State of the U.S.

Online Retail Economy

IRCE 2013

Gian Fulgoni Chairman comScore, Inc.

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Data sourced from comScores global panel of 2 million Internet users

2 Million Person Panel 360View of Person Behavior

PERSON-Centric Panel with WEBSITE-Census Measurement

Online & Offline Buying Transaction s Media & Video Consumption

Web Visiting & Search Behavior

Online Advertising Exposure Advertising Effectiveness Demographics, Lifestyles & Attitudes

PANEL

CENSUS

PANEL

Mobile Internet Usage & Behavior

Unified Digital Measurement (UDM)

Patent-Pending Methodology 1 Million Domains Participating
Adopted by 90% of Top 100 U.S. Media Properties

Plus 5 Million TV Set Top Boxes for 3-Screen Measurement

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V0411

Topics for Today

Review of Key Macroeconomic Trends Product Category Overview Multi-Platform Commerce Price Sensitivity: Taxes & Shipping

Retail-Powered Digital Advertising

Key Takeaways

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State of the Economy

A Review of Key Macroeconomic Trends

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e-Commerce spending continues to grow, up +11% versus Q1 2012, including a +13% gain for Retail and +8% for Travel
Desktop Retail e-Commerce Dollar Sales ($ Billions)
Source: comScore e-Commerce Measurement +13% +12%

$289

+7%
+17% +19% -2%

+9%

$256

$200

$214

$209

$228
+9% +11% +6%

Billions ($)

+22% +26% +29%

$171
+12% +13% +9% -5%

$143

$117 $93

+11%

$72
+33%

+20% +28%

$78
+8%

+26%

+26%

+24%

+24%

+20%

+6%

0%

+10%

+14%

+15%

+13%

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The channel shift continues: in Q1, e-commerce grew by +13%, while corresponding total discretionary consumer spending grew by just 1%
Quarterly Desktop e-Commerce Sales Growth vs. YA Source: comScore e-Commerce Measurement

23% 17%

23%

19% 13% 11% -3% 0% 3% -1% -2% 10% 9% 9% 11% 12% 14% 13% 14%

17%

14% 15% 15%

13%

6% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013

Quarterly U.S. Dept of Commerce Consumer Sales Growth vs. YA (excluding autos, gas and food/beverage)

Payroll tax impact?

3% 3% 3% 2% 2% 1% 4% 5% 6%

7%

6%

4%

4%

6% 3% 2% 2% 2%

1%

-5% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 0% 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 -5% -6% -6%

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Nearly 11% of all discretionary dollars were spent online in Q1, the highest share observed to date

Desktop e-Commerce Share of Corresponding Consumer Spending*

Source: comScore for e-Commerce & U.S. Department of Commerce (DOC) for Retail
12.0%

10.6%
10.0%
10.0%

9.4% 8.6% 8.9% 8.7% 8.7% 7.7% 7.6% 6.5%6.6% 6.8% 6.9% 7.1% 7.1% 8.1% 8.0%

e-Commerce Share

8.0%

7.4% 7.3% 6.4% 6.7% 5.9%

7.7% 7.6%7.7%

6.0%

5.1% 4.3% 5.3% 5.3% 5.0% 4.5%

6.3% 5.9%

4.0%

4.6% 4.3% 4.0% 3.7%

2.0%

e-Commerce share peaks in colder seasons (Q4 & Q1)

0.0%

Q1-04

Q2-08

Q3-11

Q2-04

Q3-04

Q4-04

Q1-05

Q2-05

Q3-05

Q4-05

Q1-06

Q2-06

Q3-06

Q4-06

Q1-07

Q2-07

Q3-07

Q4-07

Q1-08

Q3-08

Q4-08

Q1-09

Q2-09

Q3-09

Q4-09

Q1-10

Q2-10

Q3-10

Q4-10

Q1-11

Q2-11

Q4-11

Q1-12

Q2-12

Q3-12

Q4-12

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*Note: e-Commerce share is shown as a percent of DOCs Total Retail Sales excluding Food Service & Drinking, Food & Bev. Stores, Motor Vehicles & Parts, Gasoline Stations and Health & Personal Care Stores.

