US Online Commerce Growth and Opportunity Through Shipping

US ONLINECOMMERCE GROWTHAND OPPORTUNITYTHROUGH SHIPPING

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Vendor Research

US Online Commerce Growth and Opportunity Through Shipping

FEDEX

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US ONLINECOMMERCE GROWTHAND OPPORTUNITYTHROUGH SHIPPING

Vendor Research

April 19, 2006

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Published April 19, 2006. © 2006 JupiterResearch, a division of JupiterKagan, Inc.

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Table of Contents1 Market Growth

3 Online Consumers’ Demographics and Behavior

15 Report Methodology

Table of Figures1 US Online Retail Sales, 2004 to 2010

2 Growth Rates of Online Retail Sales, New Online Buyers, and Spending per Buyer, 2004 to 2010

4 Most Important Criteria in Consumers’ Choice of Online Store

5 Consumers’ Attitudes About Online Holiday Shopping

6 Holiday Spending Motivators

8 Loyalty Tactics Ranked by Overall Impact on Metrics

10 Use and Perceived Effectiveness of Loyalty-Driving Tactics

11 Reasons Customers Purchase from Retailers Again

12 Reasons for Cart Abandonment

13 Online Buyers’ Activities After Making Purchases

14 Retailer Communications Consumers Receive After Making Purchases

SUBJECT TO DISCLAIMER ON COVER© 2006 JupiterResearch, a division ofJupiterKagan, Inc./Vendor ResearchCOPYRIGHT STRICTLY ENFORCED


• CONTENTS •



• 1 •

Market Growth

US Online Retail Spending Increasing by 18 Percent in 2006, While Rising at CAGR of 12Percent Through 2010

In 2005, online retail sales grew to $81 billion—a $14 billion increase from 2004.Moreover, sales will rise by a similar amount in 2006 to $95 billion. This consistent year-over-year growth signals strong continued channel adoption by US consumers, and thistrend will persist through 2010 at a compound annual growth rate (CAGR) of 12 percent.Because the online component is the fastest-growing element of most multichannel retailers’ businesses, investment in online business units will likely return to solid early-market levels. Although online sales of $95 billion will only comprise five percent of the$2.1 trillion US retail market in 2006, impact and opportunity lie in the Internet’s off-linesales influence, representing 45 percent of total off-line US retail sales in 2010.

$0

$30

$60

$90

$120

$150

2010200920082007200620052004

Percentage of total US retail salesOnline retail sales

$67

$81$95

$108$121

$133$144

0%

20%

40%

60%

80%

100%

3% 6%6%5%5%5%4%

On

line

Ret

ail S

ales

Per

cen

tag

e o

f To

tal U

S R

etai

l Sal

es

(in billions)Fig. 1 US Online Retail Sales, 2004 to 2010

Note: Retail does not include auto, travel,and prescription drugs. Source: JupiterResearch InternetShopping Model, 11/05 (US only) © 2006 JupiterResearch, a division ofJupiterKagan, Inc.



• 2 •

Key Drivers of Sales Increases Will Shift in Importance in 2006

In 2006, two major drivers will have equal influence on the growth of overall online retailsales. Historically, new online buyers represented the primary force behind increases inonline sales, while growth in wallet share of existing buyers drove a small remainder. Asonline buyers’ share of overall online users nears its cap (approximately 75 percent in2010), however, retailers will find relatively fewer nonbuyers to convert. With online retailsales continuing to grow at a rigorous pace through 2010, growth will instead come from consumers who already purchase online and have decided to shift more of their purchases to the channel.

Most current online buyers are Net veterans (i.e., online tenure of two years or more). In fact, highly tenured groups have spent significantly more online (at least 21 percentmore in 2005) than have groups with relatively less tenure during the past three years,according to JupiterResearch consumer survey data. As these key drivers shift in importance and the online shopping environment matures, retailers will face an increasingly experienced population of online shoppers who are savvy about finding free shipping as well as discount offers and who could have increasingly high expectations regarding customer service as well as the user experience.

