2015 Retail Innovation Conference afternoon keynote presented by Maureen Mullen, Co-Founder & Head of Research & Advisory, L2

1. #RIC15
True
Retail
Innovators
&
Disruptors:
Who Is Ahead Of The Times?

2. 2
RESEARCH BENCHMARKING EDUCATION
Where are you today? What you need to do to get better?
How to hold team/vendors accountable?
BUSINESS INTELLIGENCE FOR DIGITAL

3. 3
Q2 – Q3: Digital IQ Index® Reports
UPCOMING DIGITAL IQ REPORTS

4. 4
OTHER UPCOMING RESEARCH
SOCIAL PLATFORMS
Intelligence Report:
AMAZON
Intelligence Report:
VIDEO
Intelligence Report:
PERSONALIZATION
Intelligence Report:
OMNICHANNEL
Intelligence Report:

5. PREVIEW
VIDEO 2015

6. 6
Study Methodology
OVERVIEW
L2 Intelligence Report: Video 2015
Overview of the digital video landscape and best practices
across platforms
Report covers Q4 2014 and Q1 2015 initiatives from 245 brands
across 8 Verticals with a focus on Beauty & Hair Care
!
ADVERTISING LOCALIZATION
PLATFORMS CONTENT

7. 7
1998 - 2013
U.S. Cable Prices vs. Inflation
RIPE FOR DISRUPTION
Source: FCC, Bureau of Labor Statistics

8. 8
Q1 2014- Q1 2015
VIACOM Viewership by Network
VIEWERSHIP, RATINGS IN DECLINE
-34% -34%
-30%
-23%
Source: “Viacom Takes $785 Million Charge on Cable Woes,” The Wall Street Journal, April 6, 2015.

9. 9
2015 Oscars Viewership, Ratings & Advertising Rates
…AND AD PRICES ON THE RISE
2015 YoY Change
Viewership 36.6 M -16%
Ratings 10.8 / 26 -17%
Average Ad Cost (30s) $1.9 M + 5.6%
Data Sources: Nielsen, iSpot.tv

10. 10
2006
Cable Company Disruption 2005-2011
THE RESPONSE
2005 2007 2008 20112007 2010
YouTube
YouTube
acquired
by Google
Apple
TV
Amazon
Instant
Video
HBO GO
Roku
Netflix / Hulu

11. 11
2014 – 2015 Video Launches
Social Takes on Video
SOCIAL RAMPING UP

12. 12
May 2015
Social Platforms Video Advertising Options
UNDERSTANDING ADVERTISING
Facebook Snapchat YouTube Instagram Twitter
Video Advertising
Options
Promoted Video
Posts
Live Stories,
Discover
• Skippable & Non-
Skippable In-stream
• Promoted videos in
search and alongside
YouTube videos
• Homepage Takeovers
Promoted Video
Posts
Amplify Pre-Roll,
Promoted Videos
Targeting
Capabilities
Sophisticated
• Location
• Demographics
• Interests
• Behaviors
• Education
• Connections
• Data Partner
Categories
No Targeting for Live
Stories;
Discover Ads are specific
to Discover News
Streams
Sophisticated
• Demographics
• Geography
• Language
• Interests
• Remarketing
• Data Partner
Categories
• User Type
Limited
• Age
• Gender
• Country
Sophisticated
• TV Ad Targeting
• TV Conversation
Targeting
• Interests
• Gender
• Geography
• Keyword And Hashtag
Usage

13. 13
Q4 2014: Beauty & Hair Care Social Video
SOCIAL VIDEO: BRAND VIDEOS
Platform % Brands Posting
Average Video
Length
(seconds)
Average Views per
Video
77% 61 150,506
63% 12 N/A
30% 15 N/A
77% 112 219,744

14. 14
Q1 2015: Average Video Posting Frequency (weekly)
POST FREQUENCY BY PLATFORM

15. 15
March 2015
US Market Share of On-Demand TV Service Providers
ON-DEMAND TV MARKET SHARE
Source: Morgan Stanly Research
*TV shows on free sites includes network sites (ABC.com, MTV.com, etc)
6%
8%
9%
16%
19%
25%
27%
38%
GoogleTV
AppleTV
iTunes
Netflix DVD Plan
Amazon Instant Video
TV shows (free sites)*
Hulu (free version and Plus)
Netflix Streaming
Offers Video Advertising

