AKAMAI WHITE PAPER. Retail s Omnichannel Imperative: Delivering Situational Performance
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1 AKAMAI WHITE PAPER Retail s Omnichannel Imperative: Delivering Situational Performance
2 TABLE OF CONTENTS 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
3 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. 3,000 2,500 Q2:13E: Projected Inflection point Smartphones + Tablet Installed Base> Total PCs Installed Base Global Installed Base (MMs) 2,000 1,500 1, E 2013E 2014E 2015E Note: Notebook PCs include Netbooks, Assumes the following lifecycle: Desktop PCs- 5 Years: Notebooks PCs - 4 years: Smartphones - 2 years: Tablets years. Source: Katy Huberty, Ehud Gelblum, Morgan Stanley Reasearch. Data and Estimates as of 9/12 Desktop PCs Notebook PCs Smartphones Tablets Figure 1 - Omnichannel shoppers are turning to numerous devices beyond the desktop 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. 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
4 Retail s Omnichannel Imperative: Delivering Situational Performance 2 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 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. Yours v6 3rd Parties Device Types Browsers Connectivity Content Origins Figure 3. What s the situation? 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.
5 Retail s Omnichannel Imperative: Delivering Situational Performance 3 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. Abandonment Rate Across 280+ Websites/271 Million Page Views Abandonment Rate (%) Slower pages = higher abandonment Reduces revenue Increases costs Damages brand Source: Gomez UEM Page Load Time Band (sec) iphone 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
6 Retail s Omnichannel Imperative: Delivering Situational Performance 4 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 sec. Avg. Load Time KB 129 requests incl. 16 style sheets 63 images 33 scripts sec. Avg. Load Time 490KB 108 requests incl. 15 style sheets 51 images 33 scripts 7,000+ different types of mobile devices access Facebook every day 9.42 sec. Avg. Load Time 301KB 42 requests incl. 4 style sheets 28 images 8 scripts 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 highperformance retail site experiences complex and expensive.
7 Retail s Omnichannel Imperative: Delivering Situational Performance 5 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. Measure, Apply Intelligence, Optimize Performance Measurement Optimization Measurement Intelligence 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.
8 Retail s Omnichannel Imperative: Delivering Situational Performance 6 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 Customer Infrastruture Akamai Intelligent Platform Local ISP / Mobile Network Operator First Mile Middle Mile Last Mile 10% 90% 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.
9 Retail s Omnichannel Imperative: Delivering Situational Performance 7 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 Accessed online December 2012 from the following source: II. The New Multi-screen World, Google/Ipsos, August 2012 III. IV. Wood, Zoe (2012). Marks and Spencer gambles on bringing internet age to the shop floor, The Observer, September 1, Accessed online December 2012 from the following source: Speer, Jordan K. (2012). Macy s Omni-channel Strategy on the Move, Apparel, May 12, Accessed online December 2012 from the following source: V. Deloitte, The store of the future: the new role of the store in a multichannel environment, 2011 VI. VII. VIII. Wood, Zoe (2012). Marks and Spencer gambles on bringing internet age to the shop floor, The Observer, September 1, Accessed online December 2012 from the following source: Kelly, Heather (2012). Seven tips for safer online shopping, CNN, December 12, Accessed online December 2012 from the following source: com/2012/12/12/tech/mobile/online-shopping-security/ IX. Shifting Performance Strategies And Solutions For Mobile And Web Delivery, Forrester Consulting, August X. Front-End Optimization on the Akamai Intelligent Platform Akamai Technologies, October 2012 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 or blogs.akamai.com, and on Twitter. 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 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.
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