HOLIDAY ECOMMERCE PREVIEW 2015US Shoppers Expected to Spend More This Season

SEPTEMBER 2015

Yory Wurmser

Contributors: Lisa Barron, Ricky Costa, Rimma Kats, Tracy Tang, Debra Aho Williamson

Read this on eMarketer for iPad

HOLIDAY ECOMMERCE PREVIEW 2015: US SHOPPERS EXPECTED TO SPEND MORE THIS SEASON ©2015 EMARKETER INC. ALL RIGHTS RESERVED 2

CONTENTS2 Holiday Ecommerce Preview 2015: US Shoppers Expected

to Spend More This Season

3 2015 Holiday Season Forecast

4 Why Retail Ecommerce Growth Won’t Slow Down This Holiday Season

9 Seasonal Shopping Patterns Still in Flux

10 What Will Stand Out This Season?

16 eMarketer Interviews

17 Related eMarketer Reports

17 Related Links

17 Editorial and Production Contributors

HOLIDAY ECOMMERCE PREVIEW 2015: US SHOPPERS EXPECTED TO SPEND MORE THIS SEASON

eMarketer projects that US retailers will have a good holiday season in 2015. Ecommerce sales will rise by 13.9%,

continuing a multiyear trend of double-digit growth. Retail sales overall should also have a strong season, with a

5.7% gain anticipated.

■ Double-digit retail ecommerce sales growth during the holiday season will push ecommerce’s share of total US retail sales to 9.0% for the period.

■ Mcommerce sales will grow 32% in 2015, far more quickly than ecommerce as a whole, propelled by increased use of smartphones for holiday purchases.

■ By offering flexible fulfillment and easier return options, retailers will reduce friction in digital buying and thereby increase ecommerce sales.

■ Despite efforts to spur holiday sales earlier in the fourth quarter, Thanksgiving will still represent the start of the core holiday buying season.

■ “Buy” buttons will debut on several leading social networks this fall. They hold real promise but will likely be too early in their life cycle to have much impact on sales during this holiday season.

■ Social media’s biggest influence will be on product discovery.

WHAT’S IN THIS REPORT? This report will cover eMarketer’s forecast for total retail and ecommerce sales during the 2015 holiday season. It will also look at several key trends expected to power seasonal ecommerce growth.

% change

US Retail and Retail Ecommerce* Holiday SeasonSales Growth, 2009-2015

2009

17.2%

3.2%

2010

19.4%

7.3%

2011

17.5%

6.3%

2012

13.3%

3.4%

2013

12.1%

2.9%

2014

14.4%

3.6%

2015

13.9%

5.7%

Retail ecommerce* holiday season salesRetail holiday season sales

Note: sales are for Nov and Dec of each year; excludes travel and eventtickets; *includes products or services ordered using the internet,regardless of the method of payment or fulfillmentSource: eMarketer, Aug 2015194566 www.eMarketer.com

KEY STAT: Ecommerce growth in 2015 will match growth seen in recent years, but 2015 should exceed recent years in overall growth of retail sales.

HOLIDAY ECOMMERCE PREVIEW 2015: US SHOPPERS EXPECTED TO SPEND MORE THIS SEASON ©2015 EMARKETER INC. ALL RIGHTS RESERVED 3

2015 HOLIDAY SEASON FORECAST

As it has been for several years, retail ecommerce

will be strong during this year’s holiday season.

eMarketer estimates sales during the core November–

December period will reach $79.40 billion, an increase

of 13.9% from the corresponding period of 2014.

Ecommerce’s share of overall retail sales will rise to

9.0%, significantly above its predicted 7.1% share of

total retail sales for the year.

US Retail and Retail Ecommerce* Holiday SeasonSales, 2012-2015

Retail holiday season sales (billions)

—% change

—% of Q4 retail sales

—% of full-year retail sales

Retail ecommerce* holiday season sales (billions)

—% change

—% of Q4 retail ecommerce* sales

—% of full-year retail ecommerce* sales

—% of total retail holiday season sales

2012

$786.57

3.4%

68.8%

18.3%

$54.34

13.3%

74.5%

23.7%

6.9%

2013

$809.66

2.9%

68.6%

18.1%

$60.92

12.1%

74.2%

23.4%

7.5%

2014

$838.85

3.6%

68.4%

18.1%

$69.68

14.4%

74.5%

23.4%

8.3%

2015

$885.70

5.6%

68.3%

18.5%

$79.40

13.9%

74.7%

23.3%

9.0%

Note: sales are for Nov and Dec of each year; excludes travel and eventtickets; *includes products or services ordered using the internet,regardless of the method of payment or fulfillmentSource: eMarketer, Aug 2015194564 www.eMarketer.com

TOTAL RETAIL SALES eMarketer anticipates a 5.7% increase in total US retail sales during the 2015 holiday season—a solid result, and one that will come on the heels of a relatively weak first half of 2015. US retail sales grew by just 1.5% during Q1 and by only 0.8% during Q2, according to US Department of Commerce data. eMarketer expects a strong rebound in Q3 and Q4, when retail sales should rise 4.9% and 5.8%, respectively.

trillions and % change vs. same quarter of prior yearUS Retail Sales, Q1 2014-Q4 2015

Q1

$1.061

1.7%

Q2

$1.177

4.6%

Q3

$1.168

4.2%

Q4

$1.226

3.9%

Q1

$1.078

1.5%

Q2

$1.186

0.8%

Q3

$1.225

4.9%

2014 2015Q4

$1.297

5.8%

Retail sales % change

Note: excludes travel and event ticketsSource: Q1 2014-Q2 2015 from US Department of Commerce, 2014 & 2015;Q3 & Q4 2015 from eMarketer, Aug 2015194560 www.eMarketer.com

Low gas prices—and as a result, lower gas station sales—were the main reason for anemic retail sales growth in 2015’s first half. Excluding fuel sector performance, US retail sales grew 4.8% in Q1 and 3.6% in Q2, partly because consumers had extra cash due to lower fuel costs. eMarketer expects gas prices to remain relatively consistent with last year’s levels in the second half of the year, which should help lead to strong growth overall in retail sales.

trillions and % change vs. same quarter of prior yearUS Retail Sales, by Segment, Q1 & Q2 2015

Q1 2015 Q2 2015

Retail sales including gas station sales $1.078 $1.186

—% change 1.5% 0.8%

Retail sales excluding gas station sales $0.978 $1.069

—% change 4.8% 3.6%

Note: excludes travel and event ticketsSource: US Department of Commerce, Annual Retail Trade Survey & Bureauof Economic Analysis, June 2015194574 www.eMarketer.com

RETAIL ECOMMERCE SALES Retail ecommerce will expand by 13.9% this holiday season, an increase similar to those seen in the past three years. For the first time, however, ecommerce will represent 9% of total retail sales for the season—it’s highest share yet.

