Mobile and Tablet e-commerce: Is Anyone Really Ready?

Mobile and Tablet e-commerce: Is Anyone Really Ready? How the top 100 U.S. retailers are performing or not in the mobile and tablet markets White Paper February 2012

2 Mobile and Tablet e-commerce: Is Anyone Really Ready? February 2012 Introduction Last year, according to emarketer, 33.7 million Americans used a tablet device at least monthly; by 2014, the number will rise to nearly 90 million one in three of all Internet users. More than 60 percent of 25-34 year olds now own a smartphone. And more than 800 million people worldwide are connected via Facebook. When it comes to shopping, these connected consumers increasingly turn to whichever device is at hand. While PCs and laptops are still the most widely used channel for browsing and purchasing, tablet and mobile shopping is on the rise. emarketer projects that mcommerce sales will grow more than four-fold over the next few years, from $6.7 billion in 2011 to $31 billion in 2015. What are retailers doing about it? Clearly, there is revenue up for grabs in today s mobile and tablet commerce market not to mention the potential game-changing marketing opportunities. Zmags commissioned a research project to assess how the top 100 Internet retailers are responding to the challenges of selling in a cross-channel digital environment that no longer encompasses just the web, but also mobile, tablet and social media. Who gets it and who doesn t? Who are the cross-channel e-commerce leaders, and what are they doing better than the competition? Among the retailers offering mobile and tablet shopping, how does their brand experience translate across the various devices? Which brands have optimized sites for tablets and smartphones? Who s selling on Facebook? What should you do to catch up in time for the 2012 holiday season? The answer was surprising. HawkPartners, a Boston-based marketing consulting and research firm, reviewed the mobile and tablet offerings of the top 100 US retailers. They discovered that very few even among this elite group are tapping into the full shopping potential of mobile and tablet devices.

3 Mobile and Tablet e-commerce: Is Anyone Really Ready? February 2012 Methodology The analysis was conducted in the second half of November, 2011. The offerings of the top 100 retailers, as listed in the 2011 Internet Retailer Top 500 Guide, were scrutinized on the following platforms: Tablets (ipad) Smartphones (iphone and Android) HawkPartners rated each retailer s offering on each device based on four criteria: Do they offer only a traditional search-and-purchase, or a more comprehensive discovery experience? Is it easy to use? How disruptive is the purchasing experience? Is there a consistent brand experience across platforms? Is the presentation optimized for the device? For example,»» Is there specialized content that takes advantage of tablet/smartphone interface capabilities swipe, tap, etc.?»» Is the design simple and easy-to-use?»» Is content appropriately sized and formatted for the device screen?»» Are fonts readable?»» Is the site cluttered?»» Are there video or content outages? HawkPartners also assessed whether purchasing was possible through the retailers mobile and tablet apps, or their Facebook pages. Because the research was conducted from a consumer viewpoint, the retail content analyzed was extremely dynamic in nature, and changed frequently, even as the research was being conducted. This report is based on the assessment made at the time of analysis. A full list of the Top 100 Internet Retailers that were analyzed can be found in the appendix of this report.

4 Mobile and Tablet e-commerce: Is Anyone Really Ready? February 2012 Executive Summary Very few retailers are taking full advantage of the opportunity to extend sales to mobile and tablet platforms. Only three of these 100 giants Gilt Groupe, Disney, and Urban Outfitters scored well overall and had strong offerings across the board on most or all devices. Implementation varies greatly by device. For example, there is much more optimization for smartphones; more than half of these retailers have created simplified mobile sites. There is not yet widespread optimization for tablets. We found only one retailer, Nike, that is fully taking advantage of the tablet s unique interface capabilities. This isn t terribly surprising given the relative newness of the platform the ipad was introduced in April, 2010 but the apparent absence of a defined tablet strategy does appear puzzling among this group of e-commerce leaders. It s clear that trade-offs are being made, either deliberately (retailers not sure which devices will become winners, so they place a bet) or by chance. It also appears that most retailers are dealing with only one or two pieces of the bigger puzzle: technical optimization, cross-platform branding, e-commerce, an engaging shopping experience. Perhaps because of the newness and the speed of adoption and because there are few definitive models for getting it all right the overall brand and purchasing experience is hardly on the radar screen. With so much revenue at stake, it should be. There is a great opportunity to improve the multichannel experience for shoppers and increase sales for the 2012 holiday season. Key findings Smartphones 68% of the retailers have developed smartphone apps. 59% have smartphone-specific sites, and have simplified and decluttered the sites to provide key functionality for a small screen. Smartphone mobile sites typically have very little dynamic content and focus mainly on search and category navigation. While most mobile sites allow ease of small screen purchasing, this often comes at the expense of a more engaging overall shopping experience. Tablets Less than one-third of retailers have optimized, or even adjusted, their sites for tablets. Rather than investing in separate ipad sites (or ipad apps), most simply use their existing websites which translates into a clunky and often frustrating shopping experience for consumers. The tablet browsing experience is often marred by technical glitches slow loading times, unavailable content, Flashrelated issues. Facebook Retailers are using Facebook as a vehicle for social browsing, discovery, and sharing but not yet as a platform for e-commerce. Most are treating Facebook as little more than an extended blog. Apps While over two-thirds of the retailers have iphone apps, only half offer the ability to purchase via the app. About 40% of the retailers have ipad apps, but 25% of them don t include purchase capability. Slightly more than one-third of the retailers offer the ability to purchase on Android apps.

