Looking for growth in a challenging market

1. Looking for growth in a challenging market

2. Logan Tod & Co: Europe’s Leading online business optimisation consultancy Apparel Home Sports Toys Specialist Media Tech

3. The following slides come from the Logan Tod & Co annual survey, carried out just after Christmas every year. The goals of the survey are: To understand what worked for consumers at Christmas 2008 To find out how they will shop online during 2009 To predict how Christmas 2009 will turn out The survey was undertaken online and is based upon 1245 online shoppers, who are representative of the UK population This document represents a summary of 180+ charts, and should you have any further queries please do contact the Logan Tod & Co team who will be happy to help. Logan Tod & Co 3rd Annual Shopping Index

4. In 2009, do you think you will do more of your shopping online? The trend to increased online shopping remains strong despite the economic conditions. These figures indicate that 68% of online shoppers intend to shop more online in 2009, and the average increase in activity is predicted to be +24%. Of course 24% more shopping does not equate to a forecast of 24% growth in the market place since average order values are in decline. We believe that a prudent growth forecast for 2009 would be in the range of 10-15%, driven by growth in order numbers of 20%, tempered by a decline in average order values.

5. In 2009, do you think you will do more of your shopping online? Split by Age Group 2009 shopping pattern 16-24 25-34 35-44 45-54 55-64 65+ Total Sample 1245 9.88% (123) 16.47% (205) 11.97% (149) 17.19% (214) 21.29% (265) 23.21% (289) More than 75% more 6.99% 5.69% 8.78% 11.41% 9.81% 4.91% 3.81% 51 - 75% more 12.21% 13.01% 14.63% 14.77% 13.55% 13.96% 6.23% 26 - 50% more 15.18% 13.82% 13.17% 16.11% 15.89% 17.36% 14.19% 11 - 25% more 15.90% 13.82% 14.63% 13.42% 16.36% 15.47% 19.03% Up to 10% more 15.26% 13.82% 16.59% 12.75% 14.49% 15.47% 16.61% No change 32.93% 37.40% 31.71% 29.53% 27.57% 30.94% 39.45% Up to 10% less 0.48% 1.63% 0.00% 0.67% 0.47% 0.38% 0.35% 11 - 25% less 0.32% 0.00% 0.49% 0.67% 0.47% 0.38% 0.00% 26 - 50% less 0.24% 0.00% 0.00% 0.67% 0.47% 0.38% 0.00% 51 - 75% less 0.24% 0.00% 0.00% 0.00% 0.47% 0.75% 0.00% More than 75% less 0.24% 0.81% 0.00% 0.00% 0.47% 0.00% 0.35% The highlighting shows the ‘sweet spot’ for online retail in 2009, those groups with above average intentions to do more shopping . There is a clear pattern to the shift in who will be shopping online in 2009. The highest growth is coming from people aged 35+; the 16-34 age group is now growing more slowly. The 65+ group are getting into online shopping in some cases, opening up a very valuable home shopping demographic to more retailers.

6. Thinking of the current economic climate, which of the following are you more likely to do in 2009? People clearly indicating that online shoppers will work harder to get a better deal in the current economic climate, potentially at the expense of other initiatives. Searching is seen as the most productive way to get these better prices, email is not seen as being a key route to better prices. Retailers will have to get much smarter at online price promotions.

7. Which, if any, of the following would increase your likelihood of online purchase? In terms of what consumers are looking for the basics matter most: good service and good prices. Reviews and videos come further down the priority list than payment by PayPal, slow cheap delivery, better basic product information and on-site promotions such as BOGOFs. Logan Tod & Co strongly recommend getting the basics right prior to launching new initiatives