HOLIDAY ECOMMERCE PREVIEW 2015: US SHOPPERS EXPECTED TO SPEND MORE THIS SEASON ©2015 EMARKETER INC. ALL RIGHTS RESERVED 4

US Retail Ecommerce Holiday Season Sales, 2012-2015

Retail ecommerce holiday season sales (billions)

—% change

—% of Q4 retail ecommerce sales

—% of full-year retail ecommerce sales

—% of total retail holiday season sales

2012

$54.34

13.3%

74.5%

23.7%

6.9%

2013

$60.92

12.1%

74.2%

23.4%

7.5%

2014

$69.68

14.4%

74.5%

23.4%

8.3%

2015

$79.40

13.9%

74.7%

23.3%

9.0%

Note: sales are for Nov and Dec of each year; includes products or servicesordered using the internet, regardless of the method of payment orfulfillment; excludes travel and event ticketsSource: eMarketer, Aug 2015194565 www.eMarketer.com

The fourth quarter as a whole will register 13.6% growth in retail ecommerce, which will be the lowest of any quarter in a uniformly strong year for it. The quarterly figure will also fall short of the 13.9% jump that retail ecommerce will register in the core holiday season of November and December, indicating that October’s sales will be relatively slow.

billions and % change vs. same quarter of prior yearUS Retail Ecommerce Sales, Q1 2014-Q4 2015

$65.52 $68.86 $70.35

$93.53

$74.91$79.02 $80.38

$106.29

Retail ecommerce sales% change vs. same quarter of prior year

Note: includes products or services ordered using the internet, regardlessof the method of payment or fulfillment; excludes travel and event ticketsSource: eMarketer, June 2015; confirmed and republished, Aug 2015190697 www.eMarketer.com

2014 2015Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

13.1% 15.1% 15.7% 13.9% 14.3% 14.8% 14.3% 13.6%

WHY RETAIL ECOMMERCE GROWTH WON’T SLOW DOWN THIS HOLIDAY SEASON

Ecommerce is riding a long-term growth trend

that has seen double-digit sales growth for years.

Although much of this growth represents a steady

increase in the sophistication of digital retailing and

a growing consumer comfort in buying online, two

additional factors stand out as major drivers this year:

mobile commerce and flexible fulfillment.

MCOMMERCE CONTINUES TO EXPAND At $74.93 billion, mcommerce will remain a relatively small part of US retail ecommerce overall in 2015, but sales will expand 32.2% this year and account for 22.0% of the total. “Starting last year and continuing this year, we’re starting to see better conversion rates on mobile,” said Jason Goldberg, group vice president for commerce strategy at Razorfish. “I expect that more of ecommerce sales volume will come from mobile than ever before.”

US Retail Mcommerce Sales, 2013-2019

Retail mcommerce sales (billions)—% change

—% of retail ecommerce sales

—% of total retail sales

2013

$41.71

65.3%

16.0%

0.9%

2014

$56.67

35.9%

19.0%

1.2%

2015

$74.93

32.2%

22.0%

1.6%

2016

$96.22

28.4%

25.0%

1.9%

2017

$112.28

16.7%

26.0%

2.2%

2018

$130.12

15.9%

27.0%

2.4%

2019

$149.79

15.1%

28.0%

2.7%

Note: includes products or services ordered using the internet via mobiledevices, regardless of the method of payment or fulfillment; excludes traveland event ticket sales; includes sales on tabletsSource: eMarketer, June 2015; confirmed and republished, Aug 2015190741 www.eMarketer.com

Mcommerce’s share of total retail ecommerce typically peaks during the fourth quarter. comScore data shows consistent bumps in mcommerce sales share in the final quarters of the last two years. In Q4 2014, mcommerce accounted for 13.0% of ecommerce, up from 11.1% in Q2 and Q3, according to comScore’s figures. Provided this year follows that pattern, the big jump in mcommerce share seen in Q1 2015—15.4%—portends a strong year overall for retail mcommerce growth.

HOLIDAY ECOMMERCE PREVIEW 2015: US SHOPPERS EXPECTED TO SPEND MORE THIS SEASON ©2015 EMARKETER INC. ALL RIGHTS RESERVED 5

% of total retail ecommerce salesUS Retail Mcommerce Sales Share, Q1 2013-Q1 2015

Q1

10.5%

Q2

8.6%

Q3

10.8%

Q4

11.7%

Q1

11.5%

Q2

11.1%

Q3

11.1%

Q4

13.0%

Q1

2013 2014 2015

15.4%

Note: includes purchases made via smartphones and tablets; excludesauctions, auto and travelSource: comScore Inc., "State of the US Online Retail Economy in Q1 2015,"May 27, 2015190907 www.eMarketer.com

However, while mcommerce sales continue to rise, the devices used for those purchases will differ somewhat from recent years. eMarketer estimates that 61.0% of US retail mcommerce sales in 2015 will come from tablets, down from 62.3% in 2014.

