Virtual Goods Mean REAL Money This Holiday

Virtual Goods Mean Real Money This Holiday
A consumer research study by Elastic Path Software Inc.

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“Attracting the digital goods shopper is crucial this holiday season.
Thirty percent of digital goods consumers plan to spend more
than last year on gifts of all types, with an average budget that
is significantly larger than that of ‘traditional’ gift buyers. In an
otherwise subdued holiday outlook, retailers and e-tailers that
ignore the virtual goods buyer do so at their peril, forfeiting sales to
more forward-thinking competitors.”

Survey background
This 2011 online study polled 1,012 US adults over the age of 18 who intend to purchase gifts this holiday season
(November and December 2011). The survey was developed to examine consumer attitudes and behaviors toward
giving digital goods and the devices on which they will be used.

Executive summary

Amid growing economic uncertainty, many American shoppers will hold back on spending this coming holiday
season. According to research firm Kantar Retail, e-retail sales will grow 13.5% compared with 16.5% last holiday
season and overall retail sales will increase just 2.8%, half the 2010 rate.

Within this subdued holiday outlook, the 27% of gift shoppers planning to purchase virtual products—ebooks, game
downloads, Facebook credits, and the like—is a lonely bright spot. Thirty percent of these consumers anticipate
spending more this year on holiday gifts, both physical and digital, than they did during the 2010 holiday season.
Their average gift budget is $440, significantly larger than that of more “traditional” gift buyers. The digital gift buyer
tends to be young (ages 18-34), university-educated and is more likely to be male than female.

As over half of these shoppers plan to purchase at just a few online retailers, digital content leaders such as
Amazon and iTunes will likely own the lion’s share of digital gift holiday sales. Brands such as Lego and Disney that
offer “app-cessories” (that is, physical items that interact with Apple gadgets) are positioned to also benefit.

To lure the virtual gift buyer, we offer a number of tips to retailers and e-tailers including maximizing visibility through
online search and social networks, working towards developing a single view of the customer across all channels
from mobile/web to retail, cross-merchandising digital and physical items, and expanding gifting and payment
options.

2

Key Findings:

Online is a major source of inspiration for gift shoppers.

When beginning the hunt for holiday gift ideas, 29% of shoppers look in physical stores while 21% browse
retailer websites [Figure 1]. The younger the consumer, the narrower the gap between bricks and mortar and
the web as the go-to channel. Data from Experian Hitwise indicates that website traffic increases in a troubled
economy because buyers research purchases more carefully online to stretch shopping budgets. High web
traffic does not necessarily translate into transactions; however, Forrester Research predicted in its “U.S.
Online Retail Forecast, 2009 to 2014” report that the web would influence 48% of 2011 in-store sales.

Almost one in five lower income and older adults (ages 55+) say they don’t need to look for gift ideas and
already know what holiday gifts they are going to buy. Recognizing that many consumers may be trying to
spread out holiday shopping over a longer period of time, retailers such as Home Depot and Costco began
displaying holiday-season merchandise earlier this year while others like Wal-Mart and Toys “R” Us reinstated
or introduced layaway programs.

Gen Y shoppers (ages 18-34) find more appeal in gift hunting through search engines or social media sites in
comparison to older demographics, although social remains peripheral to the gift hunting experience. To reach
[Figure 1. – Table 2]
this group, obtaining visibility in services like Google Product Search—the Internet giant’s online shopping
comparison engine for consumer products—is highly recommended.

When thinking of holiday gift ideas, where do you typically
start your search?

Look for ideas in physical stores 29%

Browse retailer websites 21%

Ask friends, family, or colleagues 18%

Search engines
11%
(e.g., Google)

Magazines and newspapers
4%
(e.g., gift reviews)

Social media sites 1%
(e.g., Facebook, blogs, forums, Twitter)

Other 2%

I don’t need to search - I already 14%
know what to get

0% 20% 40% 60% 80% 100%

Base: 1,012 US adult holiday shoppers [Figure 1]

3

Over one-quarter of holiday shoppers plan to buy digital gifts.

