E Holiday Recap

eHoliday Recap: Predictions, Results and Lessons Learned

Chuck DavisChairman, Shopzilla

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Panel Chuck DavisChairman, ShopzillaModerator

Analysts Panelists

• Heather DoughertySenior Retail AnalystNielsen/NetRatings

• Zia Daniell Wigder VP and Research DirectorJupiterResearch

• Gian FulgoniChairmanComScore Networks

• Carrie JohnsonVP and Research DirectorForrester Research

Retailer Panelists

• Steven GoldsmithVPApparel/Footwear/Jewelry/WatchesAmazon.com

• Andrea GulliOperating VPE-Commerce & Credit MarketingThe J. Jill Group, Inc

• Robert MyersVPInteractive Marketing & Business Dev.QVC. Inc

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4

About the Mood Study

• Objective - gauge online retailer success and consumer behavior during the holiday season

• Merchant data provided by Shop.org merchant members

• Consumer data provided from BizRate.com’s consumer panel

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Methodology• Study Dates

– Wave 1: September 23-27, 2005– Wave 2: November 29-30, 2005– Wave 3: December 12-14, 2005– Wave 4: January 9-12, 2006

• Shop.org Merchant Members– Wave 1: 119 Merchants– Wave 2: 113 Merchants– Wave 3: 109 Merchants– Wave 4: 104 Merchants

• BizRate Research Online Consumer Panel– Wave 1: 1,891 Online Buyers– Wave 2: 3,730 Online Buyers– Wave 3: 1,932 Online Buyers– Wave 4: 2,478 Online Buyers

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Key Holiday Insights

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Women Continue To Shop More Online• Almost two thirds of online shoppers are female.• The percentage of female shoppers has grown 67% since 1998.

Consumer Survey Source: BizRate Research Holiday Studies 1998 - 2005

1998 1998 2000 2001 2002 2003 2004 2005

Male 61% 51% 45% 44% 40% 39% 39% 35%

Female 39% 49% 55% 56% 60% 61% 61% 65%

61%

39%35%

65%Male

Female Male

Female

1998 2005

8

28%

33%

27%

11%

2%

17%

38%34%

9%

2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Dial Up Cable Modem DSL Line T1 Other

Holiday 2004

Holiday 2005

Type of Connection Speed• Over three quarters (81%) of consumers have high speed Internet

access.• Dial up access has dropped 11% points in one year.

Consumer Survey

Q. What kind of connection do you typically have when accessing the Internet?

Source: Shopzilla Online Holiday Scoop, conducted by BizRate Research, a division of Shopzilla Inc., was based on a point-of-sale survey online buyers from Nov 26-Dec 24, 2004 and online buyers from Nov 25 – Dec 24, 2004.

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Number Of Years Buying Online• Over 40% of online shoppers have been buying for over 5 years.

Consumer Survey

5%

23%

31%

20%

21%

1 to 3 years

Source: 2005 Shop.org/BizRate Research Online Holiday Mood Study

More than 3 years and less than 5 years

More than 5 years and less than 7 years

More than 7 years

Less than 1 year

Q. How long have you been buying online?

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65%

20%

14%

1%0%

10%

20%

30%

40%

50%

60%

70%

80%

At home on aweekday or night

At home on aweekend

At work on aweekday or night

At work on aweekend

Wave 4 2005

Where/When Does Shopping Occur• Over 8 out of 10 consumers shopped online at home during the holidays.• Almost two thirds of consumers shopped online at home on a weekday or

night.

Consumer Survey

Q. When/where did you do the majority of your holiday shopping?


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28%

16%

38%

16%14%

16%14%

9%12%

28%

19%

30%

9%

0%

10%

20%

30%

40%

50%

Ap

pa

rel

Co

mp

ute

rH

ard

wa

re

Co

mp

ute

rS

oft

wa

re

Ele

ctr

on

ics

En

tert

ain

me

nt

Fo

od

& D

rin

k

Gif

ts &

Flo

we

rs

He

alt

h &

Be

au

ty

Ho

me

& G

ard

en

Off

ice

Su

pp

lies

Sp

ort

ing

Go

od

s

To

ys

Vid

eo

Ga

me

s

Wave 4 2005

Increases In Holiday Gifts Purchased• Entertainment, Electronics, Apparel and Toys were the

categories that consumers indicated they purchased more of compared to the last holiday season.

