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Copyright ©2013 eMarketer, Inc. All rights reserved. The Big Picture: Retail Mcommerce Forecast 2 Smartphone Shopping and Spending Trends 4 Commerce of Convenience (Almost) 7 Conclusions 11 eMarketer Interviews 12 Related eMarketer Reports 12 Related Links 12 January 2013 Executive Summary: Consumers are creatures of convenience. With digital storefronts just an arm’s length away, millions are reaching first for their smartphone when the urge to shop strikes. Whether at home or on the go, these consumers use their phones to browse and research products, hunt for deals and make purchases. 149663 eMarketer’s mobile commerce forecast reflects a confluence of three trends: the expanding number of smartphone shoppers, whose behavior affects commerce in all channels; the growing number of smartphone buyers who enjoy the immediacy of purchasing through their phone and are expected to generate roughly a third of mcommerce sales this year; and the rapid rise in tablet shopping, which will produce the bulk of mcommerce sales over the next four years. This report presents eMarketer’s latest mobile commerce estimates and discusses smartphone shopping and sales trends, including the dual role smartphones play as a sales channel and as an influencer on purchases made through other means. US consumers will spend $13.4 billion on retail purchases made via smartphones in 2013, up from $9.8 billion last year. Despite these gains, buying products (other than digital content) with a smartphone can often be cumbersome. So even though shopping sessions frequently start on a smartphone, they often still end on a computer or in a physical store. Key Questions What is the outlook for mcommerce sales? What level of sales do smartphones generate? How, when and where do consumers use smartphones to shop? Where are retailers falling short in meeting smartphone shoppers’ expectations? billions, % change and % of total retail mcommerce sales US Smartphone Retail Mcommerce Sales, 2011-2016 2011 117.5% 55.0% 2012 31.6% 40.0% 2013 35.0% 2014 24.2% 32.0% 2015 22.7% 30.0% 2016 $7.50 $9.86 $13.44 $16.69 $20.49 $24.32 18.7% 28.0% Smartphone retail mcommerce sales % change % of retail mcommerce sales Note: excludes travel and event ticket sales Source: eMarketer, Jan 2013 149663 www.eMarketer.com 36.3% Cathy Boyle [email protected] Contributors: Christine Bittar, Jeff Grau, Stephanie Kucinskas, Haixia Wang Retail Mobile Commerce Forecast: Shoppers Turn to Smartphones First

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Page 1: E marketer retail mobile commerce

Copyright ©2013 eMarketer, Inc. All rights reserved.

The Big Picture: Retail Mcommerce Forecast 2

Smartphone Shopping and Spending Trends 4

Commerce of Convenience (Almost) 7

Conclusions 11

eMarketer Interviews 12

Related eMarketer Reports 12

Related Links 12

January 2013

Executive Summary: Consumers are creatures of convenience. With digital storefronts just an arm’s length away, millions are reaching first for their smartphone when the urge to shop strikes. Whether at home or on the go, these consumers use their phones to browse and research products, hunt for deals and make purchases. 149663

eMarketer’s mobile commerce forecast reflects a confluence of three trends: the expanding number of smartphone shoppers, whose behavior affects commerce in all channels; the growing number of smartphone buyers who enjoy the immediacy of purchasing through their phone and are expected to generate roughly a third of mcommerce sales this year; and the rapid rise in tablet shopping, which will produce the bulk of mcommerce sales over the next four years.

This report presents eMarketer’s latest mobile commerce estimates and discusses smartphone shopping and sales trends, including the dual role smartphones play as a sales channel and as an influencer on purchases made through other means.

US consumers will spend $13.4 billion on retail purchases made via smartphones in 2013, up from $9.8 billion last year. Despite these gains, buying products (other than digital content) with a smartphone can often be cumbersome. So even though shopping sessions frequently start on a smartphone, they often still end on a computer or in a physical store.

Key Questions

■ What is the outlook for mcommerce sales?

■ What level of sales do smartphones generate?

■ How, when and where do consumers use smartphones to shop?

■ Where are retailers falling short in meeting smartphone shoppers’ expectations?

billions, % change and % of total retail mcommerce salesUS Smartphone Retail Mcommerce Sales, 2011-2016

2011

117.5%

55.0%

2012

31.6%

40.0%

2013

35.0%

2014

24.2%

32.0%

2015

22.7%

30.0%

2016

$7.50

$9.86

$13.44

$16.69

$20.49

$24.32

18.7%

28.0%

Smartphone retail mcommerce sales % change

% of retail mcommerce sales

Note: excludes travel and event ticket salesSource: eMarketer, Jan 2013149663 www.eMarketer.com

36.3%

Cathy Boyle [email protected]

Contributors: Christine Bittar, Jeff Grau, Stephanie Kucinskas, Haixia Wang

Retail Mobile Commerce Forecast: Shoppers Turn to Smartphones First

Page 2: E marketer retail mobile commerce

Retail Mobile Commerce Forecast: Shoppers Turn to Smartphones First Copyright ©2013 eMarketer, Inc. All rights reserved. 2

The Big Picture: Retail Mcommerce Forecast

Today’s mobile shoppers are bewitched by the immediacy of smart devices—the ability they provide to access product information, deals and sales now and the power to purchase now, all with a tap of a fingertip. eMarketer projects double-digit increases in the number of mobile shoppers and buyers over the next two years and expects mobile retail sales to rise from $38.4 billion this year to $86.8 billion in 2016.

Tablets are expected to play a pivotal role in the growth of mobile commerce as consumers adopt these larger but still easily portable devices even faster than they did smartphones. Retail purchases made through tablets are expected to comprise 70% of mcommerce sales in 2016, up from 62% this year.