0%

5%

10%

15%

20%

25%

30%

2010200920082007200620052004

Growth rate of total online salesGrowth rate of new online buyersGrowth rate of per-buyer spending

Gro

wth

Rat

e

25%

8%10%

12%14%

18%20%

8%

15%

11%

8%6% 5% 4% 3%

8%

9%7% 6% 6% 5%

Fig. 2 Growth Rates of Online Retail Sales, New Online Buyers, and Spending per Buyer, 2004 to 2010

Source: JupiterResearch InternetShopping Model, 11/05 (US only) © 2006 JupiterResearch, a division ofJupiterKagan, Inc.



• 3 •

Online Consumers’ Demographics and Behavior

Middle-Age Adults Dominate Online Purchasing; Spending by Gender Remains Nearly Equal

Middle-age adults (i.e., ages 35 to 49) will remain the heaviest online spenders, accounting for 42 percent of all online retail sales and 30 percent of all online retail buyers in 2010. Online users, ages 18 to 34, will account for 29 percent of total onlineretail sales in 2010. Although online buyers, ages 50 and over, will comprise one of thefastest-growing online buying segments, they will only generate one-quarter of thesesales in 2010. Regarding the remainder, kids and teens (i.e., ages 17 and under) willaccount for four percent of online retail sales in 2010.

Women and men continue to spend along gender lines in terms of categories from whichthey most frequently purchase. Women are dominant purchasers in home, apparel, andfamily-oriented categories, whereas men are most likely to buy consumer electronics,PCs, and sporting goods. Although slightly more women than men currently buy online—with the proportion remaining constant through 2010 at 51 percent—men actually spend more due to the types of products they tend to buy. In addition, many categories(e.g., groceries, health and beauty aids) that lag behind regarding penetration online represent categories in which women do the heavy purchasing off-line.



• 4 •

Ease of Comparison, Retail Similarity Elevate Importance of Price to Online Buyers

In 2005, 45 percent of online buyers said low price was the most important factor inchoosing online stores to purchase from, compared with about 32 percent saying thesame in 2004. Brand expansion has given consumers many options, increasing the difficulty regarding their purchase choice. Price could therefore represent a last-resort differentiator. Furthermore, the ease of comparing products online and the aggressivepromotional schedules of most retailers could have a relatively more direct effect. Forexample, growing traffic to comparison-shopping sites (with their expanded productassortments) could result in online shoppers’ increased facility with comparing prices and getting the best deals. In fact, the proportion of online consumers who said theybelieved visiting comparison-shopping sites was the most efficient way to find andchoose products to buy rose from 45 percent in 2004 to 61 percent in 2005—an increaseof more than one-third.

Helpful product information

Security guarantees

Fast delivery options (e.g., product leaving warehouse on same day as purchase)

Good reputation of store

Promotions/discounts/coupons

Products available (enabling quick shipping)

Low-cost shipping options

Previous experience with store

Low price

9%

9%

10%

14%

14%

17%

21%

26%

45%

0% 20% 40% 60% 80% 100%

Percentage of Online Buyers

Fig. 3 Most Important Criteria in Consumers’ Choice of Online Store

Question: Which of the following helpedyou choose the online store from whichyou made your most recent purchase?(Select up to three.)Source: JupiterResearch/Ipsos-InsightRetail Consumer Survey (8/05), n = 1,629(online buyers, US only)© 2006 JupiterResearch, a division ofJupiterKagan, Inc.



• 5 •

Consumers’ Actions Do Not Match Their Perceptions Regarding Free Shipping

Online holiday spending reached $27.2 billion in November 2005 and December 2005—a23 percent increase from 2004 online holiday sales. According to a JupiterResearch survey during the 2005 holiday season, free shipping was extremely important to consumers (because of high gas/fuel prices), with 56 percent of online holiday shopperssaying free shipping was a key driver in determining stores from which they purchased.Moreover, customers said free shipping for online purchases during the holiday seasonhad more importance in 2005 than in 2004, regardless of increased, static, or decreasedbudget plans (vs. their 2004 online holiday spending). However, consumers respond tofree shipping offers for regularly planned purchases, rather than for items they have notplanned to buy (e.g., holiday gifts). In a recent JupiterResearch post-holiday survey, only14 percent of online holiday buyers said they took advantage of free shipping offers.Although consumers perceive free shipping as key to online buying, they rarely make theeffort to find or redeem these offers beyond regular purchases.

