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September 6, 2012
SCOTT GALLOWAY
NYU Stern

In partnership with:
                       Specialty Retail
                                 © L2 2012 L2ThinkTank.com   Reproductions Prohibited
Excerpt from the 2012 Digital IQ Index : Specialty Retail
                                                                                                                                                                                            Inquire about your brand’s ranking. Contact us.
                                                                             ®

              Specialty Retail
            To access the full report, contact membership@L2ThinkTank.com




What’s Old Is New Again
               The brave new world of social media has simmered as it                                            CAGR, reaching $361 billion in the U.S. by 2016.2 With brick
               appears that (thus far) hype has trumped impact. Meanwhile,                                       and mortar retail flat or declining, the percentage of sales (and
               15+ years on, e-commerce has become the disruptive force first                                    growth) traditional retailers register online could become the
               envisioned in the late 1990s. In the first quarter of 2012, online                                arbiter sorting winners from losers. Many traditional retailers now
               retail spending in the United States reached $44.3 billion, up 17                                 register more than a quarter of their sales online.
               percent YoY.1 E-commerce is expected to grow at a 13.3 percent


               Size Matters
               Scale is beginning to translate online. For the first time, there is a significant relationship       Specialty Retail Video Click to Play
               between the size of a retailer’s business and Digital IQ. The relationship strengthens
               when looking at the size of retailers’ online businesses.


               Department Stores: Rumors of Our Death
               Are Greatly Exaggerated
               Department stores have found sanctuary in the digital domain. Building on the
               successes from 2011 for the first time, the average Digital IQ for the category outpaced
               children of the medium, the e-tailers. The top two spots in the 2012 Digital IQ Index®:
               Specialty Retail were (decisively) captured by Macy’s and Nordstrom, respectively.

               Amazon.com: The Great White Shark of Retail
               A peerless e-commerce experience coupled with a 37 percent share of U.S.
               m-commerce3 make Amazon.com the force reshaping retail. The most recent victims
               are other e-tailers who can’t compete. Amazon now has brick and mortar peers
               squarely in its cross hairs. As Amazon reinvests cheap capital in a supply chain
               marching to same day delivery, it eats away at one of the few remaining advantages                1.	 “comScore Reports $44.3 Billion in Q1 2012 U.S. Retail E-Commerce Spending, Up 17 Percent vs. Year Ago,” comScore Press
                                                                                                                 	    Release, May 9, 2012.
               of terrestrial retail—immediacy. Amazon is the retail ocean’s lone Great White Shark,
                                                                                                                 2.	 “Apparel Drives US Retail Ecommerce Sales Growth,” eMarketer Press Release, April 5, 2012.
               broadening its prey from slow fat seals to … everything that swims.                               3.	 “Amazon To Book $2 Billion In M-Commerce This Year,” Steve Smith, Media Post, September 29, 2011.




© L2 2012 L2ThinkTank.com   Reproductions Prohibited                                                                                                                                                                                           2
Excerpt from the 2012 Digital IQ Index : Specialty Retail
                                                                                                                                                                                                                                     Inquire about your brand’s ranking. Contact us.
                                                                                                  ®

              Specialty Retail
            To access the full report, contact membership@L2ThinkTank.com

                                                                                                                                                                                 2012 Digital IQ vs. 2011 Overall Revenue
                                                                                                                                                                                                                     n=65

                                                                                                                                                                             Danger Zone                                                     Role Models

               Mobile: “I Can’t Believe How Much You’ve Grown!”                                                                                                    50,000
               What was supposed to take ten years took three. Everyone, including Facebook,                                                                                                                                                            Macy’s
                                                                                                                                                                                                                     H&M              JCPenney
               has been caught flat-footed by the adoption rate of smartphones, which has
                                                                                                                                                                                               ZARA                                                  Nordstrom




                                                                                                                                           2011 Overall Revenue
               reached 165 million users in the U.S. alone.4 M-commerce is now the fastest




                                                                                                                                             Log Scale, millions
                                                                                                                                                                                    UNIQLO
               growing retail channel in history, and mobile devices are likely influencing more                                                                                                                                                     Victoria’s Secret
               on- and offline purchases than traditional broadcast, let alone an in-store                                                                          5,000
                                                                                                                                                                                                                                                    Sephora
               salesperson. E-commerce is now m-commerce. Social media is now consumed
                                                                                                                                                                                       Lindt




                                                                                                                                                                                                                                                                    Source: Capital IQ, Yahoo Finance,
                                                                                                                                                                                                                                   Bloomingdale’s
               via mobile app. Digital marketing is now centered on mobile search and mobile-
               optimized email.                                                                                                                                                                                                        Crate & Barrel


               Digital IQ = Shareholder Value                                                                                                                        500
                                                                                                                                                                                   French Connection
                                                                                                                                                                                                               Tumi
                                                                                                                                                                                                                      Blue Nile

               This study attempts to quantify the digital competence of 76 global retail brands.                                                                                                                   Harry & David




                                                                                                                                                                                                                                                                    Annual Reports
                                                                                                                                                                                                    Harry & David

               Our aim is to provide a robust tool to diagnose digital strengths and weaknesses                                                                                                          Rugby

               and help brands achieve greater return on incremental investment. We have                                                                                     Under Resourced               Bluefly
                                                                                                                                                                                                                                                    Scrappy
                                                                                                                                                                      50
               modified our methodology, increasing the weighting of a brand’s site from 30                                                                                 50            70               90                110             130              150
               percent to 40 percent and decreasing the weighting of social media from 20                                                                                                                  2012 Digital IQ
               percent to 10 percent. In addition, with the help of partner STELLAService, we                                                                                                                 Log Scale
               measured each retailers order and return fundamentals, purchasing and tracking
               from three distinct locations. Similar to the medium we are assessing, our                                                                                          2012 Digital IQ vs. 2011 Online Sales
               methodology is dynamic and we hope you will reach out to us with comments                                                                                                                             n=41
                                                                                                                                           2,500
               that improve our methodology, investigation, and findings. You can reach me
               at scott@stern.nyu.edu.                                                                                                                                                                                                                   Macy’s

                                                                                                                                           2,000


                                                                                                                                                                                                                              JCPenney               Victoria’s Secret
                                                                                                                                           1,500
                                                                                                                       2011 Online Sales


               Scott Galloway                                                                                                                                                                                                                                    0.67
                                                                                                                                                                                                                                                                 Correlation
               Clinical Professor of Marketing, NYU Stern
                                                                                                                            millions



                                                                                                                                                                                                                                                                 r2= 0.45
               Founder, L2                                                                                                                 1,000




                                                                                                                                                                                                                                                                                                               Source: Internet Retailer
                                                                                                                                                                                                                 Saks Fifth Avenue                   Nordstrom
                                                                                                                                                                                               Neiman Marcus
                                                                                                                                             500                                                                                       Crate & Barrel

                                                                                                                                                                            Restoration Hardware                                            American Eagle
                                                                                                                                                                                                                                                    Sephora
                                                                                                                                                                            BCBG
                                                                                                                                                    0
                                                                                                                                                            50                    70                90                 110                130                 150                                        170

                                                                                                                                                                                                           2012 Digital IQ
               4.	 “Smartphone Adoption Rate Fastest in Tech History,” Stephanie Miot, PC Magazine, August 27, 2012.
                                                                                                                                           -500

© L2 2012 L2ThinkTank.com      Reproductions Prohibited                                                                                                                                                                                                                                                                                    3
Excerpt from the 2012 Digital IQ Index : Specialty Retail
                                                                                                                                                                                     Inquire about your brand’s ranking. Contact us.
                                                                                ®

                   Specialty Retail
                  To access the full report, contact membership@L2ThinkTank.com




                   ABOUT THE RANKING
                                                                                             The Methodology