8. Which, if any, of the following would/does increase your likelihood of an online purchase? Split by Age Group 16-24 25-34 35-44 45-54 55-64 65+ Total Sample 1245 9.88% (123) 16.47% (205) 11.97% (149) 17.19% (214) 21.29% (265) 23.21% (289) Better navigation search 42.65% 43.90% 37.07% 36.24% 42.52% 48.30% 44.29% Improved des -goods/services 53.01% 56.91% 44.39% 48.32% 55.14% 56.23% 55.36% More money saving offers 66.59% 81.30% 76.10% 76.51% 66.36% 58.49% 56.06% Low cost delivery options 71.00% 68.29% 67.32% 69.80% 73.36% 73.58% 71.28% Fast delivery but increased cost 7.23% 13.82% 11.71% 4.70% 8.41% 4.15% 4.50% Payment via PayPal 40.32% 44.72% 46.83% 50.34% 40.19% 38.11% 30.80% Additional videos 11.81% 15.45% 12.68% 11.41% 12.15% 10.94% 10.38% Users reviews & feedback 35.58% 43.09% 32.68% 38.26% 34.11% 33.21% 36.33% Other - Please specify 3.37% 1.63% 3.41% 3.36% 2.34% 3.02% 5.19% The features sought by different age groups make interesting reading as they are not similar. Clearly the younger age groups are looking for a different, more engaging, environment compared to the older groups. As ever it is important to be clear about who you are targeting when making decisions about the features to invest in. Reviews and videos may be fashionable but service, promotions and the product basics (Information and availability) need to be sorted out first of all. Those organisations who are really targeting the 16-34 age group as a core market need to start investing in more social and interactive online stores

9. Which of the following are the main reasons you bought Christmas presents online? As ever, convenience and price are the main reasons why people buy online, with price being beaten into second place by the ‘open all hours’ availability of online stores. This data is remarkably consistent from the previous year, but these average figures are deceptive as the following slide shows.

10. Which of the following are the main reasons you bought Christmas presents online? Split by Age Group 16-24 25-34 35-44 45-54 55-64 65+ 23.21% (289) Total Sample 1245 9.88% (123) 16.47% (205) 11.97% (149) 17.19% (214) 21.29% (265) Better prices online 65.86% 76.42% 74.63% 65.10% 62.62% 64.91% 58.82% To avoid crowds 61.37% 60.98% 65.85% 65.10% 63.55% 61.89% 54.33% Travelling to stores to difficult 19.52% 19.51% 10.73% 21.48% 20.09% 21.13% 22.84% Wider range of goods available 42.33% 60.16% 39.51% 44.97% 42.99% 40.75% 36.33% Online are available all hours 67.87% 64.23% 66.83% 70.47% 66.36% 72.45% 65.74% Home delivery makes life easier 60.56% 58.54% 56.10% 53.69% 63.08% 64.53% 62.63% It is easier to find gifts online 33.17% 40.65% 33.66% 32.89% 33.64% 32.83% 29.76% I prefer to shop from home 24.18% 19.51% 17.56% 24.16% 25.70% 25.28% 28.72% Other - Please specify 6.27% 5.69% 2.93% 7.38% 5.61% 7.55% 7.61% Note that the 35-44 year old category are the least likely to agree that “home shopping makes my life easy”. This is almost certainly due to the home delivery issues and this is the group that respond to different delivery options (Timed delivery etc) Online prices are clearly still thought to be cheaper, but this is especially apparent amongst the younger generation, who also believe that there is a wider range of goods online.

11. Which of the following influenced your decisions as to which ONLINE stores to visit during the Christmas period? These results are consistent year-on-year except for search which is still showing increasing influence. All other media have remained at broadly the same level over the last few years. We believe this is due to the improvements in search marketing as well as older generations becoming more ‘search–savvy’

