eRETAIL INDUSTRY PROFILE + LANDSCAPE

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WHY DO I CARE?

Glad you asked…

In this report you will find a high-level overview of the eRetail landscape. It is important that we keep a pulse on the industry and CONSUMER BEHAVIORS in order to identify OPPORTUNITIES that transform our businesses.

At Levelwing, we specialize in analyzing the paths that contribute to meaningful BUSINESS OUTCOMES. These paths are illuminated through the analysis of data collected via website analytics, customer relationship databases, consumer research, phone call logs and even recruitment application databases (yes, we actually enjoy working with the HR folks in addition to the marketing teams).

Our team of analysts, statisticians and strategists are obsessed with data and more importantly are experts at TRANSLATING THE DATA INTO A MEANINGFUL STORY that has real business applications and implications.

Please enjoy some of the insights contained within.

eRETAIL TRENDS CATEGORY OVERVIEW

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eRETAIL INDUSTRY TRENDS 4

Not only are shoppers spending more money online than last year, they are increasingly more price-conscious and using online research methods before making purchases, both online and offline.

The average US shopper will spend

$419 online

this holiday season, a 12% boost from

last year

Forrester Research Online Holiday Retail Forecast, 2012 (US).

Cross-channel* sales will account for $1.660 trillion of total US retail sales by 2016. Forrester Research US Cross-Channel Retail Forecast, 2011 To 2016, June 2012

By 2016, $327 billion will be

spent online in the US, 9% of

overall US retail sales.

Forrester Research Online Retail Forecast, 2011 To 2016

*The volume of sales that happen in physical stores as a result of web research

56% of U.S. online adults say they are more price-conscious than they were a year ago

North American Technographics Retail Online Benchmark Recontact Survey, Q3 2012

WEB-INFLUENCED SPENDING 5

U.S. shoppers are increasingly using web shopping research (e.g., using a store locator, reading customer reviews) and ultimately converting offline. Web-influenced offline spending is projected to increase to $1.660 trillion; 44% of total US retail sales. Web properties play an essential role in the research phase for consumers who purchase both online and offline, emphasizing the importance of optimizing digital assets to meet the needs of these research-seeking consumers. Source: Forrester Research Web-Influenced Retail Sales Forecast, 2011 To 2016 (US)

$1,103 $1,206 $1,320 $1,429 $1,552 $1,660

0

500

1000

1500

2000

2500

3000

3500

4000

2011 2012 2013 2014 2015 2016

Online retail sales Web-influenced offline spending Non-web-influenced offline retail sales

(In b

illions

)

SEARCH ENGINE RESULTS FOR PRODUCTS 6

Retailers (both online and with brick-and-mortar stores) make up the majority of search engine results pages for product searches across multiple categories.

In addition to PAID SEARCH PLACEMENTS and ORGANIC SEARCH RESULTS consumers are often seeing a GOOGLE SHOPPING sponsored box in the search engine results page for their product search.

Google Shopping product highlights are based on product listing ads and allow consumers to easily compare and purchase products.

*paid placements are paid advertising available through search engines, organic search results are the listings that are free and do

not require a hard media investment

SEARCH ENGINE RESULTS PAGE FOR ‘LAPTOP’

US SHOPPERS

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RESEARCH BEHAVIOR

REASONS FOR BRAND ENGAGEMENT 8

U.S. online consumers like to interact or keep in touch with the brands they like or purchase regularly in order to get deals, discounts, or special promotions. The second and third most popular reasons consumers interact with brands online are to receive free samples and earn customer loyalty rewards. Aligning with consumer expectations allows brands to better retain customers, keeping them brand loyal.

54%

0% 10% 20% 30% 40% 50% 60%

So I can share interesting content with my family or friends

I want to show my support for their mission or cause

Gain access to exclusive content or events not available to other

I just like them (i.e., favorite brands) and like being associated with

Learn about the latest product or service offerings

Earn customer loyalty points or rewards

Get free samples

Receive deals, discounts, or special promotions

Source: North American Technographics Consumer Deep Dive: Investigating The Customer Life Cycle, Q2 2012

BRAND ENGAGEMENT METHOD OF INTERACTION 9

Of the 54% of U.S. online consumers engaging with brands to receive deals, discounts, and special promotions, 60% join the brand’s email list and 53% browse the brand’s website. These interaction habits indicate the need for visibility on each of these platforms during this critical purchase consideration period.