   20% Mobile                                                                                                                              40%                        Site
                                                                                                                                            Effectiveness of Brand Site & E-commerce Operations
                                                                                                                                            Functionality & Content – 90%               Brand Translation – 10%
   Compatibility, Optimization, &
                                                                                                                                            • Technology
                               • Aesthetics

   Marketing on Smartphones, Tablets,
   & Other Mobile Devices                                                                                                                   • Navigation & Product/Site Search          • Messaging & Visuals
                                                                                                                                            • Social Media Integration
                   Provided by SapientNitro
   Mobile Site                   Android                                                                                                    • Customer Service & Store Locator
   • Compatibility               • Availability
   • Functionality               • Popularity                                                                                               • Product Page

   • Transaction Capability      • Functionality                                                                                            • Checkout
                                                                                                                                            • Account/Registry
   iOS Applications              Innovation
                                                                                                                                            • Order/Return Timing & Logistics
    (iPhone & iPad)              • SMS
                                                                                                                                             Provided by STELLAService
   • Availability                • Geolocal
   • Popularity                  • Recent Brand Initiatives
   • Functionality




                                                                                                         0%
   • iPad Differentiation 


                                                                                                                             ti ng
                                                                                                                         rke
                                                                                                    3
                                                                                                                                            Search, Display, & Email Marketing Efforts


 10% Social Media                           YouTube Views, Number
                                            of Uploads, Subscriber Growth,
                                            Viral Videos, YouTube Search
                                                                                                          ig  ita
                                                                                                                  l   Ma                    Search
                                                                                                                                            • Traffic
                                                                                                                                            • SEM
                                                                                                                                                                                 Blog & Other User-Generated Content
                                                                                                                                                                                 • Mentions
                                                                                                                                                                                 • Sentiment
  Brand Presence, Community Size,
  Content, & Engagement
                                            Emerging Social Media                                        D                                  • SEO
                                                                                                                                            • Web Authority                      Email
                                            Instagram, Google+,
                                                                                                                                                                                 • Frequency
  Facebook “Likes”, Growth, Tabs &          Pinterest, Tumblr                                                                               Advertising & Innovation             • Content
  Apps, Responsiveness, Interaction Rate
                                            Twitter Customer Service                                                                        • Display                            • Social Media Integration
  Twitter Followers, Growth, Frequency,     Responsiveness                                                                                  • Retargeting                        • Promotions
                                            Provided by STELLAService                                                                       • Brand Initiatives
  Online Voice





                                                                                            Digital IQ Classes
 Genius 140+                                         Gifted 110–139                                          Average 90–109                           Challenged 70–89                          Feeble < 70
 Digital competence is a point of                    Brands are experimenting and innovating across          Digital presence is functional yet       Inconsistent adoption of digital          Investment does not match
 differentiation for these retailers. Brands         their site, mobile, and both traditional and            predictable. Uninspired efforts are      platforms and a lack of vision.           opportunity. Losing ground.
 have user-friendly sites, m-commerce,               emerging social media platforms. Digital presence       often siloed across platforms and        Platforms lacks inspiration
 robust social campaigns, and strong SEO/            is strong, complementing brand image and larger         not always consistent. Middle of         and utility. On the outskirts.
 SEM. Digital is built to last.                      marketing efforts. Primed to make a move.               the pack.

© L2 2012 L2ThinkTank.com     Reproductions Prohibited                                                                                                                                                                           4
Excerpt from the 2012 Digital IQ Index : Specialty Retail
                                                                                                                                                                 Inquire about your brand’s rankings. Contact us.
                                                                                      ®

                        Specialty Retail
                    To access the full report, contact membership@L2ThinkTank.com                                                                                                                                  GENIUS
                                                                                                                                                                                                                     Macy’s
                                                                                                                                                                                                                  Nordstrom
                                                                                                                                                                                                                    GIFTED
                                                                                                                                                                                                           Victoria’s Secret
                                                                                                                                                                                                                    Sephora
                                                                                                                                                                                                  American Eagle Outfitters

                        DIGITAL IQ RANKING                                                                                                                                                                         JCPenney
                                                                                                                                                                                                            Bloomingdale’s
                                                                                                                                                                                                              Crate & Barrel
                                                                                                                                                                                                                        Gap
                                                                                                                                                                                                          Saks Fifth Avenue
                                                                                                                                                                                                          Williams-Sonoma
                                                                                                                                                                                                           Banana Republic
                                                                                                                                                                                                               Ralph Lauren
                                                                                                                                                                                                        lululemon athletica
                                                                                                                                                                                                              Anthropologie
                                                                                                                                                                                                            Urban Outfitters
                                                                                                                                                                                                             Steve Madden
                                                                                                                                                                                                               Tiffany & Co.
           Rank Brand                                     Digital IQ             Rank Brand                 Digital IQ             Rank Brand                                      Digital IQ
                                                                                                                                                                                                                 AVERAGE
                                                                                                                                                                                                                  Nine West
             1   Macy's                                       146                16   Tiffany & Co.           110                  35   Neiman Marcus                                 101                            Express
                                                                                                                                                                                                                       Coach
GENIUS                                                                                                                                                                                                      NET-A-PORTER

             2   Nordstrom                                    145                19   Nine West               109                  35   Shopbop                                       101                            Lacoste
                                                                                                                                                                                                White House | Black Market
                                                                                                                                                                                                               Pottery Barn

             3   Victoria's Secret                            136                20   Express                 108                  37   Aeropostale                                   100
                                                                                                                                                                                                         Barneys New York
                                                                                                                                                                                                                    Blue Nile
                                                                                                                                                                                                                      GUESS

             4                                                                   20                                                37
                                                                                                                                                                                                      A|X Armani Exchange
                 Sephora                                      134                     Coach                   108                       J.Crew                                        100                          west elm
                                                                                                                                                                                                                         H&M
                                                                                                                                                                                                                     Swatch
             5   American Eagle Outfitters                    130                20   NET-A-PORTER            108                  39   L'OCCITANE en Provence                         99              Abercrombie & Fitch
                                                                                                                                                                                                              Juicy Couture
                                                                                                                                                                                                           Neiman Marcus

             6   JCPenney                                     127                20   Lacoste                 108                  39   Chico's                                        99                           Shopbop
                                                                                                                                                                                                                Aeropostale
                                                                                                                                                                                                                      J.Crew
                                                                                      White House | Black
             7   Bloomingdale's                               125                20   Market
                                                                                                              108                  39   Bluefly                                        99         L’OCCITANE en Provence
                                                                                                                                                                                                                      Chico’s
                                                                                                                                                                                                                      Bluefly

             7                                                                   20                                                39
                                                                                                                                                                                                                        LUSH
                 Crate & Barrel                               125                     Pottery Barn            108                       LUSH                                           99                               ALDO




                                                                                                                         AVERAGE
                                                                                                                                                                                                                        bebe
                                                                                                                                                                                                        Bath & Body Works
             9                                                                   26                                                43
                                                                       AVERAGE




                 Gap                                          123                     Barneys New York        107                       ALDO                                           98                             Cartier
                                                                                                                                                                                                           Brooks Brothers
  GIFTED




                                                                                                                                                                                                          7 for All Mankind
           10    Saks Fifth Avenue                            121                26   Blue Nile               107                  44   bebe                                           97                                Tumi
                                                                                                                                                                                                                      Talbots
                                                                                                                                                                                                                       Rugby

           11    Williams-Sonoma                              114                28   Guess                   106                  44   Bath & Body Works                              97                    Harry & David
                                                                                                                                                                                                                 Swarovski
                                                                                                                                                                                                        Bergdorf Goodman

           12    Banana Republic                              112                29   A|X Armani Exchange     105                  46   Cartier                                        96
                                                                                                                                                                                                            CHALLENGED
                                                                                                                                                                                                                        Zales


