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Retail’s Omnichannel Imperative:Delivering Situational Performance

RETAIL’S OMNICHANNEL IMPERATIVE: DELIVERING SITUATIONAL PERFORMANCE 1

THE RETAIL IMPERATIVE: UNIQUELY ADDRESS EACH OMNICHANNEL SITUATION 2

MOBILE PAGE SPEEDS TRAIL THE DESKTOP WORLD BY A DECADE 3

THE CHALLENGE: IMPROVING SITUATIONAL PERFORMANCE 4

RETAIL’S LOST INTEGRATION POINT 4

THE PERFORMANCE OPTIMIZATION OPPORTUNITY 5

Measurement 5

Intelligence 5

Optimization 5

Front-End Optimization 6

RETAIL LEADERS DELIVER TO EACH OMNICHANNEL SHOPPER’S SITUATION. . 7

TABLE OF CONTENTS

Retail’s Omnichannel Imperative: Delivering Situational Performance 1

Retail’s Omnichannel Imperative: Delivering Situational Performance

Today’s shoppers are increasingly interacting with retailers across three or more channels, giving rise to the term “omnichannel

shoppers.” In addition to in-store engagement, these shoppers are overwhelmingly turning to e-commerce both at home and

on-the-go via multiple devices, including desktops, laptops, tablets, smartphones and notebooks. The chart below demonstrates

the growing reliance omnichannel shoppers have on an arrayof device types.

At the same time, omnichannel shoppers often combine shopping channels

simultaneously. For example, a recent Google/Ipsos survey showed that 96%

of consumers have used their smartphone to research a product or service

and 78% have them while shopping in brick-and-mortar stores.1 Yet another

Google/Ipsos study found that the overwhelming majority of consumers take

a multi-device path to making their purchase. In fact, 65% of shoppers say

they have started shopping on a smartphone and continued shopping on

either a desktop, PC or tablet.2

But omnichannel shoppers are not just using their newer device types for

comparison shopping; they are increasingly making their actual purchases

with smartphones and tablets. Consider these fast-moving changes among

several retail industry leaders:

Rue La La: According to Steve Davis, Rue La La’s President, in just 2 years,

mobile-device sales jumped from 1% to 50% of total sales on a given day.

eBay: According to Steve Yankovich, VP Mobile at eBay, “Mobile growth has

been phenomenal. Think of only four years back – no one thought about

mobile at all. Now we expect to do $10 billion globally on eBay Mobile.”

Sweetwater Sound, Inc.: Mike Clem, Sweetwater Sound’s Director of

E-commerce, says that the retailer’s tablet users tend to be tech-savvy,

resulting in iPad users to convert into sales at a 30% higher rate than

desktop users.

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2009 2010 2011 2012E 2013E 2014E 2015ENote: Notebook PCs include Netbooks, Assumes the following lifecycle: Desktop PCs- 5 Years: Notebooks PCs - 4 years: Smartphones - 2 years: Tablets - 2.5 years. Source: Katy Huberty, Ehud Gelblum, Morgan Stanley Reasearch. Data and Estimates as of 9/12

Q2:13E: Projected Inflection pointSmartphones + Tablet Installed Base>

Total PCs Installed Base

Desktop PCs Notebook PCs Smartphones Tablets

Figure 1 - Omnichannel shoppers are turning to numerous devices beyond the desktop

Omnichannel Shoppers Represent Tremendous Value to Marks and Spencer

UK-based retailer Marks and Spencer recently reported that shoppers who use two channels and three channels for a purchase spend four and eight times more, respectively, than a customer who uses just one channel.3

Macy’s Prepares for a Boom in Omnichannel Shopping

Macy’s is bringing digital assets into its stores, equipping sales associates with mobile devices to allow them to service customers better. “90% of our customers research online at least occasionally before purchasing in-store”, says Brian Leinbach, Macy’s senior vice president of systems development and field services. At the same time, online sales grew 40% from 2010 to 2011 at Macy’s flagship websites Macys.com and Bloomingdales.com.4


The experiences of these retailers demonstrate that omnichannel shoppers are both substantial in number and

highly valuable in terms of purchase intent.

In its recent report on The Store of the Future, Deloitte notes how these changes in omnichannel behavior are

shaping plans for retailers’ brick-and-mortar stores. According to Deloitte, “Going forward, the store needs to

be an embodiment of the brand and a ‘destination’ for consumers where they can do much more than simply

browse and interact.”5 In fact, some leading retailers are already unveiling more digitized stores. They do this by

continuously refreshing back-of-the store data, such as inventory levels and other SKU-specific data. They then

tap into this information through in-store Wi-Fi or near-field communications to map out the store and help

shoppers find products.

