MEASURING THE DIGITAL WORLD

State of the U.S. Online Retail Economy

Gian Fulgoni
Chairman
comScore, Inc.
February 19, 2009

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Data sourced from comScore’s global panel of 2MM
Internet users

360° View of Consumer Behavior Analysis Parameters

Web Visiting
Commerce on U.S. Sites

and Viewing

Behavioral activity through January 2009

Demographics Online
Survey issued in January 2009, n = 1035

Life Stages Transactions

Consumer Measurements:
•Visiting
•Buying (incl. product categories)
•Demographics
•Attitudes
•Search
Streaming Search
Video Behavior
Retailer Views:
•Multi-Channel vs. Pure Play


Media The terms Online spending and eCommerce
Exposure are used interchangeably in this presentation

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comScore Customer Knowledge Platform:
°View of 2 Million Global Internet Users
A 360°

■ Designed to be representative of the online population

■ Projectable to the total U.S. population
■ TRUSTe certified for information privacy & security

WEB VISITING & VIEWING DEMOGRAPHICS

– All Web Site/Page Click Stream – Self-reported and validated
– Content Viewed – Appended Segments (e.g. Claritas,
– Search Engine Queries Acxiom)
– Keyword Used – Individual & Household Level

ONLINE TRANSACTIONS SURVEYS

– All Secure Session Activity – E-mail or Contextual “Pops”
– Purchases and Subscriptions – Behavior-activated Surveys
– Price Paid, Shipping & Handling, – Observation of All Surveys Taken
Promotions Across All Suppliers
– Applications/Configurations

MARKETING STIMULI TV VIEWING OFFLINE PURCHASING

– Online Ads – Link to Digital Set Top TV – Linked using Name and Address
– Referral Links Data using name and address – Client CRM Databases
– Retailer Loyalty Card Data
– IRI Scanner Panel Data

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 Validation of comScore Sales Data: Comparison of
comScore to U.S. Department of Commerce

Quarterly U.S. eCommerce Sales Estimates

Source: comScore and U.S. Department of Commerce (DOC)

45
Q4 2008
40
$ Sales
35
DOC: $37.1B
comScore: $39.3B
30
% Change vs. YA
25 DOC: -4.9%
$Billions

comScore: -3.5%
20

15
US Dept of
10 Commerce
comScore
5

0
1Q '01
2Q '01
3Q '01
4Q '01
1Q '02
2Q '02
3Q '02
4Q '02
1Q '03
2Q '03
3Q '03
4Q '03
1Q '04
2Q '04
3Q '04
4Q '04
1Q '05
2Q '05
3Q '05
4Q '05
1Q '06
2Q '06
3Q '06
4Q '06
1Q '07
2Q '07
3Q '07
4Q '07
1Q '08
2Q '08
3Q '08
4Q '08
comScore Estimate = (Total Non-Travel – Event Tickets + Estimated Auction Fees)
Excludes travel and event tickets, but includes auction fees and autos
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Proceed with Caution: Industry and Retailer Predictions for
2008 Holiday eCommerce Growth Biased Towards Good News

•“Forrester expects online retail sales to reach $44 billion during the months of November
and December 2008, a 12% lift over the previous year and the slowest growth to date.”
-Forrester.com, October 21, 2008

“Continuing analysis of data for Internet Retailer’s 2009 edition of the Top 500 Guide
reveals growth for the 151 companies that have broken out web sales so far to be 20.7%”
-Internet Retailer, February 18th, 2009

“Online retailers remain optimistic in the face of a souring economy, with 56.1% expecting
their holiday sales to increase at least 15% over last year, according to a new survey from
trade group Shop.org, a unit of the National Retail Federation, the retailers’ association.”
-Shop.org surveyed 60 online retailers from Oct. 1-20, 2008

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2008 eCommerce Growth Substantially Lower than
Preceding Years

Online Consumer Dollar Sales Growth

Excluding Auctions, Autos and Managed Travel ($Billions)

Source: comScore
+7%

+17% $221
$200
+20%

+22%
$171 +9%
+12%

+26% $143
+13%
+29% $117
+20%
$93
+26%
$72 +33%
+21% +6%
Travel +24%

+24%
+26% +26%
Non-
Travel

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Online sales growth decelerated throughout
2008 while retail sales were held up by
inflation (esp. energy) until Q4 2008