Q1-13

Product Category Overview

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Five retail categories showed growth of 20%+ versus a year ago

Q1 2013 Desktop e-Commerce Sales Growth vs. YA by Retail Category
Source: comScore e-Commerce Measurement

Product Category
Digital Content & Subscriptions Apparel & Accessories

Q1 2013 Growth vs. YA Very Strong Very Strong Very Strong Very Strong Very Strong Very Strong Very Strong Strong
Moderate Moderate

Mobile phones and plans

+34%
Audio/video equipment (e.g. TVs)

Sport & Fitness

Consumer Electronics (x PC Peripherals) Consumer Packaged Goods Flowers, Greetings & Misc. Gifts Home & Garden Jewelry & Watches Furniture, Appliances & Equipment Office Supplies

+13%

Portable devices (e.g. tablets)

+25%
Desktop computers

Event Tickets
Computers/Peripherals/PDAs Video Games, Consoles & Accessories Books & Magazines

Low
Low Low No growth
Growth rate definitions: Very Strong: +15% or higher Strong: +10-14% Moderate: +5%-9% Low: +1%-4%

-16%

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Multi-Platform Commerce

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Tablet ownership has risen above 60 million people, while 137 million now own smartphones

130 MILLION

60 MILLION

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11

Its a Brave New Digital World: Multi-platform Internet usage has led to a doubling of digital media consumption in the past 3 years
Total U.S. Internet Usage in Minutes (MM) by Platform: Desktop, Smartphone and Tablet
Source: comScore Media Metrix Multi-Platform, U.S., February 2013

890
115

+97%
N/A
+389%

308

451
6343 467 +20%

388

Feb-2010

Feb-2013

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* Note: Feb-2010 Mobile is estimated based on earliest observed comScore smartphone engagement data calibrated by number of smartphone users at that time Proprietary.

12

Engagement with Retail content has seen impressive growth across all platforms, including desktop
U.S. Retail Site Usage in Minutes (MM) by Platform: Desktop, Smartphone and Tablet
Source: comScore Media Metrix Multi-Platform, U.S., February 2013

34,872
4,966

+104%
N/A

17,136
2,660
43

12,914

+385%

16,992

+17%

14,475

Feb-2010

Feb-2013

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* Note: Feb-2010 Mobile is estimated based on earliest observed comScore smartphone engagement data calibrated by number of smartphone users at that time Proprietary.

13

Nearly half of digital time spent on retail properties now occurs via smartphones and tablets
Retail Category Time Spent by Platform: Desktop, Smartphone and Tablet
Source: comScore Media Metrix Multi-Platform, U.S., March 2013

Tablet

14%
Desktop Smartphone

34%

52%

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14

Retailers significantly extend their overall digital presence via mobile platforms (smartphone and tablet)
Selected Leading Retailers: Total U.S. Digital Population Unique Visitors (000) by Platform
Source: comScore Media Metrix Multi-Platform, U.S., March 2013

0 Amazon Sites eBay Wal-Mart Apple.com Sites Target Corp. Best Buy Sites

40,000

80,000

120,000

160,000

164M 92M 57M 55M 40M 27M 21M 20M 20M 19M
PC Only PC + Mobile Mobile Only
Note: Mobile = Smartphone + Tablet
15

The Home Depot

Etsy.com Sears.com

The average Top 50 retailer extends its desktop audience by

45% via mobile channels

Lowes.com

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At $5.9B in Q1 2013, m-Commerce grew 31% vs YA and accounted for 11% of all Retail e-Commerce
Percentage of Retail e-Commerce Dollars Spent via Mobile (Smartphone & Tablet)
Source: comScore E-commerce & M-commerce Measurement

$5.9B

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16

In terms of discretionary spending, m-Commerce growth significantly outpacing e-Commerce and far ahead of all consumer spending
Q1 2013 Y/Y Retail Spending Growth by Channel
Source: Dept. of Commerce, comScore e-Commerce & m-Commerce Measurement

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17

Smartphone users are less likely to conduct purchases than tablet users, but those who do spend more on average
Q1 2013 Buyer Penetration by Platform
Source: comScore e-Commerce & m-Commerce Measurement

Q1 2013 Spending per Buyer by Platform

Source: comScore e-Commerce & m-Commerce Measurement

Is higher spending propensity among smartphone buyers a function of the showrooming effect?
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18

Price Sensitivity: Shipping & Taxes

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Free shipping is by far the online shopping incentive consumers consider most valuable

1.77
Free shipping

49% Chose Free Shipping as the

Most Valuable Option

2.57
Exclusive online deals

2.86
No sales tax

3.52
Fast shipping

4.28
In store pickup
Average rating on 1-5 importance scale (with 1 being most important)

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Among the services/factors listed below which can be provided by online retailers, please rate them on a scale of 1-5, where 1 is the most important factor to you, and 5 is the least important.