billions, % change and % of totalUS Retail Mcommerce Sales, by Device, 2013-2019

Tablet

—% change

—% of total

Smartphone

—% change

—% of total

Other mobiledevices

—% change

—% of total

Total

—% change

2013

$26.07

83.8%

62.5%

$14.60

44.6%

35.0%

$1.04

8.7%

2.5%

$41.71

65.3%

2014

$35.30

35.4%

62.3%

$20.12

37.8%

35.5%

$1.25

19.6%

2.2%

$56.67

35.9%

2015

$45.71

29.5%

61.0%

$27.73

37.8%

37.0%

$1.50

20.2%

2.0%

$74.93

32.2%

2016

$58.02

26.9%

60.3%

$36.56

31.9%

38.0%

$1.64

9.1%

1.7%

$96.22

28.4%

2017

$67.03

15.5%

59.7%

$43.56

19.1%

38.8%

$1.68

3.0%

1.5%

$112.28

16.7%

2018

$77.01

14.9%

59.2%

$51.40

18.0%

39.5%

$1.72

2.0%

1.3%

$130.12

15.9%

2019

$87.39

13.5%

58.3%

$60.66

18.0%

40.5%

$1.74

1.2%

1.2%

$149.79

15.1%

Note: includes products or services ordered using the internet via mobiledevices, regardless of the method of payment or fulfillment; excludes traveland event ticket salesSource: eMarketer, June 2015; confirmed and republished, Aug 2015190742 www.eMarketer.com

During the 2014 holiday season, Adobe found that 48% of mcommerce sales came from iPads alone. For holiday 2015, it expects this figure to decline due to increased mcommerce via iPhones (particularly the iPhone 6) and larger-screen Android phablets.

“[Mobile sales] have less to do with tablet vs. smartphone and more to do with the size of the device,” said Tyler White, senior manager at Adobe Digital Index Data Science. He added that in terms of visits and actual transactions, “growth for phones is shooting up while tablets have plateaued.”

The relative growth rates of tablet and smartphone commerce will translate to a bigger share of retail mcommerce going to smartphones this year, eMarketer expects. Smartphones will account for 37% of US retail mcommerce sales in 2015, up from 35.5% in 2014.

billions, % change and % of total retail mcommerce salesUS Smartphone Retail Mcommerce Sales, 2013-2019

2013

$14.60

44.6%

35.0%

2014

$20.12

37.8%

35.5%

2015

$27.7337.8%

37.0%

2016

$36.56

31.9%

38.0%

2017

$43.56

19.1%

38.8%

2018

$51.40

18.0%

39.5%

2019

$60.66

18.0%

40.5%

Smartphone retail mcommerce sales% change % of total retail mcommerce sales

Note: includes products or services ordered using the internet viasmartphones, regardless of the method of payment or fulfillment; excludestravel and event ticket salesSource: eMarketer, June 2015; confirmed and republished, Aug 2015190743 www.eMarketer.com

The majority of US digital buyers—70.8%, eMarketer estimates—will be mobile buyers in 2015. Of those 121.7 million mobile buyers, 78.2 million (64.3%) will buy on smartphones, an increase of 11.1 million from 2014. So the real growth in smartphone commerce will come from additional buying from people who already have dabbled in commerce via smartphones. Better interfaces, including larger screens, mobile-optimized sites and easier checkout processes, will make buying on smartphones easier, and by extension more common.

HOLIDAY ECOMMERCE PREVIEW 2015: US SHOPPERS EXPECTED TO SPEND MORE THIS SEASON ©2015 EMARKETER INC. ALL RIGHTS RESERVED 6

US Mobile Buyers, by Device, 2014-2019

Mobile buyers (millions)

—% of digital buyers

Buyers on tablet (millions)

—% of tablet users

—% of mobile buyers

—% of digital buyers

Buyers on smartphone (millions)

—% of smartphone users

—% of mobile buyers

—% of digital buyers

2014

104.8

63.6%

88.3

68.0%

84.3%

53.6%

67.2

41.0%

64.1%

40.8%

2015

121.7

70.8%

99.7

72.0%

81.9%

58.0%

78.2

43.0%

64.3%

45.5%

2016

136.3

76.1%

111.8

77.0%

82.0%

62.5%

87.8

44.5%

64.4%

49.0%

2017

147.3

79.3%

118.6

79.0%

80.5%

63.8%

95.1

45.5%

64.6%

51.2%

2018

155.5

81.3%

124.1

80.5%

79.8%

64.9%

100.6

46.2%

64.7%

52.6%

2019

162.8

83.4%

127.9

81.2%

78.5%

65.5%

105.5

46.9%

64.8%

54.1%

Note: ages 14+; mobile device users who have used their mobile device tomake at least one purchase via web browser or mobile app during thecalendar yearSource: eMarketer, Aug 2015194542 www.eMarketer.com

For more on US mobile commerce, see the eMarketer report, “US Mcommerce 2015: eMarketer’s Forecast and Trends.”

BETTER FULFILLMENT AND EXCHANGE OPTIONS In a survey of US retailers by Retail Systems Research (RSR) during the 2014 holiday season, more than three-quarters of respondents said that flexible returns, in-store pickup and home delivery from a store were very important customer order and fulfillment options, but only about half said retailers performed these services well.

% of respondents

Importance vs. Performance of Customer Order andFulfillment Options According to US Retailers, Dec 2014

Order online for direct delivery81%

51%

Order in-store for direct delivery81%

47%

Return online orders in any store80%

50%

Order online, pick up in a store78%

46%

Order in one store to pick up in another67%

29%

Very important Perform very well

Note: 90% of respondents were headquartered in the USSource: Retail Systems Research (RSR), "Ecommerce in Context: CopingWith Maturity," Dec 17, 2014185594 www.eMarketer.com

“The brands that are doing omnichannel really well are creating a seamless experience and seamless customer identification whether they are in-store or online—actually allowing the customer to shop in the way that they want,” said Danielle Bailey, principal at research firm L2 Think Tank. “That could mean ordering online and picking up in-store, researching online and going to the store to purchase, or offering extensive pay and shipping-and-collection options.” Bailey pointed to Nordstrom and Macy’s as two department stores that have managed to unify their online and offline merchandising.