In a new Marks and Spencer store, customers can use giant touchscreens to browse and order products. The

stores’ employees, each carrying an iPad, add value to the shopping experience by calling up additional data

from the web to fill gaps between the thousands of in-store products and those found online. Laura Wade-Gery,

Marks and Spencer’s Executive Director of Multi-Channel E-Commerce, is leading the charge for the store of the

future. “How do we use the Internet to reinvent the store?” she asks. “It’s as big a mission as that.”6

The Retail Imperative: Uniquely Address Each Omnichannel Situation

Device Types Browsers Connectivity Content Origins

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Figure 3. What’s the situation?

The number of omnichannel shoppers will only grow with the proliferation of Wi-Fi, broadband and mobile

technologies that enable retail website access to users around the world, on any device type. As a result, retailers

must address tremendous diversity among variables that impact the end-user experience, including connection points,

browsers, devices and operating systems that connect browsers. Akamai refers to all the permutations of these

variables as “the situation” – the way in which users access information, conduct commerce and otherwise engage

with retailers.

What does this mean for retailers? They must prepare their e-commerce infrastructure to rapidly respond to a wide

variety of situations in order to deliver the best experience possible to valuable omnichannel shoppers. To do so,

retailers must gain “situational awareness” by answering questions such as the following:

• Is the current shopper accessing the site from a desktop machine running IE 9 over a cable connection?

• How does delivery vary if the user is accessing the site from a MacBook running Safari through public Wi-Fi

or an Android smartphone on 3G?

In other words, retailers must be aware of and prepared to address all possible combinations of channels and

technologies being used by an omnichannel shopper at any given moment so as to deliver an optimal user experience.

The key is to automate situational awareness of each shopper and respond with the appropriate content-type and

delivery method.


Mobile Page Speeds Trail the Desktop World by a Decade

Regardless of the channels and technologies used by shoppers, one of the most critical aspects of serving their

needs is to optimize site performance – how quickly site pages load regardless of device. Retailers want to

ensure a quality, immersive experience and realize that performance across multiple access and device types

is key to that.

According to the performance monitoring company Keynote, the average page load speed of the top 30

e-commerce sites has been reduced to 2 seconds – very near the goal of sub-2 second response times reported

in a 2010 Aberdeen Group study. Despite this progress, Keynote also reports that the top 30 mobile commerce

sites average a full 9 seconds for page loads, an unacceptable 300% more time than their web counterparts.

Considering that the last time desktop site performance clocked at 9 seconds per page was back in 2001, retail

mobile sites are effectively 11 years behind in performance.7 Retailers cannot afford to continue this trend,

particularly as Cyber Monday and Black Friday 2012 mobile purchases jumped an astounding 190% and 193%,

respectively, according to mobile payments company PayPal.8

What’s at stake when a site performs slowly? The chart below shows the drastic impact poor site performance

has on site abandonment.

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Page Load Time Band (sec)Source: Gomez UEM

Abandonment Rate Across 280+ Websites/271 Million Page Views

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Slower pages = higher abandonmentReduces revenueIncreases costsDamages brand

Figure 4 : Abandonment rates increase as site performance decreases

Based on this research from Compuware Gomez, retailers can expect an

approximate abandonment of 15% when pages take 9 seconds to load. When

analyzing mobile and tablet users, Compuware found that more than 40%

are unlikely to revisit a site after experiencing poor performance. Even more

astounding, 33% of tablet users and 26% of smartphone users say they are less

likely to purchase from that company – across all channels. Moreover, these

tech-savvy shoppers tell their friends and acquaintances about poor shopping

experiences, leading to further negative impact from slow site performance.

Omnichannel shoppers share their experiences over social media

Poor Mobile App Performance impacts revenue and cost


The Challenge: Improving Situational Performance

Paradoxically, omnichannel shoppers grow more impatient each year with slow page downloads while continuously

seeking more immersive experiences on retail websites. In a recent report on website performance strategies,

Forrester Consulting underscored the growing pain point for retailers. According to Forrester, “Three-quarters of

firms face escalating customer expectations for better responsiveness of their web and mobile applications and

richer content.” Forrester goes on to say that rich content (i.e., multimedia, dynamic content and apps) can slow

response times when handsets, tablets or networks become constrained or limited.9 Retail sites will continue to

leverage rich content and promote a differentiated experience, which means the way they sense situations and

deliver content must fundamentally change.

