THE FUTURE OF RETAIL 2018:

MOBILE COMMERCE
DA N I E L K E Y E S , R E S E A R C H A N A LY S T

PROVIDING IN-DEPTH INSIGHT, DATA, AND ANALYSIS OF EVERYTHING DIGITAL

 US retail is projected to grow by over $200 billion
in 2018
US retail sales, trillions ($)

$5.5

$5.3

$5.1

$4.8
$4.7
$4.6

2014 2015 2016 2017 2018E 2019E

Source: Business Insider Intelligence estimates, US Census Bureau

 And will be worth $6.4 trillion
in 2023
US retail sales, trillions ($)

$6.4
$6.2
$5.9
$5.5 $5.7
$5.1 $5.3
$4.6 $4.7 $4.8

2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E

Source: Business Insider Intelligence estimates, US Census Bureau

So what’s driving this growth?
 In-store retail still makes up
the vast majority of sales
US retail sales, billions ($)

$1,400 In-store E-commerce

$1,200

$1,000

$800

$600

$400

$200

$0
Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018

Source: US Census Bureau

 And its sales are growing
steadily
US in-store YoY sales growth rates
In-store

5.0%
4.3%

3.3% 3.4%
3.1%
2.6%

1.6%
1.2% 1.1%

Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018

Source: US Census Bureau

 But e-commerce is growing nearly
5 times faster than in-store retail
US in-store and e-commerce YoY sales growth rates

In-store E-commerce
16.9%
16.0%
15.2% 15.4% 15.2% 15.4%
14.7% 14.2% 14.7%

5.0%
4.3%
3.1% 3.3% 3.4%
2.6%
1.6% 1.2% 1.1%

Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018

Source: US Census Bureau

 And while consumers are making more purchases
on desktop
US e-commerce sales on desktop PC, billions ($)

$640
$584
$529
$477
$428
$380
$332
$304
$280

2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E

Source: Business Insider Intelligence estimates, US Census Bureau, comScore

 It’s mobile commerce that’s
driving growth
US m-commerce sales, billions ($)

$447

$359

$286
$226
$177
$137
$104
$76
$55

2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E

Source: Business Insider Intelligence estimates, US Census Bureau, comScore

 And it will soon account for nearly 40% of
e-commerce sales
US m-commerce sales volume over total e-commerce

M-commerce Other devices

67% 64% 61%

75% 72% 70%
84% 80% 77%

33% 36% 39%

26% 28% 31%
16% 20% 23%

2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E

Source: Business Insider Intelligence estimates, US Census Bureau, comScore

Mobile will be the most important channel for
e-commerce retailers
 Average time per day US adults spend accessing
smartphone internet

2:16

People spend over 2:03

1:45
2 hours a day
accessing the internet
on their phones

2016 2017 2018

Source: eMarketer, 2018

 Which is more time
than any other device
Share of time spent accessing internet by device in 2018, global

Mobile Desktop Tablet

52% 44% 4%

Source: StatCounter, January-July 2018

 Nearly all of that time is
in apps
Average time per day US adults spend accessing smartphone internet, by minutes

In-app Mobile web

13
13
13

123
109
92

2016 2017 2018

Source: eMarketer, 2018

 And consumers say purchasing on apps saves
money and time
Why US customers use e-commerce apps

Receive deals and offers 68%

Flexibility to buy at any time 64%

Compare products and prices 62%

Save time at the store 54%

See a larger inventory base 53%

Avoid going to the store 47%

Save time by getting curbside pickup 27%

Source: Clutch E-commerce App Survey, n=505 US consumers, 2017

 In-app share of mobile e-commerce sales, North America
App Mobile web

Which explains why

70% of mobile
30%
purchases are through
apps
70%

Source: Criteo, Q1 2018

But consumers demand more from
apps, and retailers should invest to
meet those needs
 Because apps take a long time
to load
Mobile app load times in seconds
46.2

31.1 31.7
26.4

14.4 14.9 15.3 15.6

7.8
3.9 4.1

Sephora Walmart QVC Target Victoria's Sam's Club Charlotte Kohl's Forever 21 Home Zappos
Secret Russe Depot

Note: Times were measured on iOS devices using a Wi-Fi connection.

Source: PacketZoom Mobile App Retail Index, 2017
 And 63% of consumers will abandon an app that takes over 5
seconds to load
Mobile app load times in seconds
46.2
5-second
threshold

31.1 31.7
26.4

14.4 14.9 15.3 15.6

7.8
3.9 4.1

Sephora Walmart QVC Target Victoria's Sam's Club Charlotte Kohl's Forever 21 Home Zappos
Secret Russe Depot

Note: Times were measured on iOS devices using a Wi-Fi connection.

Source: PacketZoom Mobile App Retail Index, n=2,000 US consumers, 2017
 And while retailers say e-commerce growth is
their top priority

Grow e-commerce sales 66%

Improve in-store experience 45%

Streamline fulfillment 45%

Improve e-commerce profitability 38%

Grow in-store digital engagement 38%

Source: Retail Systems Research, n=65, 2017

 Only 38% of retailers plan to
increase their investment
in mobile

Source: BDO Retail Compass Survey of CFOs, n=100, 2017

But retailers that commit to m-commerce
reap the rewards
 Pier 1 Imports worked to
decrease its mobile home
page load times

Source: Internet Retailer, 2017

 Change in Pier 1’s mobile revenue per visit in the three
months post-redesign

+107%
And saw a 107%
increase in mobile
revenue per visit over
the three months after
the redesign

Mobile revenue per visit

Source: Internet Retailer, 2017

 Change in Pier 1’s smartphone conversion rate in the three
months post-redesign

+93%

And a 93% jump in its

smartphone
conversion rate

Smartphone conversion rate

Source: Internet Retailer, 2017

Other mobile features have promise
Augmented reality (AR) has started to take off
 Furniture retailers are using AR to help shoppers preview items in
their homes

Source: Wayfair
 Beauty brands are letting consumers test how products and styles
will appear

Source: YouCam Makeup

 Retailers are even giving shoppers an idea of how much space
products will take up

Source: Boxed
 Consumers expect retailers
to offer AR tools
When UK consumers expect retailers to introduce AR tools by

98%

79%

40%

20%

September 2017 December 2017 March 2018 September 2018

Source: DigitalBridge, n=1,000, 2017

 And one-third of shoppers would be
more likely to buy an item after
previewing it with AR

Source: DigitalBridge, n=1,000 UK consumers, 2017