State Of Retail Comscore Feb09

MEASURING THE DIGITAL WORLD

State of the U.S. Online Retail Economy Gian Fulgoni Chairman comScore, Inc.

February 19, 2009

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Data sourced from comScore’s global panel of 2MM Internet users

360° View of Consumer Behavior

Analysis Parameters
Commerce on U.S. Sites

Web Visiting and Viewing


Behavioral activity through January 2009 Demographics Life Stages

Online Transactions


Survey issued in January 2009, n = 1035
Consumer Measurements: •Visiting •Buying (incl. product categories) •Demographics •Attitudes •Search

Streaming Video

Search Behavior

Media Exposure

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Retailer Views: •Multi-Channel vs. Pure Play
The terms Online spending and eCommerce are used interchangeably in this presentation

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comScore Customer Knowledge Platform: A 360° °View of 2 Million Global Internet Users ■ Designed to be representative of the online population Projectable to the total U.S. population ■ TRUSTe certified for information privacy & security ■

WEB VISITING & VIEWING

DEMOGRAPHICS

ONLINE TRANSACTIONS

SURVEYS

– – – –

All Web Site/Page Click Stream Content Viewed Search Engine Queries Keyword Used

– All Secure Session Activity – Purchases and Subscriptions – Price Paid, Shipping & Handling, Promotions – Applications/Configurations

MARKETING STIMULI – Online Ads – Referral Links

TV VIEWING

– Link to Digital Set Top TV Data using name and address

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– Self-reported and validated – Appended Segments (e.g. Claritas, Acxiom) – Individual & Household Level

– E-mail or Contextual “Pops” – Behavior-activated Surveys – Observation of All Surveys Taken Across All Suppliers

OFFLINE PURCHASING – – – –

Linked using Name and Address Client CRM Databases Retailer Loyalty Card Data IRI Scanner Panel Data

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Validation of comScore Sales Data: Comparison of comScore to U.S. Department of Commerce

Quarterly U.S. eCommerce Sales Estimates Source: comScore and U.S. Department of Commerce (DOC) 45

Q4 2008

40

$ Sales DOC: $37.1B comScore: $39.3B

35

$Billions

30

% Change vs. YA DOC: -4.9% comScore: -3.5%

25 20 15 US Dept of Commerce comScore

10 5

1Q '01 2Q '01 3Q '01 4Q '01 1Q '02 2Q '02 3Q '02 4Q '02 1Q '03 2Q '03 3Q '03 4Q '03 1Q '04 2Q '04 3Q '04 4Q '04 1Q '05 2Q '05 3Q '05 4Q '05 1Q '06 2Q '06 3Q '06 4Q '06 1Q '07 2Q '07 3Q '07 4Q '07 1Q '08 2Q '08 3Q '08 4Q '08

0

comScore Estimate = (Total Non-Travel – Event Tickets + Estimated Auction Fees) Excludes travel and event tickets, but includes auction fees and autos Proprietary and Confidential Do not distribute without written permission from comScore

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Proceed with Caution: Industry and Retailer Predictions for 2008 Holiday eCommerce Growth Biased Towards Good News

•“Forrester expects online retail sales to reach $44 billion during the months of November and December 2008, a 12% lift over the previous year and the slowest growth to date.” -Forrester.com, October 21, 2008 “Continuing analysis of data for Internet Retailer’s 2009 edition of the Top 500 Guide reveals growth for the 151 companies that have broken out web sales so far to be 20.7%” -Internet Retailer, February 18th, 2009 “Online retailers remain optimistic in the face of a souring economy, with 56.1% expecting their holiday sales to increase at least 15% over last year, according to a new survey from trade group Shop.org, a unit of the National Retail Federation, the retailers’ association.” -Shop.org surveyed 60 online retailers from Oct. 1-20, 2008

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2008 eCommerce Growth Substantially Lower than Preceding Years Online Consumer Dollar Sales Growth Excluding Auctions, Autos and Managed Travel ($Billions) Source: comScore

+7%

$221

+17%

$200 +20%

$171

+22%

+9% +12%

$143

+26%

+13%

$117

+29%

+20%

$93 $72

+26% +33% +21%

+6%

+24%

Travel +26%

+26%

+24%

NonTravel

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Online sales growth decelerated throughout 2008 while retail sales were held up by inflation (esp. energy) until Q4 2008 Quarterly eCommerce Growth vs. YA Source: comScore