Consumer Survey

Q. For each of the following product categories please indicate whether you bought more, thesame, or few holiday gifts in that category compared to one year ago.


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Top Revenue Days

12%

10%

7% 7%

0%

10%

20%

30%

2004

Mon Dec 13

MonDec 6

BeforeNov 20

WedDec 15

20%

9%

7%

0%

10%

20%

30%

2005

MonDec 12

MonNov 28

TueDec 13

• In 2005, one fifth of merchants reported Monday, December 12th as the day that represented their largest amount of revenue from sales.

Merchant Survey

Q. What day during the 2004 holiday season representedthe largest amount of revenue from sales?

Q. What day during the 2005 holiday season representedthe largest amount of revenue from sales?


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Prediction #1• In general, deals are deep offline, and gift cards are so much

easier to buy offline, that online sales grow over last year, but only between 10% and 15%. (Forrester)

• November and December sales in the US for holiday 2005 will be $26 billion, up 18% from 2004. (Jupiter)

• However, online sales growth continues to increase overall, surpassing previous holiday seasons, driven by an increased share of spending shifting online and additional households accessing the Internet via broadband connection (Nielsen/NetRatings)

• Initial forecast for holiday online sales growth = +23-26% vs. 2004. (ComScore)

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Industry Data• Forrester Research reports sales of $22 billion for the period

between Thanksgiving and Christmas and includes travel and auctions and represents a 23% increase over last year.

• According to Goldman Sachs, Nielsen/NetRatings and Harris Interactive online holiday sales totaled $30.1 billion, excluding travel during the 2005 holiday season (October 29-December 23). This is a 30% increase over the 2004 holiday season.

• ComScore Networks has reported non-travel spending during the 2005 holiday season (November 1-December 31, 2005) totaled $19.6 billion, representing a 25% increase over 2004.

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72%

20%23%

73%

23%

3%

78%

14%

8%

87%

11%

3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Optimistic Neutral Pessimistic

2002 2003

2004 2005

Optimism Continues To Increase• Merchant optimism increased significantly in 2005.

Merchant Survey

Wave 4

Q. How did you feel about this year’s holiday season?


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Revenue Growth Continues

7%

40%

31%

22%

1%

32%

51%

16%

0% 10% 20% 30% 40% 50% 60%

Lower than lastyear

1% to 29% higher

30% to 99% higher

100% or more

Wave 4 2004 Wave 4 2005

• Two thirds (67%) of merchants are reporting growth of 30% or more over the last holiday season.

• Fewer merchants are reporting lower growth compared to last year.

Source: 2005 Shop.org/BizRate Research Online Holiday Mood StudyMerchant Survey

Q. Compared to the holiday season last year, please describe your company’s online revenue.

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Prediction #2

• Euphoria is a thing of the past (customer satisfaction lowers). (Jupiter)

• Overall satisfaction rates remain consistently high, but with no major strides thanks to a lack of material investments on retailers’ websites. (Nielsen/NetRatings)

• Customer satisfaction: Stays about the same, except when it comes to delivery times meeting expectations – that will drop. (Forrester)

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Customer Satisfaction• Consumer satisfaction hit record levels in 2005.• There was an 11% increase in customer satisfaction in Wave 4 2005

vs the same wave last year.