                                                                                                                                                                                                                  Gymboree
           12    Ralph Lauren                                 112                29   West Elm                105                  46   Brooks Brothers                                96                      Lucky Brand
                                                                                                                                                                                                         American Apparel
                                                                                                                                                                                                                  Ann Taylor

           12    lululemon athletica                          112                31   H&M                     103                  46   7 for All Mankind                              96                      Club Monaco
                                                                                                                                                                                                            Dean & Deluca
                                                                                                                                                                                                                  Cole Haan

           15    Anthropologie                                111                31   Swatch                  103                  49   Tumi                                           95
                                                                                                                                                                                                                      Diesel
                                                                                                                                                                                                                   Tourneau
                                                                                                                                                                                                      Restoration Hardware

                                                                                 33
                                                                                                                                                                                                              Lord & Taylor
           16    Urban Outfitters                             110                     Abercrombie & Fitch     102                  50   Talbots                                        94                   The Body Shop
                                                                                                                                                                                                        Godiva Chocolatier
                                                                                                                                                                                                                       ZARA
           16    Steve Madden                                 110                33   Juicy Couture           102                  50   Rugby                                          94               French Connection
                                                                                                                                                                                                           Stuart Weitzman
                                                                                                                                                                                                                     UNIQLO
                                                                                                                                                                                                                    Intermix
                                                                                                                                                                                                                       BCBG
                                                                                                                                                                                                                   FEEBLE
                                                                                                                                                                                                                       Lindt
                                                                                                                                                                                                                 Ethan Allen




  © L2 2012 L2ThinkTank.com        Reproductions Prohibited                                                                                                                                                         5
Excerpt from the 2012 Digital IQ Index : Specialty Retail
                                                                                                                         Inquire about your brand’s rankings. Contact us.
                                                                                        ®

                          Specialty Retail
                     To access the full report, contact membership@L2ThinkTank.com                                                                                         GENIUS
                                                                                                                                                                             Macy’s
                                                                                                                                                                          Nordstrom
                                                                                                                                                                            GIFTED
                                                                                                                                                                   Victoria’s Secret
                                                                                                                                                                            Sephora
                                                                                                                                                          American Eagle Outfitters

                          DIGITAL IQ RANKING                                                                                                                               JCPenney
                                                                                                                                                                    Bloomingdale’s
                                                                                                                                                                      Crate & Barrel
                                                                                                                                                                                Gap
                                                                                                                                                                  Saks Fifth Avenue
                                                                                                                                                                  Williams-Sonoma
                                                                                                                                                                   Banana Republic
                                                                                                                                                                       Ralph Lauren
                                                                                                                                                                lululemon athletica
                                                                                                                                                                      Anthropologie
                                                                                                                                                                    Urban Outfitters
                                                                                                                                                                     Steve Madden
                                                                                                                                                                       Tiffany & Co.
             Rank Brand                                  Digital IQ                Rank Brand               Digital IQ
                                                                                                                                                                         AVERAGE
                                                                                                                                                                          Nine West
             50   Harry & David                              94                    69   ZARA                   76                                                            Express
                                                                                                                                                                               Coach
                                                                                                                                                                    NET-A-PORTER

             53                                                                    70
AVERAGE




                  Swarovski                                  93                         French Connection      75                                                            Lacoste
                                                                                                                                                        White House | Black Market




                                                                      CHALLENGED
                                                                                                                                                                       Pottery Barn

             54   Bergdorf Goodman                           92                    71   Stuart Weitzman        74
                                                                                                                                                                 Barneys New York
                                                                                                                                                                            Blue Nile
                                                                                                                                                                              GUESS

             55                                                                    72
                                                                                                                                                              A|X Armani Exchange
                  Zales                                      91                         UNIQLO                 73                                                          west elm
                                                                                                                                                                                 H&M
                                                                                                                                                                             Swatch
             56   Gymboree                                   89                    73   Intermix               71                                              Abercrombie & Fitch
                                                                                                                                                                      Juicy Couture
                                                                                                                                                                   Neiman Marcus

             56   Lucky Brand                                89                    73   BCBG                   71                                                           Shopbop
                                                                                                                                                                        Aeropostale
                                                                                                                                                                              J.Crew

             58   American Apparel                           88                    75   Lindt                  67                                         L’OCCITANE en Provence
                                                                      FEEBLE




                                                                                                                                                                              Chico’s
                                                                                                                                                                              Bluefly

             58                                                                    76
                                                                                                                                                                                LUSH
                  Ann Taylor                                 88                         Ethan Allen            64                                                               ALDO
                                                                                                                                                                                bebe
                                                                                                                                                                Bath & Body Works
             60   Club Monaco                                87                                                                                                               Cartier
                                                                                                                                                                   Brooks Brothers
                                                                                                                                                                  7 for All Mankind
             61   Dean & Deluca                              85
CHALLENGED




                                                                                                                                                                                 Tumi
                                                                                                                                                                              Talbots
                                                                                                                                                                               Rugby

             61   Cole Haan                                  85                                                                                                      Harry & David
                                                                                                                                                                         Swarovski
                                                                                                                                                                Bergdorf Goodman

             63   Diesel                                     84
                                                                                                                                                                    CHALLENGED
                                                                                                                                                                                Zales


                                                                                                                                                                          Gymboree
             63   Tourneau                                   84                                                                                                        Lucky Brand
                                                                                                                                                                 American Apparel
                                                                                                                                                                          Ann Taylor

             65   Restoration Hardware                       82                                                                                                        Club Monaco
                                                                                                                                                                    Dean & Deluca
                                                                                                                                                                          Cole Haan

             66
                                                                                                                                                                              Diesel
                  Lord & Taylor                              79                                                                                                            Tourneau
                                                                                                                                                              Restoration Hardware
                                                                                                                                                                      Lord & Taylor
             66   The Body Shop                              79                                                                                                     The Body Shop
                                                                                                                                                                Godiva Chocolatier
                                                                                                                                                                               ZARA
             68   Godiva Chocolatier                         78                                                                                                 French Connection
                                                                                                                                                                   Stuart Weitzman
                                                                                                                                                                             UNIQLO
                                                                                                                                                                            Intermix
                                                                                                                                                                               BCBG
                                                                                                                                                                           FEEBLE
                                                                                                                                                                               Lindt
                                                                                                                                                                         Ethan Allen




© L2 2012 L2ThinkTank.com         Reproductions Prohibited                                                                                                                  6
Excerpt from the 2012 Digital IQ Index : Specialty Retail
                                                                                                                                                                                                                            Inquire about your brand’s ranking. Contact us.
                                                                                                          ®

              Specialty Retail
            To access the full report, contact membership@L2ThinkTank.com

                                                                                                                                                                                  Site Feature Adoption
                                                                                                                                                                               % of Sites with the Following Tools
              Key Findings                                                                                                                                                                July 2010–2012
                                                                                                                                                                                 2010 n=84      2011 n=64       2012 n=76


              The Return of E-commerce
              Brand sites continue to be the primary revenue-generation
              engine online, however significant low-hanging fruit
              remains. Only 50 percent of brands incorporate conversion-
              enhancing user reviews. Similarly, the Facebook “Like” API,                                                                                                                                                                            26%
                                                                                                                                                                                                         28%                                               23%
              a valuable source of incremental traffic, is employed by                                                                                                                                                                                  31%
                                                                                                                                              65%         37%
              only 65 percent of retailers. Most notably, adoption of live
              chat fell to 26 percent, bucking the nationwide trend5 and                                                                                 48%                                           44%
                                                                                                                                                                                        56%
              suggesting that prestige retail brands are not seeing ROI on
              the technology. However, brands are investing more on their                                                                      Product Facebook “Like”                       User Reviews                                Live Chat
              sites than in mobile or social platforms.6

