Keynote Benchmark

Positive Results and a Move to Mobile Commerce in 2010

Holiday Retail Wrap-Up: Financials, Performance, And a Prediction

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January 2010That whooshing sound heard on Christmas

morning was not the sound of Santa’s sleigh

launching its return trip to the North Pole.

It was the collective sigh of relief by America’s

retailers, as they squeaked through an

intensely uncertain holiday season with

positive growth numbers. Put in perspective,

though, a little bit of good news for the holiday

season is a modestly upbeat flourish on

what is otherwise still a very challenging

retail market.

Retailers and consumers played

a cat-and-mouse game from Black Friday

right up until the night before Christmas.

Shoppers, still keenly uncertain about the

economy and their paychecks — and

remembering last year’s unprecedented

pre-holiday discounts — held out for bigger

mark-downs, and aggressively shopped

competitors for price, often on their phones

right in the store aisle. By December 9,

consumers were only about 47% done their

shopping; almost 20 percent of shoppers had

not even started yet.i And as late as December

22, more than 40 percent of consumers hadn’t

finished their holiday shopping, according to a

survey reported in The Wall Street Journal. This was the highest rate of procrastination in

a decade.ii

Retailers, too, had last year’s

panic-ridden season in mind, and kept their

inventories lean, held (mostly) to their

planned promotion schedules, and waited out

the customers. In the end, consumers spent at

a good rate and got decent deals, and retailers

for the most part eked out a bit of growth and

avoided setting a consecutive record for worst

year ever.

As has been the trend, online

enjoyed significantly better growth than the

overall industry, though not the double-digit

numbers online retailers have previously

enjoyed. Consumer satisfaction with the

online channel continued to improve

incrementally this year. And mobile became a

serious factor on the retail scene.

round-up of The numbersThe U.S. Census Bureau reports overall retail

and food services sales up 5.4 percent for the

month of December year-over-year, though

down 0.3 percent from November. The

Census Bureau’s preliminary tally for all of

2009 shows a decline of 6.2 percent, another

confirmation that the economy is still far from

out of the woods, although the year ended

with a positive trend, showing an increase of

1.9 percent October – December.iii

Pure consumer shopping sales — not

counting automobiles and gas — grew at a less

jolly rate. Thomson Reuters put the December

growth rate at 2.9 percent year-over-year, as

reported in The New York Times, noting also

that about 75 percent of retailers finished

ahead of analysts’ estimates.iv The Wall Street Journal reports MasterCard’s SpendingPulse

tally of Thanksgiving-to-Christmas sales

showing a 3.6 percent bump over 2008.

While that is a healthy growth number, it

barely recoups the 3.4 percent hit sales took

in the same period in 2008.v

That last statistic is the big footnote

to all the sales numbers: “as compared to

a terrible 2008.” There wasn’t much growth

beyond regaining ground that was lost in

2008. The extra shopping day on the 2009

calendar was probably largely negated by

an unusual early snowstorm that dumped

as much as 24 inches of snow on the mid-

Atlantic and Northeast on December 19,

the Saturday before Christmas, which was

supposed to be the busiest shopping day of

the season. It is likely that many of those

snowbound shoppers moved online to make

their purchases.

The bottom line for the official

holiday season, encompassing the full months

of November and December: a 1.1 percent

increase to $446.8 billion, according to the

National Retail Federation.vi

online Closes in on billion-dollar day markOnline retail saw four times the growth of

the overall sector for the full November-

December holiday period. comScore reports a

4 percent boost year-over-year, with total

retail e-commerce sales of $29.1 billion. The

season saw a handful of $800 million-plus

days, and the first-ever shopping day to break

the $900 million barrier, with $913 million in

online sales logged on “Green Tuesday,”

December 15.vii

“We continued to see an evolution of

customers continuing to use the Internet as

both a research tool and a purchase tool over

the Christmas holidays,” said Simon Rodrigue,

Keynote Benchmark

The five biggest online shopping days of the season were Cyber Monday and Tuesday, and the “Green” days at the beginning of the week before Christmas.

AVP of e-commerce and interactive marketing

for Sears Canada. “And I think that

accelerated even more this holiday season. A

little more than we expected. I think it was

customers wanting to make sure that they

were getting the best value for their dollar in

this economy.” (See Benchmark’s full interview

with Simon Rodrigue.)

