HOLIDAY RECAP REPORT 2016ADOBE DIGITAL INSIGHTS

Methodology

Adobe Analytics

Adobe Mobile Services

Adobe Social

Most comprehensive and accurate report of its kind in industry

Adobe measures 80% of all online transactions from top 100 U.S. retailers ** $7.50 of every $10 spent online with top 500 U.S. retailers go through Adobe Marketing Cloud ** Report based on analysis of 1 trillion visits to over 4,500 retail websites and 55 million SKUs 2016 prediction within 0.13% accuracy 96M Social Mentions From Sept 2015 - Dec 2015 & Aug 2016 - Dec 2016

Data from different Adobe Marketing Cloud solutions:

Based on analysis of aggregated and anonymous data

** Latest IR Top 500 Report 2016

Adobe Marketing Cloud

Key Findings

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Holiday season totals $91.7B and 11% year-over-year growth, driven by late season shopping

Smartphone usage increased, but created $4.5B opportunity cost from Thanksgiving – Cyber Monday

The digital divide continues to increase: large retailers grew by 12.6% compared to others at 4.7%

The UK, France and Canada grew the same or more than the US (11%, 14% and 14% respectively)5

The Digital Price Index revealed steeper discounts this Black Friday, but higher price increases in December

1 / Holiday season totaled $91.7B and 11% year-over-year growth

Of the big three days, Black Friday grew the most

Thanksgiving grew the same as the season ($1.93B Ι 11.5% YoY Growth)

Black Friday grew fastest ($3.34B Ι 21.6% YoY Growth)

Cyber Monday all-time spending record ($3.45B Ι 12.1% YoY Growth)

Black Friday will catch Cyber Monday in 2017 if patterns hold steady

More days generated over a billion dollars

57 of 61 days exceeded $1B (4 of those days over $2B, 2 over $3B)

Strong growth occurred late in the season

Last two weeks grew by 19.2% compared to first two weeks at 1.4%

The $25B revenue mark was hit around the same time as 2015, yet the $75B revenue mark was hit 6 days quicker, indicating increased spend later in the season

1 / Growth driven by late season shopping

Revenue outpaced visit growth on 56 out of 61 days due to nominal increase in AOV and conversion

Retailers were more effective at converting visitors: Conversion rates increased to 2.70% (vs. 2.63% last year), AOV increase d 0.8%

Visit growth was consistently in the single digits until late in the season; even the major shopping weekend saw low growth ( 7.7%)

Low visit growth suggests retailers may be reaching a visit plateau as fewer net new customer shop online

Strong growth occurred late in the season as consumers took advantage of later shipping options

Seven days in last half of December grew in excess of 20% YoY

1 / Search boosted Black Friday performance

Black Friday closed the performance gap with 21.6% YoY revenue growth vs. 12.1% on Cyber Monday

Black Friday closed the revenue gap with Cyber Monday by $220M

Search activity and spend increased more on Black Friday than on Cyber Monday

Search spend increased 16% YoY on Black Friday, compared to 5% YoY on Cyber Monday

CPCs were slightly lower on Black Friday than on Cyber Monday (-7%)

Impressions on Black Friday increased 20% YoY, while Cyber Monday was essentially flat (-2%)

Mobile search increased

Mobile search doubled impressions on both days (+101%)

1 / Click and Collect and real-time delivery opportunity could be worth $2B in 2017

Once Cyber Monday passed, conversion rates increased and AOV decreased until it was too late to ship

Conversion rates hold steady up to Thanksgiving, averaging 2.4% the two weeks before

Conversion rates increase 31% to 3.2% for the two weeks after the shopping weekend

AOV shrinks by -12% during the same timeframe

Click and Collect could generate an additional $2B

Emphasizing Click and Collect could promote steady shopping behavior and maintain conversion rates, which currently decrease by 29.8% from December 20-23 Nov. 29 –

Dec. 19Dec. 20 –Dec. 30 Difference

Conversion 3.15% 2.21% -29.8%

Actual Revenue $4.94BAdjusted Revenue $7.04B $2.10B

2 / Black Friday offered higher discounts, but December prices rebounded

Prices increased 3.5% in December 2016 vs. 1.9% last year• Overall, prices were down -6.1% in November 2016