Likewise, sales made through smartphones are expected to grow at double-digit rates and comprise roughly 30% of mobile commerce sales each year through 2016. Purchases made through other mobile devices, such as ereaders or handheld gaming systems, will represent less than 3% of total mcommerce sales during the period.

billions and % of totalUS Retail Mcommerce Sales, by Device, 2011-2016

Tablet—% of total

Smartphone—% of total

Other mobile devices—% of total

Total

2011

$5.4540.0%

$7.5055.0%

$0.685.0%

$13.63

2012

$13.8656.2%

$9.8640.0%

$0.943.8%

$24.66

2013

$24.0062.5%

$13.4435.0%

$0.962.5%

$38.40

2014

$34.3365.8%

$16.6932.0%

$1.152.2%

$52.17

2015

68.0%

30.0%

2.0%

$46.44

$20.49

$1.37

$68.29

2016

70.3%

28.0%

1.7%

$61.06

$24.32

$1.48

$86.86Note: excludes travel and event ticket salesSource: eMarketer, Jan 2013149662 www.eMarketer.com

149662

An Expanded View of Mobile Commerce

Due to the rapid adoption of tablet devices in the US and the robust growth of the mobile app economy, eMarketer has expanded the scope of its retail mobile commerce forecast. The forecast now includes shopping for or buying physical or digital goods using a browser or app on a mobile phone, tablet, ereader or other handheld device, such as a gaming system or an MP3 player.

Mirroring the retail ecommerce categories established by the US Department of Commerce, sales of mobile apps and in-app purchases are also included in eMarketer’s mcommerce forecast, but travel and event ticket sales are excluded. Point-of-sale payments made using a mobile device at a physical store are also excluded as the mobile device is serving only as a digital wallet for cash or credit.

eMarketer’s retail mcommerce sales forecast and its mobile shopper and buyer forecasts are derived by comparing estimates from other research organizations and weighing overall mcommerce trends.

Mobile Shoppers vs. Buyers: Some consumers use a mobile device to browse, research or compare products but stop short of the mobile checkout counter. eMarketer classifies these “just browsing” consumers as mobile shoppers. Those who buy are referred to by eMarketer as mobile buyers. Both groups have a base age of 14 and have shopped or made a purchase with a mobile device within the past year.

Mobile Registers Are Ringing

Ecommerce sales may ring the loudest but mcommerce sales are chiming in with greater volume each year. Retail sales generated via mobile devices in 2013 are projected to total $38.4 billion and represent 15% of ecommerce sales. eMarketer projects mobile’s annual sales tally will increase by double-digit rates through 2016, at which point roughly a quarter of ecommerce sales will come through mobile devices.

billions, % change and % of retail ecommerceUS Retail Mcommerce Sales, 2011-2016

2011

$13.63

168.9%

7.0%2012

$24.66

81.0%

11.0%2013

$38.4055.7%

15.0%

2014

$52.17

35.8%

18.0%

2015

$68.29

30.9%

21.0%

2016

$86.86

27.2%

24.0%

Retail mcommerce sales % change % of retail ecommerce

Note: excludes travel and event ticket sales; includes sales on tabletsSource: eMarketer, Jan 2013149657 www.eMarketer.com

149657

eMarketer’s retail mcommerce projections have been raised compared to the forecast published in January 2012 to reflect the inclusion of digital content sales and sales made through all mobile devices. The optimistic outlook for growth is based in part on data reported in Q4 2012, including:

■ comScore’s estimate that US retail mcommerce sales in 2011 represented 7.7% of total ecommerce sales.

■ Internet Retailer’s estimate that mobile commerce sales from the 400 biggest retail, ticket and travel companies in the US totaled $10.85 billion and represented 52% of total US mcommerce sales in 2012.

■ Findings from Javelin Strategy and Research that valued the US retail mcommerce market at $20.7 billion for 2012.

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Retail Mobile Commerce Forecast: Shoppers Turn to Smartphones First Copyright ©2013 eMarketer, Inc. All rights reserved. 3

eMarketer believes the estimates made by these companies are conservative given the rapid adoption of tablets and the steady growth of smartphone ownership. Together, these devices are extending traditional shopping hours well into the evening and the average order values made via tablets and smartphones are exceeding desktop averages as consumers grow more comfortable buying through portable devices.

Majority of Online Shoppers are Mobile Shoppers, Too

eMarketer’s mobile shopper forecast reflects a cultural shift toward a mobile-centric lifestyle in the US, one in which all things digital are increasingly accessed through mobile devices. Smartphone and tablet usage is expected to increase rapidly in 2013 and grow at double-digit rates for the next two years.

The mobile shopper and buyer audiences are expected to expand in a similar fashion. eMarketer forecasts the number of mobile shoppers in the US will increase by 24% in 2013 to 118 million consumers and represent 62% of digital shoppers. Over the next four years, the overlap between mobile and digital shoppers will steadily increase as the number of mobile shoppers grows to 174 million in 2016. At that point, roughly eight out of 10 digital shoppers will also be mobile shoppers.

millions and % of digital shoppersUS Mobile Shoppers and Penetration, 2011-2016

2011

68.4

38.4%

2012

94.8

51.5%

2013

118.0

62.2%

2014

139.7

71.5%

2015

159.1

79.1%

2016

174.9

84.6%

Mobile shoppers % of digital shoppers

Note: ages 14; mobile device users who have used their mobile device tobrowse, research or compare products via web browser or mobile appwithin the past year, but have not necessarily made a purchase via mobiledeviceSource: eMarketer, Jan 2013149799 www.eMarketer.com

149799

The rising tide of mobile traffic to retail destinations is a clear sign of the consumer shift toward mobile shopping. A year-long analysis of the traffic patterns of 150 US ecommerce sites conducted by marketing technology provider Monetate showed mobile device activity more than doubled in a year. In Q3 2011, smartphones and tablets combined accounted for less than 8% of traffic for sites using the Monetate platform. Twelve months later, smartphone traffic alone comprised 8% and tablets held a 10% share. A similar

growth trend was noted by research firm comScore: one in eight page views, or 13.3% of all internet visits, in August 2012 (including those outside the retail sector) stemmed from mobile devices, double the share from a year earlier. Unlike the Monetate findings, comScore’s analysis showed mobile phone users outpaced tablet users in site visits by roughly 2-to-1.

