March 20, 2014 Omnichannel In Partnership With: Retail: Canada © L2 2014 L2ThinkTank.com. Image reproduced with the permission of Air Canada. Intelligence Report: March 20, 2014 Omnichannel Retail: Canada DIGITAL DIASPORA Watch the Video Sixty-eight percent of Canadian online shoppers purchase from retailers headquartered outside of Canada.1 subpar shopping experience, coupled with limited product assortment Internet Users in Select Countries Who and weak direct-to-consumer infrastructure from domestic players, Use Multiple Channels When Shopping forces many Canadians to endure steeper shipping costs, extended A Percentage of Respondents delivery windows, and import fees. U.S.-headquartered retailers see the June 2013, n=1,514 opportunity and greet Canadian shoppers with on-site pop-ups boasting 59% 55% international shipping and a seamless transaction experience. Four in ten 46% 40% dollars spent online in Canada are now estimated to flow cross border.2 Brazil China Russia India Influence While domestic retailers are missing out on a Canadian e-commerce market projected 3 30% 30% 29% to register double-digit annual growth and reach $34 billion by 2018, they are also 21% 19% 18% failing to recognize an even larger opportunity to influence sales at brick and mortar. While more than a quarter of Canadian consumers research purchases online before purchasing offline, omnichannel investments—intended to drive the customer from France U.K. Japan U.S. Germany Canada clicks to bricks and back again—are limited among Canadian retailers. Sixty-one Source: “Customer Experience Report,” Cisco Systems, June 5, 2013. percent of shoppers cite the ability to view in-store inventory online as “important” or “critical,”4 but just 28 percent of Canadian retailers provide this transparency. Furthermore, less than one in four retailers incorporate product video, provide in-store Online Retail as a Percentage of Total Retail appointment booking services or link to a store locator from their online product pages. 2016 (Projected) Adoption is even more nascent across mobile and tablet devices. U.K. 23.0 Circling Germany 11.7 Austrailia 8.9 Omnichannel investments are increasingly critical to ward off the great white shark of retail. Among Canadian shoppers who have made a cross-border online purchase, an Italy 8.0 overwhelming 72 percent report that a primary incentive is the inability to find product on U.S. 7.1 domestic e-commerce sites (lower prices are cited by just 59 percent of consumers).5 Japan 6.8 France 6.7 G-20* 6.0 Canada 1. “Canadian Online Retail Forecast, 2013 To 2018,” Forrester Research, July 24, 2013. 5.3 2. “What keeps online retail in Canada from clicking?,” The Globe and Mail, May 12, 2012. 3. “Canada Online Retail Forecast, 2013 to 2018.” Source: “The Internet Economy in the G-20,” The Boston Consulting Group, March 2012. 4. “The State Of Canadian Online Retail—2013,” Forrester Research, April 24, 2013. 5. Ibid. 2 Intelligence Report: March 20, 2014 Omnichannel Retail: Canada Market Share of Select Website Visits: Canada October 2011–December 2013 0.7% 1 January 8, 2013 Amazon Prime launches in Canada 0.6% 6 5 2 4 June 27, 2013 7 Toys & Games store launch (315k SKUs) 0.5% 3 September 23, 2013 3 Consumer Electronics store launch (1.6M SKUs) 0.4% 4 October 5, 2013 Office Products store launch (350k SKUs) 0.3% 2 5 October 10, 2013 Beauty store launch (160k SKUs) 0.2% 6 October 31, 2013 Market Share of Website Visits (%) of Website Market Share 1 Grocery store (15k SKUs) and Automotive 0.1% (200k SKUs) store launches 7 November 25, 2013 0.0% Black Friday and Cyber Monday store launch Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec 2011 2012 2013 Source: Experian Hitwise Canada. Product assortment is top-of-mind for the Canadian e-commerce shopper, and one Omnichannel = Shareholder Value organization stands to benefit (disproportionately)—Amazon. In 2013, Amazon.ca This report examines the efforts of 50 retailers operating in the Canadian market to launched 14 new product stores, marking the giant’s entry into a number of highly leverage digital in order to create a robust omnichannel offering. L2 benchmarked competitive categories.6 The aggressive expansion, combined with the long-anticipated organizations across 10 categories, examining site, email, digital marketing and mobile export of Amazon’s Prime service to Canada, has resulted in exponential growth in data, in an effort to determine the organizations and best practices that deliver an share, surpassing Walmart Canada, Sears Canada, Canadian Tire, and other traditional omnichannel experience. Like the medium we are assessing, our approach is dynamic. retail heavyweights. To repel the great white shark of retail, domestic retailers must Please reach out with comments that improve our methodology and findings. leverage their brick-and-mortar footprint—on- and off-line. Regards, L2 & Google 6. “Amazon Expands in Canada,” Internet Retailer, November 1, 2013. 