2005 Trends, Tactics and Tools that Deliver

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• 2005 Trends, Tactics and Tools that Deliver
• Presented by Lauren Freedman
• January 19th, 2006

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About the e-tailing group

• 13 years e-commerce consulting
• Author, Its Just Shopping
• 50 years traditional retail and catalog
  experience
• Fortune 500 client projects ranging from
  strategic planning, merchandising, marketing, to
  technology development and messaging
• Proprietary research studies on mystery shopping
  and merchandising, marketing and EMC (Evolving
  Multi-Channel Consumer), In-Store Pickup and Gift
  Registry
• E-commerce expert and frequent speaker at
  industry events, trade associations

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Todays Agenda

• Holiday 2005 Recap
• E-tailing Innovation and Best Practices
• Sending Key Performance Indicators in the Right
  Direction
• Whats Next
• e-tailing group Site Audit Promotion

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The State of the Industry

• The Numbers
• 2005 Non-travel Holiday sales reached 18.11B
  vs.14.5B in 2004 up 25 and 82B annually 1
• 12/12 saw consumer spending of 556 million
  followed closely by 12/13, 12/2 and 12/14 with
  CyberMonday hitting 10M 1
• 33 of American households made an online
  purchase up 10 from 2004 1
• 27.5 of holiday budgets were spent online 2
• 20 million packages were delivered on UPS peak
  day 12/20-230 packages every second 3
• The Categories/Players 1
• Top three categories for holiday sales included
  computer hardware (4.1B), apparel (3.0B) and
  consumer electronics (1.3B)
• Fastest growing categories included
  sports/fitness (49), apparel/accessories (37),
  computer software (35) and furniture/appliance/eq
  uipment (34) and videgames(34)
• 7 out of top 10 trafficked sites were
  multi-channel and often tied to hot product where
  ebay, amazon, wal-mart, apple, target, dell,
  toysrus, overstock, bestbuy and circuit city
  topped the list
• Neiman Marcus and LLBean recorded more orders
  from web sites than telephone
• The Trends
• MVPs are essential to e-commerce success -less
  than 1/5 of online buyers account for almost 1/2
  of spending where traits include comparison
  shopping, higher income and broadband 4
• The webs ability to locate products especially
  niche trumped price as a reason for shopping
  online 5
• Shopper satisfaction slipped during the latter
  stages of the holiday season 6

1) comScore Networks 2006 2) eSpending report
2006 3) UPS press release 4)-Nielsen/Net Ratings
5) MIT Sloan School of Management 2006 6) ForeSee
Results 2005
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e-tailing group Mystery Shopping

• Annually the e-tailing group mystery shops 100
  e-commerce websites representing a cross-section
  of merchants selling leading consumer product
  categories online
• Each of the sites is scanned to locate over 150
  features and functions within merchandising and
  customer service tool sets
• Percentages are calculated off a subset of
  relevant merchants based on existing metric,
  channel presence or prior penetration of related
  feature (see )
• The following slides summarize key learning from
  our 4Q 2005 Mystery Shopping