Also, nearly one-third of online buyers said they would be willing to pay for shipping toavoid shopping malls (31 percent) and gas expense (30 percent), which is good news forretailers. These customers are 14 percent more likely to be male, 17 percent more likely tospend more online, and 18 percent more likely to have online tenure of fewer than twoyears, compared with average buyers. Retailers could capture incremental sales by targeting first-time male buyers and men with buying tenure of less than one year, using“avoid the malls,” “save gas,” and convenience messaging—rather than heavily relyingon free shipping offers.

I’d buy items I had not planned to buy to qualify for free shipping

I am willing to make my last-minute purchases online because I trust they

will deliver products on time

I do my research online early and then go to off-line stores to purchase

(to save on shipping)

I begin looking for gifts early in the season and buy when I find the best item,

regardless of sales and promotions

I am willing to pay to ship online orders because I save on gas to get to the mall

I don’t mind paying to ship online orders if I don’t have to go to my local stores to shop

I only buy at stores I know online (to guarantee I get what I want, when I want)

Getting free shipping on online orders is more important to me this year because

of high gas/fuel prices

21%

23%

24%

29%

30%

31%

36%

56%

0% 20% 40% 60% 80% 100%

Percentage of Online Holiday Shoppers

Fig. 4 Consumers’ Attitudes About Online Holiday Shopping

Question: Which of the following statements about shopping online forgifts during this holiday season apply toyou? (Select all that apply.)Source: JupiterResearch/Ipsos-InsightConsumer Survey (10/05), n = 831 (onlineholiday shoppers, US only)© 2006 JupiterResearch, a division ofJupiterKagan, Inc.



• 6 •

Convenience, Discounts Drive 78 Percent of Online Buyers to Spend More

In 2005, 78 percent of online holiday buyers spent more online than they did in 2004.However, only 36 percent of online holiday buyers said they intended to increase theirspending in the JupiterResearch survey before the holidays. This difference in intent andactual behavior largely results from consumers’ dismal perception of the economy duringthe run-up to the holiday selling season. Consumers said macroeconomic factors (e.g.,record-high gas/fuel prices) were primary reasons for their cautious approach to holidayspending. However, only three percent of online holiday buyers in the post-holiday surveysaid high gas/fuel prices prompted them to spend more online in 2005 than in 2004, andless than one percent of the same shoppers said decreasing fuel prices during the seasonmotivated their increased spending. Instead, traditional online shopping motivators (e.g.,convenience, discounts)—not macroeconomic factors—were primary drivers of increasedspending. To impact the psyche of online buyers, online retailers should include macro-economic factors in messaging, while highlighting the convenience and benefits of onlineshopping that motivate consumers’ real action.

Gas/fuel prices went down so I could spend more

Previously researched and decided to try online buying

Had to ship most of my gifts this year

Bought online because gas/fuel prices were high

Search engine/comparison sites helped me find right gifts

Had good experience last time I purchased online

Prices cheaper online (vs. off-line)

Can find free shipping offers online

Can find good discount offers online

Wanted to avoid crowds at mall/store

Shopping online is more convenient than is going to the store

1%

2%

3%

3%

5%

6%

9%

13%

15%

19%

25%

0% 20% 40% 60% 80% 100%

Percentage of Online Holiday Buyers

Fig. 5 Holiday Spending Motivators

Question: Which of the following reasonsencouraged you to spend more moneyonline during the 2005 holiday season,compared with the 2004 holiday season?(Select up to three.)Source: JupiterResearch/Ipsos-InsightConsumer Survey (1/06), n = 2,369 (onlineusers, US only), n = 1,769 (online holidaybuyers, US only) © 2006 JupiterResearch, a division ofJupiterKagan, Inc.