“Thirty percent of our site traffic comes from mobile devices and between 70% and 75% of our customers are using iPhones,” said Bridget Dolan, vice president of interactive media at beauty products retailer Sephora. Like Sephora’s customers, the largest share of mobile shoppers on Black Friday and Cyber Monday 2012 used a smartphone to access retail sites, but tablet traffic grew the most year over year, according to findings from IBM Digital Benchmarks. So, while smartphones lead the way now, that is likely to change quickly.

As the number of mobile shoppers goes up, so does the number of buyers. “We’ve definitely seen a progression of our shoppers completing the full purchase on the device. They’re not only browsing and price-comparing, they’re placing full orders,” said Aki Iida, head of mobile for shoe and apparel retailer Zappos.com.

Retail trends and the latest research leads eMarketer to believe that 72 million people in the US will make a purchase through a mobile device in 2013, a figure that will increase nearly 65%, to 119 million, in 2016. The growth of the mobile buyer community will be fueled in greatest measure by the expanding number of tablet users who, as noted in eMarketer’s June 2012 report, “Tablet Shopping Fuels ‘Couch and Pillow’ Commerce,” are more prone to buying. Still, the number of consumers making purchases on a smartphone is expected to increase by double-digit levels for the next three years and contribute significantly to the overall expansion of the mobile buyer population.

The Big Picture: Retail Mcommerce Forecast

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Retail Mobile Commerce Forecast: Shoppers Turn to Smartphones First Copyright ©2013 eMarketer, Inc. All rights reserved. 4

millions and % changeUS Mobile Buyers, 2011-2016

2011

33.2

117.0%

2012

52.5

57.9%

2013

72.6

38.3%

2014

89.1

22.7%

2015

105.1

18.0%

2016

119.6

13.9%

Mobile buyers % change

Note: aages 14+; mobile device users who have used their mobile deviceto make at least one purchase via web browser or mobile app within thepast yearSource: eMarketer, Jan 2013149863 www.eMarketer.com

149863

“Just four years ago mobile commerce barely existed. Today, mobile touches nearly one in every three purchases on eBay,” said Steve Yankovich, vice president of mobile for eBay, in a company blog post on December 11, 2012. Prescription drug retailer Walgreens has also seen the number of customers using a smartphone to order and buy prescription refills steadily increase. “The latest numbers show 40% of our online prescription business now comes from mobile,” said Tim McCauley, Walgreens’ senior director of mcommerce.

Smartphone Shopping and Spending Trends

eMarketer’s adjusted mobile commerce forecast sheds light on several key trends related to smartphone-driven commerce:

■ Roughly six out of seven mobile shoppers, or 100 million US consumers, will use a smartphone to shop in 2013. Over the next three years, the US smartphone shopper population will expand by 55% to comprise 155 million people in 2016, or nearly half of the US population.

■ The number of smartphone buyers will increase by a larger degree (60%) over the next three years as retailers continue to invest in mobile storefronts and gain experience in converting mobile shoppers to buyers. Buyers will represent just over half (53%) of the smartphone shopper population in 2016, leaving significant headroom for growth.

■ Average annual sales per smartphone buyer will rise incrementally through 2016. Indeed, current buyers are expected to spend more as they gain confidence in the channel, but growth in the average annual spend per buyer will be tempered by a larger, more economically diverse smartphone user base. This year, the average smartphone buyer is expected to spend $262 on purchases made with their phone, and that figure will rise 12% over the next three years to reach $295.

Key eMarketer Numbers—US Smartphone RetailMcommerce

99.9

155.351.3

82.3

$13.44

$24.32$262.19

$295.65

Note: *ages 14+; **excludes travel and event ticket salesSource: eMarketer, Jan 2013149864 www.eMarketer.com

Smartphone shoppers*(millions)

Smartphone buyers* (millions)

Smartphone retail mcommercesales** (billions)

Average spend per smartphonebuyer

2013 2016 2013 2016

2013 2016 2013 2016

149864

Spending Preferences and Patterns Emerge

The comfort zone on spending levels is shifting as smartphones become a more commonly accepted shopping channel. Forty-five percent of smartphone owners surveyed by Mojiva said they were comfortable spending $50 or more

The Big Picture: Retail Mcommerce Forecast

Page 5: E marketer retail mobile commerce

Retail Mobile Commerce Forecast: Shoppers Turn to Smartphones First Copyright ©2013 eMarketer, Inc. All rights reserved. 5

on holiday gifts purchased with their phone, up 5 percentage points from a similar survey conducted a year earlier. On the other end of the spectrum, the number who said they wouldn’t spend a penny through their phone was less than half the size it was in 2011, shrinking from 21% to 9%. The “less than $20” and “more than $100” categories grew the fastest year over year as the nonspenders dwindled. The comfort zone for the largest single group of respondents was the $20–$50 price range, as it was the previous year.

% of total

Maximum Amount that US Smartphone OwnersWould Be Comfortable Spending on a Holiday GiftPurchase via Smartphone, 2011 & 2012

Note: 2011 n=205; 2012 n=1,000Source: Mojiva, "Mobile Audience Guide (MAG)," Nov 13, 2012147435 www.eMarketer.com

2011 2012

$021%

$50-$10020%

$100+20%

<$208%

$20-$5031%

$09%

$50-$10021%

$100+24%

<$2012%

$20-$5034%

147435

An August 2012 survey conducted by Research Now for mobile marketing firm Vibes showed a similar breakdown in spending patterns for “connected shoppers,” a subset of the 1,000 smartphone owners polled and defined as those who use a smartphone to perform shopping-related tasks before, during and after making a purchase. Nearly two-thirds of “connected shoppers” said they had made a purchase with their phone, and the largest group of buyers (44%) spent between $20 and $49.