20

comScore / UPS Pulse of the Shopper Study shows that while consumers often select the least expensive shipping option, they want to see a variety of options for delivery.

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21

More Valuable Information From the Study ups.com/comScore2013

Returns

Cart Abandonment

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Most consumers are aware of Amazon Tax proposals, and 54% say that such a tax would make them less likely to purchase items online

Have you heard anything about the various laws or proposals that would require all online merchants, such as Amazon, to charge sales tax on all orders at their sites?

What effect, if any, would having to pay sales tax on all online purchases have on your online shopping?

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** - no significant change versus 2012 (53%)

23

Consumers may be offsetting the incremental cost of an online sales tax with free shipping promotions
Percentage of Retail e-Commerce Transactions with Free Shipping
Source: comScore e-Commerce Measurement

Transactions that involve a sales tax are 48% more likely to have free shipping than transactions that do not collect a tax

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24

Multi-channel retailers account for majority of retail e-Commerce spending but their sales are growing more slowly than pure-plays

Type of Retailer

Percent of All Retail e-Commerce Sales 37%

Dollar Sales Growth Y/Y 17%

Pure-Play

Multi-Channel

63%

11%

Will the higher growth rate of pure play retailers be diluted by collection of state sales taxes?

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25

Commerce-Powered Digital Advertising Retailers as Advertising Platforms

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Dynamics are changing, with commerce fueling advertising in tight feedback loop

Commerce has become marketing and marketing has become commerce.

Advertising

Rishad Tobaccowala Chief Strategy & Innovation Officer Vivaki

Commerce

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27

Purchase-based targeting drives higher lifts in in-store sales than campaigns that dont leverage this type of targeting
Median Offline Sales Lift in 3-Months from Digital Advertising for CPG Brands Among Consumers Receiving Ads
Source: comScore AdEffx Offline Sales Lift, Norms for CPG, Mar-2011

+38%

+21%

No Targeting

With Purchase-Based Targeting

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28

When including mobile, leading retailers boast audiences on par with some of the largest publishers
Top 15 Digital Media Properties by Audience (000)
Source: comScore Media Metrix Multi-Platform, U.S., March 2013

237M 223M 187M 180M 164M

139M 131M 123M 117M 110M 106M 99M 92M 90M 89M

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29

Amazon has become a major player as an advertising platform, offering ad delivery based on a wealth of browsing and buying data
Amazon Display Ad Impressions (in Billions)
Source: comScore Ad Metrix, US

4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0

+40% Y/Y

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30

Major advertisers have taken notice of Amazons valuable targeting advantage to drive in-store not just online purchase behavior
Top Q1 2013 Advertisers on Amazon by Display Ad Impressions (000)
Source: comScore Ad Metrix, U.S., Q1 2013

Many of these advertisers sell a large majority of their products offline

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31

Key Takeaways

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Key Takeaways
Q1 2013 e-Commerce growth was strong at 13%, though a slight pullback from previous quarters
Increase in payroll taxes beginning Jan. 1 took disposable income from consumers pockets, which likely dampened discretionary spending But the channel shift continued and e-Commerce reached all-time high of 10.6% of total discretionary retail sales (11.8% including m-Commerce)

Consumer sentiment continues to improve, but price sensitivity still a major driver of e-Commerce behavior
Free shipping, application of sales tax, and delivery options all likely to affect health of e-Commerce channel as we go forward

Mobile & Multi-Platform Commerce are ready for primetime

11% of all digital retail commerce now coming from mobile platforms Smartphones less likely to drive purchase than tablets, but they account for more devices and greater overall mobile spending activity

Growth of retailers as advertising platforms

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33

Thank You!
For a copy of the presentation please email:

Learnmore@comscore.com
www.comscore.com www.facebook.com/comscoreinc @comScore

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