-MEMBERSHIP -INVENTORY -SHOPPING
CART -SHIPPING -ORDER CONFIRMATION -UP-SELLS/CROSS
-SELLS -EMAIL -LIVE HELP -RETURNS -MEASUREMENT
-SEARCH -SEASONAL MARKETING -ESTABLISHED
MERCHANDISING -PROMOTIONAL MERCHANDISING -CUSTOM
CONTENT -MULTI-CHANNEL TOOLS -GIFTING -PROFILING -
PRODUCT ENHANCEMENT -CUSTOMER SERVICE INFORMATION
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the e-tailing group 100 4Q 05
1-800-flowers Crate Barrel Lego Saks Fifth
Avenue Abe Books CRUTCHFIELD Levenger Sears
amazon.com CVS/Pharmacy Lillian Vernon
Sephora American Eagle DELL Linens N
Things Sharper Image American Girl Design Within
Reach Lowes Shop NBC Ann Taylor Discovery
Channel Macys Smartbargains.com Anthropologie D
rs. Foster Smith Musicians Friend Solutions Ap
ple Drugstore.com Neiman Marcus Staples Avon eB
ags New Egg Talbots Babystyle eToys.com Nine
West Target Ballard Design Famous
Footwear Nordstrom The Body Shop Barnes
Noble Finish Line Office Depot The Home
Depot Bath Body Works Gap Omaha Steaks The
Sharper Image BED BATH BEYOND Gardeners
Supply Oriental Trading The Sports
Authority BEST BUY Gloss ORVIS Tower
Records Blue Nile Godiva Overstock.com Toys R
Us bluefly Harry David Palmone
Urban Outfitters Brookstone hpshopping.com Pat
agonia VICTORIAS SECRET Brylane
Home HSN Payless Vitamin Shoppe Buy.com jcrew
PETCO Walgreens Cabelas J.
Jill Polo Wal-Mart CDW JCPenney QVC WILLIA
MS-SONOMA Circuit City L.L. Bean redENVELOPE wi
ne.com Coach Lands End REI ZALES Cooking.com
Lane Bryant Ritz Camera Zappos.com
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The Power of Brands
Consistent deployment of brands onsite, via email
and across channels is ideal

• Based on the top 20 websites during the
  holiday season, the of customers who came by
  inputting the url into their browsers ranges from
  Amazons (86) to Home Depot (70) and Lowes
  (60)

Majestic Research 2006
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Classic Tactics
Merchants are employing an array of traditional
means to inspire shoppers
Based on a relevant subset of e-tailing 100
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Creative Promotional Arsenal
Consumers respond to innovative short and long
term liquidation strategies
Based on a relevant subset of e-tailing 100
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Outlets Outperform
The growth of onsite outlets from 27 in 2004
coupled with enhanced merchandising makes them
standalone destinations for bargain hunters
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Free Shipping Starts with Conditions
Merchants creatively seek to satisfy shoppers
with their favored online shipping incentive

• Based on a relevant subset
• of e-tailing 100

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Evolved Search
Search performance continues to improve year over
year where evolved merchants begin to merchandise
these heavily trafficked pages as a point of
differentiation in hopes of driving higher
conversion
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Growing Gifting Tactics
From services to suggestions, merchants deliver
robust gift centers to grow year-round gifting
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Gift Certificates Cross-channel Tools
Heightened consumer interest pushed merchants to
enable purchase and redemption across channels

• Holiday gift card sales were 18.48 B, a
  6.6 increase over 2004 1
• Online sales of gift certificates were up 19
  over 2004 2
• 19 of online buyers bought gift certificates up
  from 11 in 2005 3

Based on a relevant subset of e-tailing 100
Source 1) NRF 2006 2) comScore Networks 2006
3)Jupiter 2006
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Wishlists Work
Convenienceoriented tactics distributed through
viral means are showing growing interest among
consumers and merchants alike

• Amazons customers ordered 108 million items
  shipped to 200 countries
• The Delight-O-Meter recorded 3.6 million items
• 12/12 was the biggest day where 41 items per
  second were ordered
• 600,000 gift certificates sold over the holidays

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Seasonal Selling Expands
Merchants significantly delivered robust seasonal
shops where delivery information was core to the
value proposition
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Last Minute Tactics
Merchants made significant efforts to take
advantage of harried customers
Last minute sales in the 2 weeks before X-mas
grew 31 over 2004--Jupiter
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Product Pages Become Sophisticated Selling Tools
Increasing utilization of external search leads
shoppers to product landing pages where optimally
comprehensive tools and information are the order
of the day
Based on a relevant subset of e-tailing 100
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Ratings/Reviews Officially a Trend
Continued interest in customer-generated content
suggests greater emphasis on integrated
information
Note 1 in 9 consumers has rated a product online
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Rich Media Effectively Serves Category Challenges