In-store pickup is becoming more common. According to an April 2015 study by Blackhawk Engagement Solutions, 45% of US digital buyers surveyed had bought online and picked up in-store within the previous six months. Even more would be willing to try it to save money or time. Eighty-six percent of those polled said that they would consider buying online and picking up an item in a store for a $10 discount on a $50 order, and 78% would consider it for faster fulfillment.

HOLIDAY ECOMMERCE PREVIEW 2015: US SHOPPERS EXPECTED TO SPEND MORE THIS SEASON ©2015 EMARKETER INC. ALL RIGHTS RESERVED 7

% of respondents

Likelihood/Adoption of US Digital Buyers PurchasingDigitally and Picking Up In-Store, April 2015

Would consider to save $10 on a $50 item86%

Would consider to receive an item 3 days earlier78%

Have purchased online and picked up in-store in the past 6months

45%

Note: ages 18+Source: Blackhawk Engagement Solutions, "Where It's At: A ConnectedShopper Study," July 14, 2015193594 www.eMarketer.com

UPS’s “Pulse of Online Shoppers” survey found that 48% of US digital shoppers had ordered something online to be shipped to a store. The same study also found that 41% of shoppers who had had items shipped to a store planned on doing this more often in the coming year, and that 45% had bought additional items in the store while there. “Retailers have to make the ‘buy online, pick up in-store’ proposition the reason why you go to them in many cases,” said Chris Mason, CEO and co-founder of mcommerce platform Branding Brand. “I almost think that as a retailer, if you don’t have [it] you’re toast.”

During the 2014 holiday season, buy online, pick up in-store spiked on big shopping days early in the season. Black Friday and Sunday saw in-store pickup rise 40% above normal. Cyber Monday, Thanksgiving Day and December 23 all saw a 20% increase over normal, according to Adobe. Tyler White, senior manager of Adobe Digital Index Data Science, cited a number of reasons why consumers might use in-store pickup more on these big shopping days: to avoid lines, shopping while waiting in line and being able to postpone pickup until after crowds disperse. “It’s just an efficiency tool for these people,” said White. “It really differentiates the online-only [stores] from the brick-and-clicks.”

The desire for flexibility extends to returns as well. A PricewaterhouseCoopers survey from last holiday season showed a big increase in the percentage of US internet users who would like flexible return options. Some 76% felt that having the option of returning items to stores was important, up from 57% a year earlier, and 61% liked the option of returning to an expedient location, such as a local convenience store.

% of respondents

Important Return Options for Digital PurchasesAccording to US Internet Users, 2013 & 2014

Paid return label provided with shipment79%

86%

Online purchase returns available in-store57%

76%

Can return purchase to a convenient location (e.g., localconvenience store)

28%

61%

Specific agreed-upon timeframe for pickup (e.g., Monday8:00am-8:30am)

10%

30%

Locker/box drop-off (e.g., Amazon lockers)5%

15%

Other1%

2%

2013 2014

Note: 2013 n=996; 2014 n=1,000; ages 18+; respondents ranked their 3most important optionsSource: PricewaterhouseCoopers (PwC), "Total Retail V Survey: UnitedStates," Feb 9, 2015186249 www.eMarketer.com

Easier and cheaper shipping and return options have become services that consumers expect, and they have given digital shopping a boost. “Providing a variety of exchange [and] return options is critical to converting shoppers to buyers,” said Roy Erez, the co-founder and CEO of Loop Commerce. “By reducing friction [with] hassle-free exchanges or returns, retailers can increase transaction volume, conversion rates and customer satisfaction, and help spur last-minute purchases.”

Fighting Falling Foot Traffic Retailers have an additional incentive to invest in flexible fulfillment and return options aimed at bringing people into stores: Foot traffic has been down across the board over the past few years. This year alone, US retail foot traffic was off between 8% and 15% each month between February and June 2015, according to analytics firm RetailNext.

HOLIDAY ECOMMERCE PREVIEW 2015: US SHOPPERS EXPECTED TO SPEND MORE THIS SEASON ©2015 EMARKETER INC. ALL RIGHTS RESERVED 8

% change vs. same period of prior yearUS Retail Sales Metric Growth, Feb-June 2015

Feb 2015

March 2015

April 2015

May 2015

June 2015

Sales -10.4% -3.2% -12.5% -7.6% -6.1%

Traffic -12.5% -8.2% -14.6% -9.8% -9.1%

Transactions -11.7% -5.8% -13.6% -8.3% -7.7%

Conversions 0.5% 0.9% 0.4% 0.5% 0.4%

% return -0.8% 0.0% 0.0% -0.2% -0.3%

Averagetransaction value

2.3% 3.5% 1.4% 0.8% 1.9%

Sales pershopper

2.8% 5.8% 2.4% 2.5% 3.3%

Source: RetailNext, "Retail Performance Pulse," July 10, 2015193094 www.eMarketer.com

“With a lot of [customers doing their research] online, whether that consumer makes a purchase online or in the store, the number of trips to a store or to a mall per purchase will go down,” said Marc Dietz, RetailNext’s chief marketing officer.

Despite drooping foot traffic, average transaction value, shopper conversion rates and sales per shopper were up, according to RetailNext data. “Those shoppers going to a physical store are more mission-oriented or purpose-driven,” said Dietz. Instead of browsing, people come to a store to buy something that they’ve already researched.

Euclid Analytics found a much smaller year-over-year drop in US traffic in the first half of 2015, down just 0.7%. Euclid also reported a rise in storefront conversion rates and the length of shopping sessions. It also saw a fall in “bounce rates,” defined as the rate that people leave a store within 5 minutes of entering. Euclid expects both trends—moderate declines in foot traffic but better shopper engagement—to continue into the holiday season.

“Consumers are spending a little more time in stores,” said Brent Franson, Euclid’s CEO. “[There’s] a moderate decline [in foot traffic], but [it’s] not all bad news—just a rapidly changing retail landscape.”

Euclid also noted that there was a slight decrease of 1.2 percentage points in repeat visits. This drop “is the nut retailers have to crack,” Franson said.