• 7 •

Retail Loyalty: Creating Lasting Bonds with Online Customers

Retailers must make loyalty generation a tactical priority to avoid having to reacquire customers and escalate marketing costs. By developing a relatively more broadly definedvision of loyalty, they can fully realize the business benefit these faithful customers bring.Retailers must include the following key components of loyalty in evaluation of their customer bases:

• Frequency. Retailers must establish a dialogue and relationship with customers. To do so, they

should generate a frequency of interaction appropriate for each type of product sold.

• Spending. Alone, spending does not indicate customers’ loyalty. However, a goal of generating

loyalty is to increase sales (and spend relatively less in doing so). Thus, spending is a key

component of the loyalty landscape.

• Trust and advocacy. The degree to which customers trust retailers/brands and refer other

customers is somewhat difficult to measure but important in gauging customers’ loyalty.

By adding this relatively qualitative view to other quantitative measures, retailers can assess

the strength of the emotional bond they have with customers. Also, retailers can evaluate

advocacy (e.g., through referral rates), identifying customers who are not necessarily high

spenders but who are still very valuable due to their ability to refer new customers.



• 8 •

Top Loyalty Tactics Help Customers to Be Efficient, and Provide Personal Recognition

In a recent executive survey, JupiterResearch asked retailers about tactics they used todrive loyalty among their customers. JupiterResearch then evaluated use of those tacticsby their impact on 10 key retail metrics, such as conversion rate and call center contacts,ranking tactics in order from the highest positive influence to the lowest. (See Figure 6.)Tactics that enabled customers to be efficient (e.g., features allowing them to manage theirrelationships with retailers through the Web), helped customers make good purchase deci-sions (e.g., rich content), as well as recognized and rewarded customers for past behavior(e.g., personalized offers, rewards) had the most positive effect on metrics overall. Thesetactics are the most effective because they offer customers tangible value.

Clearly, no single best method of engendering loyalty among customers exists. Instead,retailers should employ a combination of strategies, pulling from each of the three pillars(i.e., frequency, spending, trust/advocacy) designed to induce behavior or provide service.Tactics used must directly serve a clear strategic goal. However, retailers should not over-look frequency-oriented tactics. With a clear strategy of relationship development, retailersshould determine the assortment of loyalty tactics appropriate for their business models,and create customer communication strategies to highlight each loyalty tactic.

Community-building forums, reviews, and feedback

Toll-free contact number on all site pages

Offers and rewards for customers who refer others

Premium customer service

Privacy and fraud protection programs

Special services

Exclusive offers and events

Regular promotions

Free returns

Online enhancements

Differentiated product offering

Fast and reliable shipping capability

Personalized product presentment or recommendations on site

Customer rewards or cash back

Personalized offers on site or through e-mail

Rich product and service content

Customers use Web site to manage multichannel relationship

Program Rank

Low

est

Hig

hes

t

Fig. 6 Loyalty Tactics Ranked by Overall Impact on Metrics

Source: JupiterResearch (4/06) © 2006 JupiterResearch, a division ofJupiterKagan, Inc.



• 9 •

For example, retailers can use promotions such as free shipping to engage customers,associating these offers with the long-term value they provide (e.g., fast and reliable ship-ping). By offering rich product and service information on sites, retailers can encouragecustomers to return to sites after sales, thus building trust. As customers begin to rely onretailers for provision of not only low prices and promotional offers, but also completeand convenient resources, emotional bonds will likely develop. When consumers facetheir next purchase decisions, competitors will thus have relatively less ability to poachthem with promotional offers.

Formal Loyalty Programs Will Become Commoditized by 2007

Only 24 percent of online retailers in the US have formal loyalty programs, but another 43 percent plan to implement programs during the next 12 months, according to a recentJupiterResearch executive survey. Thus, two-thirds of US retailers will have formal loyaltyprograms consisting of points, cash back, or rewards. Retailers interviewed for this reportwere eager to implement loyalty programs to formalize efforts to gain incremental salesfrom their customers, despite already-high repeat-customer numbers in some cases. Also,they believed they should implement programs soon to stay ahead of competition.

They are correct. The heavy focus on implementing loyalty programs clearly indicatesretailers are feeling the heat from competitors and must step up their efforts to bothincrease sales and curb attrition. The challenge is creating programs that bolster retailers’overall value proposition through a combination of experiential and recognition efforts.