60%

53%

0% 10% 20% 30% 40% 50% 60% 70%

Join the brand's email list

Join the brand's customer loyalty program

Visit the brand's physical store or location

Join the brand's mailing list

Browse the brand's website

Become a fan of the brand on Facebook

Follow the brand on Twitter

Source: North American Technographics Consumer Deep Dive: Investigating The Customer Life Cycle, Q2 2012

SMARTPHONE + TABLET USAGE 10

Source: comScore, June 2012; Pew Research Center, ”25% of American Adults Own Tablet Computers”, October 2012

110 MILLION Americans own a smartphone and

78 MILLION Americans own a tablet

More than

As smartphone and tablet ownership increases so does the necessity of having a mobile website for consumers using these devices for product research and purchase.

MOBILE + TABLET AS RESEARCH TOOL 11

The average revenue generated from a purchase made on a mobile phone is $70.00 and shoppers using the iPad have a 5.2% conversion rate to e-purchase, the highest of any device. Ensuring mobile sites are optimized for easy purchase is critical to online revenue streams. Sources: North American Technographics Online Benchmark Survey (Part 1), Q2 2012; IBM Coremetrics Benchmark Reports: Springmetrics, August 2012; Google/OTX Consumer Pulse Check, Q4 2010

31% of US mobile

owners research products for purchase on their phone

41% of U.S. tablet

owners researched a product in the past month

INCENTIVES INCREASE SALES 12

FIFTY-SEVEN PERCENT of US online adults say they shop more with retailers that offer free shipping than with retailers that don’t, and 27% have BOUGHT ADDITIONAL UNPLANNED ITEMS to meet free shipping thresholds. Offering a free shipping incentive can help increase sales + overall revenue.

Source: North American Technographics Retail Online Benchmark Recontact Survey, Q3 2012 (US)

REASONS FOR SWITCHING RETAILERS 13

The top two reasons U.S. online consumers switch retailers are for lower prices and lower shipping costs. This further illuminates the opportunity for increasing sales by incentivizing online purchasing.

61%

85%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Had more product information

Had product reviews

Had additional items I intended to purchase in stock

Had a better-quality product

Offered coupons and promotions

Had a product in stock

Had lower shipping costs

Had a lower price

Source: North American Technographics Retail Online Benchmark Recontact Survey, Q3 2012

DATA CAPTURE 14

Data capture of information input on a consumer website allows organizations to not only develop comprehensive prospect and customer profiling from previous purchases but ultimately assign true ROI to marketing initiatives. Non e-commerce sites that have on-site key performance indicators can be matched back to in-store purchases with the use of custom databases and sales data.

Effectively tracking, collecting and analyzing data captured by on-site widgets can reveal business-changing insights. Intelligent analytics can uncover purchase behavior, including trends in product category searches and spikes in particular SKU searches based on the data consumers input into these data captures.

Using historical data, past trends and predictive analytics can determine future demand, ultimately leading to OPERATIONAL EFFICIENCY.

OPERATIONAL EFFICIENCY 15

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LIKE WHAT YOU SEE? WANT TO SEE MORE?

This is just the beginning of what we can tap into, imagine what we could do with the data you have internally…

At Levelwing, we specialize in interpreting your data and providing you with applications (and not just graphs) that can impact your MARKETING, MERCHANDISING, INVENTORY or even TALENT RECRUITMENT. We help companies utilize data to OPERATE WITH GREATER CLARITY + PROFITABILITY.

Bottom line, we move your business forward by helping you make sense of your data so that you can ACHIEVE WHAT COULD BE.

For additional information, please contact:

CHAD ETHRIDGE LUKE FROST Business Analyst Business Analyst cethridge@levelwing.com lfrost@levelwing.com 1+843.628.5887 1+843.647.7314

THANK YOU

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Want to learn more about Levelwing? Just keep reading.

WHO IS LEVELWING?

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GLOBAL REACH We currently serve clients throughout North America, Europe, China and Japan

UNIQUE APPROACH Levelwing is the leader in business intelligence and marketing solutions with data mining + analytics at the core

MEASURED SUCCESS Levelwing has experienced 10 consecutive years of growth with industry leading client satisfaction results

FULLY INTEGRATED We employ a matrix organization of marketers, analytics design experts, statisticians, researchers and creatives

WE ARE LEVELWING 19

The Right Data Changes Everything

Marketing Budgets Should Be Smaller, Not Larger

Accountability is Essential

Success Should Pay For Itself

Leverage Existing Demand First

OUR BELIEFS 20

“Some of the most innovative and strategic minds in the industry” - Novartis

“Some of the most sophisticated things I’ve seen being done with analytics and ROI measurement” - Adobe

SOME OF OUR PARTNERS 21