% change vs. same period of prior yearUS Retail Ecommerce Metric Growth, H1 2015

Duration (1)

17.4%

Storefront conversion (2)

0.5%

Traffic-0.7%

Repeat shoppers (3)

-1.2%

Bounce (4)

-2.9%

Note: (1) average length of shopping visit; (2) number of shoppers whoentered a store as a % total foot traffic; (3) shoppers who came back within30 days; (4) % of shoppers who entered a store but left within 5 minutesSource: Euclid Analytics, "U.S. Retail Benchmarks: Mid-Year Report 2015,"Aug 4, 2015194539 www.eMarketer.com

One other factor could play a role in boosting the use of flexible fulfillment during the 2015 holiday season. The big shipping networks have not added significant capacity for this season despite a projected increase in ecommerce spending, according to Razorfish’s Goldberg. Large retailers are reserving capacity already, so smaller shippers may face additional constraints in last-minute deliveries, as well as higher costs. For retailers with a physical presence, flexible fulfillment may alleviate some of these issues.

HOLIDAY ECOMMERCE PREVIEW 2015: US SHOPPERS EXPECTED TO SPEND MORE THIS SEASON ©2015 EMARKETER INC. ALL RIGHTS RESERVED 9

SEASONAL SHOPPING PATTERNS STILL IN FLUX

Although this year is shaping up to be a good one

for retailers overall, consumer shopping habits have

changed as a result of the Great Recession and the

availability of more and better product information

online. Try as retailers might to spur sales, consumers

will buy when the moment and price are right.

“We see that gift-buying has become a year-round process,” said Loop’s Erez. “These days, customers purchase gifts many times during the calendar year and for many occasions.”

Year-round gift-buying has reduced the importance of the core holiday season. Some 48% of US shoppers had finished the majority of their 2014 holiday shopping by Cyber Monday, up from 40% in 2013, according to a post-holiday survey by Ipsos MediaCT. In fact, one-quarter had already done some holiday shopping before Halloween.

“People are finding that if they have a chance to shop and get in front of the deals that the retailers are offering, they’ll do it,” said Branding Brand’s Mason. “They’re not going to wait until Black Friday.”

In an effort to capture these early shoppers, many retailers now start their big holiday online campaigns before Thanksgiving. Adobe reported that the highest discounts during holiday 2014 were offered on Thanksgiving Day (November 27), and that the week before Thanksgiving saw significant discounts as well. As a result, said Razorfish’s Goldberg, “the promotional season is getting extended and diluted.”

Average Price Discount Offered by US Digital Retailerson Select Holiday Shopping Days, 2014

Nov 23

19%

Nov 24

22%

Nov 25

21%

Nov 26

20%

Nov 27

25%

Nov 28

24%

Nov 29

23%

Nov 30

20%

Dec 1

20%

Dec 2

19%

Source: Adobe Digital Index, "2014 Holiday Shopping Recap," Jan 9, 2015185595 www.eMarketer.com

Despite more pre-Thanksgiving deals, most shoppers didn’t bite. “Last year, there was a tiny bump on the Monday before Thanksgiving,” said White. “Getting people to shop prior to [Thanksgiving] will be very difficult, and so far we haven’t seen evidence that it’s been effective.” Although many people buy gifts in the long run-up to Thanksgiving, the marketing push to get ahead of the crowded retail field in the core season seems to have had limited success.

Earlier deals, however, have turned Thanksgiving itself into a major online shopping day, which has changed the shopping character of the five days between Thanksgiving and Cyber Monday. “We don’t even talk about shopping behaviors in the individual days of the ‘Black Five,’” said Goldberg, referring to the days from Thanksgiving to Cyber Monday. “We’re not seeing obvious, fundamental consumer behavioral differences between those days.”

The rise of Thanksgiving as a major shopping day arose not only in response to earlier deals, but also from the increased penetration of smartphones. “The reason was … smartphones,” said Mason. “[People] would whip out [their phones] after having turkey dinner at their relatives’ house and that’s the point [at which] they were buying, because all the retailers were pushing out their promotions.”

comScore found another big rise in retail ecommerce sales at the very end of the core holiday season. In fact, the biggest retail ecommerce sales increases of 2014 were during the final week before Christmas, likely because last-minute fulfillment deals allowed for later digital orders. With the continued emphasis on in-store pickup and last-minute shipping, this late ecommerce surge is likely to happen again this year.

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Last year also saw a big increase in post-Christmas holiday shopping. Euclid and other shopper analytics firms found foot traffic on December 26 and 27 was up 3.7% from 2013. In fact, December 26 had the highest foot traffic of the 2014 holiday season. In a related trend, Loop Commerce saw a surge in post-Christmas electronic gift-giving. Some 38% of e-gifts purchased between December 26 and December 31 were holiday-related, according to Loop’s data.

WHAT WILL STAND OUT THIS SEASON?

Each holiday season brings with it the gift of new

marketing technologies and trends, and sometimes

they amount to a fundamental shift in holiday

shopping. During the 2014 holiday season, for

instance, mobile commerce came together in such

a way that consumers started to buy things with

their phones in notable numbers. Will 2015 be a

revolutionary holiday season?

eMarketer’s best guess is “no.” While a host of technologies will debut or expand this year, most are still in the early stages and will have a limited impact on retailers’ bottom lines. “We haven’t seen any indications that there’s a dramatic paradigm shifting coming this holiday,” said Razorfish’s Goldberg. “We think it will be a continuation of a number of evolutions of the holiday seasons that we’ve seen in the past.”

Nonetheless, there are several trends that retailers should note, including some that may become transformative down the line.

MOBILE’S INFLUENCE WILL CONTINUE TO RISE One trend that will continue unabated from previous years is the growing influence of mobile on all sales regardless of channel. Deloitte’s most recent study on digital influence found that 49% all US in-store retail sales, worth $1.7 trillion, were influenced by digital in 2014. In 2015, Deloitte expects that share to rise to 64%. And over half of that digital influence will come from mobile: $970 billion or 28% of all US retail sales in 2014 were mobile-influenced, according to Deloitte, and significantly more will be in 2015.