16. 16
CHANGING THE MODEL

17. 17
2011 - 2015
Hours Spent per Day with Video by US Adults
WHO WINS?
4:35 4:38 4:31 4:22 4:15
0:21 0:36 0:50 1:03 1:16
2011 2012 2013 2014 2015
TV Digital Video
Source: eMarketer, April 2015

18. 18
Share of Internet Users, July 2014
Top 10: Digital Video Viewer Penetration by Country
GLOBAL AUDIENCE EVEN LARGER…
78%
80%
84%
84%
85%
90%
90%
91%
92%
96%
U.S.
U.K.
India
Argentina
Canada
China
Mexico
Italy
Spain
South Korea
Source: eMarketer, August 2014

19. 19
Q4 2014
Share of Total Online Adult Audience
U.S. Monthly Online TV Program Viewers, by Age Group
ONLINE VIEWERS ARE YOUNG…
22%
29%
21%
15%
9%
5%
18-24 25-34 35-44 45-54 55-64 65+
Source: MarketingCharts analysis of Nielsen

20. 20
2015
Next 12 Months
Plans to Cut the Cord Across Income Groups
…AND WEALTHY
0% 5% 10% 15% 20% 25%
<$25k
$25k-$49k
$50k-$74k
$75k-$100k
$100k+
Source: Morgan Stanley, 5th Annual Streaming Video Survey, March 2015

21. 21
2013 - 2016
Annual Growth of US Advertising Revenue by Format
ADVERTISING DOLLARS ARE UP
-2.8%
-13.9%
-16.8%
8.6%
19.5%
2.9%
Source: Interactive Advertising Bureau, BI Intelligence Estimates, September 2014
TV Newspaper Radio Search Online Video Ads Display Ads

22. 22
March 2014
Obstacles to Video Marketing
CONTENT QUALITY IS AN OBSTACLE
11%
20%
25%
28%
34%
36%
41%
46%
Lack of Management Buy-in
Distributing Video Content
Producing Studio-Quality Video
Lack of Effective Strategy
Lack of In-House Resources
Attributing a ROI to Video
Lack of Budget for Video
Creating Compelling Content
Source: Ascend2, "Social Media Strategy Research Summary Report," Dec 15, 2014
Related to Content Quality

23. 23
April 2014 – April 2015, n=73 Beauty & Hair Care YouTube Brand Channels
YouTube TrueView In-Stream Advertising
Beauty & Hair Care YouTube Channels: Share of Organic and Paid Views
YOUTUBE VIDEO ADS
Paid Views
50%
Organic Views
50%
Data Source: Strike Social

24. 24
0%
65%
81%
90%
Low Average High Outlier
April 2015, n=65 Beauty & Hair Care Brands, Top-5 Viewed Videos per Brand Uploaded in Q1 2015
Beauty & Hair Care Brand Videos, Classified by View Count
Percent of Videos that Use TrueView In-Stream Advertising
YOUTUBE VIDEO AD IMPRESSIONS
Data Source: Strike Social
View count ranges correspond to quartile classification of sample distribution
0% 14% 88% 84%
Average
Share of
Views from
Advertising n=67 n=132 n=25 n=43

25. 25
Q1 2015, n=267 Brand Videos
Beauty & Hair Care
Share of YouTube Video Views From TrueView In-Stream Ads vs. Total Views
SUCCESS = CONTENT QUALITY + SPEND
R² = 0.1442
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
YouTubeVideoViewCount
Share of Views from TrueView In-Stream Advertising

26. 26
KEY FINDINGS
GOLDEN AGE OF INNOVATION IN ONLINE VIDEO
SPOILS ARE ENORMOUS
WINNING = SKILLS VS. CAPITAL…FOR NOW.
BLEEDING EDGE TO SALAD DAYS
SHIFTING SUCCESS ALGORITHM

27. FORCES ON THE HORIZON
CUSTOMER ENGAGEMENT:

28. 28Source: Deloitte Digital, “The New Digital Divide,” 2014.
Digital Influence Projection +/- 10% Sensitivity Range
Percent of Retail Sales Influenced by Digital
Digital Influence Projections
DIGITAL INFLUENCE

29. 29
CONTENT IS EXPLODING

30. 30
75%
Source: Nielsen, “The Role of Content in the Consumer Decision Making Process,” March 2014
March 2014
Percent Lift Purchases $50-$350
Impact of Content on Purchase Intent
…AND CAN DRIVE CONVERSION