Quarterly eCommerce Growth vs. YA

Source: comScore
23% Q4 Y/Y Growth by Category:
25% 23% Sport and Fitness: +16%
Consumer Electronics: +3%
23% Apparel and Acces.: +2%
19%
17% Furniture & Home: -10%

13%
11%
6%

Q3 '06 Q4 '06 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 -3%

Quarterly Retail Sales Growth vs. YA

(exc. Food Service and Auto)
Source: U.S. Department of Commerce Q4 Y/Y Growth by
Retailer Types:
Gen Merch: -2%
Sports: -3%
Electronics: -5%
Dept Stores: -7%
Clothing: -8%
Furniture: -13%

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Numerous Categories Experienced Sales Declines in
Q4 2008 when Compared to Prior Year

Q4 2008 eCommerce Sales vs. YA

Source: comScore

SPORT & FITNESS 16%

VIDEO GAMES, CONSOLES & ACCESSORIES 10%
CONSUMER ELECTRONICS (x PCs) 3%
APPAREL & ACCESSORIES 2%
COMPUTERS / PERIPHERALS / PDAs -1%
BOOKS & MAGAZINES -5%
TOYS & HOBBIES -7%
FURNITURE, HOME & GARDEN -10%
FLOWERS, GIFTS & GREETINGS -15%
EVENT TICKETS -16%
JEWELRY & WATCHES -24%
OFFICE SUPPLIES -30%
MUSIC, MOVIES & VIDEOS* -34%

-40% -30% -20% -10% 0% 10% 20%

* Does not include digital downloads

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Q4 Online Spending Fell within the Mid-to-Lower
Income Households

Q4 2008 Online Spending vs. YA by Income Segment

Source: comScore

Online Retail Bracket Share of

Income Segment Spending Chg. vs. YA Online Retail

Yr Ago Spending
Under $50,000 -17% 18%

$50,000 - $99,999 -10% 42%

$100,000 or more 17% 40%

Total -3% 100%

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 The Economy’s Impact on eCommerce

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The Internet is important to at least 6 in 10 consumers,
with 50% citing an increase compared to a year ago

Importance of Internet
Source: comScore Survey January 2009

Q: How important has the Internet become Q: How has this changed versus
in providing you with information to help a year ago?
you make buying decisions?

65%

50%
Very Important
Significantly Increased

Slightly Important
Somewhat Increased

Past 3 months Versus a year ago

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Five in ten people are surfing the Internet more to deal
with stress due to the current state of the economy

Q. Which of the following are you doing more of to deal

with stress due to the current state of the economy?

Source: comScore Survey January 2009

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As the economic hardship worsened in 2008, there was a
dramatic increase in people conducting
financial/economic-related searches across the web

Number of Unique Searchers (MM) for Each Term: December 2008 vs. YA
Source: comScore

Y/Y % +27% +58% +100% +83% +160% +157% +223%

change

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Search engines, followed by online coupon sites, have
become very important to consumers when shopping

Importance of Online Sites

Source: comScore Survey January 2009

Q: In the past 3 months, how important have the following sites become when shopping?

67%

54%

42%
39%
35%

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All income segments are turning to coupon sites
more so than they did last year

Number of Unique Visitors (000) to Coupon Sites and Growth vs. Yr Ago
Source: comScore
40,000 50%

+46% 45%
35,000

40%
30,000 +38%

Percent Growth
Unique Visitors

35%

25,000
+33% +33% 30%

20,000 +29% +26% 25%

+21% 20%
15,000 +20%

15%
10,000
+11% 10%

5,000
5%
+4% +4%

0 0%
Feb-2008 Mar-2008 Apr-2008 May-2008 Jun-2008 Jul-2008 Aug-2008 Sep-2008 Oct-2008 Nov-2008 Dec-2008

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Slightly over 50% of consumers say they are using
coupons more often; 4 in 10 receive in the Sunday FSI,
meanwhile 29% use online coupon sites

Ways of cutting back on shopping expenses Ways consumers receive coupons

Use coupons more often

Source: comScore Survey January 2009

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40% of online population using comparison shopping
sites. Number up vs. YA