(compared to -5.5% last year)

• Prices rebounded 3.5% in December, increasing above level seen last year (1.9%)

• Prices online for Televisions dropped later in November 2016 than in 2015, with more discounts during the Black Friday week (Monday 11/21 through Cyber Monday), which accounted for more than half of all Televisions units purchased between November and December

• Television prices then increased more in December 2016 than they did in December 2015, a sign that retailers were able to capitalize on later shopping

Smartphone traffic totaled 41% for the season (5.1% YoY), and is only slightly higher after Cyber Monday than earlier in the season (40.3% vs 38.6%)

Smartphone conversion jumps as the holiday goes full force (1.28% average conversion rate before the major shopping weekend, increases to 1.65% after)

Smartphone conversion is highest on Cyber Monday at 2.8%, but is still 26% below the desktop season average of 3.6%

Smartphone share of sales totaled 21%. (+23.5% YoY)

3 / Smartphone traffic increased but conversion still lags desktop

3 / Consumer intention to buy continued to be lower on smartphones

Throughout the season, desktop visits converted at 2.4x the rate of smartphone visits (3.6% vs. 1.5%, respectively)

The conversion gap remains consistent throughout the holiday season

Conversion increases at the same rate on both devices, until it’s too late for shipping

Major Shopping Days and Holidays Turn Mobile

Super Saturday (11/26) and Thanksgiving Day were top performers for mobile share of visits and revenue

Thanksgiving Day increased mobile visits and revenue by 11.8% and 37.9% YoY, respectively

Christmas Eve was the most mobile day in terms of share of visits from a mobile device, but lowest day in terms of sales

Christmas Day drove the most mobile share of purchases, but second only to Christmas Eve as the lowest revenue day of the season

3 / Mobile is strongest on some of the biggest revenue days as well as the smallest.

3 / The mobile shift created a $4.5B opportunity cost from Thanksgiving to Cyber Monday

Smartphone visits remain less valuable than desktop, causing a drag on potential revenue

During the 5-day holiday weekend smartphone conversion rates were less than half of desktop (2.2% vs. 5.1%) and tablet conversion was nearly a full point lower

With total visits up only 7.7% YoY it would seem that the multi-device experiences aren’t the normal consumer behavior.

Opportunity cost = Device Conversion Ratio * Actual 2016 Revenue by Device

4 / Growing retailers adapted their marketing mix better than others.

Retailers that saw the most growth on Black Friday and Cyber Monday saw bigger shifts in how consumers accessed their site than those with lower growth rates

Display and Social had the largest traffic increases (193% and 27% YoY, respectively) for higher growth firms vs. 36% and 12% for lower growth

High performing websites saw more traffic from marketing outreach programs leveraging Email, Social, Referral and Display and less from Search and Direct channels which rely on the consumer to take the initiative

During consumer’s planning phase of holiday shopping (November 1-23), websites who grew the most saw more than half of their traffic come from mobile devices (54% vs. 46%)

Once the major shopping weekend hit, the mobile gap disappeared and both websites who grew vs. those who didn’t tracked the same share of mobile traffic (47%)

4 / High growth websites strategically took advantage of mobile browsing

4 / Only 40% of retailers experienced above average growth on the two biggest days

Retail websites which grew averaged 48% revenue growth on Black Friday and Cyber Monday

The remaining websites actually saw an 8% decline

Retail websites with higher revenue growth improved other KPIs on Black Friday and Cyber Monday as well

Drove more traffic: 18% vs. -1%

Improved conversion by 9% (vs. 1%)

Had higher AOV: 11% vs. -3%

Growth isn’t necessarily associated with ‘mobile’. Higher growth websites saw 5% more traffic come from desktop shoppers than lower growth websites

Large retailers grew more throughout the holiday season

Large retailers grew by 12.6%, compared to others at 4.7%

And had exceptional performance from Thanksgiving – Cyber Monday:

More RPV: 37% for each visit

More shopping carts: Consumers were 19% more likely to convert (4.2% vs. 3.6%)

Larger shopping carts: Consumers spent 15% more per basket

Larger shopping carts were driven by more items (+27%) at a lower price (-9%)

