Mobile Retailing in Europe And North America A RESEARCH REPORT FROM THE CENTRE FOR RETAIL RESEARCH FOR RETAILMENOT, INC. JUNE 2015

Mobile Retailing in Europe And North America A RESEARCH REPORT FROM THE CENTRE FOR RETAIL RESEARCH FOR RETAILMENOT, INC. JUNE 2015

Overview Methodology The Scale of Mobile Retailing Mobile Purchases Consumer Expectations and Retailer Strategies The In-Store Opportuntiy Why retailers can no longer ignore mobile Conclusion 2

About the Report This report is based on surveys of a combined total of 1,300 major retailers with combined sales of more than 585 billion and a total of 5,400 consumers in Canada, France, Germany, the Netherlands, the UK and the U.S. There were 250 major retailers from a cross section of all vertical markets interviewed in each country, apart from Canada and the Netherlands (150 each). One thousand customers were interviewed in every country, except the Netherlands where the total was 400. The customer sample was a cross-section of the population aged 16 years and above between 1 April and 8 May 2015. The confidential retailer sample was carried out between 1 April and 15 May drawn from a cross section of vertical markets including department stores, clothing and footwear, hardware/dyi, pharmacy, convenience, consumer electronics, jewellery and general stores. Retail sales in this report means the sale of merchandise to the final consumer. It excludes the sale of tickets, travel, automobiles, rentals, car parts, fuel, hospitality services such as food services, restaurants, cafes and coffee shops, and as far as possible sales tax or VAT. 3

4 The Scale of Mobile Retailing

M-COMMERCE TRENDS Online retailing continues to grow Total Online Retail Sales by Country, 2013-2016 (in bn ) 58% of Europeans and 59% of Americans shop online 345 396 302 240 260 60 52 45 39 54 36 44 35 30 29 26 23 4 5 6 7 13 15 17 12 213 189 165 156 132 113 95 UK Germany France Netherlands Canada US Europe North America 2013 2014 2015 Est 2016 Est 5

M-COMMERCE TRENDS But most sales still happen in store Online Sales as Percentage of Total Retail Sales by Country Mature online countries Share of Canadian online retail relatively low due to large number of cross border online purchases made from U.S. retailers 17% 15% E 9% 8% 8% 7% 7% 7% 6% 6% 14% 12% 10% 8% 12% 14% 5% 5% 4% 4% 14% 13% 12% 11% 13% 11% 10% 8% 10% 9% 8% 7% Netherlands France Germany UK Can US Europe North America 2013 2014 2015 Est 2016 Est 6

E-COMMERCE TRENDS Three digit growth for mobile shopping Mobile Retail Sales 2013 2016, in bn US mobile retail is 73% ahead of Europe in 2015 but the gap is narrowing every year 88 92 + 439% + 341% 57 52 59 35 + 553% 33 37 + 509% 23 + 645% 20 12 14 + 439% + 522% 8 8 0,6 1,5 3 6 6 0,3 1,4 3 4 1,1 + 1192% 1,5 2,4 4 0,3 20 18 8 20 Netherlands France Germany UK Canada U.S. Europe North America 7

E-COMMERCE TRENDS Mobile could represent 50% of ecommerce spend by 2017 Share of mobile spend as part of all ecommerce spend, 2013-15 40% 38% 36% 35% 37% Share of mobile nearly identical 30% 27% 28% 27% 30% 30% 25% 22% 24% 24% 23% 22% 20% 15% 10% 18% 19% 11% 12% 6% 6% 10% 19% 9% 17% 16% 11% 11% 19% 15% 15% 8% 7% 5% 3% 0% Netherlands France UK Germany Canada U.S. Europe North America 2013 2014 2015 Est 2016 Est 8

E-COMMERCE TRENDS Average smartphone basket in the UK is at 47 this year, and set to grow by 11% in 2016 Average transaction value by market and device, 2015/16 US basket size is 28% higher than in Europe French mobile basket 5% below EU average 51 52 48 46 43 42 55 59 56 55 51 52 49 50 48 48 44 45 60 58 55 52 52 47 65 61 58 57 57 51 77 73 70 68 67 63 57 55 52 49 48 45 71 67 63 64 62 57 France Netherlands Germany UK Canada U.S. Europe North America PC 2015 PC 2016 Tablet 2015 Tablet 2016 Smartphone 2015 Smartphone 2016 9

10 Mobile Purchases

M-COMMERCE TRENDS Digital downloads #1 mobile purchase, followed by fashion Mobile purchases (past 6 months) 34% 32% 32% 27% 23% 23% 29% 27% 26% 26% 24% 21% 31% 28% 21% 34% 31% 27% 14% 14% 11% 8% 9% 8% 9% 8% 4% 13% 15% 13% 13% 11% 10% 11% 10% 9% 10% 10% 8% 9% 9% 8% 8% 8% 7% 7% 7% 8% 8% 7% 7% 7% 6% 6% 6% 6% 6% 5% 5% 4% 4% 4% 3% 13% 14% 14% 11% 11% 10% 8% 7% 5% UK Germany France Netherlands Canada U.S. Digital downloads / subscriptions Apparel & accessories Office & stationary Books, DVDs entertainment Consumer electronics Furniture Hardware & Garden Toys &hobbies Flowers & gifts Jewellery, watches Groceries Health and beauty 11

