Holiday Outlook

Savvy Retailers Can Count On A Winning Season

2

2011 Retail TouchPoints Holiday OutlookTable of Contents

Part 1: The Omni-Channel Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Hallmark .com Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Kirkland’s Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Uplift In Sales Predicted For Holiday 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Part 2: Maximizing Sales Via Mobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Potential For NFC In Future Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

‘Tis The Season For SMS And Applications . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Coach Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

6 Tips to Succeed In Mobile During the 2011 Holidays . . . . . . . . . . . . . . . . . .10

Part 3: Enterprise Mobility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

JCPenney Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Daily Deals Create Purchase Urgency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Part 4: Mining The Social Sphere To Capitalize On Peer Reviews . . . . . . . . . . . . . . . .14

5 Tips To Drive Social Sales During the 2011 Holidays . . . . . . . . . . . . . . . . . .15

Social Location Marketing Expands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

RadioShack Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Part 5: Inventory Strategies Serve New Consumer Habits . . . . . . . . . . . . . . . . . . . . .18

Service, Value And Price Drive Inventory Decisions . . . . . . . . . . . . . . . . . . . . .18

Industry Segments To Watch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

The Technology Drivers Of Inventory Planning . . . . . . . . . . . . . . . . . . . . . . . . .20

Global Retailers Find Success Through Optimization . . . . . . . . . . . . . . . . . . . .20

About Retail TouchPoints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

3

The Omni-Channel ConsumerThere’s no ignoring the fact that the retail industry has melded into an omni-channel environment . Today’s retailers must be all things to all people, through all channels (with some exceptions) . Consequently, they need to supply “all things” at the right time and place, and at the right price . This is especially true during the highly competitive holiday season .

“The way that retailers are going to drive and survive in the long-term is by satisfying their consumers,” said Larry Freed, CEO of ForeSee Results . “And satisfaction is going to be driven by a combination of the expectations that are set across marketing, advertising and execution, and the experiences that those consumers have .”

“The biggest advice I give to retailers is you need to be where your consumers are, not where you think you want to be,” added Joy Liuzzo, Senior Director of InsightExpress . She explained: “You don’t open a store in the middle of nowhere because that’s where you want to be and that’s where the land is most cost-efficient.”

The first step in preparing for the upcoming holiday season is to do a post-mortem of last year’s holiday season. Some of the key findings from recent Forrester Research studies were as follows:

Watch the Web – While shoppers continue to enjoy the multi-sensory experience of shopping in-store, the Web is gaining ground .

Promotion. Promotion. Promotion. – With an uncertain economic future looming, shoppers are on the lookout for the best offers for the products they desire .

Don’t ignore the value of “free” – Free shipping is meaningful to today’s shoppers who are constantly comparing deals and are likely to jump ship for free shipping . As many as 65% of survey respondents said they “always choose the cheapest shipping option,” in a Q1 2011 U .S . Retail Online Survey .

Stay on top of search and email – You don’t want to inundate customers with email, but a carefully placed message still has an impact; and be sure your brand continues to come up “above the fold” in Internet searches .

Pay attention to key dates – Black Friday, Cyber Monday and the like, show the most promise for a spike in sales during the holiday season .

Social and mobile are becoming greater influencers – If you think you can get through just one more holiday season without optimizing

Part One:

4

for social media and mobile technology, you’re probably mistaken . Close to one quarter (23%) of survey respondents from a Q4 2010 study said “I shared deals I found (Cyber Monday) with others through my social network .”

Overall, these tactics help to deliver the customer experience today’s shoppers are looking for . Retailers who pay the closest attention to delivering that seamless customer experience across channels will be the winners . “Those that are focused in this area are performing well and would include folks like REI and Best Buy,” said Lauren Freedman, President of the e-tailing group . But others are struggling . “Our e-tailing group research indicates that the 200 merchants average a 5 .4 out of 10 in terms of delivering that seamless experience . Understanding what the desire is among your customers and how they want to interact with brands set the stage for the approach that needs to be taken .”

For the holidays, Freedman suggests four specific mantras:

1 . Have many tactics in your arsenal

2 . Plan ahead and be flexible and ready to change

3 . Be aware of the competitive landscape

4 . Test strategies first

Freedman also shared four top strategies from 2010:

1 . Use the right gifting tools (multiple ship-tos, hold and ship later)

2 . Gift card creativity from types to visuals

3 . Customer service information on shipping times

4 . Free shipping — always a customer favorite

Preparing for the 2011 holiday season, retailers can learn from the success of a 2010 Hallmark .com implementation . Expecting an uptick in online holiday traffic for the 2010 shopping period, Hallmark .com implemented the Infosys digital commerce solution, designed to enable shoppers to create, manage and send personalized greetings . Given the rush of peak holiday traffic, the online retailer needed to meet the demands of web site visitors at a high volume .