Typically, Green Monday, the

Monday that falls with at least 10 days to go

before Christmas, is the biggest online

spending day. It was impressive at $854

million, but this year it dropped back to be

the fifth busiest online day, behind Green

Tuesday, Cyber Monday, Cyber Tuesday, and

Green Wednesday. All told, comScore reports

nine days that broke the $800-million mark

online in the holiday season.viii The Green

days, in particular, lived up to their name for

online retailers.

Mixed BaG of Winners & LosersPatterns are difficult to discern in the various

retail sectors. In December, high-end

department stores did very well, according

to Retail Forward. Nieman Marcus bumped

5.9 percent, Nordstrom jumped 10.8 percent,

and Saks led the pack at 11 percent for

overall sales growth; same-store sales tracked

slightly lower. Go down a tier or so, though,

and except for Kohl’s, which moved ahead

8.8 percent (4.7 percent same-store),

most department stores were flat or down.ix

As might be expected in a persistent

down economy, discounters enjoyed solid

gains, with T.J. Maxx, Marshalls, and

Ross all putting up double-digit

growth numbers.x

Interestingly, teen-targeted stores

posted a gaping spread of results, from a

precipitous drop of 19 percent for

Abercrombie & Fitch, to Aeropostale at

the opposite extreme, which logged a 10

percent gain.xi

Online, the biggest category gainers

in November–December were jewelry and

watches at 20 percent, consumer electronics

at 15 percent, followed by event tickets,

computer hardware, and books and magazines

at 8, 7, and 6 percent respectively, according to

comScore.xii Apparel, which was a big driver

overall according to the National Retail

Federation, evidently did not even move the

needle online.

WeB PerforManCe Mirrors ModesT GainsNo other time of year puts stress on retail sites

like the Christmas holiday season. Surges in

traffic and page views, and complex checkout

transactions, if not accurately anticipated, can

overtax a site’s infrastructure and undermine

the user experience. Like the financial results,

the performance report for the 2009 holiday

season shows modest improvement, with

mixed results for some individual sites.

“Retailers are getting better as a

whole,” says Keynote Director of Internet

Technologies Ben Rushlo, “but surprisingly,

we’re still seeing sites struggle around Black

Friday, Cyber Monday, and intermittently

throughout the holiday season. It’s surprising

that we continue to see issues at the

magnitude we’re seeing them, given that retail

is certainly no longer a niche market online.

It’s a real channel for these retailers.”

Many of the large retailers are

delivering an acceptable customer experience.

Indeed, overall satisfaction with online retail

for the holiday season was up nearly 7 percent,

according to ForeSee Results’ E-Retail

Satisfaction Index. But like the financial

results, a good bit of the improvement was

recovering from poor numbers in 2008. None

of the top 40 sites measured registered a

decline in satisfaction. Amazon was at the top

of the list, with an 87 on ForeSee’s 100-point

scale, followed by QVC at 83, Cabela’s at 82,

and Apple at 81. Not surprisingly, pure-play

Internet retailers had a four-point edge over

their multi-channel peers.xiii

One site that performed beyond

expectations was Sears Canada, though no

doubt it was somewhat of a cliffhanger for

their Web staff — Sears Canada rolled out a

complete overhaul of their site just prior to

the busy holiday season. “We essentially changed everything

from a platform perspective, a navigation

perspective, a technology perspective,”

Rodrigue explained. “It really allows us to

have a platform that can build for the future.

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Keynote Benchmark

saks enjoyed some of the biggest growth of the major retailers during the holiday season, posting 11 percent overall sales growth (9.9 percent same-store). source: retail forward.

Not only did we make the site faster for our

customers, we made it easier for them to use.”

While no site roll-out is perfect,

Sears Canada managed to debut its new site

without major glitches. “We did heavy load

testing up front and then full monitoring

throughout the season,” Rodrigue says. “It

definitely [performed] above our

expectations.”

a Bar ThaT KeePs MovinG UPThe Internet never stands still, and that’s a

problem for most sites, but especially for

highly competitive retail sites. No sooner does

a site get all its kinks worked out, delivering a

satisfying experience to the consumer, than a

new technology or functionality debuts that

quickly becomes de rigueur and sends the

Web quality team scrambling to integrate.

And in the process, new performance

challenges are created.

“On one level, it’s like they’re

running uphill,” says Rushlo. “They optimize

and the site’s running well, and then the next

thing you know everyone wants to have very

large images with zoom, or additional

tracking, or ads, or something else. So it’s a

challenge for them to keep their performance

where it needs to be.”