Looking beyond spending preferences to average order values shows basket sizes from smartphones defy the device’s small screen.

For the first three quarters of 2012, average order values from smartphones consistently outpaced desktop averages, according to marketing technology firm Monetate. “The smartphone audience is a smaller data set [compared to the desktop audience] and it has a higher affluent element, so that’s why their numbers are generally higher than traditional [desktop],” said Kurt Heinemann, Monetate’s chief marketing officer.

Q3 2012 data from Monetate showed the average order value for smartphone buyers was $97, which was roughly $6 higher than the desktop average for the same period. However, it was also $6 lower than the smartphone average from the prior year. The decline in the smartphone average order value over the 12 month period was likely due to the smartphone audience growing larger and more economically diverse.

US Average Ecommerce Order Value, by Device, Q3 2011-Q3 2012

Smartphone

Traditional

Tablet

Q3 2011

$104.11

$105.66

$100.76

Q4 2011

$119.74

$104.21

$106.05

Q1 2012

$104.28

$94.57

$96.29

Q2 2012

$96.90

$91.80

$96.37

Q3 2012

$97.82

$91.76

$69.84

Source: Monetate, "Ecommerce Quarterly EQ3 2012," Nov 16, 2012149865 www.eMarketer.com

149865

Top Retailers and Product Categories

A handful of companies and products tend to dominate the mobile commerce landscape. According to Internet Retailer’s “Mobile 400” report, mcommerce sales for the largest retail, ticket and travel companies in the US totaled $10.8 billion in 2012, up from $5.5 billion in 2011. Of that total, 39% was accrued by 10 companies. Amazon topped the list with an estimated $4 billion in mobile receipts; Apple followed with $1.7 billion in sales of mobile apps, music, video and ebooks. QVC and Wal-Mart were ranked fifth and sixth, respectively. The remaining six companies were from the travel sector.

Meanwhile, eBay estimates its mobile transactions totaled $10 billion in 2012, a number equal to the combined mcommerce sales of the Mobile 400 companies, according to Internet Retailer. It’s important to note, however, that eBay’s estimate is for mobile transactions worldwide.

Wal-Mart and Apple appeared again in an October 2012 survey conducted by Equation Research for mobile solutions provider Mobiquity. When the research firm asked 1,000 smartphone and tablet owners which retailers they purchased from most using a smartphone within the past six months, the largest group (23%) said they spent their money at Wal-Mart. Equal shares of the smartphone spenders surveyed (14%) said Target, Best Buy or Apple were their mobile stores of choice.

Brick Meets Click, which consults with clients on how technology is influencing shopping, has found that retailers who succeed with smartphone shoppers are the ones that use the device to solve shoppers’ problems. “Successful retailers are more shopper-centric and they tend to compete by moving more quickly to serve shoppers vs. responding to competition. Some are using mobile to help customers quickly find products in large stores and others are saving shoppers time by letting them use mobile devices to make purchases. They’re solving problems rather than focusing on simply selling more products,” said Bill Bishop, Bricks Meets Click’s chief architect.

Smartphone Shopping and Spending Trends

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Retail Mobile Commerce Forecast: Shoppers Turn to Smartphones First Copyright ©2013 eMarketer, Inc. All rights reserved. 6

% of respondents

Retailers that US Smartphone Owners Browse andBuy from Most on Their Smartphones, Nov 2012

Browse Buy

Wal-Mart 28% 23%

Target 22% 14%

Best Buy 21% 14%

Apple 15% 14%

Macy's 12% 10%

The Home Depot 15% 9%

Lowe's 12% 8%

Walgreens 11% 8%

Kohl's 11% 7%

Costco - 7%

CVS 9% -

Source: Mobiquity, "The Mobile Shopping Satisfaction Report" conductedby Equation Research, Dec 12, 2012149023 www.eMarketer.com

149023

Drilling down to the product level shows smartphone sales in 2012 stemmed mostly from digital products. In an August 15, 2012, blog post, Forrester reported that media products dominated the mcommerce landscape and would continue to lead the way in mobile sales over the next four years. Survey results from online research firm uSamp support Forrester’s assertion: Of 1,100 adult mobile device users polled in September, the largest group of respondents (50%) said they had purchased digital content with their mobile device. Beyond digital products, roughly a third of those polled by uSamp reported buying consumer electronics from a mobile storefront.

A pre-holiday survey conducted by mobile ad network Mojiva showed smartphone owners were getting more comfortable with the idea of buying physical goods with their phones. Of the 1,000 smartphone owners surveyed by Mojiva in September 2012, larger groups said they would consider buying toys and games (56% vs. 52%) and clothing (45% vs. 40%) with their phones compared to a similar survey conducted in 2011. Indeed, the greatest number of respondents said they were willing to buy “electronics” such as movies and music, but growth in the other holiday gift categories indicates smartphone owners were opening their minds to a wider variety of mobile purchases.

% of respondents

Types of Holiday Items that US Smartphone OwnersWould Consider Purchasing on Their Smartphones,2011 & 2012

Electronics (e.g., movies, music)51%

60%

Toys & games52%

56%

Clothing40%

45%

Flights/hotels27%

28%

Decorations23%

24%

Food items19%

20%

Charitable donations17%

17%

None of the above23%

17%

2011 2012

Note: 2011 n=205; 2012 n=1,000Source: Mojiva, "Mobile Audience Guide (MAG)," Nov 13, 2012147434 www.eMarketer.com

147434

Is Smartphone Commerce a Man’s Game?

