1. U.S. Apparel Retailing: Delivering a strong finish
Jahnia Sandford
Analyst
Mary Brett Whitfield
Senior Vice President
September 2013

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3. Today’s Presenters and Agenda
Update on Landscape
Best-in-Class Mobile Shopping Apps
Hot Growth Tactics
Presenters Mary Brett Whitfield Senior Vice President Jahnia Sandford Analyst

4. Kantar Retail ShopperScape®
4,000 primary household shoppers per month
CORE SAMPLE: Representative sample of ~50, unique primary household U.S. shoppers annually
ALSO: Oversample of men for representative sample of males HOH (n = 800/month)
Who?
How?
Fielded online the third week of every month
Survey fielded through LSR access panel of more than 3 million individuals
What?
Monthly and quarterly tracking questions on retailers and venues shopped, products purchased, where spent, near-term spending outlook, and household financial health
Questions on timely and topical issues (including key holiday periods) affecting shopping behavior
Coverage
200+ retailers across all sectors of retail
75+ product categories (e.g., over-the-counter medications)
7 major merchandise groups (e.g., health and beauty care products) 4 4

5. Agenda
Update on the Landscape: What’s Required to Deliver a Strong Finish?
Macro
Financial
Seasonal
Best-in-Class Mobile Shopping Apps
Hot Retailer Growth Tactics

6. Macro Trends Lend Favorability
But not all apparel retailers have been able to capitalize
Consumer Confidence
Spending Sentiment
Material Costs
Inflation
Weather
Strong Prior-Year Performance
Competition
Payroll Tax Increase
Housing Market Rebound Diverts Discretionary Spending
Source: Conference Board, Kantar Retail ShopperScape®, research and analysis

7. A Few Retailers Capitalized and Grew at the Top and Bottom
Growth H1 (Y-O-Y)
Sales Comps Net Income
13.0% % | 9% %
8.0% % %
7.6% % | 5% %
5.6% % %
5.0% % %
4.8% % %
1.6% % %
Source: Kantar Retail analysis and company reports

8. Top Retailers Not Able to Capitalize
Top and bottom line declines
Growth H1 (Y-O-Y)
Sales Comps Net Income
-14.5% -17% | -12% %
-7.8% % %
-4.7% -15% | -10% %
-2.9% -5% | -7% %
0.5% % %
Source: Kantar Retail analysis and company reports

9. Apparel’s Leaders Sum up Biggest Challenges
Have needed to be more promotional to drive sales
On Women’s Apparel challenges:
Ronald L. Frasch, President and Chief Merchandising Officer, Saks: “The customer … is very discriminating, and she is moving to where the fashion is and clearly letting us and the brands know that she's not going to buy something if it's not to her liking. So I would say we're probably in the middle stage into this, much more work to be done.” 
On Teen Apparel challenges:
Thomas P. Johnson, CEO, Aeropostale: “Clearly, the teen sector is challenged, and I think it's a number of different things. One is the promotional activity is high, which you would think would induce more purchases. But what it basically does is lower everybody's AUR, so that's obviously challenging.” 
Robert L. Hanson, CEO and Director ,American Eagle Outfitters: “AEO's women's business had the biggest miss to plan, comping down 9% in the quarter … we saw weakness primarily in core and core fashion styles”
“We believe that fashion always trumps weather.”
—Urban Outfitters President and CEO Richard Hayne
Source: Kantar Retail analysis and company reports

10. Seasonal Update Difficult spring leads to moderate/lackluster BTS
From a shopper perspective:
Shoppers narrowed their destination sets
Still choosing Walmart and Target as top destinations for supplies and apparel
Season starting earlier and earlier … and the “season” is really all summer
Where Plan to Shop for BTS Category
Supplies
61%
36%
Clothing
39%
33%
Will Shop for BTS Clothing in Summer …
… as I see deals
… as budget allows
Source: Kantar Retail ShopperScape®, June 2013 and analysis

11. Marshalls Turns BTS/C into a Gift Giving Occasion
Source: Kantar Retail research and analysis

12. More Retailers Use Hashtags in BTS Campaigns
#BACKTOCOOL
Source: Kantar Retail research and analysis

13. Catalog Spree Modern catalog shopping puts retailers toe-to-toe
Style and brand take prominence over price
Source: Kantar Retail research and analysis

14. Walmart’s Cyber Monday in August
Lowest prices on back-to-school for one day
Early access for Facebook fans
Also prominent on mobile app homepage in days leading up
Source: Kantar Retail research and analysis

15. New Competition to Consider
Kroger Fashion Essentials and Meijer Style
National Brands
Full-family assortment
Source: Kantar Retail store visits, retailer web sites

