different item? Yes, they can apply the gifted amount to other items 94%

Can the recipient pick up items at store? Yes, as long as the item is available in the store 84%

Who pays for shipping? Its an optional choice, gift giver can decide to pay for it or

not? 23%

Can the giver use member coupons? No, they can not be used 17%

What worked

well

Areas for

improvement

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