Hallmark reported that online customers experienced a 370% improvement in the web site’s response times, raising the site’s customer conversion rate by 30% over the previous year . Through Christmas, New Year’s and Valentine’s Day holidays, the Infosys digital e-Commerce solution handled five times the normal customer visits as previous holidays with virtually 100% up-time .

Hallmark.com Hails Hefty Holiday metrics

5

real results: kirkland’s Generates JinGle Via multi-cHannel Promotion

In an effort to establish itself as a gift-giving destination, Kirkland’s

tapped Nashville, Tennessee-based integrated marketing agency

redpepper to develop a multi-channel promotion designed to “capture”

the seasonal, holiday-only shopper, leverage the company’s online

community and create in-store engagement . Kirkland’s, a specialty

retailer of home décor, operates nearly 300 stores in 30 states .

The retailer’s merchandise includes framed art, mirrors and garden

accessories, as well as seasonal and holiday assortments .

The “Glee Spree” sweepstakes campaign — called one of the retailer’s

“most successful promotions ever” by Kirkland VP of Marketing Mark

Krebs — targeted the shoppers who views gift-giving as an “extreme

sport .” Kicked off in late October 2010, the campaign employed

“Merry, the Gift Fairy,” a character who embodied the spirit of Kirkland’s

generous, core customer . Merry was assigned to surprise seven

customers in-store with a $1,000 holiday shopping spree . The “magic

moments” were filmed and posted on the Kirkland’s web site as part of

its MyKirkland’s social community .

The campaign helped Kirkland’s extend its multi-channel reach by leaps

and bounds . Key metrics include:

• Nearly 350,000 net new emails across all Glee Spree tactics;

• Close to 315,000 new emails from in-store sweeps sign-ups;

• More than 85,000 repeat entries to the in-store sweepstakes;

• Nearly 250,000 daily gift giveaway entries;

• More than 60,000 Facebook shares;

• Almost 6,000 Facebook “Likes;”

• More than 30,000 views of Merry Making videos; and

• A 54% increase in visits to MyKirklands .com during the

campaign .

6

Uplift In Sales Predicted For Holiday 2011, With Some WarningsEconomic uncertainty aside, industry experts predict an increase in overall sales for the 2011 holiday season, although the level of increase may vary by retailer size and segments . “Overall, I think we’re going to see online retail numbers up again, which isn’t a surprise,” noted Freed . “I would predict that it’s going to be very low double digits: 10% to 11% . Yet I would expect to see the trend continuing where the bigger retailers that can be more aggressive in the promotion and discounting with the hope of drawing people in to buy more than what they just came for — the larger, more successful retailers, will take advantage of that better than the smaller, specialty retailers . We’re seeing this trend where the specialty retailers seem to be in a lot more financial trouble than the larger retailers, I think we’ll see that trend continue as well .”

“Luxury is strong, but other sectors might not do as well,” added Greg Buzek, President of IHL Group . But overall, he added: “The retailers I speak with are planning for a strong holiday aside from the negative comments in the news . They are targeting inventory levels similar to last year on a store-by-store basis .”

But shoppers will still be keeping their eyes on gas prices and their job status, according to Buzek . “A key part of this is what happens to fuel prices,” he noted, “If fuel prices reduce another 20 cents a gallon or so, then we will have a good Christmas . But pressures

due to fuel are increasing costs for raw materials as well as taking money from consumers’ wallets . Every penny sustained raise for a year is $1 .7 billion out of consumers’ wallets for other items .”

Buzek also warns retailers to watch unemployment . “The unemployment rate of those without a high school degree remains over 15%, and this is not going to change before Christmas,” he predicted . “For those with a high school degree but not a college degree, the rate is over 10% . Those jobs are not coming back anytime soon unless manufacturing comes back . So we have a structural issue in the economy that will weigh heavily on the holidays . Those who have jobs feel better and are not as concerned about losing them this year, however, many people who did not have jobs last year for the holidays still do not today, which is tragic .”

“If fuel prices reduce another 20

cents a gallon or so, then we will have a good

Christmas.”