16. Seasonal Recap and Looking Ahead
Expect similar environment headed into the holidays
Spending sentiment favorable at macro level, but retailers of discretionary goods will need to earn share of wallet
Those that do will be in a position to drive growth at top and bottom line
Competition not slowing requiring retailers to be more proactive and innovative
Source: Kantar Retail analysis

17. Agenda
Update on the Landscape: What’s Required to Deliver a Strong Finish?
Best-in-Class Mobile Shopping Applications
Who’s playing?
Who’s winning among users
Best-in-class features
Hot Retailer Growth Tactics

18. Why Discuss Mobile Shopping Apps?
142 million shoppers own a smartphone:
59% share of mobile market
24/7 Access
More than 80% of Gen Y shoppers own smart phones
Nearly one in five shoppers has used a mobile device to access a retailer Web site
More than one in 10 has used a retailer/ shopping app
Kantar Retail ShopperScape®, March 2013, comScore MobiLens, and analysis

19. Use of Retailer Apps on Mobile Growing
2013:
11%
2012: 7%
Source: Kantar Retail ShopperScape®, January 2012 and January 2013

20. Expect 2013 results to eclipse these
Mobile by the Numbers!
Retailers setting huge benchmarks
Y-O-Y mobile sales growth
Number of fashion items sold per minute on eBay thru mobile
Expect 2013 results to eclipse these
Portion of 2012 eCommerce sales from mobile
Position of fashion items among other categories based on mobile sales in U.S., U.K. Australia, and France
Portion of 2012 total sales from mobile
Source: Kantar Retail research, analysis and company reports

21. What do each of these retailers have in common???
[On the DSW mobile app’s impending launch] “That's one of the most requested thing from our customers … people don't shop on [native iPhone mobile browser] Safari, they shop on an app. They're conditioned to do that because it's more secure and it's easier.”
– Kelly Cook, SVP of Marketing, DSW Inc.
Source: Kantar Retail research and analysis

22. Steady Demand for Tablets Supports Belk Anthropologie on Tablet Play … Smartphone Play Soon
Upcoming iPhone app launch, after success of the Free People app launch in June ’13, which in in 3 short months achieved more than 80K downloads and a higher sales conversion rate than the brand’s online site
Digital currently the fastest growing business at Belk… ramping up investment in all areas
Source: Kantar Retail ShopperScape,®, January and 2013

23. Who’s Playing? Last update as of 9/12/13
*User ranking based on all iPhone versions to date
Source: Kantar Retail research, analysis, and iPhone iTunes app store

24. ModCloth’s Attention to Detail Aids in the Purchasing Decision
Source: Kantar Retail research, analysis, and retailer iPhone app

25. Gilt and Rue La La Sync Sales to Shoppers’ Schedules
Add sales reminders one-day out
Add sales reminders multiple days out
Source: Kantar Retail research, analysis, and retailer iPhone app

26. And these??
Giving shoppers other ways to connect in lieu of full mobile store app launch
Source: Kantar Retail research and analysis

27. American Apparel’s Shopping Assistant Syncs all Channels
Augmented Reality Experience
Check-out from device using scanner and PIN
Must create an account or sign-in to use full app
Source: Kantar Retail research, analysis, and retailer iPhone app

28. International Retailers Apart of U.S. Shoppers’ Routines
Interactive weekly fashion/lifestyle magazine
Singing alarm clock and weather reporter
Source: Kantar Retail research, analysis, and retailer iPhone app

29. Kate Spade Saturday
Uses pending mobile launch to direct traffic online
Source: Kantar Retail research, analysis, and retailer iPhone app

30. Ann Wants to Be Your BFF Uses corporate culture to connect with users
If you love the brand so much why not work there…
Allows users to save favorite mantras, dates, trends from the community and career opportunities
Source: Kantar Retail research, analysis, and retailer iPhone app

31. lululemon’s Lifestyle Approach
Targeting yogi community
Upcoming classes automatically load when app is opened
Source: Kantar Retail research, analysis, and retailer iPhone app

32. Neiman Marcus’ Unique Approach
Sells gifts and shoes only (SWAS concept on Mobile)
NM Gifts
Today's Shoe
Free gift wrapping
Free expedited delivery
Source: Kantar Retail research, analysis, and retailer iPhone app

33. Other Standout Features
Personalization
One Click Ordering
“Personalization is even more important on mobile because of the more limited screen real estate.”
–Steve Jacobs, CIO, Gilt.com
Timing and Overall use of Notifications
Convenience/ Omni-shopping
Source: Kantar Retail research, analysis, and retailer iPhone app