“I see mobile becoming the dominant sales driver over time,” said Jeff Simpson, partner at Deloitte Consulting. “That doesn’t mean sales will happen on the mobile platform, but [that mobile] will be the largest driver of sales.”

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Influence* of Digital and Mobile Device Usage on USIn-Store Retail Sales, 2012-2014

Mobile influence (smartphones & tablets)

—Sales (billions)

—% of total in-store sales

Digital influence (all devices)

—Sales (billions)

—% of total in-store sales

2012

$160

5%

$330

14%

2013

$590

19%

$1,100

36%

2014

$970

28%

$1,700

49%

Note: read as the use of mobile devices before or during in-store shoppingtrips influenced or helped to convert approximately $970 billion in sales in2014, representing 28% of all in-store sales; *calculated as the number ofpurchase conversions in-store that can be attributed to a customer's useof digital devices before or during the shopping tripSource: Deloitte, "Navigating The New Digital Divide: Capitalizing on DigitalInfluence in Retail," May 13, 2015172790 www.eMarketer.com

US shoppers are now spending nearly half of their online shopping time on mobile devices, according to some sources. In March 2015, 47.4% of US retail ecommerce traffic on IBM’s platform came from mobile, up from 28.7% two years earlier, according to the company.

% of retail ecommerce traffic and % of retail ecommercesales

US Retail Mcommerce Traffic and Sales Share, March 2013 & March 2015

March 2013

28.7%

12.5%

March 2015

47.4%

24.4%

% of retail ecommerce traffic % of retail ecommerce sales

Note: represents activity on the IBM platform, broader industry metricsmay varySource: IBM, "Eighth Annual Online Retail Holiday Readiness Report," June16, 2015192295 www.eMarketer.com

In a May 2015 survey by NinthDecimal, 56% of consumers said it was very likely that they would discover new products or brands on their mobile device. Of those who shopped with a mobile device, 47% went on to purchase the item in a store.

Moreover, heavier shoppers rely on smartphones more than light shoppers. In the UPS survey, 65% of heavy shoppers researched products with their phones, compared with 39% of light shoppers.

% of respondents

US Smartphone Owners Who Research and PurchaseProducts via Smartphone, by Shopper Type, Feb 2015

Heavy shoppers65%

53%

Moderate shoppers60%

43%

Light shoppers39%

25%

Total41%

30%

Research products Purchase products

Note: light shoppers—2-4 online purchases; moderate shoppers—5-8online purchases; heavy shoppers—9+ online purchasesSource: UPS, "Pulse of the Online Shopper: Empowered ConsumersChanging the Future of Retail" in association with comScore and thee-tailing group, June 3, 2015193657 www.eMarketer.com

And most shoppers with smartphones now routinely use their phones in stores. An April 2015 PowerReviews survey of smartphone-owning US shoppers found that 55% used them in-store to research product prices, and 54% used them to check ratings and reviews.

% of respondents

Ways in Which US Smartphone Owners Use TheirSmartphone While Shopping In-Store, April 2015

Researching product pricing 55%

Researching ratings and reviews 54%

Calling/texting a friend 50%

Note: n=1,011 ages 18-60Source: PowerReviews, "Mobile, Wearable Tech and Hyper-Relevance:Transforming Consumer Behavior and Retailer Opportunities," May 12,2015190295 www.eMarketer.com

While all of this in-store mobile shopping holds obvious showrooming perils for retailers, many have embraced the opportunity it provides. “Digital engagement using the consumer’s own mobile phone … is one of the obvious new kinds of omnichannel and digital experiences that a lot of retailers are investing in,” said RetailNext’s Dietz.

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Although price comparisons are still the leading reason for showrooming, consumers can also use their phones to find different options from the same retailer, or allay fears that impede an immediate purchase. In the UPS survey, 57% of respondents cited a better price elsewhere as a reason for showrooming, but 49% listed a better online selection from the same retailer, and 46% the need for additional research. “All the price-matching effort … [has] really leveled the playing field such that people can go to a Best Buy store and know that if they show a competitor’s price, it will be honored,” said Branding Brand’s Mason.

% of respondents

Reasons that US Digital Buyers Showroom WhenPurchasing Products, Feb 2015

The price was better online with a different retailer57%

The selection was better online with the same retailer49%

I wanted to do additional research before purchasing46%

The selection was better online with a different retailer45%

The store didn't have the size/color/model that I wanted40%

I wanted to go to the store to touch and feel the product beforepurchasing online

39%

I was not ready to purchase the day I visited the store33%

I was buying a gift and wanted to have it shipped to therecipient

25%

I didn't want to carry it home21%

Other45%

Source: UPS, "Pulse of the Online Shopper: Empowered ConsumersChanging the Future of Retail" in association with comScore and thee-tailing group, June 3, 2015193662 www.eMarketer.com

Increased mobile shopping also puts more pressure on retailers to create an integrated omnichannel experience. “Our primary focus is on enhancing customer engagement, and that means enabling our customers to move seamlessly between stores and our various ecommerce offerings in whatever manner best suits their individual needs and preferences,” said Elizabeth Crystal, CMO at apparel retailer Express.

SOCIAL COMMERCE WILL HAVE A NEW TWIST Holiday 2015 will be the first real test of a new wave of social commerce tools. Although a few dedicated social commerce sites, such as Polyvore and Wanelo, have created commerce models based on referrals, the big social platforms have only tinkered with social commerce—until now. Over the past year, Facebook, Pinterest, Instagram, Twitter and YouTube have all introduced “buy” or “shop now” buttons that significantly ease the process of purchasing from these sites, especially on mobile devices. Most of them will hold credit card information so buyers can purchase items with just a few clicks and then return easily to browsing on a social network.

Historically, referral traffic from social networks to retailer sites has been small. According to data from Custora, during the 2014 holiday season only 1.9% of US digital purchases came directly from social networks.