• 10 •

Shipping Is Critical Retailer Loyalty-Driving Tactic

Promotions such as free shipping have become ubiquitous among retailers, and retailersperceive promotions as most effective in encouraging loyalty. (See Figure 7.) However,promotions only ranked 10th based on JupiterResearch’s evaluation of impact on metrics. (See Figure 6.) The difference between retailers’ perception and actual resultsshows retailers rely too heavily on traffic-driving tactics, while overlooking long-term relationship-building tactics.

However, retailers also perceive fast and reliable shipping—a long-term value-orientedtactic—as a critical element in their efforts to encourage lasting customer relationships.With two shipping-related tactics considered most important, retailers therefore believelogistic capabilities are critical regarding customers’ loyalty. In many cases, retailers missthe opportunity to message customers about their solid shipping capabilities. They shouldweave messages of shipping speed into call-to-action pieces, emphasizing product detailand shopping-cart pages to create a sense of urgency and reliability.

Loyalty tactics considered effectiveLoyalty tactics used

Free returns

Privacy and fraud protection programs

Special services (e.g., live customer assistance)

Differentiated product offering


Personalized offers on site or through e-mail



Fast and reliable shipping capability

Regular promotions (e.g., coupons, free shipping)

6%

7%

7%

9%

14%

15%

19%

32%

37%

49%

28%

45%

31%

19%

49%

41%

41%

50%

58%

66%

0% 20% 40% 60% 80% 100%

Percentage of US Retailers

Fig. 7 Use and Perceived Effectiveness of Loyalty-Driving Tactics

Question: Which tactics do you currentlyuse to encourage loyalty among customers? (Please select all that apply.)What are the most effective tactics to encourage loyalty among your customers? (Please select up to three.)Source: JupiterResearch Executive Survey(5/05), n = 220 (retailers, US only), n = 210(retailers encouraging loyalty, US only)© 2006 JupiterResearch, a division ofJupiterKagan, Inc.



• 11 •

Use Shipping Efficiency, Ease of Returns to Drive Repeat Purchases

Effectively performing during past sales and meeting customers’ needs for new products(regarding future purchases) play equal parts in repeat business. To drive repeat purchases,retailers must ensure shipping performance delivers. Online buyers must have assurancetheir products will be quickly and accurately delivered. Retailers will not only have theopportunity to communicate with customers through post-sale transactional e-mail messages, but also be part of consumers’ consideration sets in the future if they have met or exceeded shipping expectations.

0% 20% 40% 60% 80% 100%

Personalized offers on site or via e-mail

Customer forums, reviews, feedback areas

Special features on site

Loyalty rewards from store




Free returns

Already had account with retailer

Privacy, fraud-protection programs

Regular promotions

Fast and reliable shipping capability 43%

30%

29%

24%

19%

19%

14%

12%

9%

8%

7%

7%


Fig. 8 Reasons Customers Purchase from Retailers Again

Question: Which of the following weremost influential in your decision to continue to purchase from an online seller from which you had purchased inthe past? (Select up to three.) Source: JupiterResearch/Ipsos-InsightRetail Consumer Survey (8/05), n = 1,629(online buyers, US only) © 2006 JupiterResearch, a division ofJupiterKagan, Inc.



• 12 •

Shipping Costs Key Causes of Cart Abandonment

Retailers constantly face the problem of cart abandonment. In a recent consumer survey,almost one-third of shoppers said shipping costs were too high. Also, 14 percent saidshipping costs were listed too late in the shopping process. Retailers should stress thevalue of their shipping offerings (e.g., quick delivery), offering consumers shipping information as early as possible in the shopping experience to stem abandonment.