Of those surveyed, 27% plan to buy digital goods as gifts this November/December. Digital media include
ebooks, music files, image or movie files, game downloads, video service subscriptions, Facebook or Xbox
credits, etc.

As early adopters of consumer electronics and active digital purchasers, younger demographics (ages 18-34) and
university-educated shoppers are much more inclined to buy digital goods than the average consumer. In general,
men find buying virtual gifts significantly more appealing than do women.
[Figure 3 – Tables 5]
Those customers who plan on buying digital goods as gifts tend to be fairly committed to the format; on average,
42% of their overall 2011 holiday spend will be on digital gifts [Figure 3]. In comparison to women, men expect to
devote a larger percentage of their total gift spend to virtual gifts.

Will you purchase any digital goods as gifts this Approximately what percentage of the money you
holiday season? will spend on gifts for the 2011 holiday season will be
on digital goods?

18%
20%
8% Not sure
27% 1% - 20%
37% 81% - 100%
No Yes

6% 24%
61% - 80% 21% - 40%

36% 25%
Unsure 41% - 60%

Base: 1,012 US adult holiday shoppers [Figure 2] Base: 273 US adult holiday shoppers buying digital gifts [Figure 3]

4

Digital shoppers are a bright spot in a stagnant
holiday forecast. Who is the digital content
shopper?
Over the past several months, U.S. consumers have experienced
wild fluctuations in the stock market, high unemployment, and mounting • More likely to be male than female
government debt. Amid growing uncertainty about the future, many
Americans will limit their spending this coming holiday season. Only • Younger adults, ages 18-34
15% plan to spend more than they did last year [Figure 4a], with
• Plans to spend $440 on gifts, which is
those in the 18-34 age group leading the way. Forty-seven percent 40% more than non-digital goods
will spend approximately the same amount, and 20% will spend less. shoppers
On average, holiday shoppers are budgeting $350 to spend on gifts
[Figure 5a]. • Forty-two percent of their gift budget
will go to digital presents

In stark contrast to the average holiday shopper, a whopping 30% • Eighty-three percent will spend as much
of virtual goods buyers plan to spend more than last year on gifts of or more then they did last year on gifts
all types, both physical and digital, with only 13% spending less of all types
[Figure 4b]. Digital shoppers have significantly larger gift budgets as
• Likes digital content because it’s fast to
well; on average, they plan to spend $440 on holiday gifts, which is
purchase and easy to replace
almost $100 more than the average shopper [Figure 5b].
• Would like to buy virtual products
These figures indicate that retailers and e-tailers selling both virtual bundled with something physical so
and physical goods could reap big returns this year. Brands such as they have a more “tangible” gift
[Figure 4a – Tables 24-26]
Lego and Disney offering products that transcend virtual and physical • Prefers gifting digital gadgets
spaces could also benefit. On October 1st, 2011, Lego’s Life with gift cards
of George game integrating real bricks and an iOS app hit retail
shelves. Similarly, Disney recently introduced Appmates—a series of
physical toy cars that can be placed on the screen of the iPad and
driven through a virtual world.

Will you spend more or less in the 2011 holiday season on…?
Will spend more Will spend less
Will spend the same amount Unsure

All holiday shoppers

Digital goods to give to others 12% 33% 35% 20%

Physical goods to give to others 14% 57% 10% 19%

Gifts of all types 20%
(i.e., physical and digital combined) 15% 47% 18%

0% 20% 40% 60% 80% 100%
Base: 1,012 US adult holiday shoppers [Figure 4a]

Digital goods shoppers

Digital goods to give to others 36% 47% 5 12%

Physical goods to give to others 24% 57% 4 15%

Gifts of all types
(i.e., physical and digital combined) 30% 53% 4 13%

0% 20% 40% 60% 80% 100%

Base: 273 US adult holiday shoppers buying digital gifts [Figure 4b]

5

[Figure 5a – Table 3]

What is the total amount you expect to spend on gifts
during the 2011 holiday season?