3 Intelligence Report: March 20, 2014 Omnichannel Retail: Canada Table of Contents Click logo to return. Click screen shots with this icon to view online. Click to jump to: 5 The Methodology 28 SEM Participation in Canada Trails U.S., U.K. 29 Most Social Media Users Also on Email 7 Brand List 30 Uptake Across Social Media Platforms Is Sluggish 31 Link Between Social Programming and Purchase Remains Tenuous 8 Key Findings Mobile Site & E-Commerce 32 M-Influence Outweighs M-Commerce 8 Nascent E-Commerce Cedes Advantage to International Retailers 33 Winning Retailers Are Moving Tablet-First 9 Ignoring the Opportunity for International Expansion Via E-Commerce 34 Omnichannel Is Inconsistent Across App Landscape 10 Robust Site Investments Are Recognized In-Store 35 SPOTLIGHT: Omnichannel Apps 11 Access to Superior Fulfillment Fundamentally Changes Customer Expectations 12 Focus Shipping Infrastructure on Key Population Centers 36 Flash of Genius 13 Amazon Prime Requires an Offensive Strategy from Retailers 36 Need for Speed 14 Integrated Inventory Separates Leaders from Laggards 37 Combatting Showrooming 15 Canadian Department Stores Trail in Omnichannel 38 Consumerism Goes Co-Op 17 Misaligned Incentive Structures Hinder Omnichannel Efforts 39 The Fairest of Them All? 18 Digital Promotion of In-Store Events/Services Drives Foot Traffic 40 #WHATITTAKES Email, CRM, Loyalty 41 DIY Goes Digital 19 Data-Driven Email Programs Drive Online and Offline Sales 42 Optimizing Optimum 20 SPOTLIGHT: Email Frequency 44 Roger That 21 Segmentation and Personalization Drive Email KPIs 45 In-Store Innovation 22 Consumer Interest in Black Friday Has Eclipsed that of Boxing Day 23 SPOTLIGHT: Holiday Email Marketing 46 Team 24 Loyalty Programs Anchor Successful CRM Strategies 25 Consumer Data and Apps Are the Cornerstones of Loyalty 47 About L2 Digital Marketing 26 Omnichannel Search Tactics Underleveraged by Canadian Retailers 27 Ad Extensions Are a Missed Opportunity 4 Intelligence Report: March 20, 2014 Omnichannel Retail: Canada The Methodology The Methodology Site & E-Commerce Email, CRM, & Loyalty Digital Marketing Mobile Site Domain & Architecture Newsletter Sign-Up Search Engine Marketing Mobile Site Domain Type, E-Commerce Availability, Country- Promotion, Opt-In Incentives, Email Pop-Up, Paid Search Presence, Cross-Market Analysis Mobile Site Configuration, Mobile Store Locator, Switching Customer Data Capture/Segmentation M-Commerce Optimization SEM Tactics E-Commerce Sophistication Site Account Use of Sitelink Extensions, Location Extensions, Omnichannel Functionality On-Site Search, Product Merchandizing, Ratings Availability, Customer Data Capture, Email Social Extensions, Communication Extensions, Real-Time In-Store Inventory, In-Store Pick-Up, & Reviews, Cross-Selling, Live Chat Communication Management Image Extensions User Ratings and Reviews, Link to Store Locator, Appointment Booking Inventory & Integrated Fulfillment Email Social Media Marketing In-Stock Notices, Real-Time In-Store Inventory, Volume, Cadence, Segmentation, Geolocal Social Platforms Presence (Facebook, Twitter, Mobile Apps Online Purchase/In-Store Pick-Up, Online Messaging, Triggered Emails YouTube, Instagram, Pinterest, Google+), Main Availability, Popularity, Omnichannel Functionality Reservation/In-Store Pick-up, Online Return Policy Account Activity, Location-Specific Account Activity Cross-Channel Messaging Tablet Site & Optimization Shipping Promotion of Online/Offline Deals, Promotion of SMM Tactics Free Shipping, Shipping Thresholds, Expedited Fulfillment Options, Promotion of Mobile Apps, Promotion/Integration of Customer Service, Store Shipping, International Shipping Links to Store Locator Locator, Offline Offers, Events, Mobile Apps, Email Newsletter Store Locator Promotionality Geolocation, Search/Filtering Capabilities, Store Volume/Cadence of Holiday Messaging Cross-Channel Digital Campaigns Contact Information, Mapping Loyalty Programs In-Store Integration Availability, E-Commerce Integration, Credit Promotion of In-Store Services/Events, Card Integration, Mobile App Integration, Tiered Appointment Booking Functionality, Event RSVP Programs Functionality, Shopping List Tools Online/Mobile Couponing Initiatives 5 Intelligence Report: March 20, 2014 Omnichannel Retail: Canada The Methodology About The Methodology Site & E-Commerce Email, CRM, & Loyalty Digital Marketing Mobile Retailers allocate significant capital (financial and Consumers expect a consistent, relevant SEM allows retailers to market directly to Consumers use mobile devices