Note: Differences aren’t a result of mobile devices, as share of revenue is the same for both groups at 35%

4 / Top retailers widened the digital divide

Belgium, France and Canada saw stronger growth than the US, while ANZ and Austria were essentially flat

The UK tracked the US up +11% YoY to $30.8B

Growth in the UK came from a combination of Black Friday sales starting earlier in the week and late season ordering on Monda y, Dec. 19

5 / International growth varied across countries

The UK is the most mobile with $3.80 out of every $10 coming from a mobile device

France is the least, with mobile accounting for $2.50 out of $10

5 / Mobile visits outpace mobile revenue across the globe

In the US, growth came late in the season as retailers improved their ability to ship and deliver in a shorter time frame

In countries outside the US, shopping patterns changed based on promotional activity by retailers

ANZ saw more sales timed around sales events (November Click Frenzy, Black Friday, Cyber Monday)

5 / Retail promotions shaped consumer behavior

Retailers saw the same pattern of online sales from smartphones and desktops as 2015

As the strongest performer in Europe with 11% growth, the UK saw increases pretty much throughout the season

Several UK retailers made “Black Friday” a weeklong event

France saw the most change with both early and late increases in holiday spend. The traditional “shop on Sunday” is starting to even out.

Other that the late season shopping, Germany was business as usual this year.

5 / European spending patterns remained consistent year-over-year

5 / The last Monday before Christmas (Dec 19th) was a major shopping day in most countries.

Late shopping helped drive the holiday season totals across countries

Across countries, growth on Dec 19 th was nearly 4x that of the season (34% vs. 9%)

Consumers focused on xx from major retailers – both pure plays and brick and mortar.

5 / Spend shifted to key shopping days in other countries

Boxing Day (Dec. 26) shifted to Black Friday and Cyber Monday in ANZ

Consumers spent $32M less on Boxing Day and $93m more on Black Friday and Cyber Monday

UK Boxing Day growth was in line with the overall season (+11%)

Canadian Boxing Day grew slower than overall season 5% vs. 13%

Canada and the UK showed growth on Cyber Monday at the expense of Black Friday

Measuring rapidly shifting consumer preferences

• Electronics see an average of 77% of online spend on new* products**

• 17% of monthly online spend for groceries on new products

* Products that have been available for 1 year or less** A product is defined as an item for purchase which has an unique identifier (such as a SKU)

Inflation rates by price ranges

• Televisions have seen higher-ticket items deflate faster than lower-ticket items in 2015

• For computers, mid-range models priced between $700 and $1,200 showed the highest deflation last year

*Price bins are determined based on the price the product had when originally launched (first price).

Inflation by price ranges

• Tablets have seen higher-ticket items deflate faster than lower-ticket items

• The greatest price decrease and increase in November and December were for tablets priced between $350 and $600

*Price bins are determined based on the price the product had when originally launched (first price).

Inflation by price ranges

• The highest priced televisions have have seen faster deflation than lower priced items

• The greatest price decrease in November and increase in December were for TVs priced between $600 and $1,000

*Price bins are determined based on the price the product had when originally launched (first price).

Inflation by price ranges

• Mid-range computers have seen faster deflation than lower and higher priced models

• The greatest price decrease in November were for mid range computers between $700 and $1,200 while the greatest price increase in December were for lower priced models between $300 and $700

*Price bins are determined based on the price the product had when originally launched (first price).

Share of Visits and Sales Breakdowns

Share of Visits and Sales Breakdowns

Spending steadily increases until mid-December

Retailers see the same pattern of online sales from smartphones and desktops as 2015

Smartphone share of revenue on Black Friday increased 47% in 2016, approaching levels seen on Cyber Monday

Cyber Monday still sees the bulk of purchases from desktops (69% in 2016)

Thanksgiving – Cyber Monday mobile trends

Between Thanksgiving and Cyber Monday, mobile share of revenue increased to 36% (+16% YoY)

Mobile share of visits increased 11%, accounting for over half of all traffic (55%) during this same time period

The shopping event starts on mobile and ends on desktop as people return to work

Mobile accounts for 37% more revenue on Thanksgiving compared to Cyber Monday