- Greg Buzek, IHL Group

7

Maximizing Sales Via Mobile The mobile market has become an integral part of the omni-channel lifestyle, allowing shoppers to tap into their phones for information on product news, releases and reviews . By utilizing the latest platform trends, including Quick Response (QR) Codes, SMS coupons and initiatives, location-based applications, and shopping apps, retailers can develop strong long-term customer relationships and improve overall loyalty .

According to the Forrester Research Mobile Commerce Forecast: 2011 to 2016, the mobile commerce market will reach $6 billion in revenue by the end of 2011, and $31 billion in 2016 . In the last six months alone, the m-Commerce market has grown by 25%, faster than any other mobile channel, according to Peter Sheldon, Senior Analyst, Forrester Research .

These statistics cement the reality of the “screen-connected consumer,” a breed of shopper who uses mobile technology to access product and retailer information via mobile stores, applications and social networks . This shopper also is constantly attached to her mobile phone in order to communicate with family and friends .

“We’ve heard ‘This is the year of mobile’ for four or five years,” Freed said . “But I think this truly is the year that

mobile is going to make a big impact on online retail not only in sales, but also as a research tool and as a companion shopping tool as people go in stores .”

Freed predicts that mobile will be the reigning tool of price comparison and stress-free shopping this holiday season, making it a top investment for retailers .

“The value of mobile will be immense for people during the holiday season who are stressed for time; the stores are busy and you often can’t find an associate when you want one,” Freed noted . During that time, he asserted, “That companion mobile phone is going to be an incredibly powerful tool . Or when (a store is) out of something, a consumer can scan the QR Code and click to buy it and have it shipped within a couple of days . It’s going to be incredibly powerful .”

Liuzzo predicted similarly high results for smartphone use during the 2011 holiday season, after the increased adoption she noted last year . “Year over year, we’ve seen a larger number of people relying on their mobile phones for shopping habits — especially over the holidays,” she said . “Last year, consumers used their smartphones twice as much as they anticipated .”

With the current scope of mobile trends — including the highly discussed mobile wallet — retailers can create a seamless shopping experience .

Part Two:

“In the last six months alone, the

m-Commerce market has grown by 25%.”

- Peter Sheldon, Senior Analyst, Forrester Research

8

Potential For NFC In Future Holidays

Within the last year, Near Field Communications (NFC) has been a hot-button topic for retailers . A study conducted by Juniper Research predicted that the NFC market would reach $50 billion worldwide by 2014, motivating retailers to consider the potential of exploring NFC to aid in line busting and create a convenient buying experience during the holidays .

The industry is abuzz with NFC activity . American Express recently announced a partnership with Sprint Nextel to develop a mobile wallet application . Through the deal, Sprint customers gain access to Serve, the credit card company’s digital payments platform . PayPal also recently developed an NFC peer-to-peer program for Android, Samsung Nexus S users, while mobile commerce platform Isis formed partnerships with MasterCard, American Express, Visa and Discover .

Although this variety of partnerships has helped spread awareness of NFC, security concerns are hindering the technology’s growth . Liuzzo predicts mobile payment won’t be a primary focus for retailers during the 2011 holiday season, since NFC is not yet fully accepted .

“The biggest hurdle right now isn’t necessarily with the technology, it’s with the consumers,” Liuzzo said . “Consumers understand their phone is critical to them, they don’t leave home without it, but they also know how easy it is to lose or misplace . How many people have left their phones in a taxi or at

a restaurant? So the idea of having everything on the phone, the security risk potential is very high in consumers’ minds .”

‘Tis The Season For SMS And Applications

With retailers like HSN successfully developing mobile applications to engage customers and increase sales via iPhone, iPad, Android and Blackberry, many retailers are considering implementing the technology to help create a seamless, cross-channel browsing and buying process during the busy holiday season .

By 2015, app downloads are expected to rise to an estimated $182 .7 billion, compared to $10 .7 million in 2010, according to the Worldwide and U.S. Mobile Applications, Storefronts, Developer, and In-App Advertising 2011-2015 Forecast: Emergence of Postdownload Business Models, released by International Data Corporation (IDC) .

Flash-sale retailer HauteLook went the extra mile during the 2010 holiday season with a Facebook-only sale, which encouraged 36,000 shoppers to “like” the company’s page . To prepare for the 2011 Holiday Season, HauteLook will release its Android app in the fall . Until then, the retailer plans to optimize its iPhone app, which sends sale alerts when new merchandise is available and allows shoppers to browse and buy from their mobile devices .

Although retailers like Macy’s, Target and Best Buy have successfully developed storefront applications, a number of companies also are using Short Message

9

System (SMS) to reach target audiences more efficiently. SMS currently is the most-used channel for all mobile subscribers . Gary Schwartz, President and CEO of Impact Mobile, advises retailers to consider the platform as a clear path to two-way communication with today’s shoppers as a means to providing product information and deals .