Didn’t want to wait for product to be shipped

Checkout process too long or confusing

Web site too slow

Shipping and handling costs listed too late

Site asked for too much information

Didn’t want to register with site

Wanted to save products in cart for later

Prices too high

Wanted to compare prices on other sites

Shipping/handling costs too high

Not ready to purchase

8%

10%

13%

14%

14%

19%

19%

20%

23%

29%

30%

0% 20% 40% 60% 80% 100%

Percentage of Online Buyers or Researchers

Shoppers search for free shipping elsewhere

Sites need shipping cost calculators on product detail pages

Fig. 9 Reasons for Cart Abandonment

Question: Thinking of the last time youput items in your shopping cart but didnot finish the online purchase, which ofthe following best describes why you didnot complete the transaction? (Select allthat apply.) Source: JupiterResearch/Ipsos-InsightRetail Consumer Survey (8/05), n = 1,934(online buyers or researchers, US only) © 2006 JupiterResearch, a division ofJupiterKagan, Inc.



• 13 •

Post-Sale Order Tracking Offers Additional Engagement Opportunities

Retailers must not neglect post-sale interaction opportunities. Offered by 90 percent ofretailers, order tracking pages are ideal places to reinforce dialogue with customers and encourage additional purchases. Retailers can test order tracking pages with the following:

• Past purchases (especially purchases that are easily reordered)

• Targeted offers that are dynamically generated

• Site-wide offers

• Offers on subsequent purchases made using promotion codes

0% 20% 40% 60% 80% 100%

None

Downloaded forms to return products

Automatically reordered products purchased regularly

Used installation and product information guides

Signed up for newsletter, RSS feed, or e-mail

Gave product feedback or wrote review

Got more product information

Looked for other products to go with item purchased

Paid store credit card bill

Called or e-mailed customer service

Took survey

Tracked order 71%

29%

29%

25%

22%

20%

20%

15%

10%

4%

5%

12%


Fig. 10 Online Buyers’ Activities After Making Purchases

Question: Which of the following activities did you engage in on a store’sWeb site once you completed an onlinepurchase? (Select all that apply.)Source: JupiterResearch/Ipsos-InsightRetail Consumer Survey (8/05), n = 1,629(online buyers, US only)© 2006 JupiterResearch, a division ofJupiterKagan, Inc.



• 14 •

Leverage Transactional E-mail to Promote Greater Involvement

Shipping confirmation e-mails are retailers’ biggest built-in opportunities to reach recentpurchasers for the following reasons:

• Retailers must send these e-mail messages. Therefore, they should try to offset their costs

with marketing designed to drive additional sales.

• These messages are the only communications consumers really remember.

To leverage post-sale transactional e-mail messages as marketing tools, retailers shouldconsider using tactics similar to aforementioned tactics for testing on-site order trackingpages. Retailers must also present messages to captive audiences in manners consistentwith their brand images. For example, Saks Fifth Avenue will probably use a much different order-confirmation marketing message from the one Wal-Mart will use. To addmarketing messages to transactional e-mail messages, most retailers will furthermoreneed to outsource transactional messages. Internal systems that generate these messagescannot currently marry relevant cross-selling data to purchase information.

0% 20% 40% 60% 80% 100%

Maintenance information about purchase

Generic company newsletter

Product registration reminder

Invitation to write review of purchase

Generic company promotions

General inquiry regarding satisfaction

Company catalog

Special offer/discount on purchase-related item

Delivery delay notification

Invitation to participate in survey

Thank-you note

Shipping confirmation 81%

37%

21%

18%

16%

18%

14%

14%

11%

9%

8%

4%


Fig. 11 Retailer Communications Consumers Receive After Making Purchases

Note: All responses are not listed.Question: What communication did youreceive from an online store after youmade a purchase from it? (Select all that apply.)Source: JupiterResearch/Ipsos-InsightRetail Consumer Survey (8/05), n = 1,629(online buyers, US only)© 2006 JupiterResearch, a division ofJupiterKagan, Inc.



• 15 •

Report MethodologyThe core of JupiterResearch’s products is the perspective and opinion ofJupiterResearch’s professionals. JupiterResearch’s analysts are immersed in the indus-tries they cover through ongoing contact with corporate and technology leaders, dailystudy of trends and events in the online world, and their collective professional experi-ence. Individual analysts’ perspectives are filtered through rigorous collective debate anddeliberation, producing research that reflects the combined sensibility ofJupiterResearch’s entire team.