              Site investments appear to pay off—Genius brands keep
              users on their sites two and a half minutes longer than                                                                                                                 Site Visit Duration
              Feeble brands do.                                                                                                                                 3-Month Average Time on Site per User by Digital IQ Class
                                                                                                                                                                               Minutes, July 2012, n=76 brands

                                                                                                                                                 Time           1:00           2:00             3:00           4:00            5:00              6:00           7:00
                                                                                                                                               Genius                                                                                                    6:02
                                                                                                                         Digital IQ Class



                                                                                                                                                Gifted                                                                                    5:11

                                                                                                                                              Average                                                                             4:43

                                                                                                                                            Challenged                                                                            4:44
                                       “Straight e-commerce sites serve a purpose,                                                              Feeble                                                        3:23
                                       but to compete in a digital space a brand’s
                                       web presence needs to be more than pictures
                                       and a shopping cart. To compete in today’s
                                                                                                                                                                              Where Retailers Are Investing6
                                       retail world, the brand needs to create that
                                                                                                                                                                       % of Retail Executives Prioritizing Investments
              personalized, one-of-kind, unique online experience, presenting
                                                                                                                                                                               in the Following Media n=100
              consumers with options they didn’t know they had.”
              – bill kanarick                                                                                                                                                     59%                        35%                      22%
                worldwide cmo, SapientNitro



               5.	 “Live Chat Effectiveness- A Survey of Internet Shoppers 2012,” Bold Chat Research Report.
               6.	 “Website investment still key for online retailers despite the rise of social and mobile,” Maria Wasing,
               	   Econsultancy, September 3, 2012.                                                                                                                    Site                    Mobile                Social Networks
© L2 2012 L2ThinkTank.com       Reproductions Prohibited                                                                                                                                                                                                                7
Excerpt from the 2012 Digital IQ Index : Specialty Retail
                                                                                                                                                                                                      Inquire about your brand’s ranking. Contact us.
                                                                                                           ®

              Specialty Retail
            To access the full report, contact membership@L2ThinkTank.com




              Key Findings                                                                                                                           Referral and Destination Sites for Specialty Retail Sites
                                                                                                                                                     Upstream and Downstream Traffic to and from the Following Sources
                                                                                                                                                                                July 2012
               Red Light, Green Light
                                                                                                                                   % of Upstream Traffic                                              % of Downstream Traffic
               While Facebook’s stock price may be down, the platform
               is not necessarily losing importance. Once again Facebook                                                             Average % of traffic to brand                                         Average % of traffic from
                                                                                                                                     sites from the following                                              brand sites forwarding to
               is a key traffic driver of users to retailer sites, representing                                                                                                                           the following destinations:
                                                                                                                                     sources:
               10 percent of upstream traffic. Conversely, Twitter does
               not represent any reportable upstream traffic, suggesting
               the medium is not a major e-commerce driver. Pinterest                                                                           53%                                                                     49%
               has emerged as a notable source of both upstream and
                                                                                                                                     Google                                                                                       Google
               downstream traffic.

               Analysis of traffic to and from Amazon.com and other third
                                                                                                                                                10%                                                                     14%
               party e-commerce sites reveals higher rates of downstream
               traffic than upstream, reinforcing the threat of the e-tailer.                                                      Facebook                                                                                      Facebook
               Facebook and Amazon together is an even bigger challenge
               to retailers. Last year, 14.5 percent of Amazon.com’s 22.3                                                                       3%                                                                        3%
               million hits7 on Black Friday came from social sites, up from
                                                                                                                                  Competitors                                                                                   Competitors
               9.0 percent in 20108—a powerful force. Overall traffic to
               retailers fell 7.1 percent year over year while Amazon.com’s
               already massive traffic rose 13 percent, suggesting it
               feasts on the traffic cookie while everyone else fights over
                                                                                                                                                2%                   Brand Site                                           3%
                                                                                                                                    Amazon                                                                                        Amazon
               increasingly small crumbs.

                                                                                                                                                1.6%                                                                      2%
                                                                                                                                    Pinterest                                                                                    Pinterest


                                                                                                                                                0.8%                                                                      2%
                                                                                                                                Other E-commerce                                                                             Other E-commerce


                                                                                                                                                0%                                                                    0.05%
                                                                                                                                     Twitter                                                                                      Twitter




               7.	 “Retail traffic on Black Friday up 2%,” Experian Hitwise Blog, November 26, 2011.
               8.	 “Social media helps big retailers drive traffic during the holidays,” internet Retailer, January 30, 2012.


© L2 2012 L2ThinkTank.com        Reproductions Prohibited                                                                                                                                                                                         8
Excerpt from the 2012 Digital IQ Index : Specialty Retail
                                                                                                                                                                                            Inquire about your brand’s ranking. Contact us.
                                                                                                     ®

              Specialty Retail
            To access the full report, contact membership@L2ThinkTank.com




              Key Findings                                                                                                                         Weekly Email Frequency by Category
                                                                                                                                                       Average Number of Emails per Week
                                                                                                                                                                   July 2012

              Back to Basics
              Email enjoys the highest conversion to traffic (4.25 percent
              in Q2 vs. 2.49 percent from search and 0.59 percent from
              social media)9, reinforcing its role as a crucial element of the
              marketing mix.


                                                                                                                                                          4.8
              Although email open rates have fallen on PCs, the number of
                                                                                                                                                                  Department Store
              emails from retailers opened using a mobile device doubled
              between the fourth quarter of 2010 and the second half of
                                                                                                                               2.9    Apparel
                                                                                                                                      (34)
                                                                                                                                                                  (10)



              2011. While almost 70 percent of mobile users delete emails                                                                                                                   2.8      E-tailer
                                                                                                                                                                                                     (4)
              that do not render well, but only 42 percent of brands sent
                                                10


              emails optimized for mobile. Email frequency actually fell year
              over year in our research, suggesting that retailers are getting
              better at segmenting their customers.
                                                                                                                                       1.9 Home & Gift
                                                                                                                                                (10)
                                                                                                                                                              2.3        Beauty
                                                                                                                                                                         & Skincare (5)

              Just 16 percent of brands have a pop-up soliciting email
              signup on their sites, and only 36 percent are sending
                                                                                                                                                               0.3 Watches
                                                                                                                                                                   & Jewelry        (6)
                                                                                                                                                                                           2.2   Accessories
                                                                                                                                                                                                 & Shoes (7)
              abandoned-cart emails (a powerful conversion enhancing
              tactic). Some brands, including Juicy Couture, have taken
              the abandoned cart email a step further, and include product
              suggestions. French Connection offers free delivery in its                                                                               Advanced Email Functionality
              abandoned-cart communications to entice purchase.                                                                                            % of Brands Implementing
                                                                                                                                                                 July 2012, n=76
                                                                                                                                                                  With         Without

                                                                                                                                                 42%                                 36%                                16%




                                                                                                                         58%                           64%                                 84%

                                                                                                                               Email Viewable                 Sending Abandoned                       Email Signup
               9.	 “Social still can’t beat search in online shopping,” Donna Tam, CNET, August 10, 2012.                        on Mobile                   Shopping Cart Emails                       Popup
               10.	 “Email Marketing Benchmarks: Key Data, Trends and Metrics,” Lauren Fisher, eMarketer, August 2012.


© L2 2012 L2ThinkTank.com      Reproductions Prohibited                                                                                                                                                                                 9
Excerpt from the 2012 Digital IQ Index : Specialty Retail
                                                                                                                                         Inquire about your brand’s ranking. Contact us.
                                                                         ®

              Specialty Retail
            To access the full report, contact membership@L2ThinkTank.com


                                                                                            Brand Responsiveness on Twitter
                                                                                    % of Tweets Replied to Within Specified Time Periods
              Key Findings                                                                                July 2012




              Twitter Service
                       StellaService sent one tweet to each retailer
                       every day during the month of July, totaling 2,294
               tweets. Each tweet asked a customer service question that
               required a response from the retailer.