• Top Seller 25 Analysis
• -For those who reached a product page half
  of those visitors used the larger view feature,
  while just over 1/3 had tried the 360 degree view
  
• -Only 3 of the folks looking at that
  alternative angle did not also look at zoom as a
  means to understand more about the product
• -The more the better when it comes to
  imaging and certainly on higher price points they
  will continue to make increased investments in
  this area
• Lego Spokesperson

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Rich Media Reaches New Levels
Engaging enthusiasts enjoy audio and video which
can serve as excellent conversion tools
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Category-centric Customization
From design technology and build your own to
category supporting content delivered through how
to guides, glossary and tips, merchants are
investing in information
The Internet was the primary source of shopping
information for 62.8 consumers-Burst Media
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Comprehensive Customer Service
Complete information delivered via efficient
links is a differentiator
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Alternative Payments Accelerate
Testing of alternative payments grows with
significant increase and positive response from
merchants and consumers
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Shopping Cart Efficiency
Take advantage of universal checkout to promote
frequent shopper programs, site-wide promotions
and customer service details
Based on a relevant subset of e-tailing 100
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Shopping Cart Success
Merchandising opportunities abound at the
shopping cart level where category issues,
relevancy and placement increase average order
sizes
Based on a relevant subset of e-tailing 100
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Retail-based Tools Support Store Initiatives
Comprehensive store locators serve as a
destination for cross-channel shoppers with
significant consumer visibility
Based on a relevant subset of e-tailing 100
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Cross Channel Conveniences
Driving customers to the stores makes online
shopping even more convenient while
simultaneously exposing shoppers to your instore
world often resulting in additional purchases
Based on a relevant subset of e-tailing 100
12/22/05 email
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Cross Channel Conveniences
The catalog can serve as your strongest
promotional advocate where website url, quickshop
links, onsite promotions and shelf extenders
serve as possibilities
Based on a relevant subset of e-tailing 100
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International Expansion
Opportunity to extend business to global markets
has grown with further growth expected though
operational and logistical challenges must be
conquered
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Communication Tactics Count
Post-order communication is ideally suited for
branding and merchandising alike
Based on a relevant subset of e-tailing 100
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Merchant Communication
Timely and appropriate responses to customer
inquiries must be forthcoming
Based on a relevant subset of e-tailing 100
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Newsletter
Development of broad yet targeted communication
is growing where resources should be evaluated
prior to deployment
Based on a relevant subset of e-tailing 100
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Returns
Defining customer-centric return policies can
impact revenue growth serving as an excellent
customer acquisition tool
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Sending Key Performance Indicators in the Right
Direction
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Merchant Secrets for Driving Conversion Up

• Objective To share the industrys perspective
  and our viewpoint regarding conversion and
  merchandising
• Sources
• Topical interviews with over 30 merchants and
  e-commerce executives
• the e-tailing group 4th Annual Merchant Survey
  (250 merchants 1Q05)
• the e-tailing group Annual Mystery Shopping Study
  (100 sites 4Q04)
• Statistical findings from leading industry
  research and marketing firms
• Its not just about conversion, its about
  profitable conversion.

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Conversion, Why Bother

• It depends upon your objectives.
• Theres no silver bullet when it comes to
  conversion.
• Dont live and die by conversion take it
  directionally.
• Conversion is certainly one of the most
  important things we do its more important than
  driving traffic.
• You cant take conversion to the bank. These
  numbers must be looked at holistically, factoring
  in your business goals and objectives.
• Dont look at a generic number, ask yourself
  what do you want the customer to do and see if
  your tactic works.
• Conversion rates always sound like theyre
  higher than they are as they are not measured
  apples for apples.
• I like to think about the old statistics saying
  when I see people throwing out conversion rates
  Statistics are like bikinis what they show is
  revealing, what they hide is vital.