Additionally, to maximize exposure and increase foot traffic during the holidays, retailers can advertise opt-in campaigns that will reward shoppers with special deals and incentives. Schwartz noted the benefits of personal URLs (PURLs) to track campaign success . Since SMS is just text and does not have traceable, clear pixels, retailers can use PURLs to track click-through rates to a web page, microsite, coupon or offer, to uncover the number of shoppers who

redeem a deal or communicate with a brand .

To maintain the upscale shopping experience outside of its traditional web site, Coach recently launched its first mobile commerce site, powered by Usablenet. The leather goods retailer focused its m-Commerce strategy on extending the upscale customer experience across multiple channels .

Offering an array of features designed to facilitate a stress-free shopping environment, the Coach mobile site includes a store locator, account management, product browsing, videos, and in-store pickup options for mobile purchases .

Coach customers also can register for a Coach .com account to receive updates on new styles, store openings and local events via mobile . The retailer began planning for the mobile commerce site in 2010 and entered a soft launch in May 2011 . According to David Duplantis, SVP of Global Web and Digital Media for Coach, the retailer plans to launch a sharing feature, called the Wishlist, in the near future . “Our primary goal is to improve touch points with our brand loyalists and offer them exceptional customer service wherever they may be .”

coacH Gets a Handle on mobile

10

6 Tips to Succeed In Mobile During the 2011 HolidaysAs the growth of the “screen-connected” consumer continues to flourish, Gary Schwartz,

President and CEO of Impact Mobile, shares six top tips on how to succeed in mobile during

the 2011 holiday season:

1. Get the opt-in: Develop an mCRM strategy that allows you to capture a shopper’s

phone number with a permission-based opt-in . Obtaining this information allows you to

consistently send timely and relevant messages to consumers to further brand interaction .

2. Link deals to texting: Focus initially on developing targeted holiday deals specifically for

the micro (smartphone) screen . To maximize exposure, link customers’ phone numbers to

these deals via SMS and use Twitter and other messaging channels to drive and increase

click-through rates .

3. Increase social communication: Design a messaging application for your Facebook

community (a number of third-party vendors can help with this task) . Work to transform this

communication into a direct messaging relationship in order to improve customer-retailer

relationships and create an optimal brand reputation .

4. Market holiday opportunities: Target media buys on web sites accessed daily by your

target consumer base to drive click-throughs to your holiday pages or sales . Avoid hit-and-

run data sites for sports and news — they don’t reach readers efficiently or make for good

click through, as the user is in-and-out and not browsing .

5. Minimize clicks: If you have enabled mobile checkout, be sure the purchasing process is

easy for shoppers by ensuring the system is optimized for minimal click-to-exit . Without a

fast exit, you will increase chances of abandoned baskets and lost income .

6. Reach all touch points: Use mobile capabilities to move the shoppers to other retail

touch points via their screens . Remember that mobile shopping is not necessarily driving

“K’Ching” through the mobile channel . Rather, use mobile to drive to purchases in brick-

and-mortar locations, online, or via portable devices and tablets .

11

Part Three:Enterprise Mobility: Creating Efficiencies With Tablets

The buzz surrounding Apple’s iPad has created a springboard for tablet technology in retail .

“We’re seeing a large uptick in terms of tablet ownership as well as intent to purchase a tablet, mainly because it’s bridging the gap between the computer and the mobile phone,” according to Liuzzo . In recent research, she noted, “We found that consumers using tablet devices are using their mobile phones less for general Internet purposes . Tablets are also mainly being used in the home…they’re going to be reaching for that versus the mobile phone .”

The recent surge in tablet adoption has prompted Forrester Research to revise its forecast on tablet use between 2010 and 2011. The research firm predicted in its eReader Forecast, 2010 to 2014, that tablet sales will more than double in 2011 to 24 .1 million units . Further, by 2015, 82 million U .S . consumers — one-third of the country’s online consumers — will be using a tablet . Although the Apple iPad is the current leader of the tablet pack, the Motorola Xoom, Samsung Galaxy Tab, HP TouchPad and the Blackberry PlayBook also are leaders of the emerging platform . At the onset of the 2011 holiday season,

online retailer Amazon .com will be joining the fray with the release of its own tablet by October, according to The Wall Street Journal .