5 Mobile and Tablet e-commerce: Is Anyone Really Ready? February 2012 Detailed Findings by Platform: Tablets When you sit down on the couch to shop the typical top 100 Internet retailer s website on your ipad, bring your patience as well as your credit card. You re likely to encounter tiny navigation buttons, cluttered content, slow loading times, video outages and other annoyances that make tablet shopping more of a chore than a pleasure. Less than one-third of the retailers have made any attempt at all to optimize their websites for tablets. Of these, the level of optimization varies considerably. Some including Apple offer working video, animation, tablet-friendly navigation and fonts and pop-up selection buttons, but very few are fully utilizing the capabilities and strengths of this platform. Who s doing it right? According to the IBM Benchmark December holiday report, shoppers using the ipad continued to drive more retail purchases than users of any other device, with conversion rates more than 2X all other mobile devices.1 Even so, we found only one brand, Nike, doing a really good job. As of the survey (November, 2011), Nike is the only top 100 Internet retailer that has invested in an ipad-specific site. Apple took a different approach. Instead of creating a separate site, it built one universal site that works well on the ipad, but didn t have to be specifically optimized for it. 1 http://www.prnewswire.com/news-releases/mobile-shopping-doubles-over-december-2011-holiday-reports-ibm-137026983.html Nike is the only retailer in Unlike Nike, Apple created a site H&M ipad site: same as their iphone site Gap: Content doesn t fit on screen; Saks Fifth Avenue: Video outage. the study offering a site fully that is functional on the ipad, but not tap navigation only, no swiping. optimized for the ipad platform. necessarily specific to the device.

6 Mobile and Tablet e-commerce: Is Anyone Really Ready? February 2012 What about ipad Apps? Optimizing the tablet browser experience appears to be the direction for most retailers; not as many are developing ipad commerce apps. In our survey, about one-quarter of the retailers have an ipad app that allows shoppers to buy directly. A few big name brands including Nike, Disney, Ralph Lauren, Toys R Us, and Victoria s Secret have ipad apps, but do not offer appbased purchasing. A number of retailers that depend on time-sensitive shopping or impulse purchases, such as Gilt Groupe, Rue La La and other luxury brands, have invested in transaction-enabled ipad apps, as have some subscription- or repeat order-driven companies like Netflix and Peapod. What should you do? For starters, here are a few technical adjustments you can make to create a more tablet-friendly user experience: De-clutter and streamline content, including navigation bars Make sure navigation buttons are large enough and sufficiently spaced for an adult finger to tap Make sure content fits within the tablet screen size Enable swiping, rather than tapping, to change screen views Reduce loading times Make sure that all video and animation works on ipad (e.g., not built in Flash) Incorporate pop-up selection and fill-in criteria buttons (color, size, shipping address, etc.) to make purchasing easier Ralph Lauren s ipad app has extensive product discovery, but then directs the consumer to the retailer s site for purchase. Saks was among the 25% of the top 100 retailers who allowed purchase directly from their ipad app.

