A P R I L 1 8, 2 0 1 3

US Retail Ecommerce OutlookWhats Driving Growth?

Sponsored by:

Jeffrey Grau Principal Analyst

2013 eMarketer Inc.

Roadmap of our journey

Product category forecast

Online sales forecast

Leading retailers

Shoppers & buyers forecast

2013 eMarketer Inc.

The outlook is bright for US retail ecommerce sales

Online sales will grow more than 4 times the rate of 3.4% the NRF forecasts for total retail sales in 2013
Retail Ecommerce Sales Defined
Products/services ordered online or price and terms of sale negotiated online, even if payment or fulfillment occurs in-store Included: o digital downloads (e.g., music from iTunes and movies from Netflix) o Gross merchandise value (GMV) of items sold on online marketplaces like Amazon and eBay o Sales from US retail websites to foreign customers Excluded: o Travel and event tickets sold online
2013 eMarketer Inc.

What forces are influencing ecommerce growth?

Convenience, price and selection The Economy

After a burst of economic gains in January and February, job growth slowed to a trickle in March, raising concerns about the strength of the economic recovery in 2013

Consumers find information, compare prices and access virtually limitless product selection at anytime, from anywhere

Waves of innovation
Mobile, globalization, omnichannel capabilities, online marketplaces, personalization, expedited fulfillment, new business models

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Mobile spending has begun to have an impact on ecommerce

Tablet Share of Mcommerce Sales

2013

2017

62.5% 71.5%

2013 eMarketer Inc.

US ecommerce is also starting to get a boost from international sales

2013 Asia Ecommerce Facts
Asia-Pacific will surpass North America as the worlds biggest B2C ecommerce market B2C ecommerce sales in AsiaPacific will grow more than 30% vs. 12.2% in North America China, India and Indonesia are driving the fast ecommerce growth in Asia-Pacific China, the primary driver of AsiaPacific growth, will surpass Japan as the regions largest B2C ecommerce market
Note: B2C includes travel, digital downloads and event tickets sales Source: eMarketer, February 2013
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Comparative estimates of ecommerce sales growth range from 10% to 14%

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Historically, research firms have been bearish in forecasting online sales

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Ecommerce is gradually accounting for more of total retail sales

Ecommerce is growing 2-3 times faster than total retail sales and the result is rising online sales penetration rates

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But thinking about channels as distinct entities ignores how consumers shop
At some point that breakdown becomes immeasurable and irrelevant.
Source: eMarketer interview, March 2013

Eric Best CEO Mercent

This notion of channel is almost melting away. Whats important is how different channels influence each other and how to attribute customer engagement across them.
Source: eMarketer interview, March 2013

Sean Cook CEO ShopVisible

2013 eMarketer Inc.

Roadmap of our journey

Product category forecast

Online sales forecast

Leading retailers

Shoppers & buyers forecast

2013 eMarketer Inc.

The two largest product categories will account for 42.9% of total online sales in 2013

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A mix of larger and smaller online product categories will post the highest CAGRs from 2012-2017

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Several categories exceed the online penetration rate of 6% for total retail ecommerce sales

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Categories to watch: Apparel and accessories

Market Position
Low Size (billion) Growth Penetration Medium High $54.2 17.2% 14%

Source: eMarketer, Booz & Company

Growth Enablers
Body scanning technology

Runway videos
360 degree product views Home try-on programs

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Categories to watch: CPG (groceries and personal care)

Market Position
Low Medium High 15.2% Size (billion) $18.3 Growth Penetration 1-4%
Source: eMarketer, Booz & Company

Growth Enablers
Automatic replenishment programs Broader product selection Faster and lower-cost delivery Twitter #eMwebinar
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Categories to watch: Autos and parts

Market Position
Low Medium High Size (billion) $25.5 Growth 9.2% Penetration <5%
Source: eMarketer

Growth Enablers
In 2011, 35% of new vehicle buyers said they would buy a car online, up from 21% in 2009*
Powerful car dealership lobby has blocked the sale of cars online
Source: *Capgemini, Oct 2011

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Roadmap of our journey

Product category forecast

Online sales forecast

Leading retailers

Shoppers & buyers forecast

2013 eMarketer Inc.

Amazon is a powerful engine of ecommerce growth

Amazon accounts for a large share of US online sales and is growing faster than ecommerce overall

If 2012 sales included the gross merchandise value from third-party merchants, Amazons contribution to US ecommerce sales would be around 25%.
Source: JMP Securities, March 2013

2013 eMarketer Inc.