M-COMMERCE TRENDS App users buy less, but spend 60% more than non-app users in Europe The App Environment Approximately 80% of time spent on mobile involves apps * 44% 38% 38% 41% 36% 38% 37% 40% 38% 40% 18% 31% 20% 28% 22% 23% 25% 17% 17% 25% 30% 19% 32% 21% UK Germany France Netherlands Canada U.S. Europe North America Merchants providing an app App users as proportion of site visits App users as proportion of purchases * Flurry Analytics/Comscore 2013 12

13 Consumer Expectations and Retailer Strategies

M-COMMERCE TRENDS 3 out of 4 compare prices and check reviews How consumers are using their mobile for shopping Compare prices Read product reviews Check retailer sites Research offers & promotions Check availability Research Market Locate store Mobile coupons Scan QR codes Receive proximity offers Pay mobile for online orders Mobile payments instore 7% 14% 19% 13% 17% 13% 14% 12% 26% 35% 34% 33% 65% 73% 76% 70% 74% 69% 74% 77% 75% 80% 83% 85% Mobile mainly used to find best prices and additional produt information. Payment still secondary Europe U.S. 14

M-COMMERCE TRENDS Lack of website optimisation and trust issues major obstacles for mobile purchases Barriers to mobile shopping Hightest percentage in France (69%) Websites slow load 57% 64% Only for known & trusted retailers Security concerns Website screen not optimized 40% 49% 46% 46% 46% 45% Data privacy 38% 43% Too many products No 360 degree view 32% 40% 39% 38% Unwanted pop ups Registering too complex Payment too complicated 36% 34% 34% 32% 34% 31% 64% of EU mobile users criticize slow page loads. Other major obstacles are security concerns (56%) and a lack of mobile optimization (46%) Europe U.S. 15

16 The In-Store Opportunity

M-COMMERCE TRENDS Consumers are looking for great deals and a seamless shopping experience Customer views on what makes a mobile friendly store Loyalty programmes on mobile/app 44% 47% Mobile based payment methods 43% 58% Stock availability 41% 46% Vouchers sent to mobile 38% 47% In-store wifi 27% 39% Personalisation based on online shopping habits 26% 39% Pop up notifications about products, discounts 25% 28% Europe U.S. 17

M-COMMERCE TRENDS But retailers are lagging behind with their offerings What retailers are doing to leverage mobile retailing Alternative delivery options (e.g. in-store pick up) 52% 56% Vouchers/offers sent to mobile 42% 48% Dedicated app 30% 40% Mobile friendly website 26% 38% Personalisation 15% 26% Price comparisons on mobile 14% 20% In-store wifi Proximity marketing Show availability 14% 13% 19% 11% 16% 24% Most retailers are still not delivering an optimized mobile experience. Only 26% of EU retailers say that their website is mobile friendly (31% in the UK) Scan and go 10% 15% Beacons/in-store transmitters 3% 9% Europe U.S. 18

19 Why retailers can no longer ignore mobile

M-COMMERCE TRENDS Customers will reward those who invest - and buy more! Would you shop more with retailers that show greater mobile engagement? 58% affirmative 62% affirmative 11% 8% 9% 12% 9% 15% 10% 12% 26% 32% 33% 35% 21% 34% 31% 27% 20% 27% 31% 24% 24% 21% 25% 22% 44% 33% 28% 29% 47% 31% 33% 40% UK France Germany Netherlands U.S. Canada Europe North America Yes Possibly No Don't Know 20

M-COMMERCE TRENDS UK retailers without mobile-optimised websites are missing on 7.8 bn in sales this year! % of shoppers who would spend more and total additional annual revenue they would spend at mobile-friendly stores 7.8bn** 39.6bn 42bn 5.6bn 1.2bn 5.8bn 2.5bn 20.5bn 44% 33% 29% 28% 31% 47% 33% 39% 7.30* 6.70 6.50 6.73 5.85 6.91 6.81 6.38 21 UK France Netherlands Germany Canada U.S. Europe North America * Average amount surveyed shoppers said they would spend/trip * *Calculated upon average extra amount spent and avg annual number of non-food related shopping trips takenby those who say that they will shop more

M-COMMERCE TRENDS Multichannel shoppers are better customers and bigger spenders Annual online spend from multichannel (pc & mobile) vs pc-only shoppers 1 734 +69% 1 213 1 024 +61% 1 394 1 011 864 +47% 1 127 835 766 654 592 +57% 929 +48% 1 072 782 727 +62% 1 540 1 108 950 +42% +58% 1 296 1 306 1 003 915 945 839 UK Germany France Netherlands Canada U.S. Europe * North America 22 Average Annual Online Spend per Customer PC only users Mobile+PC Users * Weighted average

Conclusions In just 7 years mobile has taken a major place in retail and could represent 50% or more of all ecommerce spend in Europe by 2017 The average mobile basket is slighly below the average online basket as consumers are for now using their smartphones or tablets primarily for smaller purchases. Mobile shoppers buy mostly digital downloads (such as apps or subscriptions), fashion and entertainment media (books, cds, media) for now While the majority of transactions still happen online or in-store, mobile devices have become a key element in the shopping journey. Consumers use them to find the best prices and deals, redeem vouchers, check instore availabilty or get additional product information such as reviews Barriers to mobile transactions are poor performance and security concerns, but also the complexity of transmitting credit card details or personal information Despite the interest from consumers, many retailers are yet not living up to their expectations : only 1 out of 4 European retailers consider their website mobile friendly Investments in mobile technologies will pay off. Consumers who use their mobile during their shopping journey spend on average 45% more than pc only shoppers. And for mobile friendly stores there s an opportunity of additional sales of 7.8 bn in the UK this year. In other words, retailers who are not seizing the mobile opportunity are leaving money on the table and may lose their clients to their competitors. 23