85%89% 86%

96%

0%

20%

40%

60%

80%

100%

Satisfaction 2002 Satisfaction 2003 Satisfaction 2004 Satisfaction 2005

Wave 4

Consumer Survey

Q. How satisfied were you with your online buying experience during the 2005 holiday season?

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Prediction #3

• Free shipping will be more important this year than it was last year – even if it is only a perception of importance in the consumer’s mind. (Jupiter)

• Based on experience from past holiday seasons, retailers continued to rely on conditional free shipping promotions to drive sales and increase average order sizes. (Nielsen/NetRatings)

• Free shipping offers will continue to be commonplace; though faced with higher costs some retailers may elect to increase minimum order thresholds to earn free shipping. (ComScore)

• Free shipping rears its ugly head, but fewer retailers offer it this year than last year. (Forrester)

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39%

28%

21%

33%

13%

8%

44%

31%27%

18%

12% 12%

0%

10%

20%

30%

40%

50%

60%

Free Shippingw/o Conditions

Free Shippingw/Conditions

Online Only Sale None of These Save X if SpendX

Repeat-buyerDiscount

2004 2005

Promotional Offers That Influenced Purchase• Free Shipping without conditions continues to be the most

popular promotional offer for influencing consumers followed by free shipping with conditions.

Consumer Survey

Q. Which of the following promotional offers, if any, caused you to make an online purchase this holidayseason form a particular retailer during the 2005 holiday season?


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21%

64%

23%

74%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Free Shipping w/o Conditions Free Shipping w/Conditions

Wave 1 2004

Wave 1 2005

Free Shipping Plans• Almost three quarters (74%) of merchants have indicated

they plan on having free shipping with conditions this year.

Merchant Survey

Q. What marketing promotions are you planning to add for the holiday season?


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59%

14%

24%

8%

22%

4%7%

28% 28%

19%

14%

8%4%

65%

24%

19%

13%

5%8% 9%

27%

5% 8%6%

2%

15%

5% 5%

10%10%

23%

58%

20% 22% 21%

13%

4%7%

11%

0%

10%

20%

30%

40%

50%

60%

70%

80%2003

2004

2005

Key Promotional Programs • Free shipping continues to be a key promotional program for

merchants.• Free shipping upgrade was also successful.

Merchant Survey

Q. Which of the following promotional efforts have been mostsuccessful in driving online holiday business this year?


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Prediction #4

• Margins will suffer due to higher shipping costs and downward price pressure from increases in online comparison shopping; retailers look like Tofu (low price key because too much information online and not enough differentiation). (Jupiter)

• Margin: Drops a little bit based on free shipping offers combined with high fuel prices and gas surcharges by the shipping companies. (Forrester)

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12%

35%

40%

12%

1%

0%

10%

20%

30%

40%

50%

Increasedsignificantly

Increasedsomewhat

Stayed thesame

DecreasedSomewhat

Decreasedsignificantly

Wave 4 2005

Growth in Profit Margins• Almost half of the merchants had increases in their

profit margins during the holiday season.

Merchant Survey

Q. Compared to last year’s holiday season, which of the following best describesthe profit margins of your online retail business this holiday season?


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Prediction #5

• Game of chicken is won by consumers; retailers will break price early to encourage customer to shop rather than holding onto last minute; however consumers will do bulk of shopping later again this year. (Jupiter)

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27%

49%

24%

33%

47%

20%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Earlier Than Last Year About the Same Time Later Than Last Year

Wave 4 2004

Wave 4 2005

Holiday Shopping Patterns• One third of consumers started their online shopping earlier than

last year which is 6% points more when compared to the previous year.

Consumer Survey

Q. Compared to one year ago, when did you start your holiday shopping in 2005?


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29%

9%

4% 4% 5%

11%15%

24%

0%

10%

20%

30%

40%

50%

60%

BeforeThanksgiving

ThanksgivingWeekend

November 27,2005

December 4,2005

December 11,2005

December 18,2005

December 25,2005

No markdowns

Wave 4 2005

When Did Mark Downs Start• Over one quarter of the merchants indicated they took mark downs

before Thanksgiving. Another quarter did mark downs starting Dec 18.• Another quarter did not take any mark downs.