Research studies conducted among mobile users suggest men are more avid mobile shoppers and buyers than women. These findings are noteworthy given recent data from the Pew Internet & American Life Project and from Arbitron and Edison Research that showed smartphone ownership rates among the two genders were nearly the same and that the smartphone population as a whole was equally split between men and women.

Still, results from a collection of surveys conducted in the lead-up to the 2012 holiday season showed men were more inclined to perform a wider variety of shopping-related tasks with a smartphone than were their female counterparts. And they were more likely to buy. uSamp’s September 2012 survey showed men were more likely to scan a barcode, make a mobile payment, make a purchase with the device and conduct post-purchase activities such as commenting on and reviewing a purchase. The only place where women outpaced men was in the hunt for deals: 44% of female respondents to the uSamp survey said they used a mobile coupon, vs. 35% of the men polled.

Smartphone Shopping and Spending Trends

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Retail Mobile Commerce Forecast: Shoppers Turn to Smartphones First Copyright ©2013 eMarketer, Inc. All rights reserved. 7

% of respondents in each group

Mobile Shopping Activities of US Mobile Device Users,by Gender, Sep 2012

Scanned a barcode91%

85%

Used mobile for payment46%

32%

Made a mobile purchase45%

34%

Used a mobile coupon35%

44%

Commented on a purchase35%

28%

Wrote a review of a purchase26%

16%

Male Female

Source: uSamp as cited in company blog, Sep 12, 2012145482 www.eMarketer.com

145482

“The NRF 2012 Holiday Consumer Spending Survey” conducted in October 2012 by research firm BIGinsight for The National Retail Federation showed similar results. Of the 8,900 consumers surveyed, more men than women said they intended to use their smartphone to research products or compare prices and to make purchases over the holidays. Men planned to use their phone less than women for just two activities: to find store information such as location or hours and to redeem coupons.

While men may not use mobile coupons as frequently as women, they are more likely to use their smartphone to check product information and compare prices in a store to get the best deal. When interactive marketing agency Moosylvania asked 1,800 smartphone users if they used their smartphone in-store to compare prices, 80% of men said “yes” compared to 67% of the female respondents.

Certainly, the gender mix will vary by retail category and merchant, but in general, mobile shopping and buying activities are more popular among men than women. “Our [desktop] website is female-dominant, but on mobile we see more men accessing our store,” said Zappos’ Iiada. This has implications for marketers—not only those who target male consumers, but any marketer interested in attracting more smartphone users to a mobile storefront and more women to a physical store.

Commerce of Convenience (Almost)

For smartphone users, shopping trips are morphing into shopping minutes. They occur at random times throughout the day—from home and afar—and are driven by impulse as often as intent. Curiosity piqued by a television commercial can be instantly satisfied with a smartphone search. And items from shopping lists can be purchased while waiting in a doctor’s office. By comparison, logging on to a computer at home or at work feels like a time-consuming “trip”. Yet many smartphone users still end up in front of a PC or at a physical store because they encounter roadblocks in the mobile checkout process.

Once a consumer owns a smartphone and they get a taste of the type of information, deals and storefronts that are at their fingertips, their reliance on the device ramps up rapidly. Eighty-two percent of smartphone owners surveyed by mobile marketing firm Vibes said their phone was “always or often” within arm’s reach when shopping. And smartphone shoppers surveyed by Deloitte in March 2012 reported using their phone at least 50% of the time, either on the way to a store or in the store itself. The frequency of usage was even higher, closer to 60%, for consumers who shopped in the following categories: appliance/electronics, furniture/home furnishing, food/beverage or health/personal care/drug. These high usage rates suggest that smartphones are highly influential in the purchase process.

An Unbiased Shopping Resource

With internet access in hand and friends just a phone call, text or tweet away, smartphone shoppers have a trusted source of information at their disposal at all times. “People use their phone instead of talking to a salesperson. A salesperson is trying to sell them something, but their phone doesn’t have an agenda. It’s unbiased, so they go to their phone to search for information,” said Jack Philbin, Vibes’ co-founder, president and CEO.

And they frequently tap a variety of sources for research purposes. Of the US smartphone and tablet owners polled by Prosper Mobile Insights in August 2012, 88% of respondents labeled themselves occasional or regular mobile researchers. Another August survey, this one conducted by email marketing provider Yesmail, showed that 64% of US smartphone owners searched for product information on a company’s website using their phone.

Finding product information is just one of a growing number of research activities consumers do with their smartphones. A survey conducted by MarketLive in the build-up to the 2012 holidays shed light on 10 shopping activities online shoppers

Smartphone Shopping and Spending Trends

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Retail Mobile Commerce Forecast: Shoppers Turn to Smartphones First Copyright ©2013 eMarketer, Inc. All rights reserved. 8

expected to do on their phone before visiting a store. The two largest groups of respondents said they would use their phones to check for sales and specials (42%) and to look for competitive pricing on Amazon.com (41%). A slightly smaller group (37%) said they would use their phone to browse an online store for the product they were interested in.

Across the board, more consumers planned to use their smartphone before entering the store during the 2012 holiday season compared to the prior year. Interestingly, two new activities garnered a significant number of responses: 30% of respondents said they would look up prices on the retailer’s own mobile site prior to visiting and 22% said they planned to reserve products for pickup when they arrived at the store.