23%

25%

Q4 Y/Y Growth by Category: Sport and Fitness: +16% Consumer Electronics: +3% Apparel and Acces.: +2% Furniture & Home: -10%

23%

23%

19%

17%

13% 11% 6%

Q3 '06

Q4 '06

Q1 '07

Q2 '07

Q3 '07

Q4 '07

Q1 '08

Q2 '08

Q3 '08

Q4 '08 -3%

Quarterly Retail Sales Growth vs. YA (exc. Food Service and Auto) Source: U.S. Department of Commerce

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Q4 Y/Y Growth by Retailer Types: Gen Merch: -2% Sports: -3% Electronics: -5% Dept Stores: -7% Clothing: -8% Furniture: -13%

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Numerous Categories Experienced Sales Declines in Q4 2008 when Compared to Prior Year

Q4 2008 eCommerce Sales vs. YA Source: comScore

SPORT & FITNESS

16%

VIDEO GAMES, CONSOLES & ACCESSORIES

10% 3%

CONSUMER ELECTRONICS (x PCs)

2%

APPAREL & ACCESSORIES COMPUTERS / PERIPHERALS / PDAs

-1%

BOOKS & MAGAZINES

-5% -7%

TOYS & HOBBIES

-10%

FURNITURE, HOME & GARDEN FLOWERS, GIFTS & GREETINGS

-15%

EVENT TICKETS

-16% -24%

JEWELRY & WATCHES

-30%

OFFICE SUPPLIES MUSIC, MOVIES & VIDEOS*

-34%

-40%

-30%

-20%

-10%

0%

10%

20%

* Does not include digital downloads

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Q4 Online Spending Fell within the Mid-to-Lower Income Households

Q4 2008 Online Spending vs. YA by Income Segment Source: comScore

Online Retail

Income Segment Under $50,000

Bracket Share of

Spending Chg. vs. YA

Online Retail

Yr Ago

Spending

-17%

18%

-10%

42%

$100,000 or more

17%

40%

Total

-3%

100%

$50,000 - $99,999

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The Economy’s Impact on eCommerce

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The Internet is important to at least 6 in 10 consumers, with 50% citing an increase compared to a year ago Importance of Internet Source: comScore Survey January 2009

Q: How important has the Internet become in providing you with information to help you make buying decisions?

Q: How has this changed versus a year ago?

65%

50% Very Important Significantly Increased

Slightly Important Somewhat Increased

Past 3 months

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Versus a year ago

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Five in ten people are surfing the Internet more to deal with stress due to the current state of the economy

Q. Which of the following are you doing more of to deal with stress due to the current state of the economy?

Source: comScore Survey January 2009

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As the economic hardship worsened in 2008, there was a dramatic increase in people conducting financial/economic-related searches across the web Number of Unique Searchers (MM) for Each Term: December 2008 vs. YA Source: comScore

Y/Y % change

+27%

+58%

+100%

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+83%

+160%

+157%

+223%

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Search engines, followed by online coupon sites, have become very important to consumers when shopping Importance of Online Sites Source: comScore Survey January 2009

Q: In the past 3 months, how important have the following sites become when shopping? 67%

54% 42% 39% 35%

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All income segments are turning to coupon sites more so than they did last year Number of Unique Visitors (000) to Coupon Sites and Growth vs. Yr Ago Source: comScore 40,000

50% +46%

35,000

45% 40%

Unique Visitors

+38%

35% 25,000

+33%

20,000

+29%

+33%

+26%

25% 20%

+21%

15,000

30%

Percent Growth

30,000

+20%

15% 10,000 +11%

5,000

10% 5%

+4%

+4%

0

0% Feb-2008 Mar-2008 Apr-2008 May-2008 Jun-2008 Jul-2008 Aug-2008 Sep-2008 Oct-2008 Nov-2008 Dec-2008

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Slightly over 50% of consumers say they are using coupons more often; 4 in 10 receive in the Sunday FSI, meanwhile 29% use online coupon sites Ways of cutting back on shopping expenses

Ways consumers receive coupons

Use coupons more often

Source: comScore Survey January 2009 Proprietary and Confidential Do not distribute without written permission from comScore

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40% of online population using comparison shopping sites. Number up vs. YA