                                                                             8%
                                                                              < 1 hour
                                                                                               10.8% 3.7%
                                                                                                 >1– 8 hours           >8 –24 hours
                                                                                                                                            77.5%
                                                                                                                                              > 24 hours
                 Best Practices:



                  1                                                          “In comparison, during July the country’s largest 25 retailers responded to 47.3 percent of tweets
                 Respond Quickly.                                            within 24 hours and 28.1 percent within one hour. Specialty retailers that have a presence on
                 Shoppers who ask a question over Twitter expect a           Twitter should ensure adequate engagement with shoppers. It’s interesting to note that Amazon
                 response 100 percent of the time. Prioritize the response   has made a conscious decision to not use Twitter as a service medium.”
                 to these shoppers over others who may be making             – John Ernsberger | Co-founder & vp of business developement | stellaService
                 a statement about your brand.


                  2                                                                          Brand Responsiveness on Twitter
                 Provide Recommendations.                                                    % of Brands that Replied Within Specified
                 Go the extra mile by recommending items to your                                           Time Periods
                                                                                                           July 2012, n=75
                 shoppers and provide relevant links.


                  3
                 Recommend Connecting Over the Phone.
                 Shoppers like when their issues are elevated. Suggesting
                 a phone conversation makes a customer feel
                 more important




                                                                                3%
                                                                               <0–3 hours
                                                                                                      28%
                                                                                                       >8 –24 hours
                                                                                                                                           69%
                                                                                                                                             > 24 hours

© L2 2012 L2ThinkTank.com   Reproductions Prohibited                                                                                                                               10
Excerpt from the 2012 Digital IQ Index : Specialty Retail
                                                                                                                                                                                           Inquire about your brand’s ranking. Contact us.
                                                                                                        ®

              Specialty Retail
            To access the full report, contact membership@L2ThinkTank.com




              Key Findings
                                                                                                                                                Social Media Penetration—Emerging Platforms
              The New Girl                                                                                                                             % of Brands on the Following Platforms
              Pinterest reached 10 million unique visitors faster than                                                                                             July 2012, n=76
              any platform in history11 and 86 percent of brands now
              have a presence on the visual site. Although Pinterest has
              yet to monetize this traffic, 32 percent of online shoppers
              have made a purchase based on what they’ve seen on
              Pinterest and other image-sharing sites.12 In addition, the
              incorporation of the platform appears to increase email
              open and click rates.13 Purchases by Pinterest users average
              $80, twice what Facebook users spend.14

                                                                                                                                                           73%                       71%                          42%
              Although presence on Pinterest is strong, utilization and
              strategy still lag. Only 23 percent maintain a board featuring                                                  86%                            Google+                   Instagram
                                                                                                                                                                                                                     Tumblr
                                                                                                                                Pinterest
              user-generated content, and only 14 percent display prices
              on pins. This may soon change with New York City-based
              competitor The Fancy on the horizon. Having already
              surpassed a million members,15 this startup unites the
              visual elements of Pinterest with an upfront flash-sale
                                                                                                                                                                       Pinterest
              e-commerce model.
                                                                                                                                                   % of Pinterest Pages with the Following Features
                                                                                                                                                                     July 2012, n=69




                                                                                                                                                                                            23%                       14%
                                                                                                                                                                 77%
                                                                                                                                                                                                                     Product Prices

                                                                                                                              96%
                                                                                                                                                                                        Board(s) Dedicated to
                                                                                                                                                                                                                        on Pins
               11.	 “Pinterest Hits 10 Million U.S. Monthly Uniques Faster Than Any Standalone Site Ever,” Josh Constine,                                                              User Generated Content
               	    TechCrunch, February 7, 2012.                                                                                                               Links to Other
                                                                                                                             Links to Website
               12.	 “Pinterest leads to sales,” Zac Stambor, internet Retailer, April 25, 2012.                                                                Social Properties
               13.	 “Pinterest Functionality Significantly Increases Email Open and Click Rates,” Cynthia Boris, Marketing
               	    Pilgrim, June 26, 2012.
               14.	 “How Pinterest Drives Ecommerce Sales,” Mark Hayes, shopify, May 16, 2012.
               15.	 “Can The Fancy Fulfill the Dreams of Pinners?,” Scott Gillum, Forbes, August 7, 2012.


© L2 2012 L2ThinkTank.com       Reproductions Prohibited                                                                                                                                                                             11
Excerpt from the 2012 Digital IQ Index : Specialty Retail
                                                                                                                                                                                                                          Inquire about your brand’s ranking. Contact us.
                                                                                                       ®

              Specialty Retail
            To access the full report, contact membership@L2ThinkTank.com




              Key Findings
                                                                                                                                                                                    Mobile Site Features
                                                                                                                                                                        % of Mobile Sites with the Following Features
              Movin’ On Up                                                                                                                                                              July 2012, n=59
              Smartphone penetration is almost 40 percent,16 and tablet                                                                                                                                                                           5%
              adoption skyrocketed from zero to 25 percent in only two
              years.17 69 percent of mobile users have used their device
                                                                                                                                                     44%                  41%                                    25%
              to get product information, and 82 percent of smartphone
              owners use devices to help with shopping in-store.18
              All signs point to a future built around mobile. Seventy
              eight percent of brands in the 2012 index have a mobile-                                                                           56%                            59%                               75%                             95%
              optimized site, up from a quarter two years ago.
                                                                                                                                              Product Social                  Mobile Site                   Customer Service                 M-Commerce
              Brands are building apps for iOS and Android, however                                                                              Sharing                       Search
              iPad app adoption dropped from 39 percent in 2011 to
              29 percent this year. Many retailers demonstrate higher
              conversion from their site on the tablet and likely don’t want
              to obfuscate sales by having an app in the equation. Nine
              brands removed their 2011 iPad applications: Abercrombie
                                                                                                                                                                  Mobile Application Platform Adoption Rates
              & Fitch, Banana Republic, Bath & Body Works, bebe,
                                                                                                                                                                                                  2010 –2012
              Bergdorf Goodman, Bluefly, Diesel, Tiffany & Co., &
              Williams-Sonoma.                                                                                                                                                 2010 (n=81)         2011 (n=64)     2012 (n=76)
                                                                                                                                               60

                                        Mobile Site Adoption                                                                                   50                       51%
                                                                                                                       Percent of Retailers




                                                     2010 – 2012                                                                                                45%
                                                                                                                                               40
                                  2010 (n=81)           2011 (n=64)           2012 (n=76)                                                                                                           39%

                                                                                                                                               30
                                                                                                                                                         28%                                                29%

                                                                                                                                               20                                                                                           21%

                                                                                                                                               10
                                                                                                                                                                                                                                    3%
                                                                                                                                                                                             6%                             6%
                                                                                                                                                0
                         25%                       67%                         78%
               16.	 “Smartphone penetration in the U.S. from 2010 to 2016,” Statista, 2012.                                                                    iPhone                               iPad                          Android
               17.	 “Tablet Shopping Growing, but Retailers Must Keep Up,” eMarketer, June 15, 2012.
               18.	 “The Retailers Definitive Guide to m-Commerce Success,” Cheryl Sansonetti, 5th Finger, May 2012.