Laura Davis-Taylor, SVP, Managing Director of BBDO/Proximity ShopWork, noted that efficiency is a key attraction for tablet users . “Realize what people love the most about online and what they’re most quickly adopting is mobile and helps this behavior,” she said . “People love enterprise mobility because it is relevant and you get done quickly . Most are providing a web experience on these tools, but consumers don’t want a web experience . It’s about getting information quickly and moving on .”

In response to shoppers’ growing adoption of tablets, retailers like HSN are implementing storefront applications to increase sales . However, during the holiday season, retailers must take notice of how the app is formatted, designed and organized to ensure that browsers can easily search inventory and purchase items while still being engaged in the overall experience .

“If retailers are going to be doing this — and I anticipate that they are — they need to make sure it doesn’t disappoint the consumer,” Liuzzo noted . “It’s not just about modifying your catalog and putting it up

12

there . It needs to be a very interactive, rich experience because that’s what consumers expect .”

According to Deloitte’s Predictions for the Technology, Media and Telecommunications Sector, 2011, 25% of all tablets will be purchased by businesses, with 25% of that amount by retailers . During a 2010 earnings call, Apple CEO Steve Jobs also noted that more than 65% of Fortune 100 companies have piloted or deployed iPads for in-store enterprise, including Lowes, P&G, NBC Universal and Novartis . JCPenney, Puma, Converse and Nordstrom also have brought iPads to the store floor, as well as luxury retailers including Gucci and Burberry . Best Buy deployed the iPad in-store, as well as Motorola’s Xoom, to ignite its “Connected Store” program, which was designed to give customers the ultimate hands-

on experience with electronics .

With capabilities including real-time inventory tracking, CRM, and POS systems, retailers can adopt tablet technology and sync it with backend systems to improve the in-store buying experience during the busy and sometimes stressful holiday shopping season .

JCPenney was one of the first retailers to test tablet technology for the purpose of enhancing the in-store customer experience. Designed around its “findmore” strategy, the retailer encouraged store associates and customers to “find more” by providing access to expanded assortments and product information on jcp .com, including sizes, colors, and styles not available in-store .

The program also allowed users to check merchandise availability in other stores, email images and information about online items to themselves or a friend, and use 360-degree view and zoom capabilities to see product details .

JCPenney utilized the iPad device in 50 jewelry departments with its Modern Bride concept, allowing shoppers to get a more detailed view of jewelry selections, and search a wider variety of jewelry cuts and styles .

Users also could leverage the device to scan barcodes of in-store items to learn more about a product, additional colors, and sizes available, as well as washing instructions .

JcPenney HelPs sHoPPers exPlore WitH tablets

13

daily deals create PurcHase urGency

Flash sales and extreme deals are two tactics retailers utilize to drive quick

purchases via web or in-store . Although these methods are evident in location-

based deals and mobile couponing to encourage urgent visits to the store,

the daily deal platform has furthered consumers’ desire for thrifty buys and

increased the focus on item price .

According to data collected by ForeSee Results for its Top 100 Online Retail

Satisfaction Index for Spring 2011, 65% of shoppers visiting the top 100 online

retail sites are enrolled in at least one daily deal email program, with nearly half

(46%) subscribed to more than one service . The new channel, according to

ForeSee, is sweeping the retail industry, with nearly two-thirds of consumer

respondents purchasing at least one deal in the 90 days prior to the survey . A

majority of those buyers (89%) redeemed their purchase during that time .

“[Daily deals are] driving a lot of focus on the deal, impulse and discount,” Freed

said . “Market that right and it can be really successful . But if you don’t, it can

drive you out of business .”

This price-focused mantra puts pressure on retailers to keep up with the

competition by slashing prices and altering shipping costs, according to Freed .

“We’re seeing an interesting phenomenon with consumers where retailers are

really creating a strong pressure in terms of pricing,” Freed noted . “Daily deal

sites contribute to that a great deal . Every holiday season, it seems like it starts

earlier and earlier, with discounts and free shipping . Well, now you have daily

deals mixed in, where you feel every day is part of the holiday season .”

14

Part Four:Mining The Social Sphere To Capitalize On Peer Reviews

Retailers have long been using Facebook, Twitter and other social networks to foster awareness, engagement and even to promote revenue with social storefronts, but the holiday shopping season presents a unique opportunity to capitalize on the growing trend of social selling .

To maximize brand awareness, a majority of retailers (64%) have employed a social media strategy to engage new and existing customers, and find it important to analyze platform conversations and respond to customer questions or complaints, according to the June 2011 Retail TouchPoints Customer Engagement Survey . Retailers surveyed track and measure all customer engagement management (CEM) initiatives through customer analytics (66%) and social media monitoring (40%) .