7 Mobile and Tablet e-commerce: Is Anyone Really Ready? February 2012 Detailed Findings by Platform: Smartphones There s no doubt that smartphones are here to stay, so it s a little surprising that only 59% of the retailers in our study offered optimized or somewhat optimized sites for iphone and Android devices. Such retailers include Urban Outfitters and Office Max. Many companies still expect users to suffer through their regular website, miniaturized, which can be very difficult to read and navigate much less shop with a 4.5-inch screen. A good, functional smartphone-optimized site offers simplified and de-cluttered content, streamlined browsing, and a satisfying brand experience. The best examples are visually interesting and well-branded; however, perhaps in a hurry to harness smartphone penetration or perhaps due to lack of resources, many retailers have opted for a very basic directory-style site that offers little personality and eliminates most browsing and discovery options. When it comes to purchasing, some have simplified the purchase process with PayPal and other quick check-out enablers. But while these sites may allow ease of small screen purchasing, this often comes at the expense of a more engaging overall shopping experience. The app option 50% of the retailers offer iphone and Android apps plus smartphone browsing sites. Others have elected to go the app route instead of creating mobile sites; this group includes a number of notable retail brands such as Apple. Possibly they have determined that a smartphone site can t re-create their elaborate in-store experience and live up to their brand promise, so they choose not to attempt it. Interestingly, only half of the 100 retailers offer the ability to purchase on iphone apps; one-third offer purchasing on Android apps. Urban Outfitters Mobile Site Clean navigation, basic branding, well-executed. OfficeMax Mobile Site Buying guides and other instructional info. Apple Store App Apple elected to build a mobile app rather than a mobile site.

8 Mobile and Tablet e-commerce: Is Anyone Really Ready? February 2012 Detailed Findings by Platform: Facebook Retailers have been quick to hop onto the social media bandwagon. In fact, all 100 had a Facebook page. But according to our survey, they continue to use Facebook as a vehicle for social browsing, discovery, and sharing not purchasing. Progress on Facebook and other social networking properties will, of course, depend on how each network s policies evolve. But there s a selling opportunity available here. Only 1 of the top 100 retailers Coldwater Creek provided an opportunity to actually buy within the Facebook platform. Roughly half of the retailers had no real shopping or prompt to buy. Some offered deals and promotions, and a few (7 of the 100) offered gift cards or very limited merchandise. For purchase, though, all except Coldwater Creek redirected shoppers to their websites. It will be interesting to see if retailers make more of an investment in social media commerce, as it is expected to play an increasingly large shopping role in 2012. Coldwater Creek: Ahead of the curve with full purchase capability American Eagle: Plenty to look at, but buyers have to go to the website to purchase.

9 Mobile and Tablet e-commerce: Is Anyone Really Ready? February 2012 Point of View Moving beyond traditional search-and-purchase e-commerce. Very few of these Internet top 100 retailers provide an immersive, dynamic experience for mobile shoppers. This is especially surprising in view of consumer trends today to take it all on the road, and the phenomenal proliferation of tablet and smartphone devices. Only 19 of the top 100 retailers went beyond ordinary HTML-type content to include more engaging material such as look books, catalogs, editorial picks, rich media, etc. and none of them extended the dynamic environment or optimized the brand experience for all the devices we looked at. For those that have forayed into rich media experiences, technical gremlins seem to be especially active in the cross-channel digital world. Video and Flash hang-ups were common, even among savvy and sophisticated marketers. Offline retailers (including most of these 100) tend to be zealous about orchestrating an in-store experience that invites inspiration, discovery and purchase. Why are so few making a significant effort to extend that brand experience to the tablet and mobile environment? There s clearly an opportunity here. As we look ahead to the 2012 holiday season, the winners will be the ones to recognize that tablets and smartphones are rapidly becoming not just search tools, but discovery and purchasing tools as well. To stay in the Top 100, or to make it onto the list, retailers will need to stop actively frustrating consumers, and create an engaging, even playful shopping experience on tablets and smartphones, sooner rather than later. Trade-offs across devices and the browser vs. app debate will continue to be a reality, but dabbling and hedging bets won t cut it. At this point in the game, retailers should be going all-in with their mobile shoppers and paying more attention to their cross-channel brand experience. Want to unlock the revenue opportunity of emerging tablet, mobile and social channels? Zmags can help. To learn more, visit www.zmags.com.