% of respondents

Mobile Activities US Online Shoppers Will Conduct onTheir Smartphones Before Visiting a Store ThisHoliday Season, 2011 & 2012

Check for sales and specials38%

42%

Look for competitive pricing on Amazon35%

41%

Browse an online store for product of interest33%

37%

Look up store information30%

37%

Look for competitive prices on products at retailers online otherthan Amazon

30%

35%

Check for product ratings and reviews30%

33%

Look for competitive prices on comparison shopping engines26%

30%

Check inventory of a product of interest prior to making a visitto the store

25%

28%

Look up prices on the retailer's mobile site where I wasintending to buy

30%

Reserve products for subsequent pickup at retail store22%

2011 2012

Note: "frequently" or "often"Source: MarketLive, "Fa, La, Fa...30 Last Minute Tricks to Maximize HolidaySelling," Oct 10, 2012146620 www.eMarketer.com

146620

Once in the aisle, the urge to comparison shop and find product reviews kicked in. Forty-nine percent of US mobile Wi-Fi users

polled by location-based platform provider JiWire used their device to comparison shop in Q3 2012, up 10% from the prior year. “Forty-eight percent of the connected shoppers we surveyed said they felt better about their purchase when they used their phones as a resource. So the more retailers can do to engage customers with mobile touchpoints in the store, the better shot they have at retaining their business,” said Vibes’ Philbin.

The habit of turning to the smartphone to gather information during the discovery phase of the purchase process offers marketers unique opportunities to influence buying decisions. Nearly 30% of smartphone users polled in the first quarter of 2012 for the “Our Mobile Planet: United States” study commissioned by Google said research done on their smartphone changed their decision to buy a product online, and a slightly greater number said it changed their mind about buying a product in a store. Marketers who embrace mobile researching behavior as a sign of consumer malleability and deliver relevant content—and offers of value—through mobile channels have a better chance of converting a smartphone shopper into a buyer.

% of respondents

Influence of Smartphones on Purchase DecisionsAccording to US Smartphone Owners, Q1 2012

I intentionally have my smartphone with me to compare pricesand inform myself about products

35%

I have changed my mind about purchasing a product or service instore as a result of information I gathered using my smartphone

32%

I have changed my mind about purchasing a product or serviceonline as a result of information I gathered using my smartphone

29%

Note: n=1,000Source: Google, "Our Mobile Planet: United States" in partnership withIpsos MediaCT, May 1, 2012149880 www.eMarketer.com

149880

Empowered to Roam, but Still Shopping from Home

Indeed, consumers with smartphones can shop from anywhere at anytime. However, the largest group of smartphone users (60%) surveyed by Moosylvania said they were most likely to make a purchase on their phone while at home. “The New Multi-Screen World: Understanding Cross-Platform Consumer Behavior” report published by Google in cooperation with research firm Ipsos and Sterling Brands noted a similar preference for in-home shopping. When 1,600 smartphone, PC and TV users were asked to log their media interactions in a mobile diary over a 24-hour period and were later surveyed about the behaviors noted in the diaries, 60% reported shopping at home with a smartphone while the remainder used the device to browse and buy products outside the home. Compared to the number of respondents who reported shopping out-of-home with a PC or laptop (16%), smartphone users are wonderfully mobile. Still, home is the hub of smartphone shopping.

Commerce of Convenience (Almost)

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% of total interactions

At-Home vs. Out-of-Home Shopping via Smartphoneand PC/Laptop According to US Connected DeviceUsers*, Q2 2012

Note: figures are based on 323 PC/laptop shopping interactions and 152smartphone shopping interactions reported by users; out-of-homerepresents on the go, in-store, at work or elsewhere; *use smartphone, PCand TVSource: Google and Sterling Brands, "The New Multi-Screen World:Understanding Cross-Platform Consumer Behavior" conducted by Ipsos,Aug 29, 2012144876 www.eMarketer.com

PC/laptop Smartphone

In-home84%

Out-of-home

16%

In-home59%

Out-of-home41%

144876

Although smartphones are used steadily throughout the day, usage spikes as the workday ends and consumers settle in at home. With a smartphone, “You can shop in every waking moment of the day, but we see a big burst in mobile shopping in the evening hours,” said eBay’s Yankovich in an interview with Fox Business News on November 20, 2012. A month prior to that, an analysis conducted by mobile ad network Jumptap showed iPhone usage spiked twice in the evening hours: between 4pm and 8pm usage was 16% above the daily average and was 52% above the daily average between 8pm and 12pm.

It’s no surprise the sweet spot for mobile shopping falls within these time periods. USA Touchpoints, a syndicated consumer insights and cross-platform research tool deployed by The Media Behavioral Institute, showed the highest percentage of mobile shopping occurred from 4pm to 8pm. During these hours the average reach among mobile shoppers never dropped below 8% and was as high as 13%.

Confident that consumers would turn to their smartphones after dinner on Thanksgiving Day 2012, eBay started promoting exclusive mobile deals at precisely 5:23pm—the time they anticipated most US consumers would finish eating. “On a holiday, when everyone is together, people talk about gift ideas, so we wanted to provide a convenient way for them to shop,” Yankovich said.

Mobile shopping is situational; there are times when shopping with a smartphone just makes more sense than a laptop or desktop, Yankovich added. “It’s not socially acceptable to bring a computer to the Thanksgiving table, but people are comfortable pulling out their phone.”

The comfort of the couch and the sound of the TV present another situation that motivates smartphone users to shop. Sixty-five percent of US smartphone users surveyed by Vibes said they

had their smartphone within easy reach when watching TV. And roughly half that number (29%) shopped via their phone with the TV on, according to ABI Research. Interestingly, the smartphone users polled by Moosylvania were more inclined to research products with their smartphone while sitting in front of the TV (19%) than when shopping in a store (12%).

shopkick, a mobile app that offers shoppers rewards for walking into stores, noticed that its 4.5 million shoppers were using the shopkick app from home at least six days a month. To better serve these at-home shoppers, the company redesigned the app so those who shopped at home could earn additional “kicks” (reward currency) when they later walked into the store. “The couch is now connected to the store through the reward currency, and we see 51% of all people who walk into a store have previously used the shopkick app at home to prepare for that visit,” said Cyriac Roeding, shopkick’s CEO and co-founder. “And engagement on the couch is also leading to increased engagement in the store. Walk-ins went up by 40% after we redesigned the app.”