Analysts’ perspectives are enhanced and refined through JupiterResearch-designed market research. JupiterResearch uses many data research tools, including consumer surveys, systematic polling of leading industry executives, comScore Media Metrix meas-urement data, and a rigorous approach to building market forecasting models. Specialistswith JupiterResearch’s data research group assist analysts in the technical developmentof these tools, such as survey design, sample building, data weighting, and data analysis.

This report benefited from a number of specific market research projects, described below.

JupiterResearch Executive Survey

In May 2005, JupiterResearch conducted a formal survey of online retailers regarding initiatives designed to increase customers’ loyalty. Respondents were screened for decision-making responsibility. A total of 220 qualified individuals completed the survey.Respondents received an e-mail invitation to participate in the survey with an attachedURL linked to the Web-based survey form. As an incentive, respondents were entered intoa sweepstakes for the chance to win their choice of a Canon PowerShot A510 digital camera or an Apple iPod Mini.

In this survey effort, JupiterResearch worked with PriceGrabber.com, Inc. andShopping.com, Inc. to develop a sample of online retailers and to assist in the technicaltasks of survey fielding.

PriceGrabber.com, Inc.

PriceGrabber.com, Inc. attracts more than 18 million unique visitors per month, providingthe easiest and most comprehensive environment in which they can find, select, as wellas shop for the right products. By providing detailed and comprehensive product, transac-tion, and merchant information, PriceGrabber.com, Inc. qualifies shoppers and refers buyers to the appropriate merchant to complete the purchase process. PriceGrabber.com,Inc. enjoys the highest conversion rates of shoppers into buyers, resulting in cost-effectivesales for merchant partners. PriceGrabber.com, Inc. sends more than $1 billion in customer referrals per month. Also, because PriceGrabber.com, Inc. is one of the fastest-growing comparison-shopping services, these numbers are continuously growing.



• 16 •

Shopping.com, Inc.

Shopping.com, Inc. is a leading provider of comparison-shopping resources. Its flagshipWeb site, www.shopping.com, is a new comparison-shopping service that helps consumers use the power of information to make the best shopping decisions. Currently,Shopping.com, Inc. is the only comparison-shopping service that combines millions ofconsumer product reviews with detailed price information on millions of products fromthousands of stores to help users find, compare, and buy anything.

JupiterResearch/Ipsos-Insight Consumer Surveys

In January 2006, JupiterResearch designed and fielded a survey to online consumersselected randomly from the Ipsos US online consumer panel. A total of 2,369 individualsresponded to the survey. Respondents were asked approximately 25 closed-ended questions about their behaviors and preferences regarding online holiday shopping, wireless services, online dating, and pharmaceutical Web sites. Respondents received ane-mail invitation to participate in the survey with an attached URL linked to the Web-based survey form. The samples were carefully balanced by a series of demographic andbehavioral characteristics to ensure they were representative of the online population.Demographic weighting variables included age, gender, household income, householdeducation, household type, region, and market size. Additionally, JupiterResearch took theunconventional step of weighting the data by American Online (AOL) use, online tenure,and connection speed (broadband vs. dial-up), three key determinants of online behavior.Balancing quotas were derived from JupiterResearch’s Internet Population Model, whichrelies on US Census Bureau data and a rich foundation of primary consumer surveyresearch to determine the size, demographics, and ethno-graphics of the US online population. The survey data are fully applicable to the US online population within a confidence interval of plus or minus three percent.

In October 2005, JupiterResearch designed and fielded a survey to online consumersselected randomly from the Ipsos US online consumer panel. A total of 2,106 individualsresponded to the survey. Respondents were asked approximately 25 closed-ended ques-tions about their behaviors, attitudes, and preferences regarding shopping online duringthe holiday season, browser cookies, Wi-Fi, and e-mail newsletters. Respondents receivedan e-mail invitation to participate in the survey with an attached URL linked to the Web-based survey form. The samples were carefully balanced by a series of demographic andbehavioral characteristics to ensure they were representative of the online population.Demographic weighting variables included age, gender, household income, householdeducation, household type, region, market size, race, and Hispanic ethnicity. Additionally,JupiterResearch took the unconventional step of weighting the data by AOL use, onlinetenure, and connection speed (broadband vs. dial-up), three key determinants of onlinebehavior. Balancing quotas were determined by an ongoing weekly random-digit dialed(RDD) survey of almost 5,000 US households. The survey data are fully applicable to theUS online population within a confidence interval of plus or minus three percent.