More than $500 20%

$401 - $500 14%

$301 - $400 12%
Average spend: $349
$201 - $300 17%

$101 - $200 20%

$1 - $100 12%

Unsure 6%

0% 20% 40% 60% 80% 100%

Base: 1,012 US adult holiday shoppers [Figure 5a]


More than $500 31%

$401 - $500 17%

$301 - $400 13%

$201 - $300 14% Average spend: $440

$101 - $200 17%

$1 - $100 3%

Unsure 5%

0% 20% 40% 60% 80% 100%


6

Shoppers highly value the last minute convenience of digital media.

The number one perceived advantage of digital goods over physical ones, cited by 29% of all holiday
shoppers, is that they can be bought at the last minute and delivered instantly [Figure 6]. Being faster and
easier to purchase (24%), having no shipping charges (22%), and avoiding the need to wrap or ship (19%) are
also quoted as major benefits.

[Figure 6. – Table 46] plan
The 27% who to buy digital gifts highly value the ease of replacing them if they are lost or damaged.
Of particular appeal to members of Gen Y (ages 18-34) is the convenience of being able to send digital gifts
anywhere in the world, in addition to the relatively lower cost compared to physical equivalents.

What do you think are the beneﬁts, if any, of giving digital
goods over physical goods?

Can be bought at the last minute
and delivered instantly 29%

Faster and easier to purchase 24%

No shipping charges 22%

No need to wrap or ship 19%

Can be sent anywhere in the world 17%

Takes up less space than physical gifts 16%

Can choose the exact items I want to give
(e.g., individual songs) 15%

More enviromentally friendly 11%

Easy to replace if lost or damaged 11%

More payment options available
(e.g., PayPal) 9%

Cheaper than the physical version 8%

Other 0%

I do not think there are any beneﬁts of giving 27%
digital goods over physical goods

0% 20% 40% 60% 80% 100%


7

Digital gifts are perceived as impersonal and less fun to receive.

Impersonality (32%) and the lack of cross-platform compatibility (26%) are the main disadvantages of digital
gifts, followed 47] a less enjoyable “gift opening” experience (24%), and the inability to return or exchange
[Figure 7 – Table
by
virtual goods (21%) [Figure 7]. Content providers and resellers must get creative with personalized and
entertaining e-gifting options to compensate for the lack of packaging, empty stockings, and missing presents
under the tree.

What do you think are the disadvantages of giving digital
goods over physical goods?

Less personal than physical gifts 32%

Need to know what devices the recipient
owns to purchase the correct format 26%

Less fun to receive
(e.g., cannot rip open present) 24%

Cannot return for a refund or exchange the item 21%

Less aesthetically pleasing than physical gift
(e.g., no festive wrapping paper) 18%

Appear less substantial/not as big as physical gifts 15%

Receipient can easily find out amount spent 10%

Cannot be regifted or donated 9%

More disposable
(e.g., no physical reminder of the giver) 8%

Difficult to find and buy 6%

Delivery is not guaranteed 6%

Other 1%

I do not think there are any disadvantages of
giving digital goods over physical goods 23%

0% 20% 40% 60% 80% 100%


8

Digital gift giving is a family affair.

The majority of recipients of virtual gifts will be the givers’ children (53%), other relatives (47%) and spouses or
partners (46%) [Figure 8]. The fact that children will receive the most digital gifts makes sense in light of recent
research from the NPD Group, which indicates that 50% of kids have bought some form of digital media by
age seven and that 21 cents out of every dollar children spend on entertainment goes to digital content. That’s
a sharp increase from 2009, when just 15 cents of every dollar went towards digital content.