Comparison Shopping Engine Usage Source: comScore

Average Monthly Unique Visitors (MM)

+2%

+5%

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A New Year, A New Outlook? Consumer Sentiment in Early ‘09

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Consumer Confidence at an All Time Low

"The Consumer Confidence Index™ continues to hover at all-time lows, and it appears that consumers have begun the New Year with the same degree of pessimism that they exhibited in the final months of 2008. -Lynn Franco, Director of the Conference Board Consumer Research Center Date: January 27, 2009

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On the positive side, energy prices have plummeted, but food and beverage prices continue to rise Percent Changes in Price versus Last Year Source: U.S. Bureau of Labor Statistics 50%

38%

40%

36%

33%

30%

21%

32%

21%

20% 10%

12% 5%

5%

5%

6%

6%

6%

6%

6%

6% Motor Fuel (Gas)

0% Apr 08 May 08 June 08 July 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08

Food & Beverage (Food Service and Food At Home)

-10% -20%

-29% -30% -40%

-42%

-50%

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Nominal and inflation adjusted retail sales are now well below year ago levels

Including Autos

Year over Year Change in Retail Sales: Including Autos 10% 5% 0% -5% -10% -15%

Year over Year Change in Retail Sales: Excluding Autos 10% 5% 0% -5% -10%

Source: U.S. Bureau of Economic Analysis Proprietary and Confidential Do not distribute without written permission from comScore

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80+% of consumers are more afraid of the economic future than ever before; an increase among those earning less than $100k Consumer Fear Factor by Income Segments Q: To what extent do you agree with the following statement: “I am more afraid about the economic future than ever before.” +6% 86%

+1% 84%

-5%

%Change vs. Q3

80%

Source: comScore Survey January 2009

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People earning less than $50k have the highest unemployment rate, while those earning $50k-$100k are most concerned about losing their jobs Job Loss Concerns by Income Segments Source: comScore

Q: Are you concerned about losing your job?

Extremely concerned 27%

36% 40% Somewhat concerned

Neither

Somewhat unconcerned

Extremely unconcerned I have already lost my job

Source: comScore Survey January 2009 Proprietary and Confidential Do not distribute without written permission from comScore

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Unemployment/job security becomes the top consumer concern; meanwhile, concern over prices and the financial markets declines Top Economic Issues: • Unemployment for all income groups •Rising prices for mid and lower income •Financial markets for upper income

Q: Based on your situation, which one of the following economic conditions most concerns you? Percent of Respondents Citing Their One Most Important Issue Source: comScore Surveys – April, July & October 2008; January 2009

Rising Prices

Unemployment/ Job Security

Real Estate/ Home Values

Financial Markets

Apr-08 Jul-08 Oct-08 Jan-09 Apr-08 Jul-08 Oct-08 Jan-09 Apr-08 Jul-08 Oct-08 Jan-09 Apr-08 Jul-08 Oct-08 Jan-09

Total

64%

67%

43%

29%

15%

14%

21%

46%

10%

8%

25%

14%

6%

5%

8%

7%

$100k or more

67%

56%

20%

15%

8%

9%

12%

42%

16%

14%

49%

20%

6%

14%

14%

19%

$50k-$99,999

62%

67%

35%

21%

11%

13%

22%

50%

12%

9%

29%

18%

10%

7%

11%

9%

Under $50k

65%

70%

53%

36%

18%

16%

22%

44%

6%

6%

17%

10%

4%

2%

5%

3%

Household Income

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More consumers are cutting back on spending due to concerns about the economy; an all time high for those earning $50k or more Percent Cutting Back by Income Segment Source: comScore Surveys – April, July & October 2008; January 2009

Under $50k

April 08

July 08

Oct 08

$50k - $99,999

Jan 09

April 08

July 08

Oct 08

$100k or more

Jan 09

April 08

July 08

Oct 08

Jan 09

Q: Are you cutting back on your spending due to concerns about the economy?