During the most prominent gift-giving time of the year, retailers can mine their social networks to empower customers to make more informed decisions based on peer-declared preferences and desires, fueled by social sharing .

“One area where social commerce really pays dividends during the holiday season is the use of product and brand ratings and recommendations,” said Chris Cunnane, Senior Research Associate — Retail, CPG, and Hospitality, Aberdeen Group . “The voice of the customer has never been more readily available, and retailers need to

Photo Credit: spinback

15

ensure that they are creating relationships with the influencers of the social space to further promote their brand . As consumers increasingly turn to peer recommendations when evaluating their purchases, retailers must integrate social media into their multi-touch, multi-channel marketing programs . With the holiday season looming as make or break time for retailers, a social strategy for customer connectivity and commerce is critical .”

Data from Aberdeen’s June 2011 Multi-Channel Retail Marketing Report indicates that best-in-class retailers are more than two times as likely as all other organizations to use social media tools in their marketing programs, including social campaigns and social media monitoring . “Social CRM is key to measuring how consumers perceive the brand,” Cunnane noted . “Retailers like Best Buy and Home Depot use social CRM techniques to monitor their brand across multiple social networks, respond in real time to customer inquiries and complaints, and connect with customers to promote special sales and promotions . These techniques and capabilities have really come to light over the last few holiday seasons .”

5 tiPs to driVe social sales durinG tHe 2011 Holiday season

1. Empower Shoppers To Share - Sharing functions need to

be easy and seamless for community members . Facebook and

Amazon recently announced a new opt-in service designed

to suggest gifts for friends by harnessing data listed in their

Facebook profiles, including favorite movies, music and books. An

easy share can make an easy sale .

2. Make Them “Like” You - Give your shoppers a reason to stay

involved in the social community . Research conducted by ROI

Research and released by eMarketer concluded that loyal social

network followers are more likely to buy a product and make

recommendations than other shoppers . In 2010, 32% of survey

respondents stated that they became more loyal to a brand

because of Facebook engagement . In the past year, that number

has increased to 34% . In 2010, 40% of Twitter users expressed

more loyalty to brands they followed, while in 2011, 46% of

account holders increased overall dedication to a company .

3. Create Calls To Action - Retailers such as Sears and Best Buy

have incented consumers to “Like” and “Follow” their brands

by offering exclusive access or special discounts to community

members . These special offers foster greater loyalty and help

spread the word about why your brand should be followed .

4. Don’t Let Social Stand Alone - The omni-channel consumer

demands an integrated, seamless experience . Shoppers should

be empowered to search and share on social channels, but

conveniently buy in-store or via mobile .

5. Don’t Get Post-Happy - While it’s great to keep the conversation

going on your social networks, it’s important to make sure posts

are relevant, informative and valuable . According to ExactTarget’s

Subscribers, Fans and Followers Report, 44% of respondents

said they “unliked “a brand because they posted too frequently .

16

The key to maximizing online holiday revenue in 2011 is to leverage the social channel to present a more unified, relevant online experience, according to IBM Coremetrics in its June 2011 Fourth Annual Online Retail Holiday Readiness Report, an analysis of key trends in online shopping and usage based on data from more than 500 U .S . retailers .

“Consumers are super savvy and they know that if you don’t have what they want, when they want it, at a price they’re willing to pay, odds are they can get it somewhere else,” noted John Squire, Chief Strategy Officer, IBM Coremetrics. Squire told Retail TouchPoints that this heightened consumer demand manifests itself in higher bounce rates — the percentage of people who arrive at a site and leave immediately (presumably because they don’t find what they’re looking for) . Retailers must subscribe to a “tailored approach” to reaching their audience to decrease the risk of shoppers bouncing away to competitors, he noted .

Now more than ever, retailers are striving to monetize the impact of social channels, which are being used as forums for customer ratings/reviews and peer feedback . For example, social visitors are more than twice as likely compared to the overall population to convert, at a rate of 10 .7% versus 5 .2%, according to the report . Many of these social visitors are likely responding to offers, as their bounce rate (62 .8%) is high and their time on site (3:26 minutes) is low .

“Social media is about authentic conversations,” Squire said . “That means you’ve got to be willing to take the good and the bad, and that you have to have a strategy for dealing with the hard questions people will ask . Ratings and reviews are the classic example of this point in action . Don’t even attempt a ratings and reviews program unless you’re willing to deal with some hard truths and to engage in a very public conversation with your consumers . But also recognize that there’s money to be made in those truths .”