31. 31
CUSTOMER IS OMNICHANNEL
24%
43%
47%
50%
51%
57%
82%
Usage of social media for access
Sophisticated mobile site
Consistently personalized shopping
Easy access to profile data across
Option to receive in-store receipt via
Buy online/via mobile, pick up in-store
Check in-store availability online
Important Omnichannel Retail Capabilities for US Digital Shoppers
September 2014
Source: the e-tailing group, "Holiday 2014 Omni-Channel Gift Behavior" sponsored by MarketLive, Oct 9, 2014
Best in class omnichannel solutions provide convenience, transparency, and
personalization

32. 32
ATTITUDES ARE CHANGING….
Prefer that retailers
respect my privacy
rather than receive
relevant offers
53%
Prefer receiving
relevant offers and
am not as
concerned about
privacy
47%
Source: IDC, "Business Strategy: Green Lights and Bright Red Lines - Relevancy and Privacy Challenges for 2014," May 5, 2014
Attitudes of U.S. Consumers Regarding Personalized Retail Offers
December 2013
Nearly half of
consumers prefer
relevancy to
privacy

33. 33
FIGHTING PERCEPTION PROBLEM
26%
24%
16%
11%
7%
6%
1%
10%
Share or sell information with a third party
Target ads towards me
Send me brand catalogs or email newsletters
Send me personalized offers specific to my
Assist me with my next purchase
Follow-up with me after my purchase
Won't do anything
I don't know
Perceptions of U.S. Affluents on How Brands Use Their Data
March 2013
Source: Luxury Institute “Luxury Brand Wealth Survey: Privacy Trends,” March 13, 2013
Half perceive
negative use of
their data
Only 1-in-5
perceive
customer service
benefits

34. CUSTOMER ENGAGEMENT:
DATA CAPTURE &
PERSONALIZATION

35. 35
2012: HORRIFIED… AND INSPIRED

36. 36
January 2015
Client-Side Marketers, Worldwide
Primary Area of Focus for Improving Customer Experience
TOP OF MIND
4%
5%
7%
10%
12%
29%
33%
Mobile-friendly
Expedited process
Fun and fulfilling experience
Security and reliability
Consistency across channels
Consumer value
Personalization and relevance
Source: “Quarterly Digital Intelligence Briefing: Digital Trends 2015,” January 2015

37. 37
Data Sources Used by Client-Side Marketers to Understand the
Customer Journey
UNDERSTAND WITH DATA
76%
66%
55% 54%
37%
29%
20%
16%
4%
Online
Analytics
Email Data Customer
Survey
Data
CRM Data Call Center
Data
Social
CRM Data
Mobile App
Analytics
Electronic
POS
None of
these
% of Respondents, March 2015

38. 38
67%
47%
43%
34%
30%
27%
24%
16%
11%
Human Capital / Resources
Ability to Dynamically Create Content
Other Site Priorities
Capital
Data Limitations
UX and Design Workload
Not Convinced of ROI
Management Buy-In
Concerns About Data Privacy
February 2015
Top-3 Challenges to Implementing a Personalization Strategy
…BUT CHALLENGES ABOUND
Source: FitForCommerce, “Let’s Get Personal: Omnichannel Personalization in a Hyper-Connected World,” February 2015
RESOURCES
CAPABILITIES
DATA ISSUES
BUY-IN

39. 39
February 2015
Availability and Usability of Data for Personalization
A THIRD, A THIRD, A THIRD
35%
33%
32%
Source: FitForCommerce, “Let’s Get Personal: Omnichannel Personalization in a Hyper-Connected World,” February 2015
We have data, it’s not
usable, and we don’t
know how to use it
We don’t have
enough data
We have data, it’s
usable and we know
how to use it

40. 40
February 2015
Level of Satisfaction with Personalization ROI
ROI POINTS POSITIVE
45%
24%
21%
6%
4% Too Soon to Tell
No Formal ROI Tracking in Place Yet
Seeing Some Early Success
Expensive, But Necessary
Very Satisfied
Source: FitForCommerce, “Let’s Get Personal: Omnichannel Personalization in a Hyper-Connected World,” February 2015

41. 41
PERSONALIZED NAVIGATION
Very.co.uk uses
algorithms based on
browsing behavior and
purchase history to
predict customer
behavior and optimize
individual homepages
with targeted products
and offers.