Comparison Shopping Engine Usage

Source: comScore

Average Monthly Unique Visitors (MM)

+2%
+5%

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 A New Year, A New Outlook?
Consumer Sentiment in Early ‘09

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Consumer Confidence at an All Time Low

"The Consumer Confidence Index™ continues to hover at all-time lows, and it

appears that consumers have begun the New Year with the same degree of
pessimism that they exhibited in the final months of 2008.
-Lynn Franco, Director of the Conference Board Consumer Research Center
Date: January 27, 2009

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On the positive side, energy prices have plummeted,
but food and beverage prices continue to rise

Percent Changes in Price versus Last Year

Source: U.S. Bureau of Labor Statistics

50%

38%
40% 36%
33%
32%
30%
21%
21%
20%
12%
6%
10% 5% 5% 5% 6% 6% 6% 6% 6%
Motor Fuel (Gas)

0%
Food & Beverage
Apr 08 May 08 June 08 July 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 (Food Service and Food At Home)
-10%

-20%
-29%
-30%

-40% -42%

-50%

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Nominal and inflation adjusted retail sales are now
well below year ago levels

Including Autos Year over Year Change in Retail Sales:

Including Autos
10%

5%

0%

-5%

-10%

-15%

Year over Year Change in Retail Sales:

Excluding Autos
10%

5%

0%

-5%

-10%

Source: U.S. Bureau of Economic Analysis

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80+% of consumers are more afraid of the economic
future than ever before; an increase among those
earning less than $100k
Consumer Fear Factor by Income Segments
Q: To what extent do you agree with the following statement:
“I am more afraid about the economic future than ever before.”

+6% +1% -5% %Change vs. Q3

86% 84%
80%

Source: comScore Survey January 2009

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People earning less than $50k have the highest
unemployment rate, while those earning $50k-$100k
are most concerned about losing their jobs

Job Loss Concerns by Income Segments

Source: comScore

Q: Are you concerned about losing your job?

Extremely concerned
27% 36%
40%
Somewhat concerned

Neither

Somewhat unconcerned

Extremely unconcerned

I have already lost my job

Source: comScore Survey January 2009

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Unemployment/job security becomes the top consumer
concern; meanwhile, concern over prices and the
financial markets declines

Top Economic Issues:

• Unemployment for all income groups
•Rising prices for mid and lower income
•Financial markets for upper income

Q: Based on your situation, which one of the following economic conditions most concerns you?

Percent of Respondents Citing Their One Most Important Issue

Source: comScore Surveys – April, July & October 2008; January 2009

Unemployment/ Real Estate/

Rising Prices Job Security Financial Markets Home Values

Apr-08 Jul-08 Oct-08 Jan-09 Apr-08 Jul-08 Oct-08 Jan-09 Apr-08 Jul-08 Oct-08 Jan-09 Apr-08 Jul-08 Oct-08 Jan-09

Total 64% 67% 43% 29% 15% 14% 21% 46% 10% 8% 25% 14% 6% 5% 8% 7%

Household Income

$100k or more 67% 56% 20% 15% 8% 9% 12% 42% 16% 14% 49% 20% 6% 14% 14% 19%

$50k-$99,999 62% 67% 35% 21% 11% 13% 22% 50% 12% 9% 29% 18% 10% 7% 11% 9%

Under $50k 65% 70% 53% 36% 18% 16% 22% 44% 6% 6% 17% 10% 4% 2% 5% 3%

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More consumers are cutting back on spending due to
concerns about the economy; an all time high for
those earning $50k or more

Percent Cutting Back by Income Segment

Source: comScore Surveys – April, July & October 2008; January 2009

Under $50k $50k - $99,999 $100k or more

April 08 July 08 Oct 08 Jan 09 April 08 July 08 Oct 08 Jan 09 April 08 July 08 Oct 08 Jan 09

Q: Are you cutting back on your spending due to concerns about the economy?