Younger adults (ages 18-34) are digital evangelists to the older generation; 42% plan to buy virtual goods for
[Figure 8 – Table 7]
their parents. Affluent consumers are much more likely to buy virtual gifts for a significant other, making them
excellent targets for retailers and e-tailers with digital offerings. Giving digital products to co-workers and
friends appeals to men more than women.

Who are you planning to buy digital goods for this holiday
season?

My children 53%

Other relatives
(e.g., brother, aunt, cousin) 47%

My spouse or signiﬁcant other 46%

My parents 28%

Friends 25%

My grandparents 6%

Co-workers 6%

Other 6%

0% 20% 40% 60% 80% 100%

Base: 273 US adult holiday shoppers buying digital gifts [Figure 8]

9

Ebooks continue to increase in popularity.
When asked what types of digital content they were considering giving this holiday season, respondents
answered games (21%) and music (20%), followed closely by ebooks (16%), and TV shows and movies
(16%) [Figure 9]. The most popular digital gifts last year were games (10%), music (10%), and magazines
and newspapers (9%).

However, the most “wanted” types of digital media across all age groups are ebooks (11%), music (11%),
and mobile and tablet apps (10%). As we noted in a previous study, Brave New Publishing World, ebook sales
are booming, having increased 115% so far this year (up from $32 million to $69 million), according to
the Association of American Publishers

The Facebook generation (ages 18-34) are particularly likely to have given or to be considering giving virtual
products. This group also finds digital media more desirable to receive compared to other demographics.

Which of the following types of digital goods...?
Did you give to others last holiday season
Are you considering giving to others this holiday season
Would you like to receive this holiday season

10%
Game downloads, rentals, 21%
or subscriptions
8%

10%
Music downloads or subscriptions 20%
11%

6%
Ebooks 16%
11%

8%
TV show or movie downloads,
rentals, or subscriptions 16%
10%

9%
Magazine or newspaper online editions 13%
or subscriptions
7%

6%
Software downloads or subscriptions 13%
6%

6%
Mobile or tablet apps 12%
10%

7%
Virtual currencies 12%
(e.g., Facebook or Xbox credits)
6%

0% 20% 40% 60% 80% 100%


10

Physical gift cards are the preferred way to give digital content.

According to the National Retail Federation, gift cards have topped consumers’ holiday wish lists for four years
in a row. The average shopper spent $145.61 on gift cards in 2010. Among digital goods shoppers as well, the
most popular form factor is physical gift cards (58%), followed closely by individual movies, songs, and other
similar media (55%) [Figure 10]. One reason for the popularity of gift cards for digital goods is that they make it
feasible for those without credit cards, like teenagers, to purchase goods online while allowing the recipient to
get something they really want.

Members of Gen Y (ages 18-34) and males tend to gravitate towards giving digital subscriptions like Netflix
or Hulu, while printable and emailable gift cards tend to be more popular with the affluent. This should come as
good news to the 44% of retailers surveyed by Shop.org in September 2011 who will offer e-gifting this holiday
season.

What kinds of digital goods are you planning to give
to others this holiday season?

Physical gift cards redeemable for digital goods 58%

Individual movies, songs, apps, games, etc. 55%

Printable or emailable gift cards
redeemable for digital goods 27%

Create and buy custom playlists of songs,
TV episodes, movies, etc. 23%

Digital subscription to a service
(e.g., Net ix, Hulu) 21%

Unsure 7%

Other 6%

0% 20% 40% 60% 80% 100%


11

A few e-tailers will snatch up the lion’s share of digital sales.

Not surprisingly, most digital sales occur online. When asked where they plan to purchase virtual goods,
52% responded from one or two websites, and a further 34% said from more than two online locations
[Figure 11]. Additionally 55% indicated that they would buy at a physical store.