• 17 •

In August 2005, JupiterResearch designed and fielded a survey to online consumersselected randomly from the Ipsos US online consumer panel. A total of 2,146 individualsresponded to the survey. Respondents were asked approximately 30 closed-ended ques-tions about their behaviors, attitudes, and preferences regarding buying and researchingproducts/services online. Respondents received e-mail invitations to participate in the survey with an attached uniform resource locator linked to the Web-based survey form.The samples were carefully balanced by a series of demographic and behavioral charac-teristics to ensure they were representative of the online population. Demographicweighting variables included age, gender, household income, household education,household type, region, market size, race, and Hispanic ethnicity. Additionally,JupiterResearch took the unconventional step of weighting the data by AOL use, onlinetenure, and connection speed (broadband vs. dial-up), three key determinants of onlinebehavior. Balancing quotas were determined by an ongoing weekly RDD survey of almost5,000 US households. The survey data are fully applicable to the US online populationwithin a confidence interval of plus or minus three percent.

In these survey efforts, JupiterResearch worked with its research partner, Ipsos-Insight, onthe technical tasks of survey fielding, sample building, balancing, and data processing.Ipsos-Insight is one of the largest market research companies in the US and maintains ageneral research panel of 400,000 households. Ipsos-Insight also has access to the IpsosUS online panel, which comprises two million Internet users, offering JupiterResearch an easy way to target and survey current online users. Panel-based market researchenables researchers to have baseline knowledge of each survey respondent, increase survey participation rates, and permit careful rationing of survey fielding to reduce survey burnout.

JupiterResearch Internet Shopping Model

To quantify the dynamic changes JupiterResearch believes will take place in the onlineretail industry, JupiterResearch built a complex forecast model capturing current onlineactivity in this space and six-year forecasts of user participation and revenue. This modeldefines key growth levers as well as market drivers and inhibitors, giving clients a clear,analytical way to think about upcoming changes in their sector. JupiterResearch’s analystsuse a variety of quantitative methods in modeling the future, including close examinationof analogous markets (either previous growth of new technologies or relevant off-linemarket case studies), consumer and executive intention surveys, scorecard analysis ofmarket drivers and inhibitors, complex market segmentation analysis, as well as analysisof historical trends. Additionally, all forecast assumptions are rigorously debated and vetted by a large cross-disciplinary group of JupiterResearch’s analysts in a processdesigned to capture the collective sensibility and experience of JupiterResearch’s entireanalyst team.



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As part of the forecast modeling, JupiterResearch develops comprehensive historical andbase-year market size estimates based on a variety of sources, including public financialdocuments, executive interviews, JupiterResearch’s proprietary primary consumerresearch, E-Stat data from the US Census Bureau, and analysis of the vast Web site tracking databases of comScore Media Metrix.

All JupiterResearch’s forecasts are designed by a dedicated team of forecasting analystswithin JupiterResearch’s data research group, who build the models, conduct extensiveindustry research, and manage the process of formally building consensus amongJupiterResearch’s analysts. JupiterResearch’s forecasting analysts have backgrounds ininvestment banking, management consulting, and market research, where they developedextensive experience with industry and company forecasting.

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JupiterResearch provides analyst research and advisory services to help companies develop, extend and integrate business strategies across online and emerging channels. Backed by proprietary data, JupiterResearch’s industry-specific analysis, competitive insight and strategicadvice give businesses the tools they need to exploit new technologies and business processes.JupiterResearch is headquartered in New York City with offices throughout the United States and around the world. For more information on JupiterResearch’s services, including syndicated research and custom research tailored to the specific needs of your business, visit www.jupiterresearch.com, e-mail [email protected] or call 800 481 1212 (North America), +44 (0) 20 7903 5020 (Europe) or +1 212 389 2032 (rest of world).

Documents

US Online Commerce Growth and Opportunity Through Shipping