Merchant Secrets for Driving Conversion, a
Proprietary Study, September 2005
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Top Line Questions Merchants Must Ask About
Conversion and Their Sites

• How much of your traffic is truly qualified and
  likely to convert?
• Are your browsers visiting today with an
  intention to buy?
• How much information gathering is required to buy
  your specific category?
• Are visitors willing to buy this product online
  or are they researching it on your site with
  intent to visit/buy at your store or via your
  catalog?
• How well are you communicating your value
  proposition?
• Does your brand proposition come across well on
  your website?
• Does the user interface facilitate finding and
  quickly buying product?
• How do you stack up vis-à-vis the competition?
• Do you have strong and accessible policies for
  shoppers that support your Web initiative?
• Are you often in an out-of-stock position that
  might deter conversion at the last minute?

Merchant Secrets for Driving Conversion, a
Proprietary Study, September 2005
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Key Performance Indicators (KPIs)

• Orders/visit or session was the key measure
  for most interviewed. Yet, no more than 23 of
  retailers measure overall site conversion in the
  same way.
• Jupiter Research, 2004

• Unique buyer/unique visitors over 30 days
• Customers/visitors
• Customers/visits
• Orders/buyers
• Buyer conversions over a period of time
• New buyers/new visitors
• Conversion by channel and advertising
  campaign
• Dollars per page view
• Dollars per product
• Number of sessions to make a purchase

Merchant Secrets for Driving Conversion, a
Proprietary Study, September 2005
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Smart Shopping Cart Tactics

• Be aware of the length of your checkout
• Inject key themes at critical checkpoints
  (i.e. guarantees or privacy
• messaging
• Offer repurposed billing or ship-to opt-in
  boxes to quickly populate
• previously entered information
• Incorporate things that take steps out
• Buy button and next steps should always be
  above the fold
• Ensure that shipping estimators are early in
  the process
• Be tight with your layout, ensuring that
  excess white space is
• appropriate

Merchant Secrets for Driving Conversion, a
Proprietary Study, September 2005
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Merchant Words of Wisdom--Conversion

• Know the needs and wants of your customers.
• Shop other sites for inspiration and grade
  yourself to create a competitive advantage.
• Shop your own site as customers and learn from
  this, tweaking your site accordingly.
• Look at where visitors leave.
• Monitor conversion, but dont live and die by it
  as customers will come to your site for reasons
  other than to purchase (find-a-store, store
  merchandise reservation, checking points/card
  balance/bill pay). These are still good reasons
  for coming to the site and in the long run they
  not only save on a phone call, but make it easy
  for customers to interact.
• Remember to measure seasonality and various time
  frames to determine your true performance.
• Look at behavior by source of origin, how
  customers got to the site. Determine if you
  should serve up different landing pages to engage
  the customer and get the first order.

Merchant Secrets for Driving Conversion, a
Proprietary Study, September 2005
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Whats Next

• Existing shoppers spending more will account for
  significant growth in 2006
• Merchandising will take center stage as merchants
  zero in on conversion tactics evaluating all
  marketing spends to optimize results
• The divide between the haves and have nots will
  continue to widen as best-in-class players up the
  ante in their cross-channel initiatives
• Merchants will continue to make investments in
  rich media, category-centric tools and supporting
  content
• Customer satisfaction levels will be more closely
  monitored to ensure exemplary execution

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Site Audit, Persona Evaluation Basic
Benchmarking Exclusive for MOGA clients

• the e-tailing group is extending an exclusive
  special offer for a jumpstart site audit
• Sign up before February 28th to receive this
  package, valued at 7500, starting at 5500
  depending on your category
• For more information on our services and to
  explore how we could best work with your team,
  please contact me directly

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THANK YOU

• Lauren Freedman
• the e-tailing group, inc.
• 1444 West Altgeld Street
• Chicago, IL 60614
• lf_at_e-tailing.com
• p. 773-975-7280
• f. 773-871-3528
• www.e-tailing.com