12. Which of the following influenced your decisions as to which ONLINE stores to visit during the Christmas period Split By Age Group 16-24 25-34 35-44 45-54 55-64 65+ Total Sample 1245 9.88% (123) 16.47% (205) 11.97% (149) 17.19% (214) 21.29% (265) 23.21% (289) Recommendation from Family 22.41% 32.52% 27.80% 21.48% 22.43% 17.36% 19.38% Consumer review sites 7.63% 9.76% 9.76% 10.07% 8.41% 6.04% 4.84% Social networking contacts 3.53% 9.76% 3.41% 5.37% 4.21% 2.64% 0.35% Banner adverts on portals 5.62% 11.38% 7.32% 4.70% 5.61% 4.53% 3.46% Radio or TV advertising 10.36% 10.57% 11.71% 15.44% 12.15% 10.94% 4.84% Newspaper or magazine ads 11.16% 12.20% 13.66% 10.74% 11.21% 10.57% 9.69% Search engine results 48.27% 46.34% 50.24% 42.28% 48.60% 51.70% 47.40% Catalogue received in mail 19.28% 25.20% 16.10% 22.15% 20.09% 16.60% 19.38% An email from the store 23.37% 22.76% 24.39% 21.48% 21.96% 26.04% 22.49% Previous good experience 70.20% 68.29% 66.34% 69.80% 67.76% 75.09% 71.28% Other - Please specify 4.50% 4.88% 2.93% 5.37% 5.61% 4.15% 4.50% Social media was not influential at Christmas 08 for most consumers, except the 16-24 age group. This age group does behave very differently compared to the average consumer as the table above shows, if you are planning to target this age group a very different strategy is required compared to the 35-64 age group.

13. How much online shopping do you think you will do for Christmas 2009? This chart shows that the majority of online shoppers intend to do more shopping at Christmas 2009 than they did at Christmas 2008. Despite the economic conditions this chart looks remarkably similar to the previous Shopping Index survey, and indicates that consumers’ shopping patterns will continue to change. Overall this would lead to a top line forecast of growth being similar to 2008, however increased competition will drive down prices and lead to lower average order values.

14. How much online shopping do you think you will do next Christmas – By Age Group 16-24 25-34 35-44 45-54 55-64 65+ Total Sample 1245 9.88% (123) 16.47% (205) 11.97% (149) 17.19% (214) 21.29% (265) 23.21% (289) Twice as much as this year 7.71% 6.50% 6.83% 8.05% 12.15% 7.92% 5.19% Loads more than this. year 17.03% 16.26% 19.51% 22.82% 20.09% 17.74% 9.69% More than this year 28.76% 19.51% 29.27% 26.85% 28.04% 30.19% 32.53% About the same as this year 43.45% 50.41% 43.41% 38.93% 35.05% 41.89% 50.52% Less than this year 1.04% 4.07% 0.49% 2.01% 0.47% 1.13% 0.00% Much less, about half as much 0.40% 0.81% 0.00% 0.67% 0.93% 0.00% 0.35% As little as possible/none 1.61% 2.44% 0.49% 0.67% 3.27% 1.13% 1.73% There is a clear pattern showing that growth is going to come from older demographics whose shopping habits are changing. This group is far less sophisticated in its use of the internet to shop, and so getting the basics right is far more important for them. This group is also a very traditional mail order shopping segment, typically with more disposable income and this makes them very attractive to online store owners. The younger generations are much more likely to be doing the same amount of shopping or slightly more, simply because they were the earlier adopters and have now reached a balanced position.

15. So to summarise • Online shopping is in robust good health with the public planning to do much more shopping online despite the economic climate • The key growth sectors will be older age groups • - Those 35 and over will power revenues in 2009 • - The younger age groups are already keen online shoppers, but are now starting to look for a new more engaging retail experience • - Segmentation will be the key going forward • Consumers still want retailers to get the basics right • - Product information, simple navigation and ease of use matter • Search marketing, delivery options and on-site promotions are going to be a key battleground • The outlook for Christmas 2009 is strong, similar to 2008 where Logan Tod & Co clients averaged +34% growth.

16. Logan Tod & Co Any questions or queries please call Matthew Tod (0207 395 1599) or email matthew.tod@logantod.com