Cyber monday sTresses siTesBlack Friday was busy, but Cyber Monday

pushed a number of the major sites in the

Keynote Top Retailers Index past the breaking

point. “We saw a total of six sites that we

would classify as ‘meltdown’ on Cyber

Monday, versus two on Black Friday,” Rushlo

says. “We also had nine sites with major

slowdowns. Cyber Monday was definitely the

worst day. There were many more issues.

And as we’ve typically seen, apparel was

again lagging. Apparel typically is a bit

more problematic in terms of quality than

other verticals.”

PrePPinG for 2010It’s a new year. And that means retailers have

a new opportunity to get it right for the 2010

holiday season, which is just 10 short months

away. Those sites that will be the big winners

in 2010 are evaluating their 2009

performance while it is still fresh, and making

their plans to deliver fast, flawless experiences

for shoppers all year, and particularly for the

holidays.

“Performance management,

especially for retailers, has to be top-of-mind

as much as search optimization,” Rushlo says.

“You have to care about the user experience

from a performance perspective. From that

flows a lot of things, like load testing early.

You have to be thinking about load testing in

the summer at the latest.”

Successful performance

management is ingrained in the culture of an

organization. It’s a matter of recognizing that

you can have the best content in the world,

and the best deals, but if you’re not

consistently delivering a fast, successful user

experience, shoppers will go elsewhere.

“Performance for us is one of the

streams we focus on all of the time,” says Sears

Canada’s Rodrigue. “For us it’s 12 months of

the year. It’s not just going to be as we go into

Q4. It’s — how can we improve performance

all the time so it doesn’t become that rush

towards the end of the year?”

“The complexity of sites now

demands constant scrutiny and attention,”

Rushlo adds. “Retail sites in 2010 are

exponentially more complex than retail in

2005, or even in 2007. That complexity makes

it flat-out harder to manage. It makes it

harder to improve, harder to drive long-term

performance improvements. You have to have

ongoing measurement in place.”

MoBiLe: a PrevieW of ThinGs To CoMeIt’s safe to say that mobile played a bigger role

in the 2009 holiday season than ever before,

and will likely be a driving factor in 2010

holiday sales. In the 2009 season, according to

a Deloitte survey reported in The New York Times, 20 percent of shoppers intended to use

their mobile phones for shopping; of those, 45

percent would use them for research, 32

percent for coupons or reviews, and 25

percent to actually make purchases.xiv

Twenty percent is a number that

can’t be ignored, and it is no doubt a

harbinger of things to come. In the 2009

season, the iPhone still owned the lion’s share

of the mobile browsing market. But with

Android handsets coming on strong, and the

major carriers aggressively vying for

smartphone customers, 2010 could very well

be the year when mobile commerce achieves

significant traction.

From a performance perspective,

though, mobile still has a long way to go.

Keynote measured mobile performance for

the period from late November to the

beginning of January, and found home page

load times ranging from a best case of 8.3

seconds to a worst case of more than 34

seconds. (Benchmark has previously reported

that, on their computers or the “wired” Web, a

large percentage of users will abandon sites

that take longer than two seconds to load.)

MoBiLe PaGe Load ranKinGs, hoLiday 2009Inconsistency is the rule rather than the

exception when it comes to mobile commerce

sites. On six out of ten sites measured, a small

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Keynote Benchmark

Best Buy delivered the best overall mobile experience for the holiday season, consistently delivering the fastest page-loads — fast being a relative term for mobile browsers.

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percentage of visitors experienced extremely

long home page load times. Several sites saw

performance degradation of more than 25

percent during their busiest traffic hours. Only

two sites achieved overall availability better

than 90 percent (versus 99+ percent

availability on a computer), and three sites

never averaged above 80 percent availability.

“Consumers on the wired Web are

used to much, much faster times, and often

expect pages to load in two seconds or faster,”

says Keynote Senior Consultant Ken Harker.

“Even the best mobile sites are two to three

times as long as that, despite being optimized

heavily for the mobile phone experience. The

worst sites are taking over half a minute on

average to load each page.”

is There an app for ThaT?Mobile apps are an obvious and immediate

solution to the dismal performance of mobile

Web sites. Side-stepping the performance

issues of mobile browsers and making the best

use of cellular bandwidth, apps give the

retailer more control over the user experience

and can leverage the increasing capabilities of

the iPhone, Nexus, and their rivals,

particularly location-based services.