© L2 2012 L2ThinkTank.com      Reproductions Prohibited                                                                                                                                                                                                             12
Digital iq-specialty-retail-excerpt
Digital iq-specialty-retail-excerpt
Digital iq-specialty-retail-excerpt
Digital iq-specialty-retail-excerpt

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Digital iq-specialty-retail-excerpt

  • 1. September 6, 2012 SCOTT GALLOWAY NYU Stern In partnership with: Specialty Retail © L2 2012 L2ThinkTank.com Reproductions Prohibited
  • 2. Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com What’s Old Is New Again The brave new world of social media has simmered as it CAGR, reaching $361 billion in the U.S. by 2016.2 With brick appears that (thus far) hype has trumped impact. Meanwhile, and mortar retail flat or declining, the percentage of sales (and 15+ years on, e-commerce has become the disruptive force first growth) traditional retailers register online could become the envisioned in the late 1990s. In the first quarter of 2012, online arbiter sorting winners from losers. Many traditional retailers now retail spending in the United States reached $44.3 billion, up 17 register more than a quarter of their sales online. percent YoY.1 E-commerce is expected to grow at a 13.3 percent Size Matters Scale is beginning to translate online. For the first time, there is a significant relationship Specialty Retail Video Click to Play between the size of a retailer’s business and Digital IQ. The relationship strengthens when looking at the size of retailers’ online businesses. Department Stores: Rumors of Our Death Are Greatly Exaggerated Department stores have found sanctuary in the digital domain. Building on the successes from 2011 for the first time, the average Digital IQ for the category outpaced children of the medium, the e-tailers. The top two spots in the 2012 Digital IQ Index®: Specialty Retail were (decisively) captured by Macy’s and Nordstrom, respectively. Amazon.com: The Great White Shark of Retail A peerless e-commerce experience coupled with a 37 percent share of U.S. m-commerce3 make Amazon.com the force reshaping retail. The most recent victims are other e-tailers who can’t compete. Amazon now has brick and mortar peers squarely in its cross hairs. As Amazon reinvests cheap capital in a supply chain marching to same day delivery, it eats away at one of the few remaining advantages 1. “comScore Reports $44.3 Billion in Q1 2012 U.S. Retail E-Commerce Spending, Up 17 Percent vs. Year Ago,” comScore Press Release, May 9, 2012. of terrestrial retail—immediacy. Amazon is the retail ocean’s lone Great White Shark, 2. “Apparel Drives US Retail Ecommerce Sales Growth,” eMarketer Press Release, April 5, 2012. broadening its prey from slow fat seals to … everything that swims. 3. “Amazon To Book $2 Billion In M-Commerce This Year,” Steve Smith, Media Post, September 29, 2011. © L2 2012 L2ThinkTank.com Reproductions Prohibited 2
  • 3. Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com 2012 Digital IQ vs. 2011 Overall Revenue n=65 Danger Zone Role Models Mobile: “I Can’t Believe How Much You’ve Grown!” 50,000 What was supposed to take ten years took three. Everyone, including Facebook, Macy’s H&M JCPenney has been caught flat-footed by the adoption rate of smartphones, which has ZARA Nordstrom 2011 Overall Revenue reached 165 million users in the U.S. alone.4 M-commerce is now the fastest Log Scale, millions UNIQLO growing retail channel in history, and mobile devices are likely influencing more Victoria’s Secret on- and offline purchases than traditional broadcast, let alone an in-store 5,000 Sephora salesperson. E-commerce is now m-commerce. Social media is now consumed Lindt Source: Capital IQ, Yahoo Finance, Bloomingdale’s via mobile app. Digital marketing is now centered on mobile search and mobile- optimized email. Crate & Barrel Digital IQ = Shareholder Value 500 French Connection Tumi Blue Nile This study attempts to quantify the digital competence of 76 global retail brands. Harry & David Annual Reports Harry & David Our aim is to provide a robust tool to diagnose digital strengths and weaknesses Rugby and help brands achieve greater return on incremental investment. We have Under Resourced Bluefly Scrappy 50 modified our methodology, increasing the weighting of a brand’s site from 30 50 70 90 110 130 150 percent to 40 percent and decreasing the weighting of social media from 20 2012 Digital IQ percent to 10 percent. In addition, with the help of partner STELLAService, we Log Scale measured each retailers order and return fundamentals, purchasing and tracking from three distinct locations. Similar to the medium we are assessing, our 2012 Digital IQ vs. 2011 Online Sales methodology is dynamic and we hope you will reach out to us with comments n=41 2,500 that improve our methodology, investigation, and findings. You can reach me at scott@stern.nyu.edu. Macy’s 2,000 JCPenney Victoria’s Secret 1,500 2011 Online Sales Scott Galloway 0.67 Correlation Clinical Professor of Marketing, NYU Stern millions r2= 0.45 Founder, L2 1,000 Source: Internet Retailer Saks Fifth Avenue Nordstrom Neiman Marcus 500 Crate & Barrel Restoration Hardware American Eagle Sephora BCBG 0 50 70 90 110 130 150 170 2012 Digital IQ 4. “Smartphone Adoption Rate Fastest in Tech History,” Stephanie Miot, PC Magazine, August 27, 2012. -500 © L2 2012 L2ThinkTank.com Reproductions Prohibited 3
  • 4. Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com ABOUT THE RANKING The Methodology 20% Mobile 40% Site Effectiveness of Brand Site & E-commerce Operations Functionality & Content – 90% Brand Translation – 10% Compatibility, Optimization, & • Technology
 • Aesthetics
 Marketing on Smartphones, Tablets, & Other Mobile Devices • Navigation & Product/Site Search • Messaging & Visuals • Social Media Integration
   Provided by SapientNitro Mobile Site Android • Customer Service & Store Locator • Compatibility • Availability • Functionality • Popularity • Product Page
 • Transaction Capability • Functionality • Checkout • Account/Registry iOS Applications Innovation • Order/Return Timing & Logistics (iPhone & iPad) • SMS Provided by STELLAService • Availability • Geolocal • Popularity • Recent Brand Initiatives • Functionality 0% • iPad Differentiation 
 ti ng rke 3 Search, Display, & Email Marketing Efforts 10% Social Media YouTube Views, Number of Uploads, Subscriber Growth, Viral Videos, YouTube Search ig ita l Ma Search • Traffic • SEM Blog & Other User-Generated Content • Mentions • Sentiment Brand Presence, Community Size, Content, & Engagement Emerging Social Media D • SEO • Web Authority Email Instagram, Google+, • Frequency Facebook “Likes”, Growth, Tabs & Pinterest, Tumblr Advertising & Innovation • Content Apps, Responsiveness, Interaction Rate Twitter Customer Service • Display • Social Media Integration Twitter Followers, Growth, Frequency, Responsiveness • Retargeting • Promotions Provided by STELLAService • Brand Initiatives Online Voice
 Digital IQ Classes Genius 140+ Gifted 110–139 Average 90–109 Challenged 70–89 Feeble < 70 Digital competence is a point of Brands are experimenting and innovating across Digital presence is functional yet Inconsistent adoption of digital Investment does not match differentiation for these retailers. Brands their site, mobile, and both traditional and predictable. Uninspired efforts are platforms and a lack of vision. opportunity. Losing ground. have user-friendly sites, m-commerce, emerging social media platforms. Digital presence often siloed across platforms and Platforms lacks inspiration robust social campaigns, and strong SEO/ is strong, complementing brand image and larger not always consistent. Middle of and utility. On the outskirts. SEM. Digital is built to last. marketing efforts. Primed to make a move. the pack. © L2 2012 L2ThinkTank.com Reproductions Prohibited 4