% of total

Primary Digital Marketing Channel that GeneratedDigital Purchases During the US Holiday Season*,2012-2014

2012 2013 2014

Organic 25.0% 26.0% 21.0%

Direct 28.0% 25.0% 24.9%

Email 13.0% 16.0% 17.7%

CPC 14.0% 15.0% 17.5%

Affiliate 11.0% 10.0% 10.9%

Social 2.0% 2.0% 1.9%

Display 1.0% 1.0% 0.8%

Other 6.0% 5.0% 5.5%

Note: numbers may not add up to 100% due to rounding; *Nov 1-Dec 31 in2013 and Nov-Dec in 2014Source: Custora, "2014 Holiday Ecommerce Recap Report," Jan 26, 2015168118 www.eMarketer.com

In Q2 2015, Facebook was responsible for 60% of social network referrals for Merkle RKG’s clients in North America, according to the company. Pinterest was second, providing 18.0%. Together, the two sites accounted for more than three-quarters of referral traffic from social networks.

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% of total among Merkle RKG clients

Social Network Referral Share in North America, bySite, Q2 2014 & Q2 2015

Q2 2014 Q2 2015

Facebook 51.0% 60.0%

Pinterest 23.0% 18.0%

reddit 4.0% 4.0%

Twitter 5.0% 3.0%

LinkedIn 2.0% 2.0%

Google+ 1.0% 0.4%

Note: represents activity among Merkle RKG's clients, broader industrymetrics may varySource: Merkle RKG, "Digital Marketing Report Q2 2015," July 15, 2015193273 www.eMarketer.com

Not surprisingly, given Facebook’s and Pinterest’s abilities to drive referrals, retailers and others are particularly interested in those platforms’ buy-button offerings. Both of the social networks store credit card information and let people purchase the particular item in a few clicks from within their platforms. Neither platform takes a cut from the purchase. They’re adding these buttons to make on-site conversions easier and more trackable, which will in turn make their advertising more valuable to retailers.

The impact of Facebook’s buy buttons during this holiday season will be limited since the social media giant is still in a test phase. It is partnering with Shopify to see how these buttons work for small and medium-sized retailers. It’s also testing a “shop” section on retailer pages. Neither initiative has rolled out to most Facebook users yet.

Pinterest is taking a more aggressive approach. “People make their holiday wish lists on Pinterest,” said Michael Yamartino, the social network’s head of commerce. “I hope that people are doing that and finding lots of buyable pins in there so that we can make those purchases a lot better.”

Pinterest’s “buy it” button is appearing in regular pins, not just ads or destination brand pages, as on Facebook, Twitter or Instagram. “It’s fully integrated into the organic Pinterest experience,” said Yamartino. If a retailer has given Pinterest inventory information, Pinterest will add buy buttons to their pins. “If they’re willing to give us their full product catalog, then we take that and find all the pins for them and we add the buy button to those pins,” said Yamartino.

Instagram’s approach falls somewhere between that of Facebook and Pinterest. The average Instagram user will start to see action ads, including a “shop now” button, in the fall. Unlike the buttons on Facebook and Pinterest, the ”shop now” and other action buttons open a window in the retailer’s ecommerce site; Instagram isn’t storing any credit card information.

Along with Instagram’s expansion of its ad-buying tools, these action buttons will open a new marketing channel for retailers this season. Even so, Instagram will likely keep the inventory of these ads limited as it seeks to find the right balance between delivering personalized direct-response ads and maintaining a solid user experience.

For more on Instagram’s new advertising formats, see eMarketer’s report, “Instagram Advertising: What Marketers Need to Know.”

Social’s Influence Will Be Even Stronger Social media’s biggest impact this holiday season will not be from direct referrals or purchases initiated by clicking on buy buttons. Instead, its key strength will be discovery. In an October 2014 study of US internet users by Epsilon, 29% said that retailers’ social sites had influenced their decision to try new brands, followed closely by 28% who said brands’ social sites had done the same. “Social media continues to become more and more important in awareness-driving,” said Adobe’s White.

HOLIDAY ECOMMERCE PREVIEW 2015: US SHOPPERS EXPECTED TO SPEND MORE THIS SEASON ©2015 EMARKETER INC. ALL RIGHTS RESERVED 14

% of respondents

Digital Shopping Channels that Influence US InternetUsers to Try New Brands and Products, Oct 2014

Retailer social 29%

Brand social 28%

Printable coupons 23%

Daily deal sites 23%

Friend social 22%

Product reviews 21%

Mobile payment 18%

Brand texts 18%

Shopping apps 17%

Brand emails 17%

LTC coupons 16%

Mobile coupons 15%

Brand websites 15%

Retailer emails 14%

QR codes 14%

Search engines 13%

Retailer texts 13%

Price comparison sites 13%

Retailer websites 11%

Source: Epsilon, "Digital Shopping Tool Impact Study 2015," July 8, 2015193017 www.eMarketer.com

This fits well with findings in Deloitte’s 2014 holiday survey, which noted that the leading expected use of social media during holiday shopping was finding gift ideas, reported by 47% of those who planned to use social media as part of their holiday shopping process last year.

% of respondents

Ways in Which US Internet Users Will Use SocialMedia While Holiday Shopping, Sep 2014

Get gift ideas47%

Find discounts, coupons, sale information45%

Read reviews, "likes," or recommendations for product/stores41%

Browse products40%

Check with family/friends on gifts they want32%

Post comments or share links about stores, sales, products21%

Go to a retailer's fan page18%

To watch a retail/product video16%

To post or view virtual image boards14%

Coordinate shopping with family/friends14%

Share what I purchased11%

Share my own wish list or products I'm interested in11%

Show myself wearing or using what I purchased9%

Note: among the 45% of respondents who are planning to use social mediato assist with holiday shoppingSource: Deloitte, "29th Annual Holiday Shopping Survey," Oct 29, 2014181739 www.eMarketer.com

Similarly, a study in March and April 2015 by Synchrony Financial found that 30% of US consumers surveyed bought products after seeing them on a social network.