How do you buy digital content in a physical store? Retailers like Wal-Mart now offer a wide array of physical
gift cards redeemable for virtual goods—from Facebook and iTunes to Farmville, Zynga, and Club Penguin.
Even Subway gift cards can now be redeemed for in-game and online content through universal payment
network Openbucks, which launched in September 2011. And top gaming retailer GameStop began selling
downloadable games in its stores this past July, offering convenience to those without credit cards or who
want to trade in used games for new ones.

In the online world, Amazon and iTunes should anticipate taking the majority of digital gift holiday sales. iTunes
is the dominant seller of digital content on the web, particularly of music and apps, with one in four,
or 51 million, US users. As the sixth most visited American website with 101 million visitors in August
(comScore data), Amazon is a very close second. The ecommerce giant sells more than a million ebooks,
100,000 movies and TV shows, and 17 million songs and has encouraged millions of consumers to think twice
about shopping anywhere else with its Amazon Prime loyalty program.

And let’s not forget Facebook. According to an eMarketer estimate the social platform will collect revenue
of $470 million this year from Facebook Credits alone, up from $140 million in 2010.


Where are you planning to purchase digital goods?

Ofﬂine Online

At a physical store
(e.g., Walmart, GameStop) 55%

From 1-2 websites or marketplaces 52%
(e.g., amazon.com, App Store, iTunes, Facebook)

From more than 2 websites or marketplaces
34%
(e.g., amazon.com, App Store, iTunes, Facebook)

Unsure 6%

Other 2%

0% 20% 40% 60% 80% 100%


12

Price, reputation, and familiarity are crucial to holiday shoppers.
During tough economic times, many shoppers seek value rather than novelty. So when asked what might
influence where they’ll purchase digital gifts, it comes as no surprise that the majority say prices (91%)
[Figure 12], followed closely by vendor reputation (84%), and site familiarity (83%). Other major influencers
include available delivery options (80%), and online product description quality (83%). These statistics
reinforce our conviction that virtual content leaders Amazon and iTunes will snatch the vast majority of
digital spend in Q4.

To cater to price-sensitive consumers, highlighting lower cost options and offering pre-order discounts and
time-sensitive deals (the way the leading digital gaming platform Steam does) can boost holiday sales. But
even Steam is missing a trick by not offering gift cards. You can only gift a specific title which presumes the
customer knows what the recipient wants or already owns—a big assumption when you’re holiday shopping
for nephews or cousins out-of-state.

Customer support is of higher importance to lower income shoppers whereas social media has a stronger
influence on Gen Y consumers (ages 18-34) than other age groups. Younger adults use social networks and
new media to listen to others and learn about news that is important to them.
[Figure 12 – tables 9-23]

How much will each of the following inﬂuence where
you purchase digital goods to give to others this
holiday season?

Strongly in uential Not too in uential
Moderately in uential Not at all in uential Unsure

Price 67% 24% 7% 2

Vendor reputation 48% 36% 1 11% 2

Purchased from the site or service before 43% 40% 2 12% 2

Quality of online product descriptions 42% 41% 2 14% 1

Delivery options available
(e.g., download, physical gift card, e-gift card) 41% 39% 2 13% 5%

Recommendations from family, friends, and co-workers 33% 42% 5 13% 7%

Breadth of items available
(e.g., can buy everything in one place) 39% 36% 2 18% 5%

Availability of customer reviews and ratings 31% 41% 1 18% 8%

Availability and quality of online support 35% 36% 1 23% 4

Uniqueness of product
(e.g., not available at all retailers) 31% 33% 2 26% 7%

Recipient preference 32% 30% 3 21% 15%
(e.g., “please buy from amazon.com”)

Marketing campaigns 21% 33% 2 29% 15%
(e.g., email, magazine, newspaper, TV)

Social media 15% 25% 2 28% 30%
(e.g., Facebook, blogs, forums, Twitter)

0% 20% 40% 60% 80% 100%


13

Recipient demand will fuel virtual gift giving.