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Two in ten people believe the U.S. economy will
improve in the next 3 months; but double that number
believe it will worsen

U.S. Economy Predictions by Income Segments

Source: comScore Survey January 2009

Q: In the next 3 months, do you think the U.S. economy will…

Under $50k $50k - $99,999 $100k or more

24% 28%
19%
Significantly/Slightly Improve

Significantly/Slightly Worsen

42% 42% 46%

-18% -14% -27% Net Pessimistic

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Was Q4 ‘08 the bottom? eCommerce sales in
January grew 2% vs YA; seasonally-adjusted
retail sales grew 1% from Dec. ‘08 to Jan. ‘09

eCommerce Sales (Billions $) and % Growth vs. YA

Source: comScore

45 30%

+25%
40
+23% +23% 25%
+23%
35
+19% 20%
+17%
30
Billions ($)

15%

% Growth
25 +13%

20 10%
+11%

15 +6%
5%
+2%
10

-3% 0%
5

0 -5%
3Q '06 4Q '06 1Q '07 2Q '07 3Q '07 4Q '07 1Q '08 2Q '08 3Q '08 4Q '08 Jan '09

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eCommerce Continues to Gain Market Share from
Retail Stores

eCommerce and Retail Sales Growth in January 2009 vs. YA

Source: comScore for eCommerce &
U.S. Department of Commerce for Retail (DOC)

% change vs. YA

eCommerce (source: comScore) +2%

Retail (source: DOC)

Retail & Food Service -10%

Retail excl. Autos -7%

Furniture & Home Furniture Stores -14%

Electronics Stores -8%

Food & Beverage Stores +2%

Apparel & Accessories Stores -10%

Sporting Goods, Hobby, Book & Music -6%

Stores

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Spending growth slows in upper income segment
and strengthens in middle income segment

Online Spending vs. YA by Income Segment

Source: comScore

Online Retail Bracket Share of

Income Segment Spending Chg. vs. YA Online Retail
Spending in Jan ‘09
Q4 2008 Jan ‘09

Under $50,000 -17% -9% 19%

$50,000 - $99,999 -10% 2% 46%

$100,000 or more 17% 8% 34%

Total -3% +2% 100%

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Some Evidence Emerging of a Cocooning
Phenomenon?

January 2009 eCommerce Sales vs. YA

Source: comScore

SPORT & FITNESS 42%

BOOKS & MAGAZINES 37%
HOME, GARDEN & FURNITURE 14%
FLOWERS, GREETINGS & MISC GIFTS 8%
APPAREL & ACCESSORIES 8%
VIDEO GAMES, CONSOLES & ACCESSORIES 7%
CONSUMER ELECTRONICS (x PCs) 1%
COMPUTERS / PERIPHERALS / PDAs -1%
TOYS & HOBBIES -9%
EVENT TICKETS -13%
JEWELRY & WATCHES -15%
OFFICE SUPPLIES -20%
MUSIC, MOVIES & VIDEOS * -22%
COMPUTER SOFTWARE (X PC GAMES) -58%
* Does not include digital downloads

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Multi-channel retailers grab a larger share of dollars in
the holiday season, perhaps due to heavier focus on
Internet during that time

eCommerce Dollar Share by Channel Type

Source: comScore

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The Percentage of Referred Online Sales Continues to
Increase

Referred and Non-Referred Consumer Buying: January 2009 vs. YA

Source: comScore

Non-referred

Referred

Jan-08 Jan-09

Top Three Shopper Referral Vehicles:

Search, Email and Comparison Shopping

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Search, Email and Comparison Shopping Increase
Importance in Driving Online Sales

% of Referral Sources Buying

Source: comScore

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 Some Closing Thoughts

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Questions savvy marketers should be asking
themselves in the current environment

■ Am I appropriately allocating my marketing/advertising budgets?

■ Online as a more cost-efficient medium with offline sales impact

■ How am I measuring my online advertising performance?

■ Click thru vs. view thru
■ Online and offline performance

■ What is my current coupon/promotion strategy?

■ Growing importance/use of online coupons for consumers

■ Am I using the down economy as a time to build relationships with customers that will pay off
in the future?
■ Strategic messaging
■ CRM strategy

■ Am I optimizing my search strategy in today’s economy?

■ Using the right engine for target segments and term searcher
■ Display overlay on search campaigns

■ Am I being creative, or am I doing what I have always done?

■ Twitter, Facebook, Video Ads, Etc.

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 Thank you!

Note: A copy of this presentation will be sent to all attendees

within 24 hours of today’s webinar.
Proprietary and Confidential Do not distribute without written permission from comScore