Retail’s Lost Integration Point

Complicating matters is the fact that retail website managers no longer own the integrations for all content and

apps that their sites serve. The website backend has grown exponentially more complex, with numerous apps and

data elements living outside retailers’ firewalls. While retailers maintain control of session information, search and

content management system functions, the cloud houses shopping carts, web analytics, ads from ad servers, video

from media servers, social network services, business services, analytics, reviews, news feeds and even site content.

Change is also occurring continuously on the end user side of the equation. A growing number of shoppers now

engage retailers in ways beyond the standard website. Native applications on smartphones and tablets are often

powered from a backend that is completely outside retailers’ control, yet retailers must still respond quickly and

appropriately to user requests for data.

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7,000+ different types of mobile devices access Facebook every day

Figure 5. Delivering high performance is becoming increasingly complex

Ensuring fast delivery of these elements has become a struggle for many website teams, as they cannot manage

the performance of external services and the cloud platforms that support them. This, combined with the need

to serve a growing array of devices, browsers, operating systems and networks, makes the delivery of high-

performance retail site experiences complex and expensive.


The Performance Optimization Opportunity

As with any significant market shift, the need for situational awareness presents great

opportunities for leading retailers — some of which have already progressed down the

path to situational awareness. Retailers can capitalize on the omnichannel shopping trend

through a combination of measurement, intelligence and optimization to deliver the best

experience at each shopper touch point. Op

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Intelligence

Measuremen

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Measure, Apply Intelligence, Optimize Performance

Measurement

The most important step to improving site performance is for retailers to begin measuring all end-user web

experiences on an ongoing basis. Performance monitoring services are beginning to offer “real end-user

monitoring” solutions that look at the actual response times end users are seeing, regardless of device or

connectivity. Correlating these measurements to retailers’ key business metrics (e.g., revenue and conversion)

helps to identify when retailers must make additional investments in certain performance areas and when

performance is suitable to refocus on website features and capabilities.

Intelligence

Gaining real-time intelligence about shoppers’ usage conditions (i.e., situational awareness) enables retailers

to make the right content-serving decisions. For each type of user device, given the particular conditions that

surround a given connection, providing “situational performance” — or the ability to apply optimizations

on a scenario-by-scenario basis — becomes crucial. Doing so requires sophisticated knowledge about each

data request, including information about device characteristics and real-time network conditions. A number

of leading retailers are leveraging this capability within their Internet content delivery services to provide a

differentiated experience for each end user request. Because the content delivery service provider includes

the capability as part of normal site delivery, these retailers gain intelligence without the cost and complexity

of continually tracking and responding to changes in situational variables (devices, browsers, operating systems

and networks).

Optimization

The next generation of integrated content delivery technologies are designed to provide retailers with

opportunities to optimize each shopper’s experience based on the situational intelligence that they gather. These

include capabilities that boost performance for web, web-based mobile and pure mobile applications. The three

most important performance enhancements include adaptive image compression, device characterization and

front-end optimization.

Using adaptive image compression, a content delivery service provider can utilize the situational intelligence that

it already gathers to adjust — in real time — compression parameters for images. Retailers dictate their desired

parameters to the provider so that shoppers receive appropriately changing image quality as network

conditions change.

Device characterization enables retailers to specify content to be delivered based upon shoppers’ device

characteristics. These include such factors as screen size, browser version and JavaScript support. The content

delivery service provider feeds this information to the site’s origin, which in turn serves specific and differentiated

content. In this way, omnichannel shoppers enjoy a unique and satisfying experience on their mobile devices.


Front-End Optimization

Retailers have traditionally focused web-performance tuning on the application backend. However, backend tasks

total only 10% of user-perceived page load time for most of today’s web applications. The remaining 90% arises

from latencies in the Internet’s middle mile and the front end.10 The middle mile, or time required for data to travel

across the Internet, incurs delays caused by network latency, routing problems and Internet congestion. The front

end includes the time required for data to cross the last mile to the user’s device and then for the browser to render

the page.