Twenty-eight percent of those surveyed indicate that knowing digital goods are highly desired by recipients
would encourage them to give more virtual gifts, followed by cheaper pricing than physical equivalents at
26% [Figure 13]. We therefore expect Amazon’s September unveiling of its affordable Fire tablet, along with a
low-cost range of Kindles, to fan the flames of digital desire in the coming months. Priced at $200, the new
tablet is more affordable than those of competitors Samsung, Apple, and Acer.

One in six shoppers also value the ability for the recipient to redeem a virtual gift for any device (16%) and
the ability to return or exchange unwanted items (16%) an interest that digital gaming platform, Steam, hopes
to exploit with a recent release that allow gamers to trade in-game items and “gift” copies of games.

Members of Gen Y (ages 18-34) express interest in bundles that include related digital and physical
merchandise or a physical back-up copy. “App-cessories”, physical items that interact with Apple gadgets
like iCade Arcade Cabinet, an iPad-interactive, arcade-style cabinet complete with joystick, should find ready
buyers within this age group this holiday season. Younger adults, and the less affluent, also say a wider choice
of payment methods would encourage them to give more digital gifts. Alternative payment options like PayPal,
Bill Me Later, and eLayaway can help consumers keep control of their budgets. As an example, this holiday season,
Toys”R”Us expanded its layaway program to online shoppers who can take advantage of a limited-time Bill Me
Later offer to make payments.

14

[Figure 13. – Table 48]

Which of the following would encourage you to give more
digital goods this holiday season?

Knowing they are highly desired by
those I’m giving them to 28%

At least 10% cheaper than physical equivalent 26%

Ability for the recipient to redeem for any device
(e.g., no need for me to know the devices they own) 16%

Ability to return or exchange unwanted
items after the holidays 16%

Bundled with related physical merchandise so I
have something to give the recipient 12%

Physical gift cards that come with nice physical
packaging so that they look more substantial 12%

E-gift cards that come in many attractive,
personalized designs for digital delivery 11%

Easily accessed wish list for each recipient where I can
see exactly what they want and where I can buy it 10%

Physical backup copy included so I have
something to give the recipient 10%

Flexible denominations available for digital goods
gift cards (e.g., can buy exact amount) 9%

More payment options available
(e.g., debit card, PayPal, Bill Me Later, etc.) 9%

Easier and more enjoyable ways of
browsing for gift ideas 8%

Easy checklist tool to manage all of 5%
my gift-giving in one place

Enhanced content or features not available
with the physical version 5%

Other 1%

None of the above 25%

0% 20% 40% 60% 80% 100%


15

Tablets are sexier to give than to receive.

When shoppers were asked what device they would most like to receive this holiday season vs. what device
they’d most like to give, we uncovered a slight disconnect. Regardless of affordability, the most “wanted”
digital device is a new laptop or desktop (24%), but the most desirable device to give is a shiny new tablet
(15%) [Figure 14].

Up until late September 2011, “tablet” meant Apple’s iPad 2, with 68.3% share of the worldwide market in Q2.
Continuous media hoopla over the iPad since its original launch in April 2010 has contributed to its perceived
desirability. Still, the majority of consumers—with the exception of the affluent and highly educated—seek
a more versatile and powerful piece of equipment than a tablet, which is best suited as a media player and
ebook reader. Please note that our survey results predate the Kindle Fire announcement.

Ereaders take third place as both a desirable device to receive and give; however, with the arrival of the Kindle
[Figure 14 – Table 43-44]
Fire tablet, the lines between ereader and tablet are becoming increasingly blurred.

What digital device would you most like to…?

