Forecast View Webinar Understand The Importance Of Mobile

Forecast. View Webinar Understand The Importance Of Mobile And Tablet Commerce And Web Influence Over The Next Five Years In EU 7 Michael O’Grady, Forecast Analyst February 10, 2014. Call in at 10: 55 a. m. Eastern time

Agenda › EU 7 mobile and tablet commerce: • Definitions/methodology • Drivers and inhibitors • Results › EU 7 online influence: • Definitions • Drivers and inhibitors • Results › Implications and impact: • Key factors of web influence • Key factors of mobile and tablet commerce © 2014 Forrester Research, Inc. Reproduction Prohibited 2

Agenda › EU 7 mobile and tablet commerce › EU 7 online influence ›

Optimizing online commerce for the consumer requires an understanding of device adoption and use Which device do you prefer? Do you prefer to use it on-the-go or at home? © 2014 Forrester Research, Inc. Reproduction Prohibited 4

Definitions › Inclusions: Mobile commerce includes all online purchases on a tablet or smartphone by EU 7 citizens for retail goods and travel services (air, hotel, rail, and car-hire for leisure and unmanaged business travel). It includes daily deals which are coupons bought on social shopping sites such as Groupon. › Exclusions: Retail categories such as cars, prescription drugs, food and drink sales at a restaurant or fast food chain, consumer-to-consumer commerce, and gasoline sales are excluded. Travel outside of air, hotel, rail, and car-hire is excluded. Excludes digital downloads from books and ringtones. This does not include purchases made at the retail POS through an NFC-enabled device or purchases made at a vending machine. Excludes mobile-influenced commerce, stock trades and investments, and money remittances. Excludes gambling. © 2014 Forrester Research, Inc. Reproduction Prohibited 5

Methodology Tablet And Smartphone Commerce Forecast EU 7 Assumptions The ratio of mobile buyers to mobile Internet users will grow at twice the rate seen from the evolution of online buyers to online users. The percentage of tablet users that buy online will converge toward the percentage of online users that buy online. Tablet users also own other devices; by 2018, tablets will become their preferred device for online shopping. Drivers Total online retail spend Tablet and smartphone adoption Tablet and smartphone online buyers Demographics income/online spend by device Multidevice usage (which will be category dependent) Outputs Forecast elements Tablet and smartphone buyers Forrester online retail forecast Tablet spend on retail, travel and daily deals Technographics survey data Tablet and smartphone online spend per buyer Retail references: Politecnico di Milano (Italy), Fevad (France), Thuiswinkel. org (Netherlands), IMRG Capgemini (UK), and BVH (Germany) Relative cross-country comparisons Travel references: Pho. Cus. Wright Daily deal reference: vente-privee. com © 2013 Forrester Research, Inc. Reproduction Prohibited 6

Tablet adoption One in seven online consumers own a tablet today; by 2017, nearly one in three will own one Source: Forrester Research World Tablet Adoption Forecast, 2012 To 2017 (Global) © 2014 Forrester Research, Inc. Reproduction Prohibited 7

Multidevice usage Tablet owners are laptop owners Base: 1, 834 tablet owners EU 7 online population 12+; Source: European Technographics® Online Benchmark Survey, Q 3 2012 © 2014 Forrester Research, Inc. Reproduction Prohibited 8

Income and online spend tablet users Annual income of a tablet user is 20% more than that of a non-tablet user “What is the gross annual income of your household (before tax)? ” Average annual salary of a tablet owner compared to a non-tablet owner Base: 19, 027 online adults 16+ (online weekly or more); Source: European Technographics® Online Benchmark Survey, 2013 © 2014 Forrester Research, Inc. Reproduction Prohibited 9

Tablet online buyers Online purchase behaviors on a laptop/desktop inform online purchase behaviors on a tablet Base: 18, 024 online adults 16+ (online weekly or more) who personally use a device to purchase physical goods (desktop/laptop, tablet, smartphone); Source: European Technographics® Online Benchmark Survey, 2013 © 2014 Forrester Research, Inc. Reproduction Prohibited 10

Mobile online buyers Clothes, event tickets, music, and video are the most popular categories purchased on a mobile phone “Specifically what type of product did you buy using your mobile phone in the past three months? ” Number of countries Base: 2, 093 online adults 16+ (online weekly or more) mobile phone users who purchased a product in the past three months; Source: European Technographics® Online Benchmark Survey, 2013 © 2014 Forrester Research, Inc. Reproduction Prohibited 11

Results By 2018, almost half of online retail commerce will come through tablets and smartphones Source: Forrester Research Mobile And Tablet Commerce Forecast, 2013 To 2018 (EU-7) © 2014 Forrester Research, Inc. Reproduction Prohibited 12

Although web influence has fuzzy boundaries, it helps quantify the importance and scope of an online presence Online influence © 2014 Forrester Research, Inc. Reproduction Prohibited Offline influence 14

Definitions › Web-influenced sales: Defined as online sales or sales where a consumer researches their purchases online but buys the product in store. The term “research” is very broad and can vary from looking up a store location to making brand or purchase decisions online. › Online sales. Purchases made over the Internet — a customer needs to give financial commitment (give a credit card) online. In-store pickup, where a purchase and payment are made online, is still considered an online sale. › Web impact. Web-influenced sales plus online sales. This is the total impact of the Internet: sales that happen on the online channel and sales that happen across other channels but have been influenced by research done online. › Note: Model uses same definitions as web-influenced forecast US and US Cross-Channel Retail Forecast, 2012 To 2017 (http: //www. forrester. com/US+Cross. Channel+Retail+Forecast+2012+To+201 7/quickscan/-/ERES 105461? highlight. Term=Sucharita&is. Turn. Highlighting=false). © 2014 Forrester Research, Inc. Reproduction Prohibited 15