Squire highlighted his point with an example of a large pet supply retailer that used ratings and reviews to significantly reduced the percentage of returned items that required assembly . “The reviews painted thorough pictures of what it was like to assemble the product, which in turned enabled people to decide whether they wanted to invest that kind of time,” he noted . “The net-net for the retailer was happier consumers and lower return costs .”

Social Location Marketing Expands

Building on the growing popularity of socially driven “check-in” applications like foursquare and Gowalla, location-based marketing is helping retailers extend the social conversation to drive in-store traffic. Social location marketing can help retailers reach customers while they’re in-store — when the offer is most relevant and welcome .

17

The basic elements of social location marketing revolve around meeting the needs of the social consumer, according to Simon Salt, CEO of Incslingers and author of the book “Social Location Marketing.”

“By meeting a need for the social consumer, retailers can position themselves as ‘necessary’ to the social consumer,” Salt noted . “Retailers have the opportunity to leverage locations that are complementary to their business by setting up specials and nearby offers . They can now think about where their customers might be before they come to the store . Where they might be in a situation that would make them think about that brand and want to visit them . This is incredibly powerful in terms of marketing — it’s basically like being able to hang a sign outside a complementary location saying ‘While you are here don’t forget to visit store X .’”

Further validating the trend of location-aware marketing, American Express and foursquare are partnering to offer card members exclusive mobile offers from retailers including H&M, Sports Authority & Union Square Hospitality Group . American Express card members can link the foursquare accounts to their cards to load/redeem specials without the need for coupons or special codes . Additionally, they will not have to present their mobile devices at the cash register .

Shoppers using foursquare at RadioShack generally spend 3 .5 times more than non-foursquare users, according to CMO Lee Applebaum, who shared key insights into RadioShack’s foursquare success at the AdAge Digital Conference in April 2011 . When a foursquare user is near a RadioShack location, they’ll see a “Special Nearby” icon on their phone screen (if it is the closest available merchant deal on the platform) . When they click on the icon, the offer details and the store’s location come up .

The latest app from foursquare allows merchants to run different offers across various locations, and choose from seven types of “specials .” The RadioShack campaign offers a “Newbie Special” (first-time check-ins get 20% off), and a “Check-in Special” (regular users get 10% off) . Additionally, local mayors get 20% off .

RadioShack also is experimenting with the Google Latitude Check-in Offers program, which offers tiers of checking in .

For more insights on RadioShack and location-based marketing, click here to listen to an audio podcast with Simon Salt .

radiosHack sees return on foursquare initiatiVe

18

Part Five:Inventory Strategies Serve New Consumer Habits

Throughout the last few years, retailers were caught off guard in the midst of a sudden, dramatic imbalance between supply and demand . As a result, many were forced to resort to heavy markdowns and promotions to clear out the excess merchandise . Although the retail landscape improved throughout 2010, a number of retailers remained conservative in terms of inventory planning, reflecting an uncertain consumer sentiment .

Adding to the economy-related inventory challenges is the emergence of omni-channel consumers . “With all-channel shoppers increasing year over year, retailers

are gearing up to serve this ‘new’ consumer and support emerging selling models,” said Ann Marie O’Connor, Retail Expert from RedPrairie . “Retailers are striving towards getting a consolidated view of inventory across the channels — allowing them to leverage inventory across every nook and cranny of the enterprise; moreover, they strive for a single representation of the consumer irrespective of the channels they shop .”

O’Connor added that retailers must be able and willing to fulfill orders across channels. “More retailers than ever see the store as a legitimate fulfillment center for online orders, eliminating shipping costs, getting the online consumer into the store and maximizing return on inventory . In turn, this presents a challenge to the stores, one that needs to be addressed — protect in-store inventory and labor so as not to impact the in-store experience negatively .”

O’Conner expects a continued increase in online sales, but said retailers will offer better in-store service for these purchases, be it pick-up or return . “We see this as critical to driving store traffic and maximizing sell-through during the season,” she said .

Service, Value And Price Drive Inventory Decisions

In addition to service, value and price are key factors anticipated to drive consumer shopping behavior during the 2011 holiday season . Based on survey data from Retail Systems Research (RSR), retailers believe consumers are more price-sensitive than ever . Targeted promotions are seen as a better approach when compared to the random “70% off” slashing . “We believe (and financial analysts report) that retailers have trimmed their inventories enough that they don’t need to resort to major slashing,” said Paula Rosenblum, Managing Partner at RSR . “The elephant

19

in the room is clearly price transparency driven by smartphones. So the risk is store traffic keeps going up, but without a similar spike in sales, there is really only one solution to that: Get mobile, get there fast, and find ways to engage the consumer in your own site/store .”