Receive as a gift this holiday season
Give this holiday season (regardless of affordability)

24%
Laptop or desktop computer
11%

Tablet device 18%
(e.g., iPad, Xoom) 15%

Ereader 10%
(e.g., Amazon Kindle, Barnes & Noble Nook) 9%

Smartphone 9%
(e.g., iPhone, Blackberry, Android)
6%

Game console 7%
(e.g., xBox, Wii, PS3)
7%

4%
MP3 player
9%

Handheld game device 2%
(e.g., Nintendo DS, Leapfrog)
7%

1%
Other
1%

0% 20% 40% 60% 80% 100%


16

One in three prefers to give digital devices together with gift cards.

When asked how they would give the digital device to their chosen recipient, 38% said on its own without
any bundled digital content, while 35% said together with a gift card redeemable for virtual content
[Figure 15a].

Among those with higher intent—who plan to buy digital goods to give this season—these preferences reverse.
Bundling with a gift card is preferred over other options at 41%, followed by gifting the device standalone at
39% [Figure 15b]. These figures indicate that in addition to up-selling protective covers and adaptors in the
checkout, device manufacturers such as Apple should also include iTunes gift cards or risk missing out on
potential revenue this holiday season.

How would you give the digital device to the recipient?


Together with a gift card redeemable for
digital goods (e.g., iTunes gift card) 35%

On its own (i.e., without any digital goods or
gift cards bundled with the gift) 38%

Together with speciﬁc digital goods titles 8%
(e.g., Gears of War 3)

Unsure 18%

0% 20% 40% 60% 80% 100%

Base: 581 US adult holiday shoppers interested in giving [Figure 15a]
digital devices


Together with a gift card redeemable for
digital goods (e.g., iTunes gift card) 41%

On its own (i.e., without any digital goods or
gift cards bundled with the gift) 39%

Together with speciﬁc digital goods titles
12%
(e.g., Gears of War 3)

Unsure 8%

0% 20% 40% 60% 80% 100%

and interested in giving digital devices

17

Recommendations
With virtual goods shoppers planning to spend more than other consumers on holiday gifts of all types—both digital
and physical—attracting this customer offers a way for retailers, e-tailers, content providers, and device makers
to maximize sales in an otherwise lackluster Q4 forecast. With the holiday season fast approaching, we offer 16 tips
to lure the digital shopper:

Maximize the findability of your products.

1. For content providers seeking holiday sales, leading digital retailers Amazon and Apple’s iTunes are critical
distribution channels. Numerous options for customer interaction, such as reviews, recommendations,
and previews, make these two extremely effective content marketers. Selling physical products? Try the
Amazon Marketplace or use Amazon Product Ads to place pay-per-click ads on category and product pages.
Shoppers will see your ads when looking for similar products.

2. Gift hunting through search engines is appealing to younger demographics. By submitting a feed to Google
Product Search, the Internet giant’s online shopping comparison engine, lesser known websites can improve
their exposure.

3. Social media has hit the mainstream and, while not a primary channel for discovery, is gaining in importance
to Gen Y shoppers. By adding social sharing to digital goods, e-tailers can turn customers into sales channels.
Resolving customer service issues on Facebook or Twitter publically displays your customer service prowess.

Work towards developing a holistic view of customers.

4. As the line between offline and online, and digital and physical, becomes increasing blurred, multichannel
retailers should strive to eliminate friction between retail stores and web/mobile sites and align to optimize
for any conversion regardless of channel. As an example, Home Depot uses geo-location to offer localized
pricing and deals to pull shoppers to their closest store.

5. Begin to break down the data silos between physical stores, web analytics, and online
transactions to better understand customer preferences, buying habits, and lifetime value.

18

Improve and “digitize” your ecommerce site before it’s too late.

6. With cash-strapped shoppers carefully researching every purchase online before buying, your ecommerce
site is more important than ever. Follow the lead of sites like yoyo.com in making the shopping experience
simple, efficient, and fun through gift finders, well-designed navigation, product filters and comparison tools,
curated recommendations, and rich product details. At minimum, spruce up the product copy and images
of your most popular holiday products and reinforce your value proposition.