In order to maximize discovery and brand affinity, retailers continue to deepen their social media presences. Express’s Crystal noted that social networks give retailers a platform for daily engagement with loyal and potential customers. Express buys a variety of social media ad units, including video ads on Facebook and Twitter and promoted pins on Pinterest, and it also publishes organic content on Instagram and Snapchat. “This approach allows us to cut through the clutter and interact with our customers in a manner they find both relevant and efficient,” Crystal said.

HOLIDAY ECOMMERCE PREVIEW 2015: US SHOPPERS EXPECTED TO SPEND MORE THIS SEASON ©2015 EMARKETER INC. ALL RIGHTS RESERVED 15

Retailers have also turned to influential social media users to reach potential customers. “[Consumers] want to hear from people they know, like and trust,” said Katie Paterson, digital marketing director at influencer platform Traackr. “And it may not be someone they know personally.”

According to Ipsos MediaCT’s “Google Post-Holiday Shopping Intentions Study,” among people who watched online videos at sites like YouTube to help with holiday purchases in 2014, 68% preferred videos “from people like me.” Fewer than half (45%) preferred videos from experts.

“Instead of hiring somebody to be in a commercial, [brands] are more concerned about having those influencers create ongoing content for their YouTube channel,” said Paterson.

YouTube and Instagram have become primary channels for users to post about products, which is an opportunity during the holiday season. “Brands that will do well are the ones that … celebrate the consumers that are taking advantage of those opportunities to communicate the value of those products and services,” said Matt Langie, CMO of Curalate.

When Bazaarvoice, a platform for consumer-generated content, polled digital shoppers worldwide in April 2015, over 40% of respondents from all age and income brackets said that such content had influenced an offline purchase.

% of each group

Digital Shoppers Worldwide Who Say DigitalConsumer-Generated Content Has an Influence onOffline Purchases, by Demographic, April 2015

Age

25-34 54%

35-44 48%

45-54 45%

55-64 40%

Income

<$25K 48%

$25K-$50K 43%

$50K-$75K 46%

$75K-$100K 67%

$100K-$150K 73%

$150K+ 87%

Note: among those who research online and buy offline; read as 54% ofbuyers ages 25-34 responded that digital consumer-generated content hasan influence on their offline purchasing decisionsSource: Bazaarvoice, "The Conversation Index Volume 9," July 14, 2015193862 www.eMarketer.com

Longer-Term Outlook for Social Commerce Longer term, buy buttons in social media stand a good chance of becoming major drivers of ecommerce, particularly mobile commerce. Direct-response buttons simplify the purchase path, and will likely convert some of the substantial influence of social media into direct sales. “This might be the first year we really talk about some impact of social commerce, not just social influence,” said Deitz.

Although aggregate sales of social commerce will probably be relatively low this year, the 2015 holiday season will set the stage for more expansion in 2016.

“What we’ll see is this idea of the rise of visual commerce,” said Langie. ”The brands that will do well, that will be well-prepared for the holiday shopping season, are the ones that will be in a position where they can essentially turn pictures into points of purchase.”

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EMARKETER INTERVIEWS

Danielle Bailey Principal

L2 Think Tank Interview conducted on May 12, 2015

Randy Brasche Vice President of Marketing

Euclid Analytics Interview conducted on August 5, 2015

Jeff Campbell Managing Director

Resolution Media Interview conducted on August 4, 2015

Roy Erez Co-Founder & CEO

Loop Commerce Interview conducted on August 2, 2015

Brent Franson Chief Executive Officer

Euclid Analytics Interview conducted on August 5, 2015

Jason Goldberg Global Vice President, Commerce Strategy

Razorfish Interview conducted on August 3, 2015

Jonathan Hinz Director of Product Marketing

Trustpilot Interview conducted on August 7, 2015

Matt Langie Chief Marketing Officer

Curalate Interview conducted on August 3, 2015

Chris Mason Chief Executive Officer

Branding Brand Interview conducted on July 27, 2015

Maya Mikhailov CMO and Co-Founder

GPShopper Interview conducted on March 3, 2015

Katie Paterson Digital Marketing Director

Traackr Interview conducted on August 5, 2015

Jeff Simpson Director

Deloitte Consulting Interview conducted on March 27, 2015

Tyler White Senior Manager, Adobe Digital Index Data Science

Adobe

Interview conducted on August 4 2015

Elizabeth Crystal Chief Marketing Officer

Express Interview conducted on August 5, 2015

Marc Dietz Chief Marketing Officer

RetailNext Interview conducted on August 4, 2015

Corbett Drummey Co-Founder

PopularPays Interview conducted on August 3, 2015

Michael Yamartino Head of Commerce

Pinterest Interview conducted on July 21, 2015

HOLIDAY ECOMMERCE PREVIEW 2015: US SHOPPERS EXPECTED TO SPEND MORE THIS SEASON ©2015 EMARKETER INC. ALL RIGHTS RESERVED 17

RELATED EMARKETER REPORTS

Back-to-School Ecommerce Preview 2015: Forecast and Trends for Retail’s ‘Second Season’

Holiday Shopping Preview

Instagram Advertising: What Marketers Need to Know

US MCommerce 2015: eMarketer’s Forecast and Trends

RELATED LINKS

Adobe

Bazaarvoice

Blackhawk Engagement Solutions

Branding Brand

comScore

Curalate

Custora

Deloitte Consulting

Edgell Knowledge Network

Epsilon

Euclid Analytics

Express

Google

GPShopper

Ipsos MediaCT

L2 Think Tank

Loop Commerce

Merkle RKG

NinthDecimal

Pinterest

Popular Pays

PowerReviews

PricewaterhouseCoopers

Razorfish

RetailNext

Synchrony Financial

Traackr

Trust Pilot

UPS

EDITORIAL AND PRODUCTION CONTRIBUTORS

Cliff Annicelli Managing Editor, ReportsMichael Balletti Copy EditorKate Berman Chart EditorJoanne DiCamillo Senior Production ArtistDana Hill Director of ProductionStephanie Meyer Senior Production ArtistKris Oser Deputy Editorial DirectorEzra Palmer Editorial DirectorHeather Price Senior Copy EditorJohn Rambow Senior EditorAllie Smith Director of Charts

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