  • 5. Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s rankings. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com GENIUS Macy’s Nordstrom GIFTED Victoria’s Secret Sephora American Eagle Outfitters DIGITAL IQ RANKING JCPenney Bloomingdale’s Crate & Barrel Gap Saks Fifth Avenue Williams-Sonoma Banana Republic Ralph Lauren lululemon athletica Anthropologie Urban Outfitters Steve Madden Tiffany & Co. Rank Brand Digital IQ Rank Brand Digital IQ Rank Brand Digital IQ AVERAGE Nine West 1 Macy's 146 16 Tiffany & Co. 110 35 Neiman Marcus 101 Express Coach GENIUS NET-A-PORTER 2 Nordstrom 145 19 Nine West 109 35 Shopbop 101 Lacoste White House | Black Market Pottery Barn 3 Victoria's Secret 136 20 Express 108 37 Aeropostale 100 Barneys New York Blue Nile GUESS 4 20 37 A|X Armani Exchange Sephora 134 Coach 108 J.Crew 100 west elm H&M Swatch 5 American Eagle Outfitters 130 20 NET-A-PORTER 108 39 L'OCCITANE en Provence 99 Abercrombie & Fitch Juicy Couture Neiman Marcus 6 JCPenney 127 20 Lacoste 108 39 Chico's 99 Shopbop Aeropostale J.Crew White House | Black 7 Bloomingdale's 125 20 Market 108 39 Bluefly 99 L’OCCITANE en Provence Chico’s Bluefly 7 20 39 LUSH Crate & Barrel 125 Pottery Barn 108 LUSH 99 ALDO AVERAGE bebe Bath & Body Works 9 26 43 AVERAGE Gap 123 Barneys New York 107 ALDO 98 Cartier Brooks Brothers GIFTED 7 for All Mankind 10 Saks Fifth Avenue 121 26 Blue Nile 107 44 bebe 97 Tumi Talbots Rugby 11 Williams-Sonoma 114 28 Guess 106 44 Bath & Body Works 97 Harry & David Swarovski Bergdorf Goodman 12 Banana Republic 112 29 A|X Armani Exchange 105 46 Cartier 96 CHALLENGED Zales Gymboree 12 Ralph Lauren 112 29 West Elm 105 46 Brooks Brothers 96 Lucky Brand American Apparel Ann Taylor 12 lululemon athletica 112 31 H&M 103 46 7 for All Mankind 96 Club Monaco Dean & Deluca Cole Haan 15 Anthropologie 111 31 Swatch 103 49 Tumi 95 Diesel Tourneau Restoration Hardware 33 Lord & Taylor 16 Urban Outfitters 110 Abercrombie & Fitch 102 50 Talbots 94 The Body Shop Godiva Chocolatier ZARA 16 Steve Madden 110 33 Juicy Couture 102 50 Rugby 94 French Connection Stuart Weitzman UNIQLO Intermix BCBG FEEBLE Lindt Ethan Allen © L2 2012 L2ThinkTank.com Reproductions Prohibited 5
  • 6. Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s rankings. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com GENIUS Macy’s Nordstrom GIFTED Victoria’s Secret Sephora American Eagle Outfitters DIGITAL IQ RANKING JCPenney Bloomingdale’s Crate & Barrel Gap Saks Fifth Avenue Williams-Sonoma Banana Republic Ralph Lauren lululemon athletica Anthropologie Urban Outfitters Steve Madden Tiffany & Co. Rank Brand Digital IQ Rank Brand Digital IQ AVERAGE Nine West 50 Harry & David 94 69 ZARA 76 Express Coach NET-A-PORTER 53 70 AVERAGE Swarovski 93 French Connection 75 Lacoste White House | Black Market CHALLENGED Pottery Barn 54 Bergdorf Goodman 92 71 Stuart Weitzman 74 Barneys New York Blue Nile GUESS 55 72 A|X Armani Exchange Zales 91 UNIQLO 73 west elm H&M Swatch 56 Gymboree 89 73 Intermix 71 Abercrombie & Fitch Juicy Couture Neiman Marcus 56 Lucky Brand 89 73 BCBG 71 Shopbop Aeropostale J.Crew 58 American Apparel 88 75 Lindt 67 L’OCCITANE en Provence FEEBLE Chico’s Bluefly 58 76 LUSH Ann Taylor 88 Ethan Allen 64 ALDO bebe Bath & Body Works 60 Club Monaco 87 Cartier Brooks Brothers 7 for All Mankind 61 Dean & Deluca 85 CHALLENGED Tumi Talbots Rugby 61 Cole Haan 85 Harry & David Swarovski Bergdorf Goodman 63 Diesel 84 CHALLENGED Zales Gymboree 63 Tourneau 84 Lucky Brand American Apparel Ann Taylor 65 Restoration Hardware 82 Club Monaco Dean & Deluca Cole Haan 66 Diesel Lord & Taylor 79 Tourneau Restoration Hardware Lord & Taylor 66 The Body Shop 79 The Body Shop Godiva Chocolatier ZARA 68 Godiva Chocolatier 78 French Connection Stuart Weitzman UNIQLO Intermix BCBG FEEBLE Lindt Ethan Allen © L2 2012 L2ThinkTank.com Reproductions Prohibited 6
  • 7. Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Site Feature Adoption % of Sites with the Following Tools Key Findings July 2010–2012 2010 n=84 2011 n=64 2012 n=76 The Return of E-commerce Brand sites continue to be the primary revenue-generation engine online, however significant low-hanging fruit remains. Only 50 percent of brands incorporate conversion- enhancing user reviews. Similarly, the Facebook “Like” API, 26% 28% 23% a valuable source of incremental traffic, is employed by 31% 65% 37% only 65 percent of retailers. Most notably, adoption of live chat fell to 26 percent, bucking the nationwide trend5 and 48% 44% 56% suggesting that prestige retail brands are not seeing ROI on the technology. However, brands are investing more on their Product Facebook “Like” User Reviews Live Chat sites than in mobile or social platforms.6 Site investments appear to pay off—Genius brands keep users on their sites two and a half minutes longer than Site Visit Duration Feeble brands do. 3-Month Average Time on Site per User by Digital IQ Class Minutes, July 2012, n=76 brands Time 1:00 2:00 3:00 4:00 5:00 6:00 7:00 Genius 6:02 Digital IQ Class Gifted 5:11 Average 4:43 Challenged 4:44 “Straight e-commerce sites serve a purpose, Feeble 3:23 but to compete in a digital space a brand’s web presence needs to be more than pictures and a shopping cart. To compete in today’s Where Retailers Are Investing6 retail world, the brand needs to create that % of Retail Executives Prioritizing Investments personalized, one-of-kind, unique online experience, presenting in the Following Media n=100 consumers with options they didn’t know they had.” – bill kanarick 59% 35% 22%   worldwide cmo, SapientNitro 5. “Live Chat Effectiveness- A Survey of Internet Shoppers 2012,” Bold Chat Research Report. 6. “Website investment still key for online retailers despite the rise of social and mobile,” Maria Wasing, Econsultancy, September 3, 2012. Site Mobile Social Networks © L2 2012 L2ThinkTank.com Reproductions Prohibited 7
  • 8. Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Key Findings Referral and Destination Sites for Specialty Retail Sites Upstream and Downstream Traffic to and from the Following Sources July 2012 Red Light, Green Light % of Upstream Traffic % of Downstream Traffic While Facebook’s stock price may be down, the platform is not necessarily losing importance. Once again Facebook Average % of traffic to brand Average % of traffic from sites from the following brand sites forwarding to is a key traffic driver of users to retailer sites, representing the following destinations: sources: 10 percent of upstream traffic. Conversely, Twitter does not represent any reportable upstream traffic, suggesting the medium is not a major e-commerce driver. Pinterest 53% 49% has emerged as a notable source of both upstream and Google Google downstream traffic. Analysis of traffic to and from Amazon.com and other third 10% 14% party e-commerce sites reveals higher rates of downstream traffic than upstream, reinforcing the threat of the e-tailer. Facebook Facebook Facebook and Amazon together is an even bigger challenge to retailers. Last year, 14.5 percent of Amazon.com’s 22.3 3% 3% million hits7 on Black Friday came from social sites, up from Competitors Competitors 9.0 percent in 20108—a powerful force. Overall traffic to retailers fell 7.1 percent year over year while Amazon.com’s already massive traffic rose 13 percent, suggesting it feasts on the traffic cookie while everyone else fights over 2% Brand Site 3% Amazon Amazon increasingly small crumbs. 1.6% 2% Pinterest Pinterest 0.8% 2% Other E-commerce Other E-commerce 0% 0.05% Twitter Twitter 7. “Retail traffic on Black Friday up 2%,” Experian Hitwise Blog, November 26, 2011. 8. “Social media helps big retailers drive traffic during the holidays,” internet Retailer, January 30, 2012. © L2 2012 L2ThinkTank.com Reproductions Prohibited 8