34. Apps Eliminate Need to Carry Around Physical Card, Ups Convenience Factor
Source: Kantar Retail research, analysis, and retailer iPhone app

35. Retailers Driving Cross-Channel Shopping
Pac Sun gives online shoppers 5 reasons to go mobile
PacSun sells its mobile phone app’s uses and benefits to online shoppers
Shopper won’t have to click thru to app stores to find out
Source: Kantar Retail research and analysis

36. Others Enhance the Store Locator Feature
Source: Kantar Retail research, analysis, and retailer iPhone app

37. And Some Retailers Highlight other Brands
Shows sneak preview of merchandise and app layout
Introduces shoppers to newest banner and growth brand with brief back story
Though 4-separate apps available, Gap allows users to shop all banners from any of the apps, eliminating the need to download each one
Source: Kantar Retail research, analysis, and retailer iPhone app

38. In Targeting Gen Y, Games and Interactivity Take Prominence Over Shopping
6+ different gaming options
Source: Kantar Retail research, analysis, and retailer iPhone app

39. Mobile App Recap:
Fast growing, highly relevant selling channel attractive for retailers and shoppers
Have a mobile presence and showcase product whether selling or not! Shoppers are looking
Mirror shopping at other channels but keep in mind space and time constraints
Showcase most relevant targeted messages upfront on app to engage immediately
Mobile app should be easiest shopping platform of all channels, strive for fewest clicks
Applying CRM insights just as important here as with other channels and mediums
Focus on practical but “wow” details such as store locator features and virtual wallet
Market mobile app and its features across other channels, use as competitive differentiator
Incorporate key store/ online strategies, i.e., exclusives (styles and deals), early access, shops
Source: Kantar Retail analysis

40. Agenda
Update on the Landscape: What’s Required to Deliver a Strong Finish?
Best-in-Class Mobile Shopping Applications
Hot Retailer Growth Tactics
Partnerships and collaborations
eCommerce
In-store

41. Recent and Upcoming Collaborations
Popularity not slowing
Feb 2014
2014
Source: Kantar Retail research and analysis

42. Three Signs that Partnerships Are Here to Stay
Extensions and Expansions
Acceleration/
Turn Around
Surprise Opportunities Revealed
Source: Kantar Retail research and analysis

43. TJX relaunched TJMaxx.com on Sept. 18, 2013
eCommerce Newbies
The last of the top value players get in the game
H&M debuted U.S. eCommerce Aug. 1, 2013, simultaneously with mobile phone shopping application
TJX relaunched TJMaxx.com on Sept. 18, 2013
TJX
Saks Off-fifth
Source: Kantar Retail research and analysis

44. Driving Traffic to Store
Old Navy creates an event around one product
Using the model on other products with higher price points
Limit of 5-per person
Source: Kantar Retail research and analysis

45. Retailers Carve Out Space on the Selling Floor
Influences and accommodates a longer stay in store
Nordstrom
Habitant Bar/Café
Nordstrom
Juniors Sitting area
Urban Outfitters Media Bar
Source: Kantar Retail store visits, research and analysis

46. More Space also Dedicated to Interactivity
Fun and enjoyable elements targeted toward Gen Y
Nordstrom
Urban Outfitters
Source: Kantar Retail research and analysis

47. Rack Does Mobile Checkout Right
Arming the store for an efficient digital checkout process
Source: Kantar Retail store visits, research and analysis

48. Cross-Merchandising Evolving, Blurring Department Lines
Urban Outfitters
Macy’s
Making every category relevant to the shopper
Gap
Source: Kantar Retail store visits, research and analysis

49. Macy’s Making Impulse a destination
Apparel, beauty and shoes today … mens, kids, home/ kitchen next?
Source: Kantar Retail research and analysis

50. Delivering in the Back Half:
Environment no less challenging but full of opportunities
Shoppers are more confident and willing to spend than they were a year ago.
Each shopping touch point will be important in driving traffic, conversion and return trips. Consistent and thoughtful execution is essential.
Extending value beyond price by communicating and delivering on shopping experience, exclusivity, brands, and convenience will bode well with shoppers when they make destination decisions.
Mobile is an important and profitable touch point, especially during holiday where routine browsing and pre-trip planning takes place.
Source: Kantar Retail analysis

51. QUESTIONS? Delivering a Strong Finish
Submit questions on Q&A panel on right side of screen
Delivering a Strong Finish
Best-in-Class Mobile Shopping Apps
Hot Retailer Growth Tactics

52. Jahnia Sandford
Analyst T
Mary Brett Whitfield
Senior Vice President T