42. 42
ADAPTIVE SEARCH
Edgecase technology provides personalized, adaptive navigation with filters that
align to unique language and preferences. Early adopter Crate and Barrel increased
conversation rate by 44%

43. 43
HYPER-PERSONALIZATION
Abandoned Cart
Personalized promotional
email
Browsing behavior

44. 44
April 2015, n=25 brands
With Average Number of Available Options per Data Field
Percent of Beauty Brands Adopting Account Customization Fields
BEAUTY: ACCOUNT CUSTOMIZATION
32%
28%
20% 20%
16%
4% 4%
9
5
8
5
8
10
6
0
2
4
6
8
10
12
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Skin
Concerns
Skin Type Skin Tone Eye Color Hair Color Hair
Concerns
Hair Type
Percent of Brands Adopting Average Number of Options

45. 45
INCENTIVIZING DATA CAPTURE

46. 46
L’OREAL PARIS GETS PERSONAL
Data Fields # of Options Possible Personas
Skin Type, Skin Concerns, Target Areas, Skin Condition, Age, Skin Care
Goals, Time and Effort 29 12,096
Skin Tone, Skin Undertone, Skin Shade, Skin Type, Skin Concerns,
Foundation Benefits, Foundation Formula 32 1,580,554
Eye Color, Beauty Style, Lash Look, Eyeliner 24 825
Hair Texture, Hair Thickness, Hair Condition, Hair Concerns, Chemical
Treatments, Salon Visits 21 8,748
Hair Goals, Natural Color, Natural Shade, Grey Level, Color Treatment,
Current Color, Current Shade, Current Tone, Chemical Treatment, Desired
Permanency, Desired Tone
42 151,795,445,760
Total Possible Personas
20,944,492,105,217,700,000,000,000,000
(“2.1 octillion”)

47. 47
FROM DATA TO DOLLARS
Personalized Email Targeted ContentProduct Recommendations

48. 48
IMPLICIT VS. EXPLICIT DATA CAPTURE

49. 49
IMPLICIT VS. EXPLICIT DATA CAPTURE

50. 50
UNDERARMOUR ACQUI-DATA
MapMyFitness
November 2013, $150M
20M registered users at purchase
$7.50 / user
MyFitnessPal
February 2015, $475M
80M registered users
$5.94 / user
Endomondo
February 2015, $85M
20M registered users
$4.25 / user
Source: DC Rainmaker
$5.94 / user
$7.50 / user
$4.25 / user
MyFitnessPal MapMyFitness Endomondo

51. 51
DATA + TALENT

52. SERVICE
CUSTOMER ENGAGEMENT:

53. 53
Customer Service Channel
Satisfaction
MOST SATISFIED WHEN…
64%
66%
71%
73%
75%
76%
78%
81%
Site
Social media
Email
Retail
Mobile app
Online chat
Mobile site
Phone
% of Respondents, Feb 2015 % of Respondents, Feb 2015
13%
19%
20%
22%
27%
50%
67%
73%
Effective online research
Proactive notifications
Good mobile experience
Ability to move between
Personalization
Simple navigation
Quick, effortless resolution
Clear information
Source: eMarketer
Important Attributes of Positive
Digital Experience

54. 54
GUIDE CUSTOMERS TO A TOPIC

55. 55
SOPHISTICATED BEAUTY RETAILERS
Estée Lauder tailors the live chat
experience to the specific page
An Aveda live chat agent offers an
online discount for a product
recommended during the chat session

56. 56
FACEBOOK MESSENGER
Everlane is leveraging Facebook Messenger to engage with
consumers on a more personal level.

57. 57
OTHER APPAREL VENDORS: FITS.ME
1 2
3 4
1. Entry into the
virtual fitting room
2. Select your body
type
3. Provides
recommended size
for specified product
with virtual depiction
4. Allows you to see
what other sizes
would look like on
similar body type

58. 58
AUGMENTED REALITY?
The Ikea Catalog App allows customers to envision what product will look
like in their own home before purchasing

59. 59
NEXT GEN FIT TOOLS
Yoox’s “Butler Service” in China sends packages via FedEx and has the FedEx worker
wait outside while the customer tries on items and hands back a package for product
they wish to return

60. 60
WARBY PARKER VIRTUAL TRY ON
Warby Parker Virtual Try On enables
customers to see what styles look like on their
face by uploading personal photos

61. 61
NEXT GEN LIVE CHAT: SMS/TEXT
Food delivery service
Munchery
communicates with
customers via text
message for delivery
updates and follow up.