10 Mobile and Tablet e-commerce: Is Anyone Really Ready? February 2012 Appendix: Top 100 Internet Retailers 1 Amazon.com Inc. 26 HSN Inc. 51 CSN Stores LLC 76 Signature Styles LLC 2 Staples Inc. 27 Overstock.com Inc. 52 PC Mall Inc. 77 Hayneedle Inc. 3 Apple Inc. 28 Amway Global 53 Foot Locker Inc. 78 Nike Inc. 4 Dell Inc. 29 Toys 'R' Us Inc. 54 Scholastic Inc. 79 Orchard Brands Corp. 5 Office Depot Inc. 30 Avon Products Inc. 55 Crate and Barrel 80 Build.com Inc. 6 Walmart.com 31 Kohl's Corp. 56 Abercrombie & Fitch Co. 81 Weight Watchers International Inc. 7 Sears Holdings Corp. 32 Buy.com Inc. 57 American Eagle Outfitters Inc. 82 RueLaLa.com 8 Liberty Media Corp. (QVC) 33 Redcats USA 58 Follett Higher Education Group 83 CVS Caremark Corp. 9 OfficeMax Inc. 34 Nordstrom Inc. 59 U.S. Auto Parts Network 84 ShopNBC.com 10 CDW Corp. 35 Symantec Corp. 60 Blue Nile Inc. 85 Northern Tool + Equipment Co. 11 Best Buy Co. 36 Vistaprint Ltd. 61 Market America 86 Bass Pro Outdoor Online LLC 12 Newegg Inc. 37 PC Connection Inc. 62 Recreational Equipment Inc. 87 Shoebuy.com Inc. 13 Netflix Inc. 38 Saks Direct 63 Nutrisystem Inc. 88 Sierra Trading Post Inc. 14 SonyStyle.com 39 The Neiman Marcus Group Inc. 64 Oriental Trading Co. Inc. 89 Net-a-Porter LLC 15 W.W. Grainger Inc. 40 Cabela's Inc. 65 Zones 90 Vitacost.com Inc. 16 Costco Wholesale Corp. 41 BarnesandNoble.com Inc. 66 Shutterfly Inc. 91 Lowe's Cos. Inc. 17 Macy s Inc. 42 Blockbuster Inc. 67 YOOX Group 92 Eddie Bauer LLC 18 Victoria s Secret & Bath and Body Works 43 Home Depot Inc., The 68 Microsoft Corp. 93 Coldwater Creek Inc. 19 HP Home & Home Office Store 44 Musician's Friend Inc. 69 Ancestry.com Inc. 94 Bluestem Brands Inc. 20 J.C. Penney Co. Inc. 45 1-800-Flowers.com Inc. 70 Ralph Lauren Media LLC 95 Ann Inc. 21 L.L. Bean Inc. 46 drugstore.com Inc. 71 FTD Group Inc. 96 Army & Air Force Exchange Service 22 Target Corp. 47 Peapod LLC 72 Diapers.com 97 Colony Brands Inc. 23 Systemax Inc. 48 Urban Outfitters Inc. 73 Walgreen Co. 98 Football Fanatics Inc. 24 Gap Inc. Direct 49 Gilt Groupe 74 Disney Shopping Inc. 99 Green Mountain Coffee Roasters Inc. 25 Williams-Sonoma Inc. 50 J. Crew Group Inc. 75 FreshDirect LLC 100 Etronics Inc.

11 Mobile and Tablet e-commerce: Is Anyone Really Ready? February 2012 About Zmags Zmags helps thousands of the world s most progressive global retailers and brands design brilliant and consistent marketing and merchandising campaigns across social, mobile, tablet, and e-commerce platforms, driving product discovery and inspiring impulse purchases. Using the Zmags on-demand rich media merchandising platform, leading brands have measurably and dramatically increased customer engagement, conversion rates, order size and brand loyalty without the burden of IT constraints. Zmags is among the fastest growing technology companies in North America, ranking #70 on the Deloitte 2011 Technology Fast 500. Zmags is headquartered in Boston, MA, with European offices in London and Copenhagen. For more information, please visit www.zmags.com. About HawkPartners HawkPartners is a boutique consulting firm that helps clients make fact-based decisions to guide their marketing and brand strategies. We work primarily with global, market-leading clients across a variety of industries, and have experience working across all major markets in the Americas, Europe, and Asia. Founded in 2002, HawkPartners is based in Boston, New York, and Washington, DC. HawkPartners offers a unique combination of skill sets our team is comprised of veterans of management consulting who are also experienced market research practitioners. Many of us also have substantial marketing management experience. As a result, we provide our clients with more strategic insights than a typical market research firm, and more research-based insight than a typical consulting firm. For more information, please visit www.hawkpartners.com. Copyright 2012 by Hawk Partners, Inc. All rights reserved. No part of the contents of this document may be reproduced or transmuted in any form by any means without permission of the publisher. Contact Karen Kariv@hawkpartners.com for more information. The names of actual companies or products mentioned herein may be the trademarks of their respective owners.