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Two in ten people believe the U.S. economy will improve in the next 3 months; but double that number believe it will worsen U.S. Economy Predictions by Income Segments Source: comScore Survey January 2009

Q: In the next 3 months, do you think the U.S. economy will…

Under $50k

$50k - $99,999

24%

28%

$100k or more 19% Significantly/Slightly Improve

Significantly/Slightly Worsen

42%

42%

-18%

-14%

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46% -27%

Net Pessimistic

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Was Q4 ‘08 the bottom? eCommerce sales in January grew 2% vs YA; seasonally-adjusted retail sales grew 1% from Dec. ‘08 to Jan. ‘09 eCommerce Sales (Billions $) and % Growth vs. YA Source: comScore

30%

45 +25%

40

+23%

+23%

25%

+23%

35 +19%

+17%

20%

25

15%

+13%

20

10%

+11%

% Growth

Billions ($)

30

+6%

15

+2%

5%

10 0%

-3%

5 0

-5% 3Q '06

4Q '06

1Q '07

2Q '07

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3Q '07

4Q '07

1Q '08

2Q '08

3Q '08

4Q '08

Jan '09

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eCommerce Continues to Gain Market Share from Retail Stores

eCommerce and Retail Sales Growth in January 2009 vs. YA Source: comScore for eCommerce & U.S. Department of Commerce for Retail (DOC)

% change vs. YA eCommerce

(source: comScore)

+2%

Retail (source: DOC) Retail & Food Service

-10%

Retail excl. Autos

-7%

Furniture & Home Furniture Stores

-14%

Electronics Stores

-8%

Food & Beverage Stores

+2%

Apparel & Accessories Stores

-10%

Sporting Goods, Hobby, Book & Music Stores

-6%

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Spending growth slows in upper income segment and strengthens in middle income segment

Online Spending vs. YA by Income Segment Source: comScore

Income Segment

Online Retail Spending Chg. vs. YA Q4 2008

Bracket Share of Online Retail Spending in Jan ‘09

Jan ‘09

Under $50,000

-17%

-9%

19%

$50,000 - $99,999

-10%

2%

46%

$100,000 or more

17%

8%

34%

Total

-3%

+2%

100%

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Some Evidence Emerging of a Cocooning Phenomenon?

January 2009 eCommerce Sales vs. YA Source: comScore

42%

SPORT & FITNESS

37%

BOOKS & MAGAZINES

14%

HOME, GARDEN & FURNITURE FLOWERS, GREETINGS & MISC GIFTS

8%

APPAREL & ACCESSORIES

8% 7%

VIDEO GAMES, CONSOLES & ACCESSORIES

1%

CONSUMER ELECTRONICS (x PCs)

-1%

COMPUTERS / PERIPHERALS / PDAs

-9%

TOYS & HOBBIES

-13%

EVENT TICKETS

-15%

JEWELRY & WATCHES

-20%

OFFICE SUPPLIES MUSIC, MOVIES & VIDEOS * COMPUTER SOFTWARE (X PC GAMES)

-22% -58%

* Does not include digital downloads

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30

Multi-channel retailers grab a larger share of dollars in the holiday season, perhaps due to heavier focus on Internet during that time

eCommerce Dollar Share by Channel Type Source: comScore

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31

The Percentage of Referred Online Sales Continues to Increase

Referred and Non-Referred Consumer Buying: January 2009 vs. YA Source: comScore

Non-referred

Referred Jan-08

Jan-09

Top Three Shopper Referral Vehicles: Search, Email and Comparison Shopping Proprietary and Confidential Do not distribute without written permission from comScore

32

Search, Email and Comparison Shopping Increase Importance in Driving Online Sales

% of Referral Sources Buying Source: comScore

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Some Closing Thoughts

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Questions savvy marketers should be asking themselves in the current environment ■ Am I appropriately allocating my marketing/advertising budgets? ■

Online as a more cost-efficient medium with offline sales impact

■ How am I measuring my online advertising performance? ■

Click thru vs. view thru

■

Online and offline performance

■ What is my current coupon/promotion strategy? ■

Growing importance/use of online coupons for consumers

■ Am I using the down economy as a time to build relationships with customers that will pay off in the future? ■

Strategic messaging

■

CRM strategy

■ Am I optimizing my search strategy in today’s economy? ■

Using the right engine for target segments and term searcher

■

Display overlay on search campaigns

■ Am I being creative, or am I doing what I have always done? ■

Twitter, Facebook, Video Ads, Etc.

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Thank you! Note: A copy of this presentation will be sent to all attendees within 24 hours of today’s webinar. Proprietary and Confidential Do not distribute without written permission from comScore