Definitions (cont. ) › Holdouts. Shoppers who don’t regularly research or buy online through any devices › Researchers. These are shoppers who regularly research online but do not yet regularly buy online through any devices. › Web buyers. Those shoppers who regularly buy online › Traditional buyers. Those who shop but are not online © 2014 Forrester Research, Inc. Reproduction Prohibited 16

Model drivers Drivers 1. Evolution total retail market size 2. Evolution total online retail market size 3. Evolution total buyers, online buyers, researchers, and holdouts 4. Consumer’s buying preferences and information sources used for product research Other reference data Online share of advertising budget Third-party web influence data © 2014 Forrester Research, Inc. Reproduction Prohibited Inhibitors Maximum category level web-impact limited for • categories requiring little intensive research • regular purchase categories (corner shop items like food, drink) • impulse-buy categories with high immediacy (flowers, cards) • must-see-before-buy categories (DIY, home improvements) Assumptions Increased online sales lead to increased online influence. 17

Food, drink, and clothing make up 50% of EU 7 retail spend Source: Forrester

Three profiles of online users: buyers, researchers, and holdouts 15% to 20% of online population do not buy or research online (called holdouts). 7% to 26% of online population research online but do not buy (called researchers). Online population 16+ Base: 12, 688 online adults EU 7 16+ (online weekly or more); Source: European Technographics® Retail Survey, 2013 © 2014 Forrester Research, Inc. Reproduction Prohibited 19

More people research online than buy online % online population Base: 12, 688 online adults EU 7 16+ (online weekly or more); Source: European Technographics® Retail Survey, 2013 © 2014 Forrester Research, Inc. Reproduction Prohibited 20

Holdouts and researchers earn less than online buyers Holdouts earn between 10% to 30% less than online buyers. Researchers earn 0% to 20% less than online buyers. % income relative to online buyer Base: 12, 688 online adults EU 7 16+ (online weekly or more); Source: European Technographics® Retail Survey, 2013 © 2014 Forrester Research, Inc. Reproduction Prohibited 21

Consumer buying preferences, example UK “Still thinking of the product you bought recently, which of the following influenced you when making the purchase? ” Index score UK 47% online Sum of responses Index score UK 53% offline Base: 1, 492 British online adults 16+ (online weekly or more) who recently purchased products/services in the past three months; Source: European Technographics® Retail Survey, 2013 © 2014 Forrester Research, Inc. Reproduction Prohibited 22

Consumer information sources, example UK “Which of the following sources did you use to research the most recent item that you have bought? ”* Index score UK 60% online Sum of responses Index score UK 40% offline Base: 1, 492 British online adults 16+ (online weekly or more) who recently purchased products/services in the past three months; Source: European Technographics® Retail Survey, 2013 © 2014 Forrester Research, Inc. Reproduction Prohibited 23

Web influence varies by country Source: Forrester Research Web-Influenced Retail Sales Forecast, 2013 To

By 2018, web-influenced sales will represent 44% of EU 7 retail spending which will be five times greater than online sales % of total retail sales Sources: Forrester Research Web-Influenced Retail Sales Forecast, 2013 To 2018 (EU-7) © 2014 Forrester Research, Inc. Reproduction Prohibited 25

Increasing web influence depends on the customer, their background, their buying intent, and their habits Action-oriented Influence Immediate purchase Age/background Research preference Attitudes Purchase constraints Social status/image Loyalty schemes Customer understanding (e. g. , convenience) Coupons Targeted messaging Product knowledge Online and offline behaviors © 2014 Forrester Research, Inc. Reproduction Prohibited 27

Examples of customer influence Know the customer purchase journey Understand your customer demographics Action-oriented Influence Comparison shopping sites Social networking sites Consumer ratings and reviews Family and friends Favorite/trusted retail websites Preferred purchase channel Search engines Shopping apps Consumer/expert ratings and review Loyalty schemes/promotions Forums and message boards Brand reputation Usefulness of in-store display Media advertising Product understanding Understand what motivates your customer Understand what influences a customer © 2014 Forrester Research, Inc. Reproduction Prohibited 28

Different product categories have differing levels of web influence H Online influence L High-value/complex purchases (e. g. , furniture) Touch-before-buy sales (e. g. , beauty, household goods, jewellery, health) Branded goods (e. g. , computers, household appliances, consumer electronics) Small simple purchase (e. g. , digital downloads, event tickets) Cornershop sales (e. g. , grocery) L H Online sales © 2014 Forrester Research, Inc. Reproduction Prohibited 29

What it means › Retailers that allow online buyers to use multiple devices on their purchase journey will be best suited to the challenge of mobile commerce. › Don’t forget the continued importance of the laptop/desktop user. › It is easier to purchase products online with a desktop, laptop, or tablets than on a mobile; screen size would often be a factor when choosing which device to use to make an online transaction. › Retailers that optimize their web influence are more likely to thrive, specifically for mobile. › Optimizing web influence should take a systemic view of consumer behaviors that consider influence that is action-orientated, encultured, and embedded which includes an understanding of what the customer is looking for. © 2014 Forrester Research, Inc. Reproduction Prohibited 30

Questions ? ?

Thank you Michael O’Grady mogrady@forrester. com