Merchant Survey

Q. If you offered mark downs this holiday season, when did you begin?


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Prediction #6

• Within search engine marketing, the real winners in the battle for search engine placement were the retailers that optimized organic search results due to rising keyword costs. During the 2005 Holiday season, paid search became a far less efficient means of customer acquisition than in previous. (Nielsen/NetRatings)

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84%

75%

54%

43%

29%

96%

75%

52%47%

38%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

Email to House List SEM-Paid Affiliate Programs SEM-Organic/Optimization

ComparisonShopping Engines

Wave 4 2004

Wave 4 2005

Successful Online Marketing Programs• Over three quarters of the merchants pointed out that paid

search is a successful marketing vehicle to drive sales.

Merchant Survey

Top Online Marketing Efforts

Q. Which of the following online marketing efforts have been mostsuccessful in driving online holiday business this year?


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19% 37%

9%

44%

86%5%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

SEM-Organic

SEM-Paid

1-2 3 4-5

Rank 1 to 5 with “5” being the most successful

Effectiveness of Online Marketing Tools• Paid search is seen as a more successful marketing

tool than organic search.

Merchant Survey

Q. Please rate the effectiveness of the online marketing efforts that have been mostsuccessful in driving online holiday business this year.


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Paid Search ROI Increases• By the end of the holiday season half of the merchants indicated their

Paid search ROI increased over last year.

• Paid search ROI did show declines compared to waves 2 and 3.

Merchant Survey

16% 18%

19%

41% 38%31%

0%

10%

20%

30%

40%

50%

60%

70%P

aid

Sea

rch

RO

I -W

ave

2 20

05

Pai

d S

earc

h R

OI-

Wav

e 3

2005

Pai

d S

earc

h R

OI -

Wav

e 4

2005

Increased significantly

Increased somewhat

Q. Compared to this time last year through Thanksgiving weekend, have the following online metrics increased or decreased?


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Prediction #7

• Pure online brands will hold their own, but multi-channel retailers will again post the highest overall growth in online sales, as newer online shoppers turn to the brands they trust, and the option of in-store service (e.g. returns) has significant appeal. (ComScore)

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• While multi-channel retailers were more optimistic than online-only retailers, there is a very small percentage that are pessimistic.

Multi-channel Retailers More Optimistic

Merchant Survey

83%

17%

0%

88%

8%4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Optimistic Neutral Pessimistic

Online-Only

Multi-Channel

Wave 4 - 2005

Q. How did you feel about this year’s holiday season?


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Online-Only Has Stronger Revenue Growth• Over three quarters of online only retailers reported growth of

30% or more.

1%

33%

53%

17%

0%

23%

50%

27%

0% 10% 20% 30% 40% 50% 60%

Lower than lastyear

1% to 29% higher

30% to 99% higher

100% or more

Multi-channel Online-Only

Wave 4 - 2005

Q. Compared to the holiday season last year, please describe your company’s online revenue.

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Prediction #8

• The 2005 calendar impacted online sales, due to Christmas falling on a Sunday, which encouraged last minute shoppers to take advantage of an extra Saturday in the stores for additional purchases. (Nielsen/NetRatings)

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7%

19%

5%8%

28%

10%

18%

6%10%

5%8%

12%

5%

14%

29%

17%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Have notstarted yet

Wanted tostart earlyto avoid

last minuterush

Get betterdeals bystarting

early

Wanted tobuy beforestockouts

occur

Sawsomething

I liked

Had somespare time

Foundgood price

on item

Foundgood deal

onshippingcharges

Dec 20-24, 2004

Dec 19-24, 2005

Holiday Shopping Patterns• In 2005, 10% of online shoppers had not started their

shopping the last week before Christmas.

Consumer Survey

Source: Shopzilla Online Holiday Scoop, conducted by BizRate Research, a division of Shopzilla Inc., was based on a point-of-sale survey of 3,224 online buyers from December 19 - 24, 2005 and 4,566 online buyers from December 20-24, 2004.

Q. If you started your online holiday shopping already what was your primary reasonfor starting when you did?

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Predictions 2006

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E Holiday Recap

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