Two Amazon growth engines: Prime and its third-party sellers marketplace

Key Stats
Membership (millions) 2011 2012 2017 4 10 25

Amazon said unit sales from its thirdparty sellers in the US increased more than 40% over the 2011 holiday season Online marketplaces (e.g., Amazon, eBay, Rakuten and Sears) account for 27% online retail sales* Marketplaces introduce consumers to unfamiliar retailersand greater product selection
Source: *ChannelAdvisor, 2012

Annual Spend
Prime members Non-members $1,224 $505

Source: Consumer Intelligence Research Partners

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A number of major retail chains reported strong online sales growth

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Factors attributed to strong growth

Reduced conflict between its stores and website by restructuring company by major brandsGap, Old Navy and Banana Republicas opposed to by stores, online, outlets and international

Better website search and navigation Richer product information Richer visualization tools Speedier order fulfillment and delivery

Increased coordination across digital and store channels Upgraded mobile and online sites Enhanced customer engagement features
Source: Corporate earnings announcements as reported in Internet Retailer
2013 eMarketer Inc.

Retailers attribute omnichannel initiatives with boosting sales growth

Walgreens found that its omnichannel shoppers spend more than its single-channel shoppers

Stores-only
1

Stores + Web
1 2 3 3-1/2

Stores + Web + Mobile

1 2 3 4 5 6

Source: Miguel, Almeida, VP of ecommerce at Walgreens at a session at Retails Big Show 2013, sponsored by the National Retail Federation
2013 eMarketer Inc.

Roadmap of our journey

Product category forecast

Online sales forecast

Leading retailers

Shoppers & buyers forecast

2013 eMarketer Inc.

Current (not new) online buyers are driving the bulk of ecommerce sales growth
Key Shopper/Buyer Stats
CAGR (2012-2017) Shoppers Buyers 2.7% 3.8% 2013 Buyers as a % of shoppers 82.2%

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Smartphones and tablets have become commonplace devices for buying online

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By all estimates a strong majority of internet users make online purchases

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Online buying is prevalent across all age cohorts

Buyers 65+ will grow faster than any other group at a 7.3% CAGR from 2012-2017

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Online spending is well distributed across household income segments

2013 eMarketer Inc.

Impetus for spending more online: Personalization

Survey Findings
41% of online shoppers buy more from retailers who send them personalized emails based on past browsing and buying behavior

39% purchase more on retail sites with product recommendations

Source: The e-tailing group, sponsored by MyBuys, December 2012

Personalization Drives Online Sales at Sears

Shop Your Way membership program, which offers personalized product offers based on customer shopping behavior and other characteristics, strongly contributed to: 25% boost in online sales for Q4 2012 17% increase for all of 2012

Source: Internet Retailer, March 2013

2013 eMarketer Inc.

Impetus for spending more online: Trust and security

Every year we see more consumers who were latecomers to online shopping trusting ecommerce.
Source: eMarketer interview, March 2013

Vineet Buch Group product manager Google

Free returns engender online trust by reducing the likelihood a consumer will have buyers remorse.
Source: eMarketer interview, March 2013

Jason Goldberg VP strategy Razorfish

2013 eMarketer Inc.

What were the highlights of our journey?

Product category forecast

Online sales forecast

Leading retailers

Shoppers & buyers forecast

2013 eMarketer Inc.

Takeaways
US retail ecommerce sales will increase at a 14% CAGR from 2012 to 2017

Mobile users share of US retail ecommerce sales will rise from 15% in 2013 to 25% by 2017
Ecommerce growth comes from current (not new) online buyers, who account for 73% of internet users Apparel & accessories and CPG are large categories with strong online growth potential All age groups partake in online buying, but those ages 65+ are the fastest growing cohort
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Trend: Greater Need for Guidance when Shopping Online

This is Where Needle Comes in

Power of a Needler

How Needle Does It

Guided Shopping Online Using Your Best Fans

Q&A Session
US Retail Ecommerce OutlookWhats Driving Growth

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About 200 eMarketer reports are published each year. The following are a few recent ones you may be interested in:
US Retail Ecommerce: 2013 Forecast and Comparative Estimates Online User Reviews: Building Trust and Boosting Sales

Jeffrey Grau
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Shopping Cart Abandonment: New Ways of Looking at the Purchase Path

Retail Mobile Commerce Forecast: Shoppers Turn to Smartphones First

Multichannel Customer Service: Best Practices for Building Retail Loyalty
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