  • 9. Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Key Findings Weekly Email Frequency by Category Average Number of Emails per Week July 2012 Back to Basics Email enjoys the highest conversion to traffic (4.25 percent in Q2 vs. 2.49 percent from search and 0.59 percent from social media)9, reinforcing its role as a crucial element of the marketing mix. 4.8 Although email open rates have fallen on PCs, the number of Department Store emails from retailers opened using a mobile device doubled between the fourth quarter of 2010 and the second half of 2.9 Apparel (34) (10) 2011. While almost 70 percent of mobile users delete emails 2.8 E-tailer (4) that do not render well, but only 42 percent of brands sent 10 emails optimized for mobile. Email frequency actually fell year over year in our research, suggesting that retailers are getting better at segmenting their customers. 1.9 Home & Gift (10) 2.3 Beauty & Skincare (5) Just 16 percent of brands have a pop-up soliciting email signup on their sites, and only 36 percent are sending 0.3 Watches & Jewelry (6) 2.2 Accessories & Shoes (7) abandoned-cart emails (a powerful conversion enhancing tactic). Some brands, including Juicy Couture, have taken the abandoned cart email a step further, and include product suggestions. French Connection offers free delivery in its Advanced Email Functionality abandoned-cart communications to entice purchase. % of Brands Implementing July 2012, n=76 With Without 42% 36% 16% 58% 64% 84% Email Viewable Sending Abandoned Email Signup 9. “Social still can’t beat search in online shopping,” Donna Tam, CNET, August 10, 2012. on Mobile Shopping Cart Emails Popup 10. “Email Marketing Benchmarks: Key Data, Trends and Metrics,” Lauren Fisher, eMarketer, August 2012. © L2 2012 L2ThinkTank.com Reproductions Prohibited 9
  • 10. Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Brand Responsiveness on Twitter % of Tweets Replied to Within Specified Time Periods Key Findings July 2012 Twitter Service StellaService sent one tweet to each retailer every day during the month of July, totaling 2,294 tweets. Each tweet asked a customer service question that required a response from the retailer. 8% < 1 hour 10.8% 3.7% >1– 8 hours >8 –24 hours 77.5% > 24 hours Best Practices: 1 “In comparison, during July the country’s largest 25 retailers responded to 47.3 percent of tweets Respond Quickly. within 24 hours and 28.1 percent within one hour. Specialty retailers that have a presence on Shoppers who ask a question over Twitter expect a Twitter should ensure adequate engagement with shoppers. It’s interesting to note that Amazon response 100 percent of the time. Prioritize the response has made a conscious decision to not use Twitter as a service medium.” to these shoppers over others who may be making – John Ernsberger | Co-founder & vp of business developement | stellaService a statement about your brand. 2 Brand Responsiveness on Twitter Provide Recommendations. % of Brands that Replied Within Specified Go the extra mile by recommending items to your Time Periods July 2012, n=75 shoppers and provide relevant links. 3 Recommend Connecting Over the Phone. Shoppers like when their issues are elevated. Suggesting a phone conversation makes a customer feel more important 3% <0–3 hours 28% >8 –24 hours 69% > 24 hours © L2 2012 L2ThinkTank.com Reproductions Prohibited 10
  • 11. Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Key Findings Social Media Penetration—Emerging Platforms The New Girl % of Brands on the Following Platforms Pinterest reached 10 million unique visitors faster than July 2012, n=76 any platform in history11 and 86 percent of brands now have a presence on the visual site. Although Pinterest has yet to monetize this traffic, 32 percent of online shoppers have made a purchase based on what they’ve seen on Pinterest and other image-sharing sites.12 In addition, the incorporation of the platform appears to increase email open and click rates.13 Purchases by Pinterest users average $80, twice what Facebook users spend.14 73% 71% 42% Although presence on Pinterest is strong, utilization and strategy still lag. Only 23 percent maintain a board featuring 86% Google+ Instagram Tumblr Pinterest user-generated content, and only 14 percent display prices on pins. This may soon change with New York City-based competitor The Fancy on the horizon. Having already surpassed a million members,15 this startup unites the visual elements of Pinterest with an upfront flash-sale Pinterest e-commerce model. % of Pinterest Pages with the Following Features July 2012, n=69 23% 14% 77% Product Prices 96% Board(s) Dedicated to on Pins 11. “Pinterest Hits 10 Million U.S. Monthly Uniques Faster Than Any Standalone Site Ever,” Josh Constine, User Generated Content TechCrunch, February 7, 2012. Links to Other Links to Website 12. “Pinterest leads to sales,” Zac Stambor, internet Retailer, April 25, 2012. Social Properties 13. “Pinterest Functionality Significantly Increases Email Open and Click Rates,” Cynthia Boris, Marketing Pilgrim, June 26, 2012. 14. “How Pinterest Drives Ecommerce Sales,” Mark Hayes, shopify, May 16, 2012. 15. “Can The Fancy Fulfill the Dreams of Pinners?,” Scott Gillum, Forbes, August 7, 2012. © L2 2012 L2ThinkTank.com Reproductions Prohibited 11
  • 12. Excerpt from the 2012 Digital IQ Index : Specialty Retail Inquire about your brand’s ranking. Contact us. ® Specialty Retail To access the full report, contact membership@L2ThinkTank.com Key Findings Mobile Site Features % of Mobile Sites with the Following Features Movin’ On Up July 2012, n=59 Smartphone penetration is almost 40 percent,16 and tablet 5% adoption skyrocketed from zero to 25 percent in only two years.17 69 percent of mobile users have used their device 44% 41% 25% to get product information, and 82 percent of smartphone owners use devices to help with shopping in-store.18 All signs point to a future built around mobile. Seventy eight percent of brands in the 2012 index have a mobile- 56% 59% 75% 95% optimized site, up from a quarter two years ago. Product Social Mobile Site Customer Service M-Commerce Brands are building apps for iOS and Android, however Sharing Search iPad app adoption dropped from 39 percent in 2011 to 29 percent this year. Many retailers demonstrate higher conversion from their site on the tablet and likely don’t want to obfuscate sales by having an app in the equation. Nine brands removed their 2011 iPad applications: Abercrombie Mobile Application Platform Adoption Rates & Fitch, Banana Republic, Bath & Body Works, bebe, 2010 –2012 Bergdorf Goodman, Bluefly, Diesel, Tiffany & Co., & Williams-Sonoma. 2010 (n=81) 2011 (n=64) 2012 (n=76) 60 Mobile Site Adoption 50 51% Percent of Retailers 2010 – 2012 45% 40 2010 (n=81) 2011 (n=64) 2012 (n=76) 39% 30 28% 29% 20 21% 10 3% 6% 6% 0 25% 67% 78% 16. “Smartphone penetration in the U.S. from 2010 to 2016,” Statista, 2012. iPhone iPad Android 17. “Tablet Shopping Growing, but Retailers Must Keep Up,” eMarketer, June 15, 2012. 18. “The Retailers Definitive Guide to m-Commerce Success,” Cheryl Sansonetti, 5th Finger, May 2012. © L2 2012 L2ThinkTank.com Reproductions Prohibited 12