How website page load time breaks down

Browsers differ in their support for features such as HTTP pipelining or

the number of possible simultaneous downloads. At the same time, devices

connected over networks that vary in throughput benefit from different types

of optimizations. An advanced content delivery service provider recognizes

automatically which front-end optimizations to apply to a retailer’s dynamic

site based on all of these factors. The provider handles these different scenarios

seamlessly, creating multiple possible optimizations in the analysis phase and

then intelligently applying the appropriate ones to each shopper’s situation.

The provider computes transformations offline and then provides information

to a network of cloud-based servers in regions around the globe. The servers

rapidly apply the transformations in real time as they deliver content to shoppers.

By separating the complex analysis from the real-time application of the

optimizations, front-end optimization occurs without sacrificing performance.

Build.com Responds to the Situation Fast and Economically

When asked why Build.com adopted a website infrastructure that incorporates situational awareness, Brad Ledford, Build.com’s Director of Software Development, responded this way:

“Our customers visit the site on a variety of devices and across multiple networks. It simply wasn’t feasible or economical to deploy individual sites tuned to the numerous combinations of access scenarios.”

First Mile Middle Mile Last Mile

Akamai Intelligent Platform Local ISP / Mobile Network Operator

Customer Infrastruture

10% 90%


Retail Leaders Deliver to each Omnichannel Shopper’s Situation

The value of omnichannel shoppers is simply too great for retailers to overlook. To please these demanding

customers, retailers must deliver an optimal e-commerce experience that is both measurable and adjustable

in real time, regardless of channel. While tools exist for retailers to tackle the intricacy of situational performance,

a content delivery service provider can automate all three phases: measurement, intelligence and optimization.

This leaves retailers to focus on what they do best – creating ever more immersive experiences that compel

omnichannel shoppers to purchase and return.

I. “Our Mobile Planet: United States. Understanding the Mobile Consumer,” Google/Ipsos, May 2012. Accessed online December 2012 from the following source:

II. “The New Multi-screen World,” Google/Ipsos, August 2012

III. Wood, Zoe (2012). “Marks and Spencer gambles on bringing internet age to the shop floor,” The Observer, September 1, 2012. Accessed online December 2012 from the

following source: http://www.guardian.co.uk/business/2012/sep/02/marks-and-spencer-multichannel-shopping

IV. Speer, Jordan K. (2012). “Macy’s Omni-channel Strategy on the Move,” Apparel, May 12, 2012. Accessed online December 2012 from the following source:

http://apparel.edgl.com/case-studies/Macy-s-Omni-channel-Strategy-on-the-Move801225 http://www.websiteoptimization.com/speed/tweak/average-web-page/

V. Deloitte, The store of the future: the new role of the store in a multichannel environment, 2011

VI. Wood, Zoe (2012). “Marks and Spencer gambles on bringing internet age to the shop floor,” The Observer, September 1, 2012. Accessed online December 2012 from the

following source: http://www.guardian.co.uk/business/2012/sep/02/marks-and-spencer-multichannel-shopping

VII. http://www.keynote.com/keynote_competitive_research/performance_indices/top_retailers/index.html

VIII. Kelly, Heather (2012). “Seven tips for safer online shopping,” CNN, December 12, 2012. Accessed online December 2012 from the following source: http://www.cnn.

com/2012/12/12/tech/mobile/online-shopping-security/

IX. “Shifting Performance Strategies And Solutions For Mobile And Web Delivery,” Forrester Consulting, August 2012.

X. “Front-End Optimization on the Akamai Intelligent Platform” Akamai Technologies, October 2012

©2015 Akamai Technologies, Inc. All Rights Reserved. Reproduction in whole or in part in any form or medium without express written permission is prohibited. Akamai and the Akamai wave logo are registered

trademarks. Other trademarks contained herein are the property of their respective owners. Akamai believes that the information in this publication is accurate as of its publication date; such information is subject

to change without notice. Published 05/15.

Akamai is headquartered in Cambridge, Massachusetts in the United States with operations in more than 40 offices around the world. Our services and renowned customer care enable businesses to provide an unparalleled Internet experience for their customers worldwide. Addresses, phone numbers and contact information for all locations are listed on www.akamai.com/locations.

As the global leader in Content Delivery Network (CDN) services, Akamai makes the Internet fast, reliable and secure for its customers. The company’s advanced web performance, mobile performance, cloud security and media delivery solutions are revolutionizing how businesses optimize consumer, enterprise and entertainment experiences for any device, anywhere. To learn how Akamai solutions and its team of Internet experts are helping businesses move faster forward, please visit www.akamai.com or blogs.akamai.com, and follow @Akamai on Twitter.

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