The State of Retailing Online 2013

Sucharita Mulpuru, VP & Principal AnalystForrester Research

Online retail is the pawn that is now queen

Online retail: double-digit growth

201220112010200920082007

30%29%29%29%30%32%

Online November-December sales as a % of total web sales

Source: Forrester Research

15% year-over-year growth in 2012 over

2011

Base: 60 retailers

Source: State of Retailing Online 2013, a Shop.org study conducted by Forrester Research

State of Retailing Online Study

• 10 years+ of data gathered with the goal of benchmarking

• A survey of retailers primarily drawn from the Shop.org and NRF community

• Extensive details, typically long surveys, 50-100 respondents on average

Agenda

• Recap of 2012• Implications for 2013 and beyond

1. “Mobile first”

Source: Monetate (aggregated session data)

Total phone and tablet sessions: Holiday 2012

Source: Forrester Research Mobile Commerce Forecast, 2012 to 2017 (US)Note: Excludes tablet commerce and game/app downloads, auctions

2012 2017 $5.5

$24.5 $4.1

$14.1

$2.0

$6.4

Retail Travel Daily DealsUS Mobile Commerce (excludes tablets) $B

Top M-Commerce Categories

MediaConsumer electronics

Apparel

Retailers seem to be a little gun-shy about hype

Facebook

Groupon

Which is why companies are actually thinking “site first”

Multichannel efforts

International growth

Site redesign

Mobile and tablet

Site conversion

15

16

16

26

31Examples/Definitions

Checkout optimization, alternative payments, user experience, testing, analytics investments, product detail page enhancement

Mobile-optimized sites, mobile analytics, mobile traffic and conversion growth

Core site “look and feel” overhaul, responsive design changes

Shipments abroad

Cross-channel analytics, ship from store, endless aisle

Top Digital Initiatives for 2013 (# of Retailers Responding)

Source: State of Retailing Online 2013, a Shop.org study conducted by Forrester

2. “Holding out for a (social) hero”

“…And e-commerce will become increasingly important to Facebook, as it

builds its recently launched Gifts business. The e-commerce platform—which lets users send goods, like…gift cards and cookies, to friends—poses a threat to

Amazon, especially as Facebook adds more retail partners.”

Wall Street Journal, December 25, 2012

Retailer's social presence

Deals or shopping website

Other email

Someone told me about it

Through search engines

Via email from the retailer

I visited the retail site directly

5%

6%

8%

9%

8%

46%

39%

4%

6%

7%

11%

9%

44%

41%

Retailer's social presence

Deals or shopping website

Other email

Someone told me about it

Through search engines

Via email from the retailer

I visited the retail site directly

3%

7%

9%

10%

10%

39%

44%

3%

6%

7%

11%

10%

39%

44%

Retailer's social presence

Deals or shopping website

Other email

Someone told me about it

Through search engines

Via email from the retailer

I visited the retail site directly

4%

6%

8%

9%

11%

37%

44%

4%

6%

8%

10%

11%

37%

43%

How did you learn about these special deals [from today’s purchase]?Pre-Thanksgiving Thanksgiving Weekend

Cyber Monday)

Source: Bizrate Insights/Forrester Holiday Shopping Flash Surveys, Q4 2011 and Q4 2012

2011 2012

This is the low-hanging fruit that still gets ignored

Social is a tool more than a weapon

3. The last-mile obsession

But the smart retailers are “castling”

That’s why “multichannel” still makes the list

Multichannel efforts

International growth

Site redesign

Mobile and tablet

Site conversion

15

16

16

26

31Examples/Definitions

Checkout optimization, alternative payments, user experience, testing, analytics investments, product detail page enhancement

Mobile-optimized sites, mobile analytics, mobile traffic and conversion growth

Core site “look and feel” overhaul, responsive design changes

Shipments abroad

Cross-channel analytics, ship from store, endless aisle

Top Digital Initiatives for 2013 (# of Retailers Responding)

Source: State of Retailing Online 2013, a Shop.org study conducted by Forrester Research

26%United States

27%

26%

16%

15%

14%

10%

12%

UK

Sweden

Germany

Italy

France

Spain

Netherlands

% = % of respondents who have purchased from online retailers outside the US

% = % of respondents who have purchased from online retailers outside of Europe

Base: 2,000 UK online adults, 2,000 Swedish online adults, 2,000 Dutch online adults, 2,000 German online adults, 2,065 Spanish online adults, 2,122 Italian online adults, 2,000 French online adults, n/a; Source: European Technographics Retail, Customer Experience, And Travel Online Survey, Q3 2010; North American Technographics Retail Online Survey, Q3 2009 (US)

Agenda

• Recap of 2012• Implications for 2013 and beyond

What to expect moving forward• With mobile, it will get a lot worse before it gets

better• Whatever is up Amazon’s sleeve will keep you

up at night• Relentless innovation will continue• Be prepared for the party to end

Base: 942 smartphone owners

Q: Do you think you will use your smartphone to research prices more or less in the future?