7. If you’re already selling virtual goods standalone or in addition to other merchandise, you’re a step ahead of
the game. Clearly articulate the benefits of your digital products (e.g., instant delivery to anywhere in the
world), and once shipping deadlines have passed, bring your virtual items to the forefront to extend online
shopping windows.

8. For customers who are looking for something to put under the tree, make gift selection easier by grouping
related “tangible” and “intangible” items together in some sort of gift basket or bundle. Up-sell physical
items with digital ones to raise average order value. If you offer “app-cessories”, or physical items that
interact with Apple gadgets, feature them prominently.

9. If you don’t sell digital goods, it’s not too late to consider adding third-party apps or digital subscriptions
to your catalog—sold with physical products, or as up-sells. Or giving away small amounts of Facebook
Credits to use in games like Farmville as rewards to loyal customers or those who sign up for emails.

10. To cater to price-conscious consumers, highlight lower cost options and offer pre-order discounts and
time-sensitive deals the way leading gaming platform Steam does.

Expand your gifting options.

11. If you sell digital goods, make sure you offer physical gift cards redeemable for your products online and
in store and showcase them from the product page to the shopping cart. For retailers such as Subway,
Target, and Wal-Mart, offering a wide array of gift cards redeemable for virtual items can bring valuable foot
traffic to stores.

12. To make gift cards more personal, consider boxing them like Victoria’s Secret does. Or offering user-
customized versions like those produced by Rixty Custom Game Cards. Cards include the recipient’s
username and avatar image and are mailed inside a customized greeting card with a personalized message.

13. Get creative with multiple personalized e-gifting options—printable, emailable, and those you send via
a Facebook Wall post—to compensate for the lack of packaging, empty stockings, and missing presents
under the tree.

14. Most digital shoppers prefer to gift devices with gift cards. If you sell digital devices, upsell gift cards
redeemable for virtual content in the checkout. iTunes, are you listening?

19

Offer non-credit card payment options and a streamlined checkout process.

15. Allow shoppers to buy digital product and physical products in the same cart. Customers will get
frustrated if they have to do multiple checkouts to buy different product types or buy more than one digital
product at a time. Strive for a one-page checkout and a one-click purchase option for repeat customers.

16. Provide non-credit card payment options like PayPal, Bill Me Later, and eLayaway to capture those who
don’t own credit cards, or want better control over their holiday spending.

20

About the Author

Amanda Dhalla

Follow Amanda On Twitter

Amanda Dhalla is an ecommerce consultant with Elastic Path’s consulting division. A seasoned
ecommerce professional with more than 14 years in the field, Amanda has hands-on experience
marketing, merchandising, and managing multimillion dollar online stores. Her areas of
specialization range from market research, conversion optimization, and analytics to traffic
generation tactics such as social media, search engine optimization, and content marketing.

About Elastic Path

Elastic Path provides the industry’s most flexible enterprise ecommerce platform and strategic ecommerce consulting.
We help innovative enterprises sell more digital goods and services in a way that is frictionless, social, and everywhere.
Major global brands such as Symantec, Time Inc, and Virgin Media rely on Elastic Path to innovate and grow.

Web www.elasticpath.com | Blog www.getelastic.com | Twitter www.twitter.com/elasticpath

Methodology

From September 22 to 26, 2011 Elastic Path Software hired Vision Critical, an interactive research solutions company, to
conduct an online survey among a sample of 1,012 US adults over the age of 18 who intend to purchase gifts this holiday
season (November and December 2011). The full dataset has been statistically weighted to ensure a representative sample.
The margin of error is ±3.1%, 19 times out of 20. Discrepancies in or between totals are due to rounding.

© Copyright 2011, Elastic Path Software Inc. All rights reserved. Elastic Path™ and the Elastic Path logo are trademarks or registered trademarks of Elastic Path
Software Inc. All other trademarks are the property of their respective owners.

Virtual Goods Mean REAL Money This Holiday

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