“The difference between an app and

a site on a phone is like night and day,” says

Rushlo. “Using a Web browser on the phone

today makes you feel handicapped. But an app

is built understanding the challenges, the

handicap of accessing the Web through a

phone. If you’re serious about mobile

commerce, you have to make it as easy to use

as possible. Apps definitely accomplish that.”

Whether it’s through a site that’s

simplified and streamlined for mobile devices,

or dedicated apps that create a uniquely

mobile experience, 2010 is likely to be the year

that mobile commerce comes of age. “Mobile

is like reliving the whole Internet experience

over again,” Rushlo observes. “Just like the

Internet and computers, it’s going to become

part of the framework that we live in every

day. 2010 is probably going to be a pretty good

year for that.”

sUCCeedinG in 2010Assuming the right product mix and the right

price, the significant keys to online retail

success in 2010 will be performance and

accessibility. Wired Web sites need to achieve

flawless availability, reach the magic two-

second page load threshold, and not miss a

beat under the heaviest traffic volume. Mobile

has to be taken seriously as a channel, with a

sharp focus on user experience, whether it’s

through a mobile-optimized site or a

dedicated app, in either case leveraging

smartphones’ geo-location capabilities to drive

store traffic or mobile purchases. Retailers

that concentrate on these two areas early in

the year will optimize their share throughout

the year and during the all-important holiday

season — no matter what whims the economy

follows.

retailers that invest in dedicated mobile apps — like this from industry leader amazon — are likely to achieve greater success in attracting and keeping customers, and actually completing purchases from mobile devices, thanks to an app’s superior speed and customer experience. now is the time to ready mobile platforms, expected to be a big factor in the 2010 holiday season.

Keynote Benchmark

© 2009 Keynote Systems, Inc. All rights reserved. The trademarks of Keynote Systems, Inc. include Keynote®, DataPulse®, CustomerScope®, Keynote CE Rankings®, Keynote Customer Experience Rankings®, Perspective®, Keynote Red Alert®, Keynote Traffic Perspective®, Keynote WebEffective®, The Internet Performance Authority®, MyKeynote® , SIGOS®, SITE®, keynote™, The Mobile & Internet Performance Authority™ and all related trademarks, trade names, logos, characters, design and trade dress are trademarks or registered trademarks of Keynote Systems, Inc. in the United States and other countries and may not be used without written permission.

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i. The Wall Street Journal, “Chain Stores Avoid Deeper Holiday Discounts,” by Elizabeth Holmes and Rachel Dodes, 12/18/09;

survey by National Retail Federation

ii. The Wall Street Journal, “Holiday Cliff Hanger: Stores Hope Last-Minute Shoppers Boost Season,” by Elizabeth Holmes,

12/22/09; survey by America’s Research Group and USB Investment Research

iii. U.S Census Bureau News, “Advance Monthly Sales for Retail and Food Services, December 2009, ”U.S. Department of Com-

merce, 1/14/10

iv. The New York Times, “Retailers See Holiday Sales Rebound from Grim 2008,” by Stephanie Rosenbloom, 1/7/10

v. The Wall Street Journal, “Late Holiday Shopping Puts Retailers Ahead,” by Ann Zimmerman and Rachel Dodes, 12/28/09

vi. National Retail Federation, “Holiday Season Ends On High Note As Sales Increase 1.1%, According to NRF,” 1/14/10

vii. comScore, “comScore Reports $29.1 Billion in U.S. Retail E-Commerce Spending for Full November–December Holiday Season,

Up 4 Percent vs. Year Ago,” 1/6/10

viii. ibid

ix. Retail Forward, “December 2009 Retail Sales”

x. The New York Times, “Retailers See Holiday Sales Rebound from Grim 2008,” by Stephanie Rosenbloom, 1/7/10

xi. ibid

xii. comScore, “comScore Reports $29.1 Billion in U.S. Retail E-Commerce Spending for Full November–December Holiday Season,

Up 4 Percent vs. Year Ago,” 1/6/10

xiii. ForeSee Results, Holiday E-Retail Satisfaction Index (US), “Online Retailers Find a Reason to Celebrate in Dismal Economy,” by

Larry Freed, 12/30/09

xiv. The New York Times, “Mobile Phones Become Essential Tool for Holiday Shopping,” by Claire Cain Miller, 12/18/09

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