Source: Forrester-Aprimo Showrooming Research, October 2012

More

37%About the same

59%

Less

4%

Future “showrooming” intentionIntent among men 18-34

Intent among women 18-34

More

47%

About the same

49%

Less

4%

More

31%About the same

67%

Less

2%

Base: 187 male smartphone owners

Q: Which of the following might have persuaded you to have purchased the product/brand you were researching on a smartphone while shopping in a physical store from the store or from its website. Please

select all that apply. .

A price match for the item

A personalized coupon to purchase at that time in the store

Loyalty points for purchasing from the retailer

Better customer service in the store

The opportunity to have the item shipped to my home directly

A more generous return policy

57%

36%

30%

29%

23%

19%

Base: 153 smartphone owners who purchased products at other stores or did not purchaseSource: Forrester-Aprimo Showrooming Research, October 2012

Consumer electronics (e.g. digital cameras, TVs)

Grocery (e.g. food, diapers, grooming)

Apparel, accessories, footwear

Housewares/small appliances (e.g. vacuum cleaners, window treatments)

Movie/event tickets

Video games

Books (including eBooks)

Cars or auto parts (including tires)

Computers (including tablets) and peripherals

39%

37%

33%

31%

30%

27%

25%

25%

24%

Home improvement (e.g. lumber, tools)

Sporting goods (e.g. equipment)

Music/videos (including digital)

Furniture (including mattresses)

Toys

Large appliances (e.g. dishwashers)

Office products

Baby care (e.g. strollers, feeding bottles)

Other

23%

20%

19%

18%

17%

14%

14%

11%

9%

Source: Forrester-Aprimo Showrooming Research, October 2012Base: 415 smartphone owners who recently researched prices in stores

Q: In which categories were the products you were researching or checking prices on your smartphone while shopping in a physical store? Please select all that apply.

What to expect moving forward • With mobile, it will get a lot worse before it gets

better• Whatever is up Amazon’s sleeve will keep you

up at night• Relentless innovation will continue• Be prepared for the party to end

Source: Forrester estimates; GMV=gross merchandise value, the total value paid by shoppers in a transaction

2005 2011

$359 $631 $467

$4,172 Global net income Estimated marketplace revenue

US$MM

Amazon’s global marketplace revenue dwarfs its profit

“Are you a member of a shipping club or program (i.e. Amazon Prime, Shoprunner or Williams-Sonoma

Reserve)?”

Source: Bizrate/Forrester Holiday Shopping Flash Surveys, Q4 2010, Q4 2011 and Q4 2012N: 776 shipping club members

“How does your membership in a shipping club or program affect your shopping frequency?”

I shop more (or plan to shop more) with the retailer(s) whose shipping club I have joined

The shipping club has not changed my shopping behavior with that retailer

I shop less with the retailer after joining the shipping club

66%

31%

3%

2010 2011 2012

9%

12%14%

vs. a competitor

“2-day shipping”

6 days away

$13$20 for next day!

What to expect moving forward• With mobile, it will get a lot worse before it gets

better• Whatever is up Amazon’s sleeve will keep you

up at night• Relentless innovation will continue• Be prepared for the party to end

2008 2010 2012

Flash sales Daily deals Subscriptions

Curated commerce? Distributed commerce? Crowdsourced commerce?

What to expect moving forward• With mobile, it gets a lot worse before it gets

better• Whatever is up Amazon’s sleeve will keep you

up at night• Relentless innovation will continue• Be prepared for the party to end

Source: Chase Paymentech Solutions

November 2012 December 2012

2010 2011 2012

49%

70% 72%

% agreeing with statement: “I shopped in stores less because I shopped online instead.”

Source: Bizrate Insights/Forrester Holiday Shopping Flash Surveys, Q4 2010, Q4 2011 and Q4 2012

Base: online shoppers during Thanksgiving weekend

Shopper saturation?? Deal fatigue??

I love deals, the more the merrier!

I will only buy if I have a deal, sale or promotion

Deals are so frequently offered it's easy to buy with a sale or promotion

23%

17%

6%

15%

12%

16%

2012 2011

-8%

-5%

+10%

Base: pre-Thanksgiving online buyers

“…no one was hurt, but many were disappointed.”

Wrap up• Responsive design for now, the next chapter may

take a little while to be written• Learn from the innovators, they are often just

product features anyway• Be prepared for tougher times• But for physical stores, that’s actually good news…

…so long as we see less of this

Sucharita Mulpurusmulpuru@forrester.com

Twitter: @smulpuru