Taken together with the data above, this example highlights the opportunity for retailers to increase sales by using smartphones as the link between home and the digital or physical storefront.

First Stop for Shopping, but Not Always the Last

Roughly two thirds of consumers who used multiple digital devices in a day turned to their smartphone first to shop, according to the Google/Ipsos “Multi-Screen World” report. The smartphone won out again with other online activities as well: Sixty-five percent of those polled in August 2012 said they started online searches using their smartphone and 63% reached for their smartphone first to browse the web. The number who started these same activities using a laptop or PC was significantly lower, between 25% and 30%.

% of respondents

Select Activities that Are Started on a Smartphoneand Continued on Other Devices According to USConnected Device Users*, Q2 2012

Social networking

Searching for info

Shopping online

Browsing the internet

Managing finances

Watching an online video

Planning a trip

Started ona smartphone

66%

65%

65%

63%

59%

56%

47%

Continuedon a PC

58%

60%

61%

58%

56%

48%

45%

Continuedon a tablet

8%

4%

4%

5%

3%

8%

3%

Note: read chart as 66% of connected device users have started socialnetworking on a smartphone before moving to another device, with 58%using a PC and 8% using a tablet; numbers may not add up to total due torounding; *use smartphone, PC and TV and have started an activity on onedevice then continued on anotherSource: Google and Sterling Brands, "The New Multi-Screen World:Understanding Cross-Platform Consumer Behavior" conducted by Ipsos,Aug 29, 2012144871 www.eMarketer.com

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Still, most mobile retail apps and websites fall short of meeting shoppers’ expectations and needs. Of the 65% of shoppers who began shopping on their smartphone, nearly all of them moved to their desktop or laptop to finish the task, according to the Google and Sterling Brands study. Research conducted by comScore for PayPal unearthed a similar behavior pattern, but the trend was less amplified. Forty-four percent of consumers who started the purchase process with their smartphone moved to a traditional computer to complete the task, according to comScore’s survey of smartphone and tablet owners.

Certainly, a higher degree of familiarity and comfort with buying products in the more mature (and some believe more secure) desktop environment plays a role in why smartphone shoppers move to the larger screen in the end. However, the lack of storefronts built for touch navigation is also a contributing factor.

In worldwide survey of 889 in-house marketers, agencies, vendors and consultants conducted by Econsultancy between July and August 2012, only a third of respondents said that they had designed a website specifically for mobile phones. Granted, this number was up 40% compared to the research firm’s 2011 survey, indicating that progress is being made. However, the number is still out of proportion to the rapid increase in smartphone usage for shopping-related activities. Usability testing was also limited, according to respondents; more than half (55%) of respondents said they had not yet conducted usability tests to see how their content rendered on mobile devices. While this was likely due to limited resources dedicated to mobile, it means the majority of the group was unaware of how their site rendered on a smaller screen and how a potential shopper would navigate their content with a fingertip instead of a mouse.

% of respondents

Companies Worldwide that Have Designed TheirWebsite Specifically for Mobile Phones or Tablets,2011 & 2012

Mobile phones25%

35%

Tablets13%

23%

Neither70%

61%

2011 2012

Note: 2011 n=307; 2012 n=337 client-side marketersSource: Econsultancy, "Conversion Rate Optimization Report 2012"sponsored by RedEye, Oct 31, 2012147313 www.eMarketer.com

147313

According to an annual mcommerce audit conducted by The Acquity Group, US retailers are better prepared for

smartphone shoppers. The brand commerce and digital marketing firm analyzed the mobile presence of the 300 top retailers named by Internet Retailer and found that 95% had a mobile-optimized website, an improvement of 157% over the previous year’s survey. While this demonstrates significant progress, the analysis also showed just half of the sites rendered properly across the four leading mobile operating systems—iOS, Android, RIM and Windows Mobile.

In addition, the time it takes mobile websites to load far exceeds consumer expectations. According to a smartphone user study conducted by Keynote Competitive Research in the first half of 2012, 64% of smartphone users expected a mobile website page to download in less than four seconds. Yet, the average load times for mobile retail websites in the US hovered between eight and nine seconds, according to Keynote’s mcommerce performance index, which monitors the download speeds of the homepages of 30 well-known retailers.

Indeed, businesses can’t control wireless data speeds, but by building simple (and light) mobile websites they can shave seconds off download times and increase user satisfaction levels. And if smartphone shoppers are presented with finger-friendly navigation and ordering methods, shopping carts are more likely to fill up.

The challenge then becomes understanding and managing mobile shopping cart abandonment. In a survey conducted in April 2012 by research firm Harris Interactive on behalf of MasterCard, 63% of the 2,200 consumers polled said they had abandoned a shopping cart when shopping online through a computer or mobile device. Roughly a quarter said they did so monthly. Looking specifically at mobile, shopping cart recovery firm SeeWhy contends shopping cart abandonment rates on mobile devices are substantially higher. “While the average shopping cart abandonment rate across all devices [tracked by SeeWhy] averaged 72 percent, on mobile devices the rate has been 97% for the past year,” said Charles Nicholls, SeeWhy’s founder and chief strategy officer.

Given smartphone owners’ tendency to use their smartphones to fill downtime moments, their shopping behavior is characterized by multiple starts and stops, which inherently leads to cart abandonment. Pair that behavior with the growing sophistication of consumers—the ease with which they search for product/price information on their phone and their knowledge that items in a cart will often be held there in perpetuity—and it’s easy to see how cart abandonment is becoming part of the shopping process. “Customers are getting used to permanent shopping carts where the contents are stored. They put items into carts simply because it makes it easy to find them again later on,” Nicholls said.

