Channels Q4 Market Update

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Channels Q4 Market Update

• Todd Smith
• Channels Presentation

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About ARS Channel Service Analyst

• As the Channels Analyst at ARS, Todd Smith tracks
  both the e-commerce and
• retail channels for the PC industry. For these
  channels, Todd provides research
• and analysis on general trends, special
  promotions, mergers and acquisitions,
• sales results, business programs, new players,
  personal changes, key product
• categories as they enter the market and more.
• Prior to ARS, Todd worked in product and channel
  marketing with Sony Wireless
• and Proxima Multimedia Corporation, respectively.
  Todd enrolled at National
• University in 1999 to complete his Masters in
  E-Commerce in October of 2000.
• While he attended school at night, Todd gained
  first hand experience in the world of
• start-ups working for San Diego based
  CashPile.com and E-Assist.com, an ASP
• that leverages online eCRM to a variety of
  clients looking to outsource a customer
• service platform of traditional and Net enabled
  customer service features.
•  

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About ARS Channel Services

• B2B B2C Competitive Market Intelligence
  -Founded 1987
• Corporate Headquarters - La Jolla, CA
• Additional offices in Dallas, Houston, and Tokyo
• The recent change in the retail landscape forced
  consumer and small business buyer channels to
  review its business model. Searching for the
  right formula involves a robust selection of
  products, web presence, vendors carried,
  partners, and pricing programs. ARS guides its
  Channels Programs Clients through comprehensive
  and analytical knowledge in
• people changes 
• new web features
• new partnerships 
• reviews new promotions
• tracks new store openings 
• analyzes new merchandising changes 
• reviews new products introduced 
• important financial results

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What ARS Channel Services Track

• Top 13 Retailers
• Consumer Electronic Superstores (Best Buy,Circuit
  City)
• Computer Superstores (CompUSA)
• Office Product Supply Superstores (Staples,
  OfficeMax)
• Warehouse Clubs (Sams Warehouse Club, Costco)
• Mass Discount Merchandisers (Sears, Wal-Mart)
• Top 15 Etailers
• Pureplays (Amazon, Buy.com)
• E-commerce / Mail Order (CDW, Zones)
• Price Competitiveness
• Retail
• E-Commerce

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Hot Retail Channel Topics for Q4

• Retail
• Back-To-School
• Retail and the War on Terrorism
• Upcoming Holiday Sales Anticipation

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Back-To-School

• Mass Discounters Price War
• Dare to Compare
• 74 displays mentioning Target had at least one
  error
• 30 of the items were not carried at nearest
  Target
• Note ARS Average Price Comparison Figures
  indicate the amount above or below the overall
  average market price for each retailer. For
  example, this report shows Kmarts prices were
  typically 1.8 below the market average price in
  the month of June, while Wal-Marts prices 6.7
  percent below the overall average market prices
  as well.

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Back-To-School

• Consumer Electronic Superstores
• No Financing till 2003
• Appeals to
• cash strapped college students
• consumers with maxed out credit

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Retail and the War on Terrorism

• Consumer Confidence
• Largest Drop Since Gulf War
• 114.0 in August
• 97.6 in September
• 88.4 January of 1996
• Retailers Alarmed
• Inventory cuts and deferring inventory
  commitments
• Daisytek revenue fell 60
• National Retail Federation Forecasts
• 2001 Q4 retail sales 4 to 4.5
• Down from forecasted 5 growth

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Upcoming Holiday Season

• Retail as Rosy as Before?
• Q4 generates more than 50 of annual earnings for
  many retailers
• Holiday sales account for 24 of annual retail
  sales
• November and December 2000 holiday spending rose
  5 to 194.9 billion from 1999
• Post Gulf War
• Annual retail sales in 1992 increased 7.3 percent
  to 5.19 billion from 4.85 billion in 1991
• National Retail Federation

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Upcoming Holiday Season

• What will sell during the holiday?
• MASS, CES, CSS offer similar product mix
• DVD players, software, and digital cameras
• Holiday CE Sales Catalysts
• Windows XP
• October 25, 2001
• 99 Upgrade/299 Full Version
• Nintendo Game Cube 11.18.01
• 200 price point
• Another presale for Amazon on the 18th
• 700,000 Launch
• 1.1million end of 2001
• Microsoft Xbox 11.15.01
• 299 price point
• 300,000 launch units

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Hot E-tail Environment Topics for Q4

• Offline/Online Partnership
• Holiday Outlook
• Multi-Channel Presence During Holiday Season
• Future Outlook for E-tailers

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Offline/Online Partnership

• Three Great Tastes
• Super Affiliate Amazon
• 29 million customer base
• 25,000 to 30,000 skus
• 3.1 of the CE retail market
• 8-10 commission
• Circuit City
• Several thousand skus added to Amazons CE store
  (Sony)
• Product Fulfillment/Customer Service
• 50 of on-line consumers surveyed preferred to
  buy electronic devices at a bricks-and-mortar
  store
• Target
• Utilize Amazons E-commerce Technology
• Order Fulfillment
• eCRM Numbers from shop.org

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Holiday Outlook

• E-tailers Still Hopeful For Holiday Sales
• Ghost of Xmas Past
• 2.6 billion in 1998
• 7 billion in 1999
• 2000 holiday sales totaled 10.8 billion
• increase of 54 percent in online sales volume
• Electronics 39 (NRF)
• Ghost of Xmas Future
• Holiday sales could reach 12.4 billion
• Online sales could increase approximately 34
  percent in the fourth quarter of this year
• Advertising.com Survey (Sept. 28 - Oct. 2)
• 25 will utilize Internet
• 50 spend between 100 and 300 NRF

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Holiday Outlook

• Bunker Mentality
• E-tailers Profit
• Online sales up 17 week ended Oct. 8 from Sep.
  11
• Trend should continue throughout the holiday
  season
• Flight Restrictions
• Holiday travelers a few bags lighter
• Bizrate.com

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Multi-Channel Presence During Holiday Season

• Multi-Channel Presence
• Nearly a third (31) of shoppers used online
  customer service during 2000 holiday season
• Greenfield Online for Live Person
• What functions did 2000 holiday shoppers use
  online?

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Multi-Channel Holiday Season

• Integrated Returns/Pick-Ups
• Order online
• Receive confirmation email/number
• Visit retail location for immediate pick-up
• Air Shipment Delays
• Promote early and often
• Highlight shipping value (cost/convenience/integra
  tion)

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Multi-Channel Holiday Season

• Why Integrated Return/Pick Ups?
• 63 online shoppers discouraged by shipping
  costs
• Charge by lbs.
• Do not utilize shipping as revenue stream

ARS Top E-Tailer Price Comparison Review
Jupiter Media Metrix
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Future Holiday Outlook for E-Tailers

• Holiday Centered Promotion
• Free Shipping on certain orders above _ _. _ _
• Still an appealing limited-time promotional
  function
• Integrated Return/Pickups
• Condition consumer to utilize for lower
  fulfillment costs

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Future Outlook for E-Tailers

• New customer segments sought
• Internet Confidence Index
• Increased 5 points in October
• Women
• less educated
• Consolidation Continues
• Drowning E-tailers strengthen through
  partnerships
• Amazon retail entity
• Buy.com
• 800.com
• Best Buy Entertainment

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Thank youAny ?