Rosenblum said retailers will need to treat inventory as a shared asset across all selling channels this holiday season . “It’s the best way to get the biggest bang for your inventory investment buck,” she noted .

To be lean or not to be lean? According to Aberdeen Research data, two of the top three inventory-related pressures are high inventory costs (35%) and excessive inventory in channels and warehouses (35%) . “This would indicate that retailers are weary to carry excessive inventory and would move towards a lean strategy,” noted Cunnane . “However, the number-one inventory-related pressure is lost sales opportunities due to out-of-stock inventory . The contradiction of these

pressures shows that retailers are not prioritizing fast-moving versus slow-moving inventory . Coming into the holiday season, it is unlikely that retailers will move towards a lean inventory strategy . To do so, however, they will reduce their safety stock of slower moving goods but maintain adequate supplies of faster moving inventory, with a close watch on customer-centric merchandise offers geared towards big ticket items .”

Industry Segments To Watch

Industry experts are predicting a number of different products and segments to be popular during the 2011 holidays . Rosenblum pointed to 3D televisions, digital photography equipment and software, and the iPhone 5 as this holiday season’s high-demand items . “Also, I think the luxury market is going to be strong,” she noted . “I think we’ll see high-end department stores doing well, jewelry and watches going strong and a ‘forever-type’ message around jewelry .”

Other analysts anticipate an all-around increase in holiday sales . “Overall, I think we’re going to see online retail numbers up again which isn’t a surprise,” predicted Freed . “I would predict that it’s going to be very low double digits: 10%-11% . Yet I would expect to see the trend continuing where the bigger retailers that can be more aggressive in the promotion and discounting with the hope of drawing people in to buy more than what they just came for — the larger, more successful retailers, will take advantage of that better than the smaller, specialty retailers . We’re seeing this trend where the specialty retailers seem to be in a lot more financial trouble than the larger retailers, I think we’ll see that trend continue as well .”

20

The Technology Drivers Of Inventory Planning

Smart retailers are embracing the latest technology in order to optimize inventory . Assortment, inventory and space optimization can deliver impressive results for retailers in today’s challenging economy . Most retailers are embracing these strategies, with 65% of North American retailers (including supermarket and other) having already implemented (47%) assortment optimization or are planning to implement (18%) by the end of 2011, according to RSR Research in the report Twenty-First Century Merchandising: Benchmark 2011 . In fact, 100% of retailers plan to have assortment optimization implemented at some point, with 35% reporting plans to implement in more than one year, and 0% reporting “No Plans” to implement .

Faced with the current reality of pricing and competitive pressures, many retailers “need to reinforce their knowledge of key consumer segments and better integrate marketing and merchandising strategy,” according to NRF in the 2011 Retail Horizons Report . More than 70% of retailers in all industries surveyed in the report currently use demand planning (50%) or plan to implement in the next 18 months (21%) .

Global retailers find success tHrouGH oPtimization

To improve productivity and drive growth at its more

than 900 supermarkets in Finland, S Group recently

implemented SAS Retail Forecasting to help predict

demand and shape consumer response across all

channels . The solution analyzes consumer response

to price, promotion, marketing and operational activity

to assess impact on demand . In addition to price

and promotion, SAS also can assess cannibalization

and halo effects, and causes for lost sales, as well as

forecast new product sales .

With SAS Demand Forecasting, UK grocer Waitrose

achieved faster and more accurate demand forecasts

in order to improve stock ordering, delivery and

replenishment . “With the help of SAS we have been

able to reduce stockholding by at least 8% and

reduce wastage by 3% to 4%,” said Gail Richmond,

Manager, Branch Ordering Development for 190-store

Waitrose . “We’d originally estimated a 2% drop

in wastage, so this is far better than predicted . In

addition, we can look at past events and see if

mistakes were made, at Christmas say, and put

them right next time . Or look at successes and try to

replicate them .”

2121

About Retail TouchPointsRetail TouchPoints is an online publishing network for retail executives, with content focused on optimizing the customer experience across all channels . Tapping into the power of the Web 2 .0 environment, the Retail TouchPoints network is made up of a weekly e-newsletter, category-specific blogs, twice-monthly Special Reports, Web seminars, benchmark research, virtual events, and a content-rich Web site at www .retailtouchpoints .com .

Phone: 1 .888 .603 .3626e-mail: info@retailtouchpoints .com