The challenge for retailers is getting those customers to return. Zappos noticed shoppers frequently used the mobile shopping cart as a holding area for items they liked and hoped to purchase. To remind customers of their previous shopping

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sessions and to encourage them to return, Zappos added badge functionality to its app. “It’s like the badge on the text app that tells you the number of unread messages you have. If a shopper adds three items to the shopping cart and closes the app, the badge on the app will remind them they have three items to take action on,” said Iida.

Indeed, behavior alone is not the cause of high abandonment rates. Security concerns and the form factor of the mobile storefront also play a part. “When it comes to making a purchase, people feel most comfortable on a traditional desktop/laptop, where they feel their information is safe. And they may have auto-fill turned on [which facilitates ordering through the desktop], so you’re going to end up with a multidevice path to purchase, which is challenging,” Nicholls said. With a nonlinear path to purchase that is navigated by multiple devices, marketers need to take shopping sessions on all devices into account when calculating conversion rates.

As creatures of convenience, consumers will inevitably turn to the shopping channel that best fits their mood, the moment and their environment. Multichannel shopping is a reality, and as Walgreens has found, shoppers who engage with brands in multiple channels are more valuable than those who use only one channel. “We see the more channels we use to engage with consumers and make it easier for them to shop, the better the overall value. That’s demonstrated by our data that shows customers who buy from us through multiple channels are six times as valuable as those who came through just one channel,” said Walgreens’ McCauley.

The key takeaway for marketers is to make shopping on a smartphone as frictionless an experience as it is online and in-store. Being the method many consumers turn to first to shop, a satisfying smartphone experience not only has the power to deliver a positive first impression, it could be a lasting one as well—one that leaves a business poised to build long-term, potentially lucrative, relationships with consumers.

Conclusions

Retail sales from mobile devices are beginning to represent a significant portion of ecommerce sales. eMarketer forecasts sales from mobile devices will reach $38.4 billion in 2013 and represent 15% of ecommerce sales. That share will increase to 24% in 2016, at which point mcommerce sales will total $86.9 billion.

Smartphone commerce sales will grow by 81% between 2013 and 2016 as smartphone ownership escalates and retail investments in mobile storefronts pay off. The number of smartphone buyers is expected to increase at a faster rate than smartphone shoppers. However, given the larger base of smartphone users, the ratio of these two groups will remain relatively unchanged through 2016. Smartphone buyers will comprise 53% of the smartphone audience in 2016, up from 51% this year. In the long term, that “other half” represents a significant opportunity for growth if marketers can improve site performance and conversion methods.

The vast majority of mobile shoppers have a smartphone within arms reach at all times, and for many it will be the first device they’ll turn to for shopping. A shopping spree could occur at any time and in any place, but the majority of smartphone consumers gravitate toward shopping at home between 4pm and 8pm. Retailers like eBay are targeting promotions to arrive within these prime shopping hours. And companies such as shopkick are building a bridge between the couch and the physical store by rewarding customers for using their smartphone at home prior to visiting a shop in person.

Smartphone shoppers may start shopping on their phone, but they often finish the task on a computer or in a physical store. To some degree, this is a sign that retailers have not yet met the expectations of smartphone shoppers. These consumers habitually turn to their phone in downtime moments and as a result, shopping sessions are not continuous experiences. They are characterized by frequent starts and stops. Retailers like Zappos that remind smartphone shoppers of items left in the mobile shopping cart and that make the phone the most convenient way to buy are winning the favor of these consumers. Yet there will inevitably be times when the most convenient way for smartphone shoppers to seal the deal is via a computer or a visit to a store. The key takeaway for retailers is to ensure the smartphone shopping experience leaves a positive impression on consumers, as that impression (good or bad) will be carried over to whichever channel the consumer chooses to shop through next.

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eMarketer Interviews Zappos Describes Consumers’ Mcommerce Shopping Patterns

Aki Iida Head of Mobile

Zappos.com Interview conducted on December 5, 2012

Walgreens Mobile App Satisfies Customers’ Need for Speed

Tim McCauley Senior Director of Mcommerce

Walgreens Interview conducted on December 7, 2012

Redesigned Rewards App Shopkick Drives 40% More Consumers into Stores

Cyriac Roeding CEO and Co-Founder

shopkick Interview conducted on December 6, 2012

Bill Bishop Chief Architect

Brick Meets Click Interview conducted on November 29, 2012

Bridget Dolan Vice President of Interactive Media

Sephora Interview conducted December 18, 2012

Kurt Heinemann Chief Marketing Officer

Monetate Interview conducted on December 11, 2012

Charles Nicholls Founder and Chief Strategy Officer

SeeWhy Interview conducted on December 7, 2012

Jack Philbin Co-Founder, President and CEO

Vibes Interview conducted on December 3, 2012

Related eMarketer Reports Tablet Shopping Fuels ‘Couch and Pillow’ Commerce Multichannel Customer Service: Best Practices for Building Retail Loyalty

Related Links ABI Research Arbitron The Acquity Group BIGinsight comScore Deloitte Econsultancy Edison Research Equation Research Forrester Google Harris Interactive Internet Retailer IBM Ipsos Javelin Strategy and Research JiWire Jumptap Keynote MarketLive Media Behavioral Institute Mobiquity Mojiva Monetate Moosylvania Nielsen National Retail Federation Pew Internet and American Life Project Prosper Mobile Insights Research Now SeeWhy Sterling Brands Telmetrics TNS Infratest uSamp Vibes Yesmail xAd

Editorial and Production ContributorsNicole Perrin Associate Editorial DirectorCliff Annicelli Senior Copy EditorEmily Adler Copy EditorDana Hill Director of ProductionJoanne DiCamillo Senior Production ArtistStephanie Gehrsitz Senior Production ArtistAllie Smith Director of Charts

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