62. 62
VISUAL SEARCH
Neiman Marcus’ Snap. Find. Shop tool, (powered by Slyce)
allows users to snap an image of fashion items and be instantly
provided with all close matching products currently available on
neimanmarcus.com

63. 63
CONNECTED FITTING ROOMS
Neiman Marcus Memory Mirror records
outfits as 8 second videos to enable 360
degree views, side-by-side comparisons
and sharing capabilities
Rebecca Minkoff stores feature oversize
screens to browse additional product
and request items to try on, bridging
online/offline experiences

64. OMNICHANNEL
CUSTOMER ENGAGEMENT:

65. 65
Company Multichannel Sophistication
HARD BEFORE IT GETS EASY
6%
26%
38%
29%
Advanced: "Way ahead of peers"
Moderate: "We have id'd strategy
& are executing"
In Process: "We are developing
strategy"
Lagging: We have yet to set our
long-term strategy"
2013
Source: SPS Commerce, “Retail Insight: 2015: Fulfilling Customer Expectations≈

66. 66
Company Perceived Multichannel Sophistication
HARD BEFORE IT GETS EASY
6%
26%
38%
29%
5%
26%
32%
37%
Advanced: "Way ahead of peers"
Moderate: "We have id'd strategy
& are executing"
In Process: "We are developing
strategy"
Lagging: We have yet to set our
long-term strategy"
2014 2013
Source: SPS Commerce, “Retail Insight: 2015: Fulfilling Customer Expectations

67. 67
31%
21%
16%
16%
8%
8%
Online Channel Receives Full Credit
for the Transaction
In-Store Channel Receives Full Credit
for the Transaction
Credit for the Transaction Would be
Split Between Channels
Irrelevant, Company Operates a Single
P&L Across Channels
Credit for the Transaction Would be
Accounted for Entirely Sperately from
Unsure / Other
INCENTIVES DRIVE PERFORMANCE
Revenue Attribution for Omnichannel Sales
U.S. & European Retailers, 2013
Source: Forrester, “Customer Desires Vs. Retailer Capabilities: Minding the Omni-Channel Gap”

68. 68
CHECKOUT: APPLE VS EVERYONE
ELSE
Single page however requires customer to enter all
information and hit save between each step
One-Touch Pay
On / Off Gifting
Live Stock Status

69. 69
HEAD TO HEAD WITH AMAZON
Everlane tested 1 hour delivery for New
York and San Francisco. Delivery was
available on weekdays from 9 am to 6
pm, $4.99 for one item and free for two
pieces or more.
Sephora’s Flash Subscription:
$10 for one year
What you get:
- Unlimited, FREE 2-Day Shipping
- No minimum purchase required
- Applies to EVERY order for an entire
year
- Special overnight rate of $ 5.95
- FREE for VIB Rouge Members

70. 70
FROM CART TO CAR
1 Selfridges launched Click & Collect at all stores
in May 2013.
2 In November 2013, the brand opens the world’s
first department store Click & Collect Drive
Through at its London Oxford Street store.
1
2
Selfridges expects its Click &
Collect service to account for
at least 25% of all online orders
Source: Econsultancy

71. 71
FROM CART TO CAR
Amazon’s partnership with Audi and
DHL enabled delivery of packages to the
trunk of customer’s cars
Volvo’s Roam Delivery service provided
delivery companies with the location of
your Volvo and a one-time digital key to
leave packages inside

72. 72
CHOOSE YOUR DELIVERY TIME
Delivery.walmart.com allows customers to select their delivery time in 2 or 4 hour slots.

73. 73
NARROWING WINDOWS
Though not rolled out to
every location, U.K. retailer,
Argos, offers in-store
pickup windows at small as
60 minutes; highlights
reserve online, immediate
in-store pick up during
checkout

74. 74
OMNICHANNEL BEHAVIOR ON PDP

75. 75
1 Harvey Nichol’s new Click & Try service allows customers to meet with a Style
Advisor, who will have the consumer’s order ready to try on for sizing.
2 The re-launched HN website (April 2014) includes a renewed focus on stores.
3 Services and events are prominently featured across HarveyNichols.com
1 2
3
Click & Try: Harvey Nichols
HIGH TOUCH: CLICK & TRY

76. 76
OMNICHANNEL ITERATION
The ability to reserve in-store
is promoted on-site, in email
marketing, and offline
Reserve in-store can
be used on a mobile
device to support
shoppers on the go
SMS notifications let
users know when
their reserved items
are available in-store

77. CUSTOMER ENGAGEMENT
CONCLUSIONS:

78. 78
CONCLUSIONS / QUESTIONS
1. What role does implicit & explicit data play in
customizing your brand’s customer journey?
2. Have you shifted your priorities to tackle high touch
and low touch customer service?
3. Does your omnichannel strategy take into account
convenience as well as conversion?
4. How are you tackling